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 September 30, 2003
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REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS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 SEPTEMBER 30, 2003
Page
1. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the period
January-September 2003. 3
2. Consolidated Financial Statements including Notes
to Consolidated Financial Statements for the period
January-September 2003. 15
3. Reconciliation of Historical Cost Operating Profit
to Replacement Cost Operating Profit for the years
ended December 31, 2002, 2001 and 2000. 66
DEFINITION
The following term has the meaning shown below:
OPEC-10 -- The OPEC members excluding Iraq.
Page 2
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GROUP RESULTS JANUARY - SEPTEMBER 2003
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
----------------------- -----------------------
($ million)
Turnover 60,142 49,054 180,237 128,999
======== ======= ======= =======
Reconciliation of historical cost and
replacement cost profit
Historical cost profit (loss) 2,394 2,840 8,295 6,194
Inventory holding (gains) losses (a) (84) (305) 68 (1,278)
-------- ------- ------- -------
Replacement cost profit (b) 2,310 2,535 8,363 4,916
Exceptional items, net of tax (168) (1,769) (639) (1,915)
-------- ------- ------- -------
Replacement cost profit before exceptional items 2,142 766 7,724 3,001
======== ======= ======= =======
Per Ordinary Share - cents
Historical cost profit 10.85 12.67 37.37 27.63
Replacement cost profit before exceptional items 9.71 3.42 34.80 13.39
Dividends per Ordinary Share - cents 6.50 6.00 19.25 17.75
---------------
(a) Net of minority shareholders' interest.
(b) Replacement cost is not a UK or US GAAP measure. For information on why
management believes that presentation of replacement cost profit provides
useful information to investors and management regarding the results of
operations of BP, see Item 3 - Key Information in BP p.l.c.'s Annual Report
on Form 20-F for the year ended December 31, 2002.
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, 2002 in BP p.l.c.'s Annual Report
on Form 20-F for the year ended December 31, 2002.
To reflect BP's increased focus on chemical products derived from oil and gas,
the Chemicals segment has been renamed Petrochemicals.
The TNK-BP deal was completed on August 29, 2003 and BP's share of the result of
the joint venture has been included within Exploration and Production with
effect from that date. Third quarter 2003 results include profit of $114 million
and production of 695 mboe/d from the joint venture. TNK-BP operational and
financial information has been estimated.
The three months and nine months ended September 30, 2003 results reflect a
trading environment that was more favourable overall than a year ago. For the
third quarter the Brent oil price was up $1.47 per barrel; the Henry Hub gas
price was up $1.81 per mmbtu; the Global Indicator refining margin was up $2.61
per barrel; however, the Chemicals Indicator Margin was down $11 per tonne. For
the nine months, the Brent oil price was $4.24 per barrel higher; the Henry Hub
gas price was up $2.71 per mmbtu; the refining Global Indicator Margin was up
$2.23 per barrel; and the Chemicals Indicator Margin was up $10 per tonne
compared with a year ago.
Turnover for the three months and nine months ended September 30, 2003 was
$60,142 million and $180,237 million respectively, compared with $49,054 million
and $128,999 million for the equivalent periods in 2002. The increase in
turnover for the third quarter and nine months reflects higher oil, natural gas
and product prices, higher sales volumes and a weaker US dollar.
Historical cost profit for the three months ended September 30, 2003 was $2,394
million, including inventory holding gains of $84 million and net exceptional
gains of $168 million ($172 million before tax) in respect of net gains on the
sale of fixed assets and businesses or termination of operations. For the
equivalent period of 2002, historical cost profit was $2,840 million, including
inventory holding gains of $305 million and net exceptional gains of $1,769
million ($1,794 million before tax) in respect of net gains on the sale of fixed
assets and businesses or termination of operations.
Historical cost profit for the nine months ended September 30, 2003 was $8,295
million, after inventory holding losses of $68 million and including net
exceptional gains of $639 million ($846 million before tax) in respect of net
gains on the sale of fixed assets and businesses or termination of operations.
For the equivalent period of 2002, historical cost profit was $6,194 million,
including inventory holding gains of $1,278 million and net exceptional gains of
$1,915 million ($2,061 million before tax) in respect of net gains on the sale
of fixed assets and businesses or termination of operations.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Performance of operating segments is evaluated by management based on
replacement cost operating profit or loss.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) was $2,142 million and $7,724 million for the three
months and nine months ended September 30, 2003 respectively, compared with $766
million and $3,001 million for the equivalent periods of 2002.
Replacement cost profit before exceptional items for the three months ended
September 30, 2003 includes charges of $369 million resulting from new and a
reassessment of our existing environmental remediation provisions and ongoing
Veba integration costs of $72 million in Refining and Marketing, charges of $43
million comprising a provision to cover future rental payments on surplus
property and charges resulting from a reassessment of environmental remediation
provisions in Petrochemicals; and charges of $122 million resulting from new and
a reassessment of our existing environmental remediation provisions in Other
businesses and corporate. Replacement cost profit before exceptional items for
the three months ended September 30, 2002 included impairment charges of $1,091
million and restructuring charges of $17 million in Exploration and Production;
Veba and other European integration costs of $54 million, settlement costs
associated with a pre-acquisition ARCO US MTBE supply contract of $22 million
and costs of $7 million related to an Olympic pipeline incident in Refining and
Marketing; a $140 million asset writedown in Petrochemicals; and a $125 million
provision to cover future rental payments on surplus leasehold office
accommodation in Other businesses and corporate.
Replacement cost profit before exceptional items for the nine months ended
September 30, 2003 included 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; a charge of $369
million resulting from new and a reassessment of our existing environmental
remediation provisions and Veba integration costs of $131 million in Refining
and Marketing; charges of $38 million comprising a provision to cover future
rental payments on surplus property, a charge resulting from a reassessment of
environmental remediation provisions and a credit resulting from a reduction in
the provision for costs associated with closure of polypropylene capacity in
Petrochemicals; charges of $122 million resulting from new and a reassessment of
our existing environmental remediation provisions in Other businesses and
corporate; and a $130 million credit related to tax restructuring benefits.
Replacement cost profit before exceptional items for the nine months ended
September 30, 2002 included impairment charges of $1,091 million, restructuring
charges of $179 million and litigation costs of $55 million in Exploration and
Production; a credit of $184 million for business interruption insurance
proceeds, $103 million Veba and other European integration costs, costs of $54
million related to a pipeline incident and settlement costs associated with a
pre-acquisition ARCO US MTBE supply contract of $22 million in Refining and
Marketing; a $140 million asset write-down and restructuring charges and Solvay
and Erdolchemie integration costs of $75 million in Petrochemicals; a $125
million provision to cover future rental payments on surplus leasehold office
accommodation in Other businesses and corporate; and a $355 million adjustment
to the North Sea deferred tax balance for the supplementary UK corporation tax
rate.
The increase in replacement cost profit before exceptional items for the three
months and nine months ended September 30, 2003 reflects higher average liquids
and natural gas realizations, improvement in refining margins and higher
marketing margins, particularly retail margins in the USA and Europe. In
addition to these factors, the third quarter result also reflected some offset
from weaker petrochemicals margins. Improved operating performance generated
additional income for the quarter and nine months. Excluding charges for
impairment, non-cash costs were higher in both periods due to higher
depreciation from new projects coming onstream.
Interest expense for the three months and nine months ended September 30, 2003
was $213 million and $624 million respectively, compared with $300 million and
$947 million in the same periods of 2002. The reductions in both periods reflect
lower average debt and lower interest rates.
Net taxation, other than production taxes, charged for the three months and nine
months ended September 30, 2003 was $1,450 million and $5,023 million compared
with $713 million and $3,217 million in the equivalent periods last year. The
tax charge has increased broadly in line with higher profits in 2003. The tax on
exceptional items was $4 million and $207 million for the third quarter and nine
months respectively, compared with $25 million and $146 million for the
equivalent periods in 2002. The effective tax rate on replacement cost profit
before exceptional items was 40% and 38% for the three months and nine months
ended September 30, 2003, compared with 47% and 50% for the equivalent periods
in 2002. The reduction in the third quarter and nine month rate reflects the
rateably lower impact of goodwill amortization and the depreciation charge on
uplifted asset values (for which no tax deduction is available) on higher income
in 2003. The nine month rate reduction additionally reflects the $355 million
adjustment to the North Sea deferred tax provision for the supplementary UK
corporation tax in the second quarter of 2002. The effective tax rate on
historical cost profit was 37% for both the three months and nine months ended
September 30, 2003, compared with 20% and 34% for the three months and nine
months in 2002 respectively. The lower rate in the three months and nine months
ended September 30, 2002 was due to the non-taxable gain on the sale of our
interest in Ruhrgas and the impact of non-taxable inventory holding gains.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Capital expenditure and acquisitions in the third quarter and nine months of
2003 was $9.2billion and $15.4 billion respectively, including $5.9 billion for
the acquisition of our investment in the TNK-BP joint venture in the third
quarter. Capital expenditure and acquisitions for the third quarter and nine
months of 2002 was $3.2 billion and $15.0 billion respectively, including $5.0
billion for the acquisition of Veba in the first half. Excluding acquisitions,
capital expenditure for the three months and nine months ended September, 30,
2003 was $3.3billion and $9.4billion respectively, compared with $3.2billion and
$9.3billion in the equivalent periods of 2002. Disposal proceeds in the third
quarter and nine months of 2003 were $0.9billion and $5.0billion respectively.
Disposal proceeds in the third quarter of 2002 were $2.9billion, including
$2.3billion from the sale of our investment in Ruhrgas, and $5.8billion in the
nine months.
Net cash outflow for the three months ended September 30, 2003 was $2.4billion
compared with an outflow of $0.5billion for the equivalent period of 2002;
higher cash flow from operating activities was more than offset by lower
disposal proceeds. Net cash inflow for the nine months ended September 30, 2003
was $3.2billion, compared with an outflow of $1.1billion for the equivalent
period of 2002; higher cash flow from operating activities and lower acquisition
spending were partly offset by higher tax payments and lower disposal proceeds.
Net cash inflow from operating activities was $4.9billion and $18.2billion for
the three months and nine months ended September 30, 2003, compared with
$4.4billion and $13.1billion in the equivalent periods in 2002. The increase for
the quarter reflected higher profit, higher depreciation and a higher net charge
for provisions partly offset by a higher requirement for working capital. The
increase for the nine months was largely due to higher profit and a higher net
charge for provisions.
Net debt at September 30, 2003 was $18.5billion. The ratio of net debt to net
debt plus equity was 20% at September 30, 2003 compared with 22% at December 31,
2002. 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 petrochemicals 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 on a historical cost basis was 11% for
the third quarter of 2003 compared with 13% for the same period in 2002. 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.
Management believes this performance measure is useful as an indication of
capital productivity over the long term. For the nine months ended September 30,
2003 the return on average capital employed was 12% compared with 10% in 2002.
The return on average capital employed on a replacement cost basis for the three
months ended September 30, 2003 was 10% compared with 4% for the equivalent
period of 2002. For the nine months ended September 30, 2003 the return was 12%
compared with 5% in 2002. A reconciliation of return on average capital employed
on a replacement cost basis to return on average capital employed on a
historical cost basis is included on page 65 of this report.
BP announced a third quarterly dividend for 2003 of 6.50 cents per ordinary
share. Holders of ordinary shares will receive 3.857 pence per share and holders
of American Depositary Receipts (ADRs) $0.39 per ADS. The dividend is payable on
December 8, 2003 to shareholders on the register on November 14, 2003.
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 December 8, 2003. The Company did not repurchase any of its own
shares during the quarter. During the nine months, 299 million shares were
repurchased and cancelled at a cost of $2 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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
Turnover - $m 7,310 6,220 23,811 18,397
Reconciliation of historical cost and
replacement cost operating profit
Total historical cost operating profit - $m 3,520 1,575 11,002 5,963
Inventory holding (gains) losses - $m - (3) (3) (5)
------ ------ ------ ------
Total replacement cost operating profit - $m 3,520 1,572 10,999 5,958
====== ====== ====== ======
Results include:
Exploration expense - $m 136 119 349 465
Of which: Exploration expenditure written off - $m 75 55 168 261
Key Statistics:
Crude oil Average prices
realized by BP - $/bbl 27.72 26.01 28.25 23.35
Production - mb/d 1,852 1,736 1,798 1,766
Natural gas liquids Average prices
realized by BP - $/bbl 19.39 13.15 18.96 12.23
Production - mb/d 202 247 211 242
Total liquids(a) Average prices
realized by BP - $/bbl 26.79 24.40 27.24 21.99
Production - mb/d 2,054 1,983 2,009 2,008
Natural gas Average prices
realized by BP - $/mcf 3.08 2.25 3.46 2.32
Production - mmcf/d 8,401 8,482 8,617 8,631
Total hydrocarbons(b)(c) Average prices
realized by BP - $/boe 22.58 19.27 23.88 18.17
Production - mboe/d 3,502 3,445 3,495 3,496
Brent oil price - $/bbl 28.38 26.91 28.64 24.40
West Texas Intermediate oil price - $/bbl 30.19 28.26 31.08 25.40
Alaska North Slope US West Coast - $/bbl 28.83 27.26 29.69 24.06
Henry Hub gas price (d) - $/mmbtu 4.97 3.16 5.65 2.94
UK Gas - National Balancing Point - p/therm 15.08 12.74 17.92 14.53
---------------
(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) Includes 249 mboe/d production from TNK-BP.
(d) Henry Hub First of the Month Index.
Turnover for the three months and nine months ended September 30, 2003 was
$7,310 million and $23,811 million respectively compared with $6,220 million and
$18,397 million in the corresponding periods in 2002, primarily reflecting
higher liquids and natural gas realizations.
Historical cost operating profit for the three months ended September 30, 2003
was $3,520 million; there were no inventory holding gains or losses for the
period. For the equivalent period in 2002 there was a profit of $1,575 million
including inventory holding gains of $3 million. Historical cost operating
profit for the nine months ended September 30, 2003 was $11,002 million
including inventory holding gains of $3 million; for the equivalent period in
2002 there was a profit of $5,963 million including inventory holding gains of
$5 million.
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)
Replacement cost operating profit for the three months and nine months ended
September 30, 2003 was $3,520 million and $10,999 million respectively, compared
with $1,572 million and $5,958 million for the equivalent periods in 2002.
The results for the first nine months of 2003 include an impairment charge of
$108 million relating to the Kepadong field in Indonesia, an impairment charge
of $103 million relating 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 results for the
third quarter of 2002 include impairment charges of $1,091 million relating to
the impairments of Shearwater in the North Sea, Rhourde El Baguel in Algeria,
LL652 and Boqueron in Venezuela, Pagerungan in Indonesia and Badami in Alaska,
and restructuring charges of $17 million; in addition to these items the results
for the nine months 2002 include further restructuring charges of $162 million
and litigation costs of $55 million.
The results for the third quarter of 2003 reflect higher realizations, with
liquids up $2.39/bbl and natural gas up $0.83/mcf on a year ago. North American
basin differentials to the Henry Hub marker price continued to narrow over the
quarter following the opening of pipeline expansion routes. The results for the
three months ended September 30, 2003 include income of $15 million reflecting a
lower provision for Unrealized Profit in Stock (UPIS), which removes the
upstream margin from downstream inventories. This compares with a charge of $64
million in the third quarter of last year.
The results for the nine months ended September 30, 2003 reflected the impact of
significantly higher oil and gas prices and a reduction in exploration
write-offs partly offset by the impact of divestments and higher depreciation
excluding impairment charges.
Production for the third quarter was up by more than one and a half per cent at
3,502 mboe/d compared with a year ago. This reflects the net impact of the
inclusion of incremental production volumes of 208 mboe/d from TNK-BP offset by
a reduction of 179 mboe/d from divestments. Other factors include strong growth
in Trinidad and decline in our mature areas. Total production for the nine
months at 3,495 mboe/d was in line with a year ago.
Significant progress was made during the quarter toward completion of projects
in our new profit centres. The Kapok field in Trinidad started commercial
production in July. In preparation for start-up, the Na Kika tension leg
platform has arrived on location in the Gulf of Mexico and the Xikomba Floating
Production Storage and Offloading vessel is on location in Angola. The Holstein
Spar has sailed from the fabrication yard in Finland and the Kizomba A tension
leg platform has arrived in Angola. In Azerbaijan, construction is well advanced
on our Azeri project and the BTC pipeline is on track for start-up in early
2005.
We are nearing the end of the 2003 programme of high-grading our portfolio with
the completion of previously announced divestments in China and the Lower 48
states in the USA and the sale of 49% of our In Amenas gas project in Algeria.
On 29 August we completed the creation of our joint venture TNK-BP. This sees
the establishment of the third largest integrated oil company in Russia in which
we have a 50% interest. That transaction did not include Alfa Group and Access
Renova's (AAR) interests in Slavneft or BP's interest in Sakhalin. We have
agreed to invest a further $1.35 billion to expand TNK-BP to include AAR's 50%
interest in Slavneft; we now expect to complete this transaction by year-end.
The TNK-BP result included for the period 29 August to 30 September benefited
from favourable price conditions in Russia, and production was robust.
Page 7
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
Turnover - $m 15,904 9,313 48,777 25,316
Reconciliation of historical cost and
replacement cost operating profit
Total historical cost operating profit - $m 91 59 343 292
Inventory holding (gains) losses - $m 7 (2) 52 (10)
------ ------ ------ ------
Total replacement cost operating profit - $m 98 57 395 282
====== ====== ====== ======
Turnover for the three months and nine months ended September 30, 2003 was
$15,904 million and $48,777 million respectively compared with $9,313 million
and $25,316 million in the same periods in 2002. The increase for the quarter
and nine months reflects higher natural gas prices and sales volumes.
Historical cost operating profit for the three months ended September 30, 2003
was $91 million after inventory holding losses of $7 million; for the equivalent
period in 2002 there was a profit of $59 million including inventory holding
gains of $2 million. Historical cost operating profit for the nine months ended
September 30, 2003 was $343 million after inventory holding losses of $52
million; for the equivalent period in 2002 there was a profit of $292 million
including inventory holding gains of $10 million.
Replacement cost operating profit for the three months and nine months ended
September 30, 2003 was $98 million and $395 million respectively, compared with
$57 million and $282 million for the same periods in 2002.
The results for the third quarter and nine months 2002 include a $30 million
impairment charge related to a cogeneration power plant in the UK.
The third quarter and nine month results reflect improvement in marketing and
trading, including LNG, partly offset by a lower result for the natural gas
liquids business, restructuring charges in the Solar business and the absence of
the contribution from Ruhrgas following the sale of our interest last year.
The increased marketing and trading result for the quarter and nine months was
driven by higher gas sales volumes in North America and strong performance from
the Global LNG business. Third quarter gas sales volumes were up 21%, and equity
LNG sales were up 47%. During the quarter, the first delivery of LNG was made to
the recently completed LNG import and regasification facility in Bilbao (BP 25%)
and the first delivery was made to the facility at Cove Point (operated by
Dominion Resources) in the USA, where BP has a contract for capacity access.
The results for the natural gas liquids business for the third quarter and nine
months is substantially down on a year ago due to continued high gas prices
relative to liquids prices in North America, which has led to lower sales
volumes and margins.
The Solar and Renewables result includes a restructuring charge of $45 million
as a result of decisions taken during the quarter to improve future
profitability. This charge provides for consolidation of manufacturing
operations and staff reductions across the business.
Page 8
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -------------------------
Turnover - $m 40,245 35,634 118,629 92,393
Reconciliation of historical cost and
replacement cost operating profit
Total historical cost operating profit - $m 544 548 1,911 2,158
Inventory holding (gains) losses - $m (89) (311) 64 (1,250)
------ ------ ------- -------
Total replacement cost operating profit - $m 455 237 1,975 908
====== ====== ======= =======
Total refined product sales - mb/d 6,695 6,911 6,840 6,630
Refinery throughputs - mb/d 3,086 3,154 3,124 3,084
Refining availability (a) - % 96.2 96.5 95.7 96.0
Global Indicator Refining Margin (b) - $/bbl 4.59 1.98 4.13 1.90
---------------
(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 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.
Turnover for the three months and nine months ended September 30, 2003 was
$40,245 million and $118,629 million respectively, compared with $35,634 million
and $92,393 million for the same periods in the prior year. The increase in
turnover for the third quarter and nine months is principally due to a weaker US
dollar, higher product prices and higher overall sales volumes.
Historical cost operating profit for the three months ended September 30, 2003
was $544 million including inventory holding gains of $89 million; for the
equivalent period in 2002 there was a profit of $548 million including inventory
holding gains of $311 million. Historical cost operating profit for the nine
months ended September 30, 2003 was $1,911 million after inventory holding
losses of $64 million; for the equivalent period in 2002 there was a profit of
$2,158 million including inventory holding gains of $1,250 million.
Replacement cost operating profit for the three months and nine months ended
September 30, 2003 was $455 million and $1,975 million respectively, compared
with $237 million and $908 million for the corresponding periods of 2002.
The results for the third quarter of 2003 include a $369 million charge
resulting from new and a reassessment of our existing environmental remediation
provisions, and ongoing Veba integration costs of $72 million. The results for
the third quarter of 2002 include Veba and other European integration of costs
of $54 million, settlement costs associated with a pre-acquisition ARCO US MTBE
supply contract of $22 million, costs related to the Olympic pipeline incident
of $7 million and a charge of $80 million in respect of environmental
remediation provisions.
The results for the nine months 2003 include a $369 million charge resulting for
new and a reassessment of our existing environmental remediation provisions, and
Veba integration costs of $131 million. The results for the nine months 2002
include a credit to income for business interruption insurance proceeds of $184
million, mostly offset by Veba and other European integration costs of $103
million, a charge of $80 million in respect of environmental remediation
provisions, costs of $54 million related to a pipeline incident and settlement
costs associated with a pre-acquisition ARCO US MTBE supply contract of $22
million.
The results for the quarter and nine months reflect improved refining margins
and higher marketing margins, particularly retail margins in the USA and Europe,
with some offset from higher gas fuel costs. Improved operating performance also
contributed to the results in the marketing businesses.
Refining throughputs decreased by 2%, compared with a year ago, with
availability at 96.2%. Marketing volumes were 6% lower than a year ago, as
expected, largely due to divestments.
During the quarter, an additional 2,037 sites were reimaged, bringing the total
number of sites with the BP Helios to some 14,000 worldwide.
Page 9
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING (concluded)
During October, we announced that H&R WASAG has agreed to purchase our European
Special Products business, including the Neuhof base oil refinery in Hamburg,
Germany. The transaction is subject to a number of approvals and appropriate
employee consultation.
Page 10
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
PETROCHEMICALS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
--------------------- ----------------------
Turnover - $m 3,798 3,720 11,739 9,946
Reconciliation of historical cost and
replacement cost operating profit
Total historical cost operating profit - $m 83 121 578 449
Inventory holding (gains) losses - $m (2) 11 (45) (38)
------ ------ ------ ------
Total replacement cost operating profit - $m 81 132 533 411
====== ====== ====== ======
Production (a) - kte 7,040 6,880 20,790 20,379
Chemicals Indicator Margin (b) - $/te 109(c) 120 113(c) 103
---------------
(a) Includes BP share of joint ventures, associated undertakings and other
interests in production.
(b) 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. (c) Provisional. The data for the third quarter is
based on two months' actual and one month of provisional data.
Turnover for the three months and nine months ended September 30, 2003 was
$3,798 million and $11,739 million respectively, compared with $3,720 million
and $9,946 million for the equivalent periods in 2002. The increase in turnover
for the third quarter and nine months reflects higher sales volumes and prices
as well as the effect of a weaker US dollar.
Historical cost operating profit for the three months ended September 30, 2003
was $83 million including inventory holding gains of $2 million; for the
equivalent period in 2002 there was a profit of $121 million after inventory
holding losses of $11 million. Historical cost operating profit for the nine
months ended September 30, 2003 was $578 million including inventory holding
gains of $45 million; for the equivalent period in 2002 there was a profit of
$449 million including inventory holding gains of $38 million.
Replacement cost operating profit for the three months and nine months ended
September 30, 2003, was $81 million and $533 million respectively, compared with
$132 million and $411 million for the equivalent periods in 2002.
The results for the third quarter of 2003 include a $43 million charge
comprising a provision to cover future rental payments on surplus property and a
charge resulting from a reassessment of our environmental remediation
provisions. The results for the third quarter of 2002 include a $140 million
write-down of our Indonesian manufacturing assets.
The decrease in third quarter profits compared with the third quarter of 2002
primarily reflects lower margins, with some offset from higher demand. Following
a stronger second quarter 2003, petrochemicals margins were much weaker in the
third quarter as a result of higher feedstock costs, particularly in Europe.
Similar margin pressure occurred in the first quarter.
The results for the nine months 2003 include a $43 million charge comprising a
provision to cover future rental payments on surplus property and a charge
resulting from a reassessment of our environmental remediation provisions, and a
credit of $5 million resulting from a reduction in the provision for costs
associated with the closure of polypropylene capacity in the USA. The results
for the nine months 2002 include a $140 million asset write-down, costs of $46
million related to major site restructuring and Solvay and Erdolchemie
integration and charges of $29 million for restructuring our research and
technology facilities.
The nine months results were below those of a year ago. The effect of increased
volumes and margins was more than offset by lower income from SARS-affected
businesses in Asia, several non-recurring items and portfolio rationalization.
Page 11
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
PETROCHEMICALS (concluded)
Petrochemicals production of 7,040 thousand tonnes in the third quarter was 270
thousand tonnes above the second quarter, reflecting capacity additions and
lower turnaround activity. Production for the first nine months was 411 thousand
tonnes higher than last year due to Asian PTA and acetic acid capacity
additions, the Veba acquisition and growth in market demand.
During the quarter, production commenced at a new world-scale high density
polyethylene plant (BP 25%), located in Cedar Bayou, Texas.
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
--------------------- -----------------------
Turnover - $m 138 108 378 379
Total historical cost operating (loss) - $m (310) (241) (609) (494)
Other businesses and corporate comprises Finance, the group's coal asset and
aluminium asset, its investments in PetroChina and Sinopec, interest income and
costs relating to corporate activities. The third quarter and nine month 2003
results include a net charge of $122 million resulting from new and a
reassessment of our existing environmental remediation provisions. The results
for the third quarter and nine months 2002 include a $125 million provision to
cover future rental payments on surplus leasehold office accommodation. During
October, BP completed the sale of its 50% interest in the Indonesian coal mining
company PT Kaltim Prima Coal to PT Bumi Resources for $250 million.
EXCEPTIONAL ITEMS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
----------------------- ---------------------------
Profit (loss) on sale of fixed assets and
businesses or termination of operations - $m 172 1,794 846 2,061
Taxation credit (charge) - $m (4) (25) (207) (146)
------- ------ ------ ------
Exceptional items after taxation - $m 168 1,769 639 1,915
======= ====== ====== ======
Exceptional items for the third quarter of 2003 principally relate to net gains
from the sale of various upstream interests.
OUTLOOK
World economic activity has strengthened through the third quarter. The US
appears to have grown strongly, in part owing to further policy stimulus. Asia
has also shown robust growth, in particular in China, but also in Japan.
However, OECD industrial production has been largely flat, and Europe, as a
whole, has grown slowly, with the exception of the UK. Further economic growth
is expected in the fourth quarter.
Crude oil prices in the third quarter were supported by strong crude demand on
the back of high refining margins, the slow recovery in Iraqi exports and lower
OPEC-10 production following the quota reductions that became effective in June.
Commercial oil inventories remain below normal seasonal levels but a recovery in
US crude stocks has resulted in a marked narrowing of the WTI-Brent
differential. OPEC has announced a new quota cut, effective November 1. Oil
prices have risen by around $5 per barrel since OPEC's September 24
announcement. The future path of oil prices will depend upon the recovery of
exports from Iraq and the degree of OPEC's production restraint.
US natural gas prices softened in the third quarter but remained high by
historical standards and above residual fuel oil parity. Gas price differentials
in the Rockies and San Juan Basin have narrowed significantly following the
opening of the Kern River pipeline expansion. High prices throughout 2003 have
led to large storage injections through the summer. Gas in storage has reached
historical average levels and is expected to be sufficient for the forthcoming
winter heating season, assuming normal weather.
Refining margins have started the fourth quarter below the third quarter average
but remain above historic average levels, particularly in the USA. The autumn
refinery turnaround season is supporting margins at present but OECD commercial
product inventories are recovering. Retail margins in the third quarter were
below the second quarter levels but continued to be relatively strong,
especially in western Europe and western USA. Fourth quarter margins are
expected to soften further and revert to more typical levels.
Petrochemical margins in the third quarter fell back from second quarter levels
as a result of increases in feedstock costs despite some recovery of demand in
Europe. Fourth quarter prospects will be influenced by continued strength in
feedstock costs.
Page 13
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - concluded
OUTLOOK (concluded)
Our capital expenditure, excluding acquisitions, was $9.4 billion for the nine
months. We now expect full year capital expenditure excluding acquisitions to be
slightly below the $14-14.5 billion range indicated previously, due to
continuous refinement of our spending programmes. As previously indicated, we
expect 2003 to be the peak of our medium term capital spending programme. As a
follow-up to the completion of the TNK-BP deal in August, we have agreed to
invest a further $1.35 billion to expand TNK-BP to include AAR's 50% interest in
Slavneft; we now expect to complete this transaction by year-end. We also expect
to make the remaining two-thirds of the $2billion of incremental payments into a
number of the Group's pension plans announced in July. We expect gearing to be
within our 25-35% target range following these events. In light of these
factors, we do not currently plan any share buy-backs during the fourth quarter.
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' and the statements under
'Outlook', with regard to hydrocarbon production growth, the economic outlook,
trends in the trading environment, the timing of acquisitions and divestments,
share repurchases, the timing of new projects, oil, gas and petrochemicals
margins, refining margins, retail margins, realizations on gas sales, inventory
and product stock levels, capacity utilization, capital expenditure trends,
gearing, working capital, profitability, results of operations, dividend
payments, pension scheme funding, long term purchase commitments and liquidity
or financial position 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' 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, political stability and economic growth in relevant areas
of the world, development and use of new technology, successful partnering, the
actions of competitors, the actions of third party suppliers of facilities and
services, natural disasters and other changes to business conditions, prolonged
adverse weather 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 2002 and the Annual Report on Form 20-F
for 2002 filed with the US Securities and Exchange Commission.
2003 DIVIDENDS
On October 28, 2003, BP p.l.c. announced a third quarterly dividend for 2003 of
6.50 cents per ordinary share of 25 cents (ordinary shares), representing $0.39
per American Depositary Share (ADS) amounting to $1,438 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares is November 14, 2003, with payment to be made
on December 8, 2003.
Under the former US-UK Income Tax Treaty, dividends paid to qualifying ADS
holders entitled them to a refund of a deemed UK tax credit equal to 1/9th of
the announced dividend. This credit was exactly offset by an amount deemed by
the former US-UK Income Tax Treaty to be a UK withholding tax. The net effect
for ADS holders was a cash payment equal to the amount of the announced
dividend, a potential foreign tax credit equal to 1/9th of the announced
dividend, and a gross dividend equal to the sum of those two amounts. Under the
new US-UK Tax Treaty, this deemed tax credit is no longer available on dividends
paid to qualifying ADS shareholders, beginning with the first quarterly dividend
for 2003.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan will receive the dividend in the form of shares on December 8, 2003.
Page 14
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------------- ------------------------
($ million, except per share amounts)
Turnover - Note 2 61,056 49,423 181,913 130,051
Less: joint ventures 914 369 1,676 1,052
-------- -------- -------- --------
Group turnover 60,142 49,054 180,237 128,999
Cost of sales 52,335 43,632 156,223 111,365
Production taxes - Note 3 416 350 1,302 912
-------- -------- -------- --------
Gross profit 7,391 5,072 22,712 16,722
Distribution and administration expenses 3,908 3,214 10,558 9,028
Exploration expense - Note 4 136 119 349 465
-------- -------- -------- --------
3,347 1,739 11,805 7,229
Other income 148 151 476 423
-------- -------- -------- --------
Group operating profit 3,495 1,890 12,281 7,652
Share of profits of joint ventures 300 105 522 260
Share of profits of associated undertakings 133 67 422 456
-------- -------- -------- --------
Total operating profit 3,928 2,062 13,225 8,368
Profit (loss) on sale of fixed assets and
businesses 172 1,794 846 2,061
or termination of operations - Note 5
-------- -------- -------- --------
Profit before interest and tax 4,100 3,856 14,071 10,429
Interest expense - Note 6 213 300 624 947
-------- -------- -------- --------
Profit before taxation 3,887 3,556 13,447 9,482
Taxation - Note 7 1,450 713 5,023 3,217
-------- -------- -------- --------
Profit after taxation 2,437 2,843 8,424 6,265
Minority shareholders' interest 43 3 129 71
-------- -------- -------- --------
Profit for the period (a) 2,394 2,840 8,295 6,194
======== ======== ======== ========
Earnings per ordinary share - cents (a)
Basic 10.85 12.67 37.37 27.63
Diluted 10.74 12.61 37.18 27.49
-------- -------- -------- --------
Earnings per American Depositary Share - cents (a)
Basic 65.10 76.02 224.22 165.78
Diluted 64.44 75.66 223.08 164.94
---------- ---------- ---------- ----------
Average number of outstanding ordinary
shares (thousand) 22,092,365 22,408,297 22,193,403 22,412,655
========== ========== ========== ==========
---------------
(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 13.
Page 15
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2003 December 31, 2002
(Unaudited)
-------------------- ---------------------
($ million)
Fixed assets
Intangible assets 13,631 15,566
Tangible assets 88,930 87,682
Investments 16,935 10,811
-------- --------
119,496 114,059
Current assets
Inventories 10,868 10,181
Receivables 38,243 33,150
Investments 404 215
Cash at bank and in hand 1,091 1,520
-------- --------
50,606 45,066
-------- --------
Current liabilities - falling due within one year
Finance debt 6,811 10,086
Accounts payable and accrued liabilities 41,191 36,215
-------- --------
48,002 46,301
-------- --------
Net current assets (liabilities) 2,604 (1,235)
-------- --------
Total assets less current liabilities 122,100 112,824
Noncurrent liabilities
Finance debt 13,159 11,922
Accounts payable and accrued liabilities 5,778 3,455
Provisions for liabilities and charges
Deferred tax 14,282 13,514
Other 14,525 13,886
-------- --------
47,744 42,777
-------- --------
Net assets 74,356 70,047
Minority shareholders' interest - equity 1,074 638
-------- --------
BP shareholders' interest (a) - Note 10 73,282 69,409
======== ========
Represented by:
Capital shares
Preference 21 21
Ordinary 5,527 5,595
Paid-in surplus 4,423 4,243
Merger reserve 27,060 27,033
Retained earnings 36,105 32,344
Other reserves 146 173
-------- --------
73,282 69,409
======== ========
---------------
(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 13.
Page 16
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
($ million)
Net cash inflow from operating activities 4,891 4,376 18,198 13,145
------- ------- ------- -------
Dividends from joint ventures 39 30 80 129
------- ------- ------- -------
Dividends from associated undertakings 65 96 297 303
------- ------- ------- -------
Servicing of finance and returns on investments
Interest received 41 63 124 168
Interest paid (163) (218) (816) (869)
Dividends received 26 4 74 64
Dividends paid to minority shareholders (4) (13) (17) (29)
------- ------- ------- -------
Net cash outflow from servicing of finance
and returns on investments (100) (164) (635) (666)
------- ------- ------- -------
Taxation
UK corporation tax (264) (206) (856) (560)
Overseas tax (539) (455) (2,432) (1,473)
------- ------- ------- -------
Tax paid (803) (661) (3,288) (2,033)
------- ------- ------- -------
Capital expenditure and financial investment
Payments for fixed assets (3,063) (2,980) (8,700) (8,572)
Proceeds from the sale of fixed assets 874 488 4,843 1,744
------- ------- ------- -------
Net cash outflow for capital expenditure and
financial investment (2,189) (2,492) (3,857) (6,828)
------- ------- ------- -------
Acquisitions and disposals
Investments in associated undertakings (243) (125) (760) (756)
Proceeds from the sale of investment in Ruhrgas - 2,338 - 2,338
Acquisitions, net of cash acquired (28) (2,607) (178) (4,296)
Acquisition of investment in TNK-BP joint venture (2,625) - (2,625) -
Net investment in joint ventures - (23) (16) (137)
Proceeds from the sale of businesses - 55 179 1,670
------- ------- ------- -------
Net cash (outflow) inflow for acquisitions
and disposals (2,896) (362) (3,400) (1,181)
------- ------- ------- -------
Equity dividends paid (1,433) (1,346) (4,216) (3,924)
------- ------- ------- -------
Net cash inflow (outflow) (2,426) (523) 3,179 (1,055)
======= ======= ======= =======
Financing (1,471) (219) 3,477 (485)
Management of liquid resources 76 (32) 182 (164)
Increase (decrease) in cash (1,031) (272) (480) (406)
------- ------- ------- -------
(2,426) (523) 3,179 (1,055)
======= ======= ======= =======
---------------
(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 13.
Page 17
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - concluded
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
($ million)
Reconciliation of historical cost profit before interest
and tax to net cash inflow from operating activities
Profit before interest and tax 4,100 3,856 14,071 10,429
Depreciation and amounts provided 2,485 3,506 7,847 7,886
Exploration expenditure written off 75 55 168 261
Share of profits of joint ventures and associated
undertakings (433) (172) (944) (716)
Interest and other income (72) (62) (220) (243)
(Profit) loss on sale of fixed assets and businesses (172) (1,796) (846) (2,061)
Charge for provisions 765 332 1,171 826
Utilization of provisions (278) (392) (822) (1,003)
Decrease (increase) in inventories (1,048) (155) (479) (1,458)
Decrease (increase) in debtors (638) (379) (4,321) (2,403)
(Decrease) increase in creditors 107 (417) 2,573 1,627
------- ------- ------- -------
Net cash inflow from operating activities 4,891 4,376 18,198 13,145
======= ======= ======= =======
Financing
Long-term borrowing (1,433) (558) (2,656) (3,056)
Repayments of long-term borrowing 1,774 567 2,784 1,464
Short-term borrowing (1,924) (1,627) (2,968) (5,879)
Repayments of short-term borrowing 143 704 4,430 6,414
------- ------- ------- -------
(1,440) (914) 1,590 (1,057)
Issue of ordinary share capital (31) (55) (112) (178)
Repurchase of ordinary share capital - 750 1,999 750
------- ------- ------- -------
Net cash outflow (inflow) from financing (1,471) (219) 3,477 (485)
======= ======= ======= =======
---------------
(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 13.
Page 18
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, 2002 included in BP's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------------ ------------------------
($ million)
2. Turnover
By business
Exploration and Production 7,310 6,220 23,811 18,397
Gas, Power and Renewables 15,904 9,313 48,777 25,316
Refining and Marketing 40,245 35,634 118 ,629 92,393
Petrochemicals 3,798 3,720 11,739 9,946
Other businesses and corporate 138 108 378 379
------- ------- ------- -------
67,395 54,995 203,334 146,431
Less: sales between businesses 7,253 5,941 23,097 17,432
------- ------- ------- -------
Group excluding joint ventures 60,142 49,054 180,237 128,999
Share of sales of joint ventures 914 369 1,676 1,052
------- ------- ------- -------
61,056 49,423 181,913 130,051
======= ======= ======= =======
By geographical area
Group excluding joint ventures
UK 12,856 12,160 41,739 35,664
Rest of Europe 12,181 13,460 37,409 34,798
USA 31,011 22,880 88,093 57,808
Rest of World 12,766 8,537 38,604 23,556
------- ------- ------- -------
68,814 57,037 205,845 151,826
Less: sales between areas 8,672 7,983 25,608 22,827
------- ------- ------- -------
60,142 49,054 180,237 128,999
======= ======= ======= =======
3. Production taxes
UK petroleum revenue tax 65 92 256 245
Overseas production taxes 351 258 1,046 667
------- ------- ------- -------
416 350 1,302 912
======= ======= ======= =======
4. Exploration expense
Exploration and Production
UK 11 16 16 26
Rest of Europe 23 5 32 41
USA 60 53 144 228
Rest of World 42 45 157 170
------- ------- ------- -------
136 119 349 465
======= ======= ======= =======
Page 19
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------------- --------------------------
($ million)
5. Analysis of exceptional items
Profit (loss) on sale of fixed assets and
businesses or termination of operations
Exploration and Production 196 (25) 962 407
Gas, Power and Renewables (2) 1,585 4 1,584
Refining and Marketing (21) 262 (122) 248
Petrochemicals 13 11 22 (134)
Other businesses and corporate (14) (39) (20) (44)
------ ------ ------ ------
Exceptional items before taxation 172 1,794 846 2,061
Taxation charge (4) (25) (207) (146)
------ ------ ------ ------
Exceptional items after taxation 168 1,769 639 1,915
====== ====== ====== ======
6. Interest expense
Group interest payable (a) 178 250 528 778
Capitalized (53) (27) (130) (67)
------ ------ ------ ------
125 223 398 711
Joint ventures 23 15 53 44
Associated undertakings 11 19 33 64
Unwinding of discount on provisions 45 43 131 128
Unwinding of discount on deferred consideration
for acquisitions of investment in TNK-BP 9 - 9 -
------ ------ ------ ------
213 300 624 947
====== ====== ====== ======
(a) Includes charges relating to the
early redemption of debt 18 - 21 -
7. Charge for taxation
Current 1,528 463 4,515 2,036
Deferred (a) (78) 250 508 1,181
------ ------ ------ ------
1,450 713 5,023 3,217
====== ====== ====== ======
UK (a) 280 235 1,178 1,070
Overseas 1,170 478 3,845 2,147
------ ------ ------ ------
1,450 713 5,023 3,217
====== ====== ====== ======
(a) Includes the adjustment to the North Sea
deferred tax balance for the supplementary
UK corporation tax of 10% - - - 355
------ ------ ------ ------
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
8. Business and geographical analysis
Gas, Other
Exploration Power Refining businesses
By business and and and Petro- and
Production Renewables Marketing chemicals corporate Eliminations Total
--------------------------------------------------------------------------------------------
($ million)
Three months
ended September 30, 2003
Group turnover
- third parties 1,736 15,452 39,138 3,678 138 - 60,142
- sales between businesses 5,574 452 1,107 120 - (7,253) -
--------------------------------------------------------------------------------------------
7,310 15,904 40,245 3,798 138 (7,253) 60,142
--------------------------------------------------------------------------------------------
Share of sales by joint ventures 675 - 129 110 - - 914
--------------------------------------------------------------------------------------------
Equity accounted income 348 (1) 51 29 6 - 433
--------------------------------------------------------------------------------------------
Total operating profit (loss) 3,520 91 544 83 (310) - 3,928
Exceptional items 196 (2) (21) 13 (14) - 172
--------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 3,716 89 523 96 (324) - 4,100
--------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 8,250 58 659 182 59 - 9,208
Three months
ended September 30, 2002
Group turnover
- third parties 1,628 9,218 34,723 3,377 108 - 49,054
- sales between businesses 4,592 95 911 343 - (5,941) -
--------------------------------------------------------------------------------------------
6,220 9,313 35,634 3,720 108 (5,941) 49,054
--------------------------------------------------------------------------------------------
Share of sales by joint ventures 146 - 135 88 - - 369
--------------------------------------------------------------------------------------------
Equity accounted income 174 13 60 (88) 13 - 172
--------------------------------------------------------------------------------------------
Total operating profit (loss) 1,575 59 548 121 (241) - 2,062
Exceptional items (25) 1,585 262 11 (39) - 1,794
--------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 1,550 1,644 810 132 (280) - 3,856
--------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 2,240 107 605 180 48 - 3,180
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
8. Business and geographical analysis - continued
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------------------------------------------------------------------
($ million)
Three months ended September 30, 2003
Group turnover -third parties 9,093 9,977 30,398 10,674 - 60,142
-sales between areas 3,763 2,204 613 2,092 (8,672) -
------------------------------------------------------------------
12,856 12,181 31,011 12,766 (8,672) 60,142
------------------------------------------------------------------
Share of sales by joint ventures 40 70 57 747 - 914
------------------------------------------------------------------
Equity accounted income (2) 2 56 377 - 433
------------------------------------------------------------------
Total operating profit (loss) 315 513 1,343 1,757 - 3,928
Exceptional items 168 (66) (38) 108 - 172
------------------------------------------------------------------
Profit before interest and tax 483 447 1,305 1,865 - 4,100
------------------------------------------------------------------
Capital expenditure and acquisitions 377 271 1,403 7,157 - 9,208
Three months ended September 30, 2002
Group turnover -third parties 8,316 11,095 22,770 6,873 - 49,054
-sales between areas 3,844 2,365 110 1,664 (7,983) -
------------------------------------------------------------------
12,160 13,460 22,880 8,537 (7,983) 49,054
------------------------------------------------------------------
Share of sales by joint ventures 3 62 78 226 - 369
------------------------------------------------------------------
Equity accounted income (1) 27 62 84 - 172
------------------------------------------------------------------
Total operating profit (loss) (88) 748 777 625 - 2,062
Exceptional items (18) 1,672 161 (21) - 1,794
------------------------------------------------------------------
Profit before interest and tax (106) 2,420 938 604 - 3,856
------------------------------------------------------------------
Capital expenditure and acquisitions 394 353 1,389 1,044 - 3,180
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
8. Business and geographical analysis - continued
Gas, Other
Exploration Power Refining businesses
By business and and and Petro- and
Production Renewables Marketing chemicals corporate Eliminations Total
--------------------------------------------------------------------------------------------
($ million)
Nine months
ended September 30, 2003
Group turnover
- third parties 5,892 47,321 115,303 11,343 378 - 180,237
- sales between businesses 17,919 1,456 3,326 396 - (23,097) -
--------------------------------------------------------------------------------------------
23,811 48,777 118,629 11,739 378 (23,097) 180,237
--------------------------------------------------------------------------------------------
Share of sales by joint ventures 1,024 - 341 311 - - 1,676
--------------------------------------------------------------------------------------------
Equity accounted income 743 (4) 125 56 24 - 944
--------------------------------------------------------------------------------------------
Total operating profit (loss) 11,002 343 1,911 578 (609) - 13,225
Exceptional items 962 4 (122) 22 (20) - 846
--------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 11,964 347 1,789 600 (629) - 14,071
--------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 12,849 224 1,581 476 278 - 15,408
Nine months
ended September 30, 2002
Group turnover
- third parties 4,965 24,347 89,866 9,442 379 - 128,999
- sales between businesses 13,432 969 2,527 504 - (17,432) -
--------------------------------------------------------------------------------------------
18,397 25,316 92,393 9,946 379 (17,432) 128,999
--------------------------------------------------------------------------------------------
Share of sales by joint ventures 378 - 314 360 - - 1,052
--------------------------------------------------------------------------------------------
Equity accounted income 426 105 163 (20) 42 - 716
--------------------------------------------------------------------------------------------
Total operating profit (loss) 5,963 292 2,158 449 (494) - 8,368
Exceptional items 407 1,584 248 (134) (44) - 2,061
--------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 6,370 1,876 2,406 315 (538) - 10,429
--------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 7,126 285 6,707 538 367 - 15,023
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
8. Business and geographical analysis - concluded
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------------------------------------------------------------------
($ million)
Nine months ended September 30, 2003
Group turnover -third parties 30,298 30,673 86,530 32,736 - 180,237
-sales between areas 11,441 6,736 1,563 5,868 (25,608) -
------------------------------------------------------------------
41,739 37,409 88,093 38,604 (25,608) 180,237
------------------------------------------------------------------
Share of sales by joint ventures 86 225 144 1,221 - 1,676
------------------------------------------------------------------
Equity accounted income 1 4 119 820 - 944
------------------------------------------------------------------
Total operating profit 1,718 1,632 5,319 4,556 - 13,225
Exceptional items 693 (97) (275) 525 - 846
------------------------------------------------------------------
Profit before interest and tax 2,411 1,535 5,044 5,081 - 14,071
------------------------------------------------------------------
Capital expenditure and acquisitions 1,039 640 4,341 9,388 - 15,408
Nine months ended September 30, 2002
Group turnover -third parties 24,900 28,724 56,411 18,964 - 128,999
-sales between areas 10,764 6,074 1,397 4,592 (22,827) -
------------------------------------------------------------------
35,664 34,798 57,808 23,556 (22,827) 128,999
------------------------------------------------------------------
Share of sales by joint ventures 107 188 181 576 - 1,052
------------------------------------------------------------------
Equity accounted income (4) 138 191 391 - 716
------------------------------------------------------------------
Total operating profit 1,004 1,842 2,737 2,785 - 8,368
Exceptional items (51) 1,637 534 (59) - 2,061
------------------------------------------------------------------
Profit before interest and tax 953 3,479 3,271 2,726 - 10,429
------------------------------------------------------------------
Capital expenditure and acquisitions 1,203 6,158 4,387 3,275 - 15,023
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
----------------------- -----------------------
($ million)
9. Analysis of changes in net debt Opening balance
Finance debt 18,594 21,409 22,008 21,417
Less: Cash 2,115 1,284 1,520 1,358
Current asset investments 329 285 215 450
------- ------- ------- -------
Opening net debt 16,150 19,840 20,273 19,609
------- ------- ------- -------
Closing balance
Finance debt 19,970 22,276 19,970 22,276
Less: Cash 1,091 1,005 1,091 1,005
Current asset investments 404 285 404 285
------- ------- ------- -------
Closing net debt 18,475 20,986 18,475 20,986
------- ------- ------- -------
Decrease (increase) in net debt (2,325) (1,146) 1,798 (1,377)
======= ======= ======= =======
Movement in cash/bank overdrafts (1,031) (272) (480) (406)
Increase (decrease) in current asset investments 76 (32) 182 (164)
Net cash outflow (inflow) from financing
(excluding share capital) (1,440) (914) 1,590 (1,057)
Partnership interests exchanged for BP loan notes - - - 1,135
Debt transferred to TNK-BP 93 - 93 -
Exchange of Exchangeable Bonds for
Lukoil American Depositary Shares - - 420 -
Other movements (31) 13 139 57
Debt acquired (12) - (12) (999)
------- ------- ------- -------
Movements in net debt before exchange effects (2,345) (1,205) 1,932 (1,434)
Exchange adjustments 20 59 (134) 57
------- ------- ------- -------
Decrease (increase) in net debt (2,325) (1,146) 1,798 (1,377)
======= ======= ======= =======
10. Movement in BP shareholders' interest $ million
Balance at December 31, 2002 69,409
Profit for the period 8,295
Distribution to shareholders (4,258)
Currency translation differences (net of tax) 1,723
Issue of ordinary share capital for employee share schemes 112
Repurchase of ordinary share capital (1,999)
-------
Balance at September 30, 2003 73,282
=======
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Earnings per share
Basic earnings per share excludes the dilutive effects of options, warrants
and convertible securities. Diluted earnings per share reflects the
potential dilution that could occur if options, warrants or convertible
securities were exercised or converted into ordinary shares that shared in
the earnings of the Group. The dilutive effect of outstanding share options
is as follows:
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------------- ----------------------------
(shares thousand)
Weighted average number of ordinary shares 22,092,365 22,408,297 22,193,403 22,412,655
Ordinary shares issuable under employee
share schemes and as deferred consideration
for TNK-BP acquisition 247,416 96,998 138,799 113,159
----------- ----------- ----------- -----------
22,339,781 22,505,295 22,332,202 22,525,814
=========== =========== =========== ===========
12. 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
FASB Statement No. 123, `Accounting for Stock-Based Compensation', to share
based employee compensation.
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------------- -------------------------
($ million)
Profit for the period applicable to ordinary shares,
as reported 2,394 2,840 8,295 6,194
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (23) (21) (70) (69)
-------- -------- -------- --------
Pro forma net income 2,371 2,819 8,225 6,125
======== ======== ======== ========
(cents)
Earnings per ordinary share
Basic - as reported 10.85 12.67 37.37 27.63
Basic - pro forma 10.73 12.58 37.06 27.32
Diluted - as reported 10.74 12.61 37.18 27.49
Diluted - pro forma 10.61 12.52 36.83 27.19
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. 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 certain oil and natural gas
activities and undivided interests in pipelines. US GAAP permits these
activities 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, inventory
holding gains or losses, 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 September 30, 2003
(Unaudited)
-----------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
------------------------------------------------------
($ million)
Consolidated statement of income
Other income 148 301 449
Share of profits of JVs and associated undertakings 433 (433) -
Exceptional items before taxation 172 - 172
Interest expense 213 (34) 179
Taxation 1,450 (98) 1,352
Profit for the period 2,394 - 2,394
Nine months ended September 30, 2003
(Unaudited)
--------------------------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------------------------
($ million)
Consolidated statement of income
Other income 476 692 1,168
Share of profits of JVs and associated undertakings 944 (944) -
Exceptional items before taxation 846 - 846
Interest expense 624 (86) 538
Taxation 5,023 (166) 4,857
Profit for the period 8,295 - 8,295
Page 27
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(i) Group consolidation (concluded)
Three months ended September 30, 2002
(Unaudited)
--------------------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------------------------
($ million)
Consolidated statement of income
Other income 151 76 227
Share of profits of JVs and associated undertakings 172 (172) -
Exceptional items before taxation 1,794 2 1,796
Interest expense 300 (34) 266
Taxation 713 (63) 650
Profit for the period 2,840 - 2,840
Nine months ended September 30, 2002
(Unaudited)
--------------------------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------------------------
($ million)
Consolidated statement of income
Other income 423 421 844
Share of profits of JVs and associated undertakings 716 (716) -
Exceptional items before taxation 2,061 - 2,061
Interest expense 947 (108) 839
Taxation 3,217 (187) 3,030
Profit for the year 6,194 - 6,194
(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 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. 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 Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Cost of sales (218) 380 931 670
Taxation 219 (321) (964) (495)
Profit for the period (1) (59) 33 (175)
====== ====== ====== ======
At At
September 30, December 31,
2003 2002
(Unaudited)
------------- ------------
($ million)
Tangible assets 6,605 7,408
Deferred taxation 6,664 7,486
BP shareholders' interest (59) (78)
====== ======
(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.
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 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(iv) Provisions - continued
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 nine
months ended September 30, 2003 was to increase profit for the three
month period by $10 million and decrease profit for the nine months
period by $97 million, before cumulative effect of accounting changes
as adjusted to accord with US GAAP.
Under US GAAP environmental liabilities are discounted only where the
timing and amounts of payments are fixed and reliably determinable.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Cost of sales 67 61 125 170
Interest expense (44) (43) (127) (128)
Taxation (51) (8) (51) (24)
Profit for the period before cumulative
effect of accounting changes 28 (10) 53 (18)
Cumulative effect of accounting changes - - 1,002 -
Profit for the period 28 (10) 1,055 (18)
====== ====== ====== ======
At At
September 30, December 31,
2003 2002
(Unaudited)
------------- ------------
($ million)
Tangible assets (683) (1,297)
Provisions (525) 412
Deferred taxation (58) (621)
BP shareholders' interest (100) (1,088)
====== ======
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(iv)Provisions (concluded)
The following pro forma data summarize the results of operations
assuming SFAS 143 was applied retroactively with effect from January
1, 2002 for the three and nine months ended September 30, 2003 and
2002.
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Profit for the period applicable to ordinary
shares as adjusted to accord with US GAAP
As reported 2,770 3,079 9,770 7,564
Pro forma 2,770 3,154 9,770 7,684
Per ordinary share - cents
Basic - as reported 12.55 13.73 44.02 33.74
Basic - pro forma 12.55 14.07 44.02 34.28
Diluted - as reported 12.38 13.67 43.74 33.57
Diluted - pro forma 12.38 14.01 43.74 34.11
Per American Depositary Share - cents
Basic - as reported 75.30 82.38 264.12 202.44
Basic - pro forma 75.30 84.42 264.12 205.68
Diluted - as reported 74.28 82.02 262.44 201.42
Diluted - pro forma 74.28 84.06 262.44 204.66
The pro forma asset retirement obligation at January 1, 2002 and
December 31, 2002, assuming SFAS 143 was applied retroactively with
effect from January 1, 2002, amounts to $3,268 million and $3,469
million, respectively.
(v) Sale and leaseback
The sale and leaseback of an office building in Chicago, Illinois in
1998 was treated as a sale for UK GAAP whereas for US GAAP it was
treated as a financing transaction. The remaining interest in this
building was sold in January 2003.
Provisions were recognized under UK GAAP in 1999 and 2002 to cover the
likely shortfall on rental income from subletting the Chicago office
building. As the original sale and leaseback was not treated as a sale
for US GAAP the provision was reversed for US GAAP. Following the
disposal of the building a provision has now been recognized for US
GAAP.
Under UK GAAP the profit arising on the sale and operating leaseback
of certain railcars in 1999 was taken to income in the period in which
the transaction occurred. Under US GAAP this profit was not recognized
immediately but amortized over the term of the operating lease.
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(v) Sale and leaseback (concluded)
The adjustments to profit for the period and BP shareholders' interest
to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Cost of sales (23) (51) (135) (44)
Taxation 7 18 46 16
Profit for the period 16 33 89 28
====== ====== ====== ======
At At
September 30, December 31,
2003 2002
(Unaudited)
------------- ------------
($ million)
Tangible assets - 161
Other accounts payable and accrued liabilities 25 27
Provisions 2 (117)
Finance debt - 413
Deferred taxation (10) (56)
BP shareholders' interest (17) (106)
====== ======
(vi) Goodwill and intangible assets
Various differences in the basis for determining goodwill between UK
and US GAAP result in goodwill for US GAAP reporting differing from
the amount recognized under UK GAAP.
On January 1, 2002 the Group adopted Statement of Financial Accounting
Standards No. 142 `Goodwill and Other Intangible Assets' (SFAS 142)
for US GAAP reporting. This standard eliminates the requirement to
amortize goodwill and indefinite lived intangible assets. Rather, such
assets are subject to periodic impairment testing. Intangible assets
that are not deemed to have an indefinite life continue to be
amortized over their estimated useful lives. Amortization of goodwill
charged to income under UK GAAP has been reversed for US GAAP.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Cost of sales (342) (334) (1,027) (977)
Profit for the period 342 334 1,027 977
====== ====== ====== ======
At At
September 30, December 31,
2003 2002
(Unaudited)
------------- ------------
($ million)
Intangible assets 968 (84)
BP shareholders' interest 968 (84)
====== ======
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. 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 nine months
ended September 30, 2003 are shown below.
Exploration Other
expenditure Goodwill intangibles Total
-----------------------------------------------------------
($ million)
Net book amount
At January 1, 2003 4,944 10,354 488 15,786
Amortization expense (169) - (60) (229)
Other movements (623) (90) 44 (669)
-----------------------------------------------------------
At September 30, 2003 4,152 10,264 472 14,888
===========================================================
Amortization expense relating to other intangibles is expected to be
in the range $100-$200 million in each of the succeeding five years.
During the second quarter of 2003 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.
(vii) Derivative financial instruments and hedging activities
SFAS 133 `Accounting for Derivative Instruments and Hedging
Activities' 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 US GAAP, these contracts are
marked-to-market.
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(vii) Derivative financial instruments and hedging activities (concluded)
In October 2002, the FASB Emerging Issues Task Force (EITF) reached a
consensus which rescinded EITF Issue No. 98-10, 'Accounting for
Contracts Involved in Energy Trading and Risk Management Activities'
(EITF 98-10). As a result of this consensus, all energy-related,
non-derivative contracts (such as transportation, storage, tolling,
and requirements contracts that do not meet the definition of a
derivative) and trading inventories that are accounted for at fair
value pursuant to EITF 98-10 are no longer accounted for at fair value
upon application of the consensus. Rather, such contracts are
accounted for as executory contracts on an accruals basis.
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 $50 million.
Also in October 2002, the FASB Emerging Issues Task Force (EITF)
reached a consensus with regards to EITF Issue No. 02-3, `Issues
Involved in Accounting for Contracts Under EITF Issue No. 98-10
"Accounting for Contracts Involved in Energy Trading and Risk
Management Activities"' (EITF 02-3). Under this consensus trading
inventories are recorded on the balance sheet at historical cost. The
Group marks trading inventories to market at the balance sheet date.
Thus a UK/US GAAP difference arises which impacts both profit for the
year and BP shareholders' interest due to the difference in inventory
valuations.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Cost of sales 17 71 (418) (896)
Taxation (7) (14) 145 332
Profit for the period before cumulative
effect of accounting changes (10) (57) 273 564
Cumulative effect of accounting changes - - 50 -
Profit for the period (10) (57) 323 564
====== ====== ====== ======
At At
September 30, December 31,
2003 2002
(Unaudited)
------------- ------------
($ million)
Inventories (33) (209)
Accounts payable and accrued liabilities (332) (13)
Deferred taxation 111 (61)
BP shareholders' interest 188 (135)
====== ======
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(viii) Gain arising on asset exchange
For UK GAAP the transaction with Solvay in the fourth quarter of 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 at fair
value which gave rise to a gain on disposal.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- ----------------------
($ million)
Cost of sales 6 6 17 21
Taxation (2) (2) (6) (7)
Profit for the period (4) (4) (11) (14)
====== ====== ====== ======
At At
September 30, December 31,
2003 2002
(Unaudited)
------------- ------------
($ million)
Intangibles assets 155 167
Accounts payable and accrued liabilities (49) (52)
Deferred taxation 71 77
BP shareholders' interest 133 142
====== ======
(ix) Ordinary shares held for future awards to employees
Under UK GAAP, Company shares held by an Employee Share Ownership Plan
to meet future requirements of employee share schemes are recorded in
the balance sheet as Fixed assets - investments. Under US GAAP, such
shares are recorded in the balance sheet as a reduction of
shareholders' interest.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
September 30, December 31,
2003 2002
Increase (decrease) in caption heading (Unaudited)
------------- ------------
($ million)
Fixed assets - Investments (58) (159)
BP shareholders' interest (58) (159)
====== ======
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
(x) 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
September 30, December 31,
2003 2002
Increase (decrease) in caption heading (Unaudited)
------------- ------------
($ million)
Other accounts payable and accrued liabilities (1,438) (1,398)
BP shareholders' interest 1,438 1,398
====== ======
(xi) 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.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
September 30, December 31,
2003 2002
Increase (decrease) in caption heading (Unaudited)
------------- ------------
($ million)
Fixed assets - Investments 735 52
Deferred taxation 257 18
BP shareholders' interest 478 34
====== ======
(xii) 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 BP shareholders' interest to accord with US GAAP
are summarized below.
At At
September 30, December 31,
2003 2002
Increase (decrease) in caption heading (Unaudited)
------------- ------------
($ million)
Intangible assets 137 137
Other receivables falling due after more than one year (1,211) (1,211)
Noncurrent liabilities - accounts payable and accrued liabilities 2,459 2,459
Deferred taxation (1,247) (1,247)
BP shareholders' interest (2,286) (2,286)
====== ======
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. 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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
-------------------- -------------------------
($ million)
Profit as reported in the consolidated statement of income 2,394 2,840 8,295 6,194
Adjustments:
------ ------ ------ ------
Deferred taxation/business combinations (iii) (1) (59) 33 (175)
Provisions (iv) 28 (10) 53 (18)
Sale and leaseback (v) 16 33 89 28
Goodwill (vi) 342 334 1,027 977
Derivative financial instruments (vii) (10) (57) 273 564
Gain arising on asset exchange (viii) (4) (4) (11) (14)
Other 5 2 11 8
------ ------ ------ ------
376 239 1,475 1,370
------ ------ ------ ------
Profit for the period as adjusted to accord with US
GAAP before cumulative effect of accounting changes 2,770 3,079 9,770 7,564
Cumulative effect of accounting changes:
Provisions - - 1,002 -
Derivative financial instruments - - 50 -
------ ------ ------ ------
Profit for the period as adjusted to accord with US GAAP 2,770 3,079 10,822 7,564
====== ====== ====== ======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of accounting changes 12.55 13.73 44.02 33.74
Cumulative effect of accounting changes:
Provisions - - 4.51 -
Derivative financial instruments - - 0.23 -
------ ------ ------ ------
12.55 13.73 48.76 33.74
====== ====== ====== ======
Diluted - before cumulative effect of accounting changes 12.38 13.67 43.74 33.57
Cumulative effect of accounting changes:
Provisions - - 4.49 -
Derivative financial instruments - - 0.22 -
------ ------ ------ ------
12.38 13.67 48.45 33.57
====== ====== ====== ======
Per American Depositary Share - cents (a)
Basic - before cumulative effect of accounting changes 75.30 82.38 264.12 202.44
Cumulative effect of accounting changes:
Provisions - - 27.06 -
Derivative financial instruments - - 1.38 -
------ ------ ------ ------
75.30 82.38 292.56 202.44
====== ====== ====== ======
Diluted - before cumulative effect of accounting changes 74.28 82.02 262.44 201.42
Cumulative effect of accounting changes:
Provisions - - 26.94 -
Derivative financial instruments - - 1.32 -
------ ------ ------ ------
74.28 82.02 290.70 201.42
====== ====== ====== ======
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
At
BP shareholders' interest September 30, 2003 At
(Unaudited) December 31, 2002
--------------------------------------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 73,282 69,409
------- -------
Adjustments:
Deferred taxation/business combinations (iii) (59) (78)
Provisions (iv) (100) (1,088)
Sale and leaseback (v) (17) (106)
Goodwill (vi) 968 (84)
Derivative financial instruments (vii) 188 (135)
Gain arising on asset exchange (viii) 133 142
Ordinary shares held for future awards to employees (ix) (58) (159)
Dividends (x) 1,438 1,398
Investments (xi) 478 34
Additional minimum pension liability (xii) (2,286) (2,286)
Other (44) (48)
------- -------
641 (2,410)
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 73,923 66,999
======= =======
---------------
(a) 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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
-------------------- -------------------------
($ million)
Profit for the period as adjusted to
accord with US GAAP 2,770 3,079 10,822 7,564
Currency translation differences 230 279 1,723 1,864
Net unrealized gain (loss) on investments 144 (69) 444 112
Additional minimum pension liability - - - -
------ ------ ------ ------
Comprehensive income 3,144 3,289 12,989 9,540
====== ====== ====== ======
Accumulated other comprehensive income at September 30, 2003 and December
31, 2002 comprised losses of $1,542 million and $3,709 million,
respectively.
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. 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 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
-------------------- -------------------------
($ million)
Operating activities
Profit after taxation 2,437 2,843 8,424 6,265
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,485 3,506 7,847 7,886
Exploration expenditure written off 75 55 168 261
Share of profits of joint ventures and associated
undertakings less dividends received (197) 51 (315) 11
(Profit) loss on sale of businesses and fixed assets (172) (1,796) (846) (2,061)
Working capital movement (a) (873) (1,002) (1,241) (2,323)
Deferred taxation (78) 250 508 1,181
Other 472 (191) 254 (247)
------ ------ ------ ------
Net cash provided by operating activities 4,149 3,716 14,799 10,973
------ ------ ------ ------
Investing activities
Capital expenditures (3,116) (3,007) (8,830) (8,639)
Acquisitions, net of cash acquired (2,653) (2,607) (2,803) (4,296)
Investment in associated undertakings (243) (125) (760) (756)
Net investment in joint ventures - (23) (16) (137)
Proceeds from disposal of assets 874 2,881 5,022 5,752
------ ------ ------ ------
Net cash used in investing activities (5,138) (2,881) (7,387) (8,076)
------ ------ ------ ------
Financing activities
Net proceeds from shares issued (repurchased) 31 (695) (1,887) (572)
Proceeds from long-term financing 1,433 558 2,656 3,056
Repayments of long-term financing (1,774) (567) (2,784) (1,464)
Net increase (decrease) in short-term debt 1,781 923 (1,462) (535)
Dividends paid - BP Shareholders (1,433) (1,346) (4,216) (3,924)
- Minority shareholders (4) (13) (17) (29)
------ ------ ------ ------
Net cash provided by financing activities 34 (1,140) (7,710) (3,468)
------ ------ ------ ------
Currency translation differences relating to cash
and cash equivalents 6 26 58 53
------ ------ ------ ------
Decrease in cash and cash equivalents (949) (279) (240) (518)
Cash and cash equivalents at beginning of period 2,444 1,569 1,735 1,808
------ ------ ------ ------
Cash and cash equivalents at end of period 1,495 1,290 1,495 1,290
====== ====== ====== ======
(a) Working capital:
Inventories (increase) decrease (1,048) (155) (479) (1,458)
Receivables (increase) decrease (656) (345) (4,368) (2,479)
Current liabilities - excluding finance debt
increase (decrease) 831 (502) 3,606 1,614
------ ------ ------ ------
(873) (1,002) (1,241) (2,323)
====== ====== ====== ======
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - continued
Impact of new US accounting standards
Guarantees: In November 2002, the FASB issued FASB Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" (Interpretation
45). Interpretation 45 elaborates on existing disclosure requirements for
guarantees and clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and
measurement provisions of Interpretation 45 apply on a prospective basis to
guarantees issued or modified after December 31, 2002.
Consolidation: 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. Interpretation 46 applies to variable interest entities
created or acquired after January 31, 2003. For variable interest entities
existing at January 31, 2003, Interpretation 46 is effective for accounting
periods ending after December 15, 2003.
The Company is currently carrying out the analysis necessary to adopt
Interpretation 46 in the fourth quarter of 2003 for existing entities. The
Company does not expect that the adoption of Interpretation 46 will have a
significant effect on profit, as adjusted to accord with US GAAP, or BP
shareholders' interest, as adjusted to accord with US GAAP.
The Company 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. At September 30, 2003 consolidation of these
entities would result in an increase in tangible assets and finance debt of
approximately $150 million. 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.
Financial instruments: In April 2003, the FASB issued Statement of
Financial Accounting Standards No. 149 "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends
and clarifies the financial accounting and reporting of derivative
instruments and hedging activities under SFAS 133. SFAS 149 applies to
contracts entered into or modified after June 30, 2003, and hedging
relationships designated after June 30, 2003.
In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 "Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards
for classifying and measuring certain financial instruments that have
characteristics of both liabilities and equity. SFAS 150 applies to
instruments entered into or modified after May 31, 2003. For instruments
existing at May 31, 2003, SFAS 150 is effective for accounting periods
beginning after June 15, 2003.
The adoption of SFAS 149 and SFAS 150 did not have a significant effect on
profit, as adjusted to accord with US GAAP, or BP shareholders' interest,
as adjusted to accord with US GAAP.
Tangible assets: The Securities and Exchange Commission has 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). The FASB, along with other
accounting and reporting issues impacting extractive industries, is
currently considering whether additional guidance is necessary.
In accordance with Group accounting practice, exploration license
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 September 30, 2003, exploration license acquisition
costs included in the Group's tangible fixed assets amounted to
approximately $1.1 billion, net of accumulated depletion.
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. US generally accepted accounting principles - concluded
Impact of new UK accounting standards
Retirement benefits: 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. 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.
In November 2002, the UK Accounting Standards Board issued an amendment to
FRS 17, which defers full adoption until January 1, 2005.
Impact of International accounting standards
In June 2002, the European Union Council of Ministers adopted a Regulation
which would require the Group to prepare its primary consolidated financial
statements in accordance with International Accounting Standards (IAS)
beginning January 1, 2005, with restatement of prior periods presented. IAS
differ in several respects from UK and US GAAP. In addition, significant
revisions to IAS are currently being contemplated and other revisions may
be adopted prior to January 1, 2005. The Group has not determined the
effects of adopting IAS.
14. TNK-BP operational and financial information
29 August -
30 September
2003
Production (Net of Royalties) (BP share)
Crude oil (mb/d) 654
Natural gas (mmcf/d) 239
Total hydrocarbons (mboe/d) (a) 695
=============
Income statement (BP share) $ million
Total operating profit 158
Profit (loss) on sale of fixed assets and businesses -
Interest expense (13)
Taxation (30)
Minority shareholders' interest (1)
-------------
Net income 114
=============
---------------
(a) Natural gas is converted to oil equivalent at 5.8 billion cubic feet =
1 million barrels.
15. Condensed consolidating information
The following information is presented in accordance with the financial
reporting rules of the Securities and Exchange Commission regarding issuers
and guarantors of guaranteed securities.
BP p.l.c. fully and unconditionally guarantees the payment obligations of
its 100% owned subsidiary BP Exploration (Alaska) Inc. under the Prudhoe
Bay Royalty Trust.
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 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2003
Turnover 784 - 61,056 (784) 61,056
Less: Joint ventures - - 914 - 914
-----------------------------------------------------------------------------
Group turnover 784 - 60,142 (784) 60,142
Cost of sales 378 - 52,817 (860) 52,335
Production taxes 58 - 358 - 416
-----------------------------------------------------------------------------
Gross profit 348 - 6,967 76 7,391
Distribution and administration expenses 3 38 3,867 - 3,908
Exploration expense 8 - 129 (1) 136
-----------------------------------------------------------------------------
337 (38) 2,971 77 3,347
Other income 5 112 204 (173) 148
-----------------------------------------------------------------------------
Group operating profit 342 74 3,175 (96) 3,495
Share of profits of joint ventures - - 300 - 300
Share of profits of associated undertakings - - 133 - 133
Equity accounted income of subsidiaries 64 3,908 - (3,972) -
-----------------------------------------------------------------------------
Total operating profit 406 3,982 3,608 (4,068) 3,928
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 184 172 (184) 172
-----------------------------------------------------------------------------
Profit before interest and tax 406 4,166 3,780 (4,252) 4,100
Interest expense 69 310 261 (427) 213
-----------------------------------------------------------------------------
Profit before taxation 337 3,856 3,519 (3,825) 3,887
Taxation 216 1,450 1,248 (1,464) 1,450
-----------------------------------------------------------------------------
Profit after taxation 121 2,406 2,271 (2,361) 2,437
Minority shareholders' interest - - 43 - 43
-----------------------------------------------------------------------------
Profit for the period 121 2,406 2,228 (2,361) 2,394
=============================================================================
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2003
Profit as reported 121 2,406 2,228 (2,361) 2,394
Adjustments:
Deferred taxation/business combinations (3) (1) 2 1 (1)
Provisions (20) 28 47 (27) 28
Sale and leaseback - 16 16 (16) 16
Goodwill - 342 342 (342) 342
Derivative financial instruments 8 (10) (10) 2 (10)
Gain arising on asset exchange - (4) (4) 4 (4)
Other - 5 5 (5) 5
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 106 2,782 2,626 (2,744) 2,770
=============================================================================
Page 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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)
Nine months ended September 30, 2003
Turnover 2,414 - 181,913 (2,414) 181,913
Less: Joint ventures - - 1,676 - 1,676
-----------------------------------------------------------------------------
Group turnover 2,414 - 180,237 (2,414) 180,237
Cost of sales 1,107 - 157,753 (2,637) 156,223
Production taxes 184 - 1,118 - 1,302
-----------------------------------------------------------------------------
Gross profit 1,123 - 21,366 223 22,712
Distribution and administration expenses 3 77 10,478 - 10,558
Exploration expense 16 - 334 (1) 349
-----------------------------------------------------------------------------
1,104 (77) 10,554 224 11,805
Other income 16 494 506 (540) 476
-----------------------------------------------------------------------------
Group operating profit 1,120 417 11,060 (316) 12,281
Share of profits of joint ventures - - 522 - 522
Share of profits of associated undertakings - - 422 - 422
Equity accounted income of subsidiaries 292 12,996 - (13,288) -
-----------------------------------------------------------------------------
Total operating profit 1,412 13,413 12,004 (13,604) 13,225
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 860 846 (860) 846
-----------------------------------------------------------------------------
Profit before interest and tax 1,412 14,273 12,850 (14,464) 14,071
Interest expense 207 941 785 (1,309) 624
-----------------------------------------------------------------------------
Profit before taxation 1,205 13,332 12,065 (13,155) 13,447
Taxation 605 5,023 4,507 (5,112) 5,023
-----------------------------------------------------------------------------
Profit after taxation 600 8,309 7,558 (8,043) 8,424
Minority shareholders' interest - - 129 - 129
-----------------------------------------------------------------------------
Profit for the period 600 8,309 7,429 (8,043) 8,295
=============================================================================
Page 45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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)
Nine months ended September 30, 2003
Profit as reported 600 8,309 7,429 (8,043) 8,295
Adjustments:
Deferred taxation/business combinations (9) 33 42 (33) 33
Provisions (25) 53 73 (48) 53
Sale and leaseback - 89 89 (89) 89
Goodwill - 1,027 1,027 (1,027) 1,027
Derivative financial instruments 8 273 273 (281) 273
Gain arising on asset exchange - (11) (11) 11 (11)
Other - 11 11 (11) 11
-----------------------------------------------------------------------------
Profit for the period before cumulative
effect of accounting changes as adjusted
to accord with US GAAP 574 9,784 8,933 (9,521) 9,770
Cumulative effect of accounting changes:
Provisions 214 1,002 788 (1,002) 1,002
Derivative financial instruments - 50 50 (50) 50
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 788 10,836 9,771 (10,573) 10,822
=============================================================================
Page 46
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2002
Turnover 635 - 49,423 (635) 49,423
Less: Joint ventures - - 369 - 369
-----------------------------------------------------------------------------
Group turnover 635 - 49,054 (635) 49,054
Cost of sales 427 - 43,854 (646) 43,635
Production taxes 49 - 301 - 350
-----------------------------------------------------------------------------
Gross profit 159 - 4,899 11 5,069
Distribution and administration expenses - 77 3,137 - 3,214
Exploration expense 3 - 116 - 119
-----------------------------------------------------------------------------
156 (77) 1,646 11 1,736
Other income 5 192 92 (138) 151
-----------------------------------------------------------------------------
Group operating profit 161 115 1,738 (127) 1,887
Share of profits of joint ventures - - 104 - 104
Share of profits of associated undertakings - - 71 - 71
Equity accounted income of subsidiaries 49 2,066 - (2,115) -
-----------------------------------------------------------------------------
Total operating profit 210 2,181 1,913 (2,242) 2,062
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 1,794 1,769 (1,769) 1,794
-----------------------------------------------------------------------------
Profit before interest and tax 210 3,975 3,682 (4,011) 3,856
Interest expense 23 427 416 (566) 300
-----------------------------------------------------------------------------
Profit before taxation 187 3,548 3,266 (3,445) 3,556
Taxation 55 713 666 (721) 713
-----------------------------------------------------------------------------
Profit after taxation 132 2,835 2,600 (2,724) 2,843
Minority shareholders' interest - - 3 - 3
-----------------------------------------------------------------------------
Profit for the period 132 2,835 2,597 (2,724) 2,840
=============================================================================
Page 47
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2002
Profit as reported 132 2,835 2,597 (2,724) 2,840
Adjustments:
Deferred taxation/business combinations (32) (59) (39) 71 (59)
Provisions 10 (10) (20) 10 (10)
Sale and leaseback - 33 33 (33) 33
Goodwill - 334 334 (334) 334
Derivative financial instruments - (57) (57) 57 (57)
Gain arising on asset exchange - (4) (4) 4 (4)
Other - 2 2 (2) 2
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 110 3,074 2,846 (2,951) 3,079
=============================================================================
Page 48
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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)
Nine months ended September 30, 2002
Turnover 1,729 - 129,987 (1,665) 130,051
Less: Joint ventures - - 1,052 - 1,052
-----------------------------------------------------------------------------
Group turnover 1,729 - 128,935 (1,665) 128,999
Cost of sales 1,047 - 112,013 (1,695) 111,365
Production taxes 146 - 766 - 912
-----------------------------------------------------------------------------
Gross profit 536 - 16,156 30 16,722
Distribution and administration expenses - 403 8,625 - 9,028
Exploration expense 16 - 449 - 465
-----------------------------------------------------------------------------
520 (403) 7,082 30 7,229
Other income 26 500 254 (357) 423
-----------------------------------------------------------------------------
Group operating profit 546 97 7,336 (327) 7,652
Share of profits of joint ventures - - 263 - 263
Share of profits of associated undertakings - - 453 - 453
Equity accounted income of subsidiaries 154 8,504 - (8,681) -
-----------------------------------------------------------------------------
Total operating profit 700 8,601 8,052 (9,008) 8,368
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 2,898 2,873 (3,710) 2,061
-----------------------------------------------------------------------------
Profit before interest and tax 700 11,499 10,925 (12,718) 10,429
Interest expense 63 1,274 1,176 (1,566) 947
-----------------------------------------------------------------------------
Profit before taxation 637 10,225 9,749 (11,152) 9,482
Taxation 232 3,217 3,018 (3,250) 3,217
-----------------------------------------------------------------------------
Profit after taxation 405 7,008 6,731 (7,902) 6,265
Minority shareholders' interest - - 71 - 71
-----------------------------------------------------------------------------
Profit for the period 405 7,008 6,660 (7,902) 6,194
=============================================================================
Page 49
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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)
Nine months ended September 30, 2002
Profit as reported 405 7,008 6,660 (7,902) 6,194
Adjustments:
Deferred taxation/business combinations (97) (175) (113) 210 (175)
Provisions 9 (18) (27) 18 (18)
Sale and leaseback - 28 28 (28) 28
Goodwill - 977 977 (977) 977
Derivative financial instruments - 564 564 (564) 564
Gain arising on asset exchange - (14) (14) 14 (14)
Other - 8 8 (8) 8
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 317 8,378 8,083 (9,237) 7,564
=============================================================================
Page 50
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2003
Fixed assets
Intangible assets 421 - 13,210 - 13,631
Tangible assets 6,298 - 82,632 - 88,930
Investments
Subsidiaries - equity accounted basis 2,710 81,649 - (84,359) -
Other - 60 16,875 - 16,935
-----------------------------------------------------------------------------
2,710 81,709 16,875 (84,359) 16,935
-----------------------------------------------------------------------------
Total fixed assets 9,429 81,709 112,717 (84,359) 119,496
-----------------------------------------------------------------------------
Current assets
Inventories 78 - 10,790 - 10,868
Receivables 20,580 26,497 36,465 (45,299) 38,243
Investments - - 404 - 404
Cash at bank and in hand (3) (5) 1,099 - 1,091
-----------------------------------------------------------------------------
20,655 26,492 48,758 (45,299) 50,606
-----------------------------------------------------------------------------
Current liabilities - falling due within
one year
Finance debt 9,786 - 6,756 (9,731) 6,811
Accounts payable and accrued liabilities 1,155 8,583 38,936 (7,483) 41,191
-----------------------------------------------------------------------------
Net current assets (liabilities) 9,714 17,909 3,066 (28,085) 2,604
-----------------------------------------------------------------------------
Total assets less current liabilities 19,143 99,618 115,783 (112,444) 122,100
Noncurrent liabilities
Finance debt - - 13,159 - 13,159
Accounts payable and accrued liabilities 4,404 48 29,411 (28,085) 5,778
Provisions for liabilities and charges
Deferred taxation 1,726 - 12,556 - 14,282
Other provisions 467 146 13,912 - 14,525
-----------------------------------------------------------------------------
Net assets 12,546 99,424 46,745 (84,359) 74,356
Minority shareholders' interest - equity - - 1,074 - 1,074
-----------------------------------------------------------------------------
BP shareholders' interest 12,546 99,424 45,671 (84,359) 73,282
=============================================================================
Page 51
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2003
Capital and reserves
Capital shares 1,903 5,548 - (1,903) 5,548
Paid-in surplus 3,146 4,423 - (3,146) 4,423
Merger reserve - 26,363 697 - 27,060
Other reserves - 146 - - 146
Retained earnings 7,497 62,944 44,974 (79,310) 36,105
-----------------------------------------------------------------------------
12,546 99,424 45,671 (84,359) 73,282
=============================================================================
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 12,546 99,424 45,671 (84,359) 73,282
Adjustments:
Deferred taxation/business combinations 65 (59) (124) 59 (59)
Provisions 25 (100) (125) 100 (100)
Sale and leaseback - (17) (17) 17 (17)
Goodwill - 968 968 (968) 968
Derivative financial instruments (58) 188 188 (130) 188
Gain arising on asset exchange - 133 133 (133) 133
Ordinary shares held for future
awards to employees - (58) - - (58)
Dividends - 1,438 - - 1,438
Investments - 478 478 (478) 478
Additional minimum pension liability - (2,286) (2,286) 2,286 (2,286)
Other - (44) (44) 44 (44)
-----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 12,578 100,065 44,842 (83,562) 73,923
=============================================================================
Page 52
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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, 2002
Fixed assets
Intangible assets 427 - 15,139 - 15,566
Tangible assets 6,405 - 81,277 - 87,682
Investments
Subsidiaries - equity accounted basis 2,561 91,939 - (94,500) -
Other - 162 10,649 - 10,811
-----------------------------------------------------------------------------
2,561 92,101 10,649 (94,500) 10,811
-----------------------------------------------------------------------------
Total fixed assets 9,393 92,101 107,065 (94,500) 114,059
-----------------------------------------------------------------------------
Current assets
Inventories 102 - 10,079 - 10,181
Receivables 18,169 13,581 51,022 (49,622) 33,150
Investments - - 215 - 215
Cash at bank and in hand (11) 1 1,530 - 1,520
-----------------------------------------------------------------------------
18,260 13,582 62,846 (49,622) 45,066
-----------------------------------------------------------------------------
Current liabilities - falling due within
one year
Finance debt 1,768 - 10,031 (1,713) 10,086
Accounts payable and accrued liabilities 1,129 9,906 35,369 (10,189) 36,215
-----------------------------------------------------------------------------
Net current assets (liabilities) 15,363 3,676 17,446 (37,720) (1,235)
-----------------------------------------------------------------------------
Total assets less current liabilities 24,756 95,777 124,511 (132,220) 112,824
Noncurrent liabilities
Finance debt - - 11,922 - 11,922
Accounts payable and accrued liabilities 10,586 98 30,491 (37,720) 3,455
Provisions for liabilities and charges
Deferred taxation 1,686 - 11,828 - 13,514
Other provisions 489 142 13,255 - 13,886
-----------------------------------------------------------------------------
Net assets 11,995 95,537 57,015 (94,500) 70,047
Minority shareholders' interest - equity - - 638 - 638
-----------------------------------------------------------------------------
BP shareholders' interest 11,995 95,537 56,377 (94,500) 69,409
=============================================================================
Page 53
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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, 2002
Capital and reserves
Capital shares 1,903 5,616 - (1,903) 5,616
Paid-in surplus 3,145 4,243 - (3,145) 4,243
Merger reserve - 26,336 697 - 27,033
Other reserves - 173 - - 173
Retained earnings 6,947 59,169 55,680 (89,452) 32,344
-----------------------------------------------------------------------------
11,995 95,537 56,377 (94,500) 69,409
=============================================================================
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 11,995 95,537 56,377 (94,500) 69,409
Adjustments:
Deferred taxation/business combinations 74 (78) (152) 78 (78)
Provisions (190) (1,088) (902) 1,092 (1,088)
Sale and leaseback - (106) (106) 106 (106)
Goodwill - (84) (84) 84 (84)
Derivative financial instruments (50) (135) (135) 185 (135)
Gain arising on asset exchange - 142 142 (142) 142
Ordinary shares held for future
awards to employees - (159) - - (159)
Dividends - 1,398 - - 1,398
Investments - 34 34 (34) 34
Additional minimum pension liability - (2,286) (2,286) 2,286 (2,286)
Other - (48) (48) 48 (48)
-----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 11,829 93,127 52,840 (90,797) 66,999
=============================================================================
Page 54
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2003
Net cash inflow (outflow) from
operating activities 447 (589) 5,021 12 4,891
Dividends from joint ventures - - 39 - 39
Dividends from associated undertakings - - 65 - 65
Dividends from subsidiaries 8 4,568 - (4,576) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (35) 53 (118) - (100)
Tax paid (40) - (763) - (803)
Net cash inflow (outflow) for capital
expenditure and financial investment (92) (2,665) 568 - (2,189)
Net cash inflow (outflow) for acquisitions
and disposals 1 12 (2,897) (12) (2,896)
Equity dividends paid - (1,433) (4,576) 4,576 (1,433)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 289 (54) (2,661) - (2,426)
=============================================================================
Financing 281 (31) (1,721) - (1,471)
Management of liquid resources - - 76 - 76
Increase (decrease) in cash 8 (23) (1,016) - (1,031)
-----------------------------------------------------------------------------
289 (54) (2,661) - (2,426)
=============================================================================
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 416 4,032 4,244 (4,543) 4,149
Net cash provided by (used in)
investing activities (92) (2,653) (2,329) (64) (5,138)
Net cash provided by (used in)
financing activities (316) (1,402) (2,855) 4,607 34
Currency translation differences relating to
cash and cash equivalents - - 6 - 6
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 8 (23) (934) - (949)
Cash and cash equivalents at beginning
of period (11) 18 2,437 - 2,444
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (3) (5) 1,503 - 1,495
=============================================================================
Page 55
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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 September 30, 2002
Net cash inflow (outflow) from
operating activities 340 1,955 2,081 - 4,376
Dividends from joint ventures - - 30 - 30
Dividends from associated undertakings - - 96 - 96
Dividends from subsidiaries 11 - - (11) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 63 (227) - (164)
Tax paid (29) (1) (631) - (661)
Net cash inflow (outflow) for capital
expenditure and financial investment (139) 25 (2,378) - (2,492)
Net cash inflow (outflow) for acquisitions
and disposals - - (362) - (362)
Equity dividends paid - (1,346) (11) 11 (1,346)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 183 696 (1,402) - (523)
=============================================================================
Financing 188 695 (1,102) - (219)
Management of liquid resources - - (32) - (32)
Increase (decrease) in cash (5) 1 (268) - (272)
-----------------------------------------------------------------------------
183 696 (1,402) - (523)
=============================================================================
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 322 2,017 1,348 29 3,716
Net cash provided by (used in)
investing activities (139) 25 (2,740) (27) (2,881)
Net cash provided by (used in)
financing activities (188) (2,041) 1,091 (2) (1,140)
Currency translation differences relating to
cash and cash equivalents - - 26 - 26
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (5) 1 (275) - (279)
Cash and cash equivalents at beginning
of period (6) 2 1,573 - 1,569
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (11) 3 1,298 - 1,290
=============================================================================
page 56
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. 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)
Nine months ended September 30, 2003
Net cash inflow (outflow) from
operating activities 1,337 (14,131) 30,978 14 18,198
Dividends from joint ventures - - 80 - 80
Dividends from associated undertakings - - 297 - 297
Dividends from subsidiaries 18 22,701 - (22,719) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (57) 123 (701) - (635)
Tax paid (87) (3) (3,198) - (3,288)
Net cash inflow (outflow) for capital
expenditure and financial investment (304) (2,607) (946) - (3,857)
Net cash inflow (outflow) for acquisitions
and disposals 10 14 (3,410) (14) (3,400)
Equity dividends paid - (4,216) (22,719) 22,719 (4,216)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 917 1,881 381 - 3,179
=============================================================================
Financing 909 1,887 681 - 3,477
Management of liquid resources - - 182 - 182
Increase (decrease) in cash 8 (6) (482) - (480)
-----------------------------------------------------------------------------
917 1,881 381 - 3,179
=============================================================================
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 1,278 8,691 27,456 (22,626) 14,799
Net cash provided by (used in)
investing activities (304) (2,593) (4,356) (134) (7,387)
Net cash provided by (used in)
financing activities (966) (6,104) (23,400) 22,760 (7,710)
Currency translation differences relating to
cash and cash equivalents - - 58 - 58
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 8 (6) (242) - (240)
Cash and cash equivalents at beginning
of period (11) 1 1,745 - 1,735
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (3) (5) 1,503 - 1,495
=============================================================================
Page 57
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
15. 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)
Nine months ended September 30, 2002
Net cash inflow (outflow) from
operating activities 934 3,440 7,908 863 13,145
Dividends from joint ventures - - 129 - 129
Dividends from associated undertakings - - 303 - 303
Dividends from subsidiaries 26 - - (26) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 189 (855) - (666)
Tax paid (75) (2) (1,956) - (2,033)
Net cash inflow (outflow) for capital
expenditure and financial investment (427) 7 (6,408) - (6,828)
Net cash inflow (outflow) for acquisitions
and disposals - 863 (1,181) (863) (1,181)
Equity dividends paid - (3,924) (26) 26 (3,924)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 458 573 (2,086) - (1,055)
=============================================================================
Financing 440 573 (1,498) - (485)
Management of liquid resources - - (164) - (164)
Increase (decrease) in cash 18 - (424) - (406)
-----------------------------------------------------------------------------
458 573 (2,086) - (1,055)
=============================================================================
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 885 3,627 5,543 918 10,973
Net cash provided by (used in)
investing activities (427) 871 (7,604) (916) (8,076)
Net cash provided by (used in)
financing activities (440) (4,498) 1,472 (2) (3,468)
Currency translation differences relating to
cash and cash equivalents - - 53 - 53
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 18 - (536) - (518)
Cash and cash equivalents at beginning
of period (29) 3 1,834 - 1,808
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (11) 3 1,298 - 1,290
=============================================================================
Page 58
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------------- -------------------------
Average crude oil realizations - $/bbl
UK 27.68 26.78 28.33 24.22
USA 28.61 25.86 29.19 23.15
Rest of World 26.30 25.13 26.69 22.36
BP average 27.72 26.01 28.25 23.35
Average natural gas liquids realizations - $/bbl
UK 22.62 15.30 20.09 14.43
USA 18.37 12.59 18.15 11.62
Rest of World 21.76 13.75 21.65 13.07
BP average 19.39 13.15 18.96 12.23
Average liquids realizations (a) - $/bbl
UK 27.34 26.26 27.83 23.74
USA 26.90 22.94 27.34 20.71
Rest of World 25.98 24.43 26.35 21.81
BP average 26.79 24.40 27.24 21.99
Average natural gas realizations - $/mcf
UK 2.69 2.58 2.99 2.75
USA 4.14 2.34 4.66 2.41
Rest of World 2.31 1.99 2.51 1.99
BP average 3.05 2.25 3.46 2.32
Total hydrocarbons - $/boe
UK 22.71 22.41 23.62 20.94
USA 25.63 18.73 27.21 17.68
Rest of World 19.27 18.13 20.29 16.93
BP average 22.58 19.27 23.88 18.17
Average oil marker prices - $/bbl
Brent oil price 28.38 26.91 28.64 24.40
West Texas Intermediate oil price 30.19 28.26 31.08 25.40
Alaska North Slope US West Coast 28.83 27.26 29.69 24.06
Henry Hub gas price (b) ($/mmbtu) 4.97 3.16 5.65 2.94
UK Gas - National Balancing point (p/therm) 15.08 12.74 17.92 14.53
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 2.47 1.28 2.77 0.66
US Gulf Coast 5.61 1.82 5.11 2.16
Midwest 6.39 3.27 5.09 3.03
US West Coast 9.04 3.54 7.39 4.47
Singapore 1.27 0.47 1.63 0.28
BP average 4.59 1.98 4.13 1.90
Chemicals Indicator Margin (d) - $/te 109 (e) 120 113 (e) 103
Page 59
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
---------------
(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 third 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 Nine months ended
September 30 September 30
US dollar/sterling exchange rates (Unaudited) (Unaudited)
2003 2002 2003 2002
------------------- --------------------
Average rate for the period 1.61 1.55 1.61 1.48
Period-end rate 1.66 1.55 1.66 1.55
Page 60
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
Crude oil production
(thousand barrels per day)(net of royalties)
UK 312 395 359 436
Rest of Europe 74 101 81 100
USA 558 561 578 584
Rest of World 908 679 780 646
------ ------ ------ ------
Total crude oil production 1,852 1,736 1,798 1,766
====== ====== ====== ======
Natural gas liquids production
(thousand barrels per day) (net of royalties)
UK 23 19 24 23
Rest of Europe 5 6 5 6
USA 141 193 150 184
Rest of World 33 29 32 29
------ ------ ------ ------
Total natural gas liquids production 202 247 211 242
====== ====== ====== ======
Liquids production (a)
(thousand barrels per day) (net of royalties)
UK 335 414 383 459
Rest of Europe 79 107 86 106
USA 699 754 728 768
Rest of World 941 708 812 675
------ ------ ------ ------
Total liquids production 2,054 1,983 2,009 2,008
====== ====== ====== ======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,267 1,240 1,489 1,488
Rest of Europe 98 131 111 150
USA 3,005 3,450 3,194 3,525
Rest of World 4,031 3,661 3,823 3,468
------ ------ ------ ------
Total natural gas production 8,401 8,482 8,617 8,631
====== ====== ====== ======
Total production (b)
(thousand barrels of oil equivalent per day)
(net of royalties)
UK 553 628 640 715
Rest of Europe 96 130 105 132
USA 1,217 1,349 1,279 1,376
Rest of World 1,636 1,338 1,471 1,273
------ ------ ------ ------
Total production 3,502 3,445 3,495 3,496
====== ====== ====== ======
Page 61
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
Natural gas sales volumes (million cubic feet per day)
UK 2,174 1,809 2,653 2,256
Rest of Europe 362 353 418 385
USA 11,808 9,332 11,328 8,841
Rest of World 11,133 9,556 11,173 9,155
------- ------- ------- -------
Total natural gas sales volumes (c) 25,477 21,050 25,572 20,637
======= ======= ======= =======
NGL sales volumes (thousand barrels per day)
UK - - - -
Rest of Europe - - - -
USA 188 178 150 173
Rest of World 163 185 173 204
------- ------- ------- -------
Total NGL sales volumes 351 363 323 377
======= ======= ======= =======
Oil sales volumes (thousand barrels per day)
Refined products
UK 270 258 276 248
Rest of Europe 1,293 1,604 1,323 1,441
USA 1,828 1,874 1,800 1,874
Rest of World 657 613 636 578
------- ------- ------- -------
Total marketing sales 4,048 4,322 4,035 4,141
Trading/supply sales 2,647 2,589 2,805 2,489
------- ------- ------- -------
Total refined product sales 6,695 6,911 6,840 6,630
Crude oil 5,316 3,648 5,175 4,458
------- ------- ------- -------
Total oil sales 12,011 10,559 12,015 11,088
======= ======= ======= =======
Refinery throughputs (thousand barrels per day)
UK 405 394 399 387
Rest of Europe 909 956 951 905
USA 1,406 1,455 1,391 1,438
Rest of World 366 349 383 354
------- ------- ------- -------
Total throughput 3,086 3,154 3,124 3,084
======= ======= ======= =======
Petrochemicals production (thousand tonnes)
UK 771 858 2,354 2,523
Rest of Europe 2,724 2,669 8,168 7,847
USA 2,563 2,570 7,602 7,754
Rest of World 982 783 2,666 2,255
------- ------- ------- -------
Total production 7,040 6,880 20,790 20,379
======= ======= ======= =======
---------------
(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 62
BP p.l.c. AND SUBSIDIARIES
Total replacement cost operating profit
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
($ million)
By business
Exploration and Production
UK 582 185 2,189 1,561
Rest of Europe 124 213 458 537
USA 1,368 661 4,614 1,754
Rest of World 1,446 513 3,738 2,106
------ ------ ------ ------
3,520 1,572 10,999 5,958
------ ------ ------ ------
Gas, Power and Renewables
UK 13 (66) 34 (63)
Rest of Europe (12) 17 (26) 99
USA 54 28 175 16
Rest of World 43 78 212 230
------ ------ ------ ------
98 57 395 282
------ ------ ------ ------
Refining and Marketing
UK (119) (158) (124) (343)
Rest of Europe 325 236 1,085 624
USA 51 55 471 255
Rest of World 198 104 543 372
------ ------ ------ ------
455 237 1,975 908
------ ------ ------ ------
Petrochemicals
UK (63) 6 (72) (35)
Rest of Europe 54 161 341 272
USA 47 54 154 161
Rest of World 43 (89) 110 13
------ ------ ------ ------
81 132 533 411
------ ------ ------ ------
Other businesses and corporate (310) (241) (609) (494)
------ ------ ------ ------
3,844 1,757 13,293 7,065
====== ====== ====== ======
By geographical area
UK 314 (131) 1,730 903
Rest of Europe 494 620 1,852 1,532
USA 1,295 672 5,040 1,933
Rest of World 1,741 596 4,671 2,697
------ ------ ------ ------
3,844 1,757 13,293 7,065
====== ====== ====== ======
Page 63
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
($ million)
By business
Exploration and Production
UK 182 270 598 778
Rest of Europe 80 61 204 189
USA 989 980 2,964 3,224
Rest of World (a) 6,999 929 9,083 2,935
------ ------ ------ ------
8,250 2,240 12,849 7,126
------ ------ ------ ------
Gas, Power and Renewables
UK 15 7 47 28
Rest of Europe (b) 6 29 30 120
USA 18 52 104 100
Rest of World 19 19 43 37
------ ------ ------ ------
58 107 224 285
------ ------ ------ ------
Refining and Marketing
UK 89 56 228 232
Rest of Europe (c) 169 198 337 5,486
USA 322 298 886 861
Rest of World 79 53 130 128
------ ------ ------ ------
659 605 1,581 6,707
------ ------ ------ ------
Petrochemicals
UK 51 30 81 55
Rest of Europe 16 58 68 163
USA 55 49 196 146
Rest of World 60 43 131 174
------ ------ ------ ------
182 180 476 538
------ ------ ------ ------
Other businesses and corporate (d) 59 48 278 367
------ ------ ------ ------
9,208 3,180 15,408 15,023
====== ====== ====== ======
By geographical area
UK 377 394 1,039 1,203
Rest of Europe 271 353 640 6,158
USA 1,403 1,389 4,341 4,387
Rest of World 7,157 1,044 9,388 3,275
------ ------ ------ ------
9,208 3,180 15,408 15,023
====== ====== ====== ======
------------
(a) Third quarter and nine months 2003 included the investment in the TNK-BP
joint venture. Nine months 2002 included the acquisition of an additional
interest in Sidanco.
(b) Nine months 2002 included the acquisition of a 5% stake in Enagas.
(c) Nine months 2002 included the acquisition of 100% of Veba.
(d) Nine months 2002 included the acquisition of the minority interest in
Veba's upstream oil and gas assets.
Page 64
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------------- -----------------------
($ million)
Historical cost profit for the period 2,394 2,840 8,295 6,194
Interest (a) 82 145 259 462
Minority shareholders' interest 43 3 129 71
------ ------ ------ ------
Adjusted historical cost profit 2,519 2,988 8,683 6,727
Inventory holding (gains) losses (84) (305) 68 (1,303)
Exceptional items, net of tax (168) (1,769) (639) (1,915)
------ ------ ------ ------
Adjusted replacement cost profit 2,267 914 8,112 3,509
====== ====== ====== ======
Capital employed at beginning of period:
BP shareholders' interest 72,065 67,586 69,409 65,161
Minority shareholders' interest 1,016 540 638 598
Finance debt 18,594 21,409 22,008 21,417
------ ------ ------ ------
Capital employed 91,675 89,535 92,055 87,176
====== ====== ====== ======
Capital employed at end of period:
BP shareholders' interest 73,282 68,670 73,282 68,670
Minority shareholders' interest 1,074 533 1,074 533
Finance debt 19,970 22,276 19,970 22,276
------ ------ ------ ------
Capital employed 94,326 91,479 94,326 91,479
====== ====== ====== ======
93,001 90,507 93,191 89,328
Average capital employed
====== ====== ====== ======
ROACE - historical cost basis 10.8% 13.2% 12.4% 10.0%
ROACE - replacement cost basis 9.8% 4.0% 11.6% 5.2%
------------
(a) Excludes interest on joint venture and associated undertakings debt as well
as unwinding of discount on provisions and effect of change in discount
rate on provisions, and is on a post-tax basis, using a deemed tax rate
equal to the US statutory tax rate.
Page 65
BP p.l.c. AND SUBSIDIARIES
RECONCILIATION OF HISTORICAL COST OPERATING PROFIT AND
REPLACEMENT COST OPERATING PROFIT
Other
Exploration Gas, Power Refining businesses
and and and and
Production Renewables Marketing Petrochemicals corporate Total
------------------------------------------------------------------------------
Year ended December 31, 2002
Total operating profit 9,209 405 1,921 541 (701) 11,375
Inventory holding (gains) losses (3) (51) (1,049) (26) - (1,129)
------------------------------------------------------------------------------
Total replacement cost
operating profit 9,206 354 872 515 (701) 10,246
==============================================================================
Year ended December 31, 2001
Total operating profit 12,355 407 1,990 (102) (523) 14,127
Inventory holding (gains) losses 6 81 1,583 230 - 1,900
------------------------------------------------------------------------------
Total replacement cost
operating profit 12,361 488 3,573 128 (523) 16,027
==============================================================================
Year ended December 31, 2000
Total operating profit 13,976 543 4,106 853 (1,071) 18,407
Inventory holding (gains) losses (4) (11) (620) (93) - (728)
------------------------------------------------------------------------------
Total replacement cost
operating profit 13,972 532 3,486 760 (1,071) 17,679
==============================================================================
Page 66
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
At September 30
(Unaudited) At December 31
2003 2002
-------- --------
($ million)
Net debt ratio - net debt: net debt + equity
Gross finance debt 19,970 22,008
Cash and current asset investments 1,495 1,735
-------- --------
Net debt 18,475 20,273
-------- --------
Equity 74,356 70,047
Net debt ratio 20% 22%
======== ========
Page 67
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: October 31, 2003 /s/ D. J. Pearl
.........................................
D. J. PEARL
Deputy Company Secretary