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 30 September 2017
Commission File Number 1-06262
BP p.l.c.
(Translation of registrants name into English)
1 ST JAMESS 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.
Form 20-F | ✓ | Form 40-F |
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. 333-208478 AND 333-208478-01) OF BP CAPITAL MARKETS p.l.c. AND BP p.l.c.; THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-79399) 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.
1
Form 6-K for the period ended 30 September 2017(a)
|
Page | ||||||
1. | 3-13, 26-35 | |||||
2. | 14- 25 | |||||
3. | 36 | |||||
4. | 36 | |||||
5. | 37 | |||||
6. | 38 | |||||
7. | 39 |
(a) | In this Form 6-K, references to the nine months 2017 and nine months 2016 refer to nine-month periods ended 30 September 2017 and 30 September 2016 respectively. References to the third quarter 2017 and third quarter 2016 refer to the three-month periods ended 30 September 2017 and 30 September 2016 respectively. |
(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 BPs Annual Report on Form 20-F for the year ended 31 December 2016. |
2
Group results third quarter and nine months 2017
Highlights | Share buybacks announced to offset scrip dilution Reported third quarter group oil and gas production up 14% | |||
· | Profit for the third quarter was $1.8 billion, compared with $144 million in previous quarter. Underlying replacement cost (RC) profit* for the third quarter was $1.9 billion, compared with $684 million in previous quarter. | |||
· | Third-quarter operating cash flow* was $6.0 billion after post-tax Gulf of Mexico oil spill expenditure of $0.6 billion. | |||
· | Dividend unchanged at 10 cents per share. | |||
· | Recommencing share buyback programme in fourth quarter to offset ongoing dilutive effect of scrip dividends over time. | |||
· | Reported group oil and gas production in the third quarter averaged 3.6 million barrels of oil equivalent a day, 14% higher than in the third quarter of 2016. | |||
· | Three Upstream major projects* began production in the quarter. | |||
· | Downstream underlying quarterly earnings were the highest for five years, second-highest on a RC basis. | |||
· | Around $4.5 billion in disposal proceeds are expected for full year 2017, with $1.0 billion received in first nine months. | |||
· | Proceeds expected in the fourth quarter include those from the SECCO transaction ($1.4 billion) and the initial public offering of BP Midstream Partners LPs common units ($0.7 billion).
|
Third | Third | Nine | Nine | |||||||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
Profit (loss) for the period(a) |
1,769 | 1,620 | 3,362 | (382) | ||||||||||||||||||||
Inventory holding (gains) losses*, before tax |
(557) | 60 | (37) | (996) | ||||||||||||||||||||
Taxation charge (credit) on inventory holding gains and losses |
167 | (19) | 19 | 307 | ||||||||||||||||||||
RC profit (loss)* |
1,379 | 1,661 | 3,344 | (1,071) | ||||||||||||||||||||
Net (favourable) adverse impact of non-operating items* and fair value accounting effects*, before tax |
667 | (663) | 1,171 | 6,265 | ||||||||||||||||||||
Taxation charge (credit) on non-operating items and fair value accounting effects |
(181) | (65) | (456) | (3,009) | ||||||||||||||||||||
Underlying RC profit |
1,865 | 933 | 4,059 | 2,185 | ||||||||||||||||||||
Profit (loss) per ordinary share (cents) |
8.95 | 8.61 | 17.10 | (2.05) | ||||||||||||||||||||
Profit (loss) per ADS (dollars) |
0.54 | 0.52 | 1.03 | (0.12) | ||||||||||||||||||||
RC profit (loss) per ordinary share (cents)* |
6.98 | 8.82 | 17.01 | (5.74) | ||||||||||||||||||||
RC profit (loss) per ADS (dollars) |
0.42 | 0.53 | 1.02 | (0.34) | ||||||||||||||||||||
Underlying RC profit per ordinary share (cents)* |
9.44 | 4.96 | 20.65 | 11.70 | ||||||||||||||||||||
Underlying RC profit per ADS (dollars) |
0.57 | 0.30 | 1.24 | 0.70 |
(a) | Profit attributable to BP shareholders. |
* See definitions in the Glossary on page 32. RC profit (loss) and underlying RC profit are non-GAAP measures.
The commentary above and following should be read in conjunction with the cautionary statement on page 36.
3
Group results third quarter and nine months 2017
Group headlines
The commentary above should be read in conjunction with the cautionary statement on page 36.
4
Group results third quarter and nine months 2017
Analysis of underlying RC profit before interest and tax
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 | ||||||||
Underlying RC profit before interest and tax* |
||||||||||||
Upstream |
1,562 | (224) | 3,642 | (942) | ||||||||
Downstream |
2,338 | 1,431 | 5,493 | 4,757 | ||||||||
Rosneft |
137 | 120 | 515 | 432 | ||||||||
Other businesses and corporate |
(398) | (260) | (1,204) | (814) | ||||||||
Consolidation adjustment UPII* |
(130) | 17 | (63) | (64) | ||||||||
Underlying RC profit before interest and tax |
3,509 | 1,084 | 8,383 | 3,369 | ||||||||
Finance costs and net finance expense relating to pensions and other post-retirement benefits |
(444) | (358) | (1,251) | (1,012) | ||||||||
Taxation on an underlying RC basis |
(1,212) | 164 | (3,030) | (161) | ||||||||
Non-controlling interests |
12 | 43 | (43) | (11) | ||||||||
Underlying RC profit attributable to BP shareholders |
1,865 | 933 | 4,059 | 2,185 |
Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 3 for the group and on pages 8-13 for the segments.
Analysis of RC profit (loss) before interest and tax and reconciliation to profit (loss) for the period
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 | ||||||||
RC profit (loss) before interest and tax* |
||||||||||||
Upstream |
1,242 | 1,196 | 3,293 | (118) | ||||||||
Downstream |
2,175 | 978 | 5,448 | 4,263 | ||||||||
Rosneft |
137 | 120 | 515 | 432 | ||||||||
Other businesses and corporate(a) |
(460) | (441) | (1,612) | (7,040) | ||||||||
Consolidation adjustment UPII |
(130) | 17 | (63) | (64) | ||||||||
RC profit (loss) before interest and tax |
2,964 | 1,870 | 7,581 | (2,527) | ||||||||
Finance costs and net finance expense relating to pensions and other post-retirement benefits |
(566) | (481) | (1,620) | (1,381) | ||||||||
Taxation on a RC basis |
(1,031) | 229 | (2,574) | 2,848 | ||||||||
Non-controlling interests |
12 | 43 | (43) | (11) | ||||||||
RC profit (loss) attributable to BP shareholders |
1,379 | 1,661 | 3,344 | (1,071) | ||||||||
Inventory holding gains (losses) |
557 | (60) | 37 | 996 | ||||||||
Taxation (charge) credit on inventory holding gains and losses |
(167) | 19 | (19) | (307) | ||||||||
Profit (loss) for the period attributable to BP shareholders |
1,769 | 1,620 | 3,362 | (382) |
(a) | Includes costs related to the Gulf of Mexico oil spill. See page 13 and also Note 2 from page 19 for further information on the accounting for the Gulf of Mexico oil spill. |
5
Group results third quarter and nine months 2017
Operating metrics |
Nine months 2017 (vs. Nine months 2016) |
Financial metrics |
Nine months 2017 (vs. Nine months 2016) | |||||||||
Safety Tier 1 process safety events*
|
12 (-1) |
Underlying RC profiti |
$4.1bn (+$1.9bn) | |||||||||
Safety Reported recordable injury frequency* |
0.21 (-4%) |
Operating cash flow excluding Gulf of Mexico oil spill payments |
(b) | |||||||||
Group production |
3,557mboe/d (+10%)
|
Organic capital expenditureii
|
$11.9bn (-$0.3bn)
| |||||||||
Upstream production (excludes Rosneft segment)
|
2,427mboe/d (+10%) |
Gulf of Mexico oil spill payments |
$4.9bn (+$0.03bn) | |||||||||
Upstream unit production costs* |
$7.17/boe (-16%) |
Divestment proceeds |
$1.0bn (-$1.2bn) | |||||||||
BP-operated Upstream operating efficiency*(a) |
80.4% | Net debt ratio (gearing)iii |
28.4% (+2.5) | |||||||||
Refining availability* |
95.0% (-0.4)
|
Dividend per ordinary Share(c)
|
10.00 cents (-)
|
(a) | Reported on a one-quarter lagged basis and represents first half 2017 actuals only. |
(b) | 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 expenditure 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 nine months, net cash provided by operating activities was $6.0 billion and post-tax Gulf of Mexico oil spill expenditure was $0.6 billion. |
(c) | Represents dividend announced in the quarter (vs. prior year quarter). |
Nearest GAAP equivalent measures | ||||
i Profit for the period |
: | $3.4bn | ||
ii Capital expenditure* |
: | $13.0bn | ||
iii Gross debt ratio |
: | 39.6% |
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36. |
6
INTENTIONALLY BLANK
7
Group results third quarter and nine months 2017
Upstream
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||||
Profit (loss) before interest and tax |
1,255 | 1,183 | 3,301 | (77) | ||||||||||||||||||
Inventory holding (gains) losses* |
(13) | 13 | (8) | (41) | ||||||||||||||||||
RC profit (loss) before interest and tax |
1,242 | 1,196 | 3,293 | (118) | ||||||||||||||||||
Net (favourable) adverse impact of non-operating items* and fair value accounting effects* |
320 | (1,420) | 349 | (824) | ||||||||||||||||||
Underlying RC profit (loss) before interest and tax*(a) |
1,562 | (224) | 3,642 | (942) |
(a) | See page 9 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 third quarter and nine months was $1,242 million and $3,293 million respectively, compared with a profit of $1,196 million and a loss of $118 million for the same periods in 2016. The third quarter and nine months included a net non-operating charge of $146 million and $527 million respectively, compared with a net non-operating gain of $1,465 million and $1,117 million for the same periods in 2016. Fair value accounting effects in the third quarter and nine months had an adverse impact of $174 million and a favourable impact of $178 million respectively, compared with an adverse impact of $45 million and $293 million in the same periods of 2016.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the third quarter and nine months was $1,562 million and $3,642 million respectively, compared with a loss of $224 million and a loss of $942 million for the same periods in 2016. The result for the third quarter mainly reflected higher liquids and gas realizations, higher production including the impact of the Abu Dhabi concession renewal and major project start-ups, and lower exploration write-offs, partly offset by higher depreciation, depletion and amortization. The result for the nine months reflected higher liquids and gas realizations, and higher production including the impact of the Abu Dhabi concession renewal and major project start-ups, partly offset by higher depreciation, depletion and amortization, and higher exploration write-offs.
Production
Production for the quarter was 2,462mboe/d, 16.3% higher than the third quarter of 2016. Underlying production* for the quarter increased by 10.9%, due to the ramp-up of major projects. For the nine months, production was 2,427mboe/d, 9.6% higher than in the same period of 2016. Nine months underlying production was 6.7% higher than the same period of 2016 due to major project start-ups.
Key events
On 7 August, BP announced that it has brought online a natural gas well (BP 100%) in the Mancos Shale, New Mexico in the US Lower 48, highlighting the potential of the field to be a significant new source of US natural gas supply.
On 14 August, BP Trinidad and Tobago announced first gas from the Juniper development in Trinidad. On the same day, BP confirmed that production has started from the Persephone project off the coast of Western Australia (Woodside operator, BP 16.67%).
On 11 September, BP announced an agreement with Bridas Corporation to form a new integrated energy company in Argentina, Pan American Energy Group (PAEG), by combining their interests in the oil and gas producer Pan American Energy with the refining and marketing company Axion Energy in a cash-free transaction. PAEG will be owned equally by BP and Bridas Corporation.
On 14 September, the joint development and production-sharing agreement* (PSA) for the Azeri, Chirag fields and the Deep Water Portion of the Gunashli field in the Azerbaijan sector of the Caspian Sea (ACG PSA) was extended by signing an amended and restated PSA between the State Oil Company of the Republic of Azerbaijan (SOCAR) and the contractor parties. The renewed PSA, expected to be ratified by the Azerbaijani parliament before year end, extends the PSAs term by 25 years to 2049 and includes an improved contractor parties profit share at a fixed rate of 25%. Under the terms of the agreement, BPs interest changes from 35.78% to 30.37% from the agreements effective date following ratification, with a bonus of $1.46 billion (BP net), payable to the government of Azerbaijan in equal instalments over 8 years.
On 25 September, BP, together with the Ministry of Oil & Gas of the Sultanate of Oman, announced that first gas had been achieved from the Khazzan gas field (BP operator 60%, Oman Oil Company 40%).
On 24 October, Aker BP ASA (Aker BP), in which BP holds a 30% ownership interest, announced an agreement to acquire Hess Norge AS. Upon completion of the transaction, Aker BP will become the sole owner of the Valhall and Hod fields. This transaction is subject to regulatory approvals.
On 27 October, BP won two licences in the third Pre-Salt Bid Round in Brazil, the Alto De Cabo Frio Central block (Petrobras operator 50%, BP 50%), and the Peroba block (Petrobras operator 40%, BP 40%, and China National Petroleum Corporation 20%).
Outlook
Looking ahead, we expect fourth-quarter reported production to be higher than the third quarter reflecting the continued ramp-up of major projects and recovery from seasonal turnaround and maintenance activities.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36. |
8
Group results third quarter and nine months 2017
Upstream (continued)
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 | ||||||||||||
Underlying RC profit (loss) before interest and tax |
||||||||||||||||
US |
264 | (151) | 609 | (1,123) | ||||||||||||
Non-US |
1,298 | (73) | 3,033 | 181 | ||||||||||||
1,562 |
(224) |
3,642 |
(942) | |||||||||||||
Non-operating items(a) |
||||||||||||||||
US(b) |
(97) | 326 | (143) | 106 | ||||||||||||
Non-US(c)(d) |
(49) | 1,139 | (384) | 1,011 | ||||||||||||
(146) |
1,465 |
(527) |
1,117 | |||||||||||||
Fair value accounting effects |
||||||||||||||||
US |
(100) | (15) | 184 | (105) | ||||||||||||
Non-US |
(74) | (30) | (6) | (188) | ||||||||||||
(174) |
(45) |
178 |
(293) | |||||||||||||
RC profit (loss) before interest and tax |
||||||||||||||||
US |
67 | 160 | 650 | (1,122) | ||||||||||||
Non-US |
1,175 | 1,036 | 2,643 | 1,004 | ||||||||||||
1,242 |
1,196 |
3,293 |
(118) | |||||||||||||
Exploration expense |
||||||||||||||||
US(b) |
190 | 22 | 255 | 182 | ||||||||||||
Non-US(d)(e) |
107 | 781 | 1,304 | 1,225 | ||||||||||||
297 |
803 |
1,559 |
1,407 | |||||||||||||
Of which: Exploration expenditure written off(b)(d)(e) |
217 | 687 | 1,231 | 1,108 | ||||||||||||
Production (net of royalties)(f) |
||||||||||||||||
Liquids*(g) (mb/d) |
||||||||||||||||
US |
408 | 353 | 425 | 386 | ||||||||||||
Europe |
123 | 112 | 120 | 119 | ||||||||||||
Rest of World(g) |
809 | 669 | 816 | 714 | ||||||||||||
1,341 |
1,134 |
1,360 |
1,219 | |||||||||||||
Of which equity-accounted entities |
205 |
177 |
207 |
175 | ||||||||||||
Natural gas (mmcf/d) |
||||||||||||||||
US |
1,703 | 1,679 | 1,625 | 1,649 | ||||||||||||
Europe |
217 | 262 | 251 | 263 | ||||||||||||
Rest of World |
4,581 | 3,753 | 4,311 | 3,867 | ||||||||||||
6,502 |
5,695 |
6,187 |
5,779 | |||||||||||||
Of which equity-accounted entities |
562 |
495 |
552 |
486 | ||||||||||||
Total hydrocarbons*(g) (mboe/d) |
||||||||||||||||
US |
702 | 643 | 705 | 670 | ||||||||||||
Europe |
161 | 157 | 163 | 164 | ||||||||||||
Rest of World(g) |
1,599 | 1,316 | 1,559 | 1,381 | ||||||||||||
2,462 |
2,116 |
2,427 |
2,215 | |||||||||||||
Of which equity-accounted entities |
302 |
262 |
302 |
258 | ||||||||||||
Average realizations*(h) |
||||||||||||||||
Total liquids(g)(i) ($/bbl) |
47.45 | 40.99 | 47.87 | 36.50 | ||||||||||||
Natural gas ($/mcf) |
2.89 | 2.77 | 3.18 | 2.76 | ||||||||||||
Total hydrocarbons(g) ($/boe) |
33.23 | 29.37 | 34.63 | 27.20 |
(a) | Third quarter and nine months 2016 principally relate to impairment reversals in Angola and the North Sea. |
(b) | Third quarter and nine months 2017 include the write-off of $145 million in relation to the value ascribed to certain licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. This has been classified within the other category of non-operating items. |
(c) | Nine months 2017 includes an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS. |
(d) | Third quarter and nine months 2016 include $601 million of exploration write-offs relating to a licence in Brazil, of which $334 million relates to the value ascribed to the licence when acquired from Devon Energy in 2011, and has been classified within the other category of non-operating items. |
(e) | Nine months 2017 includes the write-off of exploration well and lease costs in Angola and the write-off of exploration well costs in Egypt. |
(f) | Includes BPs share of production of equity-accounted entities in the Upstream segment. |
(g) | A minor adjustment has been made to comparative periods in 2016. See page 31 for more information. |
(h) | Realizations are based on sales by consolidated subsidiaries only this excludes equity-accounted entities. |
(i) | Includes condensate, natural gas liquids and bitumen. |
Because of rounding, some totals may not agree exactly with the sum of their component parts.
9
Group results third quarter and nine months 2017
Downstream
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 | ||||||||||||
Profit (loss) before interest and tax |
2,695 | 943 | 5,487 | 5,189 | ||||||||||||
Inventory holding (gains) losses* |
(520) |
35 | (39) | (926) | ||||||||||||
RC profit before interest and tax |
2,175 | 978 | 5,448 | 4,263 | ||||||||||||
Net (favourable) adverse impact of non-operating items* and fair value accounting effects* |
163 | 453 | 45 | 494 | ||||||||||||
Underlying RC profit before interest and tax*(a) |
2,338 | 1,431 | 5,493 | 4,757 |
(a) | See page 11 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 third quarter and nine months was $2,175 million and $5,448 million respectively, compared with $978 million and $4,263 million for the same periods in 2016.
The third quarter and nine months include a net non-operating charge of $55 million and a net non-operating gain of $7 million respectively, compared with a net non-operating charge of $196 million and a net non-operating gain of $53 million for the same periods in 2016. Fair value accounting effects had an adverse impact of $108 million in the third quarter and $52 million for the nine months, compared with an adverse impact of $257 million and $547 million for the same periods in 2016.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the third quarter and nine months was $2,338 million and $5,493 million respectively, compared with $1,431 million and $4,757 million for the same periods in 2016.
Replacement cost profit before interest and tax for fuels, lubricants and petrochemicals is set out on page 11.
Fuels business
The fuels business reported an underlying replacement cost profit before interest and tax of $1,788 million for the third quarter and $3,896 million for the nine months, compared with $983 million and $3,310 million for the same periods in 2016 driven by higher refining and fuels marketing results. The result for the quarter also reflects an improved contribution from supply and trading. The contribution was however lower for the nine months compared to last year.
The refining result for the quarter and nine months reflects continued strong operational performance, capturing higher industry refining margins which were partially offset by narrower North American heavy crude oil differentials. The result also benefited from increased commercial optimization and higher levels of advantaged feedstock processed in the US. The nine-months result also reflects the impact of a higher level of planned turnaround activity.
The fuels marketing result for both the quarter and nine months reflects continued profit growth supported by higher premium volume and the continued rollout of our convenience partnership sites.
On 30 October, we completed the initial public offering of common units in our subsidiary, BP Midstream Partners LP. As a result of the initial public offering, we received net proceeds of around $0.7 billion.
Lubricants business
The lubricants business reported an underlying replacement cost profit before interest and tax of $356 million for the third quarter and $1,104 million for the nine months, compared with $370 million and $1,166 million for the same periods in 2016. The result for the quarter and nine months reflects continued premium brand growth, more than offset by the impact of higher base oil prices due to temporary supply constraints and increasing crude oil prices.
Petrochemicals business
The petrochemicals business reported an underlying replacement cost profit before interest and tax of $194 million for the third quarter and $493 million for the nine months, compared with $78 million and $281 million for the same periods in 2016. The result for the quarter and nine months reflects an improved margin environment, stronger margin optimization and lower costs reflecting the continued benefits from our simplification and efficiency programmes.
In April, we announced our intention to divest our 50% shareholding in our Shanghai SECCO Petrochemical Company Limited joint venture in China. The transaction is expected to complete in the fourth quarter. As a result, the asset relating to our shareholding has been classified as held for sale in the group balance sheet at 30 September 2017.
Outlook
While industry refining margins have remained robust coming into the fourth quarter, we would expect a normal seasonal decline compared with the third quarter. In the fourth quarter, we also expect a higher level of turnaround activity.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36.
10
Group results third quarter and nine months 2017
Downstream (continued)
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
Underlying RC profit before interest and tax - by region |
||||||||||||||||||||
US |
640 | 298 | 1,477 | 1,224 | ||||||||||||||||
Non-US |
1,698 | 1,133 | 4,016 | 3,533 | ||||||||||||||||
2,338 | 1,431 | 5,493 | 4,757 | |||||||||||||||||
Non-operating items |
||||||||||||||||||||
US |
(39) | (56) | (23) | 74 | ||||||||||||||||
Non-US |
(16) | (140) | 30 | (21) | ||||||||||||||||
(55) | (196) | 7 | 53 | |||||||||||||||||
Fair value accounting effects |
||||||||||||||||||||
US |
20 | (178) | (32) | (343) | ||||||||||||||||
Non-US |
(128) | (79) | (20) | (204) | ||||||||||||||||
(108) | (257) | (52) | (547) | |||||||||||||||||
RC profit before interest and tax |
||||||||||||||||||||
US |
621 | 64 | 1,422 | 955 | ||||||||||||||||
Non-US |
1,554 | 914 | 4,026 | 3,308 | ||||||||||||||||
2,175 | 978 | 5,448 | 4,263 | |||||||||||||||||
Underlying RC profit before interest and tax - by business(a)(b) |
||||||||||||||||||||
Fuels |
1,788 | 983 | 3,896 | 3,310 | ||||||||||||||||
Lubricants |
356 | 370 | 1,104 | 1,166 | ||||||||||||||||
Petrochemicals |
194 | 78 | 493 | 281 | ||||||||||||||||
2,338 | 1,431 | 5,493 | 4,757 | |||||||||||||||||
Non-operating items and fair value accounting effects(c) |
||||||||||||||||||||
Fuels |
(154) | (455) | 9 | (493) | ||||||||||||||||
Lubricants |
(3) | 1 | (8) | (3) | ||||||||||||||||
Petrochemicals |
(6) | 1 | (46) | 2 | ||||||||||||||||
(163) | (453) | (45) | (494) | |||||||||||||||||
RC profit before interest and tax(a)(b) |
||||||||||||||||||||
Fuels |
1,634 | 528 | 3,905 | 2,817 | ||||||||||||||||
Lubricants |
353 | 371 | 1,096 | 1,163 | ||||||||||||||||
Petrochemicals |
188 | 79 | 447 | 283 | ||||||||||||||||
2,175 | 978 | 5,448 | 4,263 | |||||||||||||||||
BP average refining marker margin (RMM)* ($/bbl) |
16.3 | 11.6 | 14.0 | 12.0 | ||||||||||||||||
Refinery throughputs (mb/d) |
||||||||||||||||||||
US |
737 | 613 | 713 | 660 | ||||||||||||||||
Europe |
768 | 795 | 784 | 802 | ||||||||||||||||
Rest of World |
240 | 242 | 207 | 237 | ||||||||||||||||
1,745 | 1,650 | 1,704 | 1,699 | |||||||||||||||||
Refining availability* (%) |
95.3 | 95.4 | 95.0 | 95.4 | ||||||||||||||||
Marketing sales of refined products (mb/d) |
||||||||||||||||||||
US |
1,186 | 1,205 | 1,160 | 1,130 | ||||||||||||||||
Europe |
1,204 | 1,236 | 1,143 | 1,184 | ||||||||||||||||
Rest of World |
480 | 503 | 496 | 502 | ||||||||||||||||
2,870 | 2,944 | 2,799 | 2,816 | |||||||||||||||||
Trading/supply sales of refined products |
3,088 | 2,581 | 3,015 | 2,755 | ||||||||||||||||
Total sales volumes of refined products |
5,958 | 5,525 | 5,814 | 5,571 | ||||||||||||||||
Petrochemicals production (kte) |
||||||||||||||||||||
US |
617 | 564 | 1,787 | 2,018 | ||||||||||||||||
Europe |
1,285 | 898 | 3,903 | 2,799 | ||||||||||||||||
Rest of World |
2,025 | 1,987 | 6,099 | 5,863 | ||||||||||||||||
3,927 | 3,449 | 11,789 | 10,680 |
(a) | Segment-level overhead expenses are included in the fuels business result. |
(b) | BPs share of income from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany is reported in the fuels business. |
(c) | For Downstream, fair value accounting effects arise solely in the fuels business. |
11
Group results third quarter and nine months 2017
Rosneft
$ million | Third quarter 2017(a) |
Third quarter 2016 |
Nine months 2017(a) |
Nine months 2016 |
||||||||||||||||||
Profit before interest and tax(b) |
161 | 108 | 505 | 461 | ||||||||||||||||||
Inventory holding (gains) losses* |
(24) | 12 | 10 | (29) | ||||||||||||||||||
RC profit before interest and tax |
137 | 120 | 515 | 432 | ||||||||||||||||||
Net charge (credit) for non-operating items* |
- | - | - | - | ||||||||||||||||||
Underlying RC profit before interest and tax* |
137 | 120 | 515 | 432 |
Financial results
Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the third quarter and nine months was $137 million and $515 million respectively, compared with $120 million and $432 million for the same periods in 2016. There were no non-operating items in the third quarter and nine months of either year.
Compared with the same period in 2016, the result for the third quarter was primarily affected by higher oil prices and favourable duty lag effects partially offset by adverse foreign exchange effects. For the nine months, the result was primarily affected by higher oil prices partially offset by adverse foreign exchange effects.
In June 2017 Rosnefts annual general meeting adopted a resolution to pay dividends of 5.98 Russian roubles per ordinary share. In July BP received a dividend in relation to the 2016 annual results of $190 million, after the deduction of withholding tax.
BPs two nominees, Bob Dudley and Guillermo Quintero, were re-elected to Rosnefts board by the extraordinary general meeting (EGM) on 29 September. The EGM also adopted a resolution to pay interim dividends for the first half of 2017 of 3.83 Russian roubles per ordinary share. On 31 October BP received a dividend of approximately $120 million after the deduction of withholding tax.
Key events
In August, Rosneft completed the acquisition of a 49.13% stake in Essar Oil Limited (EOL), an Indian downstream business, from the Essar group.
In October Rosneft completed the deal to acquire a 30% stake in a concession agreement to develop the Zohr field in Egypt from the Italian company Eni S.p.A.
Third quarter 2017(a) |
Third quarter 2016 |
Nine months 2017(a) |
Nine months 2016 |
|||||||||||||||||||
Production (net of royalties) (BP share) |
||||||||||||||||||||||
Liquids* (mb/d) |
903 | 820 | 906 | 813 | ||||||||||||||||||
Natural gas (mmcf/d) |
1,263 | 1,221 | 1,300 | 1,256 | ||||||||||||||||||
Total hydrocarbons* (mboe/d) |
1,120 | 1,030 | 1,130 | 1,030 |
(a) | The operational and financial information of the Rosneft segment for the third quarter and nine months of the year is based on preliminary operational and financial results of Rosneft for the nine months ended 30 September 2017. Actual results may differ from these amounts. |
(b) | The Rosneft segment result includes equity-accounted earnings arising from BPs 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BPs purchase of its interest in Rosneft and the amortization of the deferred gain relating to the divestment of BPs interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the third quarter and nine months 2017, as shown in the table above, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own financial statements under IFRS. BPs share of Rosnefts profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date. BPs share of Rosnefts earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation. |
12
Group results third quarter and nine months 2017
Other businesses and corporate
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
Profit (loss) before interest and tax |
||||||||||||||||||||
Gulf of Mexico oil spill |
(84) | (66) | (466) | (5,966) | ||||||||||||||||
Other |
(376) | (375) | (1,146) | (1,074) | ||||||||||||||||
Profit (loss) before interest and tax |
(460) | (441) | (1,612) | (7,040) | ||||||||||||||||
Inventory holding (gains) losses* |
- | - | - | - | ||||||||||||||||
RC profit (loss) before interest and tax |
(460) | (441) | (1,612) | (7,040) | ||||||||||||||||
Net charge (credit) for non-operating items* |
||||||||||||||||||||
Gulf of Mexico oil spill |
84 | 66 | 466 | 5,966 | ||||||||||||||||
Other |
(22) | 115 | (58) | 260 | ||||||||||||||||
Net charge (credit) for non-operating items |
62 | 181 | 408 | 6,226 | ||||||||||||||||
Underlying RC profit (loss) before interest and tax* |
(398) | (260) | (1,204) | (814) | ||||||||||||||||
Underlying RC profit (loss) before interest and tax |
||||||||||||||||||||
US |
(145) | (107) | (446) | (326) | ||||||||||||||||
Non-US |
(253) | (153) | (758) | (488) | ||||||||||||||||
(398) | (260) | (1,204) | (814) | |||||||||||||||||
Non-operating items |
||||||||||||||||||||
US |
(92) | (168) | (480) | (6,152) | ||||||||||||||||
Non-US |
30 | (13) | 72 | (74) | ||||||||||||||||
(62) | (181) | (408) | (6,226) | |||||||||||||||||
RC profit (loss) before interest and tax |
||||||||||||||||||||
US |
(237) | (275) | (926) | (6,478) | ||||||||||||||||
Non-US |
(223) | (166) | (686) | (562) | ||||||||||||||||
(460) | (441) | (1,612) | (7,040) |
Other businesses and corporate comprises our alternative energy business, shipping, treasury, corporate activities including centralized functions, and the costs of the Gulf of Mexico oil spill.
Financial results
The replacement cost loss before interest and tax for the third quarter and nine months was $460 million and $1,612 million respectively, compared with $441 million and $7,040 million for the same periods in 2016.
The results included a net non-operating charge of $62 million for the third quarter and $408 million for the nine months, compared with a net non-operating charge of $181 million and $6,226 million for the same periods in 2016.
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the third quarter and nine months was $398 million and $1,204 million respectively, compared with $260 million and $814 million for the same periods in 2016. The underlying charge for the nine months was impacted by weaker business results, and adverse foreign exchange effects which had a favourable effect in the same period in 2016.
Alternative energy - biofuels, wind
The net ethanol-equivalent production (which includes ethanol and sugar) for the third quarter and nine months was 362 million litres and 588 million litres respectively, compared with 352 million litres and 635 million litres for the same periods in 2016.
Net wind generation capacity*(a) was 1,432MW at 30 September 2017 compared with 1,474MW at 30 September 2016. BPs net share of wind generation for the third quarter and nine months was 644GWh and 2,856GWh respectively, compared with 828GWh and 3,235GWh for the same periods in 2016.
(a) | Capacity figures for 2016 include 23MW in the Netherlands managed by our Downstream segment. |
13
Group results third quarter and nine months 2017
Group income statement
Third | Third | Nine | Nine | |||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Sales and other operating revenues (Note 5) |
60,018 | 47,047 | 172,392 | 132,001 | ||||||||||||||||
Earnings from joint ventures - after interest and tax |
231 | 174 | 596 | 477 | ||||||||||||||||
Earnings from associates - after interest and tax |
282 | 209 | 804 | 731 | ||||||||||||||||
Interest and other income |
185 | 146 | 434 | 392 | ||||||||||||||||
Gains on sale of businesses and fixed assets |
92 | 467 | 334 | 884 | ||||||||||||||||
Total revenues and other income |
60,808 | 48,043 | 174,560 | 134,485 | ||||||||||||||||
Purchases |
44,612 | 34,981 | 128,462 | 94,336 | ||||||||||||||||
Production and manufacturing expenses(a) |
5,454 | 5,517 | 16,470 | 22,482 | ||||||||||||||||
Production and similar taxes (Note 6) |
278 | 212 | 773 | 484 | ||||||||||||||||
Depreciation, depletion and amortization (Note 5) |
3,904 | 3,496 | 11,539 | 10,863 | ||||||||||||||||
Impairment and losses on sale of businesses and fixed assets |
108 | (1,424) | 612 | (1,359) | ||||||||||||||||
Exploration expense |
297 | 803 | 1,559 | 1,407 | ||||||||||||||||
Distribution and administration expenses |
2,634 | 2,648 | 7,527 | 7,803 | ||||||||||||||||
Profit (loss) before interest and taxation |
3,521 | 1,810 | 7,618 | (1,531) | ||||||||||||||||
Finance costs(a) |
511 | 433 | 1,458 | 1,241 | ||||||||||||||||
Net finance expense relating to pensions and other post-retirement benefits |
55 | 48 | 162 | 140 | ||||||||||||||||
Profit (loss) before taxation |
2,955 | 1,329 | 5,998 | (2,912) | ||||||||||||||||
Taxation(a) |
1,198 | (248) | 2,593 | (2,541) | ||||||||||||||||
Profit (loss) for the period |
1,757 | 1,577 | 3,405 | (371) | ||||||||||||||||
Attributable to |
1,769 | 1,620 | 3,362 | (382) | ||||||||||||||||
Non-controlling interests |
(12) | (43) | 43 | 11 | ||||||||||||||||
1,757 | 1,577 | 3,405 | (371) | |||||||||||||||||
Earnings per share (Note 7) |
||||||||||||||||||||
Profit (loss) for the period attributable to |
||||||||||||||||||||
Per ordinary share (cents) |
||||||||||||||||||||
Basic |
8.95 | 8.61 | 17.10 | (2.05) | ||||||||||||||||
Diluted |
8.90 | 8.56 | 17.00 | (2.05) | ||||||||||||||||
Per ADS (dollars) |
||||||||||||||||||||
Basic |
0.54 | 0.52 | 1.03 | (0.12) | ||||||||||||||||
Diluted |
0.53 | 0.51 | 1.02 | (0.12) |
(a) | See Note 2 for information on the impact of the Gulf of Mexico oil spill on these income statement line items. |
14
Group results third quarter and nine months 2017
Group statement of comprehensive income
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
Profit (loss) for the period |
1,757 | 1,577 | 3,405 | (371) | ||||||||||||||||
Other comprehensive income |
||||||||||||||||||||
Items that may be reclassified subsequently to profit or loss |
||||||||||||||||||||
Currency translation differences |
611 | 192 | 1,722 | 1,031 | ||||||||||||||||
Exchange gains (losses) on translation of foreign operations reclassified to gain or loss on sale of businesses and fixed assets |
13 | - | 18 | 6 | ||||||||||||||||
Available-for-sale investments |
- | 1 | 3 | 1 | ||||||||||||||||
Cash flow hedges marked to market |
49 | (84) | 178 | (435) | ||||||||||||||||
Cash flow hedges reclassified to the income statement |
20 | 71 | 93 | 110 | ||||||||||||||||
Cash flow hedges reclassified to the balance sheet |
29 | 30 | 104 | 49 | ||||||||||||||||
Share of items relating to equity-accounted entities, net of tax |
128 | 174 | 431 | 661 | ||||||||||||||||
Income tax relating to items that may be reclassified |
(59) | (78) | (180) | (84) | ||||||||||||||||
791 | 306 | 2,369 | 1,339 | |||||||||||||||||
Items that will not be reclassified to profit or loss |
||||||||||||||||||||
Remeasurements of the net pension and other post-retirement benefit liability or asset |
1,002 | (2,995) | 2,047 | (5,980) | ||||||||||||||||
Income tax relating to items that will not be reclassified |
(351) | 510 | (699) | 1,504 | ||||||||||||||||
651 | (2,485) | 1,348 | (4,476) | |||||||||||||||||
Other comprehensive income |
1,442 | (2,179) | 3,717 | (3,137) | ||||||||||||||||
Total comprehensive income |
3,199 | (602) | 7,122 | (3,508) | ||||||||||||||||
Attributable to |
||||||||||||||||||||
BP shareholders |
3,206 | (558) | 7,041 | (3,513) | ||||||||||||||||
Non-controlling interests |
(7) | (44) | 81 | 5 | ||||||||||||||||
3,199 | (602) | 7,122 | (3,508) |
15
Group results third quarter and nine months 2017
Group statement of changes in equity
$ million | BP shareholders equity |
Non-controlling interests |
Total equity |
|||||||||||
At 1 January 2017 |
95,286 | 1,557 | 96,843 | |||||||||||
Total comprehensive income |
7,041 | 81 | 7,122 | |||||||||||
Dividends |
(4,526) | (109) | (4,635) | |||||||||||
Share-based payments, net of tax |
514 | - | 514 | |||||||||||
Share of equity-accounted entities change in equity, net of tax |
206 | - | 206 | |||||||||||
Transactions involving non-controlling interests |
- | 88 | 88 | |||||||||||
At 30 September 2017 |
98,521 | 1,617 | 100,138 | |||||||||||
$ million | BP shareholders equity |
Non-controlling interests |
Total equity |
|||||||||||
At 1 January 2016 |
97,216 | 1,171 | 98,387 | |||||||||||
Total comprehensive income |
(3,513) | 5 | (3,508) | |||||||||||
Dividends |
(3,429) | (83) | (3,512) | |||||||||||
Share-based payments, net of tax |
622 | - | 622 | |||||||||||
Share of equity-accounted entities change in equity, net of tax |
49 | - | 49 | |||||||||||
Transactions involving non-controlling interests |
431 | 328 | 759 | |||||||||||
At 30 September 2016 |
91,376 | 1,421 | 92,797 |
16
Group results third quarter and nine months 2017
Group balance sheet
$ million | 30 September 2017 |
31 December 2016 |
||||||||
Non-current assets |
||||||||||
Property, plant and equipment |
130,651 | 129,757 | ||||||||
Goodwill |
11,514 | 11,194 | ||||||||
Intangible assets |
18,586 | 18,183 | ||||||||
Investments in joint ventures |
6,703 | 8,609 | ||||||||
Investments in associates |
15,921 | 14,092 | ||||||||
Other investments |
1,051 | 1,033 | ||||||||
Fixed assets |
184,426 | 182,868 | ||||||||
Loans |
553 | 532 | ||||||||
Trade and other receivables |
1,461 | 1,474 | ||||||||
Derivative financial instruments |
4,470 | 4,359 | ||||||||
Prepayments |
1,094 | 945 | ||||||||
Deferred tax assets |
4,819 | 4,741 | ||||||||
Defined benefit pension plan surpluses |
2,297 | 584 | ||||||||
199,120 | 195,503 | |||||||||
Current assets |
||||||||||
Loans |
267 | 259 | ||||||||
Inventories |
18,078 | 17,655 | ||||||||
Trade and other receivables |
21,833 | 20,675 | ||||||||
Derivative financial instruments |
2,248 | 3,016 | ||||||||
Prepayments |
1,441 | 1,486 | ||||||||
Current tax receivable |
746 | 1,194 | ||||||||
Other investments |
84 | 44 | ||||||||
Cash and cash equivalents |
25,780 | 23,484 | ||||||||
70,477 | 67,813 | |||||||||
Assets classified as held for sale (Note 3) |
1,892 | - | ||||||||
72,369 | 67,813 | |||||||||
Total assets |
271,489 | 263,316 | ||||||||
Current liabilities |
||||||||||
Trade and other payables |
39,965 | 37,915 | ||||||||
Derivative financial instruments |
2,154 | 2,991 | ||||||||
Accruals |
4,797 | 5,136 | ||||||||
Finance debt |
8,891 | 6,634 | ||||||||
Current tax payable |
1,455 | 1,666 | ||||||||
Provisions |
2,304 | 4,012 | ||||||||
59,566 | 58,354 | |||||||||
Non-current liabilities |
||||||||||
Other payables |
13,805 | 13,946 | ||||||||
Derivative financial instruments |
3,881 | 5,513 | ||||||||
Accruals |
501 | 469 | ||||||||
Finance debt |
56,893 | 51,666 | ||||||||
Deferred tax liabilities |
7,619 | 7,238 | ||||||||
Provisions |
20,078 | 20,412 | ||||||||
Defined benefit pension plan and other post-retirement benefit plan deficits |
9,008 | 8,875 | ||||||||
111,785 | 108,119 | |||||||||
Total liabilities |
171,351 | 166,473 | ||||||||
Net assets |
100,138 | 96,843 | ||||||||
Equity |
||||||||||
BP shareholders equity |
98,521 | 95,286 | ||||||||
Non-controlling interests |
1,617 | 1,557 | ||||||||
Total equity |
100,138 | 96,843 |
17
Group results third quarter and nine months 2017
Condensed group cash flow statement
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||||||||
Operating activities |
||||||||||||||||||||||||||
Profit (loss) before taxation |
2,955 | 1,329 | 5,998 | (2,912) | ||||||||||||||||||||||
Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities |
||||||||||||||||||||||||||
Depreciation, depletion and amortization and exploration expenditure written off |
4,121 | 4,183 | 12,770 | 11,971 | ||||||||||||||||||||||
Impairment and (gain) loss on sale of businesses and fixed assets |
16 | (1,891) | 278 | (2,243) | ||||||||||||||||||||||
Earnings from equity-accounted entities, less dividends received |
(111) | 259 | (434) | (250) | ||||||||||||||||||||||
Net charge for interest and other finance expense, less net interest paid |
163 | 204 | 499 | 485 | ||||||||||||||||||||||
Share-based payments |
177 | 166 | 495 | 629 | ||||||||||||||||||||||
Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans |
(160) | (96) | (179) | (120) | ||||||||||||||||||||||
Net charge for provisions, less payments |
(144) | (184) | (138) | 5,116 | ||||||||||||||||||||||
Movements in inventories and other current and non-current assets and liabilities |
305 | (1,001) | (3,292) | (3,591) | ||||||||||||||||||||||
Income taxes paid |
(1,298) | (461) | (2,969) | (822) | ||||||||||||||||||||||
Net cash provided by operating activities |
6,024 | 2,508 | 13,028 | 8,263 | ||||||||||||||||||||||
Investing activities |
||||||||||||||||||||||||||
Expenditure on property, plant and equipment, intangible and other assets |
(4,136) | (3,379) | (12,140) | (12,043) | ||||||||||||||||||||||
Acquisitions, net of cash acquired |
(146) | - | (311) | - | ||||||||||||||||||||||
Investment in joint ventures |
(5) | (1) | (35) | (13) | ||||||||||||||||||||||
Investment in associates |
(176) | (185) | (533) | (474) | ||||||||||||||||||||||
Total cash capital expenditure |
(4,463) | (3,565) | (13,019) | (12,530) | ||||||||||||||||||||||
Proceeds from disposal of fixed assets |
149 | 590 | 649 | 981 | ||||||||||||||||||||||
Proceeds from disposal of businesses, net of cash disposed |
92 | (21) | 305 | 1,181 | ||||||||||||||||||||||
Proceeds from loan repayments |
308 | 9 | 341 | 61 | ||||||||||||||||||||||
Net cash used in investing activities |
(3,914) | (2,987) | (11,724) | (10,307) | ||||||||||||||||||||||
Financing activities |
||||||||||||||||||||||||||
Proceeds from long-term financing |
3,078 | 3,925 | 8,511 | 9,373 | ||||||||||||||||||||||
Repayments of long-term financing |
(1,239) | (75) | (3,619) | (4,952) | ||||||||||||||||||||||
Net increase (decrease) in short-term debt |
123 | (512) | 139 | (324) | ||||||||||||||||||||||
Net increase (decrease) in non-controlling interests |
| 323 | 81 | 761 | ||||||||||||||||||||||
Dividends paid |
- BP shareholders | (1,676) | (1,161) | (4,526) | (3,429) | |||||||||||||||||||||
- non-controlling interests | (32) | (31) | (109) | (83) | ||||||||||||||||||||||
Net cash provided by (used in) financing activities |
254 | 2,469 | 477 | 1,346 | ||||||||||||||||||||||
Currency translation differences relating to cash and cash equivalents |
146 | 13 | 515 | (171) | ||||||||||||||||||||||
Increase (decrease) in cash and cash equivalents |
2,510 | 2,003 | 2,296 | (869) | ||||||||||||||||||||||
Cash and cash equivalents at beginning of period |
23,270 | 23,517 | 23,484 | 26,389 | ||||||||||||||||||||||
Cash and cash equivalents at end of period |
25,780 | 25,520 | 25,780 | 25,520 |
18
Group results third quarter and nine months 2017
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 2016 included in BP Annual Report and Form 20-F 2016.
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. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the groups 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 2017, which do not differ significantly from those used in BP Annual Report and Form 20-F 2016.
Note 2. Gulf of Mexico oil spill
(a) Overview
The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2016 - Financial statements - Note 2 and Legal proceedings on page 261.
The group income statement includes a pre-tax charge for the third quarter of $84 million to reflect the latest estimate for claims and associated administration costs, and $122 million for finance costs relating to the unwinding of discounting effects. The equivalent amounts for the nine months were $466 million and $369 million respectively. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $63,420 million.
The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||||||
Income statement |
||||||||||||||||||||||||
Production and manufacturing expenses |
84 | 66 | 466 | 5,966 | ||||||||||||||||||||
Profit (loss) before interest and taxation |
(84) | (66) | (466) | (5,966) | ||||||||||||||||||||
Finance costs |
122 | 123 | 369 | 369 | ||||||||||||||||||||
Profit (loss) before taxation |
(206) | (189) | (835) | (6,335) | ||||||||||||||||||||
Taxation |
71 | 53 | 273 | 2,837 | ||||||||||||||||||||
Profit (loss) for the period |
(135) | (136) | (562) | (3,498) |
19
Group results third quarter and nine months 2017
Note 2. Gulf of Mexico oil spill (continued)
$ million | 30 September 2017 |
31 December 2016 |
||||||||||
Balance sheet |
||||||||||||
Current assets |
||||||||||||
Trade and other receivables |
214 | 194 | ||||||||||
Current liabilities |
||||||||||||
Trade and other payables |
(2,069) | (3,056) | ||||||||||
Provisions |
(726) | (2,330) | ||||||||||
Net current assets (liabilities) |
(2,581) | (5,192) | ||||||||||
Non-current assets |
||||||||||||
Deferred tax assets |
2,821 | 2,973 | ||||||||||
Non-current liabilities |
||||||||||||
Other payables |
(12,197) | (13,522) | ||||||||||
Provisions |
| (112) | ||||||||||
Deferred tax liabilities |
5,544 | 5,119 | ||||||||||
Net non-current assets (liabilities) |
(3,832) | (5,542) | ||||||||||
Net assets (liabilities) |
(6,413) | (10,734) |
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
Cash flow statement - Operating activities |
||||||||||||||||||||
Profit (loss) before taxation |
(206) | (189) | (835) | (6,335) | ||||||||||||||||
Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities |
||||||||||||||||||||
Net charge for interest and other finance expense, less net interest paid |
122 | 123 | 369 | 369 | ||||||||||||||||
Net charge for provisions, less payments |
68 | (494) | 361 | 4,729 | ||||||||||||||||
Movements in inventories and other current and non-current assets and liabilities |
(548) | (1,766) | (4,778) | (3,825) | ||||||||||||||||
Pre-tax cash flows |
(564) | (2,326) | (4,883) | (5,062) |
Cash outflows in 2016 and 2017 include payments made under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident and the 2016 consent decree and settlement agreement with the United States and the five Gulf coast states. Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $564 million and $4,883 million in the third quarter and nine months of 2017 respectively. For the same periods in 2016, the amount was an outflow of $2,326 million and $4,849 million respectively.
20
Group results third quarter and nine months 2017
Note 2. Gulf of Mexico oil spill (continued)
(b) Provisions and other payables
Provisions
Movements in the remaining provision, which relates to litigation and claims, are shown in the table below.
$ million | ||||||
At 1 July 2017 |
955 | |||||
Net increase in provision |
75 | |||||
Reclassified to other payables |
(19) | |||||
Utilization |
(285) | |||||
At 30 September 2017 |
726 |
Movements in the remaining provision during the nine months are shown in the table below.
$ million | ||||||
At 1 January 2017 |
2,442 | |||||
Net increase in provision |
437 | |||||
Reclassified to other payables |
(709) | |||||
Utilization |
(1,444) | |||||
At 30 September 2017 |
726 |
The provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources.
PSC settlement
The provision for the cost associated with the 2012 Plaintiffs Steering Committee (PSC) settlement reflects the latest estimate for claims, including business economic loss claims and associated administration costs. However, the amounts ultimately payable may differ from the amount provided and the timing of payments is uncertain.
The settlement programmes determination of business economic loss claims is now expected to be substantially complete by the end of 2017. Nevertheless a significant number of claims determined by the settlement programme have been and continue to be appealed by BP and/or the claimants. Depending upon the resolution of these claims under appeal, the amounts payable may differ from those currently provided.
There is additional uncertainty in relation to the impact of the May 2017 Fifth Circuit opinion (on the policy addressing the matching of revenue with expenses in relation to business economic loss claims) including on those business economic loss claims that have not yet been determined and those that are under appeal within the settlement programme. This includes uncertainty in relation to the impact of recently filed appeals of the district courts orders instructing the settlement programme on how to implement the Fifth Circuits opinion. See Legal proceedings on page 36 for further details on the Fifth Circuit opinion and appeal of the district courts orders.
Amounts to resolve remaining claims under the PSC settlement are expected to be substantially paid by the end of 2018. The timing of payments is uncertain, and in particular, will be impacted by how long it takes to resolve claims that have been appealed and may be appealed in the future.
Other payables
Other payables include amounts payable under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident, amounts payable under the consent decree and settlement agreement with the United States and the five Gulf coast states for natural resource damages, state claims and Clean Water Act penalties, BPs remaining commitment to fund the Gulf of Mexico Research Initiative, and amounts payable for certain economic loss and property damage claims.
Further information on provisions, other payables, and contingent liabilities is provided in BP Annual Report and Form 20-F 2016 - Financial statements - Note 2.
21
Group results third quarter and nine months 2017
Note 3. Non-current assets held for sale and events after the reporting period
In September, BP announced that it had agreed with Bridas Corporation (Bridas) to form a new integrated energy company by combining their interests in the oil and gas producer Pan American Energy (PAE) and the refiner and marketer Axion Energy (Axion) in a cash-free transaction. PAE is currently owned 60% by BP and 40% by Bridas. The new company, Pan American Energy Group, will be owned equally by BP and Bridas. The transaction, which is subject to certain pre-closing conditions being fulfilled, is expected to complete in the first quarter 2018. As a result, one sixth of BPs investment in PAE has been classified as held for sale in the group balance sheet at 30 September 2017.
In April, BP announced its intention to divest its 50% shareholding in the Shanghai SECCO Petrochemical Company Limited joint venture in China. During the quarter a number of steps in the regulatory process, and certain conditions precedent, were completed and the investment has been classified as held for sale in the group balance sheet at 30 September 2017. We expect to complete the transaction and receive estimated proceeds of $1.4 billion in the fourth quarter.
On 30 October, we completed the initial public offering of common units in our subsidiary, BP Midstream Partners LP. As a result of the initial public offering, we received net proceeds of around $0.7 billion.
Note 4. Analysis of replacement cost profit (loss) before interest and tax and reconciliation to profit (loss) before taxation
Third | Third | Nine | Nine | |||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Upstream |
1,242 | 1,196 | 3,293 | (118) | ||||||||||||||||
Downstream |
2,175 | 978 | 5,448 | 4,263 | ||||||||||||||||
Rosneft |
137 | 120 | 515 | 432 | ||||||||||||||||
Other businesses and corporate(a) |
(460) | (441) | (1,612) | (7,040) | ||||||||||||||||
3,094 | 1,853 | 7,644 | (2,463) | |||||||||||||||||
Consolidation adjustment - UPII* |
(130) | 17 | (63) | (64) | ||||||||||||||||
RC profit (loss) before interest and tax* |
2,964 | 1,870 | 7,581 | (2,527) | ||||||||||||||||
Inventory holding gains (losses)* |
||||||||||||||||||||
Upstream |
13 | (13) | 8 | 41 | ||||||||||||||||
Downstream |
520 | (35) | 39 | 926 | ||||||||||||||||
Rosneft (net of tax) |
24 | (12) | (10) | 29 | ||||||||||||||||
Profit (loss) before interest and tax |
3,521 | 1,810 | 7,618 | (1,531) | ||||||||||||||||
Finance costs |
511 | 433 | 1,458 | 1,241 | ||||||||||||||||
Net finance expense relating to pensions and other post-retirement benefits |
55 | 48 | 162 | 140 | ||||||||||||||||
Profit (loss) before taxation |
2,955 | 1,329 | 5,998 | (2,912) | ||||||||||||||||
RC profit (loss) before interest and tax* |
||||||||||||||||||||
US |
428 | (15) | 1,243 | (6,665) | ||||||||||||||||
Non-US |
2,536 | 1,885 | 6,338 | 4,138 | ||||||||||||||||
2,964 | 1,870 | 7,581 | (2,527) |
(a) | Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information. |
22
Group results third quarter and nine months 2017
Note 5. Segmental analysis
Sales and other operating revenues | Third | Third | Nine | Nine | ||||||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
By segment |
||||||||||||||||||||||||
Upstream |
10,969 | 8,452 | 32,789 | 24,059 | ||||||||||||||||||||
Downstream |
54,881 | 43,488 | 157,156 | 120,849 | ||||||||||||||||||||
Other businesses and corporate |
378 | 425 | 989 | 1,243 | ||||||||||||||||||||
66,228 | 52,365 | 190,934 | 146,151 | |||||||||||||||||||||
Less: sales and other operating revenues between segments |
||||||||||||||||||||||||
Upstream |
5,312 | 4,952 | 17,250 | 12,886 | ||||||||||||||||||||
Downstream |
765 | 175 | 887 | 768 | ||||||||||||||||||||
Other businesses and corporate |
133 | 191 | 405 | 496 | ||||||||||||||||||||
6,210 | 5,318 | 18,542 | 14,150 | |||||||||||||||||||||
Third party sales and other operating revenues |
||||||||||||||||||||||||
Upstream |
5,657 | 3,500 | 15,539 | 11,173 | ||||||||||||||||||||
Downstream |
54,116 | 43,313 | 156,269 | 120,081 | ||||||||||||||||||||
Other businesses and corporate |
245 | 234 | 584 | 747 | ||||||||||||||||||||
Total sales and other operating revenues |
60,018 | 47,047 | 172,392 | 132,001 | ||||||||||||||||||||
By geographical area |
||||||||||||||||||||||||
US |
21,853 | 18,853 | 64,582 | 50,130 | ||||||||||||||||||||
Non-US |
44,212 | 31,762 | 125,335 | 91,390 | ||||||||||||||||||||
66,065 | 50,615 | 189,917 | 141,520 | |||||||||||||||||||||
Less: sales and other operating revenues between areas |
6,047 | 3,568 | 17,525 | 9,519 | ||||||||||||||||||||
60,018 | 47,047 | 172,392 | 132,001 | |||||||||||||||||||||
Depreciation, depletion and amortization | Third | Third | Nine | Nine | ||||||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
Upstream |
||||||||||||||||||||||||
US |
1,154 | 1,027 | 3,524 | 3,180 | ||||||||||||||||||||
Non-US |
2,154 | 1,879 | 6,298 | 5,976 | ||||||||||||||||||||
3,308 | 2,906 | 9,822 | 9,156 | |||||||||||||||||||||
Downstream |
||||||||||||||||||||||||
US |
222 | 217 | 657 | 637 | ||||||||||||||||||||
Non-US |
287 | 275 | 840 | 821 | ||||||||||||||||||||
509 | 492 | 1,497 | 1,458 | |||||||||||||||||||||
Other businesses and corporate |
||||||||||||||||||||||||
US |
17 | 16 | 49 | 51 | ||||||||||||||||||||
Non-US |
70 | 82 | 171 | 198 | ||||||||||||||||||||
87 | 98 | 220 | 249 | |||||||||||||||||||||
Total group |
3,904 | 3,496 | 11,539 | 10,863 | ||||||||||||||||||||
Note 6. Production and similar taxes
|
||||||||||||||||||||||||
Third | Third | Nine | Nine | |||||||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
US |
(69 | ) | 32 | 8 | 117 | |||||||||||||||||||
Non-US |
347 | 180 | 765 | 367 | ||||||||||||||||||||
278 | 212 | 773 | 484 |
23
Group results third quarter and nine months 2017
Note 7. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
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.
Third | Third | Nine | Nine | |||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Results for the period |
||||||||||||||||||||
Profit (loss) for the period attributable to BP shareholders |
1,769 | 1,620 | 3,362 | (382) | ||||||||||||||||
Less: preference dividend |
- | - | 1 | 1 | ||||||||||||||||
Profit (loss) attributable to BP ordinary shareholders |
1,769 | 1,620 | 3,361 | (383) | ||||||||||||||||
Number of shares (thousand)(a)(b) |
||||||||||||||||||||
Basic weighted average number of shares outstanding |
19,756,117 | 18,824,739 | 19,654,608 | 18,660,397 | ||||||||||||||||
ADS equivalent |
3,292,686 | 3,137,456 | 3,275,768 | 3,110,066 | ||||||||||||||||
Weighted average number of shares outstanding used to calculate diluted earnings per share |
19,866,745 | 18,920,920 | 19,771,579 | 18,660,397 | ||||||||||||||||
ADS equivalent |
3,311,124 | 3,153,486 | 3,295,263 | 3,110,066 | ||||||||||||||||
Shares in issue at period-end |
19,797,657 | 18,912,989 | 19,797,657 | 18,912,989 | ||||||||||||||||
ADS equivalent |
3,299,609 | 3,152,164 | 3,299,609 | 3,152,164 |
(a) | Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans. |
(b) | If the inclusion of potentially issuable shares would decrease loss per share, the potentially issuable shares are excluded from the weighted average number of shares outstanding used to calculate diluted earnings per share. |
Note 8. Dividends
Dividends payable
BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 21 December 2017 to shareholders and American Depositary Share (ADS) holders on the register on 10 November 2017. The corresponding amount in sterling is due to be announced on 11 December 2017, calculated based on the average of the market exchange rates for the four dealing days commencing on 5 December 2017. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the third quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
Third | Third | Nine | Nine | |||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Dividends paid per ordinary share |
||||||||||||||||||||
cents |
10.000 | 10.000 | 30.000 | 30.000 | ||||||||||||||||
pence |
7.621 | 7.558 | 23.536 | 21.487 | ||||||||||||||||
Dividends paid per ADS (cents) |
60.00 | 60.00 | 180.00 | 180.00 | ||||||||||||||||
Scrip dividends |
||||||||||||||||||||
Number of shares issued (millions) |
51.3 | 130.0 | 236.5 | 418.8 | ||||||||||||||||
Value of shares issued ($ million) |
298 | 714 | 1,360 | 2,148 |
24
Group results third quarter and nine months 2017
Note 9. Net Debt*
Net debt ratio* | Third | Third | Nine | Nine | ||||||||||||||||
$ million | quarter 2017 |
quarter 2016 |
months 2017 |
months 2016 |
||||||||||||||||
Gross debt |
65,784 | 58,997 | 65,784 | 58,997 | ||||||||||||||||
Fair value (asset) liability of hedges related to finance debt(a) |
(227) | (1,113) | (227) | (1,113) | ||||||||||||||||
65,557 | 57,884 | 65,557 | 57,884 | |||||||||||||||||
Less: cash and cash equivalents |
25,780 | 25,520 | 25,780 | 25,520 | ||||||||||||||||
Net debt |
39,777 | 32,364 | 39,777 | 32,364 | ||||||||||||||||
Equity |
100,138 | 92,797 | 100,138 | 92,797 | ||||||||||||||||
Net debt ratio |
28.4% | 25.9% | 28.4% | 25.9% | ||||||||||||||||
Analysis of changes in net debt | Third | Third | Nine | Nine | ||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Opening balance |
||||||||||||||||||||
Finance debt |
63,004 | 55,727 | 58,300 | 53,168 | ||||||||||||||||
Fair value (asset) liability of hedges related to finance debt(a) |
60 | (1,279) | 697 | 379 | ||||||||||||||||
Less: cash and cash equivalents |
23,270 | 23,517 | 23,484 | 26,389 | ||||||||||||||||
Opening net debt |
39,794 | 30,931 | 35,513 | 27,158 | ||||||||||||||||
Closing balance |
||||||||||||||||||||
Finance debt |
65,784 | 58,997 | 65,784 | 58,997 | ||||||||||||||||
Fair value (asset) liability of hedges related to finance debt(a) |
(227) | (1,113) | (227) | (1,113) | ||||||||||||||||
Less: cash and cash equivalents |
25,780 | 25,520 | 25,780 | 25,520 | ||||||||||||||||
Closing net debt |
39,777 | 32,364 | 39,777 | 32,364 | ||||||||||||||||
Decrease (increase) in net debt |
17 | (1,433) | (4,264) | (5,206) | ||||||||||||||||
Movement in cash and cash equivalents |
2,364 | 1,990 | 1,781 | (698) | ||||||||||||||||
Net cash outflow (inflow) from financing |
(1,962) | (3,338) | (5,031) | (4,097) | ||||||||||||||||
Other movements |
(186) | 29 | (265) | 424 | ||||||||||||||||
Movement in net debt before exchange effects |
216 | (1,319) | (3,515) | (4,371) | ||||||||||||||||
Exchange adjustments |
(199) | (114) | (749) | (835) | ||||||||||||||||
Decrease (increase) in net debt |
17 | (1,433) | (4,264) | (5,206) |
(a) | 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 $883 million (third quarter 2016 liability of $1,323 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments. |
Note 10. Inventory valuation
A provision of $501 million was held at 30 September 2017 ($509 million at 30 September 2016) to write inventories down to their net realizable value. The net movement credited to the income statement during the third quarter 2017 was $131 million (third quarter 2016 was a credit of $178 million).
Note 11. Statutory accounts
The financial information shown in this publication, which was approved by the Board of Directors on 30 October 2017, is unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP Annual Report and Form 20-F 2017.
25
Group results third quarter and nine months 2017
Additional information
Capital expenditure*
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||||
Capital expenditure on a cash basis |
||||||||||||||||||||||
Organic capital expenditure* |
3,993 | 3,519 | 11,879 | 12,202 | ||||||||||||||||||
Inorganic capital expenditure*(a) |
470 | 46 | 1,140 | 328 | ||||||||||||||||||
4,463 | 3,565 | 13,019 | 12,530 |
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||||
Organic capital expenditure by segment |
||||||||||||||||||||||
Upstream |
||||||||||||||||||||||
US |
827 | 618 | 2,273 | 2,813 | ||||||||||||||||||
Non-US |
2,601 | 2,433 | 7,945 | 8,011 | ||||||||||||||||||
3,428 | 3,051 | 10,218 | 10,824 | |||||||||||||||||||
Downstream |
||||||||||||||||||||||
US |
159 | 159 | 460 | 471 | ||||||||||||||||||
Non-US |
356 | 272 | 992 | 798 | ||||||||||||||||||
515 | 431 | 1,452 | 1,269 | |||||||||||||||||||
Other businesses and corporate |
||||||||||||||||||||||
US |
10 | 3 | 34 | 7 | ||||||||||||||||||
Non-US |
40 | 34 | 175 | 102 | ||||||||||||||||||
50 | 37 | 209 | 109 | |||||||||||||||||||
3,993 | 3,519 | 11,879 | 12,202 | |||||||||||||||||||
Organic capital expenditure by geographical area |
||||||||||||||||||||||
US |
996 | 780 | 2,767 | 3,291 | ||||||||||||||||||
Non-US |
2,997 | 2,739 | 9,112 | 8,911 | ||||||||||||||||||
3,993 | 3,519 | 11,879 | 12,202 |
(a) | Third quarter and nine months 2017 include amounts paid to acquire interests in Mauritania and Senegal and other items. Nine months 2017 also includes amounts paid to purchase an interest in the Zohr gas field in Egypt and in exploration blocks in Senegal. |
26
Group results third quarter and nine months 2017
Non-operating items*
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||||||
Upstream |
||||||||||||||||||||||||
Impairment and gain (loss) on sale of businesses and fixed assets(a) |
18 | 1,908 | (382) | 1,912 | ||||||||||||||||||||
Environmental and other provisions |
- | (8) | - | (8) | ||||||||||||||||||||
Restructuring, integration and rationalization costs |
(3) | (36) | (20) | (302) | ||||||||||||||||||||
Fair value gain (loss) on embedded derivatives |
1 | 8 | 31 | 49 | ||||||||||||||||||||
Other(b) |
(162) | (407) | (156) | (534) | ||||||||||||||||||||
(146) | 1,465 | (527) | 1,117 | |||||||||||||||||||||
Downstream |
||||||||||||||||||||||||
Impairment and gain (loss) on sale of businesses and fixed assets |
(35) | (11) | 110 | 333 | ||||||||||||||||||||
Environmental and other provisions |
- | (72) | - | (75) | ||||||||||||||||||||
Restructuring, integration and rationalization costs |
(19) | (108) | (102) | (197) | ||||||||||||||||||||
Fair value gain (loss) on embedded derivatives |
- | - | - | - | ||||||||||||||||||||
Other |
(1) | (5) | (1) | (8) | ||||||||||||||||||||
(55) | (196) | 7 | 53 | |||||||||||||||||||||
Rosneft |
||||||||||||||||||||||||
Impairment and gain (loss) on sale of businesses and fixed assets |
- | - | - | - | ||||||||||||||||||||
Environmental and other provisions |
- | - | - | - | ||||||||||||||||||||
Restructuring, integration and rationalization costs |
- | - | - | - | ||||||||||||||||||||
Fair value gain (loss) on embedded derivatives |
- | - | - | - | ||||||||||||||||||||
Other |
- | - | - | - | ||||||||||||||||||||
- | - | - | - | |||||||||||||||||||||
Other businesses and corporate |
||||||||||||||||||||||||
Impairment and gain (loss) on sale of businesses and fixed assets |
1 | (6) | (6) | (2) | ||||||||||||||||||||
Environmental and other provisions |
- | (99) | (3) | (134) | ||||||||||||||||||||
Restructuring, integration and rationalization costs |
(6) | (10) | (37) | (69) | ||||||||||||||||||||
Fair value gain (loss) on embedded derivatives |
- | - | - | - | ||||||||||||||||||||
Gulf of Mexico oil spill(c) |
(84) | (66) | (466) | (5,966) | ||||||||||||||||||||
Other |
27 | - | 104 | (55) | ||||||||||||||||||||
(62) | (181) | (408) | (6,226) | |||||||||||||||||||||
Total before interest and taxation |
(263) | 1,088 | (928) | (5,056) | ||||||||||||||||||||
Finance costs(c) |
(122) | (123) | (369) | (369) | ||||||||||||||||||||
Total before taxation |
(385) | 965 | (1,297) | (5,425) | ||||||||||||||||||||
Taxation credit (charge) |
111 | (16) | 503 | 2,777 | ||||||||||||||||||||
Total after taxation for period |
(274) | 949 | (794) | (2,648) |
(a) | Nine months 2017 relates primarily to an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS. |
(b) | Third quarter and nine months 2017 include the write-off of $145 million in relation to the value ascribed to certain licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. |
(c) | See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill. |
27
Group results third quarter and nine months 2017
Non-GAAP information on fair value accounting effects
Third | Third | Nine | Nine | |||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Favourable (adverse) impact relative to managements measure of performance |
||||||||||||||||||||
Upstream |
(174) | (45) | 178 | (293) | ||||||||||||||||
Downstream |
(108) | (257) | (52) | (547) | ||||||||||||||||
(282) | (302) | 126 | (840) | |||||||||||||||||
Taxation credit (charge) |
70 | 81 | (47) | 232 | ||||||||||||||||
(212) | (221) | 79 | (608) |
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 BPs 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. In addition, derivative instruments are used to manage the price risk associated with certain future natural gas sales. 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 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 managements internal measure of performance. Under managements internal measure of performance the inventory 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 certain derivative instruments used to risk manage certain LNG and oil and gas contracts and gas sales 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 managements estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to managements internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.
Third | Third | Nine | Nine | |||||||||||||||||
quarter | quarter | months | months | |||||||||||||||||
$ million | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Upstream |
||||||||||||||||||||
Replacement cost profit before interest and tax adjusted for fair value accounting effects |
1,416 | 1,241 | 3,115 | 175 | ||||||||||||||||
Impact of fair value accounting effects |
(174) | (45) | 178 | (293) | ||||||||||||||||
Replacement cost profit (loss) before interest and tax |
1,242 | 1,196 | 3,293 | (118) | ||||||||||||||||
Downstream |
||||||||||||||||||||
Replacement cost profit before interest and tax adjusted for fair value accounting effects |
2,283 | 1,235 | 5,500 | 4,810 | ||||||||||||||||
Impact of fair value accounting effects |
(108) | (257) | (52) | (547) | ||||||||||||||||
Replacement cost profit before interest and tax |
2,175 | 978 | 5,448 | 4,263 | ||||||||||||||||
Total group |
||||||||||||||||||||
Profit (loss) before interest and tax adjusted for fair value accounting effects |
3,803 | 2,112 | 7,492 | (691) | ||||||||||||||||
Impact of fair value accounting effects |
(282) | (302) | 126 | (840) | ||||||||||||||||
Profit (loss) before interest and tax |
3,521 | 1,810 | 7,618 | (1,531) |
28
Group results third quarter and nine months 2017
Readily marketable inventory* (RMI)
$ million | 30
September 2017 |
31 December 2016 |
||||||||
RMI at fair value |
5,714 | 5,952 | ||||||||
Paid-up RMI* |
2,516 | 2,705 |
Readily marketable inventory (RMI) is oil and oil products inventory held and price risk-managed by BPs 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 groups 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 32 for a more detailed definition of RMI. RMI, RMI at fair value and paid-up RMI are non-GAAP measures. A reconciliation of total inventory as reported on the group balance sheet to paid-up RMI is provided below.
$ million | 30 September 2017 |
31 December 2016 |
||||||||
Reconciliation of total inventory to paid-up RMI |
||||||||||
Inventories as reported on the group balance sheet |
18,078 | 17,655 | ||||||||
Less: (a) inventories which are not oil and oil products and (b) oil and oil product inventories which are not risk-managed by IST |
(12,787) | (12,131) | ||||||||
RMI on an IFRS basis |
5,291 | 5,524 | ||||||||
Plus: difference between RMI at fair value and RMI on an IFRS basis |
423 | 428 | ||||||||
RMI at fair value |
5,714 | 5,952 | ||||||||
Less: unpaid RMI* at fair value |
(3,198) | (3,247) | ||||||||
Paid-up RMI |
2,516 | 2,705 |
29
Group results third quarter and nine months 2017
Reconciliation of basic earnings per ordinary share to replacement cost (RC) profit (loss) per share and to underlying RC profit (loss) per share
Per ordinary share (cents) | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
Profit (loss) for the period |
8.95 | 8.61 | 17.10 | (2.05) | ||||||||||||||||
Inventory holding (gains) losses*, before tax |
(2.82) | 0.31 | (0.19) | (5.34) | ||||||||||||||||
Taxation charge (credit) on inventory holding gains and losses |
0.85 | (0.10) | 0.10 | 1.65 | ||||||||||||||||
RC profit (loss)* |
6.98 | 8.82 | 17.01 | (5.74) | ||||||||||||||||
Net (favourable) unfavourable impact of non-operating items*and fair value accounting effects*, before tax |
3.38 | (3.51) | 5.96 | 33.57 | ||||||||||||||||
Taxation charge (credit) on non-operating items and fair value accounting effects |
(0.92) | (0.35) | (2.32) | (16.13) | ||||||||||||||||
Underlying RC profit* |
9.44 | 4.96 | 20.65 | 11.70 | ||||||||||||||||
Reconciliation of effective tax rate (ETR) to ETR on RC profit or loss and adjusted ETR | ||||||||||||||||||||
Taxation (charge) credit | ||||||||||||||||||||
$ million | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
Taxation on profit or loss |
(1,198) | 248 | (2,593) | 2,541 | ||||||||||||||||
Taxation on inventory holding gains and losses |
(167) | 19 | (19) | (307) | ||||||||||||||||
Taxation on a RC profit or loss basis |
(1,031) | 229 | (2,574) | 2,848 | ||||||||||||||||
Taxation on non-operating items and fair value accounting effects |
181 | 65 | 456 | 3,009 | ||||||||||||||||
Adjusted for the impact of the reduction in the rate of the UK North Sea supplementary charge |
- | 434 | - | 434 | ||||||||||||||||
Adjusted taxation |
(1,212) | (270) | (3,030) | (595) | ||||||||||||||||
Effective tax rate | ||||||||||||||||||||
% | Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
||||||||||||||||
ETR on profit or loss |
41 | (19) | 43 | 87 | ||||||||||||||||
Adjusted for inventory holding gains or losses |
2 | 3 | - | (14) | ||||||||||||||||
ETR on RC profit or loss* |
43 | (16) | 43 | 73 | ||||||||||||||||
Adjusted for non-operating items and fair value accounting effects |
(3) | (7) | (1) | (66) | ||||||||||||||||
Adjusted for the impact of the reduction in the rate of the UK North Sea supplementary charge |
- | 60 | - | 18 | ||||||||||||||||
Adjusted ETR* |
40 | 37 | 42 | 25 |
30
Group results third quarter and nine months 2017
Realizations* and marker prices
Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
|||||||||||||||||
Average realizations(a) |
||||||||||||||||||||
Liquids* ($/bbl) |
||||||||||||||||||||
US |
43.58 | 39.16 | 44.87 | 34.20 | ||||||||||||||||
Europe |
50.02 | 42.87 | 50.32 | 39.18 | ||||||||||||||||
Rest of World(b) |
49.54 | 41.92 | 49.49 | 37.54 | ||||||||||||||||
BP Average(b) |
47.45 | 40.99 | 47.87 | 36.50 | ||||||||||||||||
Natural gas ($/mcf) |
||||||||||||||||||||
US |
2.34 | 2.19 | 2.39 | 1.77 | ||||||||||||||||
Europe |
5.10 | 3.94 | 4.98 | 4.28 | ||||||||||||||||
Rest of World |
3.03 | 2.98 | 3.42 | 3.14 | ||||||||||||||||
BP Average |
2.89 | 2.77 | 3.18 | 2.76 | ||||||||||||||||
Total hydrocarbons* ($/boe) |
||||||||||||||||||||
US |
31.30 | 27.71 | 32.68 | 24.15 | ||||||||||||||||
Europe |
45.26 | 37.10 | 44.33 | 35.19 | ||||||||||||||||
Rest of World(b) |
33.13 | 29.24 | 34.76 | 27.85 | ||||||||||||||||
BP Average(b) |
33.23 | 29.37 | 34.63 | 27.20 | ||||||||||||||||
Average oil marker prices ($/bbl) |
||||||||||||||||||||
Brent |
52.08 | 45.86 | 51.84 | 41.88 | ||||||||||||||||
West Texas Intermediate |
48.18 | 44.88 | 49.32 | 41.41 | ||||||||||||||||
Western Canadian Select |
38.16 | 31.60 | 38.49 | 29.26 | ||||||||||||||||
Alaska North Slope |
52.04 | 44.65 | 52.15 | 41.58 | ||||||||||||||||
Mars |
48.46 | 41.83 | 48.31 | 38.14 | ||||||||||||||||
Urals (NWE - cif) |
50.73 | 43.73 | 50.39 | 39.67 | ||||||||||||||||
Average natural gas marker prices |
||||||||||||||||||||
Henry Hub gas price(c) ($/mmBtu) |
2.99 | 2.81 | 3.17 | 2.28 | ||||||||||||||||
UK Gas - National Balancing Point (p/therm) |
41.59 | 31.00 | 42.61 | 30.93 |
(a) | Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities. |
(b) | Production volume recognition methodology for our Technical Service Contract arrangement in Iraq has been simplified to exclude the impact of oil price movements on lifting imbalances. A minor adjustment has been made to third quarter and nine months 2016. There is no impact on the financial results. |
(c) | Henry Hub First of Month Index. |
Exchange rates
Third quarter 2017 |
Third quarter 2016 |
Nine months 2017 |
Nine months 2016 |
|||||||||||||||||
$/£ average rate for the period |
1.31 | 1.31 | 1.28 | 1.39 | ||||||||||||||||
$/£ period-end rate |
1.34 | 1.30 | 1.34 | 1.30 | ||||||||||||||||
$/ average rate for the period |
1.17 | 1.12 | 1.11 | 1.12 | ||||||||||||||||
$/ period-end rate |
1.18 | 1.12 | 1.18 | 1.12 | ||||||||||||||||
Rouble/$ average rate for the period |
58.99 | 64.60 | 58.33 | 68.37 | ||||||||||||||||
Rouble/$ period-end rate |
57.94 | 63.14 | 57.94 | 63.14 |
31
Group results third quarter and nine months 2017
Glossary
Non-GAAP measures are provided for investors because they are closely tracked by management to evaluate BPs operating performance and to make financial, strategic and operating decisions.
Adjusted effective tax rate (ETR) is a non-GAAP measure. The adjusted ETR is calculated by dividing taxation on an underlying 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. For the 2016 calculation, taxation on an underlying RC basis also reflects an adjustment to eliminate a $434-million credit that arises from the reduction in the rate of the North Sea supplementary charge in the third quarter of 2016. Information on underlying RC profit or loss is provided below. BP believes it is helpful to disclose the adjusted ETR because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BPs 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. A reconciliation to GAAP information is provided on page 30.
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. A reconciliation to GAAP information is provided on page 30.
Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information is provided on page 28.
Gearing - See Net debt and net debt ratio definition.
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 BPs management invests funds in projects which expand the groups activities through acquisition. Further information and a reconciliation to GAAP information is provided on page 26.
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 operations 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.
32
Group results third quarter and nine months 2017
Glossary (continued)
Net debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross 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. The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders equity. All components of equity are included in the denominator of the calculation. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The derivatives are reported on the balance sheet within the headings Derivative financial instruments. The nearest equivalent GAAP measures are gross debt and gross debt ratio. A reconciliation of gross debt to net debt is provided on page 25.
We are unable to present reconciliations of forward-looking information for net debt ratio to gross 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 the 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.
Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BPs share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
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 groups 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 9, 11 and 13, and by segment and type is shown on page 27.
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 segments share thereof.
Operating cash flow excluding Gulf of Mexico oil spill payments or Underlying operating cash flow is a non-GAAP measure
calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill as reported in Note 2 from Net cash provided by operating activities as reported in the condensed group cash flow statement. 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 BPs management invests funds in developing and maintaining the groups assets. An analysis of organic capital expenditure by segment and region, and a reconciliation to GAAP information is provided on page 26.
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 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.
33
Group results third quarter and nine months 2017
Glossary (continued)
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, Paid-up RMI and Unpaid RMI are non-GAAP measures. Further information is provided on page 29.
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, 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 BPs 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 BPs 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 is the measure of profit or loss that is required to be disclosed for each operating segment under IFRS. 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, BPs 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.
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. A reconciliation to GAAP information is provided on page 30.
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 BPs operational HSSE reporting boundary. That boundary includes BPs own operated facilities and certain other locations or situations.
Tier 1 process safety events are losses of primary containment from a process of greatest consequence causing harm to a member of the workforce, costly damage to equipment or exceeding defined quantities. This represents reported incidents occurring within BPs operational HSSE reporting boundary. That boundary includes BPs own operated facilities and certain other locations or situations.
Underlying production is production after adjusting for divestments and entitlement impacts in our production-sharing agreements. 2017 underlying production does not include the Abu Dhabi onshore concession renewal.
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 27 and 28 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 BPs 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 BPs 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.
34
Group results third quarter and nine months 2017
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 BPs 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. A reconciliation to GAAP information is provided on page 30.
Upstream operating efficiency is calculated as production for BP operated sites, excluding US Lower 48 and adjusted for certain items including entitlement impacts in our production-sharing agreements divided by installed production capacity for BP operated sites, excluding US Lower 48. Installed production capacity is the agreed rate achievable (measured at the export end of the system) when the installed production system (reservoir, wells, plant and export) is fully optimized and operated at full rate with no planned or unplanned deferrals.
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 BPs share of equity-accounted entities.
35
Group results third quarter and nine months 2017
The following discussion sets out the material developments in the groups material legal proceedings during the recent period. For a full discussion of the groups material legal proceedings, see pages 261-265 of BP Annual Report and Form 20-F 2016, and page 35 of BP p.l.c. Group results second quarter and half year 2017.
Matters relating to the Deepwater Horizon accident and oil spill (the Incident)
Plaintiffs Steering Committee (PSC) settlements - Economic and Property Damages Settlement Agreement The Economic and Property Damages Settlement established a court-supervised settlement claims programme to resolve certain economic and property damage claims arising from the Incident.
Following numerous court decisions, on 31 March 2015, the United States district court in New Orleans denied the PSC motion seeking to alter or amend a revised policy relating to business economic loss claims. Such policy required the matching of revenue with the expenses incurred by claimants to generate that revenue, even where the revenue and expenses were recorded at different times. The PSC appealed the district court decision and, on 22 May 2017, the Fifth Circuit issued an opinion upholding the policy in part and reversing the policy in part. The Fifth Circuit ordered that the portion of the policy upheld, which covers the substantial majority of the remaining business economic loss claims, be applied as the governing methodology for all applicable business economic loss claims. BP filed a petition for a rehearing which was denied on 21 June 2017. On 25 May 2017, 13 June 2017, and 5 July 2017, the district court issued a series of orders instructing the court supervised settlement programme on how to implement the Fifth Circuits opinion. On 10 August 2017, the district court denied BPs motion to clarify or reconsider these orders. BP appealed all of these orders and decisions on 8 September 2017; the appeals have been consolidated with four appeals filed by claimants in September 2017 challenging the same set of orders and decisions. These appeals are currently pending before the Fifth Circuit.
In order to utilize the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 (the PSLRA), 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 - 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 for recommencing a share buyback programme; expectations regarding the expected quarterly dividend payment and timing of such payment; expectations regarding 2017 organic capital expenditure; plans and expectations to target gearing within a 20-30% band; expectations regarding divestment transactions and the amount and timing of divestment proceeds; expectations regarding the adjusted effective tax rate in 2017; plans and expectations regarding the formation of Pan American Energy Group; plans and expectations regarding the joint development and production-sharing agreement with the State Oil Company of the Republic of Azerbaijan; expectations regarding Aker BP ASAs agreement to acquire Hess Norge AS; expectations regarding BPs divestment of its shareholding in SECCO; expectations regarding Upstream fourth-quarter 2017 reported production; expectations regarding Downstream fourth-quarter 2017 refining margins and turnaround activity; plans and expectations with respect to the start-up and development of new Upstream projects; expectations regarding Rosneft interim dividends for 2017 and Rosneft operational and financial information for the third quarter of 2017; expectations regarding the determination of business economic loss claims in respect of the PSC settlement; expectations with respect to the timing and amount of future payments relating to the Gulf of Mexico oil spill; and expectations that claims arising under the 2012 PSC settlement will be substantially paid in 2018. 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 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; 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 Rosnefts management and board of directors; the actions of contractors; 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, under Principal risks and uncertainties in our Form 6-K for the period ended 30 June 2017 and under Risk factors in BP Annual Report and Form 20-F 2016 as filed with the US Securities and Exchange Commission.
36
Group results third quarter and nine months 2017
Computation of ratio of earnings to fixed charges
| ||||
$ million except ratio | Nine months 2017 | |||
| ||||
Earnings available for fixed charges: |
||||
Pre-tax profit from continuing operations before adjustment for income or loss from joint ventures and associates |
4,598 | |||
Fixed charges |
2,134 | |||
Amortization of capitalized interest |
166 | |||
Distributed income of joint ventures and associates |
966 | |||
Interest capitalized |
(222) | |||
Preference dividend requirements, gross of tax |
(2) | |||
Non-controlling interest of subsidiaries income not incurring fixed charges |
1 | |||
|
| |||
Total earnings available for fixed charges |
7,641 | |||
|
| |||
Fixed charges: |
||||
Interest expensed |
977 | |||
Interest capitalized |
222 | |||
Rental expense representative of interest |
933 | |||
Preference dividend requirements, gross of tax |
2 | |||
|
| |||
Total fixed charges |
2,134 | |||
|
| |||
Ratio of earnings to fixed charges |
3.58 | |||
|
|
37
Group results third quarter and nine months 2017
The following table shows the unaudited consolidated capitalization and indebtedness of the BP group as of 30 September 2017 in accordance with IFRS:
Capitalization and indebtedness
| ||||
$ million | 30 September 2017 | |||
|
| |||
Share capital and reserves |
||||
Capital shares (1-2) |
5,343 | |||
Paid-in surplus (3) |
13,573 | |||
Merger reserve (3) |
27,206 | |||
Treasury shares |
(17,060) | |||
Available-for-sale investments |
6 | |||
Cash flow hedge reserve |
(820) | |||
Foreign currency translation reserve |
(5,262) | |||
Profit and loss account |
75,535 | |||
|
| |||
BP shareholders equity |
98,521 | |||
|
| |||
Finance debt (4-6) |
||||
Due within one year |
8,891 | |||
Due after more than one year |
56,893 | |||
|
| |||
Total finance debt |
65,784 | |||
|
| |||
Total capitalization (7) |
164,305 | |||
|
|
(1) | Issued share capital as of 30 September 2017 comprised 19,807,032,377 ordinary shares, par value US$0.25 per share, and 12,706,252 preference shares, par value £1 per share. This excludes 1,479,182,123 ordinary shares which have been bought back and are held in treasury by BP. These shares are not taken into consideration in relation to the payment of dividends and voting at shareholders meetings. |
(2) | Capital shares represent the ordinary and preference shares of BP which have been issued and are fully paid. |
(3) | Paid-in surplus and merger reserve represent additional paid-in capital of BP which cannot normally be returned to shareholders. |
(4) | Finance debt recorded in currencies other than US dollars has been translated into US dollars at the relevant exchange rates existing on 30 September 2017. |
(5) | Finance debt presented in the table above consists of borrowings and obligations under finance leases. Other contractual obligations are not presented in the table above see BP Annual Report and Form 20-F 2016 Liquidity and capital resources for further information. |
(6) | At 30 September 2017, the parent company, BP p.l.c., had issued guarantees totalling $62,808 million relating to finance debt of subsidiaries. Thus 95% of the groups finance debt had been guaranteed by BP p.l.c. |
At 30 September 2017, $150 million of finance debt was secured by the pledging of assets. The remainder of finance debt was unsecured. |
(7) | At 30 September 2017 the group had issued third-party guarantees under which amounts outstanding, incremental to amounts recognized on the group balance sheet, were $321 million in respect of the borrowings of equity-accounted entities and $398 million in respect of the borrowings of other third parties. |
(8) | There has been no material change since 30 September 2017 in the consolidated capitalization and indebtedness of BP. |
38
Group results third quarter and nine months 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BP p.l.c.
(Registrant)
Dated: 31 October 2017 | /s/ David J Jackson | |||
DAVID J JACKSON | ||||