TIDMBP.
RNS Number : 5341U
BP PLC
02 August 2022
Top of page 1
FOR IMMEDIATE RELEASE
London 2 August 2022
BP p.l.c. Group results
Second quarter and first half 2022(a)
-------------------------------------
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Performing while transforming
Financial summary Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- -------- ------- -------- -------
Profit (loss) for the period attributable
to bp shareholders 9,257 (20,384) 3,116 (11,127) 7,783
Inventory holding (gains) losses*, net
of tax (1,607) (2,664) (736) (4,271) (2,078)
---------------------------------------------- ------- -------- ------- -------- -------
Replacement cost (RC) profit (loss)* 7,650 (23,048) 2,380 (15,398) 5,705
Net (favourable) adverse impact of adjusting
items*, net of tax 801 29,293 418 30,094 (277)
---------------------------------------------- ------- -------- ------- -------- -------
Underlying RC profit* 8,451 6,245 2,798 14,696 5,428
---------------------------------------------- ------- -------- ------- -------- -------
Operating cash flow* 10,863 8,210 5,411 19,073 11,520
Capital expenditure* (2,838) (2,929) (2,514) (5,767) (6,312)
---------------------------------------------- ------- -------- ------- -------- -------
Divestment and other proceeds(b) 722 1,181 215 1,903 5,054
---------------------------------------------- ------- -------- ------- -------- -------
Surplus cash flow* 6,590 4,089 695 10,679 2,382
---------------------------------------------- ------- -------- ------- -------- -------
Net issue (repurchase) of shares(c) (2,288) (1,592) (500) (3,880) (500)
---------------------------------------------- ------- -------- ------- -------- -------
Net debt*(d) 22,816 27,457 32,706 22,816 32,706
Announced dividend per ordinary share
(cents per share) 6.006 5.460 5.460 11.466 10.710
Underlying RC profit per ordinary share*
(cents) 43.58 32.00 13.80 75.55 26.75
---------------------------------------------- ------- -------- ------- -------- -------
Underlying RC profit per ADS* (dollars) 2.61 1.92 0.83 4.53 1.61
---------------------------------------------- ------- -------- ------- -------- -------
-- Net debt reduced -- 10% increase -- Delivering resilient -- Continued progress
to $22.8 billion; in resilient dividend hydrocarbons - Brazil in transformation
further share buyback per ordinary share; and Indonesia renewal to an IEC - momentum
announced unchanged financial options; high-grading in EV charging
frame; Canadian portfolio and hydrogen
Today's results show that bp continues to perform while transforming.
Our people have continued to work hard throughout the quarter helping
to solve the energy trilemma - secure, affordable and lower carbon energy.
We do this by providing the oil and gas the world needs today - while
at the same time, investing to accelerate the energy transition.
Bernard Looney
Chief executive officer
(a) This results announcement also represents bp's half-yearly financial report (see page 16).
(b) Divestment proceeds are disposal proceeds as per the
condensed group cash flow statement. See page 3 for more
information on divestment and other proceeds.
(c) Excludes the ordinary shares issued as non-cash
consideration for the acquisition of the public units of BP
Midstream Partners LP. See Note 7 for more information.
(d) See Note 9 for more information.
RC profit (loss), underlying RC profit (loss), surplus cash flow
and net debt are non-GAAP measures. Inventory holding (gains)
losses and adjusting items are non-GAAP adjustments.
* For items marked with an asterisk throughout this document,
definitions are provided in the Glossary on page 36 .
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Highlights
Underlying replacement cost profit* $8.5 billion
* Underlying replacement cost profit was $8.5 billion,
compared with $6.2 billion for the previous quarter.
This was driven by strong realized refining margins,
continuing exceptional oil trading performance and
higher liquids realizations. This was partly offset
by an average gas marketing and trading contribution,
down from the exceptional result in the first quarter,
including an impact from the ongoing outage at
Freeport LNG.
* Reported profit for the quarter was $9.3 billion,
compared with a loss of $20.4 billion for the first
quarter 2022. The reported result for the second
quarter includes a charge for adjusting items* before
tax of $0.3 billion within which are adverse fair
value accounting effects* of $0.8 billion. The first
quarter loss included a post-tax charge of $24.4
billion relating to bp's decision to exit its 19.75%
shareholding in Rosneft and its other businesses with
Rosneft in Russia.
Operating cash flow* $10.9 billion; net debt* reduced to $22.8 billion
* Operating cash flow in the quarter of $10.9 billion
includes $1.2 billion of Gulf of Mexico oil spill
payments within a working capital* build of $2.9
billion (after adjusting for inventory holding gains*
and fair value accounting effects).
* During the second quarter bp executed share buybacks
of $2.3 billion. The $2.5-billion programme announced
with the first-quarter 2022 results was completed on
22 July.
* Net debt fell for the ninth successive quarter to
reach $22.8 billion at the end of the second quarter.
Growing distributions within an unchanged financial frame
* A resilient dividend is bp's first priority within
its disciplined financial frame.
* It is underpinned by an average 2021-5 cash balance
point* of around $40 per barrel Brent, $11 per barrel
RMM and $3 per mmBtu Henry Hub (all 2020 real).
* bp has announced a 10% increase in its quarterly
dividend to 6.006 cents per ordinary share
* This increase reflects the underlying performance and
cash generation of the business, which has enabled
strong progress in delivering share buybacks and net
debt reduction.
* Looking ahead, on average, based on bp's current
forecasts, bp continues to expect to have capacity
for an annual increase in the dividend per ordinary
share of around 4% through 2025 at around $60 per
barrel Brent and subject to the board's discretion
each quarter.
* During the second quarter bp generated surplus cash
flow* of $6.6 billion and intends to execute a $3.5
billion share buyback prior to announcing its
third-quarter results. bp has now announced share
buybacks from 2021 and first-half 2022 surplus cash
flow equivalent to 60% of the cumulative surplus cash
flow.
* For 2022 and subject to maintaining a strong
investment grade credit rating, bp remains committed
to using 60% of surplus cash flow for share buybacks
and intends to allocate the remaining 40% to further
strengthen the balance sheet.
Progressing transformation to an Integrated Energy Company
* In resilient hydrocarbons bp has strengthened its
renewal options partnering with Petrobras in a
successful Drill Stem Test at the Cabo Frio discovery
in the Campos Basin offshore Brazil and participating
in the Timpan-1 discovery offshore Indonesia. bp
continues to high-grade its portfolio, agreeing to
acquire a 35% interest in the undeveloped Bay du Nord
discovery offshore Canada as part of the transaction
to sell its 50% interest in the Sunrise oil sands
project.
* In convenience and mobility bp has continued to
progress its EV charging strategy, recently
announcing expansion plans with Iberdrola in Spain
and Portugal and signing a contract to operate
China's largest fast(a) EV charging hub.
* In low carbon energy bp has announced plans to take a
40.5% stake in the AREH project to lead and operate
one of the world's largest planned renewables and
green hydrogen* energy hubs based in Western
Australia; has announced its intent to partner with
Iberdrola to develop large-scale integrated green
hydrogen production in Spain, Portugal and the UK;
and has continued to progress its renewables strategy,
submitting bids for two offshore wind leases in the
Netherlands.
bp continues to build a track record of delivery against its disciplined
financial frame, which remains unchanged. Net debt fell for the ninth
successive quarter; we are investing with discipline to advance our strategy;
and we are delivering on our commitment to shareholder distributions
- raising our dividend by 10% and announcing a further $3.5 billion share
buyback.
Murray Auchincloss
Chief financial officer
-- "fast charging" includes rapid charging >=50kW and ultra-fast charging >=150kW.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 42.
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Financial results
At 31 December 2021, the group's reportable segments were gas
& low carbon energy, oil production & operations, customers
& products and Rosneft. The group has ceased to report Rosneft
as a separate segment in the group's financial reporting for 2022.
From the first quarter of 2022, the group's reportable segments are
gas & low carbon energy, oil production & operations and
customers & products. For more information see Note 1 Basis of
preparation - Investment in Rosneft. For the period from 1 January
2022 to 27 February 2022, any net income from Rosneft is classified
as an adjusting item.
In addition to the highlights on page 2:
-- Profit attributable to bp shareholders in the second quarter
was $9.3 billion compared with $3.1 billion in the same period of
2021 largely as a result of higher realizations. Loss attributable
to bp shareholders in the half year was $11.1 billion compared with
a profit of $7.8 billion in the same period of 2021.
-- Adjusting items* in the second quarter and half year were an
adverse pre-tax impact of $0.3 billion and $31.1 billion
respectively, compared with a favourable pre-tax impact of $8
million and $704 million in the same periods of 2021.
-- As a result of bp's two nominated directors stepping-down
from the Rosneft board on 27 February, bp determined that it no
longer meets the criteria set out under IFRS for having
"significant influence" over Rosneft. bp therefore no longer equity
accounts for its interest in Rosneft from that date, treating it
prospectively as a financial asset measured at fair value. Within
the first quarter and first half results, the loss of significant
influence and an impairment assessment led to a net pre-tax charge
of $24.0 billion classified as an adjusting item, reducing equity
by $14.4 billion. A further $1.5 billion pre-tax charge relating to
bp's decision to exit its other businesses with Rosneft in Russia
is also included in the first quarter and first half results,
reducing equity by $1.2 billion. See Note 1 for further
information.
-- Adjusting items for the second quarter and half year 2022
also include adverse fair value accounting effects* of $0.8 billion
and $6.6 billion respectively, primarily arising from the changes
in the fair value of derivatives entered into by the group to
manage currency exposure and interest rate risks relating to hybrid
bonds and the increase in forward gas prices.
-- Pre-tax inventory holding gains of $2.1 billion and $5.6
billion for the second quarter and half year 2022 respectively
arose due to significant increases in most crude and product prices
during the periods.
-- The effective tax rate (ETR) on RC profit or loss* for the
second quarter and half year was 33% and -62% respectively,
compared with 37% and 31% for the same periods in 2021. Excluding
adjusting items, the underlying ETR* for the second quarter and
half year was 29% and 30% respectively, compared with 27% and 29%
for the same periods a year ago. The higher underlying ETR for the
second quarter and half year reflects the absence of
equity-accounted earnings from Rosneft. ETR on RC profit or loss
and underlying ETR are non-GAAP measures.
-- Operating cash flow* for the second quarter and half year
2022 was $10.9 billion and $19.1 billion respectively, compared
with $5.4 billion and $11.5 billion for the same periods last year.
The increase is driven largely as a result of higher
realizations.
-- Capital expenditure* in the second quarter and half year 2022
was $2.8 billion and $5.8 billion respectively, compared with $2.5
billion and $6.3 billion in the same periods of 2021.
-- Total divestment and other proceeds for the second quarter
and half year were $0.7 billion and $1.9 billion respectively,
compared with $0.2 billion and $5.1 billion for the same periods in
2021. Other proceeds for the second quarter and half year 2022
consist of $0.4 billion and $0.6 billion respectively of proceeds
from the disposal of a loan note related to the Alaska divestment.
See page 33 for further information.
-- At the end of the second quarter, net debt* was $22.8
billion, compared with $27.5 billion at the end of the first
quarter 2022 and $32.7 billion at the end of the second quarter
2021.
-- On 11 July 2022 the UK government introduced legislation
which imposes a new levy on the profits of UK oil and gas
companies. The new levy will increase the headline rate of tax from
40% to 65% on profits from bp's North Sea business made from 26 May
2022 until 31 December 2025. The introduction of the levy will
result in a one-off non-cash deferred tax charge of an estimated
$0.8 billion to reflect the higher tax rate now applicable to
existing temporary differences unwinding over the period 1 October
2022 to 31 December 2025. As the legislation was substantively
enacted after 30 June 2022, this charge will be presented within
adjusting items in the third quarter 2022.
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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 2022 2022 2021 2022 2021
--------------------------------------------------- ------- -------- ------- -------- -------
RC profit (loss) before interest and
tax
gas & low carbon energy 2,737 (1,524) 927 1,213 4,357
oil production & operations 7,237 3,831 3,118 11,068 4,597
customers & products 3,531 1,981 640 5,512 1,574
other businesses & corporate(a) (1,028) (24,719) 218 (25,747) (97)
Of which:
other businesses & corporate excluding
Rosneft (1,028) (686) (425) (1,714) (1,103)
Rosneft - (24,033) 643 (24,033) 1,006
Consolidation adjustment - UPII* (21) 34 (31) 13 (18)
--------------------------------------------------- ------- -------- ------- -------- -------
RC profit (loss) before interest and
tax 12,456 (20,397) 4,872 (7,941) 10,413
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (539) (644) (687) (1,183) (1,416)
Taxation on a RC basis (3,988) (1,693) (1,567) (5,681) (2,821)
Non-controlling interests (279) (314) (238) (593) (471)
--------------------------------------------------- ------- -------- ------- -------- -------
RC profit (loss) attributable to bp shareholders* 7,650 (23,048) 2,380 (15,398) 5,705
Inventory holding gains (losses)* 2,146 3,501 953 5,647 2,683
Taxation (charge) credit on inventory
holding gains and losses (539) (837) (217) (1,376) (605)
--------------------------------------------------- ------- -------- ------- -------- -------
Profit (loss) for the period attributable
to bp shareholders 9,257 (20,384) 3,116 (11,127) 7,783
--------------------------------------------------- ------- -------- ------- -------- -------
Analysis of underlying RC profit (loss) before interest and
tax
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit (loss) before interest
and tax
gas & low carbon energy 3,080 3,595 1,240 6,675 3,510
oil production & operations 5,902 4,683 2,242 10,585 3,807
customers & products 4,006 2,156 827 6,162 1,483
other businesses & corporate(a) (201) (259) 384 (460) 577
Of which:
other businesses & corporate excluding
Rosneft (201) (259) (305) (460) (475)
Rosneft - - 689 - 1,052
Consolidation adjustment - UPII (21) 34 (31) 13 (18)
------------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit before interest
and tax 12,766 10,209 4,662 22,975 9,359
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (509) (486) (485) (995) (1,066)
Taxation on an underlying RC basis (3,527) (3,164) (1,141) (6,691) (2,394)
Non-controlling interests (279) (314) (238) (593) (471)
------------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit attributable to
bp shareholders* 8,451 6,245 2,798 14,696 5,428
------------------------------------------------- ------- ------- ------- ------- -------
Reconciliations of underlying RC profit attributable to bp
shareholders to the nearest equivalent IFRS measure are provided on
page 1 for the group and on pages 6-15 for the segments.
(a) From first quarter 2022 the results of Rosneft, previously
reported as a separate segment, are also included in other
businesses & corporate. Comparative information for 2021 has
been restated to reflect the changes in reportable segments. For
more information see Note 1 Basis of preparation - Investment in
Rosneft.
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Operating Metrics
Operating metrics First half vs First
2022 half 2021
------------------------------------------- ---------- ----------
Tier 1 and tier 2 process safety events* 24 -8
Reported recordable injury frequency* 0.197 +15.9%
upstream* production(a) (mboe/d) 2,224 +2.6%
upstream unit production costs*(b) ($/boe) 6.53 -10.9%
bp-operated hydrocarbon plant reliability* 95.3% +1.6
bp-operated refining availability*(a) 94.4% +0.3
-------------------------------------------- ---------- ----------
(a) See Operational updates on pages 6, 9 and 11.
(b) Reflecting higher volumes and lower costs including phasing impacts.
Outlook & Guidance
Macro outlook
-- bp expects oil prices to remain elevated in the third quarter
due to ongoing disruption to Russian supply, reduced levels of
spare capacity and with inventory levels significantly below the
five year average.
-- bp expects gas prices to remain elevated and volatile during
the third quarter due to a lack of supply to Europe with the
outlook heavily dependent on Russian pipeline flows or other supply
disruptions.
-- In the third quarter of 2022, bp expects industry refining
margins to remain elevated due to ongoing supply disruptions.
3Q22 guidance
-- Looking ahead, we expect third-quarter 2022 upstream*
production on a reported basis to be broadly flat compared with the
second-quarter 2022, with improved base performance offset by
planned maintenance activity in high margin regions.
-- In our customers & products business, there remains an
elevated level of uncertainty due to the ongoing impacts of the
conflict in Ukraine and consumer demand changes driven by
inflationary pressures. We expect high base oil prices to persist
in Castrol. In refining, we expect margins to remain high, the
benefits of which will be partially offset by a continued high
level of turnaround activity and elevated energy prices.
2022 Guidance
In addition to the guidance on page 2:
-- We continue to expect reported upstream production to be
broadly flat compared with 2021 despite the absence of production
from our Russia incorporated joint ventures. On an underlying
basis, we expect upstream production to be slightly higher.
-- bp continues to expect the other businesses & corporate
underlying annual charge to be in a range of $1.2-1.4 billion for
2022. The charge may vary from quarter to quarter.
-- bp continues to expect the depreciation, depletion and
amortization to be at a similar level to 2021.
-- The underlying ETR* for 2022 is now expected to be around 35%
but is sensitive to the impact that volatility in the current price
environment may have on the geographical mix of the group's profits
and losses. The reduction from prior guidance of around 40%
reflects changes in the geographical mix of the group's profits and
losses and additional recognition of deferred tax assets, partly
offset by the impact of the new levy on UK oil and gas profits.
-- bp continues to expect capital expenditure to be in a range
of $14-15 billion for 2022.
-- bp continues to expect divestment and other proceeds for the
year of $2-3 billion. Against a target of $25 billion of divestment
and other proceeds between the second half of 2020 and 2025 bp has
now received almost $14.7 billion of proceeds.
-- bp continues to expect Gulf of Mexico oil spill payments for
the year to be around $1.4 billion pre-tax including the $1.2
billion pre-tax paid during the second quarter.
-- For 2022, and subject to maintaining a strong investment
grade credit rating, bp remains committed to using 60% of surplus
cash flow* for share buybacks and intends to allocate the remaining
40% to further strengthen the balance sheet.
-- On average, based on bp's current forecasts, at around $60
per barrel Brent and subject to the board's discretion each
quarter, bp continues to expect to be able to deliver share
buybacks of around $4.0 billion per annum and have capacity for an
annual increase in the dividend per ordinary share of around 4%
through 2025.
-- In setting the dividend per ordinary share and the buyback
each quarter, the board will take into account factors including
the cumulative level of and outlook for surplus cash flow, the cash
balance point* and the maintenance of a strong investment grade
credit rating.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 42.
----------------------------------------------------------------------
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gas & low carbon energy
Financial results
-- The replacement cost profit before interest and tax for the
second quarter and half year was $2,737 million and $1,213 million
respectively, compared with $927 million and $4,357 million for the
same periods in 2021. The second quarter and half year include an
adverse impact of net adjusting items* of $343 million and $5,462
million respectively, compared with an adverse impact of net
adjusting items of $313 million and a favourable impact of $847
million for the same periods in 2021.
-- After excluding adjusting items, the underlying replacement
cost profit before interest and tax* for the second quarter and
half year was $3,080 million and $6,675 million respectively,
compared with $1,240 million and $3,510 million for the same
periods in 2021. Adjusting items include adverse fair value
accounting effects* of $74 million for the quarter and $5,089
million for the half year, primarily arising from the increase in
forward gas prices during the first quarter.
-- The underlying replacement cost profit for the second
quarter, compared with the same period in 2021, reflects higher
realizations and higher production. Gas marketing and trading
delivered an average result in the second quarter. The result
includes management's best estimate of the impact of the recent
outage at Freeport LNG leading to a significant reduction in the
number of cargoes expected to be received. For the half year the
result reflects higher realizations and higher production partially
offset by a higher depreciation, depletion and amortization charge
and a lower gas marketing and trading result.
Operational update
-- Reported production for the quarter was 924mboe/d, 5.5%
higher than the same period in 2021. Underlying production* was
7.5% higher, mainly due to major project* start-ups in 2021, partly
offset by base decline.
-- Reported production for the half year was 944mboe/d, 5.9%
higher than the same period in 2021 due to major project start-ups
in 2021, partly offset by base decline and the partial divestment
in Oman in the first quarter of 2021. Underlying production for the
half year was 9.2% higher.
-- Renewables pipeline* at the end of the quarter was 25.8GW (bp
net). The renewables pipeline increased by 2.7GW during the half
year, primarily as a result of bp and its partner EnBW being
awarded a lease option off the east coast of Scotland to develop an
offshore wind project with a total generating capacity of around
2.9GW (1.45GW bp net) in the first quarter, and additions to the
Lightsource bp pipeline.
Strategic progress
gas
-- On 11 July Harbour Energy announced drilling completion of
the Timpan-1 exploration well located 150 kilometres offshore
Indonesia. The successful well was drilled on the Andaman II
licence offshore North Sumatra, Indonesia. The partners in the
licence are Premier Oil Andaman Ltd, a Harbour Energy Co. (40%,
operator), bp (30%) and Mubadala (30%).
-- On 27 June bp was awarded a new exploration block, offshore
Egypt. The King Mariout Offshore area, with 100% bp working
interest, is located approximately 20 kilometres west of the Raven
field in the Mediterranean Sea.
-- On 20 June bp signed 30-year Agung I and Agung II
production-sharing contracts* with the government of Indonesia.
-- These events build on the progress announced in our
first-quarter results, which comprised the following: bp increased
its shareholding in the Shah Deniz gas project in the Caspian Sea,
offshore Azerbaijan, by 1.16% to 29.99%; construction started on
the Gas Natural Acu (GNA) 2 power plant at the Port of Acu, Rio de
Janeiro state, Brazil, which is expected to have an installed
capacity of 1.7GW; bp and the Korea Gas Corporation (KOGAS) signed
a long-term agreement to supply 1.58 million tonnes of liquified
natural gas (LNG) per year from 2025 to KOGAS through a new 18-year
contract.
low carbon energy
-- On 15 June bp announced it has agreed to acquire a 40.5%
equity stake in, and to become operator of the Asian Renewable
Energy Hub (AREH) in the Pilbara region of Western Australia, which
has the potential to be one of the largest renewables and green
hydrogen* hubs in the world. The other partners are
InterContinental Energy (26.4%), CWP Global (17.8%) and Macquarie
Capital and Macquarie's Green Investment Group (15.3%).
-- On 24 May bp announced that Abu Dhabi's ADNOC would join bp's
blue hydrogen* project H2Teesside, Masdar signed a memorandum of
understanding to acquire a stake in bp's proposed HyGreen Teesside
green hydrogen project, and that bp and ADNOC would commence a
study for a new world-scale blue hydrogen project in Abu Dhabi.
-- On 12 May bp submitted bids for two individual offshore wind
leases in the Netherlands - Hollandse Kust West sites VI and VII -
with potential for combined 1.4GW generating capacity. The bids
underpin plans for further integrated clean energy investments by
bp in the Netherlands, and propose creating innovative solutions to
enhance the Dutch North Sea ecosystem.
-- These events build on the progress announced in our
first-quarter results, which included the following: bp announced
it is partnering with Marubeni to explore a selected offshore wind
development opportunity in Japan. bp will acquire a 49% interest in
a project to jointly bid in the Ishikari licence round; bp and
partner HyCC announced plans to develop H2-Fifty, a 250MW green
hydrogen production plant in the port area of Rotterdam; bp
submitted bids for our H2Teesside hydrogen project and Net Zero
Teesside Power project as part of the UK government's Phase 2 of
cluster sequencing for carbon capture, usage and storage (CCUS)
deployment.
Top of page 7
gas & low carbon energy (continued)
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- ------- ------- ------- -----
Profit (loss) before interest and tax 2,728 (1,499) 931 1,229 4,383
Inventory holding (gains) losses* 9 (25) (4) (16) (26)
---------------------------------------------- ------- ------- ------- ------- -----
RC profit (loss) before interest and
tax 2,737 (1,524) 927 1,213 4,357
Net (favourable) adverse impact of adjusting
items 343 5,119 313 5,462 (847)
---------------------------------------------- ------- ------- ------- ------- -----
Underlying RC profit before interest
and tax 3,080 3,595 1,240 6,675 3,510
Taxation on an underlying RC basis (717) (1,009) (244) (1,726) (779)
---------------------------------------------- ------- ------- ------- ------- -----
Underlying RC profit before interest 2,363 2,586 996 4,949 2,731
---------------------------------------------- ------- ------- ------- ------- -----
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------ ------- ------- ------- ----- -----
Depreciation, depletion and amortization
Total depreciation, depletion and amortization 1,203 1,255 1,115 2,458 1,969
------------------------------------------------ ------- ------- ------- ----- -----
Exploration write-offs
----------------------------------------------- ------- ------- ------- ----- -----
Exploration write-offs - (2) 21 (2) 27
------------------------------------------------ ------- ------- ------- ----- -----
Adjusted EBITDA*
----------------------------------------------- ------- ------- ------- ----- -----
Total adjusted EBITDA 4,283 4,848 2,376 9,131 5,506
------------------------------------------------ ------- ------- ------- ----- -----
Capital expenditure*
gas 681 642 705 1,323 1,516
low carbon energy(a) 142 219 42 361 1,116
------------------------------------------------ ------- ------- ------- ----- -----
Total capital expenditure 823 861 747 1,684 2,632
------------------------------------------------ ------- ------- ------- ----- -----
(a) First half 2021 includes $712 million in respect of the
remaining payment to Equinor for our investment in our strategic US
offshore wind partnership and $326 million as a lease option fee
deposit paid to The Crown Estate in connection with our
participation in the UK Round 4 Offshore Wind Leasing together with
our partner EnBW.
Second First Second First First
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ----- -----
Production (net of royalties)(b)
Liquids* (mb/d) 112 121 109 116 111
Natural gas (mmcf/d) 4,709 4,897 4,440 4,803 4,531
Total hydrocarbons* (mboe/d) 924 966 875 944 892
---------------------------------- ------- ------- ------- ----- -----
Average realizations* (c)
Liquids ($/bbl) 105.50 86.09 61.69 95.40 58.61
Natural gas ($/mcf) 8.42 7.88 4.14 8.15 4.04
Total hydrocarbons* ($/boe) 55.79 50.91 28.97 53.31 27.89
---------------------------------- ------- ------- ------- ----- -----
(b) Includes bp's share of production of equity-accounted
entities in the gas & low carbon energy segment.
(c) Realizations are based on sales by consolidated subsidiaries
only - this excludes equity-accounted entities.
Top of page 8
gas & low carbon energy (continued)
30 June 31 March 30 June
low carbon energy(a) 2022 2022 2021
Renewables (bp net, GW)
Installed renewables capacity* 2.0 1.9 1.6
-------------------------------------------------- ------- -------- -------
Developed renewables to FID* 4.4 4.4 3.7
Renewables pipeline 25.8 24.9 21.2
of which by geographical area:
================================================= ------- -------- -------
Renewables pipeline - Americas 16.9 16.3 15.3
Renewables pipeline - Asia Pacific 1.4 1.4 0.8
Renewables pipeline - Europe 7.2 7.0 5.1
Renewables pipeline - Other 0.2 0.2 -
================================================== ------- -------- -------
of which by technology:
================================================= ------- -------- -------
Renewables pipeline - offshore wind 5.2 5.2 3.7
Renewables pipeline - solar 20.6 19.7 17.5
================================================== ------- -------- -------
Total Developed renewables to FID and Renewables
pipeline 30.1 29.2 24.9
-------------------------------------------------- ------- -------- -------
(a) Because of rounding, some totals may not agree exactly with
the sum of their component parts.
Top of page 9
oil production & operations
Financial results
-- The replacement cost profit before interest and tax for the
second quarter and half year was $7,237 million and $11,068 million
respectively, compared with $3,118 million and $4,597 million for
the same periods in 2021. The second quarter and half year include
a favourable impact of net adjusting items* of $1,335 million and
$483 million respectively, which includes a favourable impact of
$904 million from Aker BP's acquisition of Lundin Energy's
exploration and production business, compared with a favourable
impact of net adjusting items of $876 million and $790 million for
the same periods in 2021.
-- After excluding adjusting items, the underlying replacement
cost profit before interest and tax* for the second quarter and
half year was $5,902 million and $10,585 million respectively,
compared with $2,242 million and $3,807 million for the same
periods in 2021.
-- The underlying replacement cost profit for the second quarter
and half year, compared with the same periods in 2021, reflects
higher realizations and higher production.
Operational update
-- Reported production for the quarter was 1,274mboe/d, 2.3%
higher than the second quarter of 2021. Underlying production* for
the quarter was 5.5% higher compared with the second quarter of
2021 reflecting bpx energy performance, major projects* and lower
seasonal maintenance partly offset by base performance.
-- Reported production for the half year was 1,280mboe/d,
broadly flat compared with the same period of 2021. Underlying
production for the half year was 2.8% higher compared with the same
period of 2021 reflecting bpx energy performance, and major
projects partly offset by base performance.
Strategic progress
-- On 13 June bp announced that it has agreed to sell its 50%
interest in the Sunrise oil sands project in Alberta, Canada, to
Calgary-based Cenovus Energy. As part of the deal, bp has agreed to
acquire Cenovus's interest in the Bay du Nord project in Eastern
Canada, adding to its sizeable acreage position offshore
Newfoundland and Labrador. Subject to regulatory approvals the
transaction is expected to complete in 2022.
-- On 30 June Aker BP completed the acquisition of Lundin
Energy's exploration and production business. The combined firm, in
which bp now owns a 15.9% stake, is the second-largest operating
company on the Norwegian continental shelf.
-- On 11 July our partner Petrobras announced a successful Drill
Stem Test at the Cabo Frio discovery in the Campos Basin offshore
Brazil, evaluating a thick interval of pre-salt carbonate rocks and
confirming good productivity (bp 50%, Petrobras operator 50%).
-- The hook-up and commissioning programme of the Mad Dog Phase
2 Argos platform topsides is proceeding to plan, with a successful
wells campaign nearing completion. An issue with two of the subsea
production flexible joints was detected during testing. This is
being assessed and an update on whether the expected project
start-up in 2022 is impacted will be provided in due course, as
appropriate (bp operator 60.5%, Woodside Energy 23.9%, Chevron
15.6%).
-- On 1 August bp and Eni completed the formation of Azule
Energy, an independent incorporated 50:50 joint venture between bp
and Eni, that combines the two companies' Angolan businesses.
-- These events build on the progress announced in our
first-quarter results, which included the start-up of the Herschel
Expansion major project* in the deepwater Gulf of Mexico. Phase 1
of the project comprises development of a new subsea production
system and the first of up to three wells tied to the Na Kika
platform.
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- ------- ------- ------- -------
Profit before interest and tax 7,230 3,832 3,112 11,062 4,606
Inventory holding (gains) losses* 7 (1) 6 6 (9)
---------------------------------------------- ------- ------- ------- ------- -------
RC profit before interest and tax 7,237 3,831 3,118 11,068 4,597
Net (favourable) adverse impact of adjusting
items (1,335) 852 (876) (483) (790)
---------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit before interest
and tax 5,902 4,683 2,242 10,585 3,807
Taxation on an underlying RC basis (2,295) (1,912) (939) (4,207) (1,668)
---------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit before interest 3,607 2,771 1,303 6,378 2,139
---------------------------------------------- ------- ------- ------- ------- -------
Top of page 10
oil production & operations (continued)
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------ ------- ------- ------- ------ -----
Depreciation, depletion and amortization
----------------------------------------------- ------- ------- ------- ------ -----
Total depreciation, depletion and amortization 1,371 1,429 1,559 2,800 3,133
------------------------------------------------ ------- ------- ------- ------ -----
Exploration write-offs
----------------------------------------------- ------- ------- ------- ------ -----
Exploration write-offs 79 51 8 130 64
------------------------------------------------ ------- ------- ------- ------ -----
Adjusted EBITDA*
----------------------------------------------- ------- ------- ------- ------ -----
Total adjusted EBITDA 7,352 6,163 3,809 13,515 7,004
------------------------------------------------ ------- ------- ------- ------ -----
Capital expenditure*
----------------------------------------------- ------- ------- ------- ------ -----
Total capital expenditure 1,208 1,254 1,148 2,462 2,467
------------------------------------------------ ------- ------- ------- ------ -----
Second First Second First First
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ----- -----
Production (net of royalties)(a)
Liquids* (mb/d) 935 948 938 941 967
Natural gas (mmcf/d) 1,964 1,964 1,786 1,964 1,798
Total hydrocarbons* (mboe/d) 1,274 1,286 1,245 1,280 1,277
---------------------------------- ------- ------- ------- ----- -----
Average realizations* (b)
Liquids ($/bbl) 100.34 83.47 60.55 92.00 56.69
Natural gas ($/mcf) 7.97 9.40 3.90 8.67 4.00
Total hydrocarbons* ($/boe) 87.46 76.64 52.47 82.12 49.61
---------------------------------- ------- ------- ------- ----- -----
(a) Includes bp's share of production of equity-accounted
entities in the oil production & operations segment.
(b) Realizations are based on sales by consolidated subsidiaries
only - this excludes equity-accounted entities.
Top of page 11
customers & products
Financial results
-- The replacement cost profit before interest and tax for the
second quarter and half year was $3,531 million and $5,512 million
respectively, compared with $640 million and $1,574 million for the
same periods in 2021. The second quarter and half year included an
adverse impact of net adjusting items* of $475 million and $650
million respectively, compared with an adverse impact of net
adjusting items of $187 million and a favourable impact of $91
million for the same periods in 2021.
-- After excluding adjusting items, the underlying replacement
cost profit before interest and tax* for the second quarter and
half year was $4,006 million and $6,162 million respectively,
compared with $827 million and $1,483 million for the same periods
in 2021.
-- The customers & products results for the second quarter
and half year reflect the benefit of significantly higher refining
margins and an exceptional oil trading contribution.
-- customers - the convenience and mobility results, excluding
Castrol, for the quarter and half year were lower than the same
periods in 2021. The benefits of a robust convenience performance
and higher aviation volumes were more than offset by a challenging
macro environment, with rising crude prices and inflation impacting
margins, costs and customer purchasing behaviour. In addition, the
results were impacted by adverse foreign exchange movements.
Castrol results for the quarter and half year were lower than
the same periods in 2021. Base oil prices continued to increase,
and COVID lockdowns in China, along with rising inflation, impacted
results.
-- products - the products results for the quarter and half year
were higher compared to the same periods in 2021. In refining, the
result benefited from the capture of significantly higher margins,
partially offset by increased energy costs and higher turnaround
and maintenance activity. In addition, the contribution from oil
trading was exceptional.
Operational update
-- Utilization for the second quarter and half year was higher
than the same periods in 2021 despite higher planned maintenance,
mainly due to lower COVID related demand impacts. bp-operated
refining availability* for the second quarter and half year was
93.9% and 94.4% respectively, higher compared with 93.5% and 94.1%
for the same periods in 2021.
Strategic progress
-- In July, bp and Iberdrola announced their intent to form a
strategic collaboration to accelerate electric vehicle (EV)
charging infrastructure roll-out and green hydrogen* production.
This includes plans to install 5,000 fast(a) EV charge points by
2025 and up to a total of 11,000 by 2030 in Spain and Portugal, and
to develop large-scale integrated green hydrogen production hubs in
Spain, Portugal and the UK, aiming for up to 600ktpa production
capacity by 2030.
-- In June, bp signed a contract with Shenzhen Huize New Energy
Co. Ltd to operate China's largest fast(a) EV charging hub, in
Shenzhen, offering charging options for consumers, fleets and
heavy-duty truck users.
-- In July, bp has signed a new supply contract and brand
partnership with Julius Stiglechner GmbH, in Austria, to establish
the bp brand in the majority of the 160 Stiglechner filling station
network by the end of 2023. In addition, bp and Stiglechner will
explore further opportunities in EV charging and convenience in
Austria.
-- In June, Castrol, which has expertise in coolants, signed a
memorandum of understanding with Submer, liquid cooling
specialists, to accelerate the adoption of liquid immersion
coolants for data centres. Castrol and Submer will also explore
solutions for the recovery and reuse of waste heat produced in data
centres.
-- In July, bp and leading gas and engineering company BOC, a
Linde company, announced a new agreement to build a hydrogen
refuelling station at the bp truckstop in Queensland. It will be
the first service station in Australia with hydrogen refuelling
capability.
-- These events build on the progress announced in our
first-quarter results: completed the sale of our retail assets in
Switzerland to Oel Pool AG; launched our strategic partnership with
Volkswagen Group to roll-out an EV fast(a) charging network in UK
and Europe; announced a ten year plan to invest GBP1 billion to
support the roll-out EV charging infrastructure across the UK;
signed a global convenience partnership with Uber and announced the
pilot of checkout-free technology in the US; signed a 10-year
strategic agreement with Nuseed, with plans to accelerate market
adoption of Nuseed Carinata; bp's Lingen refinery became Germany's
first production facility to use co-processing on an industrial
scale to produce sustainable aviation fuel (SAF); acquired a stake
in Green Biofuels Ltd, the UK's largest provider of low emission
hydrogenated vegetable oil fuels; Air bp signed a strategic
collaboration agreement with DHL Express and a SAF supply contract
with Rolls-Royce; Castrol signed a strategic cooperation agreement
with BYD for the supply of the Castrol ON range of EV fluids and a
new commercial agreement with Tesco to stock a range of Castrol
products; BP Midstream Partners LP became a wholly-owned subsidiary
of bp in April; SAPREF shareholders (bp and Shell), announced the
pause of refinery operations in South Africa for an indefinite
period from the end of March 2022; in April, the New Zealand
Whangarei refinery, in which bp holds a share, converted to an
import-only terminal.
(a) "fast charging" includes rapid charging >=50kW and ultra-fast charging >=150kW.
Top of page 12
customers & products (continued)
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- ------- ------- ------- -------
Profit (loss) before interest and tax 5,693 5,456 1,527 11,149 4,066
Inventory holding (gains) losses* (2,162) (3,475) (887) (5,637) (2,492)
---------------------------------------------- ------- ------- ------- ------- -------
RC profit (loss) before interest and
tax 3,531 1,981 640 5,512 1,574
Net (favourable) adverse impact of adjusting
items 475 175 187 650 (91)
---------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit before interest
and tax 4,006 2,156 827 6,162 1,483
Of which:(a)
customers - convenience & mobility 679 522 951 1,201 1,609
Castrol - included in customers 223 256 265 479 599
products - refining & trading 3,327 1,634 (124) 4,961 (126)
Taxation on an underlying RC basis (783) (400) (123) (1,183) (256)
---------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit before interest 3,223 1,756 704 4,979 1,227
---------------------------------------------- ------- ------- ------- ------- -------
(a) A reconciliation to RC profit before interest and tax by business is provided on page 33.
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------ ------- ------- ------- ----- -----
Adjusted EBITDA*(b)
customers - convenience & mobility 994 848 1,280 1,842 2,262
Castrol - included in customers 261 295 304 556 677
products - refining & trading 3,727 2,025 301 5,752 720
4,721 2,873 1,581 7,594 2,982
------- ------- ------- ----- -----
Depreciation, depletion and amortization
----------------------------------------------- ------- ------- ------- ----- -----
Total depreciation, depletion and amortization 715 717 754 1,432 1,499
------------------------------------------------ ------- ------- ------- ----- -----
Capital expenditure*
customers - convenience & mobility 334 347 255 681 571
Castrol - included in customers 43 52 42 95 83
products - refining & trading 341 368 264 709 480
Total capital expenditure 675 715 519 1,390 1,051
------------------------------------------------ ------- ------- ------- ----- -----
(b) A reconciliation to RC profit before interest and tax by business is provided on page 33.
Retail(c) Second First Second First First
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ------ ------
bp retail sites* - total (#) 20,600 20,550 20,300 20,600 20,300
bp retail sites in growth markets* 2,650 2,650 2,700 2,650 2,700
Strategic convenience sites* 2,200 2,150 2,000 2,200 2,000
-------------------------------------- ------- ------- ------- ------ ------
(c) Reported to the nearest 50.
Marketing sales of refined products Second First Second First First
(mb/d)
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ----- -----
US 1,163 1,113 1,131 1,138 1,074
Europe 1,032 883 838 958 772
Rest of World 439 471 469 455 455
------------------------------------------ ------- ------- ------- ----- -----
2,634 2,467 2,438 2,551 2,301
Trading/supply sales of refined products 369 352 415 361 376
------------------------------------------ ------- ------- ------- ----- -----
Total sales volume of refined products 3,003 2,819 2,853 2,912 2,677
------------------------------------------ ------- ------- ------- ----- -----
Top of page 13
customers & products (continued)
Refining marker margin*(d) Second First Second First First
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ----- -----
bp average refining marker margin (RMM)
($/bbl) 45.5 18.9 13.7 32.2 11.2
----------------------------------------- ------- ------- ------- ----- -----
(d) The RMM in the quarter is calculated based on bp's current
refinery portfolio. On a comparative basis, the second quarter and
half year 2021 RMM would be $14.2/bbl and $11.6/bbl
respectively.
Refinery throughputs (mb/d) Second First Second First First
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ----- -----
US 637 758 692 698 709
Europe 841 807 763 824 755
Rest of World 2 85 52 43 90
---------------------------------------- ------- ------- ------- ----- -----
Total refinery throughputs 1,480 1,650 1,507 1,565 1,554
---------------------------------------- ------- ------- ------- ----- -----
bp-operated refining availability* (%) 93.9 95.0 93.5 94.4 94.1
---------------------------------------- ------- ------- ------- ----- -----
Top of page 14
other businesses & corporate
Other businesses & corporate comprises innovation &
engineering, bp ventures, Launchpad, regions, cities &
solutions, our corporate activities & functions and any
residual costs of the Gulf of Mexico oil spill. From first quarter
2022 the results of Rosneft, previously reported as a separate
segment, are also included in other businesses & corporate.
Comparative information for 2021 has been restated to reflect the
changes in reportable segments. For more information see Note 1
Basis of Preparation - Investment in Rosneft.
Financial results
-- The replacement cost loss before interest and tax for the
second quarter and half year was $1,028 million and $25,747 million
respectively, compared with a profit of $218 million and a loss of
$97 million for the same periods in 2021. The second quarter and
half year included an adverse impact of net adjusting items* of
$827 million and $25,287 million respectively, compared with an
adverse impact of net adjusting items of $166 million and $674
million for the same periods in 2021. The adjusting items for the
half year of 2022 mainly relate to Rosneft.
-- Fair value accounting effects* for the second quarter and
half year had an adverse impact of $686 million and $1,111 million
respectively, compared with a favourable impact of $73 million and
an adverse impact of $374 million for the same periods in 2021.
-- After excluding adjusting items, the underlying replacement
cost loss before interest and tax* for the second quarter and half
year was $201 million and $460 million respectively, compared with
a profit of $384 million and $577 million for the same periods in
2021.
-- For other businesses & corporate excluding Rosneft, after
excluding adjusting items, the underlying replacement cost loss
before interest and tax for the second quarter and half year was
$201 million and $460 million respectively, compared with $305
million and $475 million for the same periods in 2021, reflecting
mainly foreign exchange impacts.
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- -------- ------- -------- -----
Profit (loss) before interest and tax (1,028) (24,719) 286 (25,747) 59
Inventory holding (gains) losses* - - (68) - (156)
---------------------------------------------- ------- -------- ------- -------- -----
RC profit (loss) before interest and
tax (1,028) (24,719) 218 (25,747) (97)
Net (favourable) adverse impact of adjusting
items(a) 827 24,460 166 25,287 674
---------------------------------------------- ------- -------- ------- -------- -----
Underlying RC profit (loss) before interest
and tax (201) (259) 384 (460) 577
Taxation on an underlying RC basis 167 23 33 190 52
---------------------------------------------- ------- -------- ------- -------- -----
Underlying RC profit (loss) before interest (34) (236) 417 (270) 629
---------------------------------------------- ------- -------- ------- -------- -----
(a) Includes fair value accounting effects relating to the
hybrid bonds that were issued on 17 June 2020. See page 37 for more
information.
other businesses & corporate (excluding Rosneft)
Strategic progress
-- On 5 July, bp and Thyssenkrupp Steel signed a memorandum of
understanding (MoU) focused on the development of long-term supply
of low carbon hydrogen and renewable power to support
decarbonization of steel.
-- This event builds on the progress announced in our
first-quarter results, which comprised the following: bp and AENA
signed an agreement to work on the decarbonization of the energy
and mobility system of the airports operated by AENA, starting with
Valencia airport; the Australian Federal Government announced that
bp's Kwinana Integrated Clean Energy Hub project in Perth, Western
Australia had been awarded up to A$70 million (US$52 million) of
grant funding.
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- ------- ------- ------- -------
Profit (loss) before interest and tax (1,028) (686) (425) (1,714) (1,103)
Inventory holding (gains) losses* - - - - -
--------------------------------------------- ------- ------- ------- ------- -------
RC profit (loss) before interest and
tax (1,028) (686) (425) (1,714) (1,103)
Net (favourable) adverse impact of adjusting
items 827 427 120 1,254 628
---------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit (loss) before interest
and tax (201) (259) (305) (460) (475)
Taxation on an underlying RC basis 167 23 101 190 155
---------------------------------------------- ------- ------- ------- ------- -------
Underlying RC profit (loss) before interest (34) (236) (204) (270) (320)
---------------------------------------------- ------- ------- ------- ------- -------
Top of page 15
other businesses & corporate (Rosneft)
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------- ------- -------- ------- -------- -----
Profit (loss) before interest and tax - (24,033) 711 (24,033) 1,162
Inventory holding (gains) losses* - - (68) - (156)
---------------------------------------------- ------- -------- ------- -------- -----
RC profit (loss) before interest and
tax - (24,033) 643 (24,033) 1,006
Net (favourable) adverse impact of adjusting
items - 24,033 46 24,033 46
---------------------------------------------- ------- -------- ------- -------- -----
Underlying RC profit (loss) before interest
and tax - - 689 - 1,052
Taxation on an underlying RC basis - - (68) - (103)
---------------------------------------------- ------- -------- ------- -------- -----
Underlying RC profit (loss) before interest - - 621 - 949
---------------------------------------------- ------- -------- ------- -------- -----
Top of page 16
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 18-29; (ii) pages 1-15, and 30-43 comprise the
interim management report; and (iii) the directors' responsibility
statement and auditors' independent review report can be found on
pages 16-17.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
condensed set of financial statements on pages 18-29 has been
prepared in accordance with United Kingdom adopted IAS 34 'Interim
Financial Reporting', and that the interim management report on
pages 1-15, and 30-43 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 84-87 of bp
Annual Report and Form 20-F 2021.
By order of the board
Bernard Looney Murray Auchincloss
Chief Executive Officer Chief Financial Officer
1 August 2022 1 August 2022
Top of page 17
Independent review report to BP p.l.c.
Conclusion
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 2022 which comprises the group income
statement, condensed group statement of comprehensive income,
condensed group statement of changes in equity, group balance
sheet, condensed cash flow statement and related notes 1 to 10.
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 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE(UK) 2410) 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.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), IFRS as adopted by the UK, and
European Union (EU). The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with United Kingdom adopted International Accounting
Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. 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.
Deloitte LLP
Statutory Auditor
London, United Kingdom
1 August 2022
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 18
Financial statements
Group income statement
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
--------------------------------------------------- ------- -------- ------- -------- -------
Sales and other operating revenues (Note 5) 67,866 49,258 36,467 117,124 71,011
Earnings from joint ventures - after interest
and tax 62 379 (57) 441 103
Earnings from associates - after interest
and tax 127 871 856 998 1,457
Interest and other income 142 194 82 336 164
Gains on sale of businesses and fixed assets 1,309 518 250 1,827 1,355
--------------------------------------------------- ------- -------- ------- -------- -------
Total revenues and other income 69,506 51,220 37,598 120,726 74,090
Purchases 39,141 27,808 21,241 66,949 36,897
Production and manufacturing expenses 7,601 6,975 6,562 14,576 13,420
Production and similar taxes 624 505 295 1,129 548
Depreciation, depletion and amortization (Note
6) 3,512 3,625 3,631 7,137 6,998
Net impairment and losses on sale of businesses
and fixed assets (Note 3) 445 26,031 (2,937) 26,476 (2,564)
Exploration expense 128 92 107 220 206
Distribution and administration expenses 3,453 3,080 2,874 6,533 5,489
--------------------------------------------------- ------- -------- ------- -------- -------
Profit (loss) before interest and taxation 14,602 (16,896) 5,825 (2,294) 13,096
Finance costs 556 664 682 1,220 1,405
Net finance (income) expense relating to pensions
and other post-retirement benefits (17) (20) 5 (37) 11
--------------------------------------------------- ------- -------- ------- -------- -------
Profit (loss) before taxation 14,063 (17,540) 5,138 (3,477) 11,680
Taxation 4,527 2,530 1,784 7,057 3,426
--------------------------------------------------- ------- -------- ------- -------- -------
Profit (loss) for the period 9,536 (20,070) 3,354 (10,534) 8,254
--------------------------------------------------- ------- -------- ------- -------- -------
Attributable to
BP shareholders 9,257 (20,384) 3,116 (11,127) 7,783
Non-controlling interests 279 314 238 593 471
--------------------------------------------------- ------- -------- ------- -------- -------
9,536 (20,070) 3,354 (10,534) 8,254
------- -------- ------- -------- -------
Earnings per share (Note 7)
Profit (loss) for the period attributable
to BP shareholders
Per ordinary share (cents)
Basic 47.74 (104.46) 15.37 (57.21) 38.36
Diluted 47.18 (104.46) 15.30 (57.21) 38.16
Per ADS (dollars)
Basic 2.86 (6.27) 0.92 (3.43) 2.30
Diluted 2.83 (6.27) 0.92 (3.43) 2.29
--------------------------------------------------- ------- -------- ------- -------- -------
Top of page 19
Condensed group statement of comprehensive income
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
----------------------------------------------- ------- -------- ------- -------- ------
Profit (loss) for the period 9,536 (20,070) 3,354 (10,534) 8,254
----------------------------------------------- ------- -------- ------- -------- ------
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Currency translation differences(a) (2,454) (1,749) 902 (4,203) 297
Exchange (gains) losses on translation
of foreign operations reclassified to
gain or loss on sale of businesses and
fixed assets(b) - 10,791 - 10,791 -
Cash flow hedges and costs of hedging 99 222 (207) 321 (269)
Share of items relating to equity-accounted
entities, net of tax 59 85 (68) 144 (57)
Income tax relating to items that may
be reclassified (70) (102) 8 (172) 9
----------------------------------------------- ------- -------- ------- -------- ------
(2,366) 9,247 635 6,881 (20)
------- -------- ------- -------- ------
Items that will not be reclassified to
profit or loss
Remeasurements of the net pension and
other post-retirement benefit liability
or asset(c) (392) 2,128 590 1,736 2,616
Cash flow hedges that will subsequently
be transferred to the balance sheet (3) (1) 1 (4) 3
Income tax relating to items that will
not be reclassified 179 (668) (165) (489) (753)
----------------------------------------------- ------- -------- ------- -------- ------
(216) 1,459 426 1,243 1,866
------- -------- ------- -------- ------
Other comprehensive income (2,582) 10,706 1,061 8,124 1,846
----------------------------------------------- ------- -------- ------- -------- ------
Total comprehensive income 6,954 (9,364) 4,415 (2,410) 10,100
----------------------------------------------- ------- -------- ------- -------- ------
Attributable to
BP shareholders 6,742 (9,678) 4,183 (2,936) 9,643
Non-controlling interests 212 314 232 526 457
----------------------------------------------- ------- -------- ------- -------- ------
6,954 (9,364) 4,415 (2,410) 10,100
------- -------- ------- -------- ------
(a) Second quarter 2022 is principally affected by movements in
the Pound Sterling against the US dollar. Comparative periods are
principally affected by movements in the Russian rouble against the
US dollar. Both currency movements contribute towards the first
half 2022 movement.
(b) See Note 1 Basis of preparation - Investment in Rosneft.
(c) See Note 1 Basis of preparation - Pensions and other
post-retirement benefits for further information.
Top of page 20
Condensed group statement of changes in equity
bp shareholders' Non-controlling interests Total
Hybrid
$ million equity(a) bonds Other interest equity
--------------------------------------- ---------------- -------- ----------------- -------
At 1 January 2022 75,463 13,041 1,935 90,439
Total comprehensive income (2,936) 254 272 (2,410)
Dividends (2,130) - (128) (2,258)
Cash flow hedges transferred
to the balance sheet, net of
tax (1) - - (1)
Issue of ordinary share capital(b) 820 - - 820
Repurchase of ordinary share
capital (4,490) - - (4,490)
Share-based payments, net of
tax 380 - - 380
Issue of perpetual hybrid bonds (2) 130 - 128
Payments on perpetual hybrid
bonds 15 (394) - (379)
Transactions involving non-controlling
interests, net of tax (510) - (156) (666)
---------------------------------------- ---------------- -------- ----------------- -------
At 30 June 2022 66,609 13,031 1,923 81,563
---------------------------------------- ---------------- -------- ----------------- -------
bp shareholders' Non-controlling interests Total
Hybrid
$ million equity bonds Other interest equity
--------------------------------------- ---------------- -------- ----------------- -------
At 1 January 2021 71,250 12,076 2,242 85,568
Total comprehensive income 9,643 249 208 10,100
Dividends (2,134) - (158) (2,292)
Cash flow hedges transferred
to the balance sheet, net of
tax (6) - - (6)
Repurchase of ordinary share
capital (500) - - (500)
Share-based payments, net of
tax 188 - - 188
Share of equity-accounted entities'
changes in equity, net of tax (3) - - (3)
Payments on perpetual hybrid
bonds (7) (376) - (383)
Transactions involving non-controlling
interests, net of tax 366 - 194 560
---------------------------------------- ---------------- -------- ----------------- -------
At 30 June 2021 78,797 11,949 2,486 93,232
---------------------------------------- ---------------- -------- ----------------- -------
(a) In 2022 $9.2 billion of the opening foreign currency
translation reserve has been moved to profit and loss account
reserve as a result of bp's decision to exit its shareholding in
Rosneft and its other businesses with Rosneft in Russia. For more
information see Note 1.
(b) Relates to ordinary shares issued as non-cash consideration
for the acquisition of the public units of BP Midstream Partners
LP.
Top of page 21
Group balance sheet
30 June 31 December
$ million 2022 2021
-------------------------------------------------------- ------- -----------
Non-current assets
Property, plant and equipment 107,151 112,902
Goodwill 11,462 12,373
Intangible assets 6,433 6,451
Investments in joint ventures 9,290 9,982
Investments in associates(a) 8,042 21,001
Other investments 2,682 2,544
-------------------------------------------------------- ------- -----------
Fixed assets 145,060 165,253
Loans 1,097 922
Trade and other receivables 1,155 2,693
Derivative financial instruments 8,379 7,006
Prepayments 525 479
Deferred tax assets 4,965 6,410
Defined benefit pension plan surpluses 11,152 11,919
-------------------------------------------------------- ------- -----------
172,333 194,682
------- -----------
Current assets
Loans 282 355
Inventories 34,257 23,711
Trade and other receivables 39,114 27,139
Derivative financial instruments 10,180 5,744
Prepayments 2,581 2,486
Current tax receivable 290 542
Other investments 130 280
Cash and cash equivalents 33,108 30,681
-------------------------------------------------------- ------- -----------
119,942 90,938
Assets classified as held for sale (Note 2) 6,858 1,652
-------------------------------------------------------- ------- -----------
126,800 92,590
------- -----------
Total assets 299,133 287,272
-------------------------------------------------------- ------- -----------
Current liabilities
Trade and other payables 64,015 52,611
Derivative financial instruments 19,309 7,565
Accruals 5,427 5,638
Lease liabilities 1,735 1,747
Finance debt 6,479 5,557
Current tax payable 3,817 1,554
Provisions 6,154 5,256
-------------------------------------------------------- ------- -----------
106,936 79,928
Liabilities directly associated with assets classified
as held for sale (Note 2) 2,571 359
-------------------------------------------------------- ------- -----------
109,507 80,287
------- -----------
Non-current liabilities
Other payables 9,124 10,567
Derivative financial instruments 12,918 6,356
Accruals 896 968
Lease liabilities 6,321 6,864
Finance debt 46,387 55,619
Deferred tax liabilities 8,360 8,780
Provisions 18,229 19,572
Defined benefit pension plan and other post-retirement
benefit plan deficits 5,828 7,820
-------------------------------------------------------- ------- -----------
108,063 116,546
------- -----------
Total liabilities 217,570 196,833
-------------------------------------------------------- ------- -----------
Net assets 81,563 90,439
-------------------------------------------------------- ------- -----------
Equity
BP shareholders' equity 66,609 75,463
Non-controlling interests 14,954 14,976
-------------------------------------------------------- ------- -----------
Total equity 81,563 90,439
-------------------------------------------------------- ------- -----------
(a) See Note 1 Basis of preparation - Investment in Rosneft.
Top of page 22
Condensed group cash flow statement
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
-------------------------------------------------- ------- -------- ------- -------- -------
Operating activities
Profit (loss) before taxation 14,063 (17,540) 5,138 (3,477) 11,680
Adjustments to reconcile profit (loss) before
taxation to net cash provided by operating
activities
Depreciation, depletion and amortization
and exploration expenditure written off 3,591 3,674 3,659 7,265 7,087
Net impairment and (gain) loss on sale of
businesses and fixed assets (864) 25,513 (3,187) 24,649 (3,919)
Earnings from equity-accounted entities,
less dividends received 72 (1,093) (539) (1,021) (1,172)
Net charge for interest and other finance
expense, less net interest paid (46) 184 300 138 329
Share-based payments 208 170 228 378 182
Net operating charge for pensions and other
post-retirement benefits, less contributions
and benefit payments for unfunded plans (36) (146) (371) (182) (391)
Net charge for provisions, less payments 796 484 1,172 1,280 2,074
Movements in inventories and other current
and non-current assets and liabilities (4,416) (1,771) 26 (6,187) (2,767)
Income taxes paid (2,505) (1,265) (1,015) (3,770) (1,583)
-------------------------------------------------- ------- -------- ------- -------- -------
Net cash provided by operating activities 10,863 8,210 5,411 19,073 11,520
-------------------------------------------------- ------- -------- ------- -------- -------
Investing activities
Expenditure on property, plant and equipment,
intangible and other assets (2,666) (2,602) (2,435) (5,268) (5,468)
Acquisitions, net of cash acquired 3 (8) - (5) (1)
Investment in joint ventures (159) (294) (47) (453) (789)
Investment in associates (16) (25) (32) (41) (54)
-------------------------------------------------- ------- -------- ------- -------- -------
Total cash capital expenditure (2,838) (2,929) (2,514) (5,767) (6,312)
Proceeds from disposal of fixed assets 202 468 93 670 644
Proceeds from disposal of businesses, net
of cash disposed 111 549 122 660 3,735
Proceeds from loan repayments 16 29 67 45 128
================================================== ======= ======== ======= ======== =======
Cash provided from investing activities 329 1,046 282 1,375 4,507
-------------------------------------------------- ------- -------- ------- -------- -------
Net cash used in investing activities (2,509) (1,883) (2,232) (4,392) (1,805)
-------------------------------------------------- ------- -------- ------- -------- -------
Financing activities
Net issue (repurchase) of shares (Note 7) (2,288) (1,592) (500) (3,880) (500)
Lease liability payments (472) (498) (514) (970) (1,074)
Proceeds from long-term financing - 2,002 1,985 2,002 3,941
Repayments of long-term financing (4,573) (892) (67) (5,465) (7,096)
Net increase (decrease) in short-term debt (688) (276) (33) (964) 189
Issue of perpetual hybrid bonds 62 66 - 128 -
Payments relating to perpetual hybrid bonds (161) (148) (328) (309) (383)
Payments relating to transactions involving
non-controlling interests (Other interest) (1) (5) - (6) -
Receipts relating to transactions involving
non-controlling interests (Other interest) - 7 3 7 671
Dividends paid - BP shareholders (1,062) (1,068) (1,062) (2,130) (2,126)
- non-controlling interests (63) (65) (107) (128) (158)
-------------------------------------------------- ------- -------- ------- -------- -------
Net cash provided by (used in) financing
activities (9,246) (2,469) (623) (11,715) (6,536)
-------------------------------------------------- ------- -------- ------- -------- -------
Currency translation differences relating
to cash and cash equivalents (414) (125) 24 (539) (34)
-------------------------------------------------- ------- -------- ------- -------- -------
Increase (decrease) in cash and cash equivalents (1,306) 3,733 2,580 2,427 3,145
-------------------------------------------------- ------- -------- ------- -------- -------
Cash and cash equivalents at beginning of
period 34,414 30,681 31,676 30,681 31,111
Cash and cash equivalents at end of period 33,108 34,414 34,256 33,108 34,256
-------------------------------------------------- ------- -------- ------- -------- -------
Top of page 23
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 2021 included in BP Annual
Report and Form 20-F 2021.
The directors consider it appropriate to adopt the going concern
basis of accounting in preparing these interim financial
statements.
bp prepares its consolidated financial statements included
within BP Annual Report and Form 20-F on the basis of International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), IFRS as adopted by the UK, and
European Union (EU), and in accordance with the provisions of the
UK Companies Act 2006 as applicable to companies reporting under
international accounting standards. IFRS as adopted by the UK does
not differ from IFRS as adopted by the EU. IFRS as adopted by the
UK and EU differ 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 2022 which are the same as
those used in preparing BP Annual Report and Form 20-F 2021. There
are no new or amended standards or interpretations adopted from 1
January 2022 onwards that have a significant impact on the
financial information.
Significant accounting judgements and estimates
bp's significant accounting judgements and estimates were
disclosed in BP Annual Report and Form 20-F 2021. These have been
subsequently considered at the end of each quarter to determine if
any changes were required to those judgements and estimates.
Pensions and other post-retirement benefits
The group's defined benefit 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 2022, the group's total net
defined benefit plan surplus as at 30 June 2022 is $5.3 billion,
compared to a surplus of $6.2 billion at 31 March 2022 and $4.1
billion at 31 December 2021. The movement for the six months
principally reflects net actuarial gains reported in other
comprehensive income arising from increases in the UK, US and
Eurozone discount rates and decreases in certain long-term
inflation rates partly offset by negative asset performance. 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.
Investment in Rosneft
On 27 February 2022, bp announced it will exit its shareholding
in Rosneft and bp's two nominated Rosneft directors both stepped
down from Rosneft's board. As a result, the significant judgement
on significant influence over Rosneft was reassessed and a new
significant estimate was identified for the fair value of bp's
equity investment in Rosneft. From that date, bp accounts for its
interest in Rosneft as a financial asset measured at fair value
within 'Other investments'. Russia has implemented a number of
counter-sanctions including restrictions on the divestment from
Russian assets by foreign investors. Further, bp is not able to
sell its Rosneft shares on the Moscow Stock Exchange and is unable
to ascribe probabilities to possible outcomes of any exit process.
As a result, it is considered that any measure of fair value, other
than nil, would be subject to such high measurement uncertainty
that no estimate would provide useful information even if it were
accompanied by a description of the estimate made in producing it
and an explanation of the uncertainties that affect the estimate.
Accordingly, it is not currently possible to estimate any carrying
value other than zero when determining the measurement of the
interest in Rosneft as at 30 June 2022.
At Rosneft's annual general meeting on 30 June 2022,
shareholders approved a resolution to pay dividends of 23.63
roubles per ordinary share for the second half of 2021 (49 billion
roubles bp share before withholding tax). Russia has imposed
restrictions on the payment of dividends to certain foreign
shareholders, requiring such dividends to be paid in roubles into a
restricted bank account and a requirement for approval of the
Russian government for transfers from such bank accounts out of
Russia. It is not clear in what circumstances such approval would
be given. Given the restrictions applicable to such accounts,
management considers that the criteria for recognising dividend
income from Rosneft in the second quarter have not been met.
As a result of bp's decision to exit its shareholding in Rosneft
in the first quarter 2022, the group has ceased to report Rosneft
as a separate segment in its financial reporting for 2022. Rosneft
results up to 27 February 2022 are included within other businesses
& corporate (OB&C), and 2021 comparatives have been
restated to include the Rosneft segment as per the table below.
Top of page 24
Note 1. Basis of preparation (continued)
OB&C Rosneft OB&C OB&C Rosneft OB&C
(as previously (as previously restated (as previously (as previously restated
reported) reported) reported) reported)
Second Second Second First First First
quarter quarter quarter half half half
$ million 2021 2021 2021 2021 2021 2021
-------------------------- --------------- --------------- --------- --------------- --------------- ---------
Profit (loss) before
interest
and tax (425) 711 286 (1,103) 1,162 59
Inventory holding (gains)
losses* - (68) (68) - (156) (156)
-------------------------- --------------- --------------- --------- --------------- --------------- ---------
RC profit (loss) before
interest
and tax (425) 643 218 (1,103) 1,006 (97)
Net (favourable) adverse
impact of adjusting items 120 46 166 628 46 674
-------------------------- --------------- --------------- --------- --------------- --------------- ---------
Underlying RC profit
(loss)
before interest and tax (305) 689 384 (475) 1,052 577
Taxation on an underlying
RC basis 101 (68) 33 155 (103) 52
-------------------------- --------------- --------------- --------- --------------- --------------- ---------
Underlying RC profit
(loss)
before interest (204) 621 417 (320) 949 629
-------------------------- --------------- --------------- --------- --------------- --------------- ---------
Since the first quarter 2022, bp has also determined that its
other businesses with Rosneft within Russia, which are included in
the oil production & operations segment also have a fair value
of nil and are subject to similar sanctions and restrictions with
respect to the receipt of dividends as described above. None of the
other businesses with Rosneft within Russia declared a dividend in
the second quarter 2022.
The total pre-tax charge in the first half of 2022 relating to
bp's investment in Rosneft and other businesses with Rosneft in
Russia is $25,520 million.
Events after the reporting period
On 11 July 2022 the UK government introduced legislation which
imposes a new levy on the profits of UK oil and gas companies. The
new levy will increase the headline rate of tax from 40% to 65% on
profits from bp's North Sea business made from 26 May 2022 until 31
December 2025. The introduction of the levy will result in a
one-off non-cash deferred tax charge of an estimated $0.8 billion
to reflect the higher tax rate now applicable to existing temporary
differences unwinding over the period 1 October 2022 to 31 December
2025. As the legislation was substantively enacted after 30 June
2022, this charge will be presented in the third quarter 2022.
Top of page 25
Note 2. Non-current assets held for sale
The carrying amount of assets classified as held for sale at 30
June 2022 is $6,858 million, with associated liabilities of $2,571
million.
On 12 June 2022, bp entered into an agreement to sell its 50%
interest in the Sunrise oil sands project in Canada to Cenovus
Energy Inc. for C$600 million (Canadian dollars) cash (subject to
customary closing adjustments), up to C$600 million of contingent
consideration expiring after two years and Cenovus's 35% position
in the undeveloped Bay du Nord project offshore Canada. Subject to
customary regulatory approvals, the transaction is expected to
close during the second half of 2022. Assets of $1,407 million and
associated liabilities of $369 million have been classified as held
for sale in the group balance sheet at 30 June 2022.
On 11 March 2022, bp and Eni signed an agreement to form Azule
Energy, an independent incorporated 50:50 joint venture, through
the combination of the two companies' Angolan businesses. Assets of
$5,451 million and associated liabilities of $2,202 million
remained classified as held for sale in the group balance sheet at
30 June 2022. The transaction closed on 1 August 2022 and, from
that date, bp will report an equity accounted investment in Azule
Energy.
Transactions that were classified as held for sale during 2022,
but completed during the second quarter, are described below.
On 21 December 2021, Aker BP, an equity-accounted associate of
bp, announced the proposed acquisition of Lundin Energy's
exploration and production business for consideration in cash and
new Aker BP shares. The acquisition was completed on 30 June 2022.
Prior to completion, bp held a 27.9% interest in Aker BP and
following the transaction, bp's interest is now 15.9% of the
combined company. This dilution of bp's interest is reported as a
non-cash deemed disposal of a portion of bp's investment in Aker
BP. $595 million of bp's investment in Aker BP was classified as
held for sale in the group balance sheet at 31 March 2022 and an
accounting gain on deemed disposal of $904 million was recognized
in the second quarter 2022.
As announced in August 2021, bp and PetroChina agreed to
establish Basra Energy Company Limited (BECL) to own and manage the
companies' interests in the Rumaila field in Iraq. The transaction
closed on 1 June 2022 and bp now reports an equity accounted
investment in BECL.
Note 3. Impairment and losses on sale of businesses and fixed
assets(a)
Net impairment charges and losses on sale of businesses and
fixed assets for the second quarter and half year were $445 million
and $26,476 million respectively, compared with net reversals of
$2,937 million and $2,564 million for the same periods in 2021 and
include net impairment charges for the second quarter and half year
of $402 million and $14,788 million respectively, compared with net
reversals of $2,964 million and $2,744 million for the same periods
in 2021.
gas & low carbon energy segment
In the gas & low carbon energy segment there was a net
impairment charge of $265 million and $517 million for the second
quarter and half year respectively, compared with net reversals of
$1,270 million and $1,148 million for the same periods in 2021.
oil production & operations segment
In the oil production & operations segment there was a net
impairment reversal of $245 million and charge of $379 million for
the second quarter and half year respectively, compared with net
reversals of $1,756 million and $1,657 million for the same periods
in 2021.
Impairment charges for the first half 2022 included charges
related to the decision to exit other businesses with Rosneft
within Russia.
other businesses and corporate
In the other businesses and corporate segment there was a net
impairment charge of $14 million and $13,493 million for the second
quarter and half year respectively, compared with a net impairment
charge of $56 million and $53 million for the same periods in 2021
and a loss on sale of businesses and fixed assets of $11,082
million.
The impairment charge and the loss on sale of businesses and
fixed assets for the half year mainly relates to bp's investment in
Rosneft - see Note 1.
(a) All disclosures are pre-tax .
Top of page 26
Note 4. 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 2022 2022 2021 2022 2021
---------------------------------------- ------- -------- ------- -------- ------
gas & low carbon energy 2,737 (1,524) 927 1,213 4,357
oil production & operations 7,237 3,831 3,118 11,068 4,597
customers & products 3,531 1,981 640 5,512 1,574
other businesses & corporate(a) (1,028) (24,719) 218 (25,747) (97)
---------------------------------------- ------- -------- ------- -------- ------
12,477 (20,431) 4,903 (7,954) 10,431
Consolidation adjustment - UPII* (21) 34 (31) 13 (18)
---------------------------------------- ------- -------- ------- -------- ------
RC profit (loss) before interest and
tax 12,456 (20,397) 4,872 (7,941) 10,413
Inventory holding gains (losses)*
gas & low carbon energy (9) 25 4 16 26
oil production & operations (7) 1 (6) (6) 9
customers & products 2,162 3,475 887 5,637 2,492
other businesses & corporate(a) - - 68 - 156
---------------------------------------- ------- -------- ------- -------- ------
Profit (loss) before interest and tax 14,602 (16,896) 5,825 (2,294) 13,096
Finance costs 556 664 682 1,220 1,405
Net finance expense/(income) relating
to pensions and other post-retirement
benefits (17) (20) 5 (37) 11
---------------------------------------- ------- -------- ------- -------- ------
Profit (loss) before taxation 14,063 (17,540) 5,138 (3,477) 11,680
---------------------------------------- ------- -------- ------- -------- ------
RC profit (loss) before interest and
tax*
US 3,322 2,277 955 5,599 2,862
Non-US 9,134 (22,674) 3,917 (13,540) 7,551
---------------------------------------- ------- -------- ------- -------- ------
12,456 (20,397) 4,872 (7,941) 10,413
------- -------- ------- -------- ------
(a) From first quarter 2022 the results of Rosneft, previously
reported as a separate segment, are also included in other
businesses & corporate. Comparative information for 2021 has
been restated to reflect the changes in reportable segments. For
more information see Note 1 Basis of preparation - Investment in
Rosneft.
Top of page 27
Note 5. Sales and other operating revenues
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------------------- ------- ------- ------- ------- ------
By segment
gas & low carbon energy 13,243 8,166 5,739 21,409 13,741
oil production & operations 9,504 8,158 5,597 17,662 10,752
customers & products 55,557 42,163 31,160 97,720 58,267
other businesses & corporate 516 452 381 968 817
---------------------------------------------------- ------- ------- ------- ------- ------
78,820 58,939 42,877 137,759 83,577
------- ------- ------- ------- ------
Less: sales and other operating revenues between
segments
gas & low carbon energy 1,621 1,948 1,063 3,569 2,095
oil production & operations 8,753 7,036 4,928 15,789 9,783
customers & products 392 692 112 1,084 222
other businesses & corporate 188 5 307 193 466
---------------------------------------------------- ------- ------- ------- ------- ------
10,954 9,681 6,410 20,635 12,566
------- ------- ------- ------- ------
External sales and other operating revenues
gas & low carbon energy 11,622 6,218 4,676 17,840 11,646
oil production & operations 751 1,122 669 1,873 969
customers & products 55,165 41,471 31,048 96,636 58,045
other businesses & corporate 328 447 74 775 351
---------------------------------------------------- ------- ------- ------- ------- ------
Total sales and other operating revenues 67,866 49,258 36,467 117,124 71,011
---------------------------------------------------- ------- ------- ------- ------- ------
By geographical area
US 27,331 19,152 15,305 46,483 29,796
Non-US 54,331 42,797 29,700 97,128 56,583
---------------------------------------------------- ------- ------- ------- ------- ------
81,662 61,949 45,005 143,611 86,379
Less: sales and other operating revenues between
areas 13,796 12,691 8,538 26,487 15,368
---------------------------------------------------- ------- ------- ------- ------- ------
67,866 49,258 36,467 117,124 71,011
------- ------- ------- ------- ------
Revenues from contracts with customers
Sales and other operating revenues include
the following in relation to revenues from
contracts with customers:
Crude oil 2,034 2,144 1,291 4,178 2,625
Oil products 43,267 31,751 24,651 75,018 43,929
Natural gas, LNG and NGLs 8,944 10,680 4,273 19,624 8,454
Non-oil products and other revenues from contracts
with customers 1,825 2,345 1,603 4,170 3,001
---------------------------------------------------- ------- ------- ------- ------- ------
Revenue from contracts with customers 56,070 46,920 31,818 102,990 58,009
---------------------------------------------------- ------- ------- ------- ------- ------
Other operating revenues(a) 11,796 2,338 4,649 14,134 13,002
---------------------------------------------------- ------- ------- ------- ------- ------
Total sales and other operating revenues 67,866 49,258 36,467 117,124 71,011
---------------------------------------------------- ------- ------- ------- ------- ------
(a) Principally relates to commodity derivative transactions.
Top of page 28
Note 6. Depreciation, depletion and amortization
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------ ------- ------- ------- ----- -----
Total depreciation, depletion and amortization
by segment
gas & low carbon energy 1,203 1,255 1,115 2,458 1,969
oil production & operations 1,371 1,429 1,559 2,800 3,133
customers & products 715 717 754 1,432 1,499
other businesses & corporate 223 224 203 447 397
------------------------------------------------ ------- ------- ------- ----- -----
3,512 3,625 3,631 7,137 6,998
------- ------- ------- ----- -----
Total depreciation, depletion and amortization
by geographical area
US 1,159 1,083 1,161 2,242 2,282
Non-US 2,353 2,542 2,470 4,895 4,716
------------------------------------------------ ------- ------- ------- ----- -----
3,512 3,625 3,631 7,137 6,998
------- ------- ------- ----- -----
Note 7. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated
by dividing the profit (loss) for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. As part of the share buyback
programme announced on 27 April 2021, 443 million ordinary shares
were repurchased for cancellation during the second quarter 2022
for a total cost of $2,288 million. This brings the total number of
shares repurchased in the first half to 743 million for a total
cost of $3,880 million. A further 133 million ordinary shares were
repurchased in July for a total cost of $613 million. The number of
shares in issue is reduced when shares are repurchased, but is not
reduced in respect of the period-end commitment to repurchase
shares subsequent to the end of the period.
165 million new ordinary shares were issued in April 2022 as
non-cash consideration for the acquisition of the public units of
BP Midstream Partners LP.
The calculation of EpS is performed separately for each discrete
quarterly period, and for the year-to-date period. As a result, the
sum of the discrete quarterly EpS amounts in any particular
year-to-date period may not be equal to the EpS amount for the
year-to-date period.
For the diluted EpS calculation the weighted average number of
shares outstanding during the period is adjusted for the number of
shares that are potentially issuable in connection with employee
share-based payment plans using the treasury stock method.
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------- ---------- ---------- ---------- ---------- ----------
Results for the period
Profit (loss) for the period attributable
to bp shareholders 9,257 (20,384) 3,116 (11,127) 7,783
Less: preference dividend 1 - - 1 1
------------------------------------------- ---------- ---------- ---------- ---------- ----------
Profit (loss) attributable to
bp ordinary shareholders 9,256 (20,384) 3,116 (11,128) 7,782
------------------------------------------- ---------- ---------- ---------- ---------- ----------
Number of shares (thousand) (a)(b)
Basic weighted average number
of shares outstanding 19,388,427 19,514,477 20,272,111 19,451,040 20,285,083
ADS equivalent(c) 3,231,404 3,252,412 3,378,685 3,241,840 3,380,847
------------------------------------------- ---------- ---------- ---------- ---------- ----------
Weighted average number of shares
outstanding used to calculate
diluted earnings per share 19,619,628 19,514,477 20,366,731 19,451,040 20,394,877
ADS equivalent(c) 3,269,938 3,252,412 3,394,455 3,241,840 3,399,146
------------------------------------------- ---------- ---------- ---------- ---------- ----------
Shares in issue at period-end 19,135,400 19,409,157 20,224,314 19,135,400 20,224,314
ADS equivalent(c) 3,189,233 3,234,859 3,370,719 3,189,233 3,370,719
------------------------------------------- ---------- ---------- ---------- ---------- ----------
(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 and first half 2022 are 179,226
thousand (ADS equivalent 29,871 thousand) and 202,620 thousand (ADS
equivalent 33,770 thousand) respectively.
(c) One ADS is equivalent to six ordinary shares.
Top of page 29
Note 8. Dividends
Dividends payable
BP today announced an interim dividend of 6.006 cents per
ordinary share which is expected to be paid on 23 September 2022 to
ordinary shareholders and American Depositary Share (ADS) holders
on the register on 12 August 2022. The ex-dividend date will be 11
August 2022. The corresponding amount in sterling is due to be
announced on 6 September 2022, calculated based on the average of
the market exchange rates over three dealing days between 31 August
2022 and 2 September 2022. Holders of ADSs are expected to receive
$0.36036 per ADS (less applicable fees). The board has decided not
to offer a scrip dividend alternative in respect of the second
quarter 2022 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
2022 2022 2021 2022 2021
------- ------- ------- ------ ------
Dividends paid per ordinary share
cents 5.460 5.460 5.250 10.920 10.500
pence 4.356 4.160 3.712 8.515 7.480
Dividends paid per ADS (cents) 32.76 32.76 31.50 65.52 63.00
----------------------------------- ------- ------- ------- ------ ------
Note 9. Net debt
Net debt* Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
---------------------------------------- -------- -------- -------- -------- --------
Finance debt(a) 52,866 60,606 68,247 52,866 68,247
Fair value (asset) liability of hedges
related to finance debt(b) 3,058 1,265 (1,285) 3,058 (1,285)
---------------------------------------- -------- -------- -------- -------- --------
55,924 61,871 66,962 55,924 66,962
Less: cash and cash equivalents 33,108 34,414 34,256 33,108 34,256
---------------------------------------- -------- -------- -------- -------- --------
Net debt(c) 22,816 27,457 32,706 22,816 32,706
---------------------------------------- -------- -------- -------- -------- --------
Total equity 81,563 78,519 93,232 81,563 93,232
Gearing* 21.9% 25.9% 26.0% 21.9% 26.0%
---------------------------------------- -------- -------- -------- -------- --------
(a) The fair value of finance debt at 30 June 2022 was $49,056
million (31 March 2022 $59,601 million, 30 June 2021 $70,589
million).
(b) Derivative financial instruments entered into for the
purpose of managing interest rate and foreign currency exchange
risk associated with net debt with a fair value liability position
of $246 million at 30 June 2022 (first quarter 2022 liability of
$173 million and second quarter 2021 liability of $308 million) are
not included in the calculation of net debt shown above as hedge
accounting is not applied for these instruments.
(c) Net debt does not include accrued interest, which is
reported within other receivables and other payables on the balance
sheet and for which the associated cash flows are presented as
operating cash flows in the group cash flow statement.
As part of actively managing its debt portfolio, in the second
quarter the group bought back $4.5 billion of finance debt (first
quarter 2022 $nil, second quarter 2021 $nil) consisting entirely of
US dollar bonds. Year to date the group has bought back a total of
$4.5 billion of finance debt ($3.9 billion equivalent for the
comparative period in 2021 consisting of US dollar, euro and
sterling bonds). Derivatives associated with non-US dollar debt
bought back in the comparative period were also terminated. In
addition, on 25 July 2022 the group exercised its option to redeem
finance debt with an outstanding aggregate principal amount of $2.9
billion on 24 August 2022. These transactions have no significant
impact on net debt or gearing.
Note 10. Statutory accounts
The financial information shown in this publication, which was
approved by the Board of Directors on 1 August 2022, is unaudited
and does not constitute statutory financial statements. Audited
financial information will be published in BP Annual Report and
Form 20-F 2022. BP Annual Report and Form 20-F 2021 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 30
Additional information
Capital expenditure*
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
----------------------------------- ------- ------- ------- ----- -----
Capital expenditure
Organic capital expenditure* 2,845 2,573 2,511 5,418 5,417
Inorganic capital expenditure*(a) (7) 356 3 349 895
----------------------------------- ------- ------- ------- ----- -----
2,838 2,929 2,514 5,767 6,312
------- ------- ------- ----- -----
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------- ------- ------- ------- ----- -----
Capital expenditure by segment
gas & low carbon energy(a) 823 861 747 1,684 2,632
oil production & operations 1,208 1,254 1,148 2,462 2,467
customers & products 675 715 519 1,390 1,051
other businesses & corporate 132 99 100 231 162
------- ------- ------- ----- -----
2,838 2,929 2,514 5,767 6,312
------- ------- ------- ----- -----
Capital expenditure by geographical
area
US 1,253 1,097 890 2,350 2,377
Non-US 1,585 1,832 1,624 3,417 3,935
------------------------------------- ------- ------- ------- ----- -----
2,838 2,929 2,514 5,767 6,312
------- ------- ------- ----- -----
(a) First half 2021 includes the final payment of $712 million
in respect of the strategic partnership with Equinor.
Top of page 31
Adjusting items*
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------ ------- -------- ------- -------- -------
gas & low carbon energy
Gains on sale of businesses and fixed
assets(a) - 9 - 9 1,034
Net impairment and losses on sale of
businesses and fixed assets(b) (265) (252) 1,270 (517) 1,147
Environmental and other provisions - - - - -
Restructuring, integration and rationalization
costs 1 4 (21) 5 (29)
Fair value accounting effects(c)(d) (74) (5,015) (1,311) (5,089) (1,064)
Other (5) 135 (251) 130 (241)
------------------------------------------------ ------- -------- ------- -------- -------
(343) (5,119) (313) (5,462) 847
------- -------- ------- -------- -------
oil production & operations
Gains on sale of businesses and fixed
assets(e) 1,278 249 216 1,527 384
Net impairment and losses on sale of
businesses and fixed assets(b) 268 (1,204) 1,751 (936) 1,542
Environmental and other provisions (204) 58 (776) (146) (841)
Restructuring, integration and rationalization
costs (7) (10) (90) (17) (94)
Fair value accounting effects - - - - -
Other - 55 (225) 55 (201)
------------------------------------------------ ------- -------- ------- -------- -------
1,335 (852) 876 483 790
------- -------- ------- -------- -------
customers & products
Gains on sale of businesses and fixed
assets 31 261 8 292 (89)
Net impairment and losses on sale of
businesses and fixed assets (434) (13) (35) (447) (78)
Environmental and other provisions (35) - (8) (35) (8)
Restructuring, integration and rationalization
costs 9 1 (10) 10 (51)
Fair value accounting effects(d) (62) (377) (139) (439) 320
Other 16 (47) (3) (31) (3)
------------------------------------------------ ------- -------- ------- -------- -------
(475) (175) (187) (650) 91
------- -------- ------- -------- -------
other businesses & corporate(f)
Gains on sale of businesses and fixed
assets - (1) - (1) -
Net impairment and losses on sale of
businesses and fixed assets (15) (1) (50) (16) (51)
Environmental and other provisions (89) (3) (72) (92) (72)
Restructuring, integration and rationalization
costs (3) 13 (74) 10 (99)
Fair value accounting effects(d) (686) (425) 73 (1,111) (374)
Rosneft(f) - (24,033) (46) (24,033) (46)
Gulf of Mexico oil spill (21) (19) (18) (40) (29)
Other (13) 9 21 (4) (3)
------------------------------------------------ ------- -------- ------- -------- -------
(827) (24,460) (166) (25,287) (674)
Total before interest and taxation (310) (30,606) 210 (30,916) 1,054
Finance costs(g) (30) (158) (202) (188) (350)
------------------------------------------------ ------- -------- ------- -------- -------
Total before taxation (340) (30,764) 8 (31,104) 704
Total taxation(h) (461) 1,471 (426) 1,010 (427)
------------------------------------------------ ------- -------- ------- -------- -------
Total after taxation for period (801) (29,293) (418) (30,094) 277
------------------------------------------------ ------- -------- ------- -------- -------
(a) First half 2021 relates to a gain from the divestment of a 20% stake in Oman Block 61.
(b) See Note 3 for further information.
(c) Under IFRS bp marks-to-market the derivative financial
instruments used to risk-manage LNG contracts, but does not
mark-to-market the physical LNG contracts themselves, resulting in
a mismatch in accounting treatment. The fair value accounting
effect reduces this mismatch, and the underlying result reflects
how bp risk-manages its LNG contracts.
(d) For further information, including the nature of fair value
accounting effects reported in each segment, see page 37.
(e) Second quarter and first half 2022 include gains of $904
million related to the deemed disposal of 12% of the group's
interest in Aker BP, an associate of bp, following completion of
Aker BP's acquisition of Lundin Energy, and $361 million in
relation to the disposal of the group's interest in the Rumaila
field in Iraq to Basra Energy Company, an associate of bp.
(f) From first quarter 2022 the results of Rosneft, previously
reported as a separate segment, are also included in other
businesses & corporate. Comparative information for 2021 has
been restated to reflect the changes in reportable segments. For
more information see Note 1 Basis of preparation - Investment in
Rosneft.
(g) Includes the unwinding of discounting effects relating to
Gulf of Mexico oil spill payables, the income statement impact
associated with the buyback of finance debt (see Note 9 for further
information) and temporary valuation differences associated with
the group's interest rate and foreign currency exchange risk
management of finance debt.
(h) Includes certain foreign exchange effects on tax as
adjusting 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.
Top of page 32
Net debt including leases
Net debt including leases* Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
----------------------------------------- -------- -------- -------- -------- --------
Net debt 22,816 27,457 32,706 22,816 32,706
Lease liabilities 8,056 8,466 8,863 8,056 8,863
Net partner (receivable) payable for
leases entered into on behalf of joint
operations 14 206 109 14 109
Net debt including leases 30,886 36,129 41,678 30,886 41,678
----------------------------------------- -------- -------- -------- -------- --------
Total equity 81,563 78,519 93,232 81,563 93,232
Gearing including leases* 27.5% 31.5% 30.9% 27.5% 30.9%
----------------------------------------- -------- -------- -------- -------- --------
Gulf of Mexico oil spill
30 June 31 December
$ million 2022 2021
Gulf of Mexico oil spill payables and provisions (9,390) (10,433)
-------------------------------------------------- ------- -----------
Of which - current (1,217) (1,279)
Deferred tax asset 2,340 3,959
-------------------------------------------------- ------- -----------
During the second quarter pre-tax payments of $1,204 million
were made relating to the 2016 consent decree and settlement
agreement with the United States and the five Gulf coast states.
Payables and provisions presented in the table above reflect the
latest estimate for the remaining costs associated with the Gulf of
Mexico oil spill. Where amounts have been provided on an estimated
basis, the amounts ultimately payable may differ from the amounts
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 2021 - Financial statements - Notes 6, 8, 19, 21, 22,
28, and 32.
Working capital* reconciliation
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------ ------- ------- ------- ------- -------
Movements in inventories and other current
and non-current assets and liabilities
as per condensed group cash flow statement(a) (4,416) (1,771) 26 (6,187) (2,767)
Adjusted for inventory holding gains
(losses)* (Note 4 excluding Rosneft) 2,146 3,501 885 5,647 2,527
Adjusted for fair value accounting effects
relating to subsidiaries (676) (5,817) (1,377) (6,493) (1,118)
------------------------------------------------ ------- ------- ------- ------- -------
Working capital release (build) after
adjusting for net inventory gains (losses)
and fair value accounting effects (2,946) (4,087) (466) (7,033) (1,358)
------------------------------------------------ ------- ------- ------- ------- -------
(a) The movement in working capital includes outflows relating
to the Gulf of Mexico oil spill on a pre-tax basis of $1,209
million and $1,256 million in the second quarter and first half of
2022 respectively. For the same periods in 2021 the amount was an
outflow of $1,204 million and $1,339 million respectively.
Top of page 33
Surplus cash flow* reconciliation
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------------- ------- ------- ------- -------- --------
Sources:
Net cash provided by operating activities 10,863 8,210 5,411 19,073 11,520
Cash provided from investing activities 329 1,046 282 1,375 4,507
Other proceeds(a) 409 164 - 573 -
Receipts relating to transactions involving
non-controlling interests - 7 3 7 671
------------------------------------------------- ------- ------- ------- -------- --------
Cash inflow 11,601 9,427 5,696 21,028 16,698
------------------------------------------------- ------- ------- ------- -------- --------
Uses:
Lease liability payments (472) (498) (514) (970) (1,074)
Payments on perpetual hybrid bonds (161) (148) (328) (309) (383)
Dividends paid - BP shareholders (1,062) (1,068) (1,062) (2,130) (2,126)
- non-controlling interests (63) (65) (107) (128) (158)
Total capital expenditure* (2,838) (2,929) (2,514) (5,767) (6,312)
Net repurchase of shares relating to
employee share schemes - (500) (500) (500) (500)
Payments relating to transactions involving
non-controlling interests (1) (5) - (6) -
Currency translation differences relating
to cash and cash equivalents (414) (125) 24 (539) (34)
------------------------------------------------- ------- ------- ------- -------- --------
Cash outflow (5,011) (5,338) (5,001) (10,349) (10,587)
------------------------------------------------- ------- ------- ------- -------- --------
Cash used to meet net debt target - - - - 3,729
Surplus cash flow 6,590 4,089 695 10,679 2,382
------------------------------------------------- ------- ------- ------- -------- --------
(a) Other proceeds for the second quarter and first half 2022
include $409 million and $573 million respectively of proceeds from
the disposal of a loan note related to the Alaska divestment. The
cash was received in the fourth quarter 2021, reported as a
financing cash flow and was not included in other proceeds at the
time due to potential recourse from the counterparty. The proceeds
have been recognized as the potential recourse reduces and by end
second quarter 2022 all proceeds have been recognized.
Reconciliation of customers & products RC profit before
interest and tax to underlying RC profit before interest and tax*
to adjusted EBITDA* by business
Second First Second First First
quarter quarter quarter half half
$ million 2022 2022 2021 2022 2021
------------------------------------------ ------- ------- ------- ----- -----
RC profit before interest and tax for
customers & products 3,531 1,981 640 5,512 1,574
Less: Adjusting items* gains (charges) (475) (175) (187) (650) 91
Underlying RC profit before interest
and tax for customers & products 4,006 2,156 827 6,162 1,483
By business:
customers - convenience & mobility 679 522 951 1,201 1,609
Castrol - included in customers 223 256 265 479 599
products - refining & trading 3,327 1,634 (124) 4,961 (126)
Add back: Depreciation, depletion and
amortization 715 717 754 1,432 1,499
By business:
customers - convenience & mobility 315 326 329 641 653
Castrol - included in customers 38 39 39 77 78
products - refining & trading 400 391 425 791 846
Adjusted EBITDA for customers & products 4,721 2,873 1,581 7,594 2,982
By business:
customers - convenience & mobility 994 848 1,280 1,842 2,262
Castrol - included in customers 261 295 304 556 677
products - refining & trading 3,727 2,025 301 5,752 720
------------------------------------------ ------- ------- ------- ----- -----
Top of page 34
Realizations* and marker prices
Second First Second First First
quarter quarter quarter half half
2022 2022 2021 2022 2021
------- ------- ------- ------ -----
Average realizations (a)
Liquids* ($/bbl)
US 89.80 70.34 53.64 80.41 49.36
Europe 113.92 104.41 69.19 108.72 64.83
Rest of World 106.77 88.84 64.44 97.82 61.04
BP Average 100.94 83.80 60.69 92.41 56.91
--------------------------------------------- ------- ------- ------- ------ -----
Natural gas ($/mcf)
US 6.28 3.90 3.03 5.12 3.24
Europe 16.06 33.77 8.94 25.02 7.78
Rest of World 8.42 7.88 4.13 8.15 4.03
BP Average 8.31 8.24 4.08 8.28 4.03
--------------------------------------------- ------- ------- ------- ------ -----
Total hydrocarbons* ($/boe)
US 69.71 52.17 41.14 61.21 39.02
Europe 106.29 134.62 63.85 121.37 58.93
Rest of World 71.65 62.38 40.27 66.98 38.16
BP Average 73.24 64.70 41.84 68.96 39.77
--------------------------------------------- ------- ------- ------- ------ -----
Average oil marker prices ($/bbl)
Brent 113.93 102.23 68.97 107.94 64.98
West Texas Intermediate 108.77 95.22 66.19 101.99 62.22
Western Canadian Select 90.25 79.90 53.10 85.08 49.57
Alaska North Slope 112.17 96.13 68.58 104.15 64.89
Mars 105.27 93.43 66.01 99.35 62.39
Urals (NWE - cif) 77.29 87.26 66.69 82.40 62.96
--------------------------------------------- ------- ------- ------- ------ -----
Average natural gas marker prices
Henry Hub gas price(b) ($/mmBtu) 7.17 4.96 2.83 6.06 2.77
UK Gas - National Balancing Point (p/therm) 130.11 232.84 64.79 182.73 57.19
--------------------------------------------- ------- ------- ------- ------ -----
(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
2022 2022 2021 2022 2021
------- ------- ------- ----- -----
$/GBP average rate for the period 1.26 1.34 1.40 1.30 1.39
$/GBP period-end rate 1.21 1.32 1.38 1.21 1.38
$/EUR average rate for the period 1.06 1.12 1.21 1.09 1.21
$/EUR period-end rate 1.05 1.12 1.19 1.05 1.19
$/AUD average rate for the period 0.71 0.72 0.77 0.72 0.77
$/AUD period-end rate 0.69 0.75 0.75 0.69 0.75
Rouble/$ average rate for the period 67.50 88.48 74.20 77.95 74.31
Rouble/$ period-end rate 54.68 82.59 72.70 54.68 72.70
-------------------------------------- ------- ------- ------- ----- -----
Top of page 35
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 2021
(pages 76-79) and are summarized below. There are no material
changes in those principal risks and uncertainties for the
remaining six months of the financial year.
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.
-- Accessing and progressing hydrocarbon resources and low
carbon opportunities - inability to access and progress hydrocarbon
resources and low carbon opportunities could adversely affect
delivery of our strategy.
-- 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, cyber security and data protection -
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 -
developments in policy, law, regulation, technology and markets,
including societal and investor sentiment, related to the issue of
climate change could increase costs, reduce revenues, constrain our
operations and affect our business plans and financial
performance.
-- Competition - inability to remain efficient, maintain a
high-quality portfolio of assets and innovate could negatively
impact delivery of our strategy in a highly competitive market.
-- Talent and capability - inability to attract, develop and
retain people with necessary skills and capabilities could
negatively impact delivery of our strategy.
-- 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 employees 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 law and regulation could increase
costs, constrain our operations and affect our business plans and
financial performance.
-- Trading and treasury trading activities - ineffective
oversight of trading and treasury trading activities could lead to
business disruption, financial loss, regulatory intervention or
damage to our reputation and affect our permissions to trade.
-- Reporting - failure to accurately report our data could lead
to regulatory action, legal liability and reputational damage.
Top of page 36
Legal proceedings
For a full discussion of the group's material legal proceedings,
see pages 248-249 of bp Annual Report and Form 20-F 2021.
Submission of resolutions passed at Annual General Meetings to
the National Storage Mechanism
In accordance with Listing Rules 9.6.2 and 9.6.3, copies of all
resolutions passed by BP p.l.c. other than resolutions concerning
ordinary business transacted at the company's previous Annual
General Meetings have been submitted to the national storage
mechanism and are available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
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.
Adjusted EBITDA is a non-GAAP measure presented for bp's
operating segments and is defined as replacement cost (RC) profit
before interest and tax, excluding net adjusting items*, adding
back depreciation, depletion and amortization and exploration
write-offs (net of adjusting items). Adjusted EBITDA by business is
a further analysis of adjusted EBITDA for the customers &
products businesses. bp believes it is helpful to disclose adjusted
EBITDA by operating segment and by business because it reflects how
the segments measure underlying business delivery. The nearest
equivalent measure on an IFRS basis for the segment is RC profit or
loss before interest and tax, which is bp's measure of profit or
loss that is required to be disclosed for each operating segment
under IFRS.
Adjusting items are items that bp discloses separately because
it considers such disclosures to be meaningful and relevant to
investors. They are items that management considers to be important
to period-on-period analysis of the group's results and are
disclosed in order to enable investors to better understand and
evaluate the group's reported financial performance. Adjusting
items include gains and losses on the sale of businesses and fixed
assets, impairments, environmental and other provisions,
restructuring, integration and rationalization costs, fair value
accounting effects, financial impacts relating to Rosneft for the
2022 financial reporting period and costs relating to the Gulf of
Mexico oil spill and other items. Adjusting items within
equity-accounted earnings are reported net of incremental income
tax reported by the equity-accounted entity. Adjusting items are
used as a reconciling adjustment to derive underlying RC profit or
loss and related underlying measures which are non-GAAP measures.
An analysis of adjusting items by segment and type is shown on page
31.
Blue hydrogen - Hydrogen made from natural gas in combination
with carbon capture and storage (CCS).
Capital expenditure is total cash capital expenditure as stated
in the condensed group cash flow statement. Capital expenditure for
the operating segments and customers & products businesses is
presented on the same basis.
Cash balance point is defined as the implied Brent oil price, on
average over 2021-25, to balance bp's sources and uses of cash
assuming an average bp refining marker margin around $11/bbl and
Henry Hub at $3/mmBtu in 2020 real terms.
Consolidation adjustment - UPII is unrealized profit in
inventory arising on inter-segment transactions.
Developed renewables to final investment decision (FID) - Total
generating capacity for assets developed to FID by all entities
where bp has an equity share (proportionate to equity share). If
asset is subsequently sold bp will continue to record capacity as
developed to FID. If bp equity share increases developed capacity
to FID will increase proportionately to share increase for any
assets where bp held equity at the point of FID.
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.
Taxation on a RC basis for the group is calculated as taxation as
stated on the group income statement adjusted for taxation on
inventory holding gains and losses. 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. Taxation on
a RC basis and ETR on RC profit or loss are non-GAAP measures. The
nearest equivalent measure on an IFRS basis is the ETR on profit or
loss for the period.
Electric vehicle charge points / EV charge points are defined as
the number of connectors on a charging device, operated by either
bp or a bp joint venture.
Top of page 37
Glossary (continued)
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. Fair value accounting effects are included within
adjusting items. They relate to certain of the group's commodity,
interest rate and currency risk exposures as detailed below. Other
than as noted below, the fair value accounting effects described
are reported in both the gas & low carbon energy and customer
& products segments.
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, which is reported in the
gas and low carbon energy segment, reduces the measurement
differences between that of the derivative financial instruments
used to risk manage the LNG contracts and the measurement of the
LNG contracts themselves, which therefore gives a better
representation of performance in each period.
In addition, 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
& corporate segment, 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 38
Glossary (continued)
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. Net debt does not include accrued
interest, which is reported within other receivables and other
payables on the balance sheet and for which the associated cash
flows are presented as operating cash flows in the group cash flow
statement. 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
29.
We are unable to present reconciliations of forward-looking
information for net debt or 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
32.
Green hydrogen - Hydrogen made from solar, wind and
hydro-electricity.
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
on a cash basis and 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. The nearest equivalent measure on
an IFRS basis is capital expenditure on a cash basis. Further
information and a reconciliation to GAAP information is provided on
page 30.
Installed renewables capacity is bp's share of capacity for
operating assets owned by entities where bp has an equity
share.
Inventory holding gains and losses are non-GAAP adjustments to
our IFRS profit (loss) and represent:
a. 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 of inventories other than for trading
inventories, 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 as inventory holding gains and losses 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; and
b. an adjustment relating to certain trading inventories that
are not price risk managed which relate to a minimum inventory
volume that is required to be held to maintain underlying business
activities. This adjustment represents the movement in fair value
of the inventories due to prices, on a grade by grade basis, during
the period. This is calculated from each operation's inventory
management system on a monthly basis using the discrete monthly
movement in market prices for these inventories.
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 that are
price risk-managed. See Replacement cost (RC) profit or loss
definition below.
Liquids - Liquids comprises crude oil, condensate and natural
gas liquids. For the oil production & operations segment, it
also includes bitumen.
Major projects have a bp net investment of at least $250
million, or are considered to be of strategic importance to bp or
of a high degree of complexity.
Operating cash flow is net cash provided by (used in) operating
activities as stated in the condensed group cash flow
statement.
Top of page 39
Glossary (continued)
Organic capital expenditure is a non-GAAP measure. Organic
capital expenditure comprises capital expenditure on a cash basis
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. The nearest equivalent measure on an IFRS basis is
capital expenditure on a cash basis and a reconciliation to GAAP
information is provided on page 30.
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.
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. For the gas
& low carbon energy and oil production & operations
segments, realizations include transfers between businesses.
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.
Renewables pipeline - Renewable projects satisfying the
following criteria until the point they can be considered developed
to final investment decision (FID): Site based projects that have
obtained land exclusivity rights, or for PPA based projects an
offer has been made to the counterparty, or for auction projects
pre-qualification criteria has been met, or for acquisition
projects post a binding offer being accepted.
Replacement cost (RC) profit or loss / RC profit or loss
attributable to bp shareholders reflects the replacement cost of
inventories sold in the period and is calculated as profit or loss
attributable to bp shareholders, adjusting for inventory holding
gains and losses (net of tax). 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
bp's measure of profit or loss that is required to be disclosed for
each operating segment under IFRS.
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. Reported incidents are
investigated throughout the year and as a result there may be
changes in previously reported incidents. Therefore comparative
movements are calculated against internal data reflecting the final
outcomes of such investigations, rather than the previously
reported comparative period, as this this represents a more up to
date reflection of the safety environment.
Retail sites include sites operated by dealers, jobbers,
franchisees or brand licensees or joint venture (JV) partners,
under the bp brand. These may move to and from the bp brand as
their fuel supply agreement or brand licence agreement expires and
are renegotiated in the normal course of business. Retail sites are
primarily branded bp, ARCO, Amoco, Aral and Thorntons, and also
includes sites in India through our Jio-bp JV.
Retail sites in growth markets are retail sites that are either
bp branded or co-branded with our partners in China, Mexico and
Indonesia and also include sites in India through our Jio-bp
JV.
Solomon availability - See Refining availability definition.
Strategic convenience sites are retail sites, within the bp
portfolio, which sell bp-branded vehicle energy and carry one of
the strategic convenience brands (e.g. M&S, Thorntons, Rewe to
Go). To be considered a strategic convenience brand the convenience
offer should have a demonstrable level of differentiation in the
market in which it operates. Strategic convenience site count
includes sites under a pilot phase, but exclude sites in growth
markets.
Top of page 40
Glossary (continued)
Surplus cash flow is a non-GAAP measure and refers to the net
surplus of sources of cash over uses of cash, after reaching the
$35 billion net debt target. Sources of cash include net cash
provided by operating activities, cash provided from investing
activities and cash receipts relating to transactions involving
non-controlling interests. Uses of cash include lease liability
payments, payments on perpetual hybrid bond, dividends paid, cash
capital expenditure, the cash cost of share buybacks to offset the
dilution from vesting of awards under employee share schemes, cash
payments relating to transactions involving non-controlling
interests and currency translation differences relating to cash and
cash equivalents as presented on the condensed group cash flow
statement .
For the first half of 2022, the sources of cash includes other
proceeds related to the proceeds from the disposal of a loan note
related to the Alaska divestment. The cash was received in the
fourth quarter 2021, was reported as a financing cash flow and was
not included in other proceeds at the time due to potential
recourse from the counterparty. The proceeds are being recognized
as the potential recourse reduces. See page 33 for the components
of our sources of cash and uses of cash.
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.
Reported process safety events are investigated throughout the year
and as a result there may be changes in previously reported events.
Therefore comparative movements are calculated against internal
data reflecting the final outcomes of such investigations, rather
than the previously reported comparative period, as this this
represents a more up to date reflection of the safety
environment.
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 for the group is calculated
as taxation as stated on the group income statement adjusted for
taxation on inventory holding gains and losses and total taxation
on adjusting items. Information on underlying RC profit or loss is
provided below. Taxation on an underlying RC basis presented for
the operating segments is calculated through an allocation of
taxation on an underlying RC basis to each segment. 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. Taxation on an underlying
RC basis and underlying ETR are non-GAAP measures. 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
and adjusting items, that are difficult to predict in advance in
order to include in a GAAP estimate.
Underlying production - 2022 underlying production, when
compared with 2021, 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 / underlying RC profit or loss
attributable to bp shareholders is a non-GAAP measure and is RC
profit or loss* (as defined on page 39) after excluding net
adjusting items and related taxation. See page 31 for additional
information on the adjusting items that are used to arrive at
underlying RC profit or loss in order to enable a full
understanding of the items and their financial impact.
Underlying RC profit or loss before interest and tax for the
operating segments or customers & products businesses is
calculated as RC profit or loss (as defined above) including profit
or loss attributable to non-controlling interests before interest
and tax for the operating segments and excluding net adjusting
items for the respective operating segment or business.
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 adjusting items. 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 and businesses is RC profit or loss before interest and
taxation. A reconciliation to GAAP information is provided on page
1 for the group and pages 6-15 for the segments.
Underlying RC profit or loss per share is a non-GAAP measure.
Earnings per share is defined in Note 7. Underlying RC profit or
loss per ordinary share is calculated using the same denominator as
earnings per share as defined in the consolidated financial
statements. The numerator used is underlying RC profit or loss
attributable to bp shareholders rather than profit or loss
attributable to bp shareholders. Underlying RC profit or loss per
ADS is calculated as outlined above for underlying RC profit or
loss per share except the denominator is adjusted to reflect one
ADS equivalent to six ordinary shares. bp believes it is helpful to
disclose the underlying RC profit or loss per ordinary share and
per ADS because these measures 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.
Top of page 41
Glossary (continued)
upstream includes oil and natural gas field development and
production within the gas & low carbon energy and oil
production & operations segments.
upstream/hydrocarbon plant reliability (bp-operated) is
calculated taking 100% less the ratio of total unplanned plant
deferrals divided by installed production capacity, excluding
non-operated assets and bpx energy. Unplanned plant deferrals are
associated with the topside plant and where applicable the subsea
equipment (excluding wells and reservoir). Unplanned plant
deferrals include breakdowns, which does not include Gulf of Mexico
weather related downtime.
upstream unit production cost is calculated as production cost
divided by units of production. Production cost does not include ad
valorem and severance taxes. Units of production are barrels for
liquids and thousands of cubic feet for gas. Amounts disclosed are
for bp subsidiaries only and do not include bp's share of
equity-accounted entities.
Working capital 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 and fair value accounting effects relating to
subsidiaries is a non-GAAP measure. It is calculated by adjusting
for inventory holding gains/losses reported in the period and from
the second quarter 2021 onwards, it is also adjusted for fair value
accounting effects relating to subsidiaries reported within
adjusting items for the period. This 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
underlying 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 working capital after
adjusting for Gulf of Mexico oil spill outflows, 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.
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.
Trade marks
Trade marks of the bp group appear throughout this announcement.
They include:
bp , Amoco, Aral, Castrol ON and Thorntons
Top of page 42
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: expectations regarding the conflict in
Ukraine and inflationary pressures, including the impacts and
consequences on demand; plans, expectations and assumptions
regarding oil and gas demand, supply, prices or volatility and
storage levels; expectations regarding major project ramp-up,
divestment and maintenance activity; expectations regarding
refining margins and product demand; expectations regarding
implementation of bp's strategy, bp's business, financial
performance, results of operations, cash flows, liquidity,
prospects, shareholder value and returns and reputation;
expectations regarding future hydrocarbon production and project
ramp-up; expectations regarding future project start-ups;
expectations with regards to bp's transformation to an IEC;
expectations regarding price assumptions used in accounting
estimates; bp's plans and expectations regarding the amount and
timing of share buybacks and quarterly and interim dividends; plans
and expectations regarding bp's credit rating, including in respect
of maintaining a strong investment grade credit rating; plans and
expectations regarding the allocation of surplus cash flow to share
buybacks and strengthening the balance sheet; plans and
expectations regarding bp's exit of its shareholding in Rosneft and
other investments in Russia; plans and expectations with respect to
the total depreciation, depletion and amortization and other
businesses & corporate underlying annual charge for 2022; plans
and expectations regarding investments in the UK, including in
charging infrastructure; plans and expectations regarding the
divestment programme, including the amount and timing of proceeds;
plans and expectations regarding bp's renewable energy and
alternative energy businesses; expectations regarding the UK
government's new levy on the profits of UK oil and gas companies;
expectations regarding the underlying effective tax rate for 2022;
expectations regarding the timing and amount of future payments
relating to the Gulf of Mexico oil spill; expectations regarding
the impact of the recent outage at Freeport LNG; plans and
expectations regarding bp's defined benefit pension plans; plans
and expectations regarding capital expenditure, including that
capital expenditure will be within a range of $14-15 billion in
2022; plans and expectations regarding projects, joint ventures and
other partnerships and agreements, including partnerships and other
collaborations with Iberdrola, Eni, Korea Gas Corporation, ADNOC,
Masdar, Marubeni, HyCC, Shenzhen Huize New Energy Co. Ltd, Julius
Stiglechner GmbH, Submer, and AENA, as well as plans and
expectations regarding the operation of China's largest fast EV
charging hub, the Herschel Expansion project in the Gulf of Mexico,
the Gas Natural Acu power plant in Brazil, the Asian Renewable
Energy Hub in Western Australia, submission of bids for offshore
wind leases in the Netherlands, the sale of its interest in the
Sunrise oil sands project, the acquisition of an interest in the
Bay du Nord project, the building of a hydrogen refuelling station
at the bp truckstop in Queensland, the development of EV charge
points and the HyGreen Teesside green hydrogen project.
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 or outcomes, 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 volatility of oil prices, the effects of
bp's plan to exit its shareholding in Rosneft and other investments
in Russia, the impact of COVID-19, overall global economic and
business conditions impacting bp's business and demand for bp's
products as well as the specific factors identified in the
discussions accompanying such forward-looking statements; changes
in consumer preferences and societal expectations; the pace of
development and adoption of alternative energy solutions;
developments in policy, law, regulation, technology and markets,
including societal and investor sentiment related to the issue of
climate change; 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 and continued base oil and
additive supply shortages; OPEC+ quota restrictions; PSA and 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 and policies, including related to climate
change; changes in social attitudes and customer preferences;
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; bp's access
to future credit resources; business disruption and crisis
management; the impact on bp's reputation of ethical misconduct and
non-compliance with regulatory obligations; trading losses; major
uninsured losses; the possibility that international sanctions or
other steps taken by governmental authorities or any other relevant
persons may impact Rosneft's business or outlook, bp's ability to
sell its interests in Rosneft, or the price for which bp could sell
such interests; the possibility that actions of any competent
authorities or any other relevant persons may limit bp's ability to
sell its interests in Rosneft, or the price for which it could sell
such interests; 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, as well as those factors discussed under "Risk
factors" in bp's Annual Report and Form 20-F 2021 as filed with the
US Securities and Exchange Commission.
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of BP p.l.c. is Ben Mathews, Company Secretary.
Top of page 43
Contacts
London Houston
Press Office David Nicholas Megan Baldino
+44 (0) 7831 095541 +1 907 529 9029
Investor Relations Craig Marshall Graham Collins
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