SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended March 31, 2004
BP p.l.c.
(Translation of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
----------- -------------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No |X|
----------- -------------
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO.
333-9790) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON
FORM F-3 (FILE NO. 333-65996) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-83180) OF BP AUSTRALIA CAPITAL
MARKETS LIMITED, BP CANADA FINANCE COMPANY, BP CAPITAL MARKETS p.l.c., BP
CAPITAL MARKETS AMERICA INC. AND BP p.l.c., THE REGISTRATION STATEMENT ON FORM
S-8 (FILE NO. 33-21868) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8
(FILE NO. 333-9020) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE
NO. 333-9798) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-79399) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-34968) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-74414) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-103924) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-102583) OF BP p.l.c. AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-103923) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS
REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS
SUBSEQUENTLY FILED OR FURNISHED.
Page 1
BP p.l.c. AND SUBSIDIARIES
FORM 6-K FOR THE PERIOD ENDED MARCH 31, 2004
Page
1. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the period January-March 2004. 3
2. Consolidated Financial Statements including Notes to
Consolidated Financial Statements for the period January-March 2004. 12
Page 2
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GROUP RESULTS JANUARY - MARCH 2004
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Turnover 67,602 62,031
======= =======
Profit for the period 4,818 4,219
Exceptional items, net of tax (1,300) (340)
------- -------
Profit before exceptional items 3,518 3,879
======= =======
Profit for the period per ordinary share - cents 21.81 18.90
Dividends per ordinary share - cents 6.75 6.25
The following discussion should be read in conjunction with the consolidated
financial statements and the related notes provided elsewhere in this Form 6-K
and with the information, including the consolidated financial statements and
related notes, for the year ended December 31, 2003 in BP p.l.c.'s Annual Report
on Form 20-F for the year ended December 31, 2003.
The financial information for 2003 has been restated to reflect (a) the transfer
of natural gas liquids (NGL) operations from Exploration and Production to Gas,
Power and Renewables on January 1, 2004; (b) the adoption by the Group of
Financial Reporting Standard No. 17 `Retirement Benefits' (FRS 17) with effect
from January 1, 2004; and (c) the adoption by the Group of Urgent Issues Task
Force Abstract No. 38 `Accounting for ESOP Trusts' with effect from January 1,
2004. For further information, see Note 2 of Notes to Consolidated Financial
Statements.
The first quarter trading environment was generally stronger than in the first
quarter of 2003, with higher oil realizations, refining margins and
petrochemicals margins, slightly reduced gas realizations and lower NGL and
marketing margins. The Brent oil price increased more than $0.56 per barrel, the
refining Global Indicator Margin increased $0.10 and the Henry Hub gas price
decreased $0.84 compared with the first quarter of 2003.
Turnover for the three months ended March 31, 2004 was $67,602 million compared
with $62,031 million for 2003. The increase in turnover for the first quarter
reflects net increases of $2,350 million from higher sales volumes, $2,300
million from foreign exchange movements and $580 million from higher prices,
partly offset by a decrease of $650 million related to lower production volumes
following 2003 divestments.
Profit for the three months ended March 31, 2004 was $4,818 million, including
inventory holding gains of $648 million. Profit for the three months ended March
31, 2003 was $4,219 million, including inventory holding gains of $799 million.
Inventory holding gains or losses represent the difference between the cost of
sales calculated using the average cost of supplies incurred during the period
and the cost of sales calculated using the first-in first-out method.
Profit before exceptional items was $3,518 million for the three months ended
March 31, 2004, compared with $3,879 million for the equivalent period of 2003.
Exceptional items are gains and losses on the sale of fixed assets and
businesses or termination of operations. Net exceptional gains in the first
quarter of 2004 were $1,300 million ($1,230 million before tax) and principally
relate to net gains from the sale of our interests in PetroChina and Sinopec.
Net exceptional gains in the first quarter of 2003 were $340 million ($394
million before tax) and principally relate to net gains from the sale of certain
upstream interests.
Profit before exceptional items for the three months ended March 31, 2004 is
after impairment charges of $186 million in Exploration and Production related
to our interests in two fields in Venezuela, Desarrollo Zuli Occidental (DZO)
and Boqueron. Profit before exceptional items for the three months ended March
31, 2003 is after charging impairment of $105 million related to the Yacheng
field in China, costs of $90 million in respect of our restructuring activities
in North America and the UK and a $49 million write-down of the Viscount asset
in the North Sea in Exploration and Production, Veba integration costs of $18
million in Refining and Marketing, and includes a $130 million credit related to
tax restructuring benefits.
In addition to the factors above, the decrease in profit before exceptional
items in the first quarter reflects higher costs, the impact of the changing
composition of production following 2003 divestments and slightly lower US gas
realizations in Exploration and Production as well as lower marketing margins,
with some offset from higher refining margins, the inclusion of our interest in
TNK-BP and slightly higher liquids realizations.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Interest expense for the three months ended March 31, 2004 was $152 million
compared with $176 million in the same period of 2003, primarily reflecting
lower interest rates partly offset by the inclusion of equity-accounted interest
from the TNK-BP joint venture. Other finance expense for the three months ended
March 31, 2004 was $76 million compared with $129 million in the same period of
2003, primarily reflecting a reduction in net pension finance costs.
Net taxation, other than production taxes, charged for the three months ended
March 31, 2004 was $1,822 million compared with $1,782 million in the equivalent
period last year. The tax on exceptional items was a credit of $70 million
compared with a charge of $54 million for the first quarter of 2003. The
effective tax rate was 27% for the three months ended March 31, 2004, compared
with 30% for the equivalent period of 2003. The reduction in the rate reflects
the low tax charge on the exceptional gains reported in the current quarter.
Capital expenditure in the first quarter of 2004 was $4.5 billion including a
$1.35 billion payment relating to the contribution of TNK's interest in Slavneft
within TNK-BP. Capital expenditure and acquisitions for the first quarter of
2003 was $2.9 billion; there were no acquisitions. Disposal proceeds in the
first quarter of 2004 were $2.8 billion compared with $2.5 billion for the
equivalent period in 2003.
Net cash inflow for the three months ended March 31, 2004 was $3.8 billion,
compared with an inflow of $3.2 billion for the equivalent period of 2003,
reflecting higher operating cash flow partly offset by higher acquisition
spending. Net cash inflow from operating activities was $7.7 billion for the
three months ended March 31, 2004, compared with $6.0 billion in the equivalent
period in 2003, primarily reflecting a lower requirement for working capital.
Net debt at March 31, 2004 was $17.6 billion compared with $20.2 billion at
December 31, 2003. The ratio of net debt to net debt plus equity was 19% at
March 31, 2004 compared with 22% at December 31, 2003. This ratio shows the
proportion of debt and equity used to finance our operations, and can also be
used to measure borrowing capacity. In addition to reported debt, BP uses
conventional off balance sheet sources of finance such as operating leases and
joint venture and associated undertaking borrowings.
The Group has access to other sources of liquidity in the form of committed
facilities and other funding through the capital markets. BP believes that,
taking into account the substantial amounts of undrawn borrowing facilities
available, the Group has sufficient working capital for foreseeable
requirements.
In the normal course of business the Group has entered into certain long term
purchase commitments principally relating to take or pay contracts for the
purchase of natural gas, crude oil and chemicals feedstocks and throughput
arrangements for pipelines. The Group expects to fulfil its obligations under
these arrangements with no adverse consequences to the Group's results of
operations or financial condition.
The return on average capital employed was 21.0% for the first quarter of 2004
compared with 20.3% for the same period in 2003. Return on average capital
employed is the ratio of profit including minority shareholders' interest and
excluding post-tax interest on finance debt to average capital employed for the
period. Capital employed is the total of BP shareholders' interest, minority
shareholders' interest and finance debt. This performance measure is useful for
shareholders and management as an indication of capital productivity over the
long term. For further information on the return on average capital employed
calculation see page 56 of this report.
BP announced a first quarterly dividend for 2004 of 6.75 cents per ordinary
share. Holders of ordinary shares received 3.807 pence per share and holders of
American Depositary Receipts (ADRs) $0.405 per ADS. The dividend was paid on
June 7, 2004 to shareholders on the register on May 14, 2004. Participants in
the Dividend Reinvestment Plan or the dividend reinvestment facility in the US
Direct Access Plan received the dividend in the form of shares, also on June 7,
2004. The company repurchased for cancellation 155 million of its own shares
during the quarter, at a cost of $1,249 million.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
DETAILED REVIEW OF BUSINESSES (EXCLUDING EXCEPTIONAL ITEMS)
EXPLORATION AND PRODUCTION
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Turnover - $m 8,166 8,878
Profit before interest and tax - $m 4,250 4,724
Exceptional (gains) losses - $m (211) (433)
------- -------
Total operating profit - $m 4,039 4,291
======= =======
Results include:
Exploration expense - $m 136 112
Of which: Exploration expenditure written off - $m 67 50
Key Statistics:
Crude oil Average prices realized by BP - $/bbl 31.30 31.07
Production - mb/d 2,342 1,830
Natural gas liquids Average prices realized by BP - $/bbl 23.14 19.82
Production - mb/d 191 233
Total liquids(a) Average prices realized by BP - $/bbl 30.48 29.82
Production - mb/d 2,533 2,063
Natural gas Average prices realized by BP - $/mcf 3.79 3.87
Production - mmcf/d 8,600 9,017
Total hydrocarbons(b) Average prices realized by BP - $/boe 26.48 26.39
Production - mboe/d 4,015 3,618
Brent oil price - $/bbl 32.03 31.47
West Texas Intermediate oil price - $/bbl 35.30 34.00
Alaska North Slope US West Coast - $/bbl 34.22 33.16
Henry Hub gas price (c) - $/mmbtu 5.69 6.53
UK Gas - National Balancing Point - p/therm 24.59 21.28
---------------
(a) Crude oil and natural gas liquids.
(b) Natural gas is converted to oil equivalent at 5.8 billion cubic feet =
1 million barrels.
(c) Henry Hub First of the Month Index.
Turnover for the three months ended March 31, 2004 was $8,166 million compared
with $8,878 million in the corresponding period in 2003, reflecting a decrease
of around $650 million due to lower production volumes as a result of divestment
activity in 2003 and a further decrease of around $60 million primarily related
to lower gas realizations.
Profit before interest and tax for the three months ended March 31, 2004 was
$4,250 million compared with $4,724 million for the equivalent period in 2003.
Profit for the first quarters of 2004 and 2003 included net exceptional gains
before tax of $211 million and $433 million, respectively.
Total operating profit for the three months ended March 31, 2004 was $4,039
million including inventory holding gains of $8 million, and is after impairment
charges of $186 million related to our interests in Desarrollo Zuli Occidental
(DZO) and Boqueron in Venezuela. We previously reported an exceptional loss on
disposal of $217 million in respect of these assets; however, the sales
agreement has lapsed and we will retain our interests in the fields. As a result
of the lapse of the agreement, the exceptional loss has been reversed and an
impairment charge has been recognized in the quarter. Total operating profit for
the three months ended March 31, 2003 was $4,291 including inventory holding
gains of $6 million, and was after charging impairment of $105 million related
to the Yacheng field in China, costs of $90 million in respect of restructuring
activities in North America and the UK and a $49 million write-down of the
Viscount asset in the North Sea.
Page 5
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
EXPLORATION AND PRODUCTION (concluded)
In addition to the factors above, the primary reasons for the decrease in
operating profit for the first quarter of 2004 compared with the first quarter
of 2003 are the higher depreciation of $190 million, slightly lower US gas
realizations ($135 million), higher costs due to foreign exchange movements ($95
million) and the impact of the changing composition of production resulting from
the acquisition of our interest in TNK-BP and divestments made in 2003 of $95
million, partly offset by slightly higher liquids realizations of $95 million.
The first quarter 2004 result also includes a charge of $66 million, reflecting
an increase in the provision for unrealized profit in inventory, which removes
the upstream margin from downstream inventories. This compares with a charge of
$125 million in the first quarter of 2003.
Production for the quarter was up from 3,618 mboe/d in the first quarter of 2003
to 4,015 mboe/d. This reflects the impact of the inclusion of TNK-BP including
the first quarter of Slavneft, growth in Trinidad, the startup of NaKika in
Deepwater Gulf of Mexico and Xikomba in Angola, partly offset by decline in
existing profit centres in North America and Europe and divestments made during
2003.
The first quarter saw exploration successes in Egypt with the Raven 1 and Taurt
wells in the Nile Delta along with three further discoveries in Angola: Cesio 1
and Chumbo 1 in offshore Block 18 and Bavuca in Block 15.
In January, we sold 45% of our interest in Kings Peak in Deepwater Gulf of
Mexico to Marubeni Oil & Gas (USA) Inc. Additionally, on February 9, 2004 we
signed a sale and purchase agreement with Fairborne Energy Ltd to sell a package
of non-core assets in Alberta, Canada.
Page 6
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Turnover - $m 41,694 39,495
Profit before interest and tax - $m 1,249 1,248
Exceptional (gains) losses - $m 140 52
------- -------
Total operating profit - $m 1,389 1,300
======= =======
Total refined product sales - mb/d 6,941 6,804
Refinery throughputs - mb/d 2,943 3,024
Refining availability (a) - % 95.1 94.2
Global Indicator Refining Margin (b) - $/bbl 4.62 4.52
---------------
(a) Refining availability is the weighted average percentage of the period that
refinery units are available for processing, after accounting for downtime
such as turnarounds.
(b) The Global Indicator Refining Margin (GIM) is the average of six regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity. The refining margins are industry specific measures rather than
BP specific, which we believe are useful to investors in analyzing trends
in the industry and their impact on our results. The margins are calculated
by BP based on published crude oil and product prices and take account of
fuel utilization and catalyst costs. No account is taken of BP's other cash
and non-cash costs of refining such as wages and salaries and plant
depreciation. The indicator margin 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.
Turnover for the three months ended March 31, 2004 was $41,694 million compared
with $39,495 million for the same period in the prior year. The increase in
turnover was principally due to foreign exchange movements, which contributed
approximately $2,300 million, with higher prices contributing a further $500
million. These were partially offset by lower sales volumes ($800 million) due
to disposals.
Profit before interest and tax for the three months ended March 31, 2004 was
$1,249 million compared with $1,248 million for the equivalent period in 2003.
Profit in the first quarter of 2004 was after net exceptional losses before tax
of $140 million, which principally relate to the disposal of Singapore Refining
company Private Limited (SRC) and the closure of the lubricants operation of the
Coryton Refinery in the UK. Profit in the first quarter of 2003 was after net
exceptional losses before tax of $52 million related to disposal of
approximately 2.4% North Germany Retail site network, offset by gain of $9
million from disposal of 21 Retail sites in Greece, and a gain of $9 million
from disposal of US Pipeline East Texas Crude line.
Total operating profit for the three months ended March 31, 2004 was $1,389
million, including inventory holding gains of $529 million. Total operating
profit for the three months ended March 31, 2003 was $1,300 million, including
inventory holding gains of $620 million, and is after charging Veba integration
costs of $18 million.
In addition to the factors above, the increase in operating profit in the first
quarter of 2004 compared with the first quarter of 2003 reflects approximately
$300 million from improved refining margins, particularly in the US, due to
strong demand, cold weather and concerns over US gasoline supplies. This
increase was partly offset by a decrease of $100 million in as marketing
margins, which were lower than in the first quarter of 2003 due to pressure from
higher crude and product prices.
During the quarter, BP launched its new product line of gasoline and diesel
fuels, BP Ultimate, in Portugal. We also launched a new advertising and
communications campaign - Fluid Motion - for the Castrol brand in Europe, along
with a new product, Castrol GTX High Mileage, in the UK.
Page 7
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING (concluded)
During the quarter, BP and the Singapore Petroleum Company Limited (SPC)
announced that conditional agreement had been reached for SPC to purchase BP's
interests and one-third stake in Singapore Refining Company Private Limited
(SRC) for $140 million. Subsequent to this announcement, we were notified that
the remaining shareholders wished to exercise their pre-emption rights. This
resulted in BP's one-third share being divided equally between the two remaining
shareholders in SRC, namely Caltex Singapore Private Ltd and SPC. As a result,
these two companies acquired BP's one-sixth equity interest in Tanker Mooring
Services Company Pte Ltd (TMS). The transaction was completed on June 30, 2004.
In the first quarter, BP and Lembaga Tabung Angkatan Tentera (LTAT) announced
that agreement had been reached for LTAT to purchase BP's 70% shareholding in
the BP Malaysia Sdn Bhd fuels business. Subject to receiving the necessary
regulatory consents, this transaction is expected to be concluded in the third
quarter of 2004.
Page 8
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
PETROCHEMICALS
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Turnover - $m 4,510 4,121
Profit before interest and tax - $m 96 283
Exceptional (gains) losses - $m 154 (7)
------- -------
Total operating profit - $m 250 276
======= =======
Production (a) - kte 7,243 6,980
Petrochemicals Indicator Margin (b) - $/te 122(c) 96
---------------
(a) Includes BP share of joint ventures, associated undertakings and other
interests in production.
(b) The Petrochemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Nexant in their quarterly market analyses, which we weight based on BP's
product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Among the products and businesses
covered in the CIM are the olefins and derivatives, the aromatics and
derivatives, linear alpha-olefins (LAOs), acetic acid, vinyl acetate
monomers and nitriles. Not included are fabrics and fibres, plastic
fabrications, poly alpha-olefins (PAOs), anhydrides, speciality
intermediates, and the remaining parts of the solvents and acetyls
businesses. This measure is not BP specific, rather it is an indicator of
relative industry profitability and BP's actual margins will differ. While
not entirely representative of BP's complete range of products, we believe
it does provide investors with useful information about the environment for
BP's products.
(c) Provisional. The data for the first quarter is based on two months' actual
and one month of provisional data.
Turnover for the three months ended March 31, 2004 was $4,510 million compared
with $4,121 million for the equivalent period in 2003. The increase in turnover
for the first quarter primarily reflects increases of $250 million from higher
sales volumes and $140 million from higher US Olefins prices.
Profit before interest and tax for the three months ended March 31, 2004 was $96
million compared with $283 million for the equivalent period in 2003. The first
quarter of 2004 was after net exceptional losses before tax of $154 million,
which were largely associated with the sale of our Specialty Intermediates
Business and the exit of the Baglan Bay site in the UK. The first quarter of
2003 included net exceptional gains before tax of $7 million.
Total operating profit for the three months ended March 31, 2004 was $250
million, including inventory holding gains of $121 million. Total operating
profit for the three months ended March 31, 2003 was $276 million, including
inventory holding gains of $146 million.
In addition to the factors above, operating profit in the first quarter of 2004
compared with the first quarter of 2003 reflects adverse foreign exchange
impacts. The margin structures of our European operations continue to be
affected by the strength of the euro and sterling, as we are unable to achieve
offsetting price increases due to dollar-based competition.
Petrochemicals production of 7,243 thousand tonnes in the first quarter of 2004
was 263 thousand tonnes above the first quarter of 2003. Higher production was
due to improved plant utilization and organic growth, including two new Asian
PTA plants coming on stream and increasing our share of Asian PTA joint
ventures.
During the first quarter, we announced the closure and exit from the Baglan Bay
site in the UK. We signed a sale and purchase agreement for our Specialty
Intermediates Business (trimellitic anhydride, purified isophthalic acid (PIA)
and maleic anhydride) based in Joliet, Illinois in the USA, plus the economic
interest in our European PIA business.
Page 9
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
GAS, POWER AND RENEWABLES
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Turnover - $m 20,975 18,080
Profit before interest and tax - $m 188 243
Exceptional (gains) losses - $m - -
------- -------
Total operating profit - $m 188 243
======= =======
Turnover for the three months ended March 31, 2004 was $20,975 million, compared
with $18,080 million for the same period in 2003. The increase for the quarter
primarily reflects higher natural gas sales volumes.
Profit before interest and tax for the three months ended March 31, 2004 was
$188 million compared with $243 million for the equivalent period in 2003.
Total operating profit for the three months ended March 31, 2004 was $188
million, after inventory holding losses of $10 million. Total operating profit
for the three months ended March 31, 2003 was $243 million, including inventory
holding gains of $27 million.
In addition to the factors above, operating profit in the first quarter of 2004
compared with the first quarter of 2003 reflects $54 million lower profit in
marketing and trading, improvements of $30 million in global LNG and $7 million
in Solar and a similar contribution from the natural gas liquids business.
The marketing and trading profit in North America is down compared with the
first quarter of 2003, when the business benefited from high margins as a result
of the prolonged cold weather in northeast and midwest markets. The global LNG
business had a strong quarter due to higher margins and continued growth in LNG
sales volumes.
The first quarter natural gas liquids result was flat, with volume increases of
32% offset by lower margins.
Profit in the first quarter of 2004 for the solar business increased compared
with the first quarter of 2003, primarily as a result of the benefits of the
2003 restructuring programme.
Page 10
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - concludued
OTHER BUSINESSES AND CORPORATE
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Turnover - $m 121 111
Profit (loss) before interest and tax - $m 1,129 (166)
Exceptional (gains) losses - $m (1,313) (6)
------- -------
Total operating profit (loss) - $m (184) (172)
======= =======
Other businesses and corporate comprises Finance, the Group's aluminium asset,
its investments in PetroChina and Sinopec, interest income and costs relating to
corporate activities.
Profit before interest and tax for the three months ended March 31, 2004 was
$1,129 million compared with a loss of $166 million for the equivalent period in
2003. The first quarter of 2004 included net exceptional gains before tax of
$1,313 million, which were associated with the sale of our interest in
PetroChina for $1.65 billion and our interest in Sinopec for $0.7 billion. The
first quarter of 2003 included net exceptional gains before tax of $6 million.
FORWARD-LOOKING STATEMENTS
In order to utilize the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, BP is providing the following
cautionary statement. The foregoing discussion, in particular, although not
limited to, the statements under `Group Results' with regard to working capital,
fulfillment of contract obligations, the timing of acquisitions and divestments
and the timing of new projects, are all forward-looking in nature.
Forward-looking statements are also identified by such phrases as `will',
`expects', `is expected to', `should', `may', `is likely to', `intends', 'plans'
and `believes'. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future and are outside the control of BP. Actual results may differ
materially from those expressed in such statements, depending on a variety of
factors, including the specific factors identified in the discussions
accompanying such forward-looking statements, future levels of industry product
supply, the timing of bringing new fields onstream, demand and pricing, exchange
rate fluctuations, operational problems, general economic conditions, political
stability and economic growth in relevant areas of the world, changes in laws
and governmental regulations, development and use of new technology, successful
partnering, the actions of competitors, the actions of third party suppliers of
facilities and services, natural disasters and other changes to business
conditions, prolonged adverse weather conditions, changes in public expectations
and other changes to business conditions, wars and acts of terrorism or
sabotage, and other factors discussed elsewhere in this report. These and other
factors may cause actual results and developments to differ materially from
those expressed or implied by these forward-looking statements. Additional
information, including information on factors which may affect BP's business, is
contained in BP's Annual Report and Annual Accounts for 2003 and the Annual
Report on Form 20-F for 2003 filed with the US Securities and Exchange
Commission.
2004 DIVIDENDS
On April 27, 2004, BP p.l.c. announced a first quarterly dividend for 2004 of
6.75 cents per ordinary share of 25 cents (ordinary shares), representing $0.405
per American Depositary Share (ADS) amounting to $1,483 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares was May 14, 2004, with payment made on June
7, 2004.
Under the former US-UK Income Tax Treaty, dividends paid to qualifying ADS
holders entitled them to a refund of a deemed UK tax credit equal to 1/9th of
the announced dividend. This credit was exactly offset by an amount deemed by
the former US-UK Income Tax Treaty to be a UK withholding tax. The net effect
for ADS holders was a cash payment equal to the amount of the announced
dividend, a potential foreign tax credit equal to 1/9th of the announced
dividend, and a gross dividend equal to the sum of those two amounts. Under the
new US-UK Income Tax Treaty, this deemed tax credit is no longer available on
dividends paid to qualifying ADS shareholders, beginning with the first
quarterly dividend for 2003.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan received the dividend in the form of shares on June 7, 2004.
Page 11
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million, except per
share amounts)
Turnover - Note 3 69,480 62,429
Less: joint ventures 1,878 398
------- -------
Group turnover 67,602 62,031
Cost of sales 58,750 52,668
Production taxes - Note 4 525 504
------- -------
Gross profit 8,327 8,859
Distribution and administration expenses 3,240 3,244
Exploration expense - Note 5 136 112
------- -------
4,951 5,503
Other income 90 131
------- -------
Group operating profit 5,041 5,634
Share of profits of joint ventures 491 118
Share of profits of associated undertakings 150 186
------- -------
Total operating profit 5,682 5,938
Profit (loss) on sale of fixed assets and businesses
or termination of operations - Note 6 1,230 394
------- -------
Profit before interest and tax 6,912 6,332
Interest expense - Note 7 152 176
Other finance expense - Note 8 76 129
------- -------
Profit before taxation 6,684 6,027
Taxation - Note 9 1,822 1,782
------- -------
Profit after taxation 4,862 4,245
Minority shareholders' interest 44 26
------- -------
Profit for the period (a) 4,818 4,219
======= ======
Earnings per ordinary share - cents (a)
Basic 21.81 18.90
Diluted 21.34 18.84
------- -------
Earnings per American Depositary Share - cents (a)
Basic 130.86 113.40
Diluted 128.04 113.04
---------- ----------
Average number of outstanding ordinary shares (thousand) 22,087,796 22,326,486
========== ==========
---------------
(a) A summary of the material adjustments to profit for the period which would
be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 12
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2004 December 31, 2003
(Unaudited)
----------------------- -----------------------
($ million)
Fixed assets
Intangible assets 13,386 13,642
Tangible assets 91,800 91,911
Investments 18,492 17,458
------- -------
123,678 123,011
Current assets
Inventories 11,298 11,617
Receivables 35,099 33,902
Investments 328 185
Cash at bank and in hand 2,006 1,947
------- -------
48,731 47,651
------- -------
Current liabilities - falling due within one year
Finance debt 6,997 9,456
Accounts payable and accrued liabilities 43,018 41,128
------- -------
50,015 50,584
------- -------
Net current assets (liabilities) (1,284) (2,933)
------- -------
Total assets less current liabilities 122,394 120,078
Noncurrent liabilities
Finance debt 12,940 12,869
Accounts payable and accrued liabilities 5,834 6,090
Provisions for liabilities and charges
Deferred tax 14,578 14,371
Other 8,766 8,815
------- -------
42,118 42,145
------- -------
Net assets excluding pension and other
postretirement benefit balances 80,276 77,933
Defined benefit pension plan surplus 1,258 1,021
Defined benefit pension plan and other
postretirement benefit plan deficits (7,524) (7,510)
------- -------
(6,266) (6,489)
------- -------
74,010 71,444
Net assets
Minority shareholders' interest - equity 1,181 1,125
------- -------
BP shareholders' interest (a) - Note 12 72,829 70,319
======= =======
Represented by:
Capital shares
Preference 21 21
Ordinary 5,500 5,531
Paid-in surplus 4,637 4,480
Merger reserve 27,114 27,077
Retained earnings 35,504 33,177
Shares held by ESOP trusts (39) (96)
Other reserves 92 129
------- -------
72,829 70,319
======= =======
---------------
(a) A summary of the material adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 13
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Net cash inflow from operating activities 7,674 5,961
------- -------
Dividends from joint ventures 178 13
------- -------
Dividends from associated undertakings 31 55
------- -------
Servicing of finance and returns on investments
Interest received 41 31
Interest paid (165) (207)
Dividends received 12 6
Dividends paid to minority shareholders (2) (2)
------- -------
Net cash outflow from servicing of finance
and returns on investments (114) (172)
------- -------
Taxation
UK corporation tax (322) (312)
Overseas tax (258) (320)
------- -------
Tax paid (580) (632)
------- -------
Capital expenditure and financial investment
Payments for fixed assets (2,941) (2,871)
Proceeds from the sale of fixed assets 2,839 2,317
------- -------
Net cash outflow for capital expenditure
and financial investment (102) (554)
------- -------
Acquisitions and disposals
Proceeds from the sale of businesses - 160
Net investment in TNK-BP joint venture (1,273) -
Net investment in other joint ventures (92) (14)
Investments in associated undertakings (433) (186)
------- -------
Net cash (outflow) inflow for acquisitions and disposals (1,798) (40)
------- -------
Equity dividends paid (1,492) (1,397)
------- -------
Net cash inflow (outflow) 3,797 3,234
======= =======
Financing 3,598 3,599
Management of liquid resources 138 13
Increase (decrease) in cash 61 (378)
------- -------
3,797 3,234
======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 14
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - concluded
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Reconciliation of profit before interest
and tax to net cash inflow from operating activities
Profit before interest and tax 6,912 6,332
Depreciation and amounts provided 2,814 2,709
Exploration expenditure written off 67 50
Net operating charge for pensions and other
post retirement benefits, less contributions (23) (243)
Share of profits of joint ventures and associated undertakings (641) (304)
Interest and other income (64) (48)
(Profit) loss on sale of fixed assets and businesses (1,230) (394)
Charge for provisions 67 29
Utilization of provisions (155) (116)
Decrease (increase) in inventories 247 376
(Increase) decrease in debtors (1,586) (6,645)
Increase (decrease) in creditors 1,266 4,215
------- -------
Net cash inflow from operating activities 7,674 5,961
======= =======
Financing
Long-term borrowing (628) (1,015)
Repayments of long-term borrowing 836 403
Short-term borrowing (156) (626)
Repayments of short-term borrowing 2,408 3,899
------- -------
2,460 2,661
Issue of ordinary share capital for employee share schemes (126) (67)
Purchase of shares by ESOP trusts 15 6
Repurchase of ordinary share capital 1,249 999
------- -------
Net cash outflow from financing 3,598 3,599
======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 15
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 the periods presented. The interim financial statements and
notes included in this Report should be read in conjunction with the
consolidated financial statements and related notes for the year ended
December 31, 2003 included in BP's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
2. Restatement of comparative information
Comparative information for 2003 has been restated to reflect the changes
described below.
(a) Transfer of Natural Gas Liquids activities
With effect from January 1, 2004 natural gas liquids (NGL) activities
have been transferred from Exploration and Production to Gas, Power
and Renewables.
(b) New accounting standard for pensions and other postretirement benefits
With effect from January 1, 2004 BP has adopted Financial Reporting
Standard No. 17 'Retirement Benefits' (FRS 17). FRS 17 requires that
financial statements reflect at fair value the assets and liabilities
arising from an employer's retirement benefit obligations and any
related funding. The operating costs of providing retirement benefits
are recognized in the period in which they are earned together with
any related finance costs and changes in the value of related assets
and liabilities. This contrasts with Statement of Standard Accounting
Practice No. 24 'Accounting for Pension Costs', which requires the
cost of providing pensions to be recognized on a systematic and
rational basis over the period during which the employer benefits from
the employee's services. The difference between the amount charged in
the income statement and the amount paid as contributions into the
pension fund is shown as a prepayment or provision on the balance
sheet.
(c) Accounting for Employee Share Ownership Plans
With effect from January 1, 2004 BP has adopted Urgent Issues Task
Force Abstract No. 38 'Accounting for ESOP Trusts'. This abstract
requires that BP shares held by the Group for the purposes of Employee
Share Ownership Plans (ESOPs) are deducted from equity on the balance
sheet. Such shares were previously classified as fixed asset
investments.
Balance sheet at 31 December 2003 Restated Reported
-------- --------
($ million)
Fixed assets
Intangible assets 13,642 13,642
Tangible assets 91,911 91,911
Investments 17,458 17,554
-------- --------
123,011 123,107
-------- --------
Current assets 47,651 54,465
Creditors - amounts falling due within one year 50,584 50,584
-------- --------
Net current assets (liabilities) (2,933) 3,881
-------- --------
Total assets less current liabilities 120,078 126,988
Creditors - amounts falling due after more than one year 18,959 18,959
Provisions for liabilities and charges
Deferred taxation 14,371 15,273
Other provisions 8,815 15,693
-------- --------
Net assets excluding pension and other
postretirement benefit balances 77,933 77,063
Defined benefit pension plan surplus 1,021 -
Defined benefit pension plan and other
postretirement benefit plan deficits (7,510) -
-------- --------
Net assets 71,444 77,063
Minority shareholders' interest 1,125 1,125
-------- --------
BP shareholders' interest 70,319 75,938
======== ========
Page 16
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Income Statement Three months ended
March 31 2003
(Unaudited)
Restated Reported
-------- --------
($ million)
Exploration and Production 4,724 4,765
Refining and Marketing 1,248 1,199
Petrochemicals 283 292
Gas, Power and Renewables 243 221
Other businesses and corporate (166) (159)
-------- --------
Profit before interest and tax 6,332 6,318
Interest expense 176 220
Other finance expense 129 -
-------- --------
Profit before taxation 6,027 6,098
Taxation 1,782 1,805
-------- --------
Profit after taxation 4,245 4,293
Minority shareholders' interest 26 26
-------- --------
Profit for the period 4,219 4,267
======== ========
Distribution to shareholders 1,386 1,386
-------- --------
Profit per ordinary share - cents
Basic 18.90 19.11
Diluted 18.84 19.05
======== ========
Page 17
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
3. Turnover
By business
Exploration and Production 8,166 8,878
Refining and Marketing 41,694 39,495
Petrochemicals 4,510 4,121
Gas, Power and Renewables 20,975 18,080
Other businesses and corporate 121 111
------- -------
75,466 70,685
Less: sales between businesses 7,864 8,654
------- -------
Group excluding joint ventures 67,602 62,031
Share of sales of joint ventures 1,878 398
------- -------
69,480 62,429
======= =======
By geographical area
Group excluding joint ventures
UK 17,296 15,132
Rest of Europe 12,041 13,317
USA 31,803 29,341
Rest of World 15,817 13,736
------- -------
76,957 71,526
Less: sales between areas 9,355 9,495
------- -------
67,602 62,031
======= =======
4. Production taxes
UK petroleum revenue tax 126 133
Overseas production taxes 399 371
------- -------
525 504
======= =======
5. Exploration expense
Exploration and Production
UK 2 3
Rest of Europe 2 4
USA 97 37
Rest of World 35 68
------- -------
136 112
======= =======
Page 18
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
6. Analysis of exceptional items
Profit (loss) on sale of fixed assets and
businesses or termination of operations
Exploration and Production 211 433
Refining and Marketing (140) (52)
Petrochemicals (154) 7
Gas, Power and Renewables - -
Other businesses and corporate 1,313 6
------- -------
Exceptional items before taxation 1,230 394
Taxation credit (charge) 70 (54)
------- -------
Exceptional items after taxation 1,300 340
======= =======
7. Interest expense
Group interest payable 149 187
Capitalized (50) (34)
------- -------
99 153
Joint ventures 41 13
Associated undertakings 12 10
------- -------
152 176
======= =======
8. Other finance expense
Interest on pension and other postretirement
benefit plan liabilities 500 460
Expected return on pension and other
postretirement benefit plan assets (498) (375)
------- -------
Interest net of expected return on plan assets 2 85
Unwinding of discount on provisions 48 44
Unwinding of discount on deferred consideration
for acquisition of investment in TNK-BP 26 -
------- -------
76 129
======= =======
9. Charge for taxation
Current 1,706 1,581
Deferred 116 201
------- -------
1,822 1,782
======= =======
UK 345 451
Overseas 1,477 1,331
------- -------
1,822 1,782
======= =======
Page 19
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Business and geographical analysis
Gas, Other
Exploration Refining Power businesses
By business and and Petro- and and
Production Marketing chemicals Renewables corporate Eliminations Total
----------- --------- ---------- ---------- ----------- ------------ --------
($ million)
Three months
ended March 31, 2004
Group turnover
- third parties 2,399 40,295 4,364 20,423 121 - 67,602
- sales between businesses 5,767 1,399 146 552 - (7,864) -
------------------------------------------------------------------------------------------
8,166 41,694 4,510 20,975 121 (7,864) 67,602
------------------------------------------------------------------------------------------
Share of sales by joint ventures 1,633 116 129 - - - 1,878
------------------------------------------------------------------------------------------
Equity accounted income 548 37 57 (1) - - 641
------------------------------------------------------------------------------------------
Total operating profit (loss) 4,039 1,389 250 188 (184) - 5,682
Exceptional items 211 (140) (154) - 1,313 - 1,230
------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 4,250 1,249 96 188 1,129 - 6,912
------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 3,823 464 166 61 11 - 4,525
Three months
ended March 31, 2003
Group turnover
- third parties 1,949 38,440 4,000 17,531 111 - 62,031
- sales between businesses 6,929 1,055 121 549 - (8,654) -
------------------------------------------------------------------------------------------
8,878 39,495 4,121 18,080 111 (8,654) 62,031
------------------------------------------------------------------------------------------
Share of sales by joint ventures 181 100 117 - - - 398
------------------------------------------------------------------------------------------
Equity accounted income 234 37 25 (1) 9 - 304
------------------------------------------------------------------------------------------
Total operating profit (loss) 4,291 1,300 276 243 (172) - 5,938
Exceptional items 433 (52) 7 - 6 - 394
------------------------------------------------------------------------------------------
Profit (loss) before interest
and tax 4,724 1,248 283 243 (166) - 6,332
------------------------------------------------------------------------------------------
Capital expenditure and
acquisitions 2,118 537 96 87 30 - 2,868
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Business and geographical analysis - concluded
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------- -------- ------- ------- ------------ -------
($ million)
Three months ended March 31, 2004
Group turnover -third parties 12,180 10,862 31,075 13,485 - 67,602
-sales between areas 5,116 1,179 728 2,332 (9,355) -
------------------------------------------------------------------
17,296 12,041 31,803 15,817 (9,355) 67,602
------------------------------------------------------------------
Share of sales by joint ventures 41 88 39 1,710 - 1,878
------------------------------------------------------------------
Equity accounted income 2 5 17 617 - 641
------------------------------------------------------------------
Total operating profit (loss) 401 753 2,435 2,093 - 5,682
Exceptional items (45) (36) (150) 1,461 - 1,230
------------------------------------------------------------------
Profit before interest and tax 356 717 2,285 3,554 - 6,912
------------------------------------------------------------------
Capital expenditure and acquisitions 253 180 1,257 2,835 - 4,525
Three months ended March 31, 2003
Group turnover -third parties 10,919 11,057 28,855 11,200 - 62,031
-sales between areas 4,213 2,260 486 2,536 (9,495) -
------------------------------------------------------------------
15,132 13,317 29,341 13,736 (9,495) 62,031
------------------------------------------------------------------
Share of sales by joint ventures 28 89 42 239 - 398
------------------------------------------------------------------
Equity accounted income (1) (3) 35 273 - 304
------------------------------------------------------------------
Total operating profit (loss) 932 786 2,585 1,635 - 5,938
Exceptional items (11) (42) (145) 592 - 394
------------------------------------------------------------------
Profit before interest and tax 921 744 2,440 2,227 - 6,332
------------------------------------------------------------------
Capital expenditure and acquisitions 295 202 1,394 977 - 2,868
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
11. Analysis of changes in net debt Opening balance
Finance debt 22,325 22,008
Less: Cash 1,947 1,520
Current asset investments 185 215
------- ------
Opening net debt 20,193 20,273
------- ------
Closing balance
Finance debt 19,937 19,042
Less: Cash 2,006 1,151
Current asset investments 328 228
------- ------
Closing net debt 17,603 17,663
------- ------
Decrease in net debt 2,590 2,610
======= ======
Movement in cash/bank overdrafts 61 (378)
Increase in current asset investments 138 13
Net cash outflow from financing (excluding share capital) 2,460 2,661
Exchange of Exchangeable Bonds for
Lukoil American Depositary Shares - 420
Other movements 14 64
------- ------
Movement in net debt before exchange effects 2,673 2,780
Exchange adjustments (83) (170)
------- ------
Decrease in net debt 2,590 2,610
======= ======
12. Movement in BP shareholders' interest ($ million)
Balance at December 31, 2003 75,938
Prior year adjustment - change in accounting policy (see Note 2) (5,619)
------
As restated 70,319
Profit for the period 4,818
Distribution to shareholders (1,483)
Currency translation differences (net of tax) 238
Issue of ordinary share capital for employee share schemes 126
(Purchase) release of shares by ESOP trusts 60
Repurchase of ordinary share capital (1,249)
------
Balance at March 31, 2004 72,829
======
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Earnings per share
The calculation of basic earnings per ordinary share is based on the profit
attributable to ordinary shareholders, i.e., profit for the period less
preference dividends, related to the weighted average number of ordinary
shares outstanding during the period. The average number of shares
outstanding excludes the shares held by the Employee Share Ownership Plans.
The calculation of diluted earnings per share is based on profit
attributable to ordinary shareholders, adjusted for the unwinding of the
discount on the deferred consideration for the acquisition of our interest
in TNK-BP. The number of shares outstanding is adjusted to show the
potential dilution if employee share options are converted into ordinary
shares, and for the ordinary shares issuable, in three annual tranches, in
respect of the TNK-BP joint venture. The number of ordinary shares
outstanding for basic and diluted earnings per share may be reconciled as
follows:
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
(shares thousands)
Weighted average number of ordinary shares 22,087,796 22,326,486
Ordinary shares issuable under employee share schemes 65,709 68,313
Ordinary shares issuable as consideration for BP's
interest in the TNK-BP joint venture 508,782 -
---------- ----------
22,662,287 22,394,799
========== ==========
14. Share-based compensation
BP accounts for share options granted to employees using the
intrinsic-value method. If the fair value of options granted in any
particular year is estimated and this value amortized over the vesting
period of the options, an indication of the cost of granting options to
employees can be made. The fair value of each share option granted has been
estimated using a Black-Scholes option pricing model.
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123, `Accounting for
Stock-Based Compensation', to share based employee compensation.
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Profit for the period applicable to ordinary shares, as reported 4,818 4,219
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (20) (24)
------- -------
Pro forma net income 4,798 4,195
======= =======
(cents)
Earnings per share
Basic - as reported 21.81 18.90
Basic - pro forma 21.72 18.79
Diluted - as reported 21.34 18.84
Diluted - pro forma 21.25 18.73
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles
The consolidated financial statements of the BP Group are prepared in
accordance with UK GAAP which differs in certain respects from US GAAP. The
principal differences between US GAAP and UK GAAP for BP Group reporting
relate to the following:
(i) Group consolidation
Where the Group conducts activities through a joint arrangement that
is not carrying on a trade or business in its own right, the Group
accounts for its own assets, liabilities and cash flows of the
activity measured according to the terms of the arrangement. For the
Group this method of accounting applies to undivided interests in
pipelines from production facilities to terminals for shipping or
onward transmission (such as the Trans Alaska Pipeline System and UK
Central Area Transmission System) and oil and natural gas exploration
and production activities where the Group has a direct interest in the
field or a contractual right to a share of production. The operations
of the pipeline or field may be undertaken by one participant on
behalf of all other participants or by a company specifically created
for this purpose. In either case contractual arrangements specify the
allocation of costs between participants. US GAAP permits such
arrangements to be accounted for by proportional consolidation, which
is equivalent to UK GAAP.
Joint ventures and associated undertakings are accounted for by the
equity method. UK GAAP requires the consolidated financial statements
to show separately the Group proportion of operating profit or loss,
exceptional items, interest expense and taxation of joint ventures and
associated undertakings. In addition the Group's share of turnover of
joint ventures should be disclosed. For US GAAP the after tax profits
or losses (i.e. operating results after exceptional items, interest
expense and taxation) are included in the income statement as a single
line item.
UK GAAP requires the Group's share of the gross assets and gross
liabilities of joint ventures to be shown on the face of the balance
sheet whereas under US GAAP the net investment is included as a single
line item.
The following summarizes the reclassifications for joint ventures and
associated undertakings necessary to accord with US GAAP.
Three months ended March 31, 2004
(Unaudited)
------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
------------------------------------------------
($ million)
Consolidated statement of income
Other income 90 409 499
Share of profits of JVs and associated undertakings 641 (641) -
Exceptional items before taxation 1,230 - 1,230
Interest expense 152 (53) 99
Taxation 1,822 (179) 1,643
Profit for the period 4,818 - 4,818
Three months ended March 31, 2003
(Unaudited)
------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
------------------------------------------------
($ million)
Consolidated statement of income
Other income 131 216 347
Share of profits of JVs and associated undertakings 304 (304) -
Exceptional items before taxation 394 - 394
Interest expense 176 (23) 153
Taxation 1,782 (65) 1,717
Profit for the period 4,219 - 4,219
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(ii) Exceptional items
Under UK GAAP certain exceptional items are shown separately on the
face of the income statement after operating profit. These items are
profits or losses on the sale of fixed assets and businesses or
termination of operations and fundamental restructuring charges. Under
US GAAP these items are classified as operating income or expenses.
(iii) Deferred taxation/business combinations
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of assets acquired and liabilities assumed in a purchase
business combination, whereas under UK GAAP no such deferred tax asset
or liability is recognized. Under US GAAP the deferred tax asset or
liability is amortized over the same period as the assets and
liabilities to which it relates.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
Increase (decrease) in caption heading (Unaudited)
2004 2003
------- -------
($ million)
Cost of sales 129 692
Taxation (117) (728)
Profit for the period (12) 36
======= =======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Tangible assets 5,926 6,084
Deferred taxation 6,004 6,149
BP shareholders' interest (78) (65)
======= =======
(iv) Provisions
UK GAAP requires provisions for decommissioning, environmental
liabilities and onerous contracts to be determined on a discounted
basis if the effect of the time value of money is material. The
provisions for decommissioning and environmental liabilities are
estimated using costs based on current prices and discounted using
real discount rates. Unwinding of the discount and the effect of a
change in the discount rate is included in interest expense in the
period. When a decommissioning provision is set up, a tangible fixed
asset of the same amount is also recognized and is subsequently
depreciated as part of the capital costs of the facilities.
On January 1, 2003 the Group adopted Statement of Financial Accounting
Standards No. 143 `Accounting for Asset Retirement Obligations' (SFAS
143). SFAS 143 requires companies to record liabilities equal to the
fair value of their asset retirement obligations when they are
incurred (typically when the asset is installed at the production
location). When the liability is initially recorded, companies
capitalize an equivalent amount as part of the cost of the asset. Over
time the liability is accreted for the change in its present value
each period, and the initial capitalized cost is depreciated over the
useful life of the related asset. Unwinding of the discount is
included in operating profit for the period.
The provisions for decommissioning under SFAS 143 are set up on a
similar basis to UK GAAP except that estimated future cash outflows
are discounted using a credit-adjusted risk-free rate rather than a
real discount rate.
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iv) Provisions - concluded
The cumulative effect of adopting SFAS 143 at January 1, 2003 resulted
in an after tax credit to income, as adjusted to accord with US GAAP,
of $1,002 million. The effect of adoption also included an increase in
total assets, as adjusted to accord with US GAAP, of $687 million and
a reduction in total liabilities, as adjusted to accord with US GAAP,
of $315 million. The effect of adoption on the three months ended
March 31, 2003 was to decrease profit by $23 million, before
cumulative effect of accounting changes as adjusted to accord with US
GAAP.
Under US GAAP environmental liabilities are discounted only where the
timing and amounts of payments are fixed and reliably determinable.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
Increase (decrease) in caption heading (Unaudited)
2004 2003
------- -------
($ million)
Cost of sales 62 16
Interest expense (48) (44)
Taxation (1) 2
Profit for the period before cumulative effect
of accounting change (13) 26
Cumulative effect of accounting change, net of taxation - 1,002
Profit for the period (13) 1,028
======= ======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Tangible assets (804) (835)
Provisions (602) (636)
Deferred taxation (72) (71)
BP shareholders' interest (130) (128)
======= =======
The following data summarizes the movements in the asset retirement
obligation, as adjusted to accord with US GAAP, for the three months
ended March 31, 2004.
($ million)
At January 1, 2004 3,872
Exchange adjustments 35
New provisions 22
Unwinding of discount 54
Utilized/deleted (23)
--------
At March 31, 2004 3,960
========
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(v) Sale and leaseback
The sale and leaseback of an office building in Chicago, Illinois in
1998 was treated as a sale for UK GAAP whereas for US GAAP it was
treated as a financing transaction. The remaining interest in this
building was sold in January 2003.
Provisions were recognized under UK GAAP in 1999 and 2002 to cover the
likely shortfall on rental income from subletting the Chicago office
building. As the original sale and leaseback was not treated as a sale
for US GAAP the provision was reversed for US GAAP. Following the
disposal of the building a provision has now been recognized for US
GAAP.
Under UK GAAP the profit arising on the sale and operating leaseback
of certain railcars in 1999 was taken to income in the period in which
the transaction occurred. Under US GAAP this profit was not recognized
immediately but amortized over the term of the operating lease.
The adjustments to profit for the period and BP shareholders' interest
to accord with US GAAP are summarized below.
Three months ended
March 31
Increase (decrease) in caption heading (Unaudited)
2004 2003
------- -------
($ million)
Cost of sales 3 (108)
Taxation (1) 37
Profit for the period (2) 71
======= ======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Other accounts payable and accrued liabilities 23 24
Provisions 35 32
Deferred taxation (20) (19)
BP shareholders' interest (38) (37)
======= =======
Page 27
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Goodwill and intangible assets
There are two main differences in the basis for determining goodwill
between UK and US GAAP which result in the amount of goodwill for US
GAAP reporting differing from the amount recognized under UK GAAP.
Goodwill represents the difference between the consideration paid in
an acquisition and the fair value of the assets and liabilities
acquired. Where shares are issued in connection with an acquisition UK
GAAP requires that the shares issued be valued at the time the public
offer becomes unconditional. For US GAAP the consideration is
determined at the date the offer is made.
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of the assets acquired and liabilities assumed in an
acquisition, whereas under UK GAAP no such deferred tax liability or
asset or liability is recognized. Under US GAAP the deferred tax asset
or liability is amortized over the same period as the assets and
liabilities to which it relates.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
Increase (decrease) in caption heading (Unaudited)
2004 2003
------- -------
($ million)
Cost of sales (360) (342)
Profit for the period 360 342
======= ======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Intangible assets 2,054 1,669
BP shareholders' interest 2,054 1,669
======= =======
In accordance with Group accounting practice, exploration licence
acquisition costs are initially capitalized as an intangible fixed
asset and are amortized over the estimated period of exploration.
Where proved reserves of oil or natural gas are determined and
development is sanctioned, the unamortized cost is transferred to
tangible production assets. Where exploration is unsuccessful, the
unamortized cost is charged against income. At March 31, 2004 and
December 31, 2003, exploration licence acquisition costs included in
the Group's tangible fixed assets and intangible fixed assets, net of
accumulated amortization, were as follows.
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Exploration licence acquisition cost included
in fixed assets (net of accumulated amortization)
Tangible fixed assets 577 600
Intangible fixed assets 1,200 1,300
======= =======
Page 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Goodwill and intangible assets (concluded)
Changes to exploration expenditure, goodwill and other intangible
assets, as adjusted to accord with US GAAP, during the three months
ended March 31, 2004 are shown below.
Additional
Gain on minimum
asset pension
Exploration exchange liability Other
expenditure Goodwill (see (viii)) (see xiii)) intangibles Total
----------- -------- ----------- ---------- ----------- -------
($ million)
Net book amount
At January 1, 2004 4,236 10,838 148 43 237 15,502
Amortization expense (67) - (4) - (10) (82)
Other movements 119 105 - - (19) 205
----------- ----------- ----------- ----------- ----------- ---------
At March 31 2004 4,289 10,943 144 43 208 15,626
=========== =========== =========== =========== =========== =========
Amortization expense relating to other intangibles is expected to be
in the range $50-$75million in each of the succeeding five years.
(vii) Derivative financial instruments and hedging activities
Statement of Financial Accounting Standards No. 133, 'Accounting for
Derivative Instruments and Hedging Activities' (SFAS 133) requires
that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a
hedge transaction and, if it is, the type of hedge transaction. To the
extent that certain criteria are met, SFAS 133 permits, but does not
require, hedge accounting.
In the normal course of business the Group is a party to derivative
financial instruments with off-balance sheet risk, primarily to manage
its exposure to fluctuations in foreign currency exchange rates and
interest rates, including management of the balance between floating
rate and fixed rate debt. The Group also manages certain of its
exposures to movements in oil and natural gas prices. In addition, the
Group trades derivatives in conjunction with these risk management
activities.
All oil price derivatives and all derivatives held for trading are
carried on the Group's balance sheet at fair value with changes in
that value recognized in earnings of the period for both UK and US
GAAP. Certain financial derivatives used to manage foreign currency
and interest rate risk that qualify for hedge accounting under UK GAAP
are marked to market under SFAS 133. Under US GAAP the fair values of
derivative financial instruments are shown as current assets and
liabilities as appropriate.
The Group has a number of long-term natural gas contracts which have
been in place for many years. The pricing structure for certain of
these contracts is not directly related to the market price of natural
gas but to the price of other commodities or indices, such as fuel oil
or consumer price indices. Under SFAS 133, these contracts are
marked-to-market.
In October 2002, the FASB Emerging Issues Task Force (EITF) reached a
consensus with regards to EITF Issue No. 02-3, 'Issues Involved in
Accounting for Contracts Under EITF Issue No. 98-10 "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities"'
(EITF 02-3). This consensus, which rescinded EITF Issue No. 98-10
'Accounting for Contracts Involved in Energy Trading and Risk
Management Activities' (EITF 98-10), requires all energy-related,
non-derivative contracts (such as transportation, storage, tolling,
and requirements contracts that do not meet the definition of a
derivative) to be accounted for as executory contracts on an accrual
basis. Under EITF 98-10, such contracts were accounted for at fair
value.
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vii) Derivative financial instruments and hedging activities (concluded)
The consensus is applicable for all contracts executed after October
25, 2002. Application of the consensus to contracts existing prior to
October 26, 2002 is required to be accounted for as a cumulative
effect of a change in accounting principle effective for periods
beginning after December 15, 2002.
For BP's reporting under UK GAAP, energy-related non-derivative
contracts associated with trading activities are marked to market with
gains and losses recognized in the income statement.
The cumulative effect of adopting the consensus at January 1, 2003
resulted in an after tax credit to income, as adjusted to accord with
US GAAP, of $50 million.
EITF 02-3 also requires trading inventories to be accounted for at
historical cost. The Group marks trading inventories to market at the
balance sheet date. As such, a UK/US GAAP difference arises which
impacts both profit for the year and BP shareholders' interest due to
the difference in inventory valuations.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
Increase (decrease) in caption heading (Unaudited)
2004 2003
------- -------
($ million)
Cost of sales (303) 12
Taxation 102 (4)
Profit for the period before cumulative
effect of accounting change 201 (8)
Cumulative effect of accounting change, net of taxation - 50
Profit for the period 201 42
======= ======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Inventories (116) (150)
Accounts payable and accrued liabilities (331) (58)
Deferred taxation 85 (20)
BP shareholders' interest 130 (72)
======= =======
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii) Gain arising on asset exchange
For UK GAAP the transaction with Solvay in 2001, which led to the
exchange of businesses for an interest in a joint venture and an
associated undertaking, has been treated as an asset swap which does
not give rise to a gain or loss. Under US GAAP the transaction has
been treated as a disposal and acquisition which gave rise to a gain
on disposal. For US reporting, the gain is being recognized over 10
years.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
Increase (decrease) in caption heading (Unaudited)
2004 2003
------- -------
($ million)
Cost of sales 5 5
Taxation (2) (2)
Profit for the period (3) (3)
======= ======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Intangible assets 144 148
Accounts payable and accrued liabilities (51) (51)
Deferred taxation 68 70
BP shareholders' interest 127 129
======= =======
(ix) Consolidation of variable interest entities
In January 2003, the FASB issued FASB Interpretation No. 46
'Consolidation of Variable Interest Entities' (Interpretation 46).
Interpretation 46 clarifies the application of existing consolidation
requirements to entities where a controlling financial interest is
achieved through arrangements that do not involve voting interests.
Under Interpretation 46, a variable interest entity is consolidated if
a company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a
majority of the entity's residual returns.
The Group currently has several ships under construction which will be
accounted for under UK GAAP as operating leases. Under Interpretation
46 certain of the arrangements represent variable interest entities
that would be consolidated by the Group. The maximum exposure to loss
as a result of the Group's involvement with these entities is limited
to the debt of the entity, less the fair value of the ships at the end
of the lease term.
The adoption of Interpretation 46 did not have a significant effect on
profit, as adjusted to accord with US GAAP. The adjustments to BP
shareholders' interest to accord with US GAAP are summarized below.
At At
March 31, 2004 December 31,
Increase (decrease) in caption heading (Unaudited) 2003
-------------- -------------
($ million)
Tangible assets 270 217
Accounts payable and accrued liabilities (270) (217)
BP shareholders' interest - -
======= =======
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(x) Pensions and other postretirement benefits
With effect from January 1, 2004 BP adopted Financial Reporting
Standard No. 17 `Retirement Benefits' (FRS 17). FRS 17 requires that
the assets and liabilities arising from an employer's retirement
benefit obligations and any related funding should be included in the
financial statements at fair value and that the operating costs of
providing retirement benefits to employees should be recognized in the
income statement in the periods in which the benefits are earned by
employees. This contrasts with Statement of Financial Accounting
Standards No. 87 'Employers' Accounting for Provisions' (SFAS 87)
which requires the cost of providing pensions to be recognized on a
systematic and rational basis over the period during which the
employer benefits from the employee's services. Under SFAS 87 the
difference between the amount charged in the income statement and the
amount paid as contributions into the pension fund is shown as a
prepayment or provision on the balance sheet.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2004 2003
------- -------
($ million)
Cost of sales 120 14
Other finance expense (2) (85)
Taxation (21) 23
Profit for the period (97) 48
======= ======
At At
March 31, 2004 December 31,
(Unaudited) 2003
-------------- -------------
($ million)
Other receivables falling due after more than one year 6,881 6,814
Provisions for liabilities and charges - other 6,844 6,878
Defined benefit pension plan surplus (1,258) (1,021)
Defined benefit pension plan and other
postretirement benefit plan deficits 7,524 7,510
Deferred taxation 907 902
BP shareholders' interest 5,396 5,523
======= =======
(xi) Dividends
Under UK GAAP, dividends are recorded in the period in respect of
which they are announced or declared by the board of directors to the
shareholders. Under US GAAP, dividends are recorded in the period in
which dividends are declared.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
March 31, 2004 December 31,
Increase (decrease) in caption heading (Unaudited) 2003
-------------- -------------
($ million)
Other accounts payable and accrued liabilities (1,483) (1,495)
BP shareholders' interest 1,483 1,495
======= =======
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xii) Investments
Under UK GAAP certain of the Group's equity investments are reported
as either fixed asset or current asset investments and carried on the
balance sheet at cost subject to review for impairment. For US GAAP
these investments are classified as available-for-sale securities.
Consequently they are reported at fair value, with unrealized holding
gains and losses, net of tax, reported in accumulated other
comprehensive income. If a decline in fair value below cost is 'other
than temporary' the unrealized loss is accounted for as a realized
loss and charged against income.
In February 2003, BP called its $420 Exchangeable Bonds which were
exchangeable for Lukoil American Depositary Shares (ADSs). Bondholders
converted to ADSs before the redemption date. For the three months
ended March 31, 2003, gains of $99 million were reclassified from
comprehensive income to net income.
The Group sold its investments in Petrochina and Sinopec in January
and February 2004, respectively, resulting in a gain on disposal of
$1,314 million. For the three months ended March 31, 2004 gains of
$1,165 million were reclassified from comprehensive income to net
income.
The adjustments to accumulated other comprehensive income (BP
shareholders' interest) to accord with US GAAP are summarized below.
At At
March 31, 2004 December 31,
Increase (decrease) in caption heading (Unaudited) 2003
-------------- -------------
($ million)
Fixed assets - Investments 223 1,924
Deferred taxation 78 673
BP shareholders' interest 145 1,251
======= =======
(xiii) Additional minimum pension liability
Where a pension plan has an unfunded accumulated benefit obligation,
US GAAP requires such amount to be recognized as a liability in the
balance sheet. The adjustment resulting from the recognition of any
such minimum liability, including the elimination of amounts
previously recognized as a prepaid benefit cost, is reported as an
intangible asset to the extent of unrecognized prior service cost with
the remaining amount reported in comprehensive income.
The adjustments to accumulated other comprehensive income (BP
shareholders' interest) to accord with US GAAP are summarized below.
At At
March 31, 2004 December 31,
Increase (decrease) in caption heading (Unaudited) 2003
-------------- -------------
($ million)
Intangible assets 43 43
Noncurrent liabilities - accounts payable accrued liabilities 478 478
Deferred taxation (158) (158)
BP shareholders' interest (277) (277)
======= =======
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The following is a summary of the adjustments to profit for the period and
to BP shareholders' interest which would be required if generally accepted
accounting principles in the USA (US GAAP) had been applied instead of
those generally accepted in the United Kingdom (UK GAAP).
Profit for the period Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Profit as reported in the consolidated statement of income 4,818 4,219
Adjustments:
------- -------
Deferred taxation/business combinations (iii) (12) 36
Provisions (iv) (13) 26
Sale and leaseback (v) (2) 71
Goodwill and intangible assets(vi) 360 342
Derivative financial instruments (vii) 201 (8)
Gain arising on asset exchange (viii) (3) (3)
Pensions and other postretirement benefits (x) (97) 48
Other 3 3
------- -------
437 515
------- -------
Profit for the period as adjusted to accord with US
GAAP before cumulative effect of accounting changes 5,255 4,734
Cumulative effect of accounting changes:
Provisions - 1,002
Derivative financial instruments - 50
------- -------
Profit for the period as adjusted to accord with US GAAP 5,255 5,786
======= =======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of accounting changes 23.79 21.20
Cumulative effect of accounting changes
Provisions - 4.49
Derivative financial instruments - 0.23
------- -------
23.79 25.92
======= =======
Diluted - before cumulative effect of accounting changes 23.27 21.14
Cumulative effect of accounting changes
Provisions - 4.47
Derivative financial instruments - 0.23
------- -------
23.27 25.84
======= =======
Per American Depositary Share - cents (b)
Basic - before cumulative effect of accounting changes 142.74 127.20
Cumulative effect of accounting changes
Provisions - 26.94
Derivative financial instruments - 1.38
------- -------
142.74 155.52
======= =======
Diluted - before cumulative effect of accounting changes 139.62 126.84
Cumulative effect of accounting changes
Provisions - 26.82
Derivative financial instruments - 1.38
------- -------
139.62 155.04
======= =======
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest March 31, 2004
(Unaudited) December 31, 2003
--------------------------------------
$ million)
BP shareholders' interest as reported
in the consolidated balance sheet 72,829 70,319
Adjustments:
------- -------
Deferred taxation/business combinations (iii) (78) (65)
Provisions (iv) (130) (128)
Sale and leaseback (v) (38) (37)
Goodwill and intangible assets (vi) 2,054 1,669
Derivative financial instruments (vii) 130 (72)
Gain arising on asset exchange (viii) 127 129
Consolidation of variable interest entities (ix) - -
Pensions and other postretirement benefits (x) 5,396 5,523
Dividends (xi) 1,483 1,495
Investments (xii) 145 1,251
Additional minimum pension liability (xiii) (277) (277)
Other (38) (43)
------- -------
8,774 9,445
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 81,603 79,764
======= =======
---------------
(a) The profit reported under UK GAAP for the three months ended March 31,
2003, and BP shareholders' interest at December 31, 2003, have been
restated to reflect the adoption of FRS 17 and UITF 38. Consequently
certain of the adjustments in the UK/US GAAP reconciliation have also
been restated. Profit for the period and BP shareholders' interest, as
adjusted to accord with US GAAP, are unaffected by the adoption of FRS
17 and UITF 38.
(b) One American Depositary Share is equivalent to six ordinary shares.
Comprehensive income
The components of comprehensive income, net of related tax are as follows:
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Profit for the period as adjusted to accord with US GAAP 5,255 5,786
Currency translation differences 238 (282)
Unrealized gains 59 72
Unrealized losses - -
Less: reclassification adjustment for gains
included in net income (1,165) (99)
Additional minimum pension liability - -
------- -------
Comprehensive income 4,387 5,477
======= =======
Accumulated other comprehensive income at March 31, 2004 and December 31,
2003 comprised gains of $2,570 million and $3,438 million, respectively.
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Consolidated statement of cash flows
The Group's financial statements include a consolidated statement of cash
flows in accordance with the revised UK Financial Reporting Standard No. 1
(FRS 1). The statement prepared under FRS 1 presents substantially the same
information as that required under FASB Statement of Financial Accounting
Standards No. 95 'Statement of Cash Flows' (SFAS 95).
Under FRS 1 cash flows are presented for (i) operating activities; (ii)
dividends from joint ventures; (iii) dividends from associated
undertakings; (iv) servicing of finance and returns on investments; (v)
taxation; (vi) capital expenditure and financial investment; (vii)
acquisitions and disposals; (viii) dividends; (ix) financing; and (x)
management of liquid resources. SFAS 95 only requires presentation of cash
flows from operating, investing and financing activities.
Cash flows under FRS 1 in respect of dividends from joint ventures and
associated undertakings, taxation and servicing of finance and returns on
investments are included within operating activities under SFAS 95.
Interest paid includes payments in respect of capitalized interest, which
under SFAS 95 are included in capital expenditure under investing
activities. Cash flows under FRS 1 in respect of capital expenditure and
acquisitions and disposals are included in investing activities under SFAS
95. Dividends paid are included within financing activities. All short-term
investments are regarded as liquid resources for FRS 1. Under SFAS 95
short-term investments with original maturities of three months or less are
classified as cash equivalents and aggregated with cash in the cash flow
statement. Cash flows in respect of short-term investments with original
maturities exceeding three months are included in operating activities.
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Operating activities
Profit after taxation 4,862 4,245
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,814 2,709
Exploration expenditure written off 67 50
Net charge for pensions and other postretirement benefits,
less contributions (21) (158)
Share of profits of joint ventures and associated
undertakings less dividends received (199) (148)
(Profit) loss on sale of businesses and fixed assets (1,230) (394)
Working capital movement (a) 928 (1,185)
Deferred taxation 116 201
Other (94) (59)
------- -------
Net cash provided by operating activities 7,243 5,261
======= =======
Investing activities
Capital expenditures (2,993) (2,905)
Acquisitions, net of cash acquired - -
Investment in associated undertakings (433) (186)
Net investment in joint ventures (1,365) (14)
Proceeds from disposal of assets 2,839 2,477
------- -------
Net cash used in investing activities (1,952) (628)
------- -------
Financing activities
Net proceeds from shares issued (repurchased) (1,138) (938)
Proceeds from long-term financing 628 1,015
Repayments of long-term financing (836) (403)
Net increase (decrease) in short-term debt (2,252) (3,273)
Dividends paid - BP Shareholders (1,492) (1,397)
- Minority shareholders (2) (2)
------- -------
Net cash used in financing activities (5,092) (4,998)
------- -------
Currency translation differences relating to
cash and cash equivalents 3 9
------- -------
Increase (decrease) in cash and cash equivalents 202 (356)
Cash and cash equivalents at beginning of period 2,132 1,735
------- -------
Cash and cash equivalents at end of period 2,334 1,379
======= =======
(a) Working capital:
Inventories (increase) decrease 247 376
Receivables (increase) decrease (1,599) (6,656)
Current liabilities - excluding finance debt
increase (decrease) 2,280 5,095
------- -------
928 (1,185)
======= =======
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Impact of new US accounting standards
Other postretirement benefits: In May 2004, the FASB issued Staff Position
No. 106-2 'Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003' (FSP 106-2).
The provisions of the Act provide for a federal subsidy for plans that
provide prescription drug benefits to Medicare-eligible retired employees
and meet certain qualifications. Alternatively, the Act allows prescription
drug plan sponsors to co-ordinate with the Medicare benefit.
BP's postretirement medical plans provide prescription drug coverage for
Medicare-eligible retired employees. The Group's obligation for other
postretirement benefits at March 31, 2004 and December 31, 2003 do not
reflect the effects of the Act. FSP 106-2 is effective for accounting
periods beginning after June 15, 2004. The Company continues to evaluate
the impact of the Act on its benefit plan design and accounting.
Tangible assets: The Securities and Exchange Commission requested the FASB
to consider whether oil and natural gas mineral rights held under lease or
other contractual arrangement should be classified on the balance sheet as
a tangible asset (property, plant and equipment) or as an intangible asset
(exploration expenditure). At its March 2004 meeting, the EITF reached a
consensus on Issue No. 04-2, (`Whether Mineral Rights are Tangible or
Intangible Assets') that all mineral rights should be considered tangible
assets for accounting purposes. In April 2004, the FASB issued FASB Staff
Position Nos. FAS 141-1 and FAS 142-1 (`Interaction of FASB Statements No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible
Assets, and EITF Issue No. 04-2, Whether Mineral Rights are Tangible or
Intangible Assets'), which amended SFAS 141 and 142 to remove mineral
rights as an example of an intangible asset consistent with the EIFT's
consensus. The EITF consensus and the FASB Staff Position are effective for
reporting periods beginning after April 29, 2004.
Impact of new UK accounting standards
In December 2000, the UK Accounting Standards Board issued Financial
Reporting Standard No. 17 'Retirement Benefits' (FRS 17). This standard was
to be fully effective for accounting periods ending on or after June 22,
2003 with certain of the disclosure requirements effective for periods
prior to 2003. However, in November 2002, the UK Accounting Standards Board
issued an amendment to FRS 17, which allows deferral of full adoption to no
later than January 1, 2005; although the disclosure requirements apply to
periods prior to 2005. FRS 17 requires that financial statements reflect at
fair value the assets and liabilities arising from an employer's retirement
benefit obligations and any related funding. The operating costs of
providing retirement benefits are recognized in the period in which they
are earned together with any related finance costs and changes in the value
of related assets and liabilities.
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - concluded
Impact of new UK accounting standards - concluded
With effect from January 1, 2004, BP has fully adopted FRS17. This change
in accounting policy results in a prior year adjustment. Upon adoption,
shareholder funds at January 1, 2003 have been reduced by $5,601 million,
and profit for the three months ended March 31, 2003 has been decreased by
$48 million.
In addition, with effect from January 1, 2004 BP has also changed its
accounting policy for shares held in employee share ownership plans for the
benefit of employee share schemes.
Urgent Issues Task Force Abstract 38 `Accounting for Employee Share
Ownership Plan (ESOP) trusts' (Abstract 38) changes the presentation of an
entity's own shares held in an ESOP trust from requiring them to be
recognized as assets to requiring them to be deducted in arriving at
shareholders' funds. Transactions in an entity's own shares by an ESOP
trust are similarly recorded as changes in shareholders' funds and do not
give rise to gains or losses. This treatment is in line with the accounting
for purchases and sales of own shares set out in Urgent Issues Task Force
Abstract 37 `Purchases and Sales of Own Shares' (Abstract 37).
Abstract 37 requires a holding of an entity's own shares to be accounted
for as a deduction in arriving at shareholders' funds, rather than being
recorded as assets. Transactions in an entity's own shares are similarly
recorded as changes in shareholders' funds and do not give rise to gains or
losses. Abstract 37 applies where a company purchases treasury shares under
new legislation that came into effect in December 2003.
Urgent Issues Task Force Abstract 17 `Employee share schemes' (Abstract 17)
was amended by Abstract 38 to reflect the consequences for the profit and
loss account of the changes in the presentation of an entity's own shares
held by an ESOP trust. Amended Abstract 17 requires that the minimum
expense should be the difference between the fair value of the shares at
the date of award and the amount that an employee may be required to pay
for the shares (i.e. the `intrinsic value' of the award). The expense was
previously determined either as the intrinsic value or, where purchases of
shares had been made by an ESOP trust at fair value, by reference to the
cost or book value of shares that were available for the award. The effect
of adopting Abstract 17 was to reduce BP shareholders' interest at December
31, 2003 by $96 million; the impact on profit before taxation for 2003 was
negligible.
Impact of International accounting standards
An 'International Accounting Standards Regulation' was adopted by the
Council of the European Union (EU) in June 2002. This regulation, which
automatically becomes law in all EU countries, requires all EU companies
listed on a EU Stock Exchange to use 'endorsed' International Financial
Reporting Standards (IFRS), published by the International Accounting
Standards Board (IASB), to report their consolidated results with effect
from January 1, 2005. The IASB published 15 revised standards in December
2003 and the remaining standards of its stable platform on March 31, 2004.
The stable platform is the set of IFRS to be adopted on a mandatory basis
in 2005. A process of endorsement of IFRS has been established by the EU
for completion in due time to allow adoption by companies in 2005, but
objections to certain IFRS by certain EU member states may disrupt this
process.
BP has established a broadly based project team involving representatives
of business segments and functions to plan for and achieve a smooth
transition to IFRS. The project team is looking at all implementation
aspects, including changes to accounting policies, systems impacts and the
wider business issues that may arise from such a fundamental change. We
currently expect that the Group will be fully prepared for the transition
in 2005.
The Group has not yet determined the effects of adopting IFRS. Our
preliminary view is that the major differences between our current
accounting practice and IFRS will be in respect of hedge accounting,
accounting for embedded derivatives and other items falling within the
scope of the financial instruments standards, accounting for business
combinations, deferred tax and share-based payments.
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. TNK-BP operational and financial information
Three months ended
March 31, 2004
(Unaudited)
Production (Net of Royalties) (BP share)
Crude oil (mb/d) 766
Natural gas (mmcf/d) 382
Total hydrocarbons (mboe/d) (a) 832
======
Income statement (BP share) ($ million)
Total operating profit 374
Profit (loss) on sale of fixed assets and businesses -
Interest expense (30)
Taxation (115)
Minority shareholders' interest (10)
------
Net income 219
======
---------------
(a) Natural gas is converted to oil equivalent at 5.8 billion cubic feet =
1 million barrels.
17. Condensed consolidating information
BP p.l.c. fully and unconditionally guarantees the payment obligations of
its 100% owned subsidiary BP Exploration (Alaska) Inc. under the BP Prudhoe
Bay Royalty Trust. The following financial information for BP p.l.c., and
BP Exploration (Alaska) Inc. and all other subsidiaries on a condensed
consolidating basis is intended to provide investors with meaningful and
comparable financial information about BP p.l.c. and its subsidiary issuers
of registered securities and is provided pursuant to Rule 3-10 of
Regulation S-X in lieu of the separate financial statements of each
subsidiary issuer of public debt securities. Investments include the
investments in subsidiaries recorded under the equity method for the
purposes of the condensed consolidating financial information. Equity
income of subsidiaries is the Group's share of operating profit related to
such investments. The eliminations and reclassifications column includes
the necessary amounts to eliminate the intercompany balances and
transactions between BP p.l.c., BP Exploration (Alaska) Inc. and other
subsidiaries.
BP p.l.c. also fully and unconditionally guarantees securities issued by BP
Australia Capital Markets Limited, BP Canada Finance Company, BP Capital
Markets p.l.c. and BP Capital Markets America Inc. These companies are
100%-owned finance subsidiaries of BP p.l.c.
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2004
Turnover 880 - 69,480 (880) 69,480
Less: Joint ventures - - 1,878 - 1,878
-----------------------------------------------------------------------------
Group turnover 880 - 67,602 (880) 67,602
Cost of sales 371 - 59,264 (885) 58,750
Production taxes 64 - 461 - 525
-----------------------------------------------------------------------------
Gross profit 445 - 7,877 5 8,327
Distribution and administration expenses - 84 3,156 - 3,240
Exploration expense - - 136 - 136
-----------------------------------------------------------------------------
445 (84) 4,585 5 4,951
Other income 4 367 43 (324) 90
-----------------------------------------------------------------------------
Group operating profit 449 283 4,628 (319) 5,041
Share of profits of joint ventures - - 491 - 491
Share of profits of associated undertakings - - 150 - 150
Equity-accounted income of subsidiaries 159 5,674 - (5,833) -
-----------------------------------------------------------------------------
Total operating profit 608 5,957 5,269 (6,152) 5,682
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 1,230 1,230 (1,230) 1,230
-----------------------------------------------------------------------------
Profit before interest and tax 608 7,187 6,499 (7,382) 6,912
Interest expense 22 471 463 (804) 152
Other finance expense 4 76 72 (76) 76
-----------------------------------------------------------------------------
Profit before taxation 582 6,640 5,964 (6,502) 6,684
Taxation 229 1,822 1,651 (1,880) 1,822
-----------------------------------------------------------------------------
Profit after taxation 353 4,818 4,313 (4,622) 4,862
Minority shareholders' interest - - 44 - 44
-----------------------------------------------------------------------------
Profit for the period 353 4,818 4,269 (4,622) 4,818
=============================================================================
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2004
Profit as reported 353 4,818 4,269 (4,622) 4,818
Adjustments:
Deferred taxation/business combinations (3) (12) (9) 12 (12)
Provisions - (13) (13) 13 (13)
Sale and leaseback - (2) (2) 2 (2)
Goodwill - 360 360 (360) 360
Derivative financial instruments (7) 201 201 (194) 201
Gain arising on asset exchange - (3) (3) 3 (3)
Pensions and other postretirement benefits - (97) (84) 84 (97)
Other - 3 3 (3) 3
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 343 5,255 4,722 (5,065) 5,255
=============================================================================
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2003
Turnover 880 - 62,429 (880) 62,429
Less: Joint ventures - - 398 - 398
-----------------------------------------------------------------------------
Group turnover 880 - 62,031 (880) 62,031
Cost of sales 400 - 53,224 (956) 52,668
Production taxes 68 - 436 - 504
-----------------------------------------------------------------------------
Gross profit 412 - 8,371 76 8,859
Distribution and administration expenses - 207 3,037 - 3,244
Exploration expense 1 - 111 - 112
-----------------------------------------------------------------------------
411 (207) 5,223 76 5,503
Other income 6 147 129 (151) 131
-----------------------------------------------------------------------------
Group operating profit 417 (60) 5,352 (75) 5,634
Share of profits of joint ventures - - 118 - 118
Share of profits of associated undertakings - - 186 - 186
Equity-accounted income of subsidiaries 125 6,047 - (6,172) -
-----------------------------------------------------------------------------
Total operating profit 542 5,987 5,656 (6,247) 5,938
Profit (loss) on sale of fixed assets
and businesses or termination of operations (1) 394 395 (394) 394
-----------------------------------------------------------------------------
Profit before interest and tax 541 6,381 6,051 (6,641) 6,332
Interest expense 65 251 247 (387) 176
Other finance expense 3 129 127 (130) 129
-----------------------------------------------------------------------------
Profit before taxation 473 6,001 5,677 (6,124) 6,027
Taxation 211 1,782 1,617 (1,828) 1,782
-----------------------------------------------------------------------------
Profit after taxation 262 4,219 4,060 (4,296) 4,245
Minority shareholders' interest - - 26 - 26
-----------------------------------------------------------------------------
Profit for the period 262 4,219 4,034 (4,296) 4,219
=============================================================================
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (concluded)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2003
Profit as reported 262 4,219 4,034 (4,296) 4,219
Adjustments:
Deferred taxation/business combinations (3) 36 39 (36) 36
Provisions (4) 26 25 (21) 26
Sale and leaseback - 71 71 (71) 71
Goodwill - 342 342 (342) 342
Derivative financial instruments 16 (8) (8) (8) (8)
Gain arising on asset exchange - (3) (3) 3 (3)
Pensions and other postretirement benefits - 48 (44) 44 48
Other - 3 3 (3) 3
-----------------------------------------------------------------------------
Profit for the period before cumulative
effect of accounting changes as adjusted
to accord with US GAAP 271 4,734 4,459 (4,730) 4,734
Cumulative effect of accounting changes:
Provisions 214 1,002 788 (1,002) 1,002
Derivative financial instruments - 50 50 (50) 50
-----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 485 5,786 5,297 (5,782) 5,786
-----------------------------------------------------------------------------
Page 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At March 31, 2004
Fixed assets
Intangible assets 423 - 12,963 - 13,386
Tangible assets 6,392 - 85,408 - 91,800
Investments
Subsidiaries - equity-accounted basis 2,901 73,103 - (76,004) -
Other - 2 18,490 - 18,492
-----------------------------------------------------------------------------
2,901 73,105 18,490 (76,004) 18,492
-----------------------------------------------------------------------------
Total fixed assets 9,716 73,105 116,861 (76,004) 123,678
-----------------------------------------------------------------------------
Current assets
Inventories 77 - 11,221 - 11,298
Receivables 10,707 29,471 42,280 (47,359) 35,099
Investments - - 328 - 328
Cash at bank and in hand (5) 2 2,009 - 2,006
-----------------------------------------------------------------------------
10,779 29,473 55,838 (47,359) 48,731
-----------------------------------------------------------------------------
Current liabilities - falling due within
one year
Finance debt 56 - 6,942 (1) 6,997
Accounts payable and accrued liabilities 796 5,036 50,147 (12,961) 43,018
-----------------------------------------------------------------------------
Net current assets (liabilities) 9,927 24,437 (1,251) (34,397) (1,284)
-----------------------------------------------------------------------------
Total assets less current liabilities
Noncurrent liabilities
Finance debt - - 12,940 - 12,940
Accounts payable and accrued liabilities 4,261 50 35,920 (34,397) 5,834
Provisions for liabilities and charges
Deferred taxation 1,745 - 12,833 - 14,578
Other provisions 580 172 8,014 - 8,766
-----------------------------------------------------------------------------
Net assets excluding pension and other
postretirement benefit balances 13,057 97,320 45,903 (76,004) 80,276
Defined benefit pension plan surplus - 1,156 102 - 1,258
Defined benefit pension plan and other
post-retirement benefit plan deficits - - (7,524) - (7,524)
-----------------------------------------------------------------------------
Net assets 13,057 98,476 38,481 (76,004) 74,010
Minority shareholders' interest - equity - - 1,181 - 1,181
-----------------------------------------------------------------------------
BP shareholders' interest 13,057 98,476 37,300 (76,004) 72,829
=============================================================================
Page 45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At March 31, 2004
Capital and reserves
Capital shares 1,903 5,521 - (1,903) 5,521
Paid-in surplus 3,145 4,637 - (3,145) 4,637
Merger reserve - 26,417 697 - 27,114
Other reserves - 92 - - 92
Shares held by ESOP trusts - (39) - - (39)
Retained earnings 8,009 61,848 36,603 (70,956) 35,504
-----------------------------------------------------------------------------
13,057 98,476 37,300 (76,004) 72,829
=============================================================================
The following is a summary of the adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States (US GAAP) had been applied instead of those generally accepted in the
United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 13,057 98,476 37,300 (76,004) 72,829
Adjustments:
Deferred taxation/business combinations 59 (78) (137) 78 (78)
Provisions 28 (130) (157) 129 (130)
Sale and leaseback - (38) (38) 38 (38)
Goodwill - 2,054 2,054 (2,054) 2,054
Derivative financial instruments (70) 130 130 (60) 130
Gain arising on asset exchange - 127 127 (127) 127
Pensions and other postretirement benefits - 5,396 3,879 (3,879) 5,396
Dividends - 1,483 - - 1,483
Investments - 145 145 (145) 145
Additional minimum pension liability - (277) (277) 277 (277)
Other - (38) (38) 38 (38)
-----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 13,074 107,250 42,988 (81,709) 81,603
=============================================================================
Page 46
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2003
Fixed assets
Intangible assets 424 - 13,218 - 13,642
Tangible assets 6,432 - 85,479 - 91,911
Investments
Subsidiaries - equity-accounted basis 2,814 78,076 - (80,890) -
Other - 2 17,456 - 17,458
-----------------------------------------------------------------------------
2,814 78,078 17,456 (80,890) 17,458
-----------------------------------------------------------------------------
Total fixed assets 9,670 78,078 116,153 (80,890) 123,011
-----------------------------------------------------------------------------
Current assets
Inventories 102 - 11,515 - 11,617
Receivables 11,214 24,300 43,277 (44,889) 33,902
Investments - - 185 - 185
Cash at bank and in hand (5) 3 1,949 - 1,947
-----------------------------------------------------------------------------
11,311 24,303 56,926 (44,889) 47,651
-----------------------------------------------------------------------------
Current liabilities - falling due within
one year
Finance debt 55 - 9,401 - 9,456
Accounts payable and accrued liabilities 1,541 6,746 48,376 (15,535) 41,128
-----------------------------------------------------------------------------
Net current assets (liabilities) 9,715 17,557 (851) (29,354) (2,933)
-----------------------------------------------------------------------------
Total assets less current liabilities 19,385 95,635 115,302 (110,244) 120,078
Noncurrent liabilities
Finance debt - - 12,869 - 12,869
Accounts payable and accrued liabilities 4,272 50 31,122 (29,354) 6,090
Provisions for liabilities and charges
Deferred taxation 1,745 - 12,626 - 14,371
Other provisions 569 216 8,030 - 8,815
-----------------------------------------------------------------------------
Net assets excluding pension and other
postretirement benefit balances 12,799 95,369 50,655 (80,890) 77,933
Defined benefit pension plan surplus - 1,093 (72) - 1,021
Defined benefit pension plan and other
postretirement benefit plan deficits - - (7,510) - (7,510)
-----------------------------------------------------------------------------
Net assets 12,799 96,462 43,073 (80,890) 71,444
Minority shareholders' interest - equity - - 1,125 - 1,125
-----------------------------------------------------------------------------
BP shareholders' interest 12,799 96,462 41,948 (80,890) 70,319
=============================================================================
Page 47
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance Sheet (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2003
Capital and reserves
Capital shares 1,903 5,552 - (1,903) 5,552
Paid-in surplus 3,145 4,480 - (3,145) 4,480
Merger reserve - 26,380 697 - 27,077
Other reserves - 129 - - 129
Shares held by ESOP trusts - (96) - - (96)
Retained earnings 7,751 60,017 41,251 (75,842) 33,177
-----------------------------------------------------------------------------
12,799 96,462 41,948 (80,890) 70,319
=============================================================================
The following is a summary of the adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States (US GAAP) had been applied instead of those generally accepted in the
United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 12,799 96,462 41,948 (80,890) 70,319
Adjustments:
Deferred taxation/business combinations 62 (65) (127) 65 (65)
Provisions 27 (128) (155) 128 (128)
Sale and leaseback - (37) (37) 37 (37)
Goodwill - 1,669 1,669 (1,669) 1,669
Derivative financial instruments (63) (72) (9) 72 (72)
Gain arising on asset exchange - 129 129 (129) 129
Pensions and other postretirement benefits - 5,523 4,047 (4,047) 5,523
Dividends - 1,495 - - 1,495
Investments - 1,251 1,251 (1,251) 1,251
Additional minimum pension liability - (277) (277) 277 (277)
Other - (43) (43) 43 (43)
-----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 12,825 105,907 48,396 (87,364) 79,764
=============================================================================
Page 48
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2004
Net cash inflow (outflow) from
operating activities 540 (6,657) 13,574 217 7,674
Dividends from joint ventures - - 178 - 178
Dividends from associated undertakings - - 31 - 31
Dividends from subsidiaries 8 9,070 - (9,078) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (30) 217 (84) (217) (114)
Tax paid - (1) (579) - (580)
Net cash inflow (outflow) for capital
expenditure and financial investment (92) - (10) - (102)
Net cash inflow (outflow) for acquisitions
and disposals - - (1,798) - (1,798)
Equity dividends paid - (1,492) (9,078) 9,078 (1,492)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 426 1,137 2,234 - 3,797
=============================================================================
Financing 426 1,138 2,034 - 3,598
Management of liquid resources - - 138 - 138
Increase (decrease) in cash - (1) 62 - 61
-----------------------------------------------------------------------------
426 1,137 2,234 - 3,797
=============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 548 2,629 13,120 (9,054) 7,243
Net cash provided by (used in)
investing activities (92) - (1,808) (52) (1,952)
Net cash provided by (used in)
financing activities (456) (2,630) (11,112) 9,106 (5,092)
Currency translation differences relating to
cash and cash equivalents - - 3 - 3
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents - (1) 203 - 202
Cash and cash equivalents at beginning
of period (5) 3 2,134 - 2,132
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (5) 2 2,337 - 2,334
=============================================================================
Page 49
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
17. Condensed consolidating information - concluded
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2003
Net cash inflow (outflow) from
operating activities 518 2,253 3,163 27 5,961
Dividends from joint ventures - - 13 - 13
Dividends from associated undertakings - - 55 - 55
Dividends from subsidiaries 10 - - (10) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (22) 27 (150) (27) (172)
Tax paid - - (632) - (632)
Net cash inflow (outflow) for capital
expenditure and financial investment (97) 42 (499) - (554)
Net cash inflow (outflow) for acquisitions
and disposals 6 - (46) - (40)
Equity dividends paid - (1,397) (10) 10 (1,397)
-----------------------------------------------------------------------------
Net cash inflow (outflow) 415 925 1,894 - 3,234
=============================================================================
Financing 414 937 2,248 - 3,599
Management of liquid resources - - 13 - 13
Increase (decrease) in cash 1 (12) (367) - (378)
-----------------------------------------------------------------------------
415 925 1,894 - 3,234
=============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 534 2,280 2,449 (2) 5,261
Net cash provided by (used in)
investing activities (97) 42 (545) (28) (628)
Net cash provided by (used in)
financing activities (436) (2,334) (2,258) 30 (4,998)
Currency translation differences relating to
cash and cash equivalents - - 9 - 9
-----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 1 (12) (345) - (356)
Cash and cash equivalents at beginning
of period (11) 1 1,745 - 1,735
-----------------------------------------------------------------------------
Cash and cash equivalents at end
of period (10) (11) 1,400 - 1,379
=============================================================================
Page 50
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
Average crude oil realizations - $/bbl
UK 29.36 31.16
USA 32.69 31.74
Rest of World 30.80 29.91
BP average 31.30 31.07
Average natural gas liquids realizations - $/bbl
UK 25.70 23.28
USA 22.25 18.26
Rest of World 24.61 23.05
BP average 23.14 19.82
Average liquids realizations (a) - $/bbl
UK 29.16 30.67
USA 31.08 29.36
Rest of World 30.42 29.48
BP average 30.48 29.82
Average natural gas realizations - $/mcf
UK 4.70 3.32
USA 4.72 5.27
Rest of World 2.67 2.70
BP average 3.79 3.87
Total hydrocarbons - $/boe
UK 28.42 26.14
USA 29.48 29.90
Rest of World 21.58 21.53
BP average 26.48 26.39
Average oil marker prices - $/bbl
Brent oil price 32.03 31.47
West Texas Intermediate oil price 35.30 34.00
Alaska North Slope US West Coast 34.22 33.16
Henry Hub gas price (b) ($/mmbtu) 5.69 6.53
UK Gas - National Balancing point (p/therm) 24.59 21.28
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 2.73 3.70
US Gulf Coast 6.92 6.14
Midwest 4.67 4.14
US West Coast 8.06 6.77
Singapore 3.42 2.98
BP average 4.62 4.52
Petrochemicals Indicator Margin (d) - $/te 122 (e) 96
Page 51
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS - concluded
---------------
(a) Crude oil and natural gas liquids.
(b) Henry Hub First of Month Index.
(c) The Global Indicator Refining Margin (GIM) is the average of six regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity. 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.
(d) The Petrochemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Nexant (formerly Chem Systems) in their quarterly market analyses, then
weighted based on BP's product portfolio. It does not cover our entire
portfolio of products, and consequently is only indicative rather than
representative of the margins achieved by BP in any particular period.
Amongst the products and businesses covered in the CIM are olefins and
derivatives, the aromatics and derivatives, linear alpha-olefins (LAOs),
acetic acid, vinyl acetate monomers and nitriles. Not included are fabrics
and fibres, plastic fabrications, poly alpha-olefins (PAOs), anhydrides,
speciality intermediates, and the remaining parts of the solvents and
acetyls businesses.
(e) Provisional. The data for the first quarter is based on two months' actuals
and one month of provisional data.
The table below shows the US dollar/sterling exchange rates used in the
preparation of the financial statements. The period-end rate is the mid-point
closing rate as published in the London edition of the Financial Times on the
last day of the period. The average rate for the period is the average of the
daily mid-point closing rates for the period.
Three months ended
March 31
US dollar/sterling exchange rates (Unaudited)
2004 2003
------- -------
Average rate for the period 1.84 1.60
Period-end rate 1.83 1.57
Page 52
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
Crude oil production
(thousand barrels per day) (net of royalties)
UK 344 442
Rest of Europe 73 90
USA 564 606
Rest of World 1,361 692
------- -------
Total crude oil production 2,342 1,830
======= =======
Natural gas liquids production
(thousand barrels per day) (net of royalties)
UK 20 29
Rest of Europe 5 5
USA 137 167
Rest of World 29 32
------- -------
Total natural gas liquids production 191 233
======= =======
Liquids production (a)
(thousand barrels per day) (net of royalties)
UK 364 471
Rest of Europe 78 95
USA 701 773
Rest of World 1,390 724
------- -------
Total liquids production 2,533 2,063
======= =======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,355 1,798
Rest of Europe 142 131
USA 2,869 3,437
Rest of World 4,234 3,651
------- -------
Total natural gas production 8,600 9,017
======= =======
Total production (b) (thousand barrels of oil equivalent per day)
(net of royalties)
UK 597 781
Rest of Europe 102 118
USA 1,196 1,366
Rest of World 2,120 1,353
------- -------
Total production 4,015 3,618
======= =======
Page 53
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
Natural gas sales volumes (million cubic feet per day)
UK 3,027 3,215
Rest of Europe 442 473
USA 13,618 11,734
Rest of World 13,902 11,553
------- -------
Total natural gas sales volumes (c) 30,989 26,975
======= =======
NGL sales volumes (thousand barrels per day)
UK 4 5
Rest of Europe 1 -
USA 462 282
Rest of World 244 251
------- -------
Total NGL sales volumes 711 538
======= =======
Oil sales volumes (thousand barrels per day)
Refined products
UK 294 279
Rest of Europe 1,324 1,318
USA 1,727 1,751
Rest of World 679 645
------- -------
Total marketing sales 4,024 3,993
Trading/supply sales 2,917 2,811
------- -------
Total refined product sales 6,941 6,804
Crude oil 5,104 4,529
------- -------
Total oil sales 12,045 11,333
======= =======
Refinery throughputs (thousand barrels per day)
UK 395 377
Rest of Europe 884 954
USA 1,265 1,302
Rest of World 399 391
------- -------
Total throughput 2,943 3,024
======= =======
Petrochemicals production (thousand tonnes)
UK 840 869
Rest of Europe 2,728 2,763
USA 2,543 2,536
Rest of World 1,132 812
------- -------
Total production 7,243 6,980
======= =======
---------------
(a) Crude oil and natural gas liquids.
(b) Expressed in thousand barrels of oil equivalent per day (mboe/d). Natural
gas is converted to oil equivalent at 5.8 billion cubic feet: 1 million
barrels.
(c) Encompasses sales by Exploration and Production and Gas, Power and
Renewables, including marketing, trading and supply sales.
Page 54
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
By business
Exploration and Production
UK 153 196
Rest of Europe 48 51
USA 932 963
Rest of World (a) 2,690 908
------- -------
3,823 2,118
------- -------
Refining and Marketing
UK 77 73
Rest of Europe 92 104
USA 258 336
Rest of World 37 24
------- -------
464 537
------- -------
Petrochemicals
UK 20 -
Rest of Europe 38 31
USA 47 44
Rest of World 61 21
------- -------
166 96
------- -------
Gas, Power and Renewables
UK 1 8
Rest of Europe 2 15
USA 11 41
Rest of World 47 23
------- -------
61 87
------- -------
Other businesses and corporate
UK 2 18
Rest of Europe - 1
USA 9 10
Rest of World - 1
------- -------
11 30
------- -------
4,525 2,868
======= =======
By geographical area
UK 253 295
Rest of Europe 180 202
USA 1,257 1,394
Rest of World 2,835 977
------- -------
4,525 2,868
======= =======
------------
(a) First quarter 2004 included the investment in TNK's interest in Slavneft
within TNK-BP.
Page 55
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended
March 31
(Unaudited)
2004 2003
------- -------
($ million)
Profit for the period 4,818 4,219
Interest (a) 64 99
Minority shareholders' interest 44 26
------- -------
Adjusted profit 4,926 4,344
======= =======
Capital employed at beginning of period:
BP shareholders' interest 70,319 63,649
Minority shareholders' interest 1,125 638
Finance debt 22,325 22,008
------- -------
Capital employed 93,769 86,295
======= =======
Capital employed at end of period:
BP shareholders' interest 72,829 65,189
Minority shareholders' interest 1,181 1,047
Finance debt 19,937 19,042
------- -------
Capital employed 93,947 85,278
======= =======
93,858 85,787
Average capital employed
======= =======
ROACE 21.0% 20.3%
------------
(a) Excludes interest on joint venture and associated undertakings' debt and is
on a post-tax basis, using a deemed tax rate equal to the US statutory tax
rate.
Page 56
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
At March 31
(Unaudited)
2004 2003
------- -------
($ million)
Net debt ratio - net debt: net debt + equity
Gross finance debt 19,937 19,042
Cash and current asset investments 2,334 1,379
------- -------
Net debt 17,603 17,663
------- -------
Equity 74,010 66,236
Net debt ratio 19% 21%
======= =======
Page 57
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BP p.l.c.
(Registrant)
Dated: July 8, 2004 /s/ D. J. Pearl
.........................................
D. J. PEARL
Deputy Company Secretary
Page 58