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RNS
BP PLC   -  BP.   

2Q19 Part 1 of 1

Released 07:00 30-Jul-2019

RNS Number : 1061H
BP PLC
30 July 2019
 
   

 

 

 

FOR IMMEDIATE RELEASE

Top of page 1

 

London 30 July 2019

 

 

 

BP p.l.c. Group results

 

Second quarter and half year 2019(a)

 
     

 

 

For a printer friendly copy of this announcement, please click on the link below to open a PDF version

http://www.rns-pdf.londonstockexchange.com/rns/1061H_1-2019-7-29.pdf 

 

 

Highlights

Midway through 5-year plan, continuing to deliver strong performance and strategic progress

•   Strong financial results

- Underlying replacement cost profit for the second quarter of 2019 was $2.8 billion, similar to a year earlier. The quarter's result largely reflected continued good operating performance, offset by oil prices lower than in the second quarter of 2018.

- Non-operating items in the second quarter of $0.9 billion, post-tax, related mainly to impairment charges.

- Operating cash flow, excluding Gulf of Mexico oil spill payments, was $8.2 billion for the second quarter, including a $1.5-billion working capital release (after adjusting for net inventory holding gains), and $14.2 billion for the first half, including a $0.5-billion working capital release.

- Gulf of Mexico oil spill payments of $1.4 billion on a post-tax basis in the second quarter were primarily the scheduled annual payments.

- A dividend of 10.25 cents a share was announced for the quarter.

•   Solid Upstream and Downstream performance

- Reported oil and gas production for the quarter averaged 3.8 million barrels a day of oil equivalent, 4% higher than a year earlier.

- With the start-up of Culzean in the North Sea this quarter, four Upstream major projects have begun production in the first half of the year.

- Final investment decisions were taken in the quarter for new Upstream major projects in India and the Gulf of Mexico, as well as agreement for additional investment in Angola.

- In Downstream, quarter on quarter growth in lubricants and fuels marketing, more than offset by planned turnarounds ahead of IMO 2020.

•   Growing low carbon businesses

- BP agreed to combine its Brazilian biofuels and biopower business with that of Bunge in a new equally-owned joint venture. On completion, BP's interest in the venture will be more than 50% larger than its existing biofuels business.

- Lightsource BP (43% owned by BP) has continued to make strong progress, including agreeing a significant expansion in Brazil.

- BP agreed a $30 million venturing investment in Calysta, which will use BP's natural gas to produce protein feed for aquaculture and agriculture.

 

 

See chart on PDF

 

Bob Dudley - Group chief executive:

At the midpoint of our five-year plan, BP is right on target. Reliable performance and disciplined growth across our businesses are delivering strong earnings, cash flow and returns to shareholders. And this is also allowing us to grow businesses that can make a significant contribution in the energy transition, helping deliver the energy the world needs with lower carbon.

 

 

Financial summary

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Profit for the period attributable to BP shareholders

 

1,822

 

2,934

 

2,799

 

 

4,756

 

5,268

 

Inventory holding (gains) losses, net of tax

 

(47

)

(839

)

(1,010

)

 

(886

)

(1,090

)

RC profit

 

1,775

 

2,095

 

1,789

 

 

3,870

 

4,178

 

Net (favourable) adverse impact of non-operating items and fair value accounting effects, net of tax

 

1,036

 

263

 

1,033

 

 

1,299

 

1,230

 

Underlying RC profit

 

2,811

 

2,358

 

2,822

 

 

5,169

 

5,408

 

RC profit per ordinary share (cents)

 

8.72

 

10.38

 

8.96

 

 

19.10

 

20.96

 

RC profit per ADS (dollars)

 

0.52

 

0.62

 

0.54

 

 

1.15

 

1.26

 

Underlying RC profit per ordinary share (cents)

 

13.82

 

11.69

 

14.14

 

 

25.51

 

27.13

 

Underlying RC profit per ADS (dollars)

 

0.83

 

0.70

 

0.85

 

 

1.53

 

1.63

 

(a)       This results announcement also represents BP's half-yearly financial report (see page 12).

 

RC profit (loss), underlying RC profit, operating cash flow excluding Gulf of Mexico oil spill payments and working capital are non-GAAP measures. These measures and major projects, inventory holding gains and losses, non-operating items and fair value accounting effects are defined in the Glossary on page 35.

The commentary above and following should be read in conjunction with the cautionary statement on page 39.

 

 

Top of page 2

Group headlines

 

Results

For the half year, underlying replacement cost (RC) profit* was $5,169 million, compared with $5,408 million in 2018. Underlying RC profit is after adjusting RC profit* for a net charge for non-operating items* of $1,113 million, mainly relating to impairment charges, and net adverse fair value accounting effects* of $186 million (both on a post-tax basis).

RC profit was $3,870 million for the half year, compared with $4,178 million in 2018.

For the second quarter, underlying RC profit was $2,811 million, compared with $2,822 million in 2018. Underlying RC profit is after adjusting RC profit for a net charge for non-operating items of $861 million, mainly relating to impairment charges, and net adverse fair value accounting effects of $175 million (both on a post-tax basis).

RC profit was $1,775 million for the second quarter, compared with $1,789 million in 2018.

BP's profit for the second quarter and half year was $1,822 million and $4,756 million respectively, compared with $2,799 million and $5,268 million for the same periods in 2018.

See further information on pages 3, 29 and 30.

Depreciation, depletion and amortization

The charge for depreciation, depletion and amortization was $4.6 billion in the quarter and $9.0 billion in the half year. In the same periods in 2018 it was $3.8 billion and $7.7 billion respectively (prior to the implementation of IFRS 16). In 2019, we expect the full-year charge to be around $18 billion.

 

Effective tax rate

The effective tax rate (ETR) on RC profit or loss* for the second quarter and half year was 39% and 41% respectively, compared with 49% and 42% for the same periods in 2018. Adjusting for non-operating items and fair value accounting effects, the underlying ETR* for the second quarter and half year was 34% and 37% respectively, compared with 42% and 40% for the same periods a year ago. The underlying ETR for the quarter and the half year is lower than a year ago mainly due to the absence of deferred tax charges from foreign exchange impacts. In the current environment the underlying ETR in 2019 is expected to be around 40%. ETR on RC profit or loss and underlying ETR are non-GAAP measures.

 

Dividend

BP today announced a quarterly dividend of 10.25 cents per ordinary share ($0.615 per ADS), which is expected to be paid on 20 September 2019. The corresponding amount in sterling will be announced on 10 September 2019. See page 25 for further information.

 

 

 

Share buybacks

BP repurchased 11 million ordinary shares at a cost of $75 million, including fees and stamp duty, during the second quarter of 2019. For the half year, BP repurchased 17 million ordinary shares at a cost of $125 million, including fees and stamp duty. Our share buyback programme is expected to fully offset the impact of scrip dilution since the third quarter 2017 by the end of 2019.

Operating cash flow*

Operating cash flow excluding Gulf of Mexico oil spill payments* was $8.2 billion for the second quarter and $14.2 billion for the half year. These amounts include a working capital* release of $1.5 billion in the second quarter and $0.5 billion in the half year, after adjusting for net inventory holding gains* and working capital effects of the Gulf of Mexico oil spill. The comparable amounts for the same periods in 2018 were $7.0 billion and $12.4 billion (prior to the implementation of IFRS 16).

Operating cash flow as reported in the group cash flow statement was $6.8 billion for the second quarter and $12.1 billion for the half year. These amounts include a working capital build of $58 million and $2.8 billion respectively. The comparable amounts for the same periods in 2018 were $6.3 billion and $10.0 billion (prior to the implementation of IFRS 16).

See page 32 and Glossary for further information on Gulf of Mexico oil spill cash flows and on working capital.

Capital expenditure*

Organic capital expenditure* for the second quarter and half year was $3.7 billion and $7.3 billion respectively. We reported $3.5 billion and $7.0 billion for the same periods in 2018 (prior to the implementation of IFRS 16).

Inorganic capital expenditure* for the second quarter and half year was $2.0 billion and $4.0 billion respectively, including $1.7 billion for the quarter and $3.5 billion for the half year relating to the BHP acquisition, compared with $0.4 billion and $0.8 billion for the same periods in 2018.

Organic capital expenditure and inorganic capital expenditure are non-GAAP measures. See page 28 for further information.

Divestment and other proceeds

Divestment proceeds* were $0.1 billion for the second quarter and $0.7 billion for the half year, compared with $0.2 billion and $0.3 billion for the same periods in 2018.

Gearing*

Net debt* at 30 June 2019 was $46.5 billion, compared with $38.7 billion a year ago. Gearing at 30 June 2019 was 31.0%, compared with 27.5% a year ago. Net debt and gearing are non-GAAP measures. See page 25 for more information.

 

 

Brian Gilvary - Chief financial officer:

We have announced another resilient set of quarterly results, in particular delivering strong underlying cash* of over $8 billion. Following the final acquisition payments to BHP and the scheduled annual payments relating to the Gulf of Mexico oil spill being made in the quarter, we continue to expect gearing to trend down through 2020 in line with disposal proceeds from our $10 billion programme and ongoing operating cash flow delivery.

 

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 35.

 

For more information on the impact of IFRS 16 'Leases' on key financial metrics, see page 27.

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 39.

 

 

Top of page 3

Analysis of underlying RC profit* before interest and tax

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Underlying RC profit before interest and tax

 

 

 

 

 

 

 

Upstream

 

3,413

 

2,928

 

3,508

 

 

6,341

 

6,665

 

Downstream

 

1,365

 

1,733

 

1,455

 

 

3,098

 

3,281

 

Rosneft

 

638

 

567

 

766

 

 

1,205

 

1,013

 

Other businesses and corporate

 

(290

)

(418

)

(477

)

 

(708

)

(869

)

Consolidation adjustment - UPII*

 

34

 

(13

)

151

 

 

21

 

(9

)

Underlying RC profit before interest and tax

 

5,160

 

4,797

 

5,403

 

 

9,957

 

10,081

 

Finance costs and net finance expense relating to pensions and other post-retirement benefits

 

(752

)

(754

)

(448

)

 

(1,506

)

(912

)

Taxation on an underlying RC basis

 

(1,515

)

(1,620

)

(2,059

)

 

(3,135

)

(3,625

)

Non-controlling interests

 

(82

)

(65

)

(74

)

 

(147

)

(136

)

Underlying RC profit attributable to BP shareholders

 

2,811

 

2,358

 

2,822

 

 

5,169

 

5,408

 

 

Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-11 for the segments.

 

Analysis of RC profit (loss)* before interest and tax and reconciliation to profit for the period

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

RC profit before interest and tax

 

 

 

 

 

 

 

Upstream

 

2,469

 

2,884

 

3,514

 

 

5,353

 

6,688

 

Downstream

 

1,288

 

1,765

 

840

 

 

3,053

 

2,553

 

Rosneft

 

525

 

486

 

766

 

 

1,011

 

1,013

 

Other businesses and corporate

 

(381

)

(546

)

(1,025

)

 

(927

)

(1,596

)

Consolidation adjustment - UPII

 

34

 

(13

)

151

 

 

21

 

(9

)

RC profit before interest and tax

 

3,935

 

4,576

 

4,246

 

 

8,511

 

8,649

 

Finance costs and net finance expense relating to pensions and other post-retirement benefits

 

(868

)

(882

)

(566

)

 

(1,750

)

(1,150

)

Taxation on a RC basis

 

(1,210

)

(1,534

)

(1,817

)

 

(2,744

)

(3,185

)

Non-controlling interests

 

(82

)

(65

)

(74

)

 

(147

)

(136

)

RC profit attributable to BP shareholders

 

1,775

 

2,095

 

1,789

 

 

3,870

 

4,178

 

Inventory holding gains (losses)*

 

81

 

1,088

 

1,310

 

 

1,169

 

1,402

 

Taxation (charge) credit on inventory holding gains and losses

 

(34

)

(249

)

(300

)

 

(283

)

(312

)

Profit for the period attributable to BP shareholders

 

1,822

 

2,934

 

2,799

 

 

4,756

 

5,268

 

 

 

Top of page 4

Strategic progress

 

 

Upstream

Upstream production, which excludes Rosneft, for the first half of the year averaged 2,640mboe/d, 4.2% higher than a year earlier. Underlying production*, adjusted for portfolio changes and PSA* impacts was broadly flat.

Culzean in the North Sea (BP 32%) was BP's fourth Upstream major project* to start up in 2019 and the 23rd since the start of 2016.

Final investment decisions were made for the Thunder Horse South Expansion Phase 2 project in the US Gulf of Mexico and the MJ project on Block KG D6 offshore India. BP and partners also agreed additional investment expected to increase and extend production from deepwater Block 15 offshore Angola.

In the quarter BP agreed the sale of mature oil interests in the Gulf of Suez, Egypt, including its interests in GUPCO, to Dragon Oil of Dubai. BP has agreed to sell its interest in oil and gas fields in Cleveland and McClain counties in Oklahoma, US.

 

Downstream

In fuels marketing, first-half earnings grew by more than 15% year on year.

Groupe Renault has recently appointed Castrol as its global service fill engine oil lubricants partner, effective from 1 January 2020. In addition Castrol extended the Renault Sport Racing Formula 1 sponsorship through to the end of 2024, further strengthening this strategic partnership.

 

Advancing the energy transition

In a significant advance for its biofuels position, in July BP announced it has agreed to combine its Brazilian biofuels and biopower business with that of Bunge to form a new equally-owned joint venture, BP Bunge Bioenergia. On completion, subject to regulatory approvals, BP's 50% interest in the new venture will be more than 50% larger than its existing biofuels business.

BP's equity-accounted solar entity Lightsource BP (LSBP) announced in July the acquisition of approximately two gigawatts of greenfield solar projects at various development stages across Brazil.

BP continues to make progress in its advanced mobility agenda. BP Chargemaster expanded its UK network of chargers by around 600 to 7,200 over the first half of 2019 and in the coming weeks will begin installing the first of 400 ultra-fast chargers at BP retail sites in the UK.

 

 

 

BP Ventures announced a $30-million investment into Calysta, whose technology produces protein with natural gas as a feedstock. Its innovative process offers the potential to sustainably produce protein feed to meet fast-growing demand from aquaculture and agriculture.

 

Financial framework

Following the introduction of IFRS 16 on 1 January 2019, the positive impacts on Operating cash flow* and Organic capital expenditure* are fully offset in the cash flow statement by a new line, Lease liability payments. Lease payments are now included in the definition of free cash flow* as a use of cash, which means the net impact on this measure is zero.

 

Operating cash flow excluding Gulf of Mexico oil spill payments* was $14.2 billion for the half year of 2019. For the half year of 2018, we reported $12.4 billion (prior to the implementation of IFRS 16).

Organic capital expenditure for the half year of 2019 was $7.3 billion. BP expects 2019 organic capital expenditure to be in the range of $15-17 billion.

Lease liability payments of principal for the half year of 2019 were $1.2 billion.

 

Divestment proceeds and announced transactions totalled $1.5 billion in the first half of 2019. BP continues to expect to divest more than $10 billion by the end of 2020.

Gulf of Mexico oil spill payments on a post-tax basis totalled $2.1 billion in the half year. Payments for the full year continue to be expected to be around $2 billion on a post-tax basis.

Gearing* at the end of the half year was 31.0%. See page 25 for more information. Assuming recent average oil prices, and in line with expected growth in free cash flow supported by divestment proceeds, we expect gearing to move towards the middle of our targeted range of 20-30% in 2020.

 

Safety

Tier 1 and tier 2 process safety events* increased in the first half of 2019 compared with the same period in 2018. This increase mainly related to tier 2 events. Safety remains our number one priority and we remain focused on reducing both tier 1 and tier 2 process safety events.

 

 

Operating metrics

 

First half 2019

 

Financial metrics

 

First half 2019

 

(vs. First half 2018)

 

 

(vs. First half 2018)

Tier 1 and tier 2 process safety events

 

49

 

Underlying RC profit*

 

$5.2bn

 

(+16)

 

 

(-$0.2bn)

Reported recordable injury frequency*

 

0.19

 

Operating cash flow excluding Gulf of Mexico oil spill payments (post-tax)(b)

 

$14.2bn

 

(-15%)

 

 

(+$1.8bn)

Group production

 

3,786mboe/d

 

Organic capital expenditure

 

$7.3bn

 

(+3.4%)

 

 

(+$0.3bn)

Upstream production (excludes Rosneft segment)

 

2,640mboe/d

 

Gulf of Mexico oil spill payments (post-tax)

 

$2.1bn

 

(+4.2%)

 

 

(-$0.4bn)

Upstream unit production costs(a)

 

$7.02/boe

 

Divestment proceeds*

 

$0.7bn

 

(-4.1%)

 

 

(+$0.4bn)

BP-operated Upstream plant reliability

 

94.9%

 

Gearing

 

31.0%

 

(-0.9)

 

 

(+3.5)

BP-operated refining availability*

 

93.9%

 

Dividend per ordinary share(c)

 

10.25 cents

 

(-0.1)

 

 

(─%)

(a)       Slight increase from the same period in 2018 after excluding the impacts of IFRS 16 on production costs.

(b)       First half 2019 includes estimated $1.0 billion impact due to IFRS 16.

(c)       Represents dividend announced in the quarter (vs. prior year quarter).

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 39.

 

 

Top of page 5

 

 

 

 

 

This page is intentionally left blank

 

 

 

 

 

 

 

 

Top of page 6

Upstream

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Profit before interest and tax

 

2,459

 

2,886

 

3,518

 

 

5,345

 

6,693

 

Inventory holding (gains) losses*

 

10

 

(2

)

(4

)

 

8

 

(5

)

RC profit before interest and tax

 

2,469

 

2,884

 

3,514

 

 

5,353

 

6,688

 

Net (favourable) adverse impact of non-operating items* and fair value accounting effects*

 

944

 

44

 

(6

)

 

988

 

(23

)

Underlying RC profit before interest and tax*(a)

 

3,413

 

2,928

 

3,508

 

 

6,341

 

6,665

 

(a)       See page 7 for a reconciliation to segment RC profit before interest and tax by region.

 

Financial results

The replacement cost profit before interest and tax for the second quarter and half year was $2,469 million and $5,353 million respectively, compared with $3,514 million and $6,688 million for the same periods in 2018. The second quarter and half year included a net non-operating charge of $766 million and $770 million respectively, compared with a net gain of $27 million and a net charge of $77 million for the same periods in 2018. Fair value accounting effects in the second quarter and half year had an adverse impact of $178 million and $218 million respectively, compared with an adverse impact of $21 million and a favourable impact of $100 million in the same periods of 2018.

 

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the second quarter and half year was $3,413 million and $6,341 million respectively, compared with $3,508 million and $6,665 million for the same periods in 2018. The results for the second quarter and half year mainly reflected lower liquids realizations, partly offset by ramp up of major projects* in the US Gulf of Mexico and North Sea and very strong gas marketing and trading.

 

Production

Production for the quarter was 2,625mboe/d, 6.5% higher than the second quarter of 2018. Underlying production* for the quarter increased by 0.7%, mainly due to the ramp-up of major projects.

For the half year, production was 2,640mboe/d, 4.2% higher than 2018. Underlying production* was broadly flat.

 

Key events

On 6 May, BP announced the final investment decision for the Thunder Horse South Expansion Phase 2 in the US Gulf of Mexico (BP operator 75%, ExxonMobil 25%).

On 3 June, BP announced an agreement to sell its interests in Gulf of Suez oil concessions in Egypt to Dragon Oil. The agreement, which is subject to the Egyptian Ministry of Petroleum and Mineral Resources' approval, includes producing and exploration concessions, including BP's interest in the Gulf of Suez Petroleum Company (GUPCO).

On 4 June, BP confirmed the discovery of King Embayment in the Mars corridor, in the US Gulf of Mexico (Shell operator 71.5%, BP 28.5%).

On 6 June, BP confirmed further investment into deepwater Block 15, offshore Angola. The agreement will extend the production-sharing agreement* for Block 15 through 2032. (Exxon 36% operator, BP 24%, ENI 18%, and Equinor 12%).

On 11 June, BP and Reliance Industries Limited (RIL) announced the sanction of the MJ gas development project in Block KG D6, offshore the east coast of India. MJ is the third of three new projects in the Block KG D6 integrated development plan (RIL operator 60%, BP 30%, NIKO 10%).

On 11 June, BP confirmed the start-up of gas production from the Culzean field in the UK North Sea (Total operator 49.99%, BP 32%, JX Nippon 18.01%).

On 19 June, BP confirmed an agreement to sell its interest in oil and gas fields in Cleveland and McClain counties in Oklahoma, US.

On 1 July, BP confirmed the Greater Tortue Ahmeyim-1 appraisal well, located offshore Senegal, encountered approximately 30 metres of net gas pay in high-quality Albian reservoir confirming gas resource expectations (BP operator 56%, Kosmos 27%, Petrosen 10%, SMHPM 7%).

On 17 July, BP confirmed the Bélé-1 and Tuk-1 gas discoveries, as well as the successful Hi-Hat-1 appraisal well, located offshore Trinidad and Tobago (BHP operator 70%, BP 30%).

During the second quarter, BP achieved new access in Argentina's first offshore licensing round blocks CAN-111 and CAN-113 (Total operator 50%, BP 50%), offshore Gambia block A1 (BP 100%), West of Shetland in the North Sea for one licence covering 10 blocks (BP operator 50%, Shell 50%), and a farm-in to an exploration permit WA-359-P offshore Western Australia (BP operator 42.5%, Cue 21.5%, Beach 21%, New Zealand Oil & Gas 15%).

This builds on the progress announced in our first-quarter results, which comprised the following: the Constellation development in the US Gulf of Mexico commenced production; commencement of gas production from the second stage of Egypt's West Nile Delta development, in the Giza and Fayoum fields; first gas from the Angelin project in Trinidad; BPX Energy assumed control of all Petrohawk Energy Corporation operations from BHP; BP and Environmental Defense Fund announced a three-year strategic commitment to advance technologies to reduce methane emissions from the global oil and gas supply chain; a gas discovery in the

 

 

Top of page 7

Upstream (continued)

Nour exploration prospect located in the Nour North Sinai Concession, located in the Eastern Egyptian Mediterranean; a fund of up to $100-million for projects that will deliver new greenhouse gas (GHG) emissions reductions in its Upstream oil and gas operations; and final investment decisions on Seagull, a development tieback in the Central UK North Sea and on the Azeri Central East (ACE) project, the next stage of the Azeri-Chirag-Deepwater Gunashli (ACG) field.

 

Outlook

Looking ahead, we expect third-quarter 2019 reported production to be lower than second-quarter reflecting continued seasonal turnaround and maintenance activities, including in the North Sea, Angola and the US Gulf of Mexico, as well as the impact of Hurricane Barry on operations in the US Gulf of Mexico.

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 39.

 

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Underlying RC profit before interest and tax

 

 

 

 

 

 

 

US

 

861

 

612

 

742

 

 

1,473

 

1,268

 

Non-US

 

2,552

 

2,316

 

2,766

 

 

4,868

 

5,397

 

 

 

3,413

 

2,928

 

3,508

 

 

6,341

 

6,665

 

Non-operating items(a)

 

 

 

 

 

 

 

US

 

(446

)

(30

)

(29

)

 

(476

)

(174

)

Non-US

 

(320

)

26

 

56

 

 

(294

)

97

 

 

 

(766

)

(4

)

27

 

 

(770

)

(77

)

Fair value accounting effects

 

 

 

 

 

 

 

US

 

(225

)

(93

)

(143

)

 

(318

)

(152

)

Non-US

 

47

 

53

 

122

 

 

100

 

252

 

 

 

(178

)

(40

)

(21

)

 

(218

)

100

 

RC profit before interest and tax

 

 

 

 

 

 

 

US

 

190

 

489

 

570

 

 

679

 

942

 

Non-US

 

2,279

 

2,395

 

2,944

 

 

4,674

 

5,746

 

 

 

2,469

 

2,884

 

3,514

 

 

5,353

 

6,688

 

Exploration expense

 

 

 

 

 

 

 

US

 

69

 

25

 

77

 

 

94

 

386

 

Non-US

 

77

 

342

 

87

 

 

419

 

292

 

 

 

146

 

367

 

164

 

 

513

 

678

 

Of which: Exploration expenditure written off

 

77

 

284

 

81

 

 

361

 

507

 

Production (net of royalties)(b)

 

 

 

 

 

 

 

Liquids* (mb/d)

 

 

 

 

 

 

 

US

 

506

 

455

 

411

 

 

480

 

429

 

Europe

 

137

 

159

 

147

 

 

148

 

143

 

Rest of World

 

658

 

685

 

659

 

 

672

 

695

 

 

 

1,301

 

1,299

 

1,217

 

 

1,300

 

1,267

 

Natural gas (mmcf/d)

 

 

 

 

 

 

 

US

 

2,410

 

2,310

 

1,744

 

 

2,360

 

1,767

 

Europe

 

132

 

145

 

202

 

 

139

 

209

 

Rest of World

 

5,138

 

5,417

 

5,297

 

 

5,276

 

5,376

 

 

 

7,680

 

7,872

 

7,242

 

 

7,775

 

7,352

 

Total hydrocarbons* (mboe/d)

 

 

 

 

 

 

 

US

 

921

 

853

 

711

 

 

887

 

734

 

Europe

 

160

 

184

 

182

 

 

172

 

180

 

Rest of World

 

1,544

 

1,619

 

1,572

 

 

1,581

 

1,622

 

 

 

2,625

 

2,656

 

2,465

 

 

2,640

 

2,535

 

Average realizations*(c)

 

 

 

 

 

 

 

Total liquids(d) ($/bbl)

 

62.63

 

56.47

 

67.24

 

 

59.61

 

64.21

 

Natural gas ($/mcf)

 

3.35

 

4.02

 

3.65

 

 

3.68

 

3.72

 

Total hydrocarbons ($/boe)

 

40.64

 

39.37

 

43.37

 

 

40.02

 

42.36

 

(a)       Second quarter and first half 2019 include impairment charges related to BPX Energy and GUPCO divestments.

(b)       Includes BP's share of production of equity-accounted entities in the Upstream segment.

(c)       Realizations are based on sales by consolidated subsidiaries only - this excludes equity-accounted entities.

(d)       Includes condensate, natural gas liquids and bitumen.

 

Because of rounding, some totals may not agree exactly with the sum of their component parts.

 

 

Top of page 8

Downstream

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Profit (loss) before interest and tax

 

1,381

 

2,811

 

2,036

 

 

4,192

 

3,818

 

Inventory holding (gains) losses*

 

(93

)

(1,046

)

(1,196

)

 

(1,139

)

(1,265

)

RC profit before interest and tax

 

1,288

 

1,765

 

840

 

 

3,053

 

2,553

 

Net (favourable) adverse impact of non-operating items* and fair value accounting effects*

 

77

 

(32

)

615

 

 

45

 

728

 

Underlying RC profit before interest and tax*(a)

 

1,365

 

1,733

 

1,455

 

 

3,098

 

3,281

 

(a)       See page 9 for a reconciliation to segment RC profit before interest and tax by region and by business.

 

Financial results

The replacement cost profit before interest and tax for the second quarter and half year was $1,288 million and $3,053 million respectively, compared with $840 million and $2,553 million for the same periods in 2018.

The second quarter and half year include a net non-operating charge of $31 million and $35 million respectively, compared with a charge of $225 million and $278 million for the same periods in 2018. Fair value accounting effects had an adverse impact of $46 million in the second quarter and an adverse impact of $10 million in the half year, compared with an adverse impact of $390 million and $450 million for the same periods in 2018.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the second quarter and half year was $1,365 million and $3,098 million respectively, compared with $1,455 million and $3,281 million for the same periods in 2018.

Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 9.

 

Fuels

The fuels business reported an underlying replacement cost profit before interest and tax of $961 million for the second quarter and $2,253 million for the half year, compared with $1,054 million and $2,452 million for the same periods in 2018. The result for the quarter and half year reflects the impact of significantly higher turnaround activity, lower refining margins and weaker North American heavy crude oil differentials partially offset by a stronger contribution from supply and trading. The result for the half year also reflects strong fuels marketing growth driven by higher retail earnings. Year on year we have grown the number of convenience partnership sites and continued to deliver premium fuel volume growth.

 

Lubricants

The lubricants business reported an underlying replacement cost profit before interest and tax of $321 million for the second quarter and $593 million for the half year, compared with $326 million and $657 million for the same periods in 2018. The result for the quarter and half year reflects the impact of adverse foreign exchange rate movements. Year on year we have continued to make strategic progress, delivering record premium brand volumes in the quarter.

Groupe Renault has recently appointed Castrol as its global service fill engine oil lubricants partner, effective from 1 January 2020. In addition Castrol extended the Renault Sport Racing Formula 1 sponsorship through to the end of 2024, further strengthening this strategic partnership.

 

Petrochemicals

The petrochemicals business reported an underlying replacement cost profit before interest and tax of $83 million for the second quarter and $252 million for the half year, compared with $75 million and $172 million for the same periods in 2018. The result for the quarter reflects high levels of turnaround, similar to the second quarter of 2018. The result for the half year reflects increased margin optimization, supported by stronger operational reliability.

During the first quarter we announced an expansion of capacity at our joint venture petrochemicals facility in South Korea and signed an agreement with Virent and Johnson Matthey to further advance the development of bio-paraxylene, a key raw material for the production of renewable polyester.

 

Outlook

Looking to the third quarter of 2019, we expect a lower level of turnaround activity and lower industry refining margins.

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 39.

 

 

Top of page 9

Downstream (continued)

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Underlying RC profit before interest and tax - by region

 

 

 

 

 

 

 

US

 

566

 

531

 

399

 

 

1,097

 

988

 

Non-US

 

799

 

1,202

 

1,056

 

 

2,001

 

2,293

 

 

 

1,365

 

1,733

 

1,455

 

 

3,098

 

3,281

 

Non-operating items

 

 

 

 

 

 

 

US

 

2

 

1

 

(155

)

 

3

 

(172

)

Non-US

 

(33

)

(5

)

(70

)

 

(38

)

(106

)

 

 

(31

)

(4

)

(225

)

 

(35

)

(278

)

Fair value accounting effects(a)

 

 

 

 

 

 

 

US

 

8

 

61

 

(299

)

 

69

 

(420

)

Non-US

 

(54

)

(25

)

(91

)

 

(79

)

(30

)

 

 

(46

)

36

 

(390

)

 

(10

)

(450

)

RC profit before interest and tax

 

 

 

 

 

 

 

US

 

576

 

593

 

(55

)

 

1,169

 

396

 

Non-US

 

712

 

1,172

 

895

 

 

1,884

 

2,157

 

 

 

1,288

 

1,765

 

840

 

 

3,053

 

2,553

 

Underlying RC profit before interest and tax - by business(b)(c)

 

 

 

 

 

 

 

Fuels

 

961

 

1,292

 

1,054

 

 

2,253

 

2,452

 

Lubricants

 

321

 

272

 

326

 

 

593

 

657

 

Petrochemicals

 

83

 

169

 

75

 

 

252

 

172

 

 

 

1,365

 

1,733

 

1,455

 

 

3,098

 

3,281

 

Non-operating items and fair value accounting effects(a)

 

 

 

 

 

 

 

Fuels

 

(99

)

37

 

(584

)

 

(62

)

(694

)

Lubricants

 

22

 

(4

)

(26

)

 

18

 

(29

)

Petrochemicals

 

-

 

(1

)

(5

)

 

(1

)

(5

)

 

 

(77

)

32

 

(615

)

 

(45

)

(728

)

RC profit before interest and tax(b)(c)

 

 

 

 

 

 

 

Fuels

 

862

 

1,329

 

470

 

 

2,191

 

1,758

 

Lubricants

 

343

 

268

 

300

 

 

611

 

628

 

Petrochemicals

 

83

 

168

 

70

 

 

251

 

167

 

 

 

1,288

 

1,765

 

840

 

 

3,053

 

2,553

 

 

 

 

 

 

 

 

 

BP average refining marker margin (RMM)* ($/bbl)

 

15.2

 

10.2

 

14.9

 

 

12.7

 

13.3

 

 

 

 

 

 

 

 

 

Refinery throughputs (mb/d)

 

 

 

 

 

 

 

US

 

673

 

735

 

666

 

 

703

 

690

 

Europe

 

715

 

767

 

786

 

 

741

 

792

 

Rest of World

 

209

 

237

 

228

 

 

223

 

238

 

 

 

1,597

 

1,739

 

1,680

 

 

1,667

 

1,720

 

BP-operated refining availability* (%)

 

93.4

 

94.3

 

93.1

 

 

93.9

 

94.0

 

 

 

 

 

 

 

 

 

Marketing sales of refined products (mb/d)

 

 

 

 

 

 

 

US

 

1,174

 

1,077

 

1,161

 

 

1,126

 

1,129

 

Europe

 

1,091

 

993

 

1,135

 

 

1,042

 

1,090

 

Rest of World

 

520

 

520

 

477

 

 

520

 

479

 

 

 

2,785

 

2,590

 

2,773

 

 

2,688

 

2,698

 

Trading/supply sales of refined products

 

3,099

 

3,296

 

3,247

 

 

3,197

 

3,215

 

Total sales volumes of refined products

 

5,884

 

5,886

 

6,020

 

 

5,885

 

5,913

 

 

 

 

 

 

 

 

 

Petrochemicals production (kte)

 

 

 

 

 

 

 

US

 

584

 

601

 

404

 

 

1,185

 

903

 

Europe

 

1,226

 

1,160

 

1,094

 

 

2,386

 

2,222

 

Rest of World

 

1,156

 

1,299

 

1,358

 

 

2,455

 

2,749

 

 

 

2,966

 

3,060

 

2,856

 

 

6,026

 

5,874

 

(a)       For Downstream, fair value accounting effects arise solely in the fuels business. See page 30 for further information.

(b)       Segment-level overhead expenses are included in the fuels business result.

(c)       Results from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany are reported in the fuels business.

 

 

Top of page 10

Rosneft

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019(a)

2019

2018

 

2019(a)

2018

Profit before interest and tax(b)(c)

 

523

 

526

 

876

 

 

1,049

 

1,145

 

Inventory holding (gains) losses*

 

2

 

(40

)

(110

)

 

(38

)

(132

)

RC profit before interest and tax

 

525

 

486

 

766

 

 

1,011

 

1,013

 

Net charge (credit) for non-operating items*

 

113

 

81

 

-

 

 

194

 

-

 

Underlying RC profit before interest and tax*

 

638

 

567

 

766

 

 

1,205

 

1,013

 

 

Financial results

Replacement cost (RC) profit before interest and tax for the second quarter and half year was $525 million and $1,011 million respectively, compared with $766 million and $1,013 million for the same periods in 2018.

After adjusting for non-operating items, the underlying RC profit before interest and tax for the second quarter and half year was $638 million and $1,205 million respectively. There were no non-operating items in the second quarter and half year in 2018.

Compared with the same periods in 2018, the result for the second quarter primarily reflects lower oil prices, adverse effects of duty lag and foreign exchange, whilst the result for the half year was primarily affected by favourable foreign exchange effects partially offset by lower oil prices.

BP's two nominees, Bob Dudley and Guillermo Quintero, were re-elected to Rosneft's board at Rosneft's annual general meeting (AGM) on 4 June 2019. At the AGM, shareholders also approved a resolution to pay a dividend of 11.33 roubles per ordinary share, which brings the total dividend for 2018 to 25.91 roubles per ordinary share, constituting 50% of the company's IFRS net profit. BP received a payment of $334 million, after the deduction of withholding tax, on 16 July.

 

 

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

 

 

2019(a)

2019

2018

 

2019(a)

2018

Production (net of royalties) (BP share)

 

 

 

 

 

 

 

Liquids* (mb/d)

 

912

 

937

 

909

 

 

924

 

906

 

Natural gas (mmcf/d)

 

1,250

 

1,327

 

1,262

 

 

1,288

 

1,285

 

Total hydrocarbons* (mboe/d)

 

1,127

 

1,166

 

1,127

 

 

1,146

 

1,127

 

(a)       The operational and financial information of the Rosneft segment for the second quarter and half year is based on preliminary operational and financial results of Rosneft for the three months and six months ended 30 June 2019. Actual results may differ from these amounts.

(b)       The Rosneft segment result includes equity-accounted earnings arising from BP's 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BP's purchase of its interest in Rosneft and the amortization of the deferred gain relating to the divestment of BP's interest in TNK-BP. These adjustments increase the segment's reported profit before interest and tax, as shown in the table above, compared with the amounts reported in Rosneft's IFRS financial statements.

(c)       BP's adjusted share of Rosneft's earnings after Rosneft's own finance costs, taxation and non-controlling interests is included in the BP group income statement within profit before interest and taxation. For each year-to-date period it is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date.

 

 

 

Top of page 11

Other businesses and corporate

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Profit (loss) before interest and tax

 

(381

)

(546

)

(1,025

)

 

(927

)

(1,596

)

Inventory holding (gains) losses*

 

-

 

-

 

-

 

 

-

 

-

 

RC profit (loss) before interest and tax

 

(381

)

(546

)

(1,025

)

 

(927

)

(1,596

)

Net charge (credit) for non-operating items*

 

91

 

128

 

548

 

 

219

 

727

 

Underlying RC profit (loss) before interest and tax*

 

(290

)

(418

)

(477

)

 

(708

)

(869

)

Underlying RC profit (loss) before interest and tax

 

 

 

 

 

 

 

US

 

(224

)

(155

)

(123

)

 

(379

)

(270

)

Non-US

 

(66

)

(263

)

(354

)

 

(329

)

(599

)

 

 

(290

)

(418

)

(477

)

 

(708

)

(869

)

Non-operating items

 

 

 

 

 

 

 

US

 

(78

)

(128

)

(498

)

 

(206

)

(646

)

Non-US

 

(13

)

-

 

(50

)

 

(13

)

(81

)

 

 

(91

)

(128

)

(548

)

 

(219

)

(727

)

RC profit (loss) before interest and tax

 

 

 

 

 

 

 

US

 

(302

)

(283

)

(621

)

 

(585

)

(916

)

Non-US

 

(79

)

(263

)

(404

)

 

(342

)

(680

)

 

 

(381

)

(546

)

(1,025

)

 

(927

)

(1,596

)

Other businesses and corporate comprises our alternative energy business, shipping, treasury, BP ventures and corporate activities including centralized functions, and any residual costs of the Gulf of Mexico oil spill.

Financial results

The replacement cost loss before interest and tax for the second quarter and half year was $381 million and $927 million respectively, compared with $1,025 million and $1,596 million for the same periods in 2018.

The results included a net non-operating charge of $91 million for the second quarter and a charge of $219 million for the half year, primarily relating to costs of the Gulf of Mexico oil spill, compared with a charge of $548 million and $727 million for the same periods in 2018.

After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the second quarter and half year was $290 million and $708 million respectively, compared with $477 million and $869 million for the same periods in 2018.

 

Alternative Energy

The net ethanol-equivalent production (which includes ethanol and sugar) for the second quarter and half year was 254 million litres and 268 million litres respectively, compared with 259 million litres and 267 million litres for the same periods in 2018.

Net wind generation capacity* was 926MW at 30 June 2019, compared with 1,432MW at 30 June 2018. BP's net share of wind generation for the second quarter and half year was 688GWh and 1,461GWh respectively, compared with 984GWh and 2,201GWh for the same periods in 2018. The lower production and reduced capacity in 2019 is due to divestments in the fourth quarter of 2018 and second quarter of 2019.

 

Lightsource BP (an equity-accounted entity, in which BP holds 43%) manages a total portfolio of 2GW of operating solar facilities, of which 1.3GW was developed in-house. During the second quarter, Lightsource BP announced expansion of its activities in Brazil, acquiring a 1.9GW portfolio of greenfield solar projects from Enerlife. In the US, Lightsource BP has executed a long-term agreement to supply renewable power from a 100MW solar facility in Alabama and has also begun construction of a 20MW solar facility in Kansas. This builds on the first quarter announcement that the Green Growth Equity Fund, managed by Lightsource BP's Indian joint venture, EverSource Capital, is partnering with the National Investment and Infrastructure Fund (NIIF) and CDC Group plc to invest a total of $330 million in Ayana Renewable Power. Ayana was launched to develop utility scale solar and wind generation projects in India.

 

On 22 July, BP and Bunge Limited announced that they had agreed to form a 50:50 joint venture, BP Bunge Bioenergia, that will create a leading bioenergy company in Brazil. On completion, BP's interest in the venture will increase its existing biofuels business by more than 50% and create opportunities to drive value from economies of scale, synergy and modernization of operations. The venture will have 11 biofuels sites in Brazil, with 32 million metric tonnes of combined crushing capacity per year. It will also generate renewable electricity - fuelled by waste biomass from the sugar cane - through its cogeneration facilities to power all its sites and sell surplus electricity to the Brazilian power grid.

In 2018, the two businesses produced a total of around 2.2 billion litres of ethanol equivalent and, after powering the sites, exported 1,200 gigawatt hours of low-carbon biopower to the national grid. Together the two businesses currently employ over 10,000 people in Brazil.

 

BP Ventures

During the second quarter, BP Ventures invested $30 million in Calysta, Inc., an alternative protein producer, that will use BP's natural gas to produce protein for fish, livestock and pet feeds. Calysta's proprietary gas fermentation technology produces FeedKind® protein, a sustainable feedstock that can be used for fish, livestock and pet nutritional products. The process has the potential to help meet the growing demand for feed in the aquaculture and wider agriculture markets, without some of the environmental impacts of current sourcing methods.

 

Outlook

During 2019, Other businesses and corporate average quarterly charges, excluding non-operating items, are expected to be around $350 million although this will fluctuate quarter to quarter.

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 39.

 

 

Top of page 12

Half-yearly financial report

This results announcement also represents BP's half-yearly financial report for the purposes of the Disclosure Guidance and Transparency Rules made by the UK Financial Conduct Authority. In this context: (i) the condensed set of financial statements can be found on pages 14-26; (ii) pages 1-11, and 27-39 comprise the interim management report; and (iii) the directors' responsibility statement and auditors' independent review report can be found on pages 12-13.

 

 

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, the condensed set of financial statements on pages 14-26 has been prepared in accordance with IAS 34 'Interim Financial Reporting', and that the interim management report on pages 1-11 and 27-39 includes a fair review of the information required by the Disclosure Guidance and Transparency Rules.

The directors of BP p.l.c. are listed on pages 58-62 of BP Annual Report and Form 20-F 2018, with the following exceptions. Admiral Frank Bowman and Alan Boeckmann retired at the 2019 Annual General Meeting on 21 May 2019.

 

By order of the board

 

Bob Dudley

Brian Gilvary

Group Chief Executive

Chief Financial Officer

29 July 2019

29 July 2019

 

 

Top of page 13

Independent review report to BP p.l.c.

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the group income statement, condensed group statement of comprehensive income, condensed group statement of changes in equity, group balance sheet, condensed group cash flow statement and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) and IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as issued by the IASB and as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP

Statutory Auditor

London

United Kingdom

29 July 2019

 

The maintenance and integrity of the BP p.l.c. website are the responsibility of the directors; the review work carried out by the statutory auditors does not involve consideration of these matters and, accordingly, the statutory auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

Top of page 14

Financial statements

 

Group income statement

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

 

 

 

 

 

 

 

 

Sales and other operating revenues (Note 4)

 

72,676

 

66,321

 

75,439

 

 

138,997

 

143,611

 

Earnings from joint ventures - after interest and tax

 

138

 

185

 

220

 

 

323

 

513

 

Earnings from associates - after interest and tax

 

608

 

649

 

1,027

 

 

1,257

 

1,441

 

Interest and other income

 

270

 

163

 

165

 

 

433

 

324

 

Gains on sale of businesses and fixed assets

 

55

 

89

 

56

 

 

144

 

161

 

Total revenues and other income

 

73,747

 

67,407

 

76,907

 

 

141,154

 

146,050

 

Purchases

 

55,683

 

48,272

 

58,424

 

 

103,955

 

109,936

 

Production and manufacturing expenses

 

5,391

 

5,356

 

5,515

 

 

10,747

 

10,953

 

Production and similar taxes (Note 6)

 

371

 

424

 

531

 

 

795

 

899

 

Depreciation, depletion and amortization (Note 5)

 

4,588

 

4,461

 

3,811

 

 

9,049

 

7,742

 

Impairment and losses on sale of businesses and fixed assets

 

906

 

96

 

(23

)

 

1,002

 

68

 

Exploration expense

 

146

 

367

 

164

 

 

513

 

678

 

Distribution and administration expenses

 

2,646

 

2,767

 

2,929

 

 

5,413

 

5,723

 

Profit (loss) before interest and taxation

 

4,016

 

5,664

 

5,556

 

 

9,680

 

10,051

 

Finance costs

 

853

 

867

 

535

 

 

1,720

 

1,088

 

Net finance expense relating to pensions and other post-retirement benefits

 

15

 

15

 

31

 

 

30

 

62

 

Profit (loss) before taxation

 

3,148

 

4,782

 

4,990

 

 

7,930

 

8,901

 

Taxation

 

1,244

 

1,783

 

2,117

 

 

3,027

 

3,497

 

Profit (loss) for the period

 

1,904

 

2,999

 

2,873

 

 

4,903

 

5,404

 

Attributable to

 

 

 

 

 

 

 

BP shareholders

 

1,822

 

2,934

 

2,799

 

 

4,756

 

5,268

 

Non-controlling interests

 

82

 

65

 

74

 

 

147

 

136

 

 

 

1,904

 

2,999

 

2,873

 

 

4,903

 

5,404

 

 

 

 

 

 

 

 

 

Earnings per share (Note 7)

 

 

 

 

 

 

 

Profit (loss) for the period attributable to BP shareholders

 

 

 

 

 

 

 

Per ordinary share (cents)

 

 

 

 

 

 

 

Basic

 

8.95

 

14.54

 

14.03

 

 

23.47

 

26.42

 

Diluted

 

8.92

 

14.47

 

13.96

 

 

23.35

 

26.27

 

Per ADS (dollars)

 

 

 

 

 

 

 

Basic

 

0.54

 

0.87

 

0.84

 

 

1.41

 

1.59

 

Diluted

 

0.54

 

0.87

 

0.84

 

 

1.40

 

1.58

 

 

 

Top of page 15

Condensed group statement of comprehensive income

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

 

 

 

 

 

 

 

 

Profit (loss) for the period

 

1,904

 

2,999

 

2,873

 

 

4,903

 

5,404

 

Other comprehensive income

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

Currency translation differences

 

131

 

989

 

(2,612

)

 

1,120

 

(2,081

)

Cash flow hedges and costs of hedging

 

133

 

19

 

(107

)

 

152

 

(189

)

Share of items relating to equity-accounted entities, net of tax

 

(30

)

(50

)

(33

)

 

(80

)

122

 

Income tax relating to items that may be reclassified

 

(9

)

(34

)

52

 

 

(43

)

(38

)

 

 

225

 

924

 

(2,700

)

 

1,149

 

(2,186

)

Items that will not be reclassified to profit or loss

 

 

 

 

 

 

 

Remeasurements of the net pension and other post-retirement benefit liability or asset

 

(39

)

(853

)

1,714

 

 

(892

)

2,579

 

Cash flow hedges that will subsequently be transferred to the balance sheet

 

(7

)

8

 

(35

)

 

1

 

(22

)

Income tax relating to items that will not be reclassified

 

2

 

273

 

(557

)

 

275

 

(822

)

 

 

(44

)

(572

)

1,122

 

 

(616

)

1,735

 

Other comprehensive income

 

181

 

352

 

(1,578

)

 

533

 

(451

)

Total comprehensive income

 

2,085

 

3,351

 

1,295

 

 

5,436

 

4,953

 

Attributable to

 

 

 

 

 

 

 

BP shareholders

 

2,001

 

3,281

 

1,268

 

 

5,282

 

4,848

 

Non-controlling interests

 

84

 

70

 

27

 

 

154

 

105

 

 

 

2,085

 

3,351

 

1,295

 

 

5,436

 

4,953

 

 

 

Top of page 16

Condensed group statement of changes in equity

 

 

BP shareholders'

Non-controlling

Total

$ million

 

equity

interests

equity

At 31 December 2018

 

99,444

 

2,104

 

101,548

 

Adjustment on adoption of IFRS 16, net of tax(a)

 

(329

)

(1

)

(330

)

At 1 January 2019

 

99,115

 

2,103

 

101,218

 

 

 

 

 

 

Total comprehensive income

 

5,282

 

154

 

5,436

 

Dividends

 

(3,200

)

(119

)

(3,319

)

Cash flow hedges transferred to the balance sheet, net of tax

 

12

 

-

 

12

 

Repurchase of ordinary share capital

 

(125

)

-

 

(125

)

Share-based payments, net of tax

 

398

 

-

 

398

 

Share of equity-accounted entities' changes in equity, net of tax

 

3

 

-

 

3

 

At 30 June 2019

 

101,485

 

2,138

 

103,623

 

 

 

 

 

 

 

 

BP shareholders'

Non-controlling

Total

$ million

 

equity

interests

equity

At 31 December 2017

 

98,491

 

1,913

 

100,404

 

Adjustment on adoption of IFRS 9, net of tax(b)

 

(180

)

-

 

(180

)

At 1 January 2018

 

98,311

 

1,913

 

100,224

 

 

 

 

 

 

Total comprehensive income

 

4,848

 

105

 

4,953

 

Dividends

 

(3,556

)

(70

)

(3,626

)

Cash flow hedges transferred to the balance sheet, net of tax

 

5

 

-

 

5

 

Repurchase of ordinary share capital

 

(200

)

-

 

(200

)

Share-based payments, net of tax

 

414

 

-

 

414

 

Transactions involving non-controlling interests, net of tax

 

(1

)

1

 

-

 

At 30 June 2018

 

99,821

 

1,949

 

101,770

 

(a)            See Note 1 for further information.

(b)      See Note 1 in BP Annual Report and Form 20-F 2018 for further information.

 

 

Top of page 17

Group balance sheet

 

 

30 June

31 December

$ million

 

2019

2018(a)

Non-current assets

 

 

 

Property, plant and equipment

 

145,291

 

135,261

 

Goodwill

 

12,158

 

12,204

 

Intangible assets

 

15,631

 

17,284

 

Investments in joint ventures

 

8,637

 

8,647

 

Investments in associates

 

19,587

 

17,673

 

Other investments

 

1,250

 

1,341

 

Fixed assets

 

202,554

 

192,410

 

Loans

 

689

 

637

 

Trade and other receivables

 

2,146

 

1,834

 

Derivative financial instruments

 

6,014

 

5,145

 

Prepayments

 

776

 

1,179

 

Deferred tax assets

 

3,624

 

3,706

 

Defined benefit pension plan surpluses

 

5,816

 

5,955

 

 

 

221,619

 

210,866

 

Current assets

 

 

 

Loans

 

313

 

326

 

Inventories

 

20,042

 

17,988

 

Trade and other receivables

 

24,343

 

24,478

 

Derivative financial instruments

 

3,384

 

3,846

 

Prepayments

 

1,001

 

963

 

Current tax receivable

 

930

 

1,019

 

Other investments

 

135

 

222

 

Cash and cash equivalents

 

20,674

 

22,468

 

 

 

70,822

 

71,310

 

Assets classified as held for sale (Note 2)

 

721

 

-

 

 

 

71,543

 

71,310

 

Total assets

 

293,162

 

282,176

 

Current liabilities

 

 

 

Trade and other payables

 

44,774

 

46,265

 

Derivative financial instruments

 

2,601

 

3,308

 

Accruals

 

4,143

 

4,626

 

Lease liabilities

 

2,094

 

44

 

Finance debt

 

8,677

 

9,329

 

Current tax payable

 

2,384

 

2,101

 

Provisions

 

2,070

 

2,564

 

 

 

66,743

 

68,237

 

Liabilities directly associated with assets classified as held for sale (Note 2)

 

112

 

-

 

 

 

66,855

 

68,237

 

Non-current liabilities

 

 

 

Other payables

 

12,654

 

13,830

 

Derivative financial instruments

 

5,187

 

5,625

 

Accruals

 

610

 

575

 

Lease liabilities

 

8,285

 

623

 

Finance debt

 

58,876

 

55,803

 

Deferred tax liabilities

 

9,672

 

9,812

 

Provisions

 

18,393

 

17,732

 

Defined benefit pension plan and other post-retirement benefit plan deficits

 

9,007

 

8,391

 

 

 

122,684

 

112,391

 

Total liabilities

 

189,539

 

180,628

 

Net assets

 

103,623

 

101,548

 

Equity

 

 

 

BP shareholders' equity

 

101,485

 

99,444

 

Non-controlling interests

 

2,138

 

2,104

 

Total equity

 

103,623

 

101,548

 

(a)      Finance debt on the comparative balance sheet has been re-presented to align with the current period. See Note 1 for further information.

 

 

Top of page 18

Condensed group cash flow statement

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

Operating activities

 

 

 

 

 

 

 

Profit (loss) before taxation

 

3,148

 

4,782

 

4,990

 

 

7,930

 

8,901

 

Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities

 

 

 

 

 

 

 

Depreciation, depletion and amortization and exploration expenditure written off

 

4,665

 

4,745

 

3,892

 

 

9,410

 

8,249

 

Impairment and (gain) loss on sale of businesses and fixed assets

 

851

 

7

 

(79

)

 

858

 

(93

)

Earnings from equity-accounted entities, less dividends received

 

(395

)

(589

)

(988

)

 

(984

)

(1,524

)

Net charge for interest and other finance expense, less net interest paid

 

62

 

88

 

191

 

 

150

 

271

 

Share-based payments

 

117

 

297

 

167

 

 

414

 

404

 

Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans

 

(68

)

(77

)

(62

)

 

(145

)

(264

)

Net charge for provisions, less payments

 

(198

)

(116

)

80

 

 

(314

)

224

 

Movements in inventories and other current and non-current assets and liabilities

 

(58

)

(2,695

)

(570

)

 

(2,753

)

(3,968

)

Income taxes paid

 

(1,309

)

(1,146

)

(1,315

)

 

(2,455

)

(2,248

)

Net cash provided by operating activities

 

6,815

 

5,296

 

6,306

 

 

12,111

 

9,952

 

Investing activities

 

 

 

 

 

 

 

Expenditure on property, plant and equipment, intangible and other assets

 

(3,833

)

(3,695

)

(3,484

)

 

(7,528

)

(7,070

)

Acquisitions, net of cash acquired

 

(1,747

)

(1,795

)

(1

)

 

(3,542

)

(1

)

Investment in joint ventures

 

(20

)

-

 

(18

)

 

(20

)

(57

)

Investment in associates

 

(54

)

(145

)

(322

)

 

(199

)

(660

)

Total cash capital expenditure

 

(5,654

)

(5,635

)

(3,825

)

 

(11,289

)

(7,788

)

Proceeds from disposal of fixed assets

 

70

 

235

 

105

 

 

305

 

190

 

Proceeds from disposal of businesses, net of cash disposed

 

8

 

365

 

45

 

 

373

 

127

 

Proceeds from loan repayments

 

64

 

55

 

24

 

 

119

 

33

 

Net cash used in investing activities

 

(5,512

)

(4,980

)

(3,651

)

 

(10,492

)

(7,438

)

Financing activities(a)

 

 

 

 

 

 

 

Net issue (repurchase) of shares

 

(80

)

(45

)

(90

)

 

(125

)

(200

)

Lease liability payments

 

(595

)

(617

)

(4

)

 

(1,212

)

(14

)

Proceeds from long-term financing

 

4,381

 

2,124

 

910

 

 

6,505

 

1,032

 

Repayments of long-term financing

 

(3,602

)

(2,640

)

(1,722

)

 

(6,242

)

(2,869

)

Net increase (decrease) in short-term debt

 

(119

)

1,089

 

292

 

 

970

 

(57

)

Net increase (decrease) in non-controlling interests

 

-

 

-

 

-

 

 

-

 

(1

)

Dividends paid - BP shareholders

 

(1,779

)

(1,435

)

(1,727

)

 

(3,214

)

(3,556

)

 - non-controlling interests

 

(83

)

(36

)

(57

)

 

(119

)

(70

)

Net cash provided by (used in) financing activities

 

(1,877

)

(1,560

)

(2,398

)

 

(3,437

)

(5,735

)

Currency translation differences relating to cash and cash equivalents

 

(8

)

32

 

(314

)

 

24

 

(169

)

Increase (decrease) in cash and cash equivalents

 

(582

)

(1,212

)

(57

)

 

(1,794

)

(3,390

)

Cash and cash equivalents at beginning of period

 

21,256

 

22,468

 

22,242

 

 

22,468

 

25,575

 

Cash and cash equivalents at end of period

 

20,674

 

21,256

 

22,185

 

 

20,674

 

22,185

 

(a)      Financing cash flows for the second quarter and half year 2018 have been re-presented to align with the current period. See Note 1 for further information.

 

 

 

Top of page 19

Notes

 

 

Note 1. Basis of preparation

 

The interim financial information included in this report has been prepared in accordance with IAS 34 'Interim Financial Reporting'.

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 each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2018 included in BP Annual Report and Form 20-F 2018.

The directors consider it appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.

BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006 as applicable to companies reporting under IFRS. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the group's consolidated financial statements for the periods presented.

The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing BP Annual Report and Form 20-F 2019, which are the same as those used in preparing BP Annual Report and Form 20-F 2018 with the exception of the adoption of IFRS 16 'Leases' from 1 January 2019.

 

New International Financial Reporting Standards adopted

BP adopted IFRS 16 'Leases', which replaced IAS 17 'Leases' and IFRIC 4 'Determining whether an arrangement contains a lease', with effect from 1 January 2019. Further information is included in BP Annual Report and Form 20-F 2018 - Financial statements - Note 1 Significant accounting policies, judgements, estimates and assumptions - Impact of new International Financial Reporting Standards.

IFRS 16 provides a new model for lessee accounting in which the majority of leases are accounted for by the recognition on the balance sheet of a right-of-use asset and a lease liability.

Agreements that convey the right to control the use of an identified asset for a period of time in exchange for consideration are accounted for as leases. A lease liability is recognized at the present value of future lease payments over the reasonably certain lease term. Variable lease payments that do not depend on an index or a rate are not included in the lease liability. The right-of-use asset is recognized at a value equivalent to the initial measurement of the lease liability adjusted for lease prepayments, lease incentives, initial direct costs and any restoration obligations. The subsequent amortization of the right-of-use asset and the interest expense related to the lease liability are recognized in the income statement over the lease term.

The group recognizes the full lease liability, rather than its working interest share, for leases entered into on behalf of a joint operation if the group has the primary responsibility for making the lease payments. If the right-of-use asset is jointly controlled by the group and the other joint operators, a receivable is recognized for the share of the asset transferred to the other joint operators.

BP elected to apply the modified retrospective transition approach in which the cumulative effect of initial application is recognized in opening retained earnings at the date of initial application with no restatement of comparative periods' financial information. Comparative information in the group balance sheet and group cash flow statement has, however, been re-presented to align with current year presentation, showing lease liabilities and lease liability payments as separate line items. These were previously included within the finance debt and repayments of long-term financing line items respectively. Amounts presented in these line items for the comparative periods relate to leases accounted for as finance leases under IAS 17.

IFRS 16 introduces a revised definition of a lease. As permitted by the standard, BP elected not to reassess the existing population of leases under the new definition and will only apply the new definition for the assessment of contracts entered into after the transition date. On transition the standard permits, on a lease-by-lease basis, the right-of-use asset to be measured either at an amount equal to the lease liability (as adjusted for prepaid or accrued lease payments), or on a historical basis as if the standard had always applied. BP elected to use the historical asset measurement for its more material leases and used the asset equals liability approach for the remainder of the population. BP also elected to adjust the carrying amounts of the right-of-use assets as at 1 January 2019 for onerous lease provisions that had been recognized on the group balance sheet as at 31 December 2018, rather than performing impairment tests on transition.

 

 

Top of page 20

Note 1. Basis of preparation (continued)

The effect of the adoption of IFRS 16 on the group balance sheet is set out below.

 

 

 

 

Adjustment

 

 

31 December

1 January

on adoption

$ million

 

2018

2019

of IFRS 16

Non-current assets

 

 

 

 

Property, plant and equipment

 

135,261

 

143,950

 

8,689

 

Trade and other receivables

 

1,834

 

2,159

 

325

 

Prepayments

 

1,179

 

849

 

(330

)

Deferred tax assets

 

3,706

 

3,736

 

30

 

Current assets

 

 

 

 

Trade and other receivables

 

24,478

 

24,673

 

195

 

Prepayments

 

963

 

872

 

(91

)

Current liabilities

 

 

 

 

Trade and other payables

 

46,265

 

46,209

 

(56

)

Accruals

 

4,626

 

4,578

 

(48

)

Lease liabilities

 

44

 

2,196

 

2,152

 

Finance debt

 

9,329

 

9,329

 

-

 

Provisions

 

2,564

 

2,547

 

(17

)

Non-current liabilities

 

 

 

 

Other payables

 

13,830

 

14,013

 

183

 

Accruals

 

575

 

548

 

(27

)

Lease liabilities

 

623

 

7,704

 

7,081

 

Finance debt

 

55,803

 

55,803

 

-

 

Deferred tax liabilities

 

9,812

 

9,767

 

(45

)

Provisions

 

17,732

 

17,657

 

(75

)

 

 

 

 

 

Net assets

 

101,548

 

101,218

 

(330

)

 

 

 

 

 

Equity

 

 

 

 

BP shareholders' equity

 

99,444

 

99,115

 

(329

)

Non-controlling interests

 

2,104

 

2,103

 

(1

)

 

 

101,548

 

101,218

 

(330

)

The presentation and timing of recognition of charges in the income statement has changed following the adoption of IFRS 16. The operating lease expense previously reported under IAS 17, typically on a straight-line basis, has been replaced by depreciation of the right-of-use asset and interest on the lease liability. In the cash flow statement payments are now presented as financing cash flows, representing payments of principal, and as operating cash flows, representing payments of interest. Variable lease payments that do not depend on an index or rate are not included in the lease liability and will continue to be presented as operating cash flows. In prior years, operating lease payments were principally presented within cash flows from operating activities.

The following table provides a reconciliation of the group's operating lease commitments as at 31 December 2018 to the total lease liability recognized on the group balance sheet in accordance with IFRS 16 as at 1 January 2019.

$ million

 

 

Operating lease commitments at 31 December 2018

 

11,979

 

 

 

 

Leases not yet commenced

 

(1,372

)

Leases below materiality threshold

 

(86

)

Short-term leases

 

(91

)

Effect of discounting

 

(1,512

)

Impact on leases in joint operations

 

836

 

Variable lease payments

 

(58

)

Redetermination of lease term

 

(252

)

Other

 

(22

)

Total additional lease liabilities recognized on adoption of IFRS 16

 

9,422

 

Finance lease obligations at 31 December 2018

 

667

 

Adjustment for finance leases in joint operations

 

(189

)

Total lease liabilities at 1 January 2019

 

9,900

 

 

 

Top of page 21

Note 1. Basis of preparation (continued)

An explanation of each reconciling item shown in the table above is provided in BP Annual Report and Form 20-F 2018 - Financial statements - Note 1 Significant accounting policies, judgements, estimates and assumptions - Impact of new International Financial Reporting Standards.

The total adjustments to the group's lease liabilities at 1 January 2019 are reconciled as follows:

$ million

 

 

Total additional lease liabilities recognized on adoption of IFRS 16

 

9,422

 

Less: adjustment for finance leases in joint operations

 

(189

)

Total adjustment to lease liabilities

 

9,233

 

Of which  - current

 

2,152

 

- non-current

 

7,081

 

 

IFRIC agenda decision on IFRS 9 'Financial Instruments'

In March 2019, the IFRS Interpretations Committee (IFRIC) issued an agenda decision on the application of IFRS 9 to the physical settlement of contracts to buy or sell a non-financial item. The agenda decision concluded that where a derivative contract is settled by the physical receipt (or delivery) of the commodity, the transaction price reported for the purchase (or sale) should include the fair value of the derivative instrument in addition to the cash payable (or receivable). BP is currently assessing the impact of the agenda decision but expects it to have no effect on reported earnings.

 

 

Note 2. Non-current assets held for sale

 

On 3 June 2019 BP announced that it had agreed to sell its interests in Gulf of Suez oil concessions in Egypt to Dragon Oil. Under the terms of the agreement, Dragon Oil will purchase producing and exploration concessions and BP's interest in the Gulf of Suez Petroleum Company (GUPCO). The deal, which is subject to the Egyptian Ministry of Petroleum and Mineral Resources' approval, is expected to complete during the second half of 2019. Assets and associated liabilities relating to these concessions, which are reported in the Upstream segment, have been classified as held for sale in the group balance sheet.

 

 

On 22 July, BP and Bunge announced that they will each contribute their existing Brazilian biofuel, biopower and sugar businesses into a new 50:50 joint venture. Assets and associated liabilities relating to the BP businesses will be classified as held for sale in the group's balance sheet from 22 July. Subject to satisfaction of conditions precedent, including obtaining the necessary regulatory clearances and approval, the deal is expected to complete in the fourth quarter of 2019.

 

 

Top of page 22

Note 3. Analysis of replacement cost profit (loss) before interest and tax and reconciliation to profit (loss) before taxation

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Upstream

 

2,469

 

2,884

 

3,514

 

 

5,353

 

6,688

 

Downstream

 

1,288

 

1,765

 

840

 

 

3,053

 

2,553

 

Rosneft

 

525

 

486

 

766

 

 

1,011

 

1,013

 

Other businesses and corporate

 

(381

)

(546

)

(1,025

)

 

(927

)

(1,596

)

 

 

3,901

 

4,589

 

4,095

 

 

8,490

 

8,658

 

Consolidation adjustment - UPII*

 

34

 

(13

)

151

 

 

21

 

(9

)

RC profit (loss) before interest and tax*

 

3,935

 

4,576

 

4,246

 

 

8,511

 

8,649

 

Inventory holding gains (losses)*

 

 

 

 

 

 

 

Upstream

 

(10

)

2

 

4

 

 

(8

)

5

 

Downstream

 

93

 

1,046

 

1,196

 

 

1,139

 

1,265

 

Rosneft (net of tax)

 

(2

)

40

 

110

 

 

38

 

132

 

Profit (loss) before interest and tax

 

4,016

 

5,664

 

5,556

 

 

9,680

 

10,051

 

Finance costs

 

853

 

867

 

535

 

 

1,720

 

1,088

 

Net finance expense relating to pensions and other post-retirement benefits

 

15

 

15

 

31

 

 

30

 

62

 

Profit (loss) before taxation

 

3,148

 

4,782

 

4,990

 

 

7,930

 

8,901

 

 

 

 

 

 

 

 

 

RC profit (loss) before interest and tax*

 

 

 

 

 

 

 

US

 

498

 

771

 

(20

)

 

1,269

 

339

 

Non-US

 

3,437

 

3,805

 

4,266

 

 

7,242

 

8,310

 

 

 

3,935

 

4,576

 

4,246

 

 

8,511

 

8,649

 

 

 

 

Top of page 23

Note 4. Sales and other operating revenues

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

By segment

 

 

 

 

 

 

 

Upstream

 

13,556

 

14,594

 

12,698

 

 

28,150

 

26,568

 

Downstream

 

66,396

 

58,416

 

69,174

 

 

124,812

 

130,580

 

Other businesses and corporate

 

433

 

356

 

376

 

 

789

 

719

 

 

 

80,385

 

73,366

 

82,248

 

 

153,751

 

157,867

 

 

 

 

 

 

 

 

 

Less: sales and other operating revenues between segments

 

 

 

 

 

 

 

Upstream

 

7,481

 

6,324

 

5,795

 

 

13,805

 

12,528

 

Downstream

 

62

 

586

 

785

 

 

648

 

1,267

 

Other businesses and corporate

 

166

 

135

 

229

 

 

301

 

461

 

 

 

7,709

 

7,045

 

6,809

 

 

14,754

 

14,256

 

 

 

 

 

 

 

 

 

Third party sales and other operating revenues

 

 

 

 

 

 

 

Upstream

 

6,075

 

8,270

 

6,903

 

 

14,345

 

14,040

 

Downstream

 

66,334

 

57,830

 

68,389

 

 

124,164

 

129,313

 

Other businesses and corporate

 

267

 

221

 

147

 

 

488

 

258

 

Total sales and other operating revenues

 

72,676

 

66,321

 

75,439

 

 

138,997

 

143,611

 

 

 

 

 

 

 

 

 

By geographical area

 

 

 

 

 

 

 

US

 

26,086

 

21,848

 

26,676

 

 

47,934

 

50,289

 

Non-US

 

52,933

 

49,618

 

56,032

 

 

102,551

 

107,272

 

 

 

79,019

 

71,466

 

82,708

 

 

150,485

 

157,561

 

Less: sales and other operating revenues between areas

 

6,343

 

5,145

 

7,269

 

 

11,488

 

13,950

 

 

 

72,676

 

66,321

 

75,439

 

 

138,997

 

143,611

 

 

 

 

 

 

 

 

 

Revenues from contracts with customers

 

 

 

 

 

 

 

Sales and other operating revenues include the following in relation to revenues from contracts with customers:

 

 

 

 

 

 

 

Crude oil

 

17,070

 

14,282

 

17,167

 

 

31,352

 

32,084

 

Oil products

 

46,999

 

42,583

 

51,440

 

 

89,582

 

95,570

 

Natural gas, LNG and NGLs

 

4,823

 

5,793

 

4,960

 

 

10,616

 

10,119

 

Non-oil products and other revenues from contracts with customers

 

3,173

 

3,501

 

3,081

 

 

6,674

 

6,576

 

 

 

72,065

 

66,159

 

76,648

 

 

138,224

 

144,349

 

 

 

Note 5. Depreciation, depletion and amortization

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Upstream

 

 

 

 

 

 

 

US

 

1,288

 

1,113

 

999

 

 

2,401

 

2,087

 

Non-US

 

2,396

 

2,498

 

2,226

 

 

4,894

 

4,498

 

 

 

3,684

 

3,611

 

3,225

 

 

7,295

 

6,585

 

Downstream

 

 

 

 

 

 

 

US

 

333

 

323

 

221

 

 

656

 

440

 

Non-US

 

392

 

383

 

293

 

 

775

 

595

 

 

 

725

 

706

 

514

 

 

1,431

 

1,035

 

Other businesses and corporate

 

 

 

 

 

 

 

US

 

14

 

13

 

16

 

 

27

 

32

 

Non-US

 

165

 

131

 

56

 

 

296

 

90

 

 

 

179

 

144

 

72

 

 

323

 

122

 

Total group

 

4,588

 

4,461

 

3,811

 

 

9,049

 

7,742

 

 

 

Top of page 24

Note 6. Production and similar taxes

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

US

 

79

 

81

 

89

 

 

160

 

179

 

Non-US

 

292

 

343

 

442

 

 

635

 

720

 

 

 

371

 

424

 

531

 

 

795

 

899

 

 

 

Note 7. Earnings per share and shares in issue

 

Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit (loss) for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. During the quarter the company repurchased for cancellation 11 million ordinary shares for a total cost of $75 million, as part of the share buyback programme as announced on 31 October 2017. This brings the total number of shares repurchased in the first half to 17 million for a total cost of $125 million. The number of shares in issue is reduced when shares are repurchased.

The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.

For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method.

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Results for the period

 

 

 

 

 

 

 

Profit (loss) for the period attributable to BP shareholders

 

1,822

 

2,934

 

2,799

 

 

4,756

 

5,268

 

Less: preference dividend

 

1

 

-

 

1

 

 

1

 

1

 

Profit (loss) attributable to BP ordinary shareholders

 

1,821

 

2,934

 

2,798

 

 

4,755

 

5,267

 

 

 

 

 

 

 

 

 

Number of shares (thousand)(a)

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

20,336,347

 

20,175,634

 

19,945,053

 

 

20,256,254

 

19,931,945

 

ADS equivalent

 

3,389,391

 

3,362,605

 

3,324,175

 

 

3,376,042

 

3,321,990

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding used to calculate diluted earnings per share

 

20,421,184

 

20,281,773

 

20,044,277

 

 

20,368,125

 

20,050,123

 

ADS equivalent

 

3,403,530

 

3,380,295

 

3,340,712

 

 

3,394,687

 

3,341,687

 

 

 

 

 

 

 

 

 

Shares in issue at period-end

 

20,373,332

 

20,330,597

 

19,973,943

 

 

20,373,332

 

19,973,943

 

ADS equivalent

 

3,395,555

 

3,388,432

 

3,328,991

 

 

3,395,555

 

3,328,991

 

(a)       Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans.

 

 

 

Top of page 25

Note 8. Dividends

Dividends payable

BP today announced an interim dividend of 10.25 cents per ordinary share which is expected to be paid on 20 September 2019 to ordinary shareholders and American Depositary Share (ADS) holders on the register on 9 August 2019. The corresponding amount in sterling is due to be announced on 10 September 2019, calculated based on the average of the market exchange rates for the four dealing days commencing on 4 September 2019. Holders of ADSs are expected to receive $0.615 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the second quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.

 

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

 

 

2019

2019

2018

 

2019

2018

Dividends paid per ordinary share

 

 

 

 

 

 

 

cents

 

10.250

 

10.250

 

10.000

 

 

20.500

 

20.000

 

pence

 

8.066

 

7.738

 

7.444

 

 

15.804

 

14.613

 

Dividends paid per ADS (cents)

 

61.50

 

61.50

 

60.00

 

 

123.00

 

120.00

 

Scrip dividends

 

 

 

 

 

 

 

Number of shares issued (millions)

 

46.3

 

90.1

 

34.5

 

 

136.4

 

57.9

 

Value of shares issued ($ million)

 

318

 

629

 

266

 

 

947

 

421

 

 

 

 

Note 9. Net debt and net debt including leases

Net debt*

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Finance debt(a)

 

67,553

 

65,990

 

59,739

 

 

67,553

 

59,739

 

Fair value (asset) liability of hedges related to finance debt(b)

 

(378

)

350

 

1,104

 

 

(378

)

1,104

 

 

 

67,175

 

66,340

 

60,843

 

 

67,175

 

60,843

 

Less: cash and cash equivalents

 

20,674

 

21,256

 

22,185

 

 

20,674

 

22,185

 

Net debt

 

46,501

 

45,084

 

38,658

 

 

46,501

 

38,658

 

Equity

 

103,623

 

103,336

 

101,770

 

 

103,623

 

101,770

 

Gearing

 

31.0%

30.4%

27.5%

 

31.0%

27.5%

(a)       The fair value of finance debt at 30 June 2019 was $68,857 million (31 December 2018 $65,259 million).

(b)       Derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $563 million (first quarter 2019 liability of $609 million and second quarter 2018 liability of $774 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.

 

As a result of the adoption of IFRS 16 'Leases', leases that were previously classified as finance leases under IAS 17 are now presented as 'Lease liabilities' on the group balance sheet and therefore do not form part of finance debt. Comparative information for finance debt (previously termed 'gross debt'), net debt and gearing (previously termed 'net debt ratio') have been amended to be on a consistent basis with amounts presented for 2019. The relevant amount for finance lease liabilities that has been excluded from comparative information for the second quarter and first half 2018 is $619 million. The previously disclosed amount for finance debt for the second quarter and first half 2018 was $60,358 million. The previously disclosed amount for net debt for the second quarter and first half 2018 was $39,277 million. The previously disclosed gearing for the second quarter and first half 2018 was 27.8%.

Net debt including leases*

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Net debt

 

46,501

 

45,084

 

38,658

 

 

46,501

 

38,658

 

Lease liabilities

 

10,379

 

10,294

 

619

 

 

10,379

 

619

 

Net partner (receivable) payable for leases entered into on behalf of joint operations

 

(230

)

(303

)

-

 

 

(230

)

-

 

Net debt including leases

 

56,650

 

55,075

 

39,277

 

 

56,650

 

39,277

 

 

 

Top of page 26

Note 10. Inventory valuation

 

A provision of $242 million was held against hydrocarbon inventories at 30 June 2019 ($124 million at 31 March 2019 and $38 million at 30 June 2018) to write them down to their net realizable value. The net movement charged to the income statement during the second quarter 2019 was $120 million (first quarter 2019 was a credit of $480 million and second quarter 2018 was a credit of $15 million).

 

 

Note 11. Statutory accounts

 

The financial information shown in this publication, which was approved by the Board of Directors on 29 July 2019, is unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP Annual Report and Form 20-F 2019. BP Annual Report and Form 20-F 2018 has been filed with the Registrar of Companies in England and Wales. The report of the auditor on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under section 498(2) or section 498(3) of the UK Companies Act 2006.

 

 

Top of page 27

Additional information

 

 

Effects on the financial statements of the adoption of IFRS 16 'Leases'

BP adopted IFRS 16 'Leases' with effect from 1 January 2019. The principal effects of the adoption are described below. BP elected to apply the modified retrospective transition approach in which the cumulative effect of initial application is recognized in opening retained earnings at the date of initial application with no restatement of comparative periods' financial information. For further information of the effects of adoption see Financial statements - Note 1 and Note 9.

Balance sheet

As a result of the adoption of IFRS 16, $9.7 billion of right-of-use assets and $10.4 billion of lease liabilities have been included in the group balance sheet as at 30 June 2019. Lease liabilities are now presented separately on the group balance sheet and do not form part of finance debt. Comparative information for finance debt in the group balance sheet has been re-presented to align with current year presentation.

 

 

30 June

31 December

$ billion

 

2019

2018

Property, plant and equipment(a) (b)

 

9.7

 

0.5

 

Lease liabilities(a)

 

10.4

 

0.7

 

Finance debt

 

67.6

 

65.1

 

(a)      Comparative information represents finance leases accounted for under IAS 17.

(b)    Net additions to right-of-use assets for the second quarter and half year 2019 were $0.8 billion and $1.7 billion respectively.

 

Income statement

The presentation and timing of recognition of charges in the income statement has changed following the adoption of IFRS 16. The operating lease expense reported under the previous lease accounting standard, IAS 17, typically on a straight-line basis, has been replaced by depreciation of the right-of-use asset and interest on the lease liability. Depreciation of right-of-use assets for the second quarter and first half 2019 was $0.5 billion and $0.9 billion respectively. Interest on the group's lease liabilities for the second quarter and first half 2019 was $0.1 billion and $0.2 billion respectively. Operating lease expenses were previously principally included within Production and manufacturing expenses and Distribution and administration expenses in the income statement. It is estimated that the resulting benefit to these line items is offset, in total, by an equivalent amount in depreciation and interest charges. Therefore, there has been no material overall effect on group profit measures in the second quarter of 2019.

Cash flow statement

Lease payments are now presented as financing cash flows, representing payments of principal, and as operating cash flows, representing payments of interest. In prior years, operating lease payments were presented as operating cash flows and capital expenditure. Of the $0.6 billion of lease payments included within financing activities for the second quarter of 2019, it is estimated that $0.5 billion would have been reported as operating cash flows and $0.1 billion would have been reported as capital expenditure cash flows ignoring the effects of IFRS 16. Of the $1.2 billion of lease payments included within financing activities for the first half 2019, it is estimated that $1.0 billion would have been reported as operating cash flows and $0.2 billion would have been reported as capital expenditure cash flows ignoring the effects of IFRS 16.

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ billion

 

2019

2019

2018

 

Financing activities

 

 

 

 

 

 

 

Lease liability payments(a)

 

(0.6

)

(0.6

)

-

 

 

(1.2

)

-

 

                         

(a)       Comparative information represents finance leases accounted for under IAS 17.

 

 

Top of page 28

Capital expenditure*

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Capital expenditure on a cash basis

 

 

 

 

 

 

 

Organic capital expenditure*

 

3,686

 

3,648

 

3,470

 

 

7,334

 

7,008

 

Inorganic capital expenditure*(a)

 

1,968

 

1,987

 

355

 

 

3,955

 

780

 

 

 

5,654

 

5,635

 

3,825

 

 

11,289

 

7,788

 

 

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Organic capital expenditure by segment

 

 

 

 

 

 

 

Upstream

 

 

 

 

 

 

 

US

 

972

 

982

 

826

 

 

1,954

 

1,580

 

Non-US

 

1,858

 

1,888

 

1,941

 

 

3,746

 

4,053

 

 

 

2,830

 

2,870

 

2,767

 

 

5,700

 

5,633

 

Downstream

 

 

 

 

 

 

 

US

 

271

 

187

 

232

 

 

458

 

403

 

Non-US

 

470

 

534

 

382

 

 

1,004

 

829

 

 

 

741

 

721

 

614

 

 

1,462

 

1,232

 

Other businesses and corporate

 

 

 

 

 

 

 

US

 

15

 

9

 

7

 

 

24

 

14

 

Non-US

 

100

 

48

 

82

 

 

148

 

129

 

 

 

115

 

57

 

89

 

 

172

 

143

 

 

 

3,686

 

3,648

 

3,470

 

 

7,334

 

7,008

 

Organic capital expenditure by geographical area

 

 

 

 

 

 

 

US

 

1,258

 

1,178

 

1,065

 

 

2,436

 

1,997

 

Non-US

 

2,428

 

2,470

 

2,405

 

 

4,898

 

5,011

 

 

 

3,686

 

3,648

 

3,470

 

 

7,334

 

7,008

 

(a)       On 31 October 2018, BP acquired from BHP Billiton Petroleum (North America) Inc. 100% of the issued share capital of Petrohawk Energy Corporation, a wholly owned subsidiary of BHP that holds a portfolio of unconventional onshore US oil and gas assets. As at 30 June 2019, the entire consideration payable of $10,268 million, after customary closing adjustments, had been paid. This includes $1,732 million during the first quarter 2019 and $1,748 million during the second quarter 2019. These amounts are included, net of cash acquired, in inorganic capital expenditure. First quarter and first half 2019 and first half 2018 include amounts relating to the 25-year extension to our ACG production-sharing agreement* in Azerbaijan.

 

 

Top of page 29

Non-operating items*

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018(a)

 

2019

2018(a)

Upstream

 

 

 

 

 

 

 

Impairment and gain (loss) on sale of businesses and fixed assets(b)

 

(796

)

(11

)

81

 

 

(807

)

107

 

Environmental and other provisions

 

-

 

-

 

-

 

 

-

 

-

 

Restructuring, integration and rationalization costs

 

(17

)

(35

)

(62

)

 

(52

)

(61

)

Fair value gain (loss) on embedded derivatives

 

-

 

-

 

9

 

 

-

 

16

 

Other

 

47

 

42

 

(1

)

 

89

 

(139

)

 

 

(766

)

(4

)

27

 

 

(770

)

(77

)

Downstream

 

 

 

 

 

 

 

Impairment and gain (loss) on sale of businesses and fixed assets

 

(51

)

4

 

(1

)

 

(47

)

(15

)

Environmental and other provisions

 

-

 

-

 

-

 

 

-

 

-

 

Restructuring, integration and rationalization costs

 

20

 

(2

)

(74

)

 

18

 

(110

)

Fair value gain (loss) on embedded derivatives

 

-

 

-

 

-

 

 

-

 

-

 

Other

 

-

 

(6

)

(150

)

 

(6

)

(153

)

 

 

(31

)

(4

)

(225

)

 

(35

)

(278

)

Rosneft

 

 

 

 

 

 

 

Impairment and gain (loss) on sale of businesses and fixed assets

 

(113

)

(81

)

-

 

 

(194

)

-

 

Environmental and other provisions

 

-

 

-

 

-

 

 

-

 

-

 

Restructuring, integration and rationalization costs

 

-

 

-

 

-

 

 

-

 

-

 

Fair value gain (loss) on embedded derivatives

 

-

 

-

 

-

 

 

-

 

-

 

Other

 

-

 

-

 

-

 

 

-

 

-

 

 

 

(113

)

(81

)

-

 

 

(194

)

-

 

Other businesses and corporate

 

 

 

 

 

 

 

Impairment and gain (loss) on sale of businesses and fixed assets

 

(4

)

-

 

(1

)

 

(4

)

1

 

Environmental and other provisions

 

(22

)

(6

)

1

 

 

(28

)

(20

)

Restructuring, integration and rationalization costs

 

(3

)

10

 

(30

)

 

7

 

(45

)

Fair value gain (loss) on embedded derivatives

 

-

 

-

 

-

 

 

-

 

-

 

Gulf of Mexico oil spill

 

(57

)

(115

)

(433

)

 

(172

)

(519

)

Other

 

(5

)

(17

)

(85

)

 

(22

)

(144

)

 

 

(91

)

(128

)

(548

)

 

(219

)

(727

)

Total before interest and taxation

 

(1,001

)

(217

)

(746

)

 

(1,218

)

(1,082

)

Finance costs(c)

 

(116

)

(128

)

(118

)

 

(244

)

(238

)

Total before taxation

 

(1,117

)

(345

)

(864

)

 

(1,462

)

(1,320

)

Taxation credit (charge) on non-operating items

 

256

 

93

 

141

 

 

349

 

350

 

Total after taxation for period

 

(861

)

(252

)

(723

)

 

(1,113

)

(970

)

(a)       Amounts reported as restructuring, integration and rationalization costs relate to the group's restructuring programme, originally announced in 2014, which was completed in fourth quarter 2018.

(b)       Second quarter and first half 2019 include impairment charges of $634 million resulting from the announcements to dispose of certain assets in Egypt and the US.

(c)       Relates to the unwinding of discounting effects relating to Gulf of Mexico oil spill payables.

 

 

Top of page 30

Non-GAAP information on fair value accounting effects

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Favourable (adverse) impact relative to management's measure of performance

 

 

 

 

 

 

 

Upstream

 

(178

)

(40

)

(21

)

 

(218

)

100

 

Downstream

 

(46

)

36

 

(390

)

 

(10

)

(450

)

 

 

(224

)

(4

)

(411

)

 

(228

)

(350

)

Taxation credit (charge)

 

49

 

(7

)

101

 

 

42

 

90

 

 

 

(175

)

(11

)

(310

)

 

(186

)

(260

)

 

BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in the income statement. This is because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness-testing requirements. Therefore, measurement differences in relation to recognition of gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices consistent with the contract maturity.

BP enters into physical commodity contracts to meet certain business requirements, such as the purchase of crude for a refinery or the sale of BP's gas production. Under IFRS these physical contracts are treated as derivatives and are required to be fair valued when they are managed as part of a larger portfolio of similar transactions. Gains and losses arising are recognized in the income statement from the time the derivative commodity contract is entered into.

IFRS require that inventory held for trading is recorded at its fair value using period-end spot prices, whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices, resulting in measurement differences.

BP enters into contracts for pipelines and other transportation, storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments that are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.

The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management's internal measure of performance. Under management's internal measure of performance the inventory, transportation and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period. The fair values of derivative instruments used to risk manage certain oil, gas and other contracts, are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management's estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole.

In addition, fair value accounting effects include changes in the fair value of the near-term portions of LNG contracts that fall within BP's risk management framework. LNG contracts are not considered derivatives, because there is insufficient market liquidity, and they are therefore accrual accounted under IFRS. However, oil and natural gas derivative financial instruments (used to risk manage the near-term portions of the LNG contracts) are fair valued under IFRS. The fair value accounting effect reduces timing differences between recognition of the derivative financial instruments used to risk manage the LNG contracts and the recognition of the LNG contracts themselves, which therefore gives a better representation of performance in each period.

 

 

Top of page 31

Non-GAAP information on fair value accounting effects (continued)

The impacts of fair value accounting effects, relative to management's internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Upstream

 

 

 

 

 

 

 

Replacement cost profit (loss) before interest and tax adjusted for fair value accounting effects

 

2,647

 

2,924

 

3,535

 

 

5,571

 

6,588

 

Impact of fair value accounting effects

 

(178

)

(40

)

(21

)

 

(218

)

100

 

Replacement cost profit (loss) before interest and tax

 

2,469

 

2,884

 

3,514

 

 

5,353

 

6,688

 

Downstream

 

 

 

 

 

 

 

Replacement cost profit (loss) before interest and tax adjusted for fair value accounting effects

 

1,334

 

1,729

 

1,230

 

 

3,063

 

3,003

 

Impact of fair value accounting effects

 

(46

)

36

 

(390

)

 

(10

)

(450

)

Replacement cost profit (loss) before interest and tax

 

1,288

 

1,765

 

840

 

 

3,053

 

2,553

 

Total group

 

 

 

 

 

 

 

Profit (loss) before interest and tax adjusted for fair value accounting effects

 

4,240

 

5,668

 

5,967

 

 

9,908

 

10,401

 

Impact of fair value accounting effects

 

(224

)

(4

)

(411

)

 

(228

)

(350

)

Profit (loss) before interest and tax

 

4,016

 

5,664

 

5,556

 

 

9,680

 

10,051

 

 

 

Readily marketable inventory* (RMI)

 

 

30 June

31 December

$ million

 

2019

2018

RMI at fair value*

 

5,497

 

4,202

 

Paid-up RMI*

 

2,317

 

1,641

 

 

Readily marketable inventory (RMI) is oil and oil products inventory held and price risk-managed by BP's integrated supply and trading function (IST) which could be sold to generate funds if required. Paid-up RMI is RMI that BP has paid for.

We believe that disclosing the amounts of RMI and paid-up RMI is useful to investors as it enables them to better understand and evaluate the group's inventories and liquidity position by enabling them to see the level of discretionary inventory held by IST and to see builds or releases of liquid trading inventory.

See the Glossary on page 35 for a more detailed definition of RMI. RMI, RMI at fair value, paid-up RMI and unpaid RMI are non-GAAP measures. A reconciliation of total inventory as reported on the group balance sheet to paid-up RMI is provided below.

 

 

30 June

31 December

$ million

 

2019

2018

Reconciliation of total inventory to paid-up RMI

 

 

 

Inventories as reported on the group balance sheet under IFRS

 

20,042

 

17,988

 

Less: (a) inventories that are not oil and oil products and (b) oil and oil product inventories that are not risk-managed by IST

 

(14,821

)

(14,066

)

 

 

5,221

 

3,922

 

Plus: difference between RMI at fair value and RMI on an IFRS basis

 

276

 

280

 

RMI at fair value

 

5,497

 

4,202

 

Less: unpaid RMI* at fair value

 

(3,180

)

(2,561

)

Paid-up RMI

 

2,317

 

1,641

 

 

 

Top of page 32

Gulf of Mexico oil spill

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Net cash provided by operating activities as per condensed group cash flow statement

 

6,815

 

5,296

 

6,306

 

 

12,111

 

9,952

 

Exclude net cash from operating activities relating to the Gulf of Mexico oil spill on a post-tax basis

 

1,413

 

649

 

707

 

 

2,062

 

2,421

 

Operating cash flow, excluding Gulf of Mexico oil spill payments*

 

8,228

 

5,945

 

7,013

 

 

14,173

 

12,373

 

Net cash from operating activities relating to the Gulf of Mexico oil spill on a pre-tax basis amounted to an outflow of $1,472 million and $2,126 million in the second quarter and first half of 2019 respectively. For the same periods in 2018, the amount was an outflow of $1,078 million and $2,698 million respectively. Net cash outflows relating to the Gulf of Mexico oil spill in 2019 and 2018 include payments made under the 2016 consent decree and settlement agreement with the United States and the five Gulf coast states. Included in the current quarter are payments of $1,194 million on a pre-tax basis relating to the 2016 consent decree and settlement agreement. Cash outflows in 2018 also include the final payment made under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident.

 

 

30 June

31 December

$ million

 

2019

2018

Trade and other payables

 

(12,623

)

(14,201

)

Provisions

 

(199

)

(345

)

Gulf of Mexico oil spill payables and provisions

 

(12,822

)

(14,546

)

Of which - current

 

(2,022

)

(2,612

)

 

 

 

 

Deferred tax asset

 

5,600

 

5,562

 

The provision reflects the latest estimate for the remaining costs associated with the Gulf of Mexico oil spill. The amounts ultimately payable may differ from the amount provided and the timing of payments is uncertain. Further information relating to the Gulf of Mexico oil spill, including information on the nature and expected timing of payments relating to provisions and other payables, is provided in BP Annual Report and Form 20-F 2018 - Financial statements - Note 2 and pages 296 to 298 of Legal proceedings.

 

 

 

 

 

Working capital* reconciliation

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

$ million

 

2019

2019

2018

 

2019

2018

Movements in inventories and other current and non-current assets and liabilities as per condensed group cash flow statement

 

(58

)

(2,695

)

(570

)

 

(2,753

)

(3,968

)

Adjustments to exclude movements in inventories and other current and non-current assets and liabilities for the Gulf of Mexico oil spill

 

1,451

 

631

 

693

 

 

2,082

 

2,281

 

Adjusted for Inventory holding gains (losses)* (Note 3)

 

 

 

 

 

 

 

Upstream

 

(10

)

2

 

4

 

 

(8

)

5

 

Downstream

 

93

 

1,046

 

1,196

 

 

1,139

 

1,265

 

Working capital release (build)

 

1,476

 

(1,016

)

1,323

 

 

460

 

(417

)

 

 

Top of page 33

Realizations* and marker prices

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

 

 

2019

2019

2018

 

2019

2018

Average realizations(a)

 

 

 

 

 

 

 

Liquids* ($/bbl)

 

 

 

 

 

 

 

US

 

56.98

 

50.57

 

62.47

 

 

53.91

 

60.01

 

Europe

 

68.73

 

61.78

 

71.70

 

 

65.04

 

68.56

 

Rest of World

 

66.24

 

60.02

 

69.88

 

 

63.18

 

66.50

 

BP Average

 

62.63

 

56.47

 

67.24

 

 

59.61

 

64.21

 

Natural gas ($/mcf)

 

 

 

 

 

 

 

US

 

1.80

 

2.57

 

1.96

 

 

2.18

 

2.10

 

Europe

 

3.63

 

5.84

 

7.04

 

 

4.75

 

7.11

 

Rest of World

 

4.12

 

4.67

 

4.16

 

 

4.40

 

4.19

 

BP Average

 

3.35

 

4.02

 

3.65

 

 

3.68

 

3.72

 

Total hydrocarbons* ($/boe)

 

 

 

 

 

 

 

US

 

35.94

 

34.17

 

40.77

 

 

35.08

 

40.19

 

Europe

 

63.40

 

58.89

 

64.91

 

 

61.02

 

62.72

 

Rest of World

 

41.60

 

40.52

 

42.89

 

 

41.06

 

41.69

 

BP Average

 

40.64

 

39.37

 

43.37

 

 

40.02

 

42.36

 

Average oil marker prices ($/bbl)

 

 

 

 

 

 

 

Brent

 

68.86

 

63.13

 

74.39

 

 

65.95

 

70.58

 

West Texas Intermediate

 

59.90

 

54.87

 

68.02

 

 

57.42

 

65.52

 

Western Canadian Select

 

47.37

 

44.91

 

49.76

 

 

46.06

 

43.30

 

Alaska North Slope

 

68.29

 

64.39

 

73.93

 

 

66.37

 

70.64

 

Mars

 

65.20

 

61.13

 

69.47

 

 

63.20

 

66.04

 

Urals (NWE - cif)

 

67.62

 

62.91

 

72.21

 

 

65.23

 

68.71

 

Average natural gas marker prices

 

 

 

 

 

 

 

Henry Hub gas price(b) ($/mmBtu)

 

2.64

 

3.15

 

2.80

 

 

2.90

 

2.90

 

UK Gas - National Balancing Point (p/therm)

 

31.53

 

48.23

 

53.88

 

 

40.01

 

55.94

 

(a)       Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.

(b)       Henry Hub First of Month Index.

 

 

 

Exchange rates

 

 

Second

First

Second

 

First

First

 

 

quarter

quarter

quarter

 

half

half

 

 

2019

2019

2018

 

2019

2018

$/£ average rate for the period

 

1.29

 

1.30

 

1.36

 

 

1.29

 

1.38

 

$/£ period-end rate

 

1.27

 

1.31

 

1.31

 

 

1.27

 

1.31

 

 

 

 

 

 

 

 

 

$/€ average rate for the period

 

1.12

 

1.14

 

1.19

 

 

1.13

 

1.21

 

$/€ period-end rate

 

1.14

 

1.12

 

1.16

 

 

1.14

 

1.16

 

 

 

 

 

 

 

 

 

Rouble/$ average rate for the period

 

64.58

 

66.00

 

62.13

 

 

65.29

 

59.47

 

Rouble/$ period-end rate

 

63.09

 

65.02

 

63.07

 

 

63.09

 

63.07

 

 

 

Top of page 34

Principal risks and uncertainties

The principal risks and uncertainties affecting BP are described in the Risk factors section of BP Annual Report and Form 20-F 2018 (pages 55-56) and are summarized below. There are no material changes in those risk factors for the remaining six months of the financial year.

The risks summarized below, separately or in combination, could have a material adverse effect on the implementation of our strategy, our business, financial performance, results of operations, cash flows, liquidity, prospects, shareholder value and returns and reputation.

 

Strategic and commercial risks

•       Prices and markets - our financial performance is impacted by fluctuating prices of oil, gas and refined products, technological change, exchange rate fluctuations, and the general macroeconomic outlook.

•       Access, renewal and reserves progression - inability to access, renew and progress upstream resources in a timely manner could adversely affect our long-term replacement of reserves.

•       Major project* delivery - failure to invest in the best opportunities or deliver major projects successfully could adversely affect our financial performance.

•       Geopolitical - exposure to a range of political developments and consequent changes to the operating and regulatory environment could cause business disruption.

•       Liquidity, financial capacity and financial, including credit, exposure - failure to work within our financial framework could impact our ability to operate and result in financial loss.

•       Joint arrangements and contractors - varying levels of control over the standards, operations and compliance of our partners, contractors and sub-contractors could result in legal liability and reputational damage.

•       Digital infrastructure and cyber security - breach of our digital security or failure of our digital infrastructure including loss or misuse of sensitive information could damage our operations, increase costs and damage our reputation.

•       Climate change and the transition to a lower carbon economy - policy, legal, regulatory, technology and market change related to the issue of climate change could increase costs, reduce demand for our products, reduce revenue and limit certain growth opportunities.

•       Competition - inability to remain efficient, maintain a high quality portfolio of assets, innovate and retain an appropriately skilled workforce could negatively impact delivery of our strategy in a highly competitive market.

•       Crisis management and business continuity - failure to address an incident effectively could potentially disrupt our business.

•       Insurance - our insurance strategy could expose the group to material uninsured losses.

 

Safety and operational risks

•       Process safety, personal safety, and environmental risks - exposure to a wide range of health, safety, security and environmental risks could cause harm to people, the environment and our assets and result in regulatory action, legal liability, business interruption, increased costs, damage to our reputation and potentially denial of our licence to operate.

•       Drilling and production - challenging operational environments and other uncertainties could impact drilling and production activities.

•       Security - hostile acts against our staff and activities could cause harm to people and disrupt our operations.

•       Product quality - supplying customers with off-specification products could damage our reputation, lead to regulatory action and legal liability, and impact our financial performance.

 

Compliance and control risks

•       Regulation - changes in the regulatory and legislative environment could increase the cost of compliance, affect our provisions and limit our access to new growth opportunities.

•       Ethical misconduct and non-compliance - ethical misconduct or breaches of applicable laws by our businesses or our employees could be damaging to our reputation, and could result in litigation, regulatory action and penalties.

•       Treasury and trading activities - ineffective oversight of treasury and trading activities could lead to business disruption, financial loss, regulatory intervention or damage to our reputation.

•       Reporting - failure to accurately report our data could lead to regulatory action, legal liability and reputational damage.

 

 

Top of page 35

Legal proceedings

 

 

The following discussion sets out the material developments in the group's material legal proceedings during the first half of 2019.  For a full discussion of the group's material legal proceedings, see pages 296-298 of BP Annual Report and Form 20-F 2018.

 

Scharfstein v BP West Coast Products LLC

A class action lawsuit was filed against BP West Coast Products, LLC (BPWCP) in Oregon State Court under the Oregon Unlawful Trade Practices Act on behalf of customers who used a debit card at ARCO gasoline stations in Oregon during the period 1 January 2011 to 30 August 2013, alleging that ARCO sites in Oregon failed to provide sufficient notice of the 35 cents per transaction debit card fee. In January 2014, the jury rendered a verdict against BPWCP and awarded statutory damages of $200 per class member. On 25 August 2015, the trial court determined the size of the class to be slightly in excess of two million members. On 31 May 2016 the trial court entered a judgment against BPWCP for the amount of $417.3 million. On 31 May 2018 the Oregon Court of Appeals affirmed the trial court's ruling. In March 2019, BP and the Plaintiffs agreed to a settlement of the class action lawsuit, subject to final court approval. On 4 June 2019 the court granted final approval of the settlement agreement. The judgment dismissing the case was entered on 13 June 2019. No appeal was taken from the judgment on or before the 14 July 2019 deadline. On 15 July 2019, BP made its first payment under the terms of the settlement agreement. The second and final payment is due in July 2020. BP's provisions for litigation and claims include a provision for this lawsuit.

 

 

Glossary

Non-GAAP measures are provided for investors because they are closely tracked by management to evaluate BP's operating performance and to make financial, strategic and operating decisions. Non-GAAP measures are sometimes referred to as alternative performance measures.

Capital expenditure is total cash capital expenditure as stated in the condensed group cash flow statement.

Consolidation adjustment - UPII is unrealized profit in inventory arising on inter-segment transactions.

Divestment proceeds are disposal proceeds as per the condensed group cash flow statement.

Effective tax rate (ETR) on replacement cost (RC) profit or loss is a non-GAAP measure. The ETR on RC profit or loss is calculated by dividing taxation on a RC basis by RC profit or loss before tax. Information on RC profit or loss is provided below. BP believes it is helpful to disclose the ETR on RC profit or loss because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.

Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss). They reflect the difference between the way BP manages the economic exposure and internally measures performance of certain activities and the way those activities are measured under IFRS. Further information on fair value accounting effects is provided on page 30.

Free cash flow is operating cash flow less net cash used in investing activities and lease liability payments included in financing activities, as presented in the condensed group cash flow statement.

Gearing and net debt are non-GAAP measures. Net debt is calculated as finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents. Gearing is defined as the ratio of net debt to the total of net debt plus total equity. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of finance debt, related hedges and cash and cash equivalents in total. Gearing enables investors to see how significant net debt is relative to total equity. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'. The nearest equivalent GAAP measures on an IFRS basis are finance debt and finance debt ratio. A reconciliation of finance debt to net debt is provided on page 25.

We are unable to present reconciliations of forward-looking information for gearing to finance debt ratio, because without unreasonable efforts, we are unable to forecast accurately certain adjusting items required to present a meaningful comparable GAAP forward-looking financial measure. These items include fair value asset (liability) of hedges related to finance debt and cash and cash equivalents, that are difficult to predict in advance in order to include in a GAAP estimate.

Hydrocarbons - Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.

Inorganic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Inorganic capital expenditure comprises consideration in business combinations and certain other significant investments made by the group. It is reported on a cash basis. BP believes that this measure provides useful information as it allows investors to understand how BP's management invests funds in projects which expand the group's activities through acquisition. Further information and a reconciliation to GAAP information is provided on page 28.

 

 

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Glossary (continued)

Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation's production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.

Liquids - Liquids for Upstream and Rosneft comprises crude oil, condensate and natural gas liquids. For Upstream, liquids also includes bitumen.

Major projects have a BP net investment of at least $250 million, or are considered to be of strategic importance to BP or of a high degree of complexity.

Net debt including leases is a non-GAAP measure. Net debt including leases is calculated as net debt plus lease liabilities, less the net amount of partner receivables and payables relating to leases entered into on behalf of joint operations. BP believes this measure provides useful information to investors as it enables investors to understand the impact of the group's lease portfolio on net debt. The nearest equivalent GAAP measure on an IFRS basis is finance debt. A reconciliation of finance debt to net debt including leases is provided on page 25.

Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP's share of equity-accounted entities.

Non-operating items are charges and credits included in the financial statements that BP discloses separately because it considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the group's reported financial performance. Non-operating items within equity-accounted earnings are reported net of incremental income tax reported by the equity-accounted entity. An analysis of non-operating items by region is shown on pages 7, 9 and 11, and by segment and type is shown on page 29.

Operating cash flow is net cash provided by (used in) operating activities as stated in the condensed group cash flow statement. When used in the context of a segment rather than the group, the terms refer to the segment's share thereof.

Operating cash flow excluding working capital change is a non-GAAP measure. It is operating cash flow excluding Gulf of Mexico oil spill payments less change in working capital adjusted for inventory holding gains/losses (see below). BP believes operating cash flow excluding working capital change is a useful measure as it allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is net cash provided by operating activities.

Operating cash flow excluding Gulf of Mexico oil spill payments is a non-GAAP measure. It is calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill from net cash provided by operating activities as reported in the condensed group cash flow statement. BP believes net cash provided by operating activities excluding amounts related to the Gulf of Mexico oil spill is a useful measure as it allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is net cash provided by operating activities.

Organic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Organic capital expenditure comprises capital expenditure less inorganic capital expenditure. BP believes that this measure provides useful information as it allows investors to understand how BP's management invests funds in developing and maintaining the group's assets. An analysis of organic capital expenditure by segment and region, and a reconciliation to GAAP information is provided on page 28.

We are unable to present reconciliations of forward-looking information for organic capital expenditure to total cash capital expenditure, because without unreasonable efforts, we are unable to forecast accurately the adjusting item, inorganic capital expenditure, that is difficult to predict in advance in order to derive the nearest GAAP estimate.

Production-sharing agreement (PSA) is an arrangement through which an oil and gas company bears the risks and costs of exploration, development and production. In return, if exploration is successful, the oil company receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of the production remaining after such cost recovery.

Readily marketable inventory (RMI) is inventory held and price risk-managed by our integrated supply and trading function (IST) which could be sold to generate funds if required. It comprises oil and oil products for which liquid markets are available and excludes inventory which is required to meet operational requirements and other inventory which is not price risk-managed. RMI is reported at fair value. Inventory held by the Downstream fuels business for the purpose of sales and marketing, and all inventories relating to the lubricants and petrochemicals businesses, are not included in RMI.

Paid-up RMI excludes RMI which has not yet been paid for. For inventory that is held in storage, a first-in first-out (FIFO) approach is used to determine whether inventory has been paid for or not. Unpaid RMI is RMI which has not yet been paid for by BP. RMI, RMI at fair value, Paid-up RMI and Unpaid RMI are non-GAAP measures. Further information is provided on page 31.

 

 

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Glossary (continued)

Realizations are the result of dividing revenue generated from hydrocarbon sales, excluding revenue generated from purchases made for resale and royalty volumes, by revenue generating hydrocarbon production volumes. Revenue generating hydrocarbon production reflects the BP share of production as adjusted for any production which does not generate revenue. Adjustments may include losses due to shrinkage, amounts consumed during processing, and contractual or regulatory host committed volumes such as royalties.

Refining availability represents Solomon Associates' operational availability for BP-operated refineries, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory downtime.

The Refining marker margin (RMM) is the average of regional indicator margins weighted for BP's crude refining capacity in each region. Each regional marker margin is based on product yields and a marker crude oil deemed appropriate for the region. 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.

Replacement cost (RC) profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss. RC profit or loss for the group is not a recognized GAAP measure. BP believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP's management believes it is helpful to disclose this measure. The nearest equivalent measure on an IFRS basis is profit or loss attributable to BP shareholders. A reconciliation to GAAP information is provided on page 1. RC profit or loss before interest and tax is the measure of profit or loss that is required to be disclosed for each operating segment under IFRS.

RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 7. RC profit or loss per share is calculated using the same denominator. The numerator used is RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the RC profit or loss per share because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders.

Reported recordable injury frequency measures the number of reported work-related employee and contractor incidents that result in a fatality or injury per 200,000 hours worked. This represents reported incidents occurring within BP's operational HSSE reporting boundary. That boundary includes BP's own operated facilities and certain other locations or situations.

Solomon availability - See Refining availability definition.

Tier 1 and tier 2 process safety events - Tier 1 events are losses of primary containment from a process of greatest consequence - causing harm to a member of the workforce, damage to equipment from a fire or explosion, a community impact or exceeding defined quantities. Tier 2 events are those of lesser consequence. These represent reported incidents occurring within BP's operational HSSE reporting boundary. That boundary includes BP's own operated facilities and certain other locations or situations.

Underlying cash is a non-GAAP measure. See operating cash flow excluding Gulf of Mexico oil spill payments.

Underlying effective tax rate (ETR) is a non-GAAP measure. The underlying ETR is calculated by dividing taxation on an underlying replacement cost (RC) basis by underlying RC profit or loss before tax. Taxation on an underlying RC basis is taxation on a RC basis for the period adjusted for taxation on non-operating items and fair value accounting effects. Information on underlying RC profit or loss is provided below. BP believes it is helpful to disclose the underlying ETR because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.

We are unable to present reconciliations of forward-looking information for underlying ETR to ETR on profit or loss for the period, because without unreasonable efforts, we are unable to forecast accurately certain adjusting items required to present a meaningful comparable GAAP forward-looking financial measure. These items include the taxation on inventory holding gains and losses, non-operating items and fair value accounting effects, that are difficult to predict in advance in order to include in a GAAP estimate.

Underlying production - 2019 underlying production, when compared with 2018, is production after adjusting for BPX Energy, other acquisitions and divestments, and entitlement impacts in our production-sharing agreements.

Underlying RC profit or loss is RC profit or loss after adjusting for non-operating items and fair value accounting effects. Underlying RC profit or loss and adjustments for fair value accounting effects are not recognized GAAP measures. See pages 29 and 30 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact. BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by management to evaluate BP's operating performance and to make financial, strategic and operating decisions and because it may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss attributable to BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and taxation. A reconciliation to GAAP information is provided on page 1.

 

 

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Glossary (continued)

Underlying RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 7. Underlying RC profit or loss per share is calculated using the same denominator. The numerator used is underlying RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the underlying RC profit or loss per share because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders.

Upstream plant reliability (BP-operated) is calculated taking 100% less the ratio of total unplanned plant deferrals divided by installed production capacity. Unplanned plant deferrals are associated with the topside plant and where applicable the subsea equipment (excluding wells and reservoir). Unplanned plant deferrals include breakdowns, which does not include Gulf of Mexico weather related downtime.

Upstream unit production cost is calculated as production cost divided by units of production. Production cost does not include ad valorem and severance taxes. Units of production are barrels for liquids and thousands of cubic feet for gas. Amounts disclosed are for BP subsidiaries only and do not include BP's share of equity-accounted entities.

Working capital - Change in working capital is movements in inventories and other current and non-current assets and liabilities as reported in the condensed group cash flow statement. Change in working capital adjusted for inventory holding gains/losses is a non-GAAP measure. It is calculated by adjusting for inventory holding gains/losses reported in the period and this therefore represents what would have been reported as movements in inventories and other current and non-current assets and liabilities, if the starting point in determining net cash provided by operating activities had been replacement cost profit rather than profit for the period. The nearest equivalent measure on an IFRS basis for this is movements in inventories and other current and non-current assets and liabilities. In the context of describing operating cash flow excluding Gulf of Mexico oil spill payments, change in working capital also excludes movements in inventories and other current and non-current assets and liabilities relating to the Gulf of Mexico oil spill. See page 32 for further details.

BP utilizes various arrangements in order to manage its working capital including discounting of receivables and, in the supply and trading business, the active management of supplier payment terms, inventory and collateral.

 

 

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Cautionary statement

In order to utilize the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995 (the 'PSLRA') and the general doctrine of cautionary statements, BP is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events and circumstances - with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as 'will', 'expects', 'is expected to', 'aims', 'should', 'may', 'objective', 'is likely to', 'intends', 'believes', 'anticipates', 'plans', 'we see' or similar expressions. In particular, the following, among other statements, are all forward looking in nature: plans and expectations regarding BP's low-carbon business, including with regard to BP's $30 million venturing investment in Calysta and Calysta's business model and impacts thereof, and to the timing of the installation of 400 ultra-fast chargers at BP's UK retail sites; plans and expectations with respect to the joint venture between BP's Brazilian biofuels business and Bunge, including BP's interest in the venture, the combined business plan and completion timing; expectations regarding the expected quarterly dividend payment and timing of such payment; plans and expectations regarding share buybacks, including to offset the impact of dilution from the scrip program; expectations regarding the underlying effective tax rate in 2019; expectations regarding 2019 organic capital expenditure and depreciation, depletion and amortization charges; plans and expectations with respect to gearing, including for gearing to move toward the middle of the 20-30% targeted range in 2020; expectations with respect to new discoveries and the potential to develop them; plans and expectations with respect to expected project start-ups for which final investment decisions have been made; plans and expectations regarding Upstream investments, including with regard to the agreement to sell BP's interests in Gulf of Suez oil concessions to Dragon Oil and timing thereof, for the investment in deepwater Block 15 offshore Angola to increase and extend production and to BP's intention to sell BP's interest in oil and gas fields in Oklahoma, US; expectations with regard to the strategic partnership between Castrol and Renault Sport Racing; plans and expectations regarding divestments and disposals, including to have more than $10 billion of divestments by the end of 2020; plans and expectations with respect to BP's and Environmental Defense Fund's commitment to reduce methane emissions; plans regarding the $100-million fund for projects that will deliver emissions reductions; expectations regarding Upstream third-quarter 2019 reported production, seasonal turnaround and maintenance activities; expectations regarding Downstream third-quarter 2019 refining margins and turnaround activity; expectations regarding the impact of the IFRIC agenda decision on IFRS 9 on reported earnings;  expectations that the second and final payment in connection with the Scharfstein litigation will be made in July 2020; plans and expectations regarding Lightsource BP, including for the Green Energy Equity Fund to invest a total of $330 million in Ayana Renewable Power; plans and expectations regarding the Other businesses and corporate 2019 average quarterly charges; and expectations with respect to the amount of future payments relating to the Gulf of Mexico oil spill. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future 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; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain acquisitions and divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; amounts ultimately payable and timing of payments relating to the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft's management and board of directors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report, including under "Principal risks and uncertainties" and under "Risk factors" in BP Annual Report and Form 20-F 2018 as filed with the US Securities and Exchange Commission.

 

 

 

 

 

Contacts

 

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+44 (0)20 7496 4708

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Investor Relations

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2Q19 Part 1 of 1 - RNS