TIDMBP.
RNS Number : 0047V
BP PLC
04 August 2020
FOR IMMEDIATE RELEASE Top of page 1
London 4 August 2020
=============
BP p.l.c. Group results
Second quarter and half year 2020 (a)
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For a printer friendly copy of this announcement, please click
on the link below to open a PDF version
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Highlights Resetting for the future in face of difficult conditions
- Underlying replacement cost loss for the quarter was $6.7
billion, compared with a profit of $2.8 billion for the same period
a year earlier. The result was driven primarily by non-cash
Upstream exploration write-offs - $6.5 billion after tax -
principally resulting from a review of BP's long-term strategic
plans and revisions to long-term price assumptions, combined with
the impact of lower oil and gas prices and very weak refining
margins, reduced oil and gas production and much lower demand for
fuels and lubricants. Oil trading delivered an exceptionally strong
result.
- Reported loss for the quarter was $16.8 billion, compared with
a profit of $1.8 billion for the same period a year earlier,
including a net post-tax charge of $10.9 billion for non-operating
items. This included $9.2 billion in post-tax non-cash impairments
across the group largely arising from the revisions to its
long-term price assumptions and $1.7 billion of post-tax non-cash
exploration write-offs treated as non-operating items.
- Operating cash flow for the quarter, excluding Gulf of Mexico
oil spill payments, was $4.8 billion, including a $1.5 billion
working capital release (after adjusting for net inventory holding
gains). Gulf of Mexico oil spill payments in the quarter of $1.1
billion on a post-tax basis included the scheduled annual
payment.
- Proceeds from divestments and other disposals received in the
quarter were $1.1 billion. This included the first payment from the
agreed sale of BP's petrochemicals business to INEOS, which
delivered BP's plans for $15 billion of announced transactions a
year earlier than expected. The sale of the upstream portion of
BP's Alaska business also completed at the end of the quarter.
- Organic capital expenditure in the first half of 2020 was $6.6
billion, on track to meet BP's revised full year expectation of
around $12 billion, announced in April.
- BP's redesign of its organization to become leaner, faster
moving and lower cost, including the announced reduction of around
10,000 jobs, is expected to make a significant contribution to the
planned $2.5 billion reduction in annual cash costs by the end of
2021, relative to 2019. Restructuring costs of around $1.5 billion
are expected to be recognized in 2020.
- During the quarter BP issued $11.9 billion in hybrid bonds - a
significant step in diversifying its capital structure, supporting
its investment grade credit rating, and strengthening its
finances.
- Net debt at the end of the quarter was $40.9 billion, $10.5
billion lower than in the first quarter. Gearing at the end of the
quarter was 33.1% compared with 36.2% at the end of the previous
quarter. This reflected the increase in equity associated with the
issuance of hybrid bonds and the lower net debt, partly offset by
the reduction in equity associated with the second-quarter
loss.
- A dividend of 5.25 cents per share was announced for the
quarter, compared to 10.5 cents per share for the previous quarter.
This dividend decision is aligned with BP's new distribution policy
announced separately today.
Second quarter ($ Operating cash
billion) flow excluding
Underlying RC Profit (loss) Gulf of Mexico
profit (loss) for the period oil spill payments
See chart on PDF
Helge Lund - chairman :
Together with our results, we are today announcing BP's new strategy
to deliver our net zero ambition, and a new investor proposition underpinned
by a coherent financial frame. Our investor proposition includes a new
distribution policy, which is designed to reward our investors with committed
distributions, and which has informed the board's decision on the dividend
declared today for the second quarter of 2020.
Financial summary Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== ========
Profit (loss) for the period attributable
to BP shareholders (16,848) (4,365) 1,822 (21,213) 4,756
Inventory holding (gains) losses, net
of tax (809) 3,737 (47) 2,928 (886)
RC profit (loss) (17,657) (628) 1,775 (18,285) 3,870
Net (favourable) adverse impact of non-operating
items and fair value accounting effects,
net of tax 10,975 1,419 1,036 12,394 1,299
======= =======
Underlying RC profit (loss) (6,682) 791 2,811 (5,891) 5,169
=================================================== ======= ====== ====== ======= =====
RC profit (loss) per ordinary share (cents) (87.32) (3.11) 8.72 (90.52) 19.10
RC profit (loss) per ADS (dollars) (5.24) (0.19) 0.52 (5.43) 1.15
Underlying RC profit (loss) per ordinary
share (cents) (33.05) 3.92 13.82 (29.17) 25.51
Underlying RC profit (loss) per ADS (dollars) (1.98) 0.24 0.83 (1.75) 1.53
=================================================== ======= ====== ====== ======= =====
(a) This results announcement also represents BP's half-yearly
financial report (see page 12).
RC profit (loss), underlying RC profit, operating cash flow
excluding Gulf of Mexico oil spill payments, working capital,
organic capital expenditure, net debt and gearing are non-GAAP
measures. These measures and inventory holding gains and losses,
non-operating items, fair value accounting effects, underlying
production, major project, Upstream plant reliability and refining
availability are defined in the Glossary on page 35.
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Bernard Looney - chief executive officer :
"These headline results have been driven by another very challenging
quarter, but also by the deliberate steps we have taken as we continue
to reimagine energy and reinvent bp. In particular, our reset of long-term
price assumptions and the related impairment and exploration write-off
charges had a major impact. Beneath these, however, our performance remained
resilient, with good cash flow and - most importantly - safe and reliable
operations."
COVID-19 Update
Outlook:
- The ongoing severe impacts of the COVID-19 pandemic continue
to create a volatile and challenging trading environment.
- Looking ahead, the outlook for commodity prices and product
demand remains challenging and uncertain.
- Global GDP is expected to contract this year by 4-5%.
- Global oil demand is expected to be around 8-9 million barrels
of oil per day lower than 2019, with OECD oil stocks above their
five-year range, and gas markets are likely to remain materially
oversupplied. There is also a risk of the pandemic having an
enduring impact on the global economy, with the potential for
weaker demand for energy for a sustained period.
- In July, refining margins remained under pressure, with RMM at
$6.3/barrel due to lower product demand and high inventories, while
BP refining utilization improved to above 80%. Retail fuel demand
recovered in July to 10-15% lower than a year earlier, however,
aviation fuel demand continued to be over 70% lower.
- The pandemic is not expected to result in Upstream oil and gas
outages but has impacted development of the Mad Dog 2, Tangguh
Expansion, Trinidad Cassia Compression and Greater Tortue Ahmeyin
Phase 1 major projects.
- BP's future financial performance, including cash flows, net
debt and gearing, will be impacted by the extent and duration of
the current market conditions and the effectiveness of the actions
that it and others take, including its financial interventions. It
is difficult to predict when current supply and demand imbalances
will be resolved and what the ultimate impact of COVID-19 will
be.
Strengthening finances:
- BP continues to take deliberate steps to strengthen its
finances and drive down its cash balance point.
- These steps include issuing around $7 billion of bonds in
April, issuing $12 billion in hybrid bonds in June, agreeing the $5
billion divestment of its petrochemicals business, and completing
the sale of the upstream Alaska business. BP also reset its
long-term price assumptions.
- BP will continue to review these actions, and any further
actions that may be appropriate, in response to changes in
prevailing market conditions.
- Organic capital expenditure was limited to $6.6 billion in the
first half.
- Net debt fell to $40.9 billion at quarter-end. BP had around
$47 billion of liquidity, including cash and undrawn revolving
credit facilities, at quarter end.
- Costs that are directly attributable to COVID-19 were around
$200 million for the quarter.
Protecting our people and operations:
- BP continues to monitor the impact of COVID-19 on global
operations and to date there has been no direct significant
operational impact, although this could change through the rest of
the third quarter.
- In the second quarter, Upstream production was curtailed as a
result of market demand and OPEC+ restrictions, and refinery
utilization was more than 10% below normal levels due to COVID-19
demand impacts.
- Despite the significant challenges of the environment, BP's
operations continued safely and reliably in the quarter.
BP-operated Upstream plant reliability was 95.5% and BP-operated
refining availability was strong at 95.6%.
- BP continues to take steps to protect and support its staff
through the pandemic, including: reduced manning levels, changing
working patterns, and deploying appropriate personal protective
equipment (PPE), enhanced cleaning and social distancing measures
at plants and retail sites. The great majority of BP staff who are
able to work from home have done so since mid-March. Decisions on
repopulating offices are taken with caution and in compliance with
local and national guidelines and regulations.
- BP is providing enhanced support and guidance to staff on
safety, health and hygiene, homeworking and mental health.
Supporting communities:
- BP continues to offer support in response to the pandemic in
communities in which it operates.
- Recent actions include: providing discounts to emergency
service and health workers in the UK and US; donating PPE to health
services; campaigning to promote the wearing of masks in Africa;
and supporting staff in volunteering efforts, including matching
employee donations to charities.
The commentary above and following should be read in conjunction with
the cautionary statement on page 39.
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Group headlines
Results
For the half year, underlying replacement
cost (RC) loss* was $5,891 million, Share buybacks
compared with a profit of $5,169 million BP repurchased 120 million ordinary
in 2019. Underlying RC loss is after shares at a cost of $776 million (including
adjusting RC loss* for a net charge fees and stamp duty) in the first
for non-operating items* of $12,248 half year of 2020, all of which was
million and net adverse fair value completed in the first quarter. In
accounting effects* of $146 million January 2020, the share dilution buyback
(both on a post-tax basis). programme had fully offset the impact
RC loss was $18,285 million for the of scrip dilution since the third
half year, compared with a profit quarter 2017.
of $3,870 million in 2019. Operating cash flow*
For the second quarter, underlying Operating cash flow excluding Gulf
RC loss was $6,682 million, compared of Mexico oil spill payments* was
with a profit of $2,811 million in $4.8 billion for the second quarter
2019. Underlying RC loss is after and $6.1 billion for the half year.
adjusting RC loss for a net charge These amounts include a working capital*
for non-operating items of $10,857 release of $1.5 billion in the second
million and net adverse fair value quarter and a working capital build
accounting effects of $118 million of $2.2 billion in the half year,
(both on a post-tax basis). after adjusting for net inventory
RC loss was $17,657 million for the holding gains or losses* and working
second quarter, compared with a profit capital effects of the Gulf of Mexico
of $1,775 million in 2019. oil spill. The comparable amount for
Loss for the second quarter and half the same periods in 2019 was $8.2
year attributable to BP shareholders billion and $14.2 billion.
was $16,848 million and $21,213 million Operating cash flow as reported in
respectively, compared with a profit the group cash flow statement was
of $1,822 million and $4,756 million $3.7 billion for the second quarter
for the same periods in 2019. and $4.7 billion for the half year,
See further information on pages 4, including a working capital build
29 and 30. of $0.6 billion and a working capital
Depreciation, depletion and amortization release of $0.1 billion respectively,
The charge for depreciation, depletion compared with $6.8 billion and $12.1
and amortization was $3.9 billion billion for the same periods in 2019.
in the quarter and $8.0 billion in See page 32 and Glossary for further
the half year, compared with $4.6 information on Gulf of Mexico oil
billion and $9.0 billion for the same spill cash flows and on working capital.
periods in 2019. BP now expects the Capital expenditure*
2020 full-year charge to be around Organic capital expenditure* for the
10% lower than 2019. second quarter and half year was $3.0
Effective tax rate billion and $6.6 billion respectively,
The effective tax rate (ETR) on RC compared with $3.7 billion and $7.3
profit or loss* for the second quarter billion for the same periods in 2019.
and half year was 19% and 15% respectively, Inorganic capital expenditure* for
compared with 39% and 41% for the the second quarter and half year was
same periods in 2019. Adjusting for $33 million and $0.4 billion respectively,
non-operating items and fair value compared with $2.0 billion and $4.0
accounting effects, the underlying billion for the same periods in 2019.
ETR* for the second quarter and half Organic capital expenditure and inorganic
year was 9% and -3% respectively, capital expenditure are non-GAAP measures.
compared with 34% and 37% for the See page 28 for further information.
same periods a year ago. The lower Divestment and other proceeds
underlying ETR for the second quarter Divestment and other proceeds were
and half year reflects the exploration $1.1 billion for the second quarter,
write-offs with a limited deferred including the first tranche of petrochemicals
tax benefit and the reassessment of disposal proceeds and TANAP pipeline
deferred tax asset recognition. The refinancing, and $1.8 billion for
underlying ETR in the second half the half year, compared with $0.1
of the year remains sensitive to the billion and $0.7 billion for the same
volatility in the current environment. periods in 2019.
ETR on RC profit or loss and underlying Net debt* and gearing*
ETR are non-GAAP measures. Net debt at 30 June 2020 was $40.9
billion, compared with $46.5 billion
Dividend a year ago. Gearing at 30 June 2020
BP today announced a quarterly dividend was 33.1%, compared with 31.0% a year
of 5.25 cents per ordinary share ($0.315 ago. Gearing including leases* at
per ADS), which is expected to be 30 June 2020 was 37.7%, compared with
paid on 25 September 2020. The corresponding 35.3% a year ago. Net debt, gearing
amount in sterling will be announced and gearing including leases are non-GAAP
on 14 September 2020. See page 26 measures. See pages 27 and 31 for
for more information. more information.
* For items marked with an asterisk throughout this document,
definitions are provided in the Glossary on page 35.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 39.
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Analysis of underlying RC profit (loss)* before interest and
tax
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ======= =========
Underlying RC profit (loss) before interest
and tax
Upstream (8,487) 1,871 3,413 (6,616) 6,341
Downstream 1,405 921 1,365 2,326 3,098
Rosneft (61) (17) 638 (78) 1,205
Other businesses and corporate (260) (561) (290) (821) (708)
Consolidation adjustment - UPII* (46) 178 34 132 21
Underlying RC profit (loss) before interest
and tax (7,449) 2,392 5,160 (5,057) 9,957
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (677) (668) (752) (1,345) (1,506)
Taxation on an underlying RC basis 770 (953) (1,515) (183) (3,135)
Non-controlling interests 674 20 (82) 694 (147)
====== ======
Underlying RC profit (loss) attributable
to BP shareholders (6,682) 791 2,811 (5,891) 5,169
================================================== ====== ====== ====== ====== ======
Reconciliations of underlying RC profit or loss attributable to
BP shareholders to the nearest equivalent IFRS measure are provided
on page 1 for the group and on pages 6-11 for the segments.
Analysis of RC profit (loss)* before interest and tax and
reconciliation to profit (loss) for the period
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== =========
RC profit (loss) before interest and
tax
Upstream (22,008) 1,023 2,469 (20,985) 5,353
Downstream 594 664 1,288 1,258 3,053
Rosneft (124) (17) 525 (141) 1,011
Other businesses and corporate (317) (698) (381) (1,015) (927)
Consolidation adjustment - UPII (46) 178 34 132 21
RC profit (loss) before interest and
tax (21,901) 1,150 3,935 (20,751) 8,511
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (791) (790) (868) (1,581) (1,750)
Taxation on a RC basis 4,361 (1,008) (1,210) 3,353 (2,744)
Non-controlling interests 674 20 (82) 694 (147)
RC profit (loss) attributable to BP shareholders (17,657) (628) 1,775 (18,285) 3,870
Inventory holding gains (losses)* 1,088 (4,884) 81 (3,796) 1,169
Taxation (charge) credit on inventory
holding gains and losses (279) 1,147 (34) 868 (283)
Profit (loss) for the period attributable
to BP shareholders (16,848) (4,365) 1,822 (21,213) 4,756
=================================================== ======= ====== ====== ======= ======
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Operational updates
Upstream Low carbon
Upstream production, which excludes BP entered into an agreement with
Rosneft, for the first half of the China's ENN to work together to supply
year averaged 2,552mboe/d, 3.3% lower 300,000 tonnes a year of regasified
than a year earlier. Underlying production*, LNG to ENN's customers in Guangdong
was 1.0% higher than 2019 mainly due province. BP also agreed with Enágas
to ramp up of major projects*. in Spain to jointly promote LNG and
The sale of the upstream portion of CNG for transport and the use of renewable
BP's Alaska business completed on gas.
30 June. Hilcorp Energy and BP continue In July BP announced plans to work
to work with regulators and subject with JinkoPower, a leading Chinese
to approvals, expect to complete the solar power company, to offer integrated
sale of the midstream portion, including decarbonized energy solutions and
BP's interest in the Trans Alaska services to customers in China. It
Pipeline, during 2020. BP and Premier also announced plans to invest $70
Oil signed sale and purchase agreements, million in India's Green Growth Equity
reflecting final agreed terms, for Fund to support the growing renewable
the divestment of the Andrew Area energy sector in India.
and Shearwater assets in the UK North Petrofac and BP extended their partnership
Sea. Subject to approvals, the transaction with a new metering contract for four
is expected to complete by the end years. BP has invested in Satelytics
of the third quarter of 2020. whose technology is expected to aid
Upstream has delayed exploration and in the deployment of a suite of methane
appraisal activities and curtailed detecting techniques across new and
development activities in lower margin existing major facilities.
areas, as well as rephasing or minimizing
spend on projects in the early phases Financial framework
of development. These interventions Operating cash flow excluding Gulf
are expected to reduce 2020 reported of Mexico oil spill payments* was
production by around 70mboe/d. $6.1 billion for the half year of
Downstream 2020, compared with $14.2 billion
The second quarter saw the weakest for the same period in 2019.
industry refining environment in over Organic capital expenditure * for
15 years, and an unprecedented fall the half year of 2020 was $6.6 billion.
in product demand driven by COVID-19. BP expects 2020 organic capital expenditure
While refining operations in the quarter to be around $12 billion.
were strong, with BP-operated refining Divestment and other proceeds were
availability of 95.6%, demand destruction $1.8 billion for the half year of
resulted in lower utilization. 2020.
In June BP announced the sale of its Gulf of Mexico oil spill payments
petrochemicals business to INEOS for on a post-tax basis were $1.4 billion
a total consideration of $5 billion. in the half year of 2020. BP now expects
Subject to approvals, the transaction the post-tax payments to be around
is expected to complete before the $1.5 billion in 2020.
end of the year. Gearing * at 30 June 2020 was 33.1%,
In July BP and Reliance Industries in part reflecting the recent hybrid
completed the formation of the new bond issue. See page 27 for more information.
fuel and mobility joint venture that
will operate across India under the
Jio-bp brand.
Operating metrics First half 2020 Financial metrics First half 2020
========================== ============================
(vs. First half (vs. First half
2019) 2019)
========================== ================ ============================ ================
Tier 1 and tier 2 Underlying RC profit
process safety events 47 (loss)* $(5.9)bn
========================== ============================
(-2) (-$11.1bn)
========================== ================ ============================ ================
Reported recordable Operating cash flow
injury frequency* excluding Gulf of
Mexico oil spill payments
0.131 (post-tax) $6.1bn
========================== ============================
(-29.8%) (-$8.1bn)
========================== ================ ============================ ================
Group production 3,655mboe/d Organic capital expenditure $6.6bn
========================== ============================
(-3.5%) (-$0.8bn)
========================== ================ ============================ ================
Upstream production Gulf of Mexico oil
(excludes Rosneft spill payments (post-tax)
segment) 2,552mboe/d $1.4bn
========================== ============================
(-3.3%) (-$0.7bn)
========================== ================ ============================ ================
Upstream unit production Divestment proceeds*
costs* (a) $6.13/boe $1.4bn
========================== ============================
(-12.6%) (+$0.7bn)
========================== ================ ============================ ================
BP-operated Upstream
plant reliability* 94.2% Gearing 33.1%
=========================== ============================
(-0.7) (+2.1)
================ ============================ ================
BP-operated refining Dividend per ordinary
availability* 95.9% share (b) 5.25 cents
========================== ============================
(+2.0) (-48.8%)
================ ============================ ================
(a) Reflecting divestment impacts and lower costs.
(b) Represents dividend announced in the quarter (vs. prior year quarter).
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 39.
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Upstream
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== =======
Profit (loss) before interest and tax (21,951) 955 2,459 (20,996) 5,345
Inventory holding (gains) losses* (57) 68 10 11 8
=======
RC profit (loss) before interest and
tax (22,008) 1,023 2,469 (20,985) 5,353
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* 13,521 848 944 14,369 988
Underlying RC profit (loss) before interest
and tax*(a) (8,487) 1,871 3,413 (6,616) 6,341
=================================================== ======= ======= ======= ======= =====
(a) See page 7 for a reconciliation to segment RC profit before interest and tax by region.
Financial results
The replacement cost loss before interest and tax for the second
quarter and half year was $22,008 million and $20,985 million
respectively, compared with a profit of $2,469 million and $5,353
million for the same periods in 2019. The second quarter and half
year included a net non-operating charge of $13,454 million and
$14,525 million respectively, which principally relate to
impairments associated with revisions to long-term price
assumptions, compared with a net charge of $766 million and $770
million for the same periods in 2019. Fair value accounting effects
in the second quarter and half year had an adverse impact of $67
million and a favourable impact of $156 million respectively,
compared with an adverse impact of $178 million and $218 million in
the same periods of 2019.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost loss before
interest and tax for the second quarter and half year was $8,487
million and $6,616 million respectively, compared with a profit of
$3,413 million and $6,341 million for the same periods in 2019. The
results for the second quarter and half year mainly reflect the
impact of writing down certain exploration intangible carrying
values, and lower liquids and gas realizations.
Production
Production for the quarter was 2,525mboe/d, 3.8% lower than the
second quarter of 2019. Underlying production* for the quarter
increased by 0.6% mainly due to ramp up of major projects*.
For the half year, production was 2,552mboe/d, 3.3% lower than
the first half of 2019. Underlying production for the half year was
1.0% higher than 2019 mainly due to ramp up of major projects.
Key events
On 30 June, BP completed the sale of its upstream Alaska
business to Hilcorp. BP and Hilcorp continue to work with
regulators to complete the sale of midstream assets, including BP's
interest in the Trans Alaska Pipeline System (TAPS).
On 1 July, BP confirmed the Bashrush gas discovery, located
offshore Egypt. Evaluation is ongoing (Eni operator 37.5%, BP
37.5%, Total 25%).
On 20 July, BP signed sale and purchase agreements, reflecting
final agreed terms, for the divestment of its interests in the
Andrew Area and Shearwater assets, both located in the UK North
Sea, to Premier Oil. Subject to approvals, the transaction is
expected to complete by the end of the third quarter of 2020.
These events follow the announcements in our first-quarter
results, which comprised the following: BP executed a gas sale and
purchase agreement with partners in the Greater Tortue Ahmeyim
(GTA) project. GTA operations are severely affected by COVID-19 and
the 2020 weather window for installation works can no longer be met
resulting in a delay of around one year (BP operator 56%, Kosmos
27%, Petrosen 10%, SMHPM 7%); BP confirmed notification from the
Brazilian National Petroleum Agency (ANP) of its approvals to
postpone the deadline for declaring commerciality of the Wahoo (BP
operator 35.7%, IBV Brasil Petróleo 35.7% Total 20%, Anadarko 8.6%)
and Itaipu (BP operator 60%, Total 26.7%, Anadarko 13.3%) pre-salt
discoveries offshore Brazil in the Campos basin, until June 2022;
BP confirmed completion of the restructuring of contractual
arrangements for the Petrojari Foinaven floating production,
storage and offloading vessel on the Foinaven field to the west of
the Shetlands (BP operator 72%, RockRose Energy 28%); BP relocated
personnel from the remote Tangguh expansion project in Indonesia,
as part of a COVID-19 response plan and anticipates a delay to
start-up (BP operator 40.22%, MI Berau B.V. 16.30%, CNOOC Muturi
Ltd. 13.90%, Nippon Oil Exploration (Berau) Ltd. 12.23%, KG Berau
Petroleum Ltd 8.60%, Indonesia Natural Gas Resources Muturi Inc
7.35%, KG Wiriagar Overseas Ltd 1.40%).
Outlook
Looking ahead, we expect third-quarter 2020 reported production
to be lower than the second quarter reflecting price impacts on
TSC* entitlement volumes, divestment of the Alaska business, and
seasonal maintenance activities.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 39.
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Upstream (continued)
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ========
Underlying RC profit (loss) before interest
and tax
US (2,960) 539 861 (2,421) 1,473
Non-US (5,527) 1,332 2,552 (4,195) 4,868
(8,487) 1,871 3,413 (6,616) 6,341
======= ====== ====== ======= =====
Non-operating items (a)(b)
US (2,122) (632) (446) (2,754) (476)
Non-US (11,332) (439) (320) (11,771) (294)
(13,454) (1,071) (766) (14,525) (770)
======= ====== ====== ======= =====
Fair value accounting effects
US 39 (2) (225) 37 (318)
Non-US (106) 225 47 119 100
(67) 223 (178) 156 (218)
======= ====== ====== ======= =====
RC profit (loss) before interest and
tax
US (5,043) (95) 190 (5,138) 679
Non-US (16,965) 1,118 2,279 (15,847) 4,674
(22,008) 1,023 2,469 (20,985) 5,353
======= ====== ====== ======= =====
Exploration expense
US 2,560 20 69 2,580 94
Non-US 7,114 182 77 7,296 419
9,674 202 146 9,876 513
Of which: Exploration expenditure written
off(b) 9,618 98 77 9,716 361
============================================== ======= ====== ====== ======= =====
Production (net of royalties)(c)(d)
Liquids* (mb/d)
US 472 505 506 488 480
Europe 166 147 137 156 148
Rest of World 728 655 658 691 672
1,366 1,306 1,301 1,336 1,300
======= ====== ====== ======= =====
Natural gas (mmcf/d)
US 1,549 2,050 2,410 1,799 2,360
Europe 298 244 132 271 139
Rest of World 4,878 5,093 5,138 4,985 5,276
6,725 7,387 7,680 7,056 7,775
======= ====== ====== ======= =====
Total hydrocarbons* (mboe/d)
US 739 858 921 799 887
Europe 217 189 160 203 172
Rest of World 1,569 1,533 1,544 1,551 1,581
2,525 2,579 2,625 2,552 2,640
======= ====== ====== ======= =====
Average realizations* (e)
Total liquids(f) ($/bbl) 22.75 47.47 62.63 34.39 59.61
Natural gas ($/mcf) 2.53 2.83 3.35 2.69 3.68
Total hydrocarbons ($/boe) 19.06 31.80 40.64 25.36 40.02
============================================== ======= ====== ====== ======= =====
(a) Second quarter 2020 principally relates to impairments in a
number of our businesses resulting from the revisions to BP's
long-term price assumptions. First quarter 2020 includes impairment
charges and loss principally related to the disposal of our Alaska
business, BPX Energy assets and oil price impacts in the UK North
Sea. Second quarter and first half 2019 include impairment charges
related to the disposal of BPX Energy assets and GUPCO divestment.
See Note 3 for further information.
(b) Second quarter 2020 includes the write-off of $1,969 million
relating to value ascribed to certain licences as part of the
accounting for the acquisition of upstream assets in Brazil, India
and the Gulf of Mexico. This has been classified within the 'other'
category of non-operating items. See Note 4 for further
information.
(c) Includes BP's share of production of equity-accounted entities in the Upstream segment.
(d) Because of rounding, some totals may not agree exactly with
the sum of their component parts.
(e) Realizations are based on sales by consolidated subsidiaries
only - this excludes equity-accounted entities.
(f) Includes condensate, natural gas liquids and bitumen.
Top of page 8
Downstream
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= =========
Profit (loss) before interest and tax 1,572 (3,951) 1,381 (2,379) 4,192
Inventory holding (gains) losses* (978) 4,615 (93) 3,637 (1,139)
RC profit before interest and tax 594 664 1,288 1,258 3,053
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* 811 257 77 1,068 45
Underlying RC profit before interest
and tax*(a) 1,405 921 1,365 2,326 3,098
=================================================== ====== ====== ====== ====== ======
(a) See page 9 for a reconciliation to segment RC profit before
interest and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the
second quarter and half year was $594 million and $1,258 million
respectively, compared with $1,288 million and $3,053 million for
the same periods in 2019.
The second quarter and half year include a net non-operating
charge of $780 million and $778 million respectively, mainly
relating to impairments, compared with a charge of $31 million and
$35 million for the same periods in 2019. Fair value accounting
effects in the second quarter and half year had an adverse impact
of $31 million and $290 million respectively, compared with an
adverse impact of $46 million and $10 million in the same periods
in 2019.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the second quarter and half year was $1,405
million and $2,326 million respectively, compared with $1,365
million and $3,098 million for the same periods in 2019.
Replacement cost profit before interest and tax for the fuels,
lubricants and petrochemicals businesses is set out on page 9.
Fuels
The fuels business reported an underlying replacement cost
profit before interest and tax of $1,295 million for the second
quarter and $1,984 million for the half year, compared with $961
million and $2,253 million for the same periods in 2019. The result
for the quarter was primarily driven by an exceptionally strong
contribution from supply and trading.
The refining result for the quarter and half year reflects the
weakest industry refining environment in over 15 years. In
addition, utilization was more than 10% below normal levels at
around 80%, driven by COVID-19 demand impacts. These factors were
partially offset by lower turnaround activity and continued strong
availability.
The fuels marketing result was significantly impacted by
COVID-19 related fuels demand destruction with retail fuels volumes
in the quarter around 30% lower than last year. In addition,
aviation fuels volumes were more than 70% lower than the same
period in 2019. Despite these demand impacts, store sales at our
retail sites increased year on year on a like for like basis,
demonstrating the strength and resilience of our convenience retail
offer.
In July we announced the start of our new fuels and mobility
joint venture in India, Reliance BP Mobility Limited. Operating
under the "Jio-bp" brand, the joint venture aims to become a
leading player in India's growing fuels and mobility markets,
expanding from its current retail network of over 1,400 retail
sites to up to 5,500 over the next five years.
Lubricants
The lubricants business reported an underlying replacement cost
profit before interest and tax of $63 million for the second
quarter and $230 million for the half year, compared with $321
million and $593 million for the same periods in 2019. The result
for the quarter and half year reflects significant COVID-19 related
demand destruction, with lubricants volumes in Europe, North
America and India 40-50% lower in the quarter compared with the
same period last year. In China, where we experienced significant
impacts in the first quarter, we have seen strong volume recovery
in the second quarter.
Petrochemicals
The petrochemicals business reported an underlying replacement
cost profit before interest and tax of $47 million for the second
quarter and $112 million for the half year, compared with $83
million and $252 million for the same periods in 2019. The result
for the quarter and half year reflects a weaker margin environment
and the impact of COVID-19, partly offset by lower turnaround
activity.
In the quarter we announced the sale of BP's petrochemicals
business to INEOS for a total consideration of $5 billion, subject
to customary adjustments. As a result, the net assets have been
classified as held for sale in the group balance sheet at 30 June
2020. Subject to approvals, the transaction is expected to complete
before the end of the year.
Outlook
Looking to the third quarter of 2020, we expect higher product
demand, albeit still significantly below last year's levels. We
also expect significant continued pressure on industry refining
margins into the third quarter.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 39.
-----------------------------------------------------------------------
Top of page 9
Downstream (continued)
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ======= ========
Underlying RC profit before interest
and tax - by region
US 719 557 566 1,276 1,097
Non-US 686 364 799 1,050 2,001
1,405 921 1,365 2,326 3,098
====== ====== ====== ====== =====
Non-operating items
US (69) 6 2 (63) 3
Non-US (711) (4) (33) (715) (38)
(780) 2 (31) (778) (35)
====== ====== ====== ====== =====
Fair value accounting effects(a)
US (71) 145 8 74 69
Non-US 40 (404) (54) (364) (79)
(31) (259) (46) (290) (10)
====== ====== ====== ====== =====
RC profit before interest and tax
US 579 708 576 1,287 1,169
Non-US 15 (44) 712 (29) 1,884
594 664 1,288 1,258 3,053
====== ====== ====== ====== =====
Underlying RC profit before interest
and tax - by business (b)(c)
Fuels 1,295 689 961 1,984 2,253
Lubricants 63 167 321 230 593
Petrochemicals 47 65 83 112 252
1,405 921 1,365 2,326 3,098
====== ====== ====== ====== =====
Non-operating items and fair value accounting
effects (a)
Fuels (748) (257) (99) (1,005) (62)
Lubricants (51) - 22 (51) 18
Petrochemicals (12) - - (12) (1)
(811) (257) (77) (1,068) (45)
====== ====== ====== ====== =====
RC profit before interest and tax (b)(c)
Fuels 547 432 862 979 2,191
Lubricants 12 167 343 179 611
Petrochemicals 35 65 83 100 251
======
594 664 1,288 1,258 3,053
====== ====== ====== ====== =====
BP average refining marker margin (RMM)*
($/bbl) 5.9 8.8 15.2 7.4 12.7
Refinery throughputs (mb/d)
US 614 748 673 681 703
Europe 716 835 715 776 741
Rest of World 157 223 209 190 223
1,487 1,806 1,597 1,647 1,667
BP-operated refining availability* (%) 95.6 96.1 93.4 95.9 93.9
================================================ ====== ====== ====== ====== =====
Marketing sales of refined products
(mb/d)
US 872 1,038 1,174 955 1,126
Europe 685 954 1,091 820 1,042
Rest of World 364 519 520 441 520
1,921 2,511 2,785 2,216 2,688
Trading/supply sales of refined products 3,172 3,377 3,099 3,274 3,197
Total sales volumes of refined products 5,093 5,888 5,884 5,490 5,885
================================================ ====== ====== ====== ====== =====
Petrochemicals production (kte)
US 410 611 584 1,021 1,185
Europe 1,246 1,371 1,226 2,617 2,386
Rest of World 1,271 1,153 1,156 2,424 2,455
2,927 3,135 2,966 6,062 6,026
====== ====== ====== ====== =====
(a) For Downstream, fair value accounting effects arise solely
in the fuels business. See page 30 for further information.
(b) Segment-level overhead expenses are included in the fuels business result.
(c) Results from petrochemicals at our Gelsenkirchen and Mülheim
sites in Germany are reported in the fuels business.
Top of page 10
Rosneft
Second First Second First First
quarter quarter quarter half half
2020 2020
$ million (a) 2020 2019 (a) 2019
======= ======= ======= ===== ========
Profit (loss) before interest and tax(b)(c) (71) (218) 523 (289) 1,049
Inventory holding (gains) losses* (53) 201 2 148 (38)
RC profit (loss) before interest and
tax (124) (17) 525 (141) 1,011
Net charge (credit) for non-operating
items* 63 - 113 63 194
Underlying RC profit (loss) before interest
and tax* (61) (17) 638 (78) 1,205
============================================== ====== ====== ======= ==== =====
Financial results
Replacement cost (RC) loss before interest and tax for the
second quarter and half year was $124 million and $141 million
respectively, compared with a profit of $525 million and $1,011
million for the same periods in 2019.
After adjusting for non-operating items, the underlying RC loss
before interest and tax for the second quarter and half year was
$61 million and $78 million respectively, compared with a profit of
$638 million and $1,205 million for the same periods in 2019.
Compared with the same periods in 2019, the result for the
second quarter primarily reflects lower oil prices partially offset
by favourable foreign exchange, whilst the result for the half year
was primarily affected by lower oil prices.
Key events
BP's two nominees, Bob Dudley and Bernard Looney, were elected
to Rosneft's board at Rosneft's annual general meeting (AGM) on 2
June 2020. At the AGM, shareholders also approved a resolution to
pay a dividend of 18.07 roubles per ordinary share, which brings
the total dividend for 2019 to 33.41 roubles per ordinary share,
constituting 50% of the company's IFRS net profit. BP received a
payment of $480 million, after the deduction of withholding tax, on
14 July.
On 30 April 2020, Rosneft completed a transaction to transfer
all of its interest and cease participation in its Venezuelan
businesses to a company owned by the government of the Russian
Federation. In consideration, Rosneft received shares equal to a
9.6% share of its own equity. The shares are held by a 100%
subsidiary of Rosneft and accounted for as treasury shares. Rosneft
also has an approved programme of share buybacks under which shares
are being repurchased. Those shares are also accounted for as
treasury shares.
BP retains 19.75% of the voting rights at meetings of Rosneft
shareholders and continues to be entitled to dividends based on
that shareholding. BP's economic interest as of 30 June, however,
has increased to 21.93% as a result of its indirect interest in the
shares held by the subsidiaries of Rosneft. BP's share of profit or
loss of Rosneft reflects its economic interest.
Second First Second First First
quarter quarter quarter half half
2020 2020
(a) 2020 2019 (a) 2019
======= ======= ======= ===== =======
Production (net of royalties) (BP share)
Liquids* (mb/d) 856 916 912 886 924
Natural gas (mmcf/d) 1,248 1,275 1,250 1,261 1,288
Total hydrocarbons* (mboe/d) 1,071 1,136 1,127 1,103 1,146
=========================================== ======= ======= ======= ===== =====
(a) The operational and financial information of the Rosneft
segment for the second quarter and half year is based on
preliminary operational and financial results of Rosneft for the
three months and six months ended 30 June 2020. Actual results may
differ from these amounts. Amounts reported for the second quarter
are based on BP's 21.2% average economic interest for the quarter
and include adjustments to reflect the finalization of Rosneft's
first quarter results. Amounts reported for the first quarter and
all comparative periods are based on BP's 19.75% economic
interest.
(b) The Rosneft segment result includes equity-accounted
earnings arising from BP's economic interest in Rosneft for the
second quarter 2020 as adjusted for accounting required under IFRS
relating to BP's purchase of its interest in Rosneft, and the
amortization of the deferred gain relating to the divestment of
BP's interest in TNK-BP.
(c) BP's adjusted share of Rosneft's earnings after Rosneft's own finance costs, taxation and non-controlling interests is included in the BP group income statement within profit before interest and taxation. For each year-to-date period it is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date.
Top of page 11
Other businesses and corporate
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ======= =======
Profit (loss) before interest and tax (317) (698) (381) (1,015) (927)
Inventory holding (gains) losses* - - - - -
RC profit (loss) before interest and
tax (317) (698) (381) (1,015) (927)
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* 57 137 91 194 219
====== ====== ====== ====== ====
Underlying RC profit (loss) before interest
and tax* (260) (561) (290) (821) (708)
=================================================== ====== ====== ====== ====== ====
Underlying RC profit (loss) before interest
and tax
US (129) (124) (224) (253) (379)
Non-US (131) (437) (66) (568) (329)
(260) (561) (290) (821) (708)
====== ====== ====== ====== ====
Non-operating items
US (62) (48) (78) (110) (206)
Non-US 46 (89) (13) (43) (13)
(16) (137) (91) (153) (219)
====== ====== ====== ====== ====
Fair value accounting effects
US - - - - -
Non-US (41) - - (41) -
(41) - - (41) -
====== ====== ====== ====== ====
RC profit (loss) before interest and
tax
US (191) (172) (302) (363) (585)
Non-US (126) (526) (79) (652) (342)
(317) (698) (381) (1,015) (927)
====== ====== ====== ====== ====
Other businesses and corporate comprises our alternative energy
business, shipping, treasury, BP ventures and corporate activities
including centralized functions, and any residual costs of the Gulf
of Mexico oil spill.
Financial results
The replacement cost loss before interest and tax for the second
quarter and half year was $317 million and $1,015 million
respectively, compared with $381 million and $927 million for the
same periods in 2019.
The results included a net non-operating charge of $16 million
for the second quarter and $153 million for the half year, compared
with a charge of $91 million and $219 million for the same periods
in 2019. Fair value accounting effects in the second quarter and
half year had an adverse impact of $41 million. See page 30 for
further information.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost loss before
interest and tax for the second quarter and half year was $260
million and $821 million respectively, compared with $290 million
and $708 million for the same periods in 2019.
Alternative Energy
BP's net ethanol-equivalent production* for the first half of
the year averaged 14.4kb/d, compared with 9.3kb/d for the 100%
BP-owned business for the same period in 2019.
Net wind generation capacity* was 923MW at 30 June 2020,
compared with 926MW at 30 June 2019. BP's net share of wind
generation for the second quarter and half year was 673GWh and
1,450GWh respectively, compared with 688GWh and 1,461GWh for the
same periods in 2019. In July, BP agreed to acquire the remaining
50% interest in the BP-operated Fowler Ridge 1 wind asset from its
current partner, Dominion Energy. Located in central Indiana, the
asset includes 162 wind turbines with a generating capacity of
300MW and will increase BP's net wind generation capacity to
1,073MW.
Lightsource BP has developed assets of 2.2GW to date and has an
ambition to reach 10GW of developed assets by the end of 2023.
In April, Lightsource BP and Conway Corp signed a 20-year
purchase power agreement for the development of a 132MW solar
energy project in White County, Arkansas, US. In the same month
Lightsource BP and the Southeastern Pennsylvania Transportation
Authority (SEPTA) in the US signed a long-term power contract. The
agreement will provide SEPTA with 67,029MWh of electricity from two
solar power plants in Franklin county - about 20% of the
transportation agency's annual electricity usage. Lightsource BP
also acquired the Wellington North solar project in New South
Wales, Australia in July. It will be sited adjacent to Lightsource
BP's existing 200MW Wellington solar asset, which is currently in
construction, creating a combined total capacity of 550MW.
This builds on the progress announced in our first-quarter
results, which comprised the following: Lightsource BP signed a
multi-year module supply agreement with Canadian Solar Inc. to
deliver 1.2GW of high-efficiency polycrystalline solar modules for
projects in the US and Australia; and Lightsource BP closed on a
$250 million financing package for its Impact Solar project located
in Lamar County, Texas, USA.
In early July BP signed a memorandum of understanding (MOU) with
Chinese solar firm, JinkoPower Technologies, to provide integrated
decarbonized energy solutions and services to customers in
China.
Outlook
Other businesses and corporate average quarterly charges,
excluding non-operating items, fair value accounting effects and
foreign exchange volatility impact, are expected to be around $350
million although this will fluctuate quarter to quarter.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 39.
-----------------------------------------------------------------------
Top of page 12
This results announcement also represents BP's half-yearly
financial report for the purposes of the Disclosure Guidance and
Transparency Rules made by the UK Financial Conduct Authority. In
this context: (i) the condensed set of financial statements can be
found on pages 14-27; (ii) pages 1-11, and 28-39 comprise the
interim management report; and (iii) the directors' responsibility
statement and auditors' independent review report can be found on
pages 12-13.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
condensed set of financial statements on pages 14-27 has been
prepared in accordance with IAS 34 'Interim Financial Reporting',
and that the interim management report on pages 1-11 and 28-39
includes a fair review of the information required by the
Disclosure Guidance and Transparency Rules.
The directors of BP p.l.c. are listed on pages 74-77 of BP
Annual Report and Form 20-F 2019, with the following exceptions:
Brian Gilvary retired on 30 June 2020 and Murray Auchincloss joined
the board on 1 July 2020.
By order of the board
Bernard Looney Murray Auchincloss
Chief Executive Officer Chief Financial Officer
3 August 2020 3 August 2020
Top of page 13
Independent review report to BP p.l.c.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2020 which comprises the group income
statement, condensed group statement of comprehensive income,
condensed group statement of changes in equity, group balance
sheet, condensed group cash flow statement and related notes 1 to
13. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London
United Kingdom
3 August 2020
The maintenance and integrity of the BP p.l.c. website are the
responsibility of the directors; the review work carried out by the
statutory auditors does not involve consideration of these matters
and, accordingly, the statutory auditors accept no responsibility
for any changes that may have occurred to the financial information
since it was initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Top of page 14
Financial statements
Group income statement
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== =========
Sales and other operating revenues (Note
6) 31,676 59,650 72,676 91,326 138,997
Earnings from joint ventures - after
interest and tax (567) (22) 138 (589) 323
Earnings from associates - after interest
and tax (100) (244) 608 (344) 1,257
Interest and other income 107 140 270 247 433
Gains on sale of businesses and fixed
assets 74 16 55 90 144
======
Total revenues and other income 31,190 59,540 73,747 90,730 141,154
Purchases 18,778 48,878 55,683 67,656 103,955
Production and manufacturing expenses 5,211 6,099 5,391 11,310 10,747
Production and similar taxes (Note 8) 124 203 371 327 795
Depreciation, depletion and amortization
(Note 7) 3,937 4,059 4,588 7,996 9,049
Impairment and losses on sale of businesses
and fixed assets (Note 3) 11,770 1,149 906 12,919 1,002
Exploration expense (Note 4) 9,674 202 146 9,876 513
Distribution and administration expenses 2,509 2,684 2,646 5,193 5,413
=======
Profit (loss) before interest and taxation (20,813) (3,734) 4,016 (24,547) 9,680
Finance costs 783 783 853 1,566 1,720
Net finance expense relating to pensions
and other post-retirement benefits 8 7 15 15 30
Profit (loss) before taxation (21,604) (4,524) 3,148 (26,128) 7,930
Taxation (4,082) (139) 1,244 (4,221) 3,027
Profit (loss) for the period (17,522) (4,385) 1,904 (21,907) 4,903
============================================== ======= ====== ======= ======= =======
Attributable to
BP shareholders (16,848) (4,365) 1,822 (21,213) 4,756
Non-controlling interests (674) (20) 82 (694) 147
(17,522) (4,385) 1,904 (21,907) 4,903
======= ====== ======= ======= =======
Earnings per share (Note 9)
Profit (loss) for the period attributable
to BP shareholders
Per ordinary share (cents)
Basic (83.32) (21.63) 8.95 (105.02) 23.47
Diluted (83.32) (21.63) 8.92 (105.02) 23.35
Per ADS (dollars)
Basic (5.00) (1.30) 0.54 (6.30) 1.41
Diluted (5.00) (1.30) 0.54 (6.30) 1.40
============================================== ======= ====== ======= ======= =======
Top of page 15
Condensed group statement of comprehensive income
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== ========
Profit (loss) for the period (17,522) (4,385) 1,904 (21,907) 4,903
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Currency translation differences(a) 1,371 (4,642) 131 (3,271) 1,120
Exchange (gains) losses on translation
of foreign operations reclassified to
gain or loss on sale of businesses and
fixed assets 3 1 - 4 -
Cash flow hedges and costs of hedging 68 85 133 153 152
Share of items relating to equity-accounted
entities, net of tax (333) 442 (30) 109 (80)
Income tax relating to items that may
be reclassified (37) 117 (9) 80 (43)
1,072 (3,997) 225 (2,925) 1,149
======= ====== ====== ======= =====
Items that will not be reclassified to
profit or loss
Remeasurements of the net pension and
other post-retirement benefit liability
or asset(b) (1,960) 1,719 (39) (241) (892)
Cash flow hedges that will subsequently
be transferred to the balance sheet (2) (8) (7) (10) 1
Income tax relating to items that will
not be reclassified 623 (623) 2 - 275
(1,339) 1,088 (44) (251) (616)
Other comprehensive income (267) (2,909) 181 (3,176) 533
======= ====== ====== ======= =====
Total comprehensive income (17,789) (7,294) 2,085 (25,083) 5,436
================================================ ======= ====== ====== ======= =====
Attributable to
BP shareholders (17,142) (7,217) 2,001 (24,359) 5,282
Non-controlling interests (647) (77) 84 (724) 154
(17,789) (7,294) 2,085 (25,083) 5,436
======= ====== ====== ======= =====
(a) First and second quarter 2020 was principally affected by
movements in the Russian rouble against the US dollar.
(b) See Note 1 for further information.
Top of page 16
Condensed group statement of changes in equity
BP shareholders' Non-controlling interests Total
$ million equity Hybrid bonds Other interest equity
At 1 January 2020 98,412 - 2,296 100,708
=========================================
Total comprehensive income (24,359) - (724) (25,083)
Dividends (4,242) - (105) (4,347)
Cash flow hedges transferred to
the balance sheet, net of tax 6 - - 6
Repurchase of ordinary share capital (776) - - (776)
Share-based payments, net of tax 342 - - 342
Share of equity-accounted entities'
changes in equity, net of tax - - - -
Issue of perpetual hybrid bonds (48) 11,909 - 11,861
Transactions involving non-controlling
interests, net of tax (471) - 571 100
At 30 June 2020 68,864 11,909 2,038 82,811
========================================= ============== ================= ============= =======
BP shareholders' Non-controlling interests Total
$ million equity Hybrid bonds Other interest equity
======================================== ================= ==============
At 31 December 2018 99,444 - 2,104 101,548
Adjustment on adoption of IFRS
16, net of tax(a) (329) - (1) (330)
=========================================
At 1 January 2019 99,115 - 2,103 101,218
=========================================
Total comprehensive income 5,282 - 154 5,436
Dividends (3,200) - (119) (3,319)
Cash flow hedges transferred to
the balance sheet, net of tax 12 - - 12
Repurchase of ordinary share capital (125) - - (125)
Share-based payments, net of tax 398 - - 398
Share of equity-accounted entities'
changes in equity, net of tax 3 - - 3
At 30 June 2019 101,485 - 2,138 103,623
========================================= ============== ================= ============= =======
(a) See Note 1 in BP Annual Report and Form 20-F 2019 for further information.
Top of page 17
Group balance sheet
30 June 31 December
$ million 2020 2019
=============
Non-current assets
Property, plant and equipment 117,208 132,642
Goodwill 12,352 11,868
Intangible assets 5,987 15,539
Investments in joint ventures 8,015 9,991
Investments in associates 16,982 20,334
Other investments 2,559 1,276
Fixed assets 163,103 191,650
Loans 724 630
Trade and other receivables 4,270 2,147
Derivative financial instruments 7,381 6,314
Prepayments 495 781
Deferred tax assets 6,891 4,560
Defined benefit pension plan surpluses 6,346 7,053
189,210 213,135
======= ===========
Current assets
Loans 370 339
Inventories 12,504 20,880
Trade and other receivables 16,522 24,442
Derivative financial instruments 4,751 4,153
Prepayments 679 857
Current tax receivable 637 1,282
Other investments 122 169
Cash and cash equivalents 34,217 22,472
=========================================================
69,802 74,594
Assets classified as held for sale (Note 2) 4,169 7,465
========================================================= ======= ===========
73,971 82,059
======= ===========
Total assets 263,181 295,194
========================================================= ======= ===========
Current liabilities
Trade and other payables 32,134 46,829
Derivative financial instruments 3,678 3,261
Accruals 3,670 5,066
Lease liabilities 1,958 2,067
Finance debt 11,452 10,487
Current tax payable 1,159 2,039
Provisions 2,074 2,453
56,125 72,202
Liabilities directly associated with assets classified
as held for sale (Note 2) 948 1,393
========================================================= ======= ===========
57,073 73,595
======= ===========
Non-current liabilities
Other payables 11,777 12,626
Derivative financial instruments 5,652 5,537
Accruals 936 996
Lease liabilities 7,373 7,655
Finance debt 64,527 57,237
Deferred tax liabilities 6,585 9,750
Provisions 17,986 18,498
Defined benefit pension plan and other post-retirement
benefit plan deficits 8,461 8,592
123,297 120,891
======= ===========
Total liabilities 180,370 194,486
========================================================= ======= ===========
Net assets 82,811 100,708
========================================================= ======= ===========
Equity
BP shareholders' equity 68,864 98,412
Non-controlling interests 13,947 2,296
=========================================================
Total equity 82,811 100,708
========================================================= ======= ===========
Top of page 18
Condensed group cash flow statement
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== ==========
Operating activities
Profit (loss) before taxation (21,604) (4,524) 3,148 (26,128) 7,930
Adjustments to reconcile profit (loss) before
taxation to net cash provided by operating
activities
Depreciation, depletion and amortization
and exploration expenditure written off 13,555 4,157 4,665 17,712 9,410
Impairment and (gain) loss on sale of businesses
and fixed assets 11,696 1,133 851 12,829 858
Earnings from equity-accounted entities,
less dividends received 860 505 (395) 1,365 (984)
Net charge for interest and other finance
expense, less net interest paid 17 137 62 154 150
Share-based payments 351 (6) 117 345 414
Net operating charge for pensions and other
post-retirement benefits, less contributions
and benefit payments for unfunded plans (34) (20) (68) (54) (145)
Net charge for provisions, less payments (365) (59) (198) (424) (314)
Movements in inventories and other current
and non-current assets and liabilities (609) 683 (58) 74 (2,753)
Income taxes paid (130) (1,054) (1,309) (1,184) (2,455)
Net cash provided by operating activities 3,737 952 6,815 4,689 12,111
===================================================== ======= ====== ====== ======= =======
Investing activities
Expenditure on property, plant and equipment,
intangible and other assets (3,018) (3,789) (3,833) (6,807) (7,528)
Acquisitions, net of cash acquired - (17) (1,747) (17) (3,542)
Investment in joint ventures (8) (18) (20) (26) (20)
Investment in associates (41) (37) (54) (78) (199)
Total cash capital expenditure (3,067) (3,861) (5,654) (6,928) (11,289)
Proceeds from disposal of fixed assets 10 10 70 20 305
Proceeds from disposal of businesses, net
of cash disposed 670 671 8 1,341 373
Proceeds from loan repayments 543 63 64 606 119
Net cash used in investing activities (1,844) (3,117) (5,512) (4,961) (10,492)
===================================================== ======= ====== ====== ======= =======
Financing activities
Net issue (repurchase) of shares (Note 9) - (776) (80) (776) (125)
Lease liability payments (664) (569) (595) (1,233) (1,212)
Proceeds from long-term financing 6,846 2,684 4,381 9,530 6,505
Repayments of long-term financing (964) (3,717) (3,602) (4,681) (6,242)
Net increase (decrease) in short-term debt (215) 2,517 (119) 2,302 970
Issue of perpetual hybrid bonds 11,861 - - 11,861 -
Payments relating to transactions involving
non-controlling interests (other) (8) - - (8) -
Receipts relating to transactions involving
non-controlling interests (other) - 9 - 9 -
Dividends paid - BP shareholders (2,119) (2,102) (1,779) (4,221) (3,214)
- non-controlling interests (74) (31) (83) (105) (119)
======= =======
Net cash provided by (used in) financing
activities 14,663 (1,985) (1,877) 12,678 (3,437)
===================================================== ======= ====== ====== ======= =======
Currency translation differences relating
to cash and cash equivalents (42) (183) (8) (225) 24
Increase (decrease) in cash and cash equivalents 16,514 (4,333) (582) 12,181 (1,794)
===================================================== ======= ====== ====== ======= =======
Cash and cash equivalents at beginning of
period 18,139 22,472 21,256 22,472 22,468
Cash and cash equivalents at end of period(a) 34,653 18,139 20,674 34,653 20,674
===================================================== ======= ====== ====== ======= =======
(a) Second quarter and first half 2020 includes $436 million of
cash and cash equivalents classified as assets held for sale in the
group balance sheet.
Top of page 19
Notes
Note 1. Basis of preparation
The interim financial information included in this report has
been prepared in accordance with IAS 34 'Interim Financial
Reporting'.
The results for the interim periods are unaudited and, in the
opinion of management, include all adjustments necessary for a fair
presentation of the results for each period. All such adjustments
are of a normal recurring nature. This report should be read in
conjunction with the consolidated financial statements and related
notes for the year ended 31 December 2019 included in BP Annual
Report and Form 20-F 2019.
The directors consider it appropriate to adopt the going concern
basis of accounting in preparing the interim financial information.
The impact of COVID-19 and the current economic environment has
been considered as part of the going concern assessment. Forecast
liquidity has been assessed under a number of stressed scenarios
and a reverse stress test performed to support this assertion.
BP prepares its consolidated financial statements included
within BP Annual Report and Form 20-F on the basis of International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), IFRS as adopted by the European
Union (EU) and in accordance with the provisions of the UK
Companies Act 2006 as applicable to companies reporting under IFRS.
IFRS as adopted by the EU differs in certain respects from IFRS as
issued by the IASB. The differences have no impact on the group's
consolidated financial statements for the periods presented.
The financial information presented herein has been prepared in
accordance with the accounting policies expected to be used in
preparing BP Annual Report and Form 20-F 2020 which are the same as
those used in preparing BP Annual Report and Form 20-F 2019 with
the exception of the changes described in the 'Updates to
significant accounting policies' section below. There are no other
new or amended standards or interpretations adopted from 1 January
2020 onwards that have a significant impact on the interim
financial information.
Considerations in respect of COVID 19 (coronavirus) and the
current economic environment
BP's significant accounting judgements and estimates were
disclosed in BP Annual Report and Form 20-F 2019. These have been
subsequently reviewed at the end of each quarter to determine if
any changes were required to those judgements and estimates as a
result of current market conditions. The valuation of certain
assets and liabilities is subject to a greater level of uncertainty
than when reported in BP Annual Report and Form 20-F 2019,
including those set out below.
Impairment testing assumptions
With the COVID-19 pandemic having continued during the second
quarter of 2020, BP now sees the prospect of an enduring impact on
the global economy, with the potential for weaker demand for energy
for a sustained period. BP's management also has a growing
expectation that the aftermath of the pandemic will accelerate the
pace of transition to a lower carbon economy and energy system, as
countries seek to 'build back better' so that their economies will
be more resilient in the future. As a result of all the above, BP
has revised its price assumptions used in value-in-use impairment
testing, lowering them and extending the period covered to 2050. A
summary of the group's revised price assumptions, in real 2020
terms, is provided below:
Second
half 2020 2021 2025 2030 2040 2050
========== ==== ==== ==== ==== ====
Brent oil ($/bbl) 40 50 50 60 60 50
Henry Hub gas ($/mmBtu) 2.00 3.00 3.00 3.00 3.00 2.75
========================== ========== ==== ==== ==== ==== ====
As disclosed in BP Annual Report and Form 20-F 2019 - Note 1,
the majority of BP's reserves and resources that support the
carrying amount of the group's oil and gas properties are expected
to be produced over the next ten years. The revised assumptions for
Brent oil and Henry Hub gas for the next 10 years are lower by
approximately 30% and 16% respectively than the average prices used
to estimate cash flows over this period as disclosed in BP Annual
Report and Form 20-F 2019 - Note 1. The revised impairment testing
price assumptions are lower, on average, by approximately 27% and
31% respectively for the period from 2020 to 2050, than the prices
referenced in BP Annual Report and Form 20-F 2019 - Note 1.
The group identified oil and gas properties with carrying
amounts totalling $43 billion where the headroom, after the
impairment tests performed in the second quarter, was less than or
equal to 20% of the carrying value. A change in price or other
assumptions within the next financial year may result in a
recoverable amount of one or more of these assets above or below
the current carrying amount.
Impairment charges for the second quarter of 2020 relate to the
changes to price assumptions, the group's ongoing disposal
programme and other factors. For further information see Note
3.
The discount rates used in value-in-use impairment testing were
also reviewed. As these are set using a number of parameters that
are applicable to longer-term assets, a revision of the discount
rate assumption was determined not to be appropriate and therefore
the rates, as disclosed in BP Annual Report and Form 20-F 2019,
remain unchanged.
Exploration and appraisal intangible assets
As a result of the revised price assumptions and a review of the
long-term strategic plan, management reviewed BP's exploration
prospects and the carrying value of the associated intangible
assets. The outcome of the review has resulted in revised
judgements over the expectations to extract value from certain
prospects, thereby leading to write-offs of the associated
exploration and appraisal intangible assets in the second quarter
of 2020. For further information see Note 4.
Top of page 20
Note 1. Basis of preparation (continued)
Provisions
The nominal risk-free discount rate applied to provisions is
reviewed on a quarterly basis. Recent changes in long-dated US
government bond yields have not affected the group's overall
assessment of the discount rate applied to the group's provisions
and therefore the rate, as disclosed in BP Annual Report and Form
20-F 2019, remains unchanged. The timing and amount of cash flows
relating to the group's existing provisions are not currently
expected to change significantly as a result of the current
environment. The detailed annual review will take place later in
2020.
In addition, the group expects to recognize provisions for
restructuring costs as plans are formalized from the second half of
2020.
Pensions and other post-retirement benefits
The group's defined benefit pension plans are reviewed quarterly
to determine any changes to the fair value of the plan assets or
present value of the defined benefit obligations. As a result of
the review during the second quarter of 2020, the group's total net
defined benefit pension plan deficit as at 30 June 2020 is $2.1
billion, an increase in the deficit by $2.0 billion and $0.6
billion from 31 March 2020 and 31 December 2019 respectively. This
principally reflects actuarial losses reported in other
comprehensive income arising from decreasing discount rates and
higher inflation assumptions increasing the plan obligations
partially offset by increases in the valuation of plan assets. The
current environment is likely to continue to affect the values of
the plan assets and obligations resulting in potential volatility
in the amount of the net defined benefit pension plan
surplus/deficit recognized.
Impairment of financial assets measured at amortized cost
The estimate of the loss allowance recognised on financial
assets measured at amortized cost using an expected credit loss
approach was determined not to be a significant accounting estimate
in preparing BP Annual Report and Form 20-F 2019. Expected credit
loss allowances are, however, reviewed and updated quarterly.
Allowances are recognized on assets where there is evidence that
the asset is credit-impaired and on a forward-looking expected
credit loss basis for assets that are not credit-impaired. The
current economic environment and future credit risk outlook have
been considered in updating the estimate of loss allowances
although the full economic impact of COVID-19 on the
forward-looking expected credit loss is subject to significant
uncertainty due to the limited forward-looking information
currently available.
Whilst credit risk has increased since 31 December 2019, there
has also been a significant reduction in the group's trade and
other receivables balance. Therefore, the total expected credit
loss allowances recognized as at 30 June 2020 have not
significantly increased from the amounts disclosed in BP Annual
Report and Form 20-F 2019 - Financial statements - Note 21
Valuation and qualifying accounts.
The group continues to believe that the calculation of expected
credit loss allowances is not a significant accounting estimate.
The group continues to apply its credit policy as disclosed in BP
Annual Report and Form 20-F 2019 - Financial statements - Note 29
Financial instruments and financial risk factors - credit risk.
Income taxes
None of the group's deferred tax assets in BP Annual Report and
Form 20-F 2019 were determined to be a significant accounting
estimate. The carrying amounts are, however, reviewed and updated
quarterly to the extent that there are changes in the probability
of sufficient taxable profits being available to utilize the
reported deferred tax assets. The group has recognized deferred tax
assets as at 30 June 2020 of $6.9 billion, an increase of $2.3
billion from 31 December 2019. The group continues to believe that
the measurement of its deferred tax assets is not a significant
accounting estimate.
Other accounting judgements and estimates
All other significant accounting judgements and estimates
disclosed in BP Annual Report and Form 20-F 2019 remain applicable
and no new significant accounting judgements or estimates have been
identified.
Updates to significant accounting policies
Hybrid bond issuance
On 17 June 2020, a group subsidiary issued perpetual
subordinated hybrid bonds in EUR, GBP and USD for a USD equivalent
amount of $11.9 billion. As the group has the unconditional right
to avoid transferring cash or another financial asset in relation
to these hybrid bonds, they are classified as equity instruments
and reported within non-controlling interests in the condensed
consolidated financial statements. The contractual terms of these
instruments allow the group to defer coupon payments and the
repayment of principal indefinitely, however their terms and
conditions stipulate that any deferred payments must be made in the
event of an announcement of an ordinary share or parity equity
dividend distribution or certain share repurchases or
redemptions.
Change in accounting policy - Interest Rate Benchmark Reform:
Amendments to IFRS 9 'Financial instruments'
Financial authorities in the US, UK, EU and other territories
are currently undertaking reviews of key interest rate benchmarks
such as the London Inter-bank Offered Rate (LIBOR) with a view to
replacing them with alternative benchmarks. Uncertainty around the
method and timing of transition from Inter-bank Offered Rates
(IBORs) to alternative risk-free rates (RfRs) may impact the
assessment of whether hedge accounting can be applied to certain
hedging relationships.
BP is significantly exposed to benchmark interest rate
components e.g. USD LIBOR, GBP LIBOR, EURIBOR and CHF LIBOR. All of
the group's existing fair value hedge relationships are directly
affected by interest rate benchmark reform as they all manage
interest rate risk. Further information about the group's fair
value hedges is included in BP Annual Report and Form 20-F 2019 -
Financial statements - Note 30 Derivative financial instruments -
Fair value hedges.
BP adopted the amendments to IFRS 9 and IFRS 7 'Financial
Instruments: Disclosures' relating to interest rate benchmark
reform with effect from 1 January 2020. This first phase of
amendments provides temporary relief from applying specific hedge
accounting requirements to hedging relationships directly affected
by interest rate benchmark reforms.
Top of page 21
Note 1. Basis of preparation (continued)
The reliefs provided by the amendments allow BP, in the event
that significant uncertainty around the reforms arise, to assume
that:
- the interest rate benchmark component of fair value hedges
only needs to be assessed as separately identifiable at initial
designation; and
- the interest rate benchmark is not altered for the purposes of
assessing the economic relationship between the hedged item and the
hedging instrument for fair value hedges.
In accordance with the transition provisions, the amendments
have been adopted retrospectively to hedging relationships that
existed at the start of the current reporting period and will be
applied to new hedging relationships designated after that
date.
The reliefs have meant that the uncertainty over the interest
rate benchmark reforms has not resulted in discontinuation of hedge
accounting for any of BP's fair value hedges.
The second phase of IFRS amendments is expected to be issued by
the IASB later in 2020 to address the financial reporting impacts
of transitioning from IBORs to RfRs. BP has set up an internal
working group to monitor and manage the transition to alternative
benchmark rates and are currently assessing the population of
contracts and arrangements that are linked to existing interest
rate benchmarks, for example, leases and derivative contracts. BP
is also participating on external committees and task forces
dedicated to interest rate benchmark reform.
Change in accounting policy - physically settled derivative
contracts
In March 2019, the IFRS Interpretations Committee ("IFRIC")
issued an agenda decision on the application of IFRS 9 to the
physical settlement of contracts to buy or sell a non-financial
item, such as commodities, that are not accounted for as 'own-use'
contracts. IFRIC concluded that such contracts are settled by the
delivery or receipt of a non-financial item in exchange for both
cash and the settlement of the derivative asset or liability.
BP regularly enters into forward sale and purchase contracts. As
described in the group's accounting policy for revenue in BP Annual
Report and Form 20-F 2019, revenue recognized at the time such
contracts were physically settled was measured at the contractual
transaction price and was presented together with revenue from
contracts with customers in those financial statements.
BP has changed its accounting policy for these contracts, in
accordance with the conclusions included in the agenda decision,
with effect from 1 April 2020, as follows:
- Revenues and purchases from such contracts are measured at the
contractual transaction price plus the carrying amount of the
related derivative at the date of settlement. Realized derivative
gains and losses on physically settled derivative contracts are
included in other revenues.
- There is no significant effect on current period or
comparative information, including the first quarter 2020, for
'Sales and other operating revenues' and 'Purchases' as presented
in the group income statement, therefore no comparative information
has been re-stated.
- There is no significant effect on net assets or on comparative
information for 'Profit before taxation' or 'Profit after taxation'
as presented in the group income statement.
In addition, BP chose to change its presentation of revenues
from physically settled derivative sales contracts from first
quarter 2020. Revenues from physically settled derivative sales
contracts are no longer presented together with revenue from
contracts with customers. They are now presented as other revenues.
Comparative information in Note 6 for revenue from contracts with
customers and other revenues have been re-presented to align with
the current period.
Note 2. Non-current assets held for sale
The carrying amount of assets classified as held for sale at 30
June 2020 is $4,169 million, with associated liabilities of $948
million. These principally relate to two transactions.
Downstream segment
On 29 June 2020 BP announced that it had agreed to sell its
global petrochemicals business to INEOS for a total consideration
of $5 billion, subject to customary closing adjustments. Under the
terms of the agreement, INEOS paid BP a deposit of $400 million and
will pay a further $3.6 billion on completion. An additional $1
billion will be deferred and paid in three separate instalments of
$100 million in March, April and May 2021 with the remaining $700
million payable by the end of June 2021. The business has interests
in manufacturing plants in Asia, Europe and the US, including
interests held in equity-accounted entities. Subject to regulatory
and other approvals, the transaction is expected to complete before
the end of 2020. Assets of $3,647 million and associated
liabilities of $637 million have been classified as held for sale
in the group balance sheet at 30 June 2020. Accumulated foreign
exchange differences will be reclassified from the foreign currency
translation reserve to the income statement when the sale
transaction completes. At 30 June 2020 these foreign exchange
differences amounted to a gain of approximately $300 million.
Upstream segment
On 27 August 2019, BP announced that it had agreed to sell all
of its Alaska operations and interests to Hilcorp Energy
('Hilcorp'), including its ownership interests in BP Exploration
(Alaska) Inc, which owned all of BP's upstream oil and gas
interests in Alaska, and the assets of BP Pipelines (Alaska) Inc.,
including a 49% interest in the Trans Alaska Pipeline System
(TAPS), for up to $5.6 billion, subject to customary closing
adjustments. Assets of $6,518 million and associated liabilities of
$969 million relating to this transaction were classified as held
for sale at 31 December 2019. Deposit payments totalling $500
million in cash were received in 2019.
On 30 June 2020, BP completed the sale of BP Exploration
(Alaska) Inc. On completion, BP received $209 million in cash and
recognized a loan note with a principal amount of $2,100 million
receivable from Hilcorp. The group also recognized other assets
totalling $1,689 million, including amounts in relation to the
'earn-out' provisions of the agreement.
Top of page 22
Note 2. Non-current assets held for sale (continued)
The sale of BP Pipelines (Alaska) Inc.'s 49% interest in the
Trans Alaska Pipeline System (TAPS) and other midstream assets,
which is subject to regulatory approvals, is expected to complete
during 2020. On completion of the sale, BP will retain its
decommissioning liability relating to TAPS, which will be partially
offset by a 30% cost reimbursement from Harvest Alaska LLC, an
affiliate of Hilcorp. Assets of $499 million and associated
liabilities of $279 million relating to this transaction continue
to be classified as held for sale at 30 June 2020.
Note 3. Impairment and losses on sale of businesses and fixed
assets
Impairment and losses on sale of businesses and fixed assets for
the second quarter and half year were $11,770 million and $12,919
million and include net impairment charges of $11,848 million
($8,540 million after tax) and $12,646 million ($9,111 million
after tax) respectively. Impairment charges also arose in certain
equity-accounted entities in the second quarter. The BP shares of
these charges, amounting to $648 million for the second quarter
($635 million after tax), are reported in the line items 'Earnings
from joint ventures' and 'Earnings from associates' in the group
income statement.
Upstream segment
Impairment charges in the Upstream segment were $11,100 million
and $11,885 million for the second quarter and half year
respectively.
Impairment charges for the second quarter mainly relate to
producing assets and principally arose as a result of changes to
the group's oil and gas price assumptions. They include amounts in
Azerbaijan, BPX Energy, Canada, Egypt, India, Mauritania &
Senegal, the North Sea, and Trinidad. The recoverable amounts of
the cash generating units within these businesses were based on
value-in-use calculations.
Impairment charges for the second quarter and half year also
include amounts relating to the disposal of the group's interests
in its Alaska business. For the second quarter these principally
relate to revisions to the fair value of the consideration
recognized following changes to oil and gas price assumptions. For
the first half they additionally relate to completion adjustments,
changes to structure and phasing of consideration and discounting
impacts. The recoverable amount of the Alaska business was based on
its fair value less costs of disposal. See Note 2 for further
information.
The BP share of impairment charges arising in equity-accounted
entities reported in the Upstream segment in the second quarter was
$585 million.
Downstream segment
Impairment charges in the Downstream segment were $729 million
for the second quarter, principally relating to anticipated
portfolio changes in the fuels business. There were no other
significant impairment charges in the Downstream segment for the
half year.
Note 4. Exploration expense
Exploration expense in the second quarter and half year was
$9,674 million and $9,876 million and includes exploration
expenditure write-offs of $9,618 million ($8,128 million after tax)
and $9,716 million ($8,202 million after tax) respectively. All
exploration expenditure is recorded within the Upstream
segment.
The exploration write-offs principally arose following
management's re-assessment of expectations to extract value from
certain exploration prospects as a result of a review of the
group's long-term strategic plan and changes in the group's
long-term price assumptions. The exploration write-offs for the
second quarter principally arose in Angola, Brazil, Canada, Egypt,
India and the Gulf of Mexico.
Top of page 23
Note 5. Analysis of replacement cost profit (loss) before
interest and tax and reconciliation to profit (loss) before
taxation
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== ========
Upstream (22,008) 1,023 2,469 (20,985) 5,353
Downstream 594 664 1,288 1,258 3,053
Rosneft (124) (17) 525 (141) 1,011
Other businesses and corporate (317) (698) (381) (1,015) (927)
(21,855) 972 3,901 (20,883) 8,490
Consolidation adjustment - UPII* (46) 178 34 132 21
RC profit (loss) before interest and
tax* (21,901) 1,150 3,935 (20,751) 8,511
Inventory holding gains (losses)*
Upstream 57 (68) (10) (11) (8)
Downstream 978 (4,615) 93 (3,637) 1,139
Rosneft (net of tax) 53 (201) (2) (148) 38
Profit (loss) before interest and tax (20,813) (3,734) 4,016 (24,547) 9,680
Finance costs 783 783 853 1,566 1,720
Net finance expense relating to pensions
and other post-retirement benefits 8 7 15 15 30
Profit (loss) before taxation (21,604) (4,524) 3,148 (26,128) 7,930
=========================================== ======= ====== ====== ======= =====
RC profit (loss) before interest and
tax*
US (4,695) 595 498 (4,100) 1,269
Non-US (17,206) 555 3,437 (16,651) 7,242
(21,901) 1,150 3,935 (20,751) 8,511
======= ====== ====== ======= =====
Top of page 24
Note 6. Sales and other operating revenues
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
============================================ ======= ======= ======= ======== =========
By segment
Upstream 7,194 11,464 13,556 18,658 28,150
Downstream 27,241 53,964 66,396 81,205 124,812
Other businesses and corporate 450 453 433 903 789
34,885 65,881 80,385 100,766 153,751
======= ====== ======= ======= =======
Less: sales and other operating revenues
between segments
Upstream 2,613 6,907 7,481 9,520 13,805
Downstream 330 (782) 62 (452) 648
Other businesses and corporate 266 106 166 372 301
3,209 6,231 7,709 9,440 14,754
======= ====== ======= ======= =======
Third party sales and other operating
revenues
Upstream 4,581 4,557 6,075 9,138 14,345
Downstream 26,911 54,746 66,334 81,657 124,164
Other businesses and corporate 184 347 267 531 488
Total sales and other operating revenues 31,676 59,650 72,676 91,326 138,997
============================================= ======= ====== ======= ======= =======
By geographical area
US 10,117 21,219 26,086 31,336 47,934
Non-US 24,776 43,955 52,933 68,731 102,551
============================================= ======= ====== ======= ======= =======
34,893 65,174 79,019 100,067 150,485
Less: sales and other operating revenues
between areas 3,217 5,524 6,343 8,741 11,488
31,676 59,650 72,676 91,326 138,997
======= ====== ======= ======= =======
Revenues from contracts with customers(a)
Sales and other operating revenues include
the following in relation to revenues
from contracts with customers:
Crude oil 1,062 1,435 2,577 2,497 5,067
Oil products 10,452 20,254 27,211 30,706 49,915
Natural gas, LNG and NGLs 2,992 3,638 4,294 6,630 9,651
Non-oil products and other revenues from
contracts with customers(b) 2,118 2,490 3,258 4,608 6,321
Revenue from contracts with customers 16,624 27,817 37,340 44,441 70,954
============================================= ======= ====== ======= ======= =======
Other operating revenues(b)(c) 15,052 31,833 35,336 46,885 68,043
============================================= ======= ====== ======= ======= =======
Total sales and other operating revenues 31,676 59,650 72,676 91,326 138,997
============================================= ======= ====== ======= ======= =======
(a) Amounts shown for revenue from contracts with customers and
other operating revenues for second quarter and first half 2019
have been represented to align with the current period. See Note 1
for further information.
(b) Comparative information for the first quarter 2020 for
non-oil products and other revenues from contracts with customers
and other operating revenues have been amended from those
previously presented with no overall effect on total sales and
other operating revenues. The previously disclosed amount for
non-oil products and other revenues from contracts was $2,853
million. The previously disclosed amount for other operating
revenues was $31,470 million.
(c) Principally relates to physically settled derivative sales contracts.
Top of page 25
Note 7. Depreciation, depletion and amortization
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
================================ ======= ======= ======= ===== =======
Upstream
US 1,044 1,068 1,288 2,112 2,401
Non-US 1,973 2,082 2,396 4,055 4,894
3,017 3,150 3,684 6,167 7,295
======= ======= ======= ===== =====
Downstream
US 344 342 333 686 656
Non-US 408 405 392 813 775
752 747 725 1,499 1,431
======= ======= ======= ===== =====
Other businesses and corporate
US 16 15 14 31 27
Non-US 152 147 165 299 296
================================= ======= ======= ======= ===== =====
168 162 179 330 323
Total group 3,937 4,059 4,588 7,996 9,049
================================= ======= ======= ======= ===== =====
Note 8. Production and similar taxes
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ===== =======
US 13 13 79 26 160
Non-US 111 190 292 301 635
124 203 371 327 795
======= ======= ======= ===== =====
Note 9. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated
by dividing the profit (loss) for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. No share buybacks were
carried out during the quarter. This brings the total number of
ordinary shares repurchased for cancellation in the year to 120
million for a total cost of $776 million, including transaction
costs of $4 million, as part of the share buyback programme
announced on 31 October 2017. The number of shares in issue is
reduced when shares are repurchased.
The calculation of EpS is performed separately for each discrete
quarterly period, and for the year-to-date period. As a result, the
sum of the discrete quarterly EpS amounts in any particular
year-to-date period may not be equal to the EpS amount for the
year-to-date period.
For the diluted EpS calculation the weighted average number of
shares outstanding during the period is adjusted for the number of
shares that are potentially issuable in connection with employee
share-based payment plans using the treasury stock method.
Top of page 26
Note 9. Earnings per share and shares in issue (continued)
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
=========== =========== ========== =========== ============
Results for the period
Profit (loss) for the period
attributable
to BP shareholders (16,848) (4,365) 1,822 (21,213) 4,756
Less: preference dividend 1 - 1 1 1
Profit (loss) attributable to
BP ordinary shareholders (16,849) (4,365) 1,821 (21,214) 4,755
========================================= ========== ========== ========== ========== ==========
Number of shares (thousand) (a)(b)
Basic weighted average number
of shares outstanding 20,222,575 20,178,803 20,336,347 20,200,694 20,256,254
ADS equivalent 3,370,429 3,363,133 3,389,391 3,366,782 3,376,042
========================================= ========== ========== ========== ========== ==========
Weighted average number of shares
outstanding used to calculate
diluted earnings per share 20,222,575 20,178,803 20,421,184 20,200,694 20,368,125
ADS equivalent 3,370,429 3,363,133 3,403,530 3,366,782 3,394,687
========================================= ========== ========== ========== ========== ==========
Shares in issue at period-end 20,249,046 20,197,527 20,373,332 20,249,046 20,373,332
ADS equivalent 3,374,841 3,366,254 3,395,555 3,374,841 3,395,555
========================================= ========== ========== ========== ========== ==========
(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. The numbers of
potentially issuable shares that have been excluded from the
calculation for the first quarter 2020, second quarter 2020 and
first half 2020 are 74,240 thousand (ADS equivalent 12,374
thousand), 63,119 thousand (ADS equivalent 10,520 thousand) and
85,469 thousand (ADS equivalent 14,245 thousand) respectively.
Note 10. Dividends
Dividends payable
BP today announced an interim dividend of 5.25 cents per
ordinary share which is expected to be paid on 25 September 2020 to
ordinary shareholders and American Depositary Share (ADS) holders
on the register on 14 August 2020. The corresponding amount in
sterling is due to be announced on 14 September 2020, calculated
based on the average of the market exchange rates for the four
dealing days commencing on 8 September 2020. Holders of ADSs are
expected to receive $0.315 per ADS (less applicable fees). The
board has decided not to offer a scrip dividend alternative in
respect of the second quarter 2020 dividend. Ordinary shareholders
and ADS holders (subject to certain exceptions) will be able to
participate in a dividend reinvestment programme. Details of the
second quarter dividend and timetable are available at
bp.com/dividends and further details of the dividend reinvestment
programmes are available at bp.com/drip.
Second First Second First First
quarter quarter quarter half half
2020 2020 2019 2020 2019
======= ======= ======= ====== ========
Dividends paid per ordinary share
cents 10.500 10.500 10.250 21.000 20.500
pence 8.342 8.156 8.066 16.498 15.804
Dividends paid per ADS (cents) 63.00 63.00 61.50 126.00 123.00
=======
Scrip dividends
Number of shares issued (millions) - - 46.3 - 136.4
Value of shares issued ($ million) - - 318 - 947
===================================== ======= ======= ======= ====== ======
Top of page 27
Note 11. Net debt
Net debt* Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
========== ========== ========== ========== ============
Finance debt(a)(b) 76,003 69,117 67,553 76,003 67,553
Fair value (asset) liability of hedges
related to finance debt(c) (430) 426 (378) (430) (378)
75,573 69,543 67,175 75,573 67,175
Less: cash and cash equivalents(b) 34,653 18,139 20,674 34,653 20,674
Net debt 40,920 51,404 46,501 40,920 46,501
========================================= ========= ========== ========= ========= =========
Total equity(d) 82,811 90,480 103,623 82,811 103,623
Gearing* 33.1% 36.2% 31.0% 33.1% 31.0%
========================================= ========== ========== ========== ========== ============
(a) The fair value of finance debt at 30 June 2020 was $77,990
million (30 June 2019 $68,857 million).
(b) Second quarter and first half 2020 includes $436 million of
cash and $24 million of finance debt included in assets and
liabilities held for sale in the group balance sheet.
(c) 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 $554 million (first quarter 2020 liability of $663 million and
second quarter 2019 liability of $563 million) are not included in
the calculation of net debt shown above as hedge accounting is not
applied for these instruments.
(d) Total equity in the second quarter and first half 2020
includes $11.9 billion related to perpetual hybrid bonds issued on
17 June 2020. See Note 1 for further information.
Note 12. Inventory valuation
A provision of $289 million was held against hydrocarbon
inventories at 30 June 2020 ($3,596 million at 31 March 2020 and
$290 million at 31 December 2019) to write them down to their net
realizable value.
Note 13. Statutory accounts
The financial information shown in this publication, which was
approved by the Board of Directors on 3 August 2020, is unaudited
and does not constitute statutory financial statements. Audited
financial information will be published in BP Annual Report and
Form 20-F 2020. BP Annual Report and Form 20-F 2019 has been filed
with the Registrar of Companies in England and Wales. The report of
the auditor on those accounts was unqualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain a
statement under section 498(2) or section 498(3) of the UK
Companies Act 2006.
Top of page 28
Additional information
Capital expenditure*
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ===== ========
Capital expenditure on a cash basis
Organic capital expenditure* 3,034 3,539 3,686 6,573 7,334
Inorganic capital expenditure*(a) 33 322 1,968 355 3,955
3,067 3,861 5,654 6,928 11,289
======= ======= ======= ===== ======
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ===== =======
Organic capital expenditure by segment
Upstream
US 1,018 1,168 972 2,186 1,954
Non-US 1,517 1,662 1,858 3,179 3,746
2,535 2,830 2,830 5,365 5,700
======= ======= ======= ===== =====
Downstream
US 135 121 271 256 458
Non-US 295 531 470 826 1,004
430 652 741 1,082 1,462
======= ======= ======= ===== =====
Other businesses and corporate
US 21 32 15 53 24
Non-US 48 25 100 73 148
69 57 115 126 172
3,034 3,539 3,686 6,573 7,334
======= ======= ======= ===== =====
Organic capital expenditure by geographical
area
US 1,174 1,321 1,258 2,495 2,436
Non-US 1,860 2,218 2,428 4,078 4,898
3,034 3,539 3,686 6,573 7,334
======= ======= ======= ===== =====
(a) On 31 October 2018, BP acquired from BHP Billiton Petroleum
(North America) Inc. 100% of the issued share capital of Petrohawk
Energy Corporation, a wholly owned subsidiary of BHP that holds a
portfolio of unconventional onshore US oil and gas assets. The
entire consideration payable of $10,268 million, after customary
closing adjustments, was paid in instalments between July 2018 and
April 2019. The amounts presented as inorganic capital expenditure
include $1,748 million for the second quarter 2019 and $3,480
million for the first half 2019 relating to this transaction. First
half 2020 and 2019 also include amounts relating to the 25-year
extension to our ACG production-sharing agreement* in
Azerbaijan.
Top of page 29
Non-operating items*
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======== ======= ======= ======== =========
Upstream
Gains on sale of businesses and fixed
assets 87 7 47 94 105
Impairment and losses on sale of businesses
and fixed assets(a) (10,953) (1,131) (843) (12,084) (912)
Environmental and other provisions - (13) - (13) -
Restructuring, integration and rationalization
costs (24) (4) (17) (28) (52)
Other(b)(c) (2,564) 70 47 (2,494) 89
(13,454) (1,071) (766) (14,525) (770)
======= ====== ====== ======= ======
Downstream
Gains on sale of businesses and fixed
assets (13) 7 10 (6) 42
Impairment and losses on sale of businesses
and fixed assets(a) (798) (5) (61) (803) (89)
Environmental and other provisions - - - - -
Restructuring, integration and rationalization
costs 31 - 20 31 18
Other - - - - (6)
(780) 2 (31) (778) (35)
======= ====== ====== ======= ======
Rosneft
Other(c) (63) - (113) (63) (194)
(63) - (113) (63) (194)
======= ====== ====== ======= ======
Other businesses and corporate
Gains on sale of businesses and fixed
assets - 2 (4) 2 (4)
Impairment and losses on sale of businesses
and fixed assets (19) (2) - (21) -
Environmental and other provisions - (23) (22) (23) (28)
Restructuring, integration and rationalization
costs (33) (13) (3) (46) 7
Gulf of Mexico oil spill (31) (21) (57) (52) (172)
Other(d) 67 (80) (5) (13) (22)
(16) (137) (91) (153) (219)
======= ====== ====== ======= ======
Total before interest and taxation (14,313) (1,206) (1,001) (15,519) (1,218)
Finance costs(e) (114) (122) (116) (236) (244)
Total before taxation (14,427) (1,328) (1,117) (15,755) (1,462)
Taxation credit (charge) on non-operating
items 3,456 302 256 3,758 349
Taxation - impact of foreign exchange(f) 114 (365) - (251) -
================================================= ======= ====== ====== ======= ======
Total after taxation for period (10,857) (1,391) (861) (12,248) (1,113)
================================================= ======= ====== ====== ======= ======
(a) See Note 3 for further information.
(b) Second quarter and first half 2020 include the exploration
write-off of $1,969 million ($1,670 million after tax) relating to
fair value ascribed to certain licences as part of the accounting
at the time of acquisition of upstream assets in Brazil, India and
the Gulf of Mexico and the impairment of certain intangible assets
in Mauritania and Senegal.
(c) Second quarter and first half 2020 include $585 million and
$63 million of impairments reported by equity-accounted entities in
the Upstream and Rosneft segments respectively.
(d) From first quarter 2020, BP is presenting temporary
valuation differences associated with the group's interest rate and
foreign currency exchange risk management of finance debt as
non-operating items. These amounts represent: (i) the impact of
ineffectiveness and the amortisation of cross currency basis
resulting from the application of fair value hedge accounting; and
(ii) the net impact of foreign currency exchange movements on
finance debt and associated derivatives where hedge accounting is
not applied. Relevant amounts in the comparative periods presented
were not material.
(e) Relates to the unwinding of discounting effects relating to
Gulf of Mexico oil spill payables.
(f) From first quarter 2020, BP is presenting certain foreign
exchange effects on tax as non-operating items. These amounts
represent the impact of: (i) foreign exchange on deferred tax
balances arising from the conversion of local currency tax base
amounts into functional currency, and (ii) taxable gains and losses
from the retranslation of US dollar-denominated intra-group loans
to local currency. Relevant amounts in the comparative periods
presented were not material.
Top of page 30
Non-GAAP information on fair value accounting effects
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ===== =======
Favourable (adverse) impact relative to
management's measure of performance
Upstream (67) 223 (178) 156 (218)
Downstream (31) (259) (46) (290) (10)
Other businesses and corporate (41) - - (41) -
========================================== ====== ====== ======
(139) (36) (224) (175) (228)
Taxation credit (charge) 21 8 49 29 42
(118) (28) (175) (146) (186)
====== ====== ====== ==== ====
Fair value accounting effects reflect differences in the way
that BP manages the economic exposure and measures performance
relating to certain activities and the way these activities are
measured under IFRS. They relate to certain of the groups
commodity, interest rate and currency risk exposures as detailed
below.
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, other than net realizable value provisions, are not
recognized until the commodity is sold in a subsequent accounting
period. Gains and losses on the related derivative commodity
contracts are recognized in the income statement, from the time the
derivative commodity contract is entered into, on a fair value
basis using forward prices consistent with the contract
maturity.
BP enters into physical commodity contracts to meet certain
business requirements, such as the purchase of crude for a refinery
or the sale of BP's gas production. Under IFRS these physical
contracts are treated as derivatives and are required to be fair
valued when they are managed as part of a larger portfolio of
similar transactions. Gains and losses arising are recognized in
the income statement from the time the derivative commodity
contract is entered into.
IFRS require that inventory held for trading is recorded at its
fair value using period-end spot prices, whereas any related
derivative commodity instruments are required to be recorded at
values based on forward prices consistent with the contract
maturity. Depending on market conditions, these forward prices can
be either higher or lower than spot prices, resulting in
measurement differences.
BP enters into contracts for pipelines and other transportation,
storage capacity, oil and gas processing, liquefied natural gas
(LNG) and certain gas and power contracts that, under IFRS, are
recorded on an accruals basis. These contracts are risk-managed
using a variety of derivative instruments that are fair valued
under IFRS. This results in measurement differences in relation to
recognition of gains and losses.
The way that BP manages the economic exposures described above,
and measures performance internally, differs from the way these
activities are measured under IFRS. BP calculates this difference
for consolidated entities by comparing the IFRS result with
management's internal measure of performance. Under management's
internal measure of performance the inventory, transportation and
capacity contracts in question are valued based on fair value using
relevant forward prices prevailing at the end of the period. The
fair values of derivative instruments used to risk manage certain
oil, gas, power and other contracts, are deferred to match with the
underlying exposure and the commodity contracts for business
requirements are accounted for on an accruals basis. We believe
that disclosing management's estimate of this difference provides
useful information for investors because it enables investors to
see the economic effect of these activities as a whole.
Fair value accounting effects also include changes in the fair
value of the near-term portions of LNG contracts that fall within
BP's risk management framework. LNG contracts are not considered
derivatives, because there is insufficient market liquidity, and
they are therefore accrual accounted under IFRS. However, oil and
natural gas derivative financial instruments (used to risk manage
the near-term portions of the LNG contracts) are fair valued under
IFRS. The fair value accounting effect reduces timing differences
between recognition of the derivative financial instruments used to
risk manage the LNG contracts and the recognition of the LNG
contracts themselves, which therefore gives a better representation
of performance in each period.
In addition, from the second quarter 2020 fair value accounting
effects include changes in the fair value of derivatives entered
into by the group to manage currency exposure and interest rate
risks relating to hybrid bonds to their respective first call
periods. The hybrid bonds which were issued on 17 June 2020 are
classified as equity instruments and were recorded in the balance
sheet at that date at their USD equivalent issued value. Under IFRS
these equity instruments are not remeasured from period to period,
and do not qualify for application of hedge accounting. The
derivative instruments relating to the hybrid bonds, however, are
required to be recorded at fair value with mark to market gains and
losses recognized in the income statement. Therefore, measurement
differences in relation to the recognition of gains and losses
occur. The fair value accounting effect, which is reported in the
Other businesses and corporate segment in the table above,
eliminates the fair value gains and losses of these derivative
financial instruments that are recognized in the income statement.
We believe that this gives a better representation of performance,
by more appropriately reflecting the economic effect of these risk
management activities, in each period.
Top of page 31
Net debt including leases
Net debt including leases* Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
========================================= ========== ========== ========== ========== ============
Net debt 40,920 51,404 46,501 40,920 46,501
Lease liabilities 9,331 9,373 10,379 9,331 10,379
Net partner (receivable) payable for
leases entered into on behalf of joint
operations (90) (159) (230) (90) (230)
Net debt including leases 50,161 60,618 56,650 50,161 56,650
========================================== ========= ========= ========= ========= =========
Total equity(a) 82,811 90,480 103,623 82,811 103,623
Gearing including leases* 37.7% 40.1% 35.3% 37.7% 35.3%
========================================== ========== ========== ========== ========== ============
(a) Total equity in the second quarter and first half 2020
includes $11.9 billion related to perpetual hybrid bonds issued on
17 June 2020. See Note 1 for further information.
Readily marketable inventory* (RMI)
30 June 31 December
$ million 2020 2019
======= =============
RMI at fair value* 4,111 6,837
Paid-up RMI* 1,971 3,217
===================== ======= ===========
Readily marketable inventory (RMI) is oil and oil products
inventory held and price risk-managed by BP's integrated supply and
trading function (IST) which could be sold to generate funds if
required. Paid-up RMI is RMI that BP has paid for.
We believe that disclosing the amounts of RMI and paid-up RMI is
useful to investors as it enables them to better understand and
evaluate the group's inventories and liquidity position by enabling
them to see the level of discretionary inventory held by IST and to
see builds or releases of liquid trading inventory.
See the Glossary on page 35 for a more detailed definition of
RMI. RMI at fair value, paid-up RMI and unpaid RMI are non-GAAP
measures. A reconciliation of total inventory as reported on the
group balance sheet to paid-up RMI is provided below.
30 June 31 December
$ million 2020 2019
======= =============
Reconciliation of total inventory to paid-up RMI
Inventories as reported on the group balance sheet
under IFRS 12,504 20,880
Less: (a) inventories that are not oil and oil
products and (b) oil and oil product inventories
that are not risk-managed by IST (8,793) (14,280)
3,711 6,600
Plus: difference between RMI at fair value and
RMI on an IFRS basis 400 237
RMI at fair value 4,111 6,837
Less: unpaid RMI* at fair value (2,140) (3,620)
Paid-up RMI 1,971 3,217
===================================================== ====== ==========
Top of page 32
Gulf of Mexico oil spill
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ===== ========
Net cash provided by operating activities
as per condensed group cash flow statement 3,737 952 6,815 4,689 12,111
Exclude net cash from operating activities
relating to the Gulf of Mexico oil spill
on a post-tax basis 1,097 281 1,413 1,378 2,062
======= ======= ===== ======
Operating cash flow, excluding Gulf of Mexico
oil spill payments* 4,834 1,233 8,228 6,067 14,173
================================================ ======= ======= ======= ===== ======
Net cash from operating activities relating to the Gulf of
Mexico oil spill on a pre-tax basis amounted to an outflow of
$1,209 million and $1,490 million in the second quarter and first
half of 2020 respectively. For the same periods in 2019, the amount
was an outflow of $1,472 million and $2,126 million respectively.
Net cash outflows relating to the Gulf of Mexico oil spill in 2020
and 2019 include payments made under the 2016 consent decree and
settlement agreement with the United States and the five Gulf coast
states. Included in the current quarter are payments of $1,199
million on a pre-tax basis relating to the 2016 consent decree and
settlement agreement.
30 June 31 December
$ million 2020 2019
======== =============
Trade and other payables (11,294) (12,480)
Provisions (29) (189)
Gulf of Mexico oil spill payables and provisions (11,323) (12,669)
=================================================== ======= ==========
Of which - current (1,511) (1,800)
Deferred tax asset 5,456 5,526
=================================================== ======= ==========
The provision reflects the latest estimate for the remaining
costs associated with the Gulf of Mexico oil spill. The amounts
ultimately payable may differ from the amount provided and the
timing of payments is uncertain. Further information relating to
the Gulf of Mexico oil spill, including information on the nature
and expected timing of payments relating to provisions and other
payables, is provided in BP Annual Report and Form 20-F 2019 -
Financial statements - Notes 7, 9, 20, 22, 23, 29, 33 and pages 319
to 320 of Legal proceedings.
Working capital* reconciliation
Second First Second First First
quarter quarter quarter half half
$ million 2020 2020 2019 2020 2019
======= ======= ======= ======= =========
Movements in inventories and other current
and non-current assets and liabilities
as per condensed group cash flow statement (609) 683 (58) 74 (2,753)
Adjustments to exclude movements in inventories
and other current and non-current assets
and liabilities for the Gulf of Mexico
oil spill 1,120 254 1,451 1,374 2,082
Adjusted for Inventory holding gains
(losses)* (Note 5)
Upstream 57 (68) (10) (11) (8)
Downstream 978 (4,615) 93 (3,637) 1,139
Working capital release (build) 1,546 (3,746) 1,476 (2,200) 460
================================================== ====== ====== ====== ====== ======
Top of page 33
Realizations* and marker prices
Second First Second First First
quarter quarter quarter half half
2020 2020 2019 2020 2019
============================================= ======= ======= ======= ===== =======
Average realizations (a)
Liquids* ($/bbl)
US 21.63 45.96 56.98 33.80 53.91
Europe 28.91 50.71 68.73 40.30 65.04
Rest of World 22.58 48.13 66.24 33.79 63.18
BP Average 22.75 47.47 62.63 34.39 59.61
============================================== ======= ======= ======= ===== =====
Natural gas ($/mcf)
US 0.97 1.28 1.80 1.15 2.18
Europe 1.38 3.23 3.63 2.17 4.75
Rest of World 3.12 3.51 4.12 3.32 4.40
BP Average 2.53 2.83 3.35 2.69 3.68
============================================== ======= ======= ======= ===== =====
Total hydrocarbons* ($/boe)
US 16.05 29.94 35.94 23.37 35.08
Europe 23.00 43.97 63.40 33.46 61.02
Rest of World 20.21 31.61 41.60 25.63 41.06
BP Average 19.06 31.80 40.64 25.36 40.02
============================================== ======= ======= ======= ===== =====
Average oil marker prices ($/bbl)
Brent 29.56 50.10 68.86 40.07 65.95
West Texas Intermediate 27.96 45.56 59.90 36.69 57.42
Western Canadian Select 22.19 28.71 47.37 25.48 46.14
Alaska North Slope 30.28 51.07 68.29 40.59 66.37
Mars 30.02 45.57 65.20 37.73 63.20
Urals (NWE - cif) 31.36 47.84 67.62 39.80 65.23
============================================== ======= ======= ======= ===== =====
Average natural gas marker prices
Henry Hub gas price(b) ($/mmBtu) 1.71 1.95 2.64 1.83 2.90
UK Gas - National Balancing Point (p/therm) 12.88 24.81 31.53 18.98 40.01
============================================== ======= ======= ======= ===== =====
(a) Based on sales of consolidated subsidiaries only - this
excludes equity-accounted entities.
(b) Henry Hub First of Month Index.
Exchange rates
Second First Second First First
quarter quarter quarter half half
2020 2020 2019 2020 2019
======= ======= ======= ===== =======
$/GBP average rate for the period 1.24 1.28 1.29 1.26 1.29
$/GBP period-end rate 1.23 1.24 1.27 1.23 1.27
$/EUR average rate for the period 1.10 1.10 1.12 1.10 1.13
$/EUR period-end rate 1.12 1.10 1.14 1.12 1.14
Rouble/$ average rate for the period 72.40 66.75 64.58 69.64 65.29
Rouble/$ period-end rate 71.25 78.14 63.09 71.25 63.09
======================================= ======= ======= ======= ===== =====
Top of page 34
Principal risks and uncertainties
The principal risks and uncertainties affecting BP are described
in the Risk factors section of BP Annual Report and Form 20-F 2019
(pages 70-71) and are summarized below. There are no material
changes in those principal risks and uncertainties for the
remaining six months of the financial year. See page 2 for an
update in relation to COVID-19.
The risks and uncertainties summarized below, separately or in
combination, could have a material adverse effect on the
implementation of our strategy, our business, financial
performance, results of operations, cash flows, liquidity,
prospects, shareholder value and returns and reputation.
Strategic and commercial risks
-- Prices and markets - our financial performance is impacted by
fluctuating prices of oil, gas and refined products, technological
change, exchange rate fluctuations, and the general macroeconomic
outlook.
-- Access, renewal and reserves progression - inability to
access, renew and progress upstream resources in a timely manner
could adversely affect our long-term replacement of reserves.
-- Major project* delivery - failure to invest in the best
opportunities or deliver major projects successfully could
adversely affect our financial performance.
-- Geopolitical - exposure to a range of political developments
and consequent changes to the operating and regulatory environment
could cause business disruption.
-- Liquidity, financial capacity and financial, including
credit, exposure - failure to work within our financial framework
could impact our ability to operate and result in financial
loss.
-- Joint arrangements and contractors - varying levels of
control over the standards, operations and compliance of our
partners, contractors and sub-contractors could result in legal
liability and reputational damage.
-- Digital infrastructure and cyber security - breach or failure
of our or third parties' digital infrastructure or cyber security,
including loss or misuse of sensitive information could damage our
operations, increase costs and damage our reputation.
-- Climate change and the transition to a lower carbon economy -
policy, legal, regulatory, technology and market developments
related to the issue of climate change could increase costs, reduce
demand for our products, reduce revenue and limit certain growth
opportunities.
-- Competition - inability to remain efficient, maintain a
high-quality portfolio of assets, innovate and retain an
appropriately skilled workforce could negatively impact delivery of
our strategy in a highly competitive market.
-- Crisis management and business continuity - failure to
address an incident effectively could potentially disrupt our
business.
-- Insurance - our insurance strategy could expose the group to material uninsured losses.
Safety and operational risks
-- Process safety, personal safety, and environmental risks -
exposure to a wide range of health, safety, security and
environmental risks could cause harm to people, the environment and
our assets and result in regulatory action, legal liability,
business interruption, increased costs, damage to our reputation
and potentially denial of our licence to operate.
-- Drilling and production - challenging operational
environments and other uncertainties could impact drilling and
production activities.
-- Security - hostile acts against our staff and activities
could cause harm to people and disrupt our operations.
-- Product quality - supplying customers with off-specification
products could damage our reputation, lead to regulatory action and
legal liability, and impact our financial performance.
Compliance and control risks
-- Ethical misconduct and non-compliance - ethical misconduct or
breaches of applicable laws by our businesses or our employees
could be damaging to our reputation, and could result in
litigation, regulatory action and penalties.
-- Regulation - changes in the regulatory and legislative
environment could increase the cost of compliance, affect our
provisions and limit our access to new growth opportunities.
-- Treasury and trading activities - ineffective oversight of
treasury and trading activities could lead to business disruption,
financial loss, regulatory intervention or damage to our
reputation.
-- Reporting - failure to accurately report our data could lead
to regulatory action, legal liability and reputational damage.
Legal proceedings
For a full discussion of the group's material legal proceedings,
see pages 319-320 of BP Annual Report and Form 20-F 2019.
Top of page 35
Glossary
Non-GAAP measures are provided for investors because they are
closely tracked by management to evaluate BP's operating
performance and to make financial, strategic and operating
decisions. Non-GAAP measures are sometimes referred to as
alternative performance measures.
Capital expenditure is total cash capital expenditure as stated
in the condensed group cash flow statement.
Consolidation adjustment - UPII is unrealized profit in
inventory arising on inter-segment transactions.
Divestment proceeds are disposal proceeds as per the condensed
group cash flow statement.
Effective tax rate (ETR) on replacement cost (RC) profit or loss
is a non-GAAP measure. The ETR on RC profit or loss is calculated
by dividing taxation on a RC basis by RC profit or loss before tax.
Information on RC profit or loss is provided below. BP believes it
is helpful to disclose the ETR on RC profit or loss because this
measure excludes the impact of price changes on the replacement of
inventories and allows for more meaningful comparisons between
reporting periods. The nearest equivalent measure on an IFRS basis
is the ETR on profit or loss for the period.
Ethanol-equivalent production (which includes ethanol and sugar)
is converted to thousands of barrels a day at 6.289 million litres
= 1 thousand barrels divided by the total number of days in the
period reported.
Fair value accounting effects are non-GAAP adjustments to our
IFRS profit (loss). They reflect the difference between the way BP
manages the economic exposure and internally measures performance
of certain activities and the way those activities are measured
under IFRS. Further information on fair value accounting effects is
provided on page 30.
Gearing and net debt are non-GAAP measures. Net debt is
calculated as finance debt, as shown in the balance sheet, plus the
fair value of associated derivative financial instruments that are
used to hedge foreign currency exchange and interest rate risks
relating to finance debt, for which hedge accounting is applied,
less cash and cash equivalents. Gearing is defined as the ratio of
net debt to the total of net debt plus total equity. BP believes
these measures provide useful information to investors. Net debt
enables investors to see the economic effect of finance debt,
related hedges and cash and cash equivalents in total. Gearing
enables investors to see how significant net debt is relative to
total equity. The derivatives are reported on the balance sheet
within the headings 'Derivative financial instruments'. The nearest
equivalent GAAP measures on an IFRS basis are finance debt and
finance debt ratio. A reconciliation of finance debt to net debt is
provided on page 27.
We are unable to present reconciliations of forward-looking
information for gearing to finance debt and total equity, because
without unreasonable efforts, we are unable to forecast accurately
certain adjusting items required to present a meaningful comparable
GAAP forward-looking financial measure. These items include fair
value asset (liability) of hedges related to finance debt and cash
and cash equivalents, that are difficult to predict in advance in
order to include in a GAAP estimate.
Gearing including leases and net debt including leases are
non-GAAP measures. Net debt including leases is calculated as net
debt plus lease liabilities, less the net amount of partner
receivables and payables relating to leases entered into on behalf
of joint operations. Gearing including leases is defined as the
ratio of net debt including leases to the total of net debt
including leases plus total equity. BP believes these measures
provide useful information to investors as they enable investors to
understand the impact of the group's lease portfolio on net debt
and gearing. The nearest equivalent GAAP measures on an IFRS basis
are finance debt and finance debt ratio. A reconciliation of
finance debt to net debt including leases is provided on page
31.
Hydrocarbons - Liquids and natural gas. Natural gas is converted
to oil equivalent at 5.8 billion cubic feet = 1 million
barrels.
Inorganic capital expenditure is a subset of capital expenditure
and is a non-GAAP measure. Inorganic capital expenditure comprises
consideration in business combinations and certain other
significant investments made by the group. It is reported on a cash
basis. BP believes that this measure provides useful information as
it allows investors to understand how BP's management invests funds
in projects which expand the group's activities through
acquisition. Further information and a reconciliation to GAAP
information is provided on page 28.
Inventory holding gains and losses represent the difference
between the cost of sales calculated using the replacement cost of
inventory and the cost of sales calculated on the first-in
first-out (FIFO) method after adjusting for any changes in
provisions where the net realizable value of the inventory is lower
than its cost. Under the FIFO method, which we use for IFRS
reporting, the cost of inventory charged to the income statement is
based on its historical cost of purchase or manufacture, rather
than its replacement cost. In volatile energy markets, this can
have a significant distorting effect on reported income. The
amounts disclosed represent the difference between the charge to
the income statement for inventory on a FIFO basis (after adjusting
for any related movements in net realizable value provisions) and
the charge that would have arisen based on the replacement cost of
inventory. For this purpose, the replacement cost of inventory is
calculated using data from each operation's production and
manufacturing system, either on a monthly basis, or separately for
each transaction where the system allows this approach. The amounts
disclosed are not separately reflected in the financial statements
as a gain or loss. No adjustment is made in respect of the cost of
inventories held as part of a trading position and certain other
temporary inventory positions. See Replacement cost (RC) profit or
loss definition below.
Liquids - Liquids for Upstream and Rosneft comprises crude oil,
condensate and natural gas liquids. For Upstream, liquids also
includes bitumen.
Top of page 36
Glossary (continued)
Major projects have a BP net investment of at least $250
million, or are considered to be of strategic importance to BP or
of a high degree of complexity.
Net wind generation capacity is the sum of the rated capacities
of the assets/turbines that have entered into commercial operation,
including BP's share of equity-accounted entities.
Non-operating items are charges and credits included in the
financial statements that BP discloses separately because it
considers such disclosures to be meaningful and relevant to
investors. They are items that management considers not to be part
of underlying business operations and are disclosed in order to
enable investors better to understand and evaluate the group's
reported financial performance. Non-operating items within
equity-accounted earnings are reported net of incremental income
tax reported by the equity-accounted entity. An analysis of
non-operating items by region is shown on pages 7, 9 and 11, and by
segment and type is shown on page 29.
Operating cash flow is net cash provided by (used in) operating
activities as stated in the condensed group cash flow statement.
When used in the context of a segment rather than the group, the
terms refer to the segment's share thereof.
Operating cash flow excluding Gulf of Mexico oil spill payments
is a non-GAAP measure. It is calculated by excluding post-tax
operating cash flows relating to the Gulf of Mexico oil spill from
net cash provided by operating activities as reported in the
condensed group cash flow statement. BP believes net cash provided
by operating activities excluding amounts related to the Gulf of
Mexico oil spill is a useful measure as it allows for more
meaningful comparisons between reporting periods. The nearest
equivalent measure on an IFRS basis is net cash provided by
operating activities.
Organic capital expenditure is a subset of capital expenditure
and is a non-GAAP measure. Organic capital expenditure comprises
capital expenditure less inorganic capital expenditure. BP believes
that this measure provides useful information as it allows
investors to understand how BP's management invests funds in
developing and maintaining the group's assets. An analysis of
organic capital expenditure by segment and region, and a
reconciliation to GAAP information is provided on page 28.
We are unable to present reconciliations of forward-looking
information for organic capital expenditure to total cash capital
expenditure, because without unreasonable efforts, we are unable to
forecast accurately the adjusting item, inorganic capital
expenditure, that is difficult to predict in advance in order to
derive the nearest GAAP estimate.
Production-sharing agreement/contract (PSA/PSC) is an
arrangement through which an oil and gas company bears the risks
and costs of exploration, development and production. In return, if
exploration is successful, the oil company receives entitlement to
variable physical volumes of hydrocarbons, representing recovery of
the costs incurred and a stipulated share of the production
remaining after such cost recovery.
Readily marketable inventory (RMI) is inventory held and price
risk-managed by our integrated supply and trading function (IST)
which could be sold to generate funds if required. It comprises oil
and oil products for which liquid markets are available and
excludes inventory which is required to meet operational
requirements and other inventory which is not price risk-managed.
RMI is reported at fair value. Inventory held by the Downstream
fuels business for the purpose of sales and marketing, and all
inventories relating to the lubricants and petrochemicals
businesses, are not included in RMI.
Paid-up RMI excludes RMI which has not yet been paid for. For
inventory that is held in storage, a first-in first-out (FIFO)
approach is used to determine whether inventory has been paid for
or not. Unpaid RMI is RMI which has not yet been paid for by BP.
RMI at fair value, Paid-up RMI and Unpaid RMI are non-GAAP
measures. Further information is provided on page 31.
Realizations are the result of dividing revenue generated from
hydrocarbon sales, excluding revenue generated from purchases made
for resale and royalty volumes, by revenue generating hydrocarbon
production volumes. Revenue generating hydrocarbon production
reflects the BP share of production as adjusted for any production
which does not generate revenue. Adjustments may include losses due
to shrinkage, amounts consumed during processing, and contractual
or regulatory host committed volumes such as royalties.
Refining availability represents Solomon Associates' operational
availability for BP-operated refineries, which is defined as the
percentage of the year that a unit is available for processing
after subtracting the annualized time lost due to turnaround
activity and all planned mechanical, process and regulatory
downtime.
The Refining marker margin (RMM) is the average of regional
indicator margins weighted for BP's crude refining capacity in each
region. Each regional marker margin is based on product yields and
a marker crude oil deemed appropriate for the region. The regional
indicator margins may not be representative of the margins achieved
by BP in any period because of BP's particular refinery
configurations and crude and product slate.
Top of page 37
Glossary (continued)
Replacement cost (RC) profit or loss reflects the replacement
cost of inventories sold in the period and is arrived at by
excluding inventory holding gains and losses from profit or loss.
RC profit or loss for the group is not a recognized GAAP measure.
BP believes this measure is useful to illustrate to investors the
fact that crude oil and product prices can vary significantly from
period to period and that the impact on our reported result under
IFRS can be significant. Inventory holding gains and losses vary
from period to period due to changes in prices as well as changes
in underlying inventory levels. In order for investors to
understand the operating performance of the group excluding the
impact of price changes on the replacement of inventories, and to
make comparisons of operating performance between reporting
periods, BP's management believes it is helpful to disclose this
measure. The nearest equivalent measure on an IFRS basis is profit
or loss attributable to BP shareholders. A reconciliation to GAAP
information is provided on page 1. RC profit or loss before
interest and tax is the measure of profit or loss that is required
to be disclosed for each operating segment under IFRS.
RC profit or loss per share is a non-GAAP measure. Earnings per
share is defined in Note 9. RC profit or loss per share is
calculated using the same denominator. The numerator used is RC
profit or loss attributable to BP shareholders rather than profit
or loss attributable to BP shareholders. BP believes it is helpful
to disclose the RC profit or loss per share because this measure
excludes the impact of price changes on the replacement of
inventories and allows for more meaningful comparisons between
reporting periods. The nearest equivalent measure on an IFRS basis
is basic earnings per share based on profit or loss for the period
attributable to BP shareholders.
Reported recordable injury frequency measures the number of
reported work-related employee and contractor incidents that result
in a fatality or injury per 200,000 hours worked. This represents
reported incidents occurring within BP's operational HSSE reporting
boundary. That boundary includes BP's own operated facilities and
certain other locations or situations.
Solomon availability - See Refining availability definition.
Technical service contract (TSC) - Technical service contract is
an arrangement through which an oil and gas company bears the risks
and costs of exploration, development and production. In return,
the oil and gas company receives entitlement to variable physical
volumes of hydrocarbons, representing recovery of the costs
incurred and a profit margin which reflects incremental production
added to the oilfield.
Tier 1 and tier 2 process safety events - Tier 1 events are
losses of primary containment from a process of greatest
consequence - causing harm to a member of the workforce, damage to
equipment from a fire or explosion, a community impact or exceeding
defined quantities. Tier 2 events are those of lesser consequence.
These represent reported incidents occurring within BP's
operational HSSE reporting boundary. That boundary includes BP's
own operated facilities and certain other locations or
situations.
Underlying effective tax rate (ETR) is a non-GAAP measure. The
underlying ETR is calculated by dividing taxation on an underlying
replacement cost (RC) basis by underlying RC profit or loss before
tax. Taxation on an underlying RC basis is taxation on a RC basis
for the period adjusted for taxation on non-operating items and
fair value accounting effects. Information on underlying RC profit
or loss is provided below. BP believes it is helpful to disclose
the underlying ETR because this measure may help investors to
understand and evaluate, in the same manner as management, the
underlying trends in BP's operational performance on a comparable
basis, period on period. The nearest equivalent measure on an IFRS
basis is the ETR on profit or loss for the period.
We are unable to present reconciliations of forward-looking
information for underlying ETR to ETR on profit or loss for the
period, because without unreasonable efforts, we are unable to
forecast accurately certain adjusting items required to present a
meaningful comparable GAAP forward-looking financial measure. These
items include the taxation on inventory holding gains and losses,
non-operating items and fair value accounting effects, that are
difficult to predict in advance in order to include in a GAAP
estimate.
Underlying production - 2020 underlying production, when
compared with 2019, is production after adjusting for acquisitions
and divestments, curtailments, and entitlement impacts in our
production-sharing agreements/contracts and technical service
contract.
Underlying RC profit or loss is RC profit or loss after
adjusting for non-operating items and fair value accounting
effects. Underlying RC profit or loss and adjustments for fair
value accounting effects are not recognized GAAP measures. See
pages 29 and 30 for additional information on the non-operating
items and fair value accounting effects that are used to arrive at
underlying RC profit or loss in order to enable a full
understanding of the events and their financial impact. BP believes
that underlying RC profit or loss is a useful measure for investors
because it is a measure closely tracked by management to evaluate
BP's operating performance and to make financial, strategic and
operating decisions and because it may help investors to understand
and evaluate, in the same manner as management, the underlying
trends in BP's operational performance on a comparable basis,
period on period, by adjusting for the effects of these
non-operating items and fair value accounting effects. The nearest
equivalent measure on an IFRS basis for the group is profit or loss
attributable to BP shareholders. The nearest equivalent measure on
an IFRS basis for segments is RC profit or loss before interest and
taxation. A reconciliation to GAAP information is provided on page
1.
Underlying RC profit or loss per share is a non-GAAP measure.
Earnings per share is defined in Note 9. Underlying RC profit or
loss per share is calculated using the same denominator. The
numerator used is underlying RC profit or loss attributable to BP
shareholders rather than profit or loss attributable to BP
shareholders. BP believes it is helpful to disclose the underlying
RC profit or loss per share because this measure may help investors
to understand and evaluate, in the same manner as management, the
underlying trends in BP's operational performance on a comparable
basis, period on period. The nearest equivalent measure on an IFRS
basis is basic earnings per share based on profit or loss for the
period attributable to BP shareholders.
Upstream plant reliability (BP-operated) is calculated taking
100% less the ratio of total unplanned plant deferrals divided by
installed production capacity. Unplanned plant deferrals are
associated with the topside plant and where applicable the subsea
equipment (excluding wells and reservoir). Unplanned plant
deferrals include breakdowns, which does not include Gulf of Mexico
weather related downtime.
Top of page 38
Glossary (continued)
Upstream unit production cost is calculated as production cost
divided by units of production. Production cost does not include ad
valorem and severance taxes. Units of production are barrels for
liquids and thousands of cubic feet for gas. Amounts disclosed are
for BP subsidiaries only and do not include BP's share of
equity-accounted entities.
Working capital - Change in working capital is movements in
inventories and other current and non-current assets and
liabilities as reported in the condensed group cash flow statement.
Change in working capital adjusted for inventory holding
gains/losses is a non-GAAP measure. It is calculated by adjusting
for inventory holding gains/losses reported in the period and this
therefore represents what would have been reported as movements in
inventories and other current and non-current assets and
liabilities, if the starting point in determining net cash provided
by operating activities had been replacement cost profit rather
than profit for the period. The nearest equivalent measure on an
IFRS basis for this is movements in inventories and other current
and non-current assets and liabilities. In the context of
describing operating cash flow excluding Gulf of Mexico oil spill
payments, change in working capital also excludes movements in
inventories and other current and non-current assets and
liabilities relating to the Gulf of Mexico oil spill. See page 32
for further details.
BP utilizes various arrangements in order to manage its working
capital including discounting of receivables and, in the supply and
trading business, the active management of supplier payment terms,
inventory and collateral.
Top of page 39
Cautionary statement
In order to utilize the 'safe harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995 (the
'PSLRA') and the general doctrine of cautionary statements, BP is
providing the following cautionary statement: The discussion in
this results announcement contains certain forecasts, projections
and forward-looking statements - that is, statements related to
future, not past events and circumstances - with respect to the
financial condition, results of operations and businesses of BP and
certain of the plans and objectives of BP with respect to these
items. These statements may generally, but not always, be
identified by the use of words such as 'will', 'expects', 'is
expected to', 'aims', 'should', 'may', 'objective', 'is likely to',
'intends', 'believes', 'anticipates', 'plans', 'we see' or similar
expressions.
In particular, the following, among other statements, are all
forward looking in nature: the expectations regarding the COVID-19
pandemic including its risks, impacts, consequences and challenges
and BP's response, including the impact on the trading environment,
commodity prices, global GDP; plans and expectations regarding the
divestment programme including expectations with respect to
completion of transactions and the timing and amount of proceeds of
agreed disposals (including the expected completion of the sales of
the midstream portion of BP's Alaskan business to Hilcorp, BP's
petrochemicals business to INEOS and BP's Andrew Area and
Shearwater assets to Premier Oil); expectations for the total
amount of organic capital expenditure in 2020; plans and
expectations regarding new joint ventures and other agreements,
including partnerships with Reliance Industries, China's ENN,
Enágas in Spain, JinkoPower, and Petrofac; plans to invest in
India's Green Growth Equity Fund and Satelytics; expectations
regarding quarterly dividends; expectations regarding demand for
BP's products in the Upstream and Downstream; expectations
regarding the Downstream refining margins; expectations regarding
BP's future financial performance and cash flows; plans and
expectations with respect to the implementation and impact of BP's
redesign of its organization, including the announced reduction of
around 10,000 jobs, and plans for BP to achieve $2.5 billion in
cost savings by the end of 2021 relative to 2019, and the
amount
and timing of associated restructuring charges; expectations
regarding the full-year charge for depreciation, depletion and
amortization; expectations regarding the underlying effective tax
rate in the second half of 2020; plans and expectations with
respect the Lightsource BP project with SEPTA in the US and
Lightsource BP's ambition to reach 10GW of developed assets by the
end of 2023; expectations regarding the Rosneft results; plans and
expectations regarding Upstream projects, including the timing of
the Mad Dog 2, Tanguuh Expansion, Trinidad Cassia Compression and
Greater Tortue Ahmeyin Phase 1 major projects; expectations
regarding Upstream full year and third-quarter 2020 reported
production, including the expectation that interventions will
reduce 2020 reported production; expectations regarding price
assumptions used in accounting estimates; expectations regarding
the Other businesses and corporate average quarterly charges; and
expectations with respect to the timing and amount of future
payments relating to the Gulf of Mexico oil spill.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will or may occur in the future and are outside
the control of BP. Actual results may differ materially from those
expressed in such statements, depending on a variety of factors,
including: the extent and duration of the impact of current market
conditions including the significant drop in the oil price, the
impact of COVID-19, overall global economic and business conditions
impacting our business and demand for our products as well as the
specific factors identified in the discussions accompanying such
forward-looking statements; the receipt of relevant third party
and/or regulatory approvals; the timing and level of maintenance
and/or turnaround activity; the timing and volume of refinery
additions and outages; the timing of bringing new fields onstream;
the timing, quantum and nature of certain acquisitions and
divestments; future levels of industry product supply, demand and
pricing, including supply growth in North America; OPEC quota
restrictions; TSC effects; operational and safety problems;
potential lapses in product quality; economic and financial market
conditions generally or in various countries and regions; political
stability and economic growth in relevant areas of the world;
changes in laws and governmental regulations; regulatory or legal
actions including the types of enforcement action pursued and the
nature of remedies sought or imposed; the actions of prosecutors,
regulatory authorities and courts; delays in the processes for
resolving claims; amounts ultimately payable and timing of payments
relating to the Gulf of Mexico oil spill; exchange rate
fluctuations; development and use of new technology; recruitment
and retention of a skilled workforce; the success or otherwise of
partnering; the actions of competitors, trading partners,
contractors, subcontractors, creditors, rating agencies and others;
our access to future credit resources; business disruption and
crisis management; the impact on our reputation of ethical
misconduct and non-compliance with regulatory obligations; trading
losses; major uninsured losses; decisions by Rosneft's management
and board of directors; 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, and under "Risk factors" in BP
Annual Report and Form 20-F 2019 as filed with the US Securities
and Exchange Commission.
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014. The person
responsible for arranging the release of this announcement on
behalf of BP p.l.c. is Ben Mathews, Company Secretary.
Contacts
London Houston
Press Office David Nicholas Brett Clanton
+44 (0)20 7496 4708 +1 281 366 8346
Investor Relations Craig Marshall Brian Sullivan
bp.com/investors +44 (0)20 7496 4962 +1 281 892 3421
BP p.l.c.'s LEI Code 213800LH1BZH3D16G760
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KKNBPKBKBAFK
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