Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended 31 March 2019
Commission File Number 1-06262
BP p.l.c.
(Translation of registrant’s name into English)
1 ST JAMES’S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
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| Form 20-F x Form 40-F ¨ | |
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨ |
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NOS. 333-226485, 333-226485-01 AND 333-226485-02) OF BP p.l.c., BP CAPITAL MARKETS p.l.c. AND BP CAPITAL MARKETS AMERICA INC.; THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-79399) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-103924) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-123482) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-123483) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-131583) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-131584) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-132619) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146868) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146870) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146873) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-173136) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-177423) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-179406) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-186462) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-186463) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-199015) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-200794) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-200795) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-207188) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-207189) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-210316) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-210318) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.
BP p.l.c. and subsidiaries
Form 6-K for the period ended 31 March 2019(a)
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1. | | | 3-14, 27-33, 34-37 |
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2. | | | 15-26 |
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3. | | | 34 |
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4. | | | 37 |
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5. | | | 38 |
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(a) | In this Form 6-K, references to the first quarter 2019 and first quarter 2018 refer to the three-month periods ended 31 March 2019 and 31 March 2018 respectively. |
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(b) | This discussion should be read in conjunction with the consolidated financial statements and related notes provided elsewhere in this Form 6-K and with the information, including the consolidated financial statements and related notes, in BP’s Annual Report on Form 20-F for the year ended 31 December 2018. |
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Group results first quarter 2019 |
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Highlights | Resilient earnings and cash flow, continued strategic progress |
• Earnings and cash flow
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– | Profit for the first quarter was $2.9 billion, compared with $2.5 billion for the same period in 2018. Underlying replacement cost profit for the quarter was $2.4 billion, compared to $2.6 billion a year earlier. The result reflected the weaker price and margin environment at the start of the quarter, partially offset by strong supply and trading results. |
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– | Operating cash flow for the quarter was $5.3 billion including the impact of Gulf of Mexico oil spill payments(a). Gulf of Mexico oil spill payments in the quarter were $0.6 billion. |
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– | Dividend of 10.25 cents a share announced for the quarter, 2.5% higher than a year earlier. |
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• | New projects and marketing growth |
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– | Reported oil and gas production for the quarter averaged 3.8 million barrels a day of oil equivalent. Upstream production, which excludes Rosneft, was 2% higher than a year earlier. BP-operated Upstream plant reliability was 96.2%. |
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– | Integration of US onshore assets acquired from BHP continues, with BP taking operational control in March. |
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– | Three Upstream major projects – in Trinidad, Egypt and the Gulf of Mexico – have started production in 2019 and BP has taken final investment decisions for three more Upstream major projects. |
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– | Downstream continued growth in fuels marketing reflected increased numbers of convenience partnership sites and expansion in new markets. |
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– | Strong progress is being made towards BP’s published targets for operational greenhouse gas (GHG) emissions, with reduced operational GHG emissions in 2018, good delivery of sustainable GHG emissions reductions, and methane intensity remaining on target. |
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– | A $100-million fund to support new emissions-reducing projects in the Upstream was announced, as well as an agreement with Environmental Defense Fund to advance technologies and practices to reduce oil and gas industry methane emissions. |
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(a) | Operating cash flow excluding Gulf of Mexico oil spill payments is a measure used by management and BP believes it is useful as it allows for meaningful comparisons between reporting periods. It is not however disclosed in this SEC filing because SEC regulations do not permit the inclusion of this non-GAAP metric. |
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Financial summary | | First |
| First |
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| quarter |
| quarter |
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$ million | | 2019 |
| 2018 |
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Profit for the period attributable to BP shareholders | | 2,934 |
| 2,469 |
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Inventory holding (gains) losses, before tax | | (1,088 | ) | (92 | ) |
Taxation charge (credit) on inventory holding gains and losses | | 249 |
| 12 |
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RC profit | | 2,095 |
| 2,389 |
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Net (favourable) adverse impact of non-operating items and fair value accounting effects, before tax | | 349 |
| 395 |
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Taxation charge (credit) on non-operating items and fair value accounting effects | | (86 | ) | (198 | ) |
Underlying RC profit | | 2,358 |
| 2,586 |
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Profit per ordinary share (cents) | | 14.54 |
| 12.40 |
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Profit per ADS (dollars) | | 0.87 |
| 0.74 |
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RC profit per ordinary share (cents) | | 10.38 |
| 11.99 |
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RC profit per ADS (dollars) | | 0.62 |
| 0.72 |
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Underlying RC profit per ordinary share (cents) | | 11.69 |
| 12.98 |
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Underlying RC profit per ADS (dollars) | | 0.70 |
| 0.78 |
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RC profit (loss) and underlying RC profit are non-GAAP measures. These measures and Upstream plant reliability, major projects, inventory holding gains and losses, non-operating items and fair value accounting effects are defined in the Glossary on page 34.
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The commentary above and following should be read in conjunction with the cautionary statement on page 37. |
Effects on key financial metrics of the adoption of IFRS 16 'Leases'
A new IFRS standard on leases came into effect on 1 January 2019. The impact on key financial metrics for the first quarter is shown below.
Balance sheet
As a result of the adoption of IFRS 16, $9.6 billion of right-of-use assets and $10.3 billion of lease liabilities have been included in the group balance sheet as at 31 March 2019. The majority of these were previously reported as operating leases and so were not previously recognized on the balance sheet. The total lease liability also includes leases that were previously classified as finance leases under IAS 17, which totalled $0.7 billion at 31 December 2018. Lease liabilities are now presented separately on the group balance sheet, do not form part of finance debt and are not included in net debt and gearing in the financial framework.
Income statement
The increase in depreciation from recognizing right-of-use assets and interest on the lease liability is largely offset by the absence of operating lease expenses, resulting in no material overall effect on group profit measures.
Cash flow
In prior years, operating lease payments were presented as operating cash flows* or capital expenditure*. Lease payments are now split into payments of principal that are presented as financing cash flows, and payments of interest that are presented as operating cash flows. There were $0.6 billion of lease payments of principal included within financing cash flows for the first quarter of 2019. BP estimates that $0.5 billion of these would have been reported as operating cash outflow and $0.1 billion would have been reported as capital expenditure without the adoption of IFRS 16.
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| | Impact of |
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$ billion | | IFRS 16 |
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Balance sheet at 31 March 2019 | | | |
Fixed assets | | 9.6 |
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Lease liabilities | | 10.3 |
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Income statement for the first quarter 2019 | | | |
Operating lease expenses(a) | | ~0.6 |
| – |
Depreciation, depletion and amortization | | 0.5 |
| + |
Interest charge | | 0.1 |
| + |
Replacement cost profit* | | Negligible |
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Cash flow for the first quarter 2019 | | | |
Operating cash flow | | ~0.5 |
| + |
Capital expenditure | | ~0.1 |
| + |
Lease payments | | 0.6 |
| – |
Free cash flow* | | Nil |
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(a) | Included in production and manufacturing expenses and distribution and administration expenses under IAS 17. |
See pages 20-22, 25 and 27 for more information.
Group headlines
Results
BP’s profit for the first quarter was $2,934 million, compared with $2,469 million for the same period in 2018.
For the first quarter, replacement cost (RC) profit* was $2,095 million, compared with $2,389 million in 2018. Underlying RC profit* was $2,358 million, compared with $2,586 million in 2018. Underlying RC profit is after adjusting RC profit for a net charge for non-operating items* of $252 million and net adverse fair value accounting effects* of $11 million (both on a post-tax basis).
See further information on pages 6, 29 and 30.
Depreciation, depletion and amortization
The charge for depreciation, depletion and amortization was $4.5 billion in the quarter. In the same period in 2018 it was $3.9 billion (prior to the adoption of IFRS 16). In 2019, we expect the full-year charge to be around $2.5 billion higher than 2018 reflecting the depreciation of the right of use assets recognized under IFRS 16 (expected to be offset in the income statement as operating lease expenses will no longer appear in the income statement).
Non-operating items
Non-operating items amounted to a post-tax charge of $252 million for the quarter. See further information on page 29.
Effective tax rate
The effective tax rate (ETR) on the profit for the first quarter was 37%, compared with 35% for the same period in 2018.
The ETR on RC profit or loss* for the first quarter was 42%, compared with 36% for the same period in 2018. Adjusting for non-operating items and fair value accounting effects, the underlying ETR* for the first quarter was 40%, compared with 37% for the same period a year ago. The higher underlying ETR for the first quarter reflects charges for adjustments in respect of prior years. 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 21 June 2019. The corresponding amount in sterling will be announced on 10 June 2019. See page 25 for further information.
Share buybacks
BP repurchased 6 million ordinary shares at a cost of $50 million, including fees and stamp duty, during the first quarter of 2019. Our share buyback programme is expected to be weighted to the second half of 2019 and to fully offset the impact of scrip dilution since the third quarter 2017 by the end of 2019.
Operating cash flow*
Operating cash flow was $5.3 billion in the first quarter including the impact of Gulf of Mexico oil spill payments of $0.6 billion. For the same period in 2018 we reported $3.6 billion (prior to the implementation of IFRS 16).
Capital expenditure*
Total capital expenditure for the first quarter was $5.6 billion. We reported $4.0 billion for the same period in 2018 (prior to the implementation of IFRS 16).
Organic capital expenditure* for the first quarter was $3.6 billion. We reported $3.5 billion for the same period in 2018 (prior to the implementation of IFRS 16).
Inorganic capital expenditure* for the first quarter was $2.0 billion, including $1.7 billion relating to the BHP acquisition, compared with $0.4 billion for the same period 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 $0.6 billion for the first quarter, compared with $0.2 billion for the same period in 2018.
Debt
Finance debt at 31 March 2019 was $66.0 billion, compared with $61.5 billion a year ago. Finance debt ratio* at 31 March 2019 was 39.0%, compared with 37.6% a year ago. Net debt* at 31 March 2019 was $45.1 billion, compared with $39.3 billion a year ago. Gearing* at 31 March 2019 was 30.4%, compared with 30.0% at the end of 2018 and 27.8% a year ago.
Net debt and gearing are non-GAAP measures. See page 25 for more information.
* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 34. |
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The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 37. |
Analysis of underlying RC profit* before interest and tax
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| | First |
| First |
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| | quarter |
| quarter |
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$ million | | 2019 |
| 2018 |
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Underlying RC profit before interest and tax | | | |
Upstream | | 2,928 |
| 3,157 |
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Downstream | | 1,733 |
| 1,826 |
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Rosneft | | 567 |
| 247 |
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Other businesses and corporate | | (418 | ) | (392 | ) |
Consolidation adjustment – UPII* | | (13 | ) | (160 | ) |
Underlying RC profit before interest and tax | | 4,797 |
| 4,678 |
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Finance costs and net finance expense relating to pensions and other post-retirement benefits | | (754 | ) | (464 | ) |
Taxation on an underlying RC basis | | (1,620 | ) | (1,566 | ) |
Non-controlling interests | | (65 | ) | (62 | ) |
Underlying RC profit attributable to BP shareholders | | 2,358 |
| 2,586 |
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Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 3 for the group and on pages 9-14 for the segments.
Analysis of RC profit (loss)* before interest and tax and reconciliation to profit for the period
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| | First |
| First |
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| | quarter |
| quarter |
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$ million | | 2019 |
| 2018 |
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RC profit before interest and tax | | | |
Upstream | | 2,884 |
| 3,174 |
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Downstream | | 1,765 |
| 1,713 |
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Rosneft | | 486 |
| 247 |
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Other businesses and corporate | | (546 | ) | (571 | ) |
Consolidation adjustment – UPII | | (13 | ) | (160 | ) |
RC profit before interest and tax | | 4,576 |
| 4,403 |
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Finance costs and net finance expense relating to pensions and other post-retirement benefits | | (882 | ) | (584 | ) |
Taxation on a RC basis | | (1,534 | ) | (1,368 | ) |
Non-controlling interests | | (65 | ) | (62 | ) |
RC profit attributable to BP shareholders | | 2,095 |
| 2,389 |
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Inventory holding gains (losses)* | | 1,088 |
| 92 |
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Taxation (charge) credit on inventory holding gains and losses | | (249 | ) | (12 | ) |
Profit for the period attributable to BP shareholders | | 2,934 |
| 2,469 |
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Strategic progress
Upstream
Upstream production, excluding Rosneft, for the quarter was 2,656mboe/d, 2% higher than a year earlier due to acquisition of the BHP assets and growth of major projects*. Upstream plant reliability* was 96.2%. Upstream unit production costs* were $7.39/boe.
Constellation in the Gulf of Mexico was the first Upstream major project to come onstream in 2019, followed by the second stage of the West Nile Delta development, the Giza and Fayoum fields, in Egypt and the Angelin development offshore Trinidad. These are the first of five Upstream major projects expected to begin production in 2019. BP has now safely brought 22 new upstream major projects into production since 2016, remaining on track to deliver 900,000boe/d from new projects by 2021.
Since the start of the year, BP has taken final investment decisions on the Atlantis Phase 3 development in the Gulf of Mexico, Azeri Central East in Azerbaijan and Seagull in the UK North Sea.
On 1 March, BPX Energy assumed full control of the BHP acquired US field operations.
In March, BP confirmed a gas discovery, operated by Eni, in the Nour North Sinai offshore prospect in the Egyptian Eastern Mediterranean.
Downstream
Increased year-on-year fuels marketing earnings reflected higher premium fuels volumes and the continued roll-out of convenience partnership sites. Expansion in new markets continued, including new sites opening in Mexico, Indonesia and China.
In the quarter BP opened its first BP-branded retail site in Shandong Province, China.
BP and Lotte agreed an expansion of capacity at their joint venture acetyls petrochemicals site in South Korea, helping to meet growing regional demand.
BP also signed an agreement with Virent and Johnson Matthey to advance the development of bio-paraxylene, a raw material for the production of renewable polyester.
Advancing the energy transition
BP announced progress against its near-term targets for operational GHG emissions: 2018 operational emissions were 1.7 million tonnes CO2 equivalent (MteCO2e) lower than 2017; 2.5MteCO2e sustainable GHG emissions reductions have been generated throughout BP’s operations since the beginning of 2016; and methane intensity was maintained at 0.2% in 2018.
At the end of the quarter BP announced the establishment of a new initiative under which up to $100-million will be made available over
the next three years to support projects across the Upstream to deliver new emissions reductions. BP has also entered into an agreement with Environmental Defense Fund to collaborate in development of technologies and practices to accelerate reduction of methane emissions across the oil and gas industry.
BP opened two dedicated electric vehicle charging stations in the quarter, the first in China, in partnership with 66i Fuel, and the second in the UK.
Financial framework
Following the introduction of IFRS 16, 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 following the adoption of IFRS 16.
Operating cash flow* was $5.3 billion for the first quarter of 2019, including Gulf of Mexico oil spill payments of $0.6 billion. For the first quarter of 2018, we reported $3.6 billion (prior to the implementation of IFRS 16).
Organic capital expenditure for the first quarter of 2019 was $3.6 billion. BP expects 2019 organic capital expenditure to be in the range of $15-17 billion.
Lease liability payments of principal for the first quarter of 2019 were $0.6 billion.
Divestments and other proceeds were $0.6 billion for the quarter.
Gulf of Mexico oil spill payments on a post-tax basis totalled $0.6 billion in the quarter. Payments for the full year are expected to be around $2 billion on a post-tax basis.
Gearing* at the end of the quarter was 30.4%. 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. See page 25 for more information.
Safety
BP has introduced a new safety operating metric including tier 2 as well as tier 1 process safety events, giving a wider view of process safety within BP’s operations. The increase compared to the first quarter 2018 was mainly due to a higher number of tier 2 events.
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Operating metrics | | First quarter 2019 | | Financial metrics | | First quarter 2019 |
| (vs. First quarter 2018) | | | (vs. First quarter 2018) |
Tier 1 and tier 2 process safety events* | | 28 | | Underlying RC profit*i | | $2.4bn |
| (+15) | | | (-$0.2bn) |
Reported recordable injury frequency* | | 0.16 | | Operating cash flow excluding Gulf of Mexico oil spill payments (post-tax) | | (c) |
| (-22%) | | | |
Group production | | 3,822mboe/d | | Organic capital expenditureii | | $3.6bn |
| (+2.4%) | | | (+$0.1bn) |
Upstream production (excludes Rosneft segment) | | 2,656mboe/d | | Gulf of Mexico oil spill payments (post-tax) | | $0.6bn |
| (+2.0%) | | | (-$1.1bn) |
Upstream unit production costs(a) | | $7.39/boe | | Divestment proceeds* | | $0.6bn |
| (-3.9%) | | | (+$0.4bn) |
BP-operated Upstream plant reliability | | 96.2% | | Gearingiii | | 30.4% |
| (+0.3) | | | (+2.6) |
BP-operated refining availability*(b) | | 94.3% | | Dividend per ordinary share(d) | | 10.25 cents |
| (-0.5) | | | (+2.5%) |
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(a) | Broadly flat with the same period in 2018 after excluding the impacts of IFRS 16 on production costs. |
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(b) | From the first quarter 2019 refining availability has changed to BP-operated refining availability to more closely align to the BP-operated upstream plant reliability measure. |
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(c) | SEC regulations do not permit inclusion of this non-GAAP metric in this SEC filing. Operating cash flow excluding Gulf of Mexico oil spill payments is calculated by excluding post-tax payments relating to the Gulf of Mexico oil spill from net cash provided by operating activities, |
as reported in the condensed group cash flow statement. For the first quarter, net cash provided by operating activities was $5.3 billion and post-tax Gulf of Mexico oil spill payments were $0.6 billion.
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(d) | Represents dividend announced in the quarter (vs. prior year quarter). |
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Nearest GAAP equivalent measures |
i | Profit for the period: | $2.9bn |
ii | Capital expenditure*: | $5.6bn |
iii | Finance debt ratio*: | 39.0% |
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The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 37. |
Upstream
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| | First |
| First |
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| | quarter |
| quarter |
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$ million | | 2019 |
| 2018 |
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Profit before interest and tax | | 2,886 |
| 3,175 |
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Inventory holding (gains) losses* | | (2 | ) | (1 | ) |
RC profit before interest and tax | | 2,884 |
| 3,174 |
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Net (favourable) adverse impact of non-operating items* and fair value accounting effects* | | 44 |
| (17 | ) |
Underlying RC profit before interest and tax*(a) | | 2,928 |
| 3,157 |
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(a) | See page 10 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 first quarter was $2,884 million, compared with $3,174 million for the same period in 2018. The first quarter included a net non-operating charge of $4 million, compared with a net charge of $104 million for the same period in 2018. Fair value accounting effects in the first quarter had an adverse impact of $40 million, compared with a favourable impact of $121 million in the same period of 2018.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the first quarter was $2,928 million, compared with $3,157 million for the same period in 2018. The result for the first quarter mainly reflected lower liquids realizations and the impact of turnaround activities in the US Gulf of Mexico, partly offset by strong gas marketing and trading.
Production
Production for the quarter was 2,656mboe/d, 2.0% higher than the first quarter of 2018. Underlying production* for the quarter decreased by 1.9%, mainly due to turnaround and maintenance activities in the US Gulf of Mexico and severe weather impacts in BPX Energy.
Key events
On 6 February, the Constellation development in the US Gulf of Mexico, a tieback to the Constitution spar, commenced production (Anadarko operator 33.33% and BP 66.67%).
On 11 February, BP confirmed it started gas production from the second stage of Egypt’s West Nile Delta development, in the Giza and Fayoum fields (BP operator 82.75% and DEA Deutsche Erdoel AG 17.25%).
On 26 February, BP announced first gas from the Angelin project in Trinidad.
On 1 March, BPX Energy assumed control of all Petrohawk Energy Corporation operations from BHP.
On 13 March, BP and Environmental Defense Fund announced a three-year strategic commitment to advance technologies and practices to reduce methane emissions from the global oil and gas supply chain.
On 14 March, BP confirmed a gas discovery in the Nour exploration prospect located in the Nour North Sinai Concession, located in the Eastern Egyptian Mediterranean (Eni operator 40%, BP 25%, Mubadala Petroleum 20% and Tharwa Petroleum 15%). The well is currently under evaluation.
On 26 March, BP announced that it has established a fund of up to $100-million to be made available over the next three years for projects that will deliver new greenhouse gas (GHG) emissions reductions in its Upstream oil and gas operations. The new Upstream carbon fund will provide further support to BP’s work in sustainably reducing GHG emissions in its operations.
In March, a final investment decision was made on Seagull, a development tieback in the Central UK North Sea (Neptune Energy operator 35%, BP 50% and Japan Petroleum Exploration Co. LTD. 15%).
In April, a final investment decision was made on the Azeri Central East (ACE) project, the next stage of the Azeri-Chirag-Deepwater Gunashli (ACG) field.
Outlook
Looking ahead, we expect second-quarter 2019 reported production to be broadly flat with the first quarter reflecting ramp up of major projects* offset by ongoing seasonal turnaround and maintenance activities in high margin regions.
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The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 37. |
Upstream (continued)
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| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Underlying RC profit before interest and tax | | | |
US | | 612 |
| 526 |
|
Non-US | | 2,316 |
| 2,631 |
|
| | 2,928 |
| 3,157 |
|
Non-operating items | | | |
US | | (30 | ) | (145 | ) |
Non-US | | 26 |
| 41 |
|
| | (4 | ) | (104 | ) |
Fair value accounting effects | | | |
US | | (93 | ) | (9 | ) |
Non-US | | 53 |
| 130 |
|
| | (40 | ) | 121 |
|
RC profit before interest and tax | | | |
US | | 489 |
| 372 |
|
Non-US | | 2,395 |
| 2,802 |
|
| | 2,884 |
| 3,174 |
|
Exploration expense | | | |
US | | 25 |
| 309 |
|
Non-US | | 342 |
| 205 |
|
| | 367 |
| 514 |
|
Of which: Exploration expenditure written off | | 284 |
| 426 |
|
Production (net of royalties)(a) | | | |
Liquids* (mb/d) | | | |
US | | 455 |
| 448 |
|
Europe | | 159 |
| 139 |
|
Rest of World | | 685 |
| 731 |
|
| | 1,299 |
| 1,319 |
|
Of which equity-accounted entities | | 137 |
| 175 |
|
Natural gas (mmcf/d) | | | |
US | | 2,310 |
| 1,790 |
|
Europe | | 145 |
| 217 |
|
Rest of World | | 5,417 |
| 5,456 |
|
| | 7,872 |
| 7,463 |
|
Of which equity-accounted entities | | 459 |
| 478 |
|
Total hydrocarbons* (mboe/d) | | | |
US | | 853 |
| 757 |
|
Europe | | 184 |
| 177 |
|
Rest of World | | 1,619 |
| 1,672 |
|
| | 2,656 |
| 2,605 |
|
Of which equity-accounted entities | | 216 |
| 258 |
|
Average realizations*(b) | | | |
Total liquids(c) ($/bbl) | | 56.47 |
| 61.40 |
|
Natural gas ($/mcf) | | 4.02 |
| 3.78 |
|
Total hydrocarbons ($/boe) | | 39.37 |
| 41.39 |
|
| |
(a) | Includes BP’s share of production of equity-accounted entities in the Upstream segment. |
| |
(b) | Realizations are based on sales by consolidated subsidiaries only - this excludes equity-accounted entities. |
| |
(c) | Includes condensate, natural gas liquids and bitumen. |
Because of rounding, some totals may not agree exactly with the sum of their component parts.
Downstream
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Profit (loss) before interest and tax | | 2,811 |
| 1,782 |
|
Inventory holding (gains) losses* | | (1,046 | ) | (69 | ) |
RC profit before interest and tax | | 1,765 |
| 1,713 |
|
Net (favourable) adverse impact of non-operating items* and fair value accounting effects* | | (32 | ) | 113 |
|
Underlying RC profit before interest and tax*(a) | | 1,733 |
| 1,826 |
|
| |
(a) | See page 12 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 first quarter was $1,765 million, compared with $1,713 million for the same period in 2018.
The first quarter includes a net non-operating charge of $4 million, compared with a charge of $53 million for the same period in 2018. Fair value accounting effects had a favourable impact of $36 million in the first quarter, compared with an adverse impact of $60 million for the same period in 2018.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the first quarter was $1,733 million, compared with $1,826 million for the same period in 2018.
Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 12.
Fuels
The fuels business reported an underlying replacement cost profit before interest and tax of $1,292 million for the first quarter, compared with $1,398 million for the same period in 2018. The year-on-year movement was driven by lower refining margins, partially offset by a strong contribution from supply and trading and higher fuels marketing earnings.
The refining result for the quarter reflects the impact of lower industry refining margins and narrower North American heavy crude oil discounts.
The fuels marketing result for the quarter primarily reflects year-on-year retail earnings growth, benefiting from higher premium volumes, the continued roll out of our convenience partnership model and further expansion in new markets, most notably Mexico.
In the quarter we opened our first BP-branded retail station in Shandong Province, through our joint venture with Dongming. This marks the start of our plan to add 1,000 new sites over the next five years to our existing network in China of more than 740 sites.
Lubricants
The lubricants business reported an underlying replacement cost profit before interest and tax of $272 million for the first quarter, compared with $331 million for the same period in 2018. The result for the quarter reflects continued adverse foreign exchange rate movements and one-off impacts related to the completion of a systems implementation.
Petrochemicals
The petrochemicals business reported an underlying replacement cost profit before interest and tax of $169 million for the first quarter, compared with $97 million for the same period in 2018. The result for the quarter reflects increased margin optimization and a lower level of turnaround activity.
In the quarter we agreed an expansion of capacity at our joint venture petrochemicals facility in South Korea which will help us to meet the region’s growing acetyls demand. We also continued to make progress in our commitment to a low carbon future, signing 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 second quarter of 2019, we expect higher industry refining margins, a similar level of North American heavy crude oil discounts and a significantly higher level of turnaround activity.
|
|
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 37. |
Downstream (continued)
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Underlying RC profit before interest and tax - by region | | | |
US | | 531 |
| 589 |
|
Non-US | | 1,202 |
| 1,237 |
|
| | 1,733 |
| 1,826 |
|
Non-operating items | | | |
US | | 1 |
| (17 | ) |
Non-US | | (5 | ) | (36 | ) |
| | (4 | ) | (53 | ) |
Fair value accounting effects(a) | | | |
US | | 61 |
| (121 | ) |
Non-US | | (25 | ) | 61 |
|
| | 36 |
| (60 | ) |
RC profit before interest and tax | | | |
US | | 593 |
| 451 |
|
Non-US | | 1,172 |
| 1,262 |
|
| | 1,765 |
| 1,713 |
|
Underlying RC profit before interest and tax - by business(b)(c) | | | |
Fuels | | 1,292 |
| 1,398 |
|
Lubricants | | 272 |
| 331 |
|
Petrochemicals | | 169 |
| 97 |
|
| | 1,733 |
| 1,826 |
|
Non-operating items and fair value accounting effects(a) | | | |
Fuels | | 37 |
| (110 | ) |
Lubricants | | (4 | ) | (3 | ) |
Petrochemicals | | (1 | ) | — |
|
| | 32 |
| (113 | ) |
RC profit before interest and tax(b)(c) | | | |
Fuels | | 1,329 |
| 1,288 |
|
Lubricants | | 268 |
| 328 |
|
Petrochemicals | | 168 |
| 97 |
|
| | 1,765 |
| 1,713 |
|
| | | |
BP average refining marker margin (RMM)* ($/bbl) | | 10.2 |
| 11.7 |
|
| | | |
Refinery throughputs (mb/d) | | | |
US | | 735 |
| 715 |
|
Europe | | 767 |
| 797 |
|
Rest of World | | 237 |
| 249 |
|
| | 1,739 |
| 1,761 |
|
BP-operated refining availability* (%) | | 94.3 |
| 94.8 |
|
| | | |
Marketing sales of refined products (mb/d) | | | |
US | | 1,077 |
| 1,096 |
|
Europe | | 993 |
| 1,045 |
|
Rest of World | | 520 |
| 481 |
|
| | 2,590 |
| 2,622 |
|
Trading/supply sales of refined products | | 3,296 |
| 3,181 |
|
Total sales volumes of refined products | | 5,886 |
| 5,803 |
|
| | | |
Petrochemicals production (kte) | | | |
US | | 601 |
| 499 |
|
Europe | | 1,160 |
| 1,128 |
|
Rest of World | | 1,299 |
| 1,391 |
|
| | 3,060 |
| 3,018 |
|
| |
(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. |
Rosneft
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019(a) |
| 2018 |
|
Profit before interest and tax(b)(c) | | 526 |
| 269 |
|
Inventory holding (gains) losses* | | (40 | ) | (22 | ) |
RC profit before interest and tax | | 486 |
| 247 |
|
Net charge (credit) for non-operating items* | | 81 |
| — |
|
Underlying RC profit before interest and tax* | | 567 |
| 247 |
|
Financial results
Replacement cost (RC) profit before interest and tax for the first quarter was $486 million, compared with $247 million for the same period in 2018.
After adjusting for a non-operating item, the underlying RC profit before interest and tax for the first quarter was $567 million. There were no non-operating items in the first quarter of 2018.
Compared with the same period in 2018, the result for the first quarter primarily reflects favourable foreign exchange effects, partially offset by the impact of lower oil prices.
On 16 April 2019, Rosneft announced that the board of directors had recommended that the annual general meeting (AGM) adopts a resolution to pay dividends of 11.33 roubles per ordinary share, which would bring the total dividend for 2018 to 25.91 roubles per ordinary share, which constitutes 50% of the company’s IFRS net profit. In addition to the dividend received in October 2018 in relation to the results for the first half of 2018, BP expects to receive later this year a dividend of 21.3 billion roubles, after the deduction of withholding tax, subject to approval at the AGM.
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
| | 2019(a) |
| 2018 |
|
Production (net of royalties) (BP share) | | | |
Liquids* (mb/d) | | 937 |
| 902 |
|
Natural gas (mmcf/d) | | 1,327 |
| 1,307 |
|
Total hydrocarbons* (mboe/d) | | 1,166 |
| 1,127 |
|
| |
(a) | The operational and financial information of the Rosneft segment for the first quarter is based on preliminary operational and financial results of Rosneft for the three months ended 31 March 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. |
Other businesses and corporate
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Profit (loss) before interest and tax | | (546 | ) | (571 | ) |
Inventory holding (gains) losses* | | — |
| — |
|
RC profit (loss) before interest and tax | | (546 | ) | (571 | ) |
Net charge (credit) for non-operating items | | 128 |
| 179 |
|
Underlying RC profit (loss) before interest and tax* | | (418 | ) | (392 | ) |
Underlying RC profit (loss) before interest and tax | | | |
US | | (155 | ) | (147 | ) |
Non-US | | (263 | ) | (245 | ) |
| | (418 | ) | (392 | ) |
Non-operating items | | | |
US | | (128 | ) | (148 | ) |
Non-US | | — |
| (31 | ) |
| | (128 | ) | (179 | ) |
RC profit (loss) before interest and tax | | | |
US | | (283 | ) | (295 | ) |
Non-US | | (263 | ) | (276 | ) |
| | (546 | ) | (571 | ) |
Other businesses and corporate comprises our alternative energy business, shipping, treasury, 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 first quarter was $546 million, compared with $571 million for the same period in 2018.
The results included a net non-operating charge of $128 million for the first quarter, primarily relating to costs of the Gulf of Mexico oil spill, compared with a charge of $179 million for the same period in 2018.
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the first quarter was $418 million, compared with $392 million for the same period in 2018.
Alternative Energy
The net ethanol-equivalent production (which includes ethanol and sugar) for the first quarter was 14 million litres, compared with 7.6 million litres for the same period in 2018.
Net wind generation capacity* was 1,001MW at 31 March 2019, compared with 1,432MW at 31 March 2018. BP’s net share of wind generation for the first quarter was 773GWh, compared with 1,217GWh for the same period in 2018. The lower production for the quarter is due to divestments in the fourth quarter of 2018.
Lightsource BP announced that the Green Energy Equity Fund, managed by its Indian joint venture, EverSource Capital, is partnering with the National Investment and Infrastructure Fund 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.
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 37. |
Financial statements
Group income statement
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
| | | |
Sales and other operating revenues (Note 3) | | 66,321 |
| 68,172 |
|
Earnings from joint ventures – after interest and tax | | 185 |
| 293 |
|
Earnings from associates – after interest and tax | | 649 |
| 414 |
|
Interest and other income | | 163 |
| 159 |
|
Gains on sale of businesses and fixed assets | | 89 |
| 105 |
|
Total revenues and other income | | 67,407 |
| 69,143 |
|
Purchases | | 48,272 |
| 51,512 |
|
Production and manufacturing expenses | | 5,356 |
| 5,438 |
|
Production and similar taxes (Note 5) | | 424 |
| 368 |
|
Depreciation, depletion and amortization (Note 4) | | 4,461 |
| 3,931 |
|
Impairment and losses on sale of businesses and fixed assets | | 96 |
| 91 |
|
Exploration expense | | 367 |
| 514 |
|
Distribution and administration expenses | | 2,767 |
| 2,794 |
|
Profit (loss) before interest and taxation | | 5,664 |
| 4,495 |
|
Finance costs | | 867 |
| 553 |
|
Net finance expense relating to pensions and other post-retirement benefits | | 15 |
| 31 |
|
Profit (loss) before taxation | | 4,782 |
| 3,911 |
|
Taxation | | 1,783 |
| 1,380 |
|
Profit (loss) for the period | | 2,999 |
| 2,531 |
|
Attributable to | | | |
BP shareholders | | 2,934 |
| 2,469 |
|
Non-controlling interests | | 65 |
| 62 |
|
| | 2,999 |
| 2,531 |
|
| | | |
Earnings per share (Note 6) | | | |
Profit (loss) for the period attributable to BP shareholders | | | |
Per ordinary share (cents) | | | |
Basic | | 14.54 |
| 12.40 |
|
Diluted | | 14.47 |
| 12.33 |
|
Per ADS (dollars) | | | |
Basic | | 0.87 |
| 0.74 |
|
Diluted | | 0.87 |
| 0.74 |
|
Condensed group statement of comprehensive income
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
| | | |
Profit (loss) for the period | | 2,999 |
| 2,531 |
|
Other comprehensive income | | | |
Items that may be reclassified subsequently to profit or loss | | | |
Currency translation differences | | 989 |
| 531 |
|
Cash flow hedges and costs of hedging | | 19 |
| (82 | ) |
Share of items relating to equity-accounted entities, net of tax | | (50 | ) | 155 |
|
Income tax relating to items that may be reclassified | | (34 | ) | (90 | ) |
| | 924 |
| 514 |
|
Items that will not be reclassified to profit or loss | | | |
Remeasurements of the net pension and other post-retirement benefit liability or asset | | (853 | ) | 865 |
|
Cash flow hedges that will subsequently be transferred to the balance sheet | | 8 |
| 13 |
|
Income tax relating to items that will not be reclassified | | 273 |
| (265 | ) |
| | (572 | ) | 613 |
|
Other comprehensive income | | 352 |
| 1,127 |
|
Total comprehensive income | | 3,351 |
| 3,658 |
|
Attributable to | | | |
BP shareholders | | 3,281 |
| 3,580 |
|
Non-controlling interests | | 70 |
| 78 |
|
| | 3,351 |
| 3,658 |
|
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 | | 3,281 |
| 70 |
| 3,351 |
|
Dividends | | (1,435 | ) | (36 | ) | (1,471 | ) |
Cash flow hedges transferred to the balance sheet, net of tax | | 5 |
| — |
| 5 |
|
Repurchase of ordinary share capital | | (50 | ) | — |
| (50 | ) |
Share-based payments, net of tax | | 280 |
| — |
| 280 |
|
Share of equity-accounted entities’ changes in equity, net of tax | | 3 |
| — |
| 3 |
|
At 31 March 2019 | | 101,199 |
| 2,137 |
| 103,336 |
|
| | | | |
| | 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 | | 3,580 |
| 78 |
| 3,658 |
|
Dividends | | (1,828 | ) | (13 | ) | (1,841 | ) |
Cash flow hedges transferred to the balance sheet, net of tax | | 1 |
| — |
| 1 |
|
Repurchase of ordinary share capital | | (120 | ) | — |
| (120 | ) |
Share-based payments, net of tax | | 244 |
| — |
| 244 |
|
Transactions involving non-controlling interests, net of tax | | (1 | ) | — |
| (1 | ) |
At 31 March 2018 | | 100,187 |
| 1,978 |
| 102,165 |
|
| |
(a) | See Note 1 for further information. |
| |
(b) | See Note 1 in BP Annual Report and Form 20-F 2018 for further information. |
Group balance sheet
|
| | | | | |
| | 31 March |
| 31 December |
|
$ million | | 2019 |
| 2018(a) |
|
Non-current assets | | | |
Property, plant and equipment | | 144,625 |
| 135,261 |
|
Goodwill | | 12,277 |
| 12,204 |
|
Intangible assets | | 16,505 |
| 17,284 |
|
Investments in joint ventures | | 8,701 |
| 8,647 |
|
Investments in associates | | 19,073 |
| 17,673 |
|
Other investments | | 1,269 |
| 1,341 |
|
Fixed assets | | 202,450 |
| 192,410 |
|
Loans | | 642 |
| 637 |
|
Trade and other receivables | | 2,111 |
| 1,834 |
|
Derivative financial instruments | | 5,265 |
| 5,145 |
|
Prepayments | | 814 |
| 1,179 |
|
Deferred tax assets | | 3,593 |
| 3,706 |
|
Defined benefit pension plan surpluses | | 5,709 |
| 5,955 |
|
| | 220,584 |
| 210,866 |
|
Current assets | | | |
Loans | | 340 |
| 326 |
|
Inventories | | 21,426 |
| 17,988 |
|
Trade and other receivables | | 24,490 |
| 24,478 |
|
Derivative financial instruments | | 3,004 |
| 3,846 |
|
Prepayments | | 1,082 |
| 963 |
|
Current tax receivable | | 965 |
| 1,019 |
|
Other investments | | 134 |
| 222 |
|
Cash and cash equivalents | | 21,256 |
| 22,468 |
|
| | 72,697 |
| 71,310 |
|
Total assets | | 293,281 |
| 282,176 |
|
Current liabilities | | | |
Trade and other payables | | 46,749 |
| 46,265 |
|
Derivative financial instruments | | 2,340 |
| 3,308 |
|
Accruals | | 3,924 |
| 4,626 |
|
Lease liabilities | | 2,099 |
| 44 |
|
Finance debt | | 11,480 |
| 9,329 |
|
Current tax payable | | 2,348 |
| 2,101 |
|
Provisions | | 2,332 |
| 2,564 |
|
| | 71,272 |
| 68,237 |
|
Non-current liabilities | | | |
Other payables | | 13,898 |
| 13,830 |
|
Derivative financial instruments | | 5,294 |
| 5,625 |
|
Accruals | | 547 |
| 575 |
|
Lease liabilities | | 8,195 |
| 623 |
|
Finance debt | | 54,510 |
| 55,803 |
|
Deferred tax liabilities | | 9,770 |
| 9,812 |
|
Provisions | | 17,773 |
| 17,732 |
|
Defined benefit pension plan and other post-retirement benefit plan deficits | | 8,686 |
| 8,391 |
|
| | 118,673 |
| 112,391 |
|
Total liabilities | | 189,945 |
| 180,628 |
|
Net assets | | 103,336 |
| 101,548 |
|
Equity | | | |
BP shareholders’ equity | | 101,199 |
| 99,444 |
|
Non-controlling interests | | 2,137 |
| 2,104 |
|
Total equity | | 103,336 |
| 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. |
Condensed group cash flow statement
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Operating activities | | | |
Profit (loss) before taxation | | 4,782 |
| 3,911 |
|
Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities | | | |
Depreciation, depletion and amortization and exploration expenditure written off | | 4,745 |
| 4,357 |
|
Impairment and (gain) loss on sale of businesses and fixed assets | | 7 |
| (14 | ) |
Earnings from equity-accounted entities, less dividends received | | (589 | ) | (536 | ) |
Net charge for interest and other finance expense, less net interest paid | | 88 |
| 80 |
|
Share-based payments | | 297 |
| 237 |
|
Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans | | (77 | ) | (202 | ) |
Net charge for provisions, less payments | | (116 | ) | 144 |
|
Movements in inventories and other current and non-current assets and liabilities | | (2,695 | ) | (3,398 | ) |
Income taxes paid | | (1,146 | ) | (933 | ) |
Net cash provided by operating activities | | 5,296 |
| 3,646 |
|
Investing activities | | | |
Expenditure on property, plant and equipment, intangible and other assets | | (3,695 | ) | (3,586 | ) |
Acquisitions, net of cash acquired | | (1,795 | ) | — |
|
Investment in joint ventures | | — |
| (39 | ) |
Investment in associates | | (145 | ) | (338 | ) |
Total cash capital expenditure | | (5,635 | ) | (3,963 | ) |
Proceeds from disposal of fixed assets | | 235 |
| 85 |
|
Proceeds from disposal of businesses, net of cash disposed | | 365 |
| 82 |
|
Proceeds from loan repayments | | 55 |
| 9 |
|
Net cash used in investing activities | | (4,980 | ) | (3,787 | ) |
Financing activities(a) | | | |
Net issue (repurchase) of shares | | (45 | ) | (110 | ) |
Lease liability payments | | (617 | ) | (10 | ) |
Proceeds from long-term financing | | 2,124 |
| 122 |
|
Repayments of long-term financing | | (2,640 | ) | (1,147 | ) |
Net increase (decrease) in short-term debt | | 1,089 |
| (349 | ) |
Net increase (decrease) in non-controlling interests | | — |
| (1 | ) |
Dividends paid - BP shareholders | | (1,435 | ) | (1,829 | ) |
- non-controlling interests | | (36 | ) | (13 | ) |
Net cash provided by (used in) financing activities | | (1,560 | ) | (3,337 | ) |
Currency translation differences relating to cash and cash equivalents | | 32 |
| 145 |
|
Increase (decrease) in cash and cash equivalents | | (1,212 | ) | (3,333 | ) |
Cash and cash equivalents at beginning of period | | 22,468 |
| 25,575 |
|
Cash and cash equivalents at end of period | | 21,256 |
| 22,242 |
|
| |
(a) | Financing cash flows for the first quarter 2018 have been re-presented to align with the current period. See Note 1 for further information. |
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.
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.
The effect of the adoption of IFRS 16 on the group balance sheet is set out below.
Note 1. Basis of preparation (continued)
|
| | | | | | | |
| | | | 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 |
|
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 |
|
| | 7,081 |
|
Note 2. Analysis of replacement cost profit (loss) before interest and tax and reconciliation to profit (loss) before taxation
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Upstream | | 2,884 |
| 3,174 |
|
Downstream | | 1,765 |
| 1,713 |
|
Rosneft | | 486 |
| 247 |
|
Other businesses and corporate | | (546 | ) | (571 | ) |
| | 4,589 |
| 4,563 |
|
Consolidation adjustment – UPII* | | (13 | ) | (160 | ) |
RC profit (loss) before interest and tax* | | 4,576 |
| 4,403 |
|
Inventory holding gains (losses)* | | | |
Upstream | | 2 |
| 1 |
|
Downstream | | 1,046 |
| 69 |
|
Rosneft (net of tax) | | 40 |
| 22 |
|
Profit (loss) before interest and tax | | 5,664 |
| 4,495 |
|
Finance costs | | 867 |
| 553 |
|
Net finance expense relating to pensions and other post-retirement benefits | | 15 |
| 31 |
|
Profit (loss) before taxation | | 4,782 |
| 3,911 |
|
| | | |
RC profit (loss) before interest and tax* | | | |
US | | 771 |
| 359 |
|
Non-US | | 3,805 |
| 4,044 |
|
| | 4,576 |
| 4,403 |
|
Note 3. Sales and other operating revenues
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
By segment | | | |
Upstream | | 14,594 |
| 13,870 |
|
Downstream | | 58,416 |
| 61,406 |
|
Other businesses and corporate | | 356 |
| 343 |
|
| | 73,366 |
| 75,619 |
|
| | | |
Less: sales and other operating revenues between segments | | | |
Upstream | | 6,324 |
| 6,733 |
|
Downstream | | 586 |
| 482 |
|
Other businesses and corporate | | 135 |
| 232 |
|
| | 7,045 |
| 7,447 |
|
| | | |
Third party sales and other operating revenues | | | |
Upstream | | 8,270 |
| 7,137 |
|
Downstream | | 57,830 |
| 60,924 |
|
Other businesses and corporate | | 221 |
| 111 |
|
Total sales and other operating revenues | | 66,321 |
| 68,172 |
|
| | | |
By geographical area | | | |
US | | 21,848 |
| 23,613 |
|
Non-US | | 49,618 |
| 51,240 |
|
| | 71,466 |
| 74,853 |
|
Less: sales and other operating revenues between areas | | 5,145 |
| 6,681 |
|
| | 66,321 |
| 68,172 |
|
| | | |
Revenues from contracts with customers | | | |
Sales and other operating revenues include the following in relation to revenues from contracts with customers: | | | |
Crude oil | | 14,282 |
| 14,917 |
|
Oil products | | 42,583 |
| 44,130 |
|
Natural gas, LNG and NGLs | | 5,793 |
| 5,159 |
|
Non-oil products and other revenues from contracts with customers | | 3,501 |
| 3,495 |
|
| | 66,159 |
| 67,701 |
|
Note 4. Depreciation, depletion and amortization
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Upstream | | | |
US | | 1,113 |
| 1,088 |
|
Non-US | | 2,498 |
| 2,272 |
|
| | 3,611 |
| 3,360 |
|
Downstream | | | |
US | | 323 |
| 219 |
|
Non-US | | 383 |
| 302 |
|
| | 706 |
| 521 |
|
Other businesses and corporate | | | |
US | | 13 |
| 16 |
|
Non-US | | 131 |
| 34 |
|
| | 144 |
| 50 |
|
Total group | | 4,461 |
| 3,931 |
|
Note 5. Production and similar taxes
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
US | | 81 |
| 90 |
|
Non-US | | 343 |
| 278 |
|
| | 424 |
| 368 |
|
Note 6. 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 6 million ordinary shares for a total cost of $50 million, as part of the share buyback programme as announced on 31 October 2017. 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.
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
|
Results for the period | | | |
Profit (loss) for the period attributable to BP shareholders | | 2,934 |
| 2,469 |
|
Less: preference dividend | | — |
| — |
|
Profit (loss) attributable to BP ordinary shareholders | | 2,934 |
| 2,469 |
|
| | | |
Number of shares (thousand)(a) | | | |
Basic weighted average number of shares outstanding | | 20,175,634 |
| 19,918,700 |
|
ADS equivalent | | 3,362,605 |
| 3,319,783 |
|
| | | |
Weighted average number of shares outstanding used to calculate diluted earnings per share | | 20,281,773 |
| 20,030,656 |
|
ADS equivalent | | 3,380,295 |
| 3,338,442 |
|
| | | |
Shares in issue at period-end | | 20,330,597 |
| 19,943,591 |
|
ADS equivalent | | 3,388,432 |
| 3,323,931 |
|
| |
(a) | Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans. |
Issued ordinary share capital as at 31 March 2019 comprised 20,345,694,052 ordinary shares (31 December 2018 20,260,732,488 ordinary shares). This includes shares held in trust to settle future employee share plan obligations and excludes 1,262,930,568 ordinary shares which have been bought back and are held in treasury by BP (31 December 2018 1,264,731,539 ordinary shares).
Note 7. Dividends
Dividends payable
BP today announced an interim dividend of 10.25 cents per ordinary share which is expected to be paid on 21 June 2019 to ordinary shareholders and American Depositary Share (ADS) holders on the register on 10 May 2019. The corresponding amount in sterling is due to be announced on 10 June 2019, calculated based on the average of the market exchange rates for the four dealing days commencing on 4 June 2019. Holders of ADSs are expected to receive $0.615 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the first quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
|
| | | | | |
| | First |
| First |
|
| | quarter |
| quarter |
|
| | 2019 |
| 2018 |
|
Dividends paid per ordinary share | | | |
cents | | 10.250 |
| 10.000 |
|
pence | | 7.738 |
| 7.169 |
|
Dividends paid per ADS (cents) | | 61.50 |
| 60.00 |
|
Scrip dividends | | | |
Number of shares issued (millions) | | 90.1 |
| 23.4 |
|
Value of shares issued ($ million) | | 629 |
| 155 |
|
Note 8. Net debt and net debt including leases
|
| | | | | | | |
Net debt* | | First |
| Fourth |
| First |
|
| | quarter |
| quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
| 2018 |
|
Finance debt(a) | | 65,990 |
| 65,132 |
| 61,540 |
|
Fair value (asset) liability of hedges related to finance debt(b) | | 350 |
| 813 |
| 46 |
|
| | 66,340 |
| 65,945 |
| 61,586 |
|
Less: cash and cash equivalents | | 21,256 |
| 22,468 |
| 22,242 |
|
Net debt | | 45,084 |
| 43,477 |
| 39,344 |
|
Equity | | 103,336 |
| 101,548 |
| 102,165 |
|
Gearing | | 30.4 | % | 30.0 | % | 27.8 | % |
| |
(a) | The fair value of finance debt at 31 March 2019 was $67,003 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 $609 million (fourth quarter 2018 liability of $827 million and first quarter 2018 liability of $457 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 amounts for finance lease liabilities that have been excluded from comparative information are $667 million and $649 million for the fourth and first quarters 2018. The previously disclosed amounts for finance debt for the fourth and first quarters 2018 were $65,799 million and $62,189 million respectively. The previously disclosed amounts for net debt for the fourth and first quarters 2018 were $44,144 million and $39,993 million respectively. The previously disclosed amounts for gearing for the fourth and first quarters 2018 were 30.3% and 28.1% respectively.
|
| | | | | | | |
Net debt including leases* | | First |
| Fourth |
| First |
|
| | quarter |
| quarter |
| quarter |
|
$ million | | 2019 |
| 2018 |
| 2018 |
|
Net debt | | 45,084 |
| 43,477 |
| 39,344 |
|
Lease liabilities | | 10,294 |
| 667 |
| 649 |
|
Net partner (receivable) payable for leases entered into on behalf of joint operations | | (303 | ) | — |
| — |
|
Net debt including leases | | 55,075 |
| 44,144 |
| 39,993 |
|
Note 9. Inventory valuation
A provision of $124 million was held against hydrocarbon inventories at 31 March 2019 ($54 million at 31 March 2018) to write them down to their net realizable value. The net movement credited to the income statement during the first quarter 2019 was $480 million (first quarter 2018 was a credit of $9 million).
Note 10. Statutory accounts
The financial information shown in this publication, which was approved by the Board of Directors on 29 April 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.
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 8.
Balance sheet
As a result of the adoption of IFRS 16, $9.6 billion of right-of-use assets and $10.3 billion of lease liabilities have been included in the group balance sheet as at 31 March 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.
|
| | | | | |
| | 31 March |
| 31 December |
|
$ billion | | 2019 |
| 2018 |
|
Property, plant and equipment(a) (b) | | 9.6 |
| 0.5 |
|
Lease liabilities(a) | | 10.3 |
| 0.7 |
|
Finance debt | | 66.0 |
| 65.1 |
|
| |
(a) | Comparative information represents finance leases accounted for under IAS 17. |
| |
(b) | Net additions to right-of-use assets for the first quarter of 2019 were $0.9 billion. |
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 first quarter of 2019 was $0.5 billion. Interest on the group’s lease liabilities for the first quarter of 2019 was $0.1 billion. 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 first 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 first 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.