6-K
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

for the period ended 30 September 2017

Commission File Number 1-06262

BP p.l.c.

(Translation of registrant’s name into English)

1 ST JAMES’S SQUARE, LONDON, SW1Y 4PD, ENGLAND

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F                Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                 

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NOS. 333-208478 AND 333-208478-01) OF BP CAPITAL MARKETS p.l.c. AND BP p.l.c.; THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-79399) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-103924) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-123482) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-123483) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-131583) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-131584) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-132619) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146868) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146870) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146873) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-173136) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-177423) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-179406) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-186462) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-186463) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-199015) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-200794) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-200795) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-207188) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-207189) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-210316) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-210318) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

 

1


Table of Contents

BP p.l.c. and subsidiaries

Form 6-K for the period ended 30 September 2017(a)

    

 

          Page    
1.     

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the period January-September 2017(b)

     3-13, 26-35  
2.     

Consolidated Financial Statements including Notes to Consolidated Financial Statements for the period January-September 2017

     14-  25  
3.     

Legal proceedings

       36  
4.     

Cautionary statement

       36  
5.     

Computation of Ratio of Earnings to Fixed Charges

       37  
6.     

Capitalization and Indebtedness

       38  
7.     

Signatures

       39  

 

  (a)  In this Form 6-K, references to the nine months 2017 and nine months 2016 refer to nine-month periods ended 30 September 2017 and 30 September 2016 respectively. References to the third quarter 2017 and third quarter 2016 refer to the three-month periods ended 30 September 2017 and 30 September 2016 respectively.
  (b) This discussion should be read in conjunction with the consolidated financial statements and related notes provided elsewhere in this Form 6-K and with the information, including the consolidated financial statements and related notes, in BP’s Annual Report on Form 20-F for the year ended 31 December 2016.

 

2


Table of Contents

Group results third quarter and nine months 2017

 

 

 

Highlights    Share buybacks announced to offset scrip dilution
Reported third quarter group oil and gas production up 14%
   ·    Profit for the third quarter was $1.8 billion, compared with $144 million in previous quarter. Underlying replacement cost (RC) profit* for the third quarter was $1.9 billion, compared with $684 million in previous quarter.
   ·    Third-quarter operating cash flow* was $6.0 billion after post-tax Gulf of Mexico oil spill expenditure of $0.6 billion.
   ·    Dividend unchanged at 10 cents per share.
   ·    Recommencing share buyback programme in fourth quarter to offset ongoing dilutive effect of scrip dividends over time.
   ·    Reported group oil and gas production in the third quarter averaged 3.6 million barrels of oil equivalent a day, 14% higher than in the third quarter of 2016.
   ·    Three Upstream major projects* began production in the quarter.
   ·    Downstream underlying quarterly earnings were the highest for five years, second-highest on a RC basis.
   ·    Around $4.5 billion in disposal proceeds are expected for full year 2017, with $1.0 billion received in first nine months.
   ·   

Proceeds expected in the fourth quarter include those from the SECCO transaction ($1.4 billion) and the initial public offering of BP Midstream Partners LP’s common units ($0.7 billion).

 

 

            Third      Third               Nine      Nine    
            quarter          quarter               months          months    
   $ million           2017      2016               2017      2016    

Profit (loss) for the period(a)

        1,769        1,620             3,362        (382)    

Inventory holding (gains) losses*, before tax

        (557)        60             (37)        (996)    

Taxation charge (credit) on inventory holding gains and losses

        167        (19)             19        307    

RC profit (loss)*

        1,379        1,661             3,344        (1,071)    

Net (favourable) adverse impact of non-operating items* and fair value accounting effects*, before tax

        667        (663)             1,171        6,265    

Taxation charge (credit) on non-operating items and fair value accounting effects

        (181)        (65)             (456)        (3,009)    

Underlying RC profit

        1,865        933             4,059        2,185    

Profit (loss) per ordinary share (cents)

        8.95        8.61             17.10        (2.05)    

Profit (loss) per ADS (dollars)

        0.54        0.52             1.03        (0.12)    

RC profit (loss) per ordinary share (cents)*

        6.98        8.82             17.01        (5.74)    

RC profit (loss) per ADS (dollars)

        0.42        0.53             1.02        (0.34)    

Underlying RC profit per ordinary share (cents)*

        9.44        4.96             20.65        11.70    

Underlying RC profit per ADS (dollars)

        0.57        0.30             1.24        0.70    

 

  (a)  Profit attributable to BP shareholders.

 

 

 

 

 * See definitions in the Glossary on page 32. RC profit (loss) and underlying RC profit are non-GAAP measures.

 

The commentary above and following should be read in conjunction with the cautionary statement on page 36.

 

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

 

Group headlines

Earnings

BP’s profit for the third quarter and nine months was $1,769 million and $3,362 million respectively, compared with a profit of $1,620 million and a loss of $382 million for the same periods in 2016.

The third-quarter replacement cost (RC) profit was $1,379 million, compared with $1,661 million for the same period in 2016. After adjusting for a net charge for non-operating items of $274 million and net adverse fair value accounting effects of $212 million (both on a post-tax basis), underlying RC profit for the third quarter was $1,865 million, compared with $933 million for the same period in 2016.

For the nine months, RC profit was $3,344 million, compared with a loss of $1,071 million a year ago. After adjusting for a net charge for non-operating items of $794 million and net favourable fair value accounting effects of $79 million (both on a post-tax basis), underlying RC profit for the nine months was $4,059 million, compared with $2,185 million for the same period in 2016.

See further information on page 5.

Non-operating items

Non-operating items amounted to a charge of $385 million pre-tax and $274 million post-tax for the quarter and a charge of $1,297 million pre-tax and $794 million post-tax for the nine months. See further information on page 27.

Effective tax rate

The effective tax rate (ETR) on the profit or loss for the third quarter and nine months was 41% and 43% respectively, compared with -19% and 87% for the same periods in 2016. The ETR on RC profit or loss* for the third quarter and nine months was 43% for both periods, compared with -16% and 73% for the same periods in 2016. Adjusting for non-operating items and fair value accounting effects and the impact of the reduction in the rate of the UK North Sea supplementary charge in the third quarter 2016, the adjusted ETR* for the third quarter and nine months was 40% and 42% respectively, compared with 37% and 25% for the same periods in 2016.

The adjusted ETR for the third quarter and nine months is higher than a year ago mainly due to changes in the mix of profits, notably the impact of the renewal of our interest in the Abu Dhabi onshore oil concession. We continue to expect the full year adjusted ETR to be above 40%. ETR on RC profit or loss and adjusted ETR are non-GAAP measures. See further information on page 32.

Dividend

BP today announced a quarterly dividend of 10.00 cents per ordinary share ($0.600 per ADS), which is expected to be paid on 21 December 2017. The corresponding amount in sterling will be announced on 11 December 2017. See page 24 for further information.

Share buybacks

BP will recommence a share buyback programme in the fourth quarter, intended to offset the ongoing dilutive effect of scrip dividends over time. The programme will not necessarily match the dilution on a quarterly basis but will reflect the ongoing judgement of various factors including changes in the price environment, the underlying performance of the business, the outlook for the group’s financial framework and other market factors which may vary from quarter to quarter.

Operating cash flow*

Operating cash flow for the third quarter and nine months was $6.0 billion and $13.0 billion respectively, after post-tax expenditure relating to the Gulf of Mexico oil spill of $0.6 billion and $4.9 billion. For the same periods in 2016 the equivalent amounts were $2.5 billion and $8.3 billion, after post-tax Gulf of Mexico oil spill expenditure of $2.3 billion and $4.8 billion.

Capital expenditure*

Total capital expenditure for the third quarter and nine months was $4.5 billion and $13.0 billion respectively, compared with $3.6 billion and $12.5 billion for the same periods in 2016.

Organic capital expenditure* for the third quarter and nine months was $4.0 billion and $11.9 billion respectively, compared with $3.5 billion and $12.2 billion for the same periods in 2016.

Inorganic capital expenditure* for the third quarter and nine months was $0.5 billion and $1.1 billion respectively, compared with $0.05 billion, and $0.3 billion for the same periods in 2016.

Organic and inorganic capital expenditure are non-GAAP measures. See page 26 for further information.

Divestment proceeds*

Divestment proceeds were $0.2 billion for the third quarter and $1.0 billion for the nine months, compared with $0.6 billion and $2.2 billion for the same periods in 2016.

Debt

Gross debt at 30 September 2017 was $65.8 billion compared with $59.0 billion a year ago. The ratio of gross debt to gross debt plus equity at 30 September 2017 was 39.6%, compared with 38.9% a year ago.

Net debt* at 30 September 2017 was $39.8 billion, compared with $32.4 billion a year ago. The net debt ratio* at 30 September 2017 was 28.4%, compared with 25.9% a year ago. Net debt and the net debt ratio are non-GAAP measures. See page 25 for more information.

 

 

 

 

  The commentary above should be read in conjunction with the cautionary statement on page 36.

 

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

 

Analysis of underlying RC profit before interest and tax

   $ million      

Third

        quarter

2017

 

Third  

        quarter  

2016  

     

Nine

        months

2017

 

Nine  

        months  

2016  

Underlying RC profit before interest and tax*

           

Upstream

    1,562   (224)       3,642   (942)  

Downstream

    2,338   1,431       5,493   4,757  

Rosneft

    137   120       515   432  

Other businesses and corporate

    (398)   (260)       (1,204)   (814)  

Consolidation adjustment – UPII*

    (130)   17       (63)   (64)  

Underlying RC profit before interest and tax

    3,509   1,084       8,383   3,369  

Finance costs and net finance expense relating to pensions and other post-retirement benefits

    (444)   (358)       (1,251)   (1,012)  

Taxation on an underlying RC basis

    (1,212)   164       (3,030)   (161)  

Non-controlling interests

    12   43       (43)   (11)  

Underlying RC profit attributable to BP shareholders

    1,865   933       4,059   2,185  

Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 3 for the group and on pages 8-13 for the segments.

Analysis of RC profit (loss) before interest and tax and reconciliation to profit (loss) for the period

   $ million       Third
        quarter
2017
  Third  
        quarter  
2016  
      Nine
        months
2017
  Nine  
        months  
2016  

RC profit (loss) before interest and tax*

           

Upstream

    1,242   1,196       3,293   (118)  

Downstream

    2,175   978       5,448   4,263  

Rosneft

    137   120       515   432  

Other businesses and corporate(a)

    (460)   (441)       (1,612)   (7,040)  

Consolidation adjustment – UPII

    (130)   17       (63)   (64)  

RC profit (loss) before interest and tax

    2,964   1,870       7,581   (2,527)  

Finance costs and net finance expense relating to pensions and other post-retirement benefits

    (566)   (481)       (1,620)   (1,381)  

Taxation on a RC basis

    (1,031)   229       (2,574)   2,848  

Non-controlling interests

    12   43       (43)   (11)  

RC profit (loss) attributable to BP shareholders

    1,379   1,661       3,344   (1,071)  

Inventory holding gains (losses)

    557   (60)       37   996  

Taxation (charge) credit on inventory holding gains and losses

    (167)   19       (19)   (307)  

Profit (loss) for the period attributable to BP shareholders

    1,769   1,620       3,362   (382)  

 

  (a) Includes costs related to the Gulf of Mexico oil spill. See page 13 and also Note 2 from page 19 for further information on the accounting for the Gulf of Mexico oil spill.

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

 

Strategic progress

Upstream

Three Upstream major projects, the Persephone project in Australia, the Juniper project in Trinidad, and the first phase of the Khazzan tight gas development in Oman, all started production in the third quarter. Six of the seven major projects BP expects to start production in 2017 are now online. The seventh, Zohr in Egypt, is on track to start up before the end of the year.

The delivery of the major projects continues to underpin Upstream production growth. Over the first nine months of 2017, Upstream production - which excludes Rosneft - was 10% higher than in the same period in 2016. Upstream unit production costs* are also 16% lower than the prior year, benefiting from production growth and continued focus on cost discipline.

In September, BP, together with our partners, extended the production-sharing agreement* (PSA) for the Azeri, Chirag and Deep Water Gunashli fields (ACG) in Azerbaijan by 25 years to the end of 2049.

Downstream

BP delivered double digit earnings growth from fuels marketing in the first nine months - premium fuel sales volumes have continued to grow and BP’s convenience partnership model has been rolled out to more than 170 retail sites worldwide so far this year. In lubricants, BP renewed its global partnership and supply agreement with Volvo Car Group.

In manufacturing, both refining and petrochemicals have grown earnings, with our US refineries processing record levels of advantaged crude.

Financial framework

Operating cash flow* in the third quarter, after post-tax expenditure relating to the Gulf of Mexico oil spill of $0.6 billion, was $6.0 billion, with $13.0 billion for the first nine months of 2017, after post-tax expenditure relating to the Gulf of Mexico oil spill of $4.9 billion. This compares with $8.3 billion for the first nine months of 2016, after post-tax Gulf of Mexico oil spill expenditure of $4.8 billion.

Organic capital expenditure* of $4.0 billion in the third quarter brought the total for the first nine months to $11.9 billion. BP now expects total organic capital expenditure for 2017 will be around $16 billion, within the $15-17 billion range previously indicated.

Divestment proceeds*, as per the cash flow statement, for the first nine months of 2017 were $1.0 billion.

Significant proceeds are expected to be received in the fourth quarter, including those from the sale of BP’s interest in the SECCO joint venture in China ($1.4 billion) and from the initial public offering of BP Midstream Partners LP’s common units ($0.7 billion). Total proceeds in 2017 are expected to be around $4.5 billion.

Gulf of Mexico oil spill payments were $0.6 billion in the third quarter, significantly lower than in the first two quarters of the year. Payments over the first nine months of 2017 were $4.9 billion; for the full year payments are now expected to be around $5.5 billion.

BP continues to target a gearing* range of 20-30%. At the end of the third quarter, gearing was 28.4%.

 

 

Operating

metrics

     Nine months 2017
(vs. Nine months 2016)
    

Financial

metrics

    

Nine months 2017

(vs. Nine months 2016)

Safety

Tier 1 process safety

events*

 

    

12

(-1)

    

Underlying RC profiti

    

$4.1bn (+$1.9bn)

Safety

Reported recordable

injury frequency*

    

0.21

(-4%)

    

Operating cash flow

excluding Gulf of

Mexico oil spill

payments

     (b)

Group production

    

3,557mboe/d

(+10%)

 

    

Organic capital

expenditureii

 

    

$11.9bn (-$0.3bn)

 

Upstream production

(excludes Rosneft segment)

 

    

2,427mboe/d

(+10%)

    

Gulf of Mexico oil spill

payments

    

$4.9bn (+$0.03bn)

Upstream unit

production costs*

    

$7.17/boe

(-16%)

    

Divestment proceeds

    

$1.0bn (-$1.2bn)

BP-operated Upstream

operating efficiency*(a)

     80.4%     

Net debt ratio

(gearing)iii

     28.4% (+2.5)

Refining availability*

    

95.0%

(-0.4)

 

    

Dividend per ordinary

Share(c)

 

    

10.00 cents (-)

 

 

  (a) Reported on a one-quarter lagged basis and represents first half 2017 actuals only.
  (b) SEC regulations do not permit inclusion of this non-GAAP metric in this SEC filing. Operating cash flow excluding Gulf of Mexico oil spill payments is calculated by excluding post-tax expenditure relating to the Gulf of Mexico oil spill from net cash provided by operating activities, as reported in the condensed group cash flow statement. For the nine months, net cash provided by operating activities was $6.0 billion and post-tax Gulf of Mexico oil spill expenditure was $0.6 billion.
  (c) Represents dividend announced in the quarter (vs. prior year quarter).

 

Nearest GAAP equivalent measures

i   Profit for the period

  :   $3.4bn                

ii  Capital expenditure*

  :   $13.0bn

iii Gross debt ratio

  :   39.6%

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36.

 

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INTENTIONALLY BLANK

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

Upstream

 

  $ million        Third
quarter
2017
     Third
quarter
2016
            Nine
months
2017
     Nine
months
2016
 

Profit (loss) before interest and tax

       1,255        1,183           3,301        (77)  

Inventory holding (gains) losses*

       (13)        13           (8)        (41)  

RC profit (loss) before interest and tax

       1,242        1,196           3,293        (118)  

Net (favourable) adverse impact of non-operating items* and fair value accounting effects*

       320        (1,420)           349        (824)  

Underlying RC profit (loss) before interest and tax*(a)

       1,562        (224)           3,642        (942)  

 

  (a)  See page 9 for a reconciliation to segment RC profit before interest and tax by region.

Financial results

The replacement cost profit before interest and tax for the third quarter and nine months was $1,242 million and $3,293 million respectively, compared with a profit of $1,196 million and a loss of $118 million for the same periods in 2016. The third quarter and nine months included a net non-operating charge of $146 million and $527 million respectively, compared with a net non-operating gain of $1,465 million and $1,117 million for the same periods in 2016. Fair value accounting effects in the third quarter and nine months had an adverse impact of $174 million and a favourable impact of $178 million respectively, compared with an adverse impact of $45 million and $293 million in the same periods of 2016.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the third quarter and nine months was $1,562 million and $3,642 million respectively, compared with a loss of $224 million and a loss of $942 million for the same periods in 2016. The result for the third quarter mainly reflected higher liquids and gas realizations, higher production including the impact of the Abu Dhabi concession renewal and major project start-ups, and lower exploration write-offs, partly offset by higher depreciation, depletion and amortization. The result for the nine months reflected higher liquids and gas realizations, and higher production including the impact of the Abu Dhabi concession renewal and major project start-ups, partly offset by higher depreciation, depletion and amortization, and higher exploration write-offs.

Production

Production for the quarter was 2,462mboe/d, 16.3% higher than the third quarter of 2016. Underlying production* for the quarter increased by 10.9%, due to the ramp-up of major projects. For the nine months, production was 2,427mboe/d, 9.6% higher than in the same period of 2016. Nine months underlying production was 6.7% higher than the same period of 2016 due to major project start-ups.

Key events

On 7 August, BP announced that it has brought online a natural gas well (BP 100%) in the Mancos Shale, New Mexico in the US Lower 48, highlighting the potential of the field to be a significant new source of US natural gas supply.

On 14 August, BP Trinidad and Tobago announced first gas from the Juniper development in Trinidad. On the same day, BP confirmed that production has started from the Persephone project off the coast of Western Australia (Woodside operator, BP 16.67%).

On 11 September, BP announced an agreement with Bridas Corporation to form a new integrated energy company in Argentina, Pan American Energy Group (PAEG), by combining their interests in the oil and gas producer Pan American Energy with the refining and marketing company Axion Energy in a cash-free transaction. PAEG will be owned equally by BP and Bridas Corporation.

On 14 September, the joint development and production-sharing agreement* (PSA) for the Azeri, Chirag fields and the Deep Water Portion of the Gunashli field in the Azerbaijan sector of the Caspian Sea (ACG PSA) was extended by signing an amended and restated PSA between the State Oil Company of the Republic of Azerbaijan (SOCAR) and the contractor parties. The renewed PSA, expected to be ratified by the Azerbaijani parliament before year end, extends the PSA’s term by 25 years to 2049 and includes an improved contractor parties’ profit share at a fixed rate of 25%. Under the terms of the agreement, BP’s interest changes from 35.78% to 30.37% from the agreement’s effective date following ratification, with a bonus of $1.46 billion (BP net), payable to the government of Azerbaijan in equal instalments over 8 years.

On 25 September, BP, together with the Ministry of Oil & Gas of the Sultanate of Oman, announced that first gas had been achieved from the Khazzan gas field (BP operator 60%, Oman Oil Company 40%).

On 24 October, Aker BP ASA (Aker BP), in which BP holds a 30% ownership interest, announced an agreement to acquire Hess Norge AS. Upon completion of the transaction, Aker BP will become the sole owner of the Valhall and Hod fields. This transaction is subject to regulatory approvals.

On 27 October, BP won two licences in the third Pre-Salt Bid Round in Brazil, the Alto De Cabo Frio Central block (Petrobras operator 50%, BP 50%), and the Peroba block (Petrobras operator 40%, BP 40%, and China National Petroleum Corporation 20%).

Outlook

Looking ahead, we expect fourth-quarter reported production to be higher than the third quarter reflecting the continued ramp-up of major projects and recovery from seasonal turnaround and maintenance activities.

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36.

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

Upstream (continued)

 

   $ million           Third
        quarter
2017
   Third
        quarter
2016
          Nine
        months
2017
   Nine  
months  
2016  

Underlying RC profit (loss) before interest and tax

                 

US

      264    (151)         609    (1,123)  

Non-US

      1,298    (73)         3,033    181  
       

1,562

  

(224)  

     

3,642

  

(942)  

Non-operating items(a)

                 

US(b)

      (97)    326         (143)    106  

Non-US(c)(d)

      (49)    1,139         (384)    1,011  
       

(146)

  

1,465  

     

(527)

  

1,117  

Fair value accounting effects

                 

US

      (100)    (15)         184    (105)  

Non-US

      (74)    (30)         (6)    (188)  
       

(174)

  

(45)  

     

178

  

(293)  

RC profit (loss) before interest and tax

                 

US

      67    160         650    (1,122)  

Non-US

      1,175    1,036         2,643    1,004  
       

1,242

  

1,196  

     

3,293

  

(118)  

Exploration expense

                 

US(b)

      190    22         255    182  

Non-US(d)(e)

      107    781         1,304    1,225  
       

297

  

803  

     

1,559

  

1,407  

Of which: Exploration expenditure written off(b)(d)(e)

      217    687         1,231    1,108  

Production (net of royalties)(f)

                 

Liquids*(g) (mb/d)

                 

US

      408    353         425    386  

Europe

      123    112         120    119  

Rest of World(g)

      809    669         816    714  
       

1,341

  

1,134  

     

1,360

  

1,219  

Of which equity-accounted entities

     

205

  

177  

     

207

  

175  

Natural gas (mmcf/d)

                 

US

      1,703    1,679         1,625    1,649  

Europe

      217    262         251    263  

Rest of World

      4,581    3,753         4,311    3,867  
       

6,502

  

5,695  

     

6,187

  

5,779  

Of which equity-accounted entities

     

562

  

495  

     

552

  

486  

Total hydrocarbons*(g) (mboe/d)

                 

US

      702    643         705    670  

Europe

      161    157         163    164  

Rest of World(g)

      1,599    1,316         1,559    1,381  
       

2,462

  

2,116  

     

2,427

  

2,215  

Of which equity-accounted entities

     

302

  

262  

     

302

  

258  

Average realizations*(h)

                 

Total liquids(g)(i) ($/bbl)

      47.45    40.99         47.87    36.50  

Natural gas ($/mcf)

      2.89    2.77         3.18    2.76  

Total hydrocarbons(g) ($/boe)

      33.23    29.37         34.63    27.20  

 

  (a) Third quarter and nine months 2016 principally relate to impairment reversals in Angola and the North Sea.
  (b) Third quarter and nine months 2017 include the write-off of $145 million in relation to the value ascribed to certain licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. This has been classified within the ‘other’ category of non-operating items.
  (c) Nine months 2017 includes an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS.
  (d) Third quarter and nine months 2016 include $601 million of exploration write-offs relating to a licence in Brazil, of which $334 million relates to the value ascribed to the licence when acquired from Devon Energy in 2011, and has been classified within the ‘other’ category of non-operating items.
  (e) Nine months 2017 includes the write-off of exploration well and lease costs in Angola and the write-off of exploration well costs in Egypt.
  (f) Includes BP’s share of production of equity-accounted entities in the Upstream segment.
  (g) A minor adjustment has been made to comparative periods in 2016. See page 31 for more information.
  (h) Realizations are based on sales by consolidated subsidiaries only – this excludes equity-accounted entities.
  (i) Includes condensate, natural gas liquids and bitumen.

Because of rounding, some totals may not agree exactly with the sum of their component parts.

 

 

 

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Group results third quarter and nine months 2017

 

 

 

Downstream

 

   $ million           Third
    quarter
2017
   Third
    quarter
2016
          Nine
    months
2017
   Nine
    months
2016

Profit (loss) before interest and tax

      2,695    943         5,487    5,189  

Inventory holding (gains) losses*

     

(520)

   35         (39)    (926)  

RC profit before interest and tax

      2,175    978         5,448    4,263  

Net (favourable) adverse impact of non-operating items* and fair value accounting effects*

      163    453         45    494  

Underlying RC profit before interest and tax*(a)

      2,338    1,431         5,493    4,757  

 

  (a)  See page 11 for a reconciliation to segment RC profit before interest and tax by region and by business.

Financial results

The replacement cost profit before interest and tax for the third quarter and nine months was $2,175 million and $5,448 million respectively, compared with $978 million and $4,263 million for the same periods in 2016.

The third quarter and nine months include a net non-operating charge of $55 million and a net non-operating gain of $7 million respectively, compared with a net non-operating charge of $196 million and a net non-operating gain of $53 million for the same periods in 2016. Fair value accounting effects had an adverse impact of $108 million in the third quarter and $52 million for the nine months, compared with an adverse impact of $257 million and $547 million for the same periods in 2016.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the third quarter and nine months was $2,338 million and $5,493 million respectively, compared with $1,431 million and $4,757 million for the same periods in 2016.

Replacement cost profit before interest and tax for fuels, lubricants and petrochemicals is set out on page 11.

Fuels business

The fuels business reported an underlying replacement cost profit before interest and tax of $1,788 million for the third quarter and $3,896 million for the nine months, compared with $983 million and $3,310 million for the same periods in 2016 driven by higher refining and fuels marketing results. The result for the quarter also reflects an improved contribution from supply and trading. The contribution was however lower for the nine months compared to last year.

The refining result for the quarter and nine months reflects continued strong operational performance, capturing higher industry refining margins which were partially offset by narrower North American heavy crude oil differentials. The result also benefited from increased commercial optimization and higher levels of advantaged feedstock processed in the US. The nine-months result also reflects the impact of a higher level of planned turnaround activity.

The fuels marketing result for both the quarter and nine months reflects continued profit growth supported by higher premium volume and the continued rollout of our convenience partnership sites.

On 30 October, we completed the initial public offering of common units in our subsidiary, BP Midstream Partners LP. As a result of the initial public offering, we received net proceeds of around $0.7 billion.

Lubricants business

The lubricants business reported an underlying replacement cost profit before interest and tax of $356 million for the third quarter and $1,104 million for the nine months, compared with $370 million and $1,166 million for the same periods in 2016. The result for the quarter and nine months reflects continued premium brand growth, more than offset by the impact of higher base oil prices due to temporary supply constraints and increasing crude oil prices.

Petrochemicals business

The petrochemicals business reported an underlying replacement cost profit before interest and tax of $194 million for the third quarter and $493 million for the nine months, compared with $78 million and $281 million for the same periods in 2016. The result for the quarter and nine months reflects an improved margin environment, stronger margin optimization and lower costs reflecting the continued benefits from our simplification and efficiency programmes.

In April, we announced our intention to divest our 50% shareholding in our Shanghai SECCO Petrochemical Company Limited joint venture in China. The transaction is expected to complete in the fourth quarter. As a result, the asset relating to our shareholding has been classified as held for sale in the group balance sheet at 30 September 2017.

Outlook

While industry refining margins have remained robust coming into the fourth quarter, we would expect a normal seasonal decline compared with the third quarter. In the fourth quarter, we also expect a higher level of turnaround activity.

 

 

 

  The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36.

 

 

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

Downstream (continued)

 

   $ million        Third
    quarter
2017
     Third
    quarter
2016
         Nine
    months
2017
     Nine
    months
2016
 

Underlying RC profit before interest and tax - by region

               

US

       640        298          1,477        1,224  

Non-US

       1,698        1,133          4,016        3,533  
         2,338        1,431          5,493        4,757  

Non-operating items

               

US

       (39)        (56)          (23)        74  

Non-US

       (16)        (140)          30        (21)  
         (55)        (196)          7        53  

Fair value accounting effects

               

US

       20        (178)          (32)        (343)  

Non-US

       (128)        (79)          (20)        (204)  
         (108)        (257)          (52)        (547)  

RC profit before interest and tax

               

US

       621        64          1,422        955  

Non-US

       1,554        914          4,026        3,308  
         2,175        978          5,448        4,263  

Underlying RC profit before interest and tax - by business(a)(b)

               

Fuels

       1,788        983          3,896        3,310  

Lubricants

       356        370          1,104        1,166  

Petrochemicals

       194        78          493        281  
         2,338        1,431          5,493        4,757  

Non-operating items and fair value accounting effects(c)

               

Fuels

       (154)        (455)          9        (493)  

Lubricants

       (3)        1          (8)        (3)  

Petrochemicals

       (6)        1          (46)        2  
         (163)        (453)          (45)        (494)  

RC profit before interest and tax(a)(b)

               

Fuels

       1,634        528          3,905        2,817  

Lubricants

       353        371          1,096        1,163  

Petrochemicals

       188        79          447        283  
         2,175        978          5,448        4,263  

BP average refining marker margin (RMM)* ($/bbl)

       16.3        11.6          14.0        12.0  

Refinery throughputs (mb/d)

               

US

       737        613          713        660  

Europe

       768        795          784        802  

Rest of World

       240        242          207        237  
         1,745        1,650          1,704        1,699  

Refining availability* (%)

       95.3        95.4          95.0        95.4  

Marketing sales of refined products (mb/d)

               

US

       1,186        1,205          1,160        1,130  

Europe

       1,204        1,236          1,143        1,184  

Rest of World

       480        503          496        502  
       2,870        2,944          2,799        2,816  

Trading/supply sales of refined products

       3,088        2,581          3,015        2,755  

Total sales volumes of refined products

       5,958        5,525          5,814        5,571  

Petrochemicals production (kte)

               

US

       617        564          1,787        2,018  

Europe

       1,285        898          3,903        2,799  

Rest of World

       2,025        1,987          6,099        5,863  
         3,927        3,449          11,789        10,680  

 

  (a) Segment-level overhead expenses are included in the fuels business result.
  (b) BP’s share of income from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany is reported in the fuels business.
  (c) For Downstream, fair value accounting effects arise solely in the fuels business.

 

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Group results third quarter and nine months 2017

 

 

 

Rosneft

 

  $ million        Third
    quarter
2017(a)
     Third
    quarter
2016
           Nine
    months
2017(a)
     Nine
    months
2016
 

Profit before interest and tax(b)

       161        108          505        461  

Inventory holding (gains) losses*

       (24)        12          10        (29)  

RC profit before interest and tax

       137        120          515        432  

Net charge (credit) for non-operating items*

       -        -          -        -  

Underlying RC profit before interest and tax*

       137        120          515        432  

Financial results

Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the third quarter and nine months was $137 million and $515 million respectively, compared with $120 million and $432 million for the same periods in 2016. There were no non-operating items in the third quarter and nine months of either year.

Compared with the same period in 2016, the result for the third quarter was primarily affected by higher oil prices and favourable duty lag effects partially offset by adverse foreign exchange effects. For the nine months, the result was primarily affected by higher oil prices partially offset by adverse foreign exchange effects.

In June 2017 Rosneft’s annual general meeting adopted a resolution to pay dividends of 5.98 Russian roubles per ordinary share. In July BP received a dividend in relation to the 2016 annual results of $190 million, after the deduction of withholding tax.

BP’s two nominees, Bob Dudley and Guillermo Quintero, were re-elected to Rosneft’s board by the extraordinary general meeting (EGM) on 29 September. The EGM also adopted a resolution to pay interim dividends for the first half of 2017 of 3.83 Russian roubles per ordinary share. On 31 October BP received a dividend of approximately $120 million after the deduction of withholding tax.

Key events

In August, Rosneft completed the acquisition of a 49.13% stake in Essar Oil Limited (EOL), an Indian downstream business, from the Essar group.

In October Rosneft completed the deal to acquire a 30% stake in a concession agreement to develop the Zohr field in Egypt from the Italian company Eni S.p.A.

 

          Third
    quarter
2017(a)
     Third
    quarter
2016
           Nine
    months
2017(a)
     Nine
    months
2016
 

Production (net of royalties) (BP share)

               

Liquids* (mb/d)

       903        820          906        813  

Natural gas (mmcf/d)

       1,263        1,221          1,300        1,256  

Total hydrocarbons* (mboe/d)

       1,120        1,030          1,130        1,030  

 

  (a) The operational and financial information of the Rosneft segment for the third quarter and nine months of the year is based on preliminary operational and financial results of Rosneft for the nine months ended 30 September 2017. Actual results may differ from these amounts.
  (b) The Rosneft segment result includes equity-accounted earnings arising from BP’s 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BP’s purchase of its interest in Rosneft and the amortization of the deferred gain relating to the divestment of BP’s interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the third quarter and nine months 2017, as shown in the table above, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own financial statements under IFRS. BP’s share of Rosneft’s profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date. BP’s share of Rosneft’s earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation.

 

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Group results third quarter and nine months 2017

 

 

Other businesses and corporate

 

  $ million        Third
    quarter
2017
     Third
    quarter
2016
         Nine
    months
2017
     Nine
    months
2016
 

Profit (loss) before interest and tax

               

Gulf of Mexico oil spill

       (84)        (66)          (466)        (5,966)  

Other

       (376)        (375)          (1,146)        (1,074)  

Profit (loss) before interest and tax

       (460)        (441)          (1,612)        (7,040)  

Inventory holding (gains) losses*

       -        -          -        -  

RC profit (loss) before interest and tax

       (460)        (441)          (1,612)        (7,040)  

Net charge (credit) for non-operating items*

               

Gulf of Mexico oil spill

       84        66          466        5,966  

Other

       (22)        115          (58)        260  

Net charge (credit) for non-operating items

       62        181          408        6,226  

Underlying RC profit (loss) before interest and tax*

       (398)        (260)          (1,204)        (814)  

Underlying RC profit (loss) before interest and tax

               

US

       (145)        (107)          (446)        (326)  

Non-US

       (253)        (153)          (758)        (488)  
         (398)        (260)          (1,204)        (814)  

Non-operating items

               

US

       (92)        (168)          (480)        (6,152)  

Non-US

       30        (13)          72        (74)  
         (62)        (181)          (408)        (6,226)  

RC profit (loss) before interest and tax

               

US

       (237)        (275)          (926)        (6,478)  

Non-US

       (223)        (166)          (686)        (562)  
         (460)        (441)          (1,612)        (7,040)  

Other businesses and corporate comprises our alternative energy business, shipping, treasury, corporate activities including centralized functions, and the costs of the Gulf of Mexico oil spill.

Financial results

The replacement cost loss before interest and tax for the third quarter and nine months was $460 million and $1,612 million respectively, compared with $441 million and $7,040 million for the same periods in 2016.

The results included a net non-operating charge of $62 million for the third quarter and $408 million for the nine months, compared with a net non-operating charge of $181 million and $6,226 million for the same periods in 2016.

After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the third quarter and nine months was $398 million and $1,204 million respectively, compared with $260 million and $814 million for the same periods in 2016. The underlying charge for the nine months was impacted by weaker business results, and adverse foreign exchange effects which had a favourable effect in the same period in 2016.

Alternative energy - biofuels, wind

The net ethanol-equivalent production (which includes ethanol and sugar) for the third quarter and nine months was 362 million litres and 588 million litres respectively, compared with 352 million litres and 635 million litres for the same periods in 2016.

Net wind generation capacity*(a) was 1,432MW at 30 September 2017 compared with 1,474MW at 30 September 2016. BP’s net share of wind generation for the third quarter and nine months was 644GWh and 2,856GWh respectively, compared with 828GWh and 3,235GWh for the same periods in 2016.

 

  (a)  Capacity figures for 2016 include 23MW in the Netherlands managed by our Downstream segment.

 

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Group results third quarter and nine months 2017

 

 

 

Financial statements

Group income statement

 

         Third      Third          Nine      Nine  
             quarter          quarter              months          months  
   $ million        2017      2016          2017      2016  

Sales and other operating revenues (Note 5)

       60,018        47,047          172,392        132,001  

Earnings from joint ventures - after interest and tax

       231        174          596        477  

Earnings from associates - after interest and tax

       282        209          804        731  

Interest and other income

       185        146          434        392  

Gains on sale of businesses and fixed assets

       92        467          334        884  

Total revenues and other income

       60,808        48,043          174,560        134,485  

Purchases

       44,612        34,981          128,462        94,336  

Production and manufacturing expenses(a)

       5,454        5,517          16,470        22,482  

Production and similar taxes (Note 6)

       278        212          773        484  

Depreciation, depletion and amortization (Note 5)

       3,904        3,496          11,539        10,863  

Impairment and losses on sale of businesses and fixed assets

       108        (1,424)          612        (1,359)  

Exploration expense

       297        803          1,559        1,407  

Distribution and administration expenses

       2,634        2,648          7,527        7,803  

Profit (loss) before interest and taxation

       3,521        1,810          7,618        (1,531)  

Finance costs(a)

       511        433          1,458        1,241  

Net finance expense relating to pensions and other post-retirement benefits

       55        48          162        140  

Profit (loss) before taxation

       2,955        1,329          5,998        (2,912)  

Taxation(a)

       1,198        (248)          2,593        (2,541)  

Profit (loss) for the period

       1,757        1,577          3,405        (371)  

Attributable to
BP shareholders

       1,769        1,620          3,362        (382)  

Non-controlling interests

       (12)        (43)          43        11  
         1,757        1,577          3,405        (371)  

Earnings per share (Note 7)

               

Profit (loss) for the period attributable to
BP shareholders

               

Per ordinary share (cents)

               

Basic

       8.95        8.61          17.10        (2.05)  

Diluted

       8.90        8.56          17.00        (2.05)  

Per ADS (dollars)

               

Basic

       0.54        0.52          1.03        (0.12)  

Diluted

       0.53        0.51          1.02        (0.12)  

 

  (a)  See Note 2 for information on the impact of the Gulf of Mexico oil spill on these income statement line items.

 

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Group results third quarter and nine months 2017

 

 

 

Group statement of comprehensive income

  $ million        Third
        quarter
2017
     Third  
        quarter  
2016  
         Nine
        months
2017
     Nine  
        months  
2016  
 

Profit (loss) for the period

            1,757        1,577                 3,405        (371)    

Other comprehensive income

               

Items that may be reclassified subsequently to profit or loss

               

Currency translation differences

       611        192            1,722        1,031    

Exchange gains (losses) on translation of foreign operations reclassified to gain or loss on sale of businesses and fixed assets

       13        -            18        6    

Available-for-sale investments

       -        1            3        1    

Cash flow hedges marked to market

       49        (84)            178        (435)    

Cash flow hedges reclassified to the income statement

       20        71            93        110    

Cash flow hedges reclassified to the balance sheet

       29        30            104        49    

Share of items relating to equity-accounted entities, net of tax

       128        174            431        661    

Income tax relating to items that may be reclassified

       (59)        (78)            (180)        (84)    
         791        306            2,369        1,339    

Items that will not be reclassified to profit or loss

               

Remeasurements of the net pension and other post-retirement benefit liability or asset

       1,002        (2,995)            2,047        (5,980)    

Income tax relating to items that will not be reclassified

       (351)        510            (699)        1,504    
         651        (2,485)            1,348        (4,476)    

Other comprehensive income

       1,442        (2,179)            3,717        (3,137)    

Total comprehensive income

       3,199        (602)            7,122        (3,508)    

Attributable to

               

BP shareholders

       3,206        (558)            7,041        (3,513)    

Non-controlling interests

       (7)        (44)            81        5    
         3,199        (602)            7,122        (3,508)    

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

 

Group statement of changes in equity

  $ million           BP shareholders’
equity
           Non-controlling
interests
     Total  
            equity  
 

At 1 January 2017

      95,286        1,557        96,843    

Total comprehensive income

      7,041        81        7,122    

Dividends

      (4,526)        (109)        (4,635)    

Share-based payments, net of tax

      514        -        514    

Share of equity-accounted entities’ change in equity, net of tax

      206        -        206    

Transactions involving non-controlling interests

      -        88        88    

At 30 September 2017

      98,521        1,617        100,138    
         
  $ million       BP shareholders’
equity
           Non-controlling
interests
    

Total  

equity  

 

At 1 January 2016

      97,216        1,171        98,387    

Total comprehensive income

      (3,513)        5        (3,508)    

Dividends

      (3,429)        (83)        (3,512)    

Share-based payments, net of tax

      622        -        622    

Share of equity-accounted entities’ change in equity, net of tax

      49        -        49    

Transactions involving non-controlling interests

      431        328        759    

At 30 September 2016

      91,376        1,421        92,797    

 

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Group results third quarter and nine months 2017

 

 

 

Group balance sheet

  $ million        30 September
2017
     31 December
2016
 

Non-current assets

       

Property, plant and equipment

       130,651        129,757  

Goodwill

       11,514        11,194  

Intangible assets

       18,586        18,183  

Investments in joint ventures

       6,703        8,609  

Investments in associates

       15,921        14,092  

Other investments

       1,051        1,033  

Fixed assets

       184,426        182,868  

Loans

       553        532  

Trade and other receivables

       1,461        1,474  

Derivative financial instruments

       4,470        4,359  

Prepayments

       1,094        945  

Deferred tax assets

       4,819        4,741  

Defined benefit pension plan surpluses

       2,297        584  
         199,120        195,503  

Current assets

       

Loans

       267        259  

Inventories

       18,078        17,655  

Trade and other receivables

       21,833        20,675  

Derivative financial instruments

       2,248        3,016  

Prepayments

       1,441        1,486  

Current tax receivable

       746        1,194  

Other investments

       84        44  

Cash and cash equivalents

       25,780        23,484  
       70,477        67,813  

Assets classified as held for sale (Note 3)

       1,892        -  
         72,369        67,813  

Total assets

       271,489        263,316  

Current liabilities

       

Trade and other payables

       39,965        37,915  

Derivative financial instruments

       2,154        2,991  

Accruals

       4,797        5,136  

Finance debt

       8,891        6,634  

Current tax payable

       1,455        1,666  

Provisions

       2,304        4,012  
         59,566        58,354  

Non-current liabilities

       

Other payables

       13,805        13,946  

Derivative financial instruments

       3,881        5,513  

Accruals

       501        469  

Finance debt

       56,893        51,666  

Deferred tax liabilities

       7,619        7,238  

Provisions

       20,078        20,412  

Defined benefit pension plan and other post-retirement benefit plan deficits

       9,008        8,875  
         111,785        108,119  

Total liabilities

       171,351        166,473  

Net assets

       100,138        96,843  

Equity

       

BP shareholders’ equity

       98,521        95,286  

Non-controlling interests

       1,617        1,557  

Total equity

       100,138        96,843  

 

17


Table of Contents

Group results third quarter and nine months 2017

 

 

Condensed group cash flow statement

 

   $ million         Third
        quarter
2017
    Third  
        quarter  
2016  
          Nine
        months
2017
    Nine  
        months  
2016  
 

Operating activities

           

Profit (loss) before taxation

      2,955       1,329           5,998       (2,912)    

Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities

           

Depreciation, depletion and amortization and exploration expenditure written off

      4,121       4,183           12,770       11,971    

Impairment and (gain) loss on sale of businesses and fixed assets

      16       (1,891)           278       (2,243)    

Earnings from equity-accounted entities, less dividends received

      (111)       259           (434)       (250)    

Net charge for interest and other finance expense, less net interest paid

      163       204           499       485    

Share-based payments

      177       166           495       629    

Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans

      (160)       (96)           (179)       (120)    

Net charge for provisions, less payments

      (144)       (184)           (138)       5,116    

Movements in inventories and other current and non-current assets and liabilities

      305       (1,001)           (3,292)       (3,591)    

Income taxes paid

      (1,298)       (461)           (2,969)       (822)    

Net cash provided by operating activities

      6,024       2,508           13,028       8,263    

Investing activities

           

Expenditure on property, plant and equipment, intangible and other assets

      (4,136)       (3,379)           (12,140)       (12,043)    

Acquisitions, net of cash acquired

      (146)       -           (311)       -    

Investment in joint ventures

      (5)       (1)           (35)       (13)    

Investment in associates

      (176)       (185)           (533)       (474)    

Total cash capital expenditure

      (4,463)       (3,565)           (13,019)       (12,530)    

Proceeds from disposal of fixed assets

      149       590           649       981    

Proceeds from disposal of businesses, net of cash disposed

      92       (21)           305       1,181    

Proceeds from loan repayments

      308       9           341       61    

Net cash used in investing activities

      (3,914)       (2,987)           (11,724)       (10,307)    

Financing activities

           

Proceeds from long-term financing

      3,078       3,925           8,511       9,373    

Repayments of long-term financing

      (1,239)       (75)           (3,619)       (4,952)    

Net increase (decrease) in short-term debt

      123       (512)           139       (324)    

Net increase (decrease) in non-controlling interests

            323           81       761    

Dividends paid

  - BP shareholders       (1,676)       (1,161)           (4,526)       (3,429)    
  - non-controlling interests       (32)       (31)           (109)       (83)    

Net cash provided by (used in) financing activities

      254       2,469           477       1,346    

Currency translation differences relating to cash and cash equivalents

      146       13           515       (171)    

Increase (decrease) in cash and cash equivalents

      2,510       2,003           2,296       (869)    

Cash and cash equivalents at beginning of period

      23,270       23,517           23,484       26,389    

Cash and cash equivalents at end of period

      25,780       25,520           25,780       25,520    

 

18


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Group results third quarter and nine months 2017

 

 

Notes

Note 1. Basis of preparation

 

The interim financial information included in this report has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’.

The results for the interim periods are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2016 included in BP Annual Report and Form 20-F 2016.

BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the group’s consolidated financial statements for the periods presented.

The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing BP Annual Report and Form 20-F 2017, which do not differ significantly from those used in BP Annual Report and Form 20-F 2016.

Note 2. Gulf of Mexico oil spill

(a) Overview

The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2016 - Financial statements - Note 2 and Legal proceedings on page 261.

The group income statement includes a pre-tax charge for the third quarter of $84 million to reflect the latest estimate for claims and associated administration costs, and $122 million for finance costs relating to the unwinding of discounting effects. The equivalent amounts for the nine months were $466 million and $369 million respectively. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $63,420 million.

The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.

 

   $ million         Third
        quarter
2017
    Third  
        quarter  
2016  
          Nine
        months
2017
    Nine  
        months  
2016  
 

Income statement

           

Production and manufacturing expenses

      84       66           466       5,966    

Profit (loss) before interest and taxation

      (84)       (66)           (466)       (5,966)    

Finance costs

      122       123           369       369    

Profit (loss) before taxation

      (206)       (189)           (835)       (6,335)    

Taxation

      71       53           273       2,837    

Profit (loss) for the period

      (135)       (136)           (562)       (3,498)    

 

19


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Group results third quarter and nine months 2017

 

 

Note 2. Gulf of Mexico oil spill (continued)

 

  $ million         30 September
2017
    31 December
2016
 

Balance sheet

     

Current assets

     

Trade and other receivables

      214       194  

Current liabilities

     

Trade and other payables

      (2,069)       (3,056)  

Provisions

      (726)       (2,330)  

Net current assets (liabilities)

      (2,581)       (5,192)  

Non-current assets

     

Deferred tax assets

      2,821       2,973  

Non-current liabilities

     

Other payables

      (12,197)       (13,522)  

Provisions

            (112)  

Deferred tax liabilities

      5,544       5,119  

Net non-current assets (liabilities)

      (3,832)       (5,542)  

Net assets (liabilities)

      (6,413)       (10,734)  

 

  $ million        Third
        quarter
2017
     Third
        quarter
2016
         Nine
        months
2017
     Nine
        months
2016
 

Cash flow statement - Operating activities

               

Profit (loss) before taxation

       (206)        (189)          (835)        (6,335)  

Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities

               

Net charge for interest and other finance expense, less net interest paid

       122        123          369        369  

Net charge for provisions, less payments

       68        (494)          361        4,729  

Movements in inventories and other current and non-current assets and liabilities

       (548)        (1,766)          (4,778)        (3,825)  

Pre-tax cash flows

       (564)        (2,326)          (4,883)        (5,062)  

Cash outflows in 2016 and 2017 include payments made under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident and the 2016 consent decree and settlement agreement with the United States and the five Gulf coast states. Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $564 million and $4,883 million in the third quarter and nine months of 2017 respectively. For the same periods in 2016, the amount was an outflow of $2,326 million and $4,849 million respectively.

 

20


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Group results third quarter and nine months 2017

 

 

Note 2. Gulf of Mexico oil spill (continued)

 

(b) Provisions and other payables

Provisions

Movements in the remaining provision, which relates to litigation and claims, are shown in the table below.

 

  $ million            

At 1 July 2017

            955    

Net increase in provision

       75    

Reclassified to other payables

       (19)    

Utilization

          (285)    

At 30 September 2017

       726    

Movements in the remaining provision during the nine months are shown in the table below.

 

  $ million            

At 1 January 2017

            2,442    

Net increase in provision

       437    

Reclassified to other payables

       (709)    

Utilization

       (1,444)    

At 30 September 2017

       726    

The provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources.

PSC settlement

The provision for the cost associated with the 2012 Plaintiffs’ Steering Committee (PSC) settlement reflects the latest estimate for claims, including business economic loss claims and associated administration costs. However, the amounts ultimately payable may differ from the amount provided and the timing of payments is uncertain.

The settlement programme’s determination of business economic loss claims is now expected to be substantially complete by the end of 2017. Nevertheless a significant number of claims determined by the settlement programme have been and continue to be appealed by BP and/or the claimants. Depending upon the resolution of these claims under appeal, the amounts payable may differ from those currently provided.

There is additional uncertainty in relation to the impact of the May 2017 Fifth Circuit opinion (on the policy addressing the matching of revenue with expenses in relation to business economic loss claims) including on those business economic loss claims that have not yet been determined and those that are under appeal within the settlement programme. This includes uncertainty in relation to the impact of recently filed appeals of the district court’s orders instructing the settlement programme on how to implement the Fifth Circuit’s opinion. See Legal proceedings on page 36 for further details on the Fifth Circuit opinion and appeal of the district court’s orders.

Amounts to resolve remaining claims under the PSC settlement are expected to be substantially paid by the end of 2018. The timing of payments is uncertain, and in particular, will be impacted by how long it takes to resolve claims that have been appealed and may be appealed in the future.

Other payables

Other payables include amounts payable under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident, amounts payable under the consent decree and settlement agreement with the United States and the five Gulf coast states for natural resource damages, state claims and Clean Water Act penalties, BP’s remaining commitment to fund the Gulf of Mexico Research Initiative, and amounts payable for certain economic loss and property damage claims.

Further information on provisions, other payables, and contingent liabilities is provided in BP Annual Report and Form 20-F 2016 - Financial statements - Note 2.

 

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Group results third quarter and nine months 2017

 

 

 

Note 3. Non-current assets held for sale and events after the reporting period

In September, BP announced that it had agreed with Bridas Corporation (Bridas) to form a new integrated energy company by combining their interests in the oil and gas producer Pan American Energy (PAE) and the refiner and marketer Axion Energy (Axion) in a cash-free transaction. PAE is currently owned 60% by BP and 40% by Bridas. The new company, Pan American Energy Group, will be owned equally by BP and Bridas. The transaction, which is subject to certain pre-closing conditions being fulfilled, is expected to complete in the first quarter 2018. As a result, one sixth of BP’s investment in PAE has been classified as held for sale in the group balance sheet at 30 September 2017.

In April, BP announced its intention to divest its 50% shareholding in the Shanghai SECCO Petrochemical Company Limited joint venture in China. During the quarter a number of steps in the regulatory process, and certain conditions precedent, were completed and the investment has been classified as held for sale in the group balance sheet at 30 September 2017. We expect to complete the transaction and receive estimated proceeds of $1.4 billion in the fourth quarter.

On 30 October, we completed the initial public offering of common units in our subsidiary, BP Midstream Partners LP. As a result of the initial public offering, we received net proceeds of around $0.7 billion.

Note 4. Analysis of replacement cost profit (loss) before interest and tax and reconciliation to profit (loss) before taxation

         Third      Third          Nine      Nine  
         quarter      quarter          months      months  
  $ million        2017      2016          2017      2016  

Upstream

       1,242        1,196          3,293        (118)  

Downstream

       2,175        978          5,448        4,263  

Rosneft

       137        120          515        432  

Other businesses and corporate(a)

       (460)        (441)          (1,612)        (7,040)  
         3,094        1,853          7,644        (2,463)  

Consolidation adjustment - UPII*

       (130)        17          (63)        (64)  

RC profit (loss) before interest and tax*

       2,964        1,870          7,581        (2,527)  

Inventory holding gains (losses)*

               

Upstream

       13        (13)          8        41  

Downstream

       520        (35)          39        926  

Rosneft (net of tax)

       24        (12)          (10)        29  

Profit (loss) before interest and tax

       3,521        1,810          7,618        (1,531)  

Finance costs

       511        433          1,458        1,241  

Net finance expense relating to pensions and other post-retirement benefits

       55        48          162        140  

Profit (loss) before taxation

       2,955        1,329          5,998        (2,912)  

RC profit (loss) before interest and tax*

               

US

       428        (15)          1,243        (6,665)  

Non-US

       2,536        1,885          6,338        4,138  
         2,964        1,870          7,581        (2,527)  

 

  (a)  Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.

 

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Group results third quarter and nine months 2017

 

 

 

Note 5. Segmental analysis

 

  Sales and other operating revenues          Third     Third            Nine      Nine  
           quarter     quarter            months      months  
  $ million          2017     2016            2017      2016  

By segment

              

Upstream

       10,969       8,452          32,789        24,059  

Downstream

       54,881       43,488          157,156        120,849  

Other businesses and corporate

       378       425          989        1,243  
         66,228       52,365          190,934        146,151  

Less: sales and other operating revenues between segments

              

Upstream

       5,312       4,952          17,250        12,886  

Downstream

       765       175          887        768  

Other businesses and corporate

       133       191          405        496  
         6,210       5,318          18,542        14,150  

Third party sales and other operating revenues

              

Upstream

       5,657       3,500          15,539        11,173  

Downstream

       54,116       43,313          156,269        120,081  

Other businesses and corporate

       245       234          584        747  

Total sales and other operating revenues

       60,018       47,047          172,392        132,001  

By geographical area

              

US

       21,853       18,853          64,582        50,130  

Non-US

       44,212       31,762          125,335        91,390  
       66,065       50,615          189,917        141,520  

Less: sales and other operating revenues between areas

       6,047       3,568          17,525        9,519  
         60,018       47,047          172,392        132,001  
              
  Depreciation, depletion and amortization          Third     Third            Nine      Nine  
           quarter     quarter            months      months  
  $ million          2017     2016            2017      2016  

Upstream

              

US

       1,154       1,027          3,524        3,180  

Non-US

       2,154       1,879          6,298        5,976  
         3,308       2,906          9,822        9,156  

Downstream

              

US

       222       217          657        637  

Non-US

       287       275          840        821  
         509       492          1,497        1,458  

Other businesses and corporate

              

US

       17       16          49        51  

Non-US

       70       82          171        198  
       87       98          220        249  

Total group

       3,904       3,496          11,539        10,863  

 

Note 6. Production and similar taxes

 

              
           Third     Third            Nine      Nine  
           quarter     quarter            months      months  
  $ million          2017     2016            2017      2016  

US

       (69     32          8        117  

Non-US

       347       180          765        367  
         278       212          773        484  

 

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Group results third quarter and nine months 2017

 

 

 

Note 7. Earnings per share and shares in issue

Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.

For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method.

 

         Third      Third          Nine      Nine  
         quarter      quarter          months      months  
  $ million        2017      2016          2017      2016  

Results for the period

               

Profit (loss) for the period attributable to BP shareholders

       1,769        1,620          3,362        (382)  

Less: preference dividend

       -        -          1        1  

Profit (loss) attributable to BP ordinary shareholders

       1,769        1,620          3,361        (383)  

Number of shares (thousand)(a)(b)

               

Basic weighted average number of shares outstanding

       19,756,117        18,824,739          19,654,608        18,660,397  

ADS equivalent

       3,292,686        3,137,456          3,275,768        3,110,066  

Weighted average number of shares outstanding used to calculate diluted earnings per share

       19,866,745        18,920,920          19,771,579        18,660,397  

ADS equivalent

       3,311,124        3,153,486          3,295,263        3,110,066  

Shares in issue at period-end

       19,797,657        18,912,989          19,797,657        18,912,989  

ADS equivalent

       3,299,609        3,152,164          3,299,609        3,152,164  

 

  (a)  Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans.
  (b)  If the inclusion of potentially issuable shares would decrease loss per share, the potentially issuable shares are excluded from the weighted average number of shares outstanding used to calculate diluted earnings per share.

Note 8. Dividends

Dividends payable

BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 21 December 2017 to shareholders and American Depositary Share (ADS) holders on the register on 10 November 2017. The corresponding amount in sterling is due to be announced on 11 December 2017, calculated based on the average of the market exchange rates for the four dealing days commencing on 5 December 2017. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the third quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.

 

         Third      Third          Nine      Nine  
         quarter      quarter          months      months  
         2017      2016          2017      2016  

Dividends paid per ordinary share

               

cents

       10.000        10.000          30.000        30.000  

pence

       7.621        7.558          23.536        21.487  

Dividends paid per ADS (cents)

       60.00        60.00          180.00        180.00  

Scrip dividends

               

Number of shares issued (millions)

       51.3        130.0          236.5        418.8  

Value of shares issued ($ million)

       298        714          1,360        2,148  

 

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Group results third quarter and nine months 2017

 

 

Note 9. Net Debt*

 

  Net debt ratio*        Third      Third          Nine      Nine  
  $ million           quarter
2017
     quarter
2016
            months
2017
     months
2016
 

Gross debt

       65,784        58,997          65,784        58,997  

Fair value (asset) liability of hedges related to finance debt(a)

       (227)        (1,113)          (227)        (1,113)  
       65,557        57,884          65,557        57,884  

Less: cash and cash equivalents

       25,780        25,520          25,780        25,520  

Net debt

       39,777        32,364          39,777        32,364  

Equity

       100,138        92,797          100,138        92,797  

Net debt ratio

       28.4%        25.9%          28.4%        25.9%  
               
Analysis of changes in net debt        Third      Third          Nine      Nine  
         quarter      quarter          months      months  
  $ million        2017      2016          2017      2016  

Opening balance

               

Finance debt

       63,004        55,727          58,300        53,168  

Fair value (asset) liability of hedges related to finance debt(a)

       60        (1,279)          697        379  

Less: cash and cash equivalents

       23,270        23,517          23,484        26,389  

Opening net debt

       39,794        30,931          35,513        27,158  

Closing balance

               

Finance debt

       65,784        58,997          65,784        58,997  

Fair value (asset) liability of hedges related to finance debt(a)

       (227)        (1,113)          (227)        (1,113)  

Less: cash and cash equivalents

       25,780        25,520          25,780        25,520  

Closing net debt

       39,777        32,364          39,777        32,364  

Decrease (increase) in net debt

       17        (1,433)          (4,264)        (5,206)  

Movement in cash and cash equivalents
(excluding exchange adjustments)

       2,364        1,990          1,781        (698)  

Net cash outflow (inflow) from financing
(excluding share capital and dividends)

       (1,962)        (3,338)          (5,031)        (4,097)  

Other movements

       (186)        29          (265)        424  

Movement in net debt before exchange effects

       216        (1,319)          (3,515)        (4,371)  

Exchange adjustments

       (199)        (114)          (749)        (835)  

Decrease (increase) in net debt

       17        (1,433)          (4,264)        (5,206)  

 

  (a)  Derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $883 million (third quarter 2016 liability of $1,323 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.

Note 10. Inventory valuation

A provision of $501 million was held at 30 September 2017 ($509 million at 30 September 2016) to write inventories down to their net realizable value. The net movement credited to the income statement during the third quarter 2017 was $131 million (third quarter 2016 was a credit of $178 million).

Note 11. Statutory accounts

The financial information shown in this publication, which was approved by the Board of Directors on 30 October 2017, is unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP Annual Report and Form 20-F 2017.

 

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Group results third quarter and nine months 2017

 

 

 

Additional information

Capital expenditure*

 

   $ million        Third
quarter
2017
     Third
quarter
2016
            Nine
months
2017
     Nine
months
2016
 

Capital expenditure on a cash basis

                

Organic capital expenditure*

       3,993        3,519           11,879        12,202  

Inorganic capital expenditure*(a)

       470        46           1,140        328  
         4,463        3,565           13,019        12,530  

 

   $ million        Third
quarter
2017
     Third
quarter
2016
            Nine
months
2017
     Nine
months
2016
 

Organic capital expenditure by segment

                

Upstream

                

US

       827        618           2,273        2,813  

Non-US

       2,601        2,433           7,945        8,011  
         3,428        3,051           10,218        10,824  

Downstream

                

US

       159        159           460        471  

Non-US

       356        272           992        798  
         515        431           1,452        1,269  

Other businesses and corporate

                

US

       10        3           34        7  

Non-US

       40        34           175        102  
         50        37           209        109  
         3,993        3,519           11,879        12,202  

Organic capital expenditure by geographical area

                

US

       996        780           2,767        3,291  

Non-US

       2,997        2,739           9,112        8,911  
         3,993        3,519           11,879        12,202  

 

  (a)  Third quarter and nine months 2017 include amounts paid to acquire interests in Mauritania and Senegal and other items. Nine months 2017 also includes amounts paid to purchase an interest in the Zohr gas field in Egypt and in exploration blocks in Senegal.

 

26


Table of Contents

Group results third quarter and nine months 2017

 

 

 

Non-operating items*

   $ million          Third
      quarter
2017
     Third 
      quarter 
2016 
           Nine
      months
2017
     Nine 
      months 
2016 
 

Upstream

               

Impairment and gain (loss) on sale of businesses and fixed assets(a)

       18        1,908           (382)        1,912   

Environmental and other provisions

       -        (8)           -        (8)   

Restructuring, integration and rationalization costs

       (3)        (36)           (20)        (302)   

Fair value gain (loss) on embedded derivatives

       1                 31        49   

Other(b)

       (162)        (407)           (156)        (534)   
         (146)        1,465           (527)        1,117   

Downstream

               

Impairment and gain (loss) on sale of businesses and fixed assets

       (35)        (11)           110        333   

Environmental and other provisions

       -        (72)           -        (75)   

Restructuring, integration and rationalization costs

       (19)        (108)           (102)        (197)   

Fair value gain (loss) on embedded derivatives

       -                 -         

Other

       (1)        (5)           (1)        (8)   
         (55)        (196)           7        53   

Rosneft

               

Impairment and gain (loss) on sale of businesses and fixed assets

       -                 -         

Environmental and other provisions

       -                 -         

Restructuring, integration and rationalization costs

       -                 -         

Fair value gain (loss) on embedded derivatives

       -                 -         

Other

       -                 -         
         -                 -         

Other businesses and corporate

               

Impairment and gain (loss) on sale of businesses and fixed assets

       1        (6)           (6)        (2)   

Environmental and other provisions

       -        (99)           (3)        (134)   

Restructuring, integration and rationalization costs

       (6)        (10)           (37)        (69)   

Fair value gain (loss) on embedded derivatives

       -                 -         

Gulf of Mexico oil spill(c)

       (84)        (66)           (466)        (5,966)   

Other

       27                 104        (55)   
         (62)        (181)           (408)        (6,226)   

Total before interest and taxation

       (263)        1,088           (928)        (5,056)   

Finance costs(c)

       (122)        (123)           (369)        (369)   

Total before taxation

       (385)        965           (1,297)        (5,425)   

Taxation credit (charge)

       111        (16)           503        2,777   

Total after taxation for period

       (274)        949           (794)        (2,648)   

 

  (a)  Nine months 2017 relates primarily to an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS.
  (b)  Third quarter and nine months 2017 include the write-off of $145 million in relation to the value ascribed to certain licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011.
  (c)  See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

 

Non-GAAP information on fair value accounting effects

         Third      Third          Nine      Nine  
         quarter      quarter          months      months  
  $ million        2017      2016          2017      2016  

Favourable (adverse) impact relative to management’s measure of performance

               

Upstream

       (174)        (45)          178        (293)  

Downstream

       (108)        (257)          (52)        (547)  
       (282)        (302)          126        (840)  

Taxation credit (charge)

       70        81          (47)        232  
         (212)        (221)          79        (608)  

BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in the income statement. This is because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness-testing requirements. Therefore, measurement differences in relation to recognition of gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices consistent with the contract maturity.

BP enters into physical commodity contracts to meet certain business requirements, such as the purchase of crude for a refinery or the sale of BP’s gas production. Under IFRS these physical contracts are treated as derivatives and are required to be fair valued when they are managed as part of a larger portfolio of similar transactions. In addition, derivative instruments are used to manage the price risk associated with certain future natural gas sales. Gains and losses arising are recognized in the income statement from the time the derivative commodity contract is entered into.

IFRS require that inventory held for trading is recorded at its fair value using period-end spot prices, whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices, resulting in measurement differences.

BP enters into contracts for pipelines and storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments that are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.

The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management’s internal measure of performance. Under management’s internal measure of performance the inventory and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period. The fair values of certain derivative instruments used to risk manage certain LNG and oil and gas contracts and gas sales contracts, are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management’s estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to management’s internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.

 

         Third      Third          Nine      Nine  
         quarter      quarter          months      months  
  $ million        2017      2016          2017      2016  

Upstream

               

Replacement cost profit before interest and tax adjusted for fair value accounting effects

       1,416        1,241          3,115        175  

Impact of fair value accounting effects

       (174)        (45)          178        (293)  

Replacement cost profit (loss) before interest and tax

       1,242        1,196          3,293        (118)  

Downstream

               

Replacement cost profit before interest and tax adjusted for fair value accounting effects

       2,283        1,235          5,500        4,810  

Impact of fair value accounting effects

       (108)        (257)          (52)        (547)  

Replacement cost profit before interest and tax

       2,175        978          5,448        4,263  

Total group

               

Profit (loss) before interest and tax adjusted for fair value accounting effects

       3,803        2,112          7,492        (691)  

Impact of fair value accounting effects

       (282)        (302)          126        (840)  

Profit (loss) before interest and tax

       3,521        1,810          7,618        (1,531)  

 

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Group results third quarter and nine months 2017

 

 

Readily marketable inventory* (RMI)

 

   $ million                          30  September
2017
               31 December 
2016 
 

RMI at fair value

       5,714        5,952   

Paid-up RMI*

       2,516        2,705   

Readily marketable inventory (RMI) is oil and oil products inventory held and price risk-managed by BP’s integrated supply and trading function (IST) which could be sold to generate funds if required. Paid-up RMI is RMI that BP has paid for.

We believe that disclosing the amounts of RMI and paid-up RMI is useful to investors as it enables them to better understand and evaluate the group’s inventories and liquidity position by enabling them to see the level of discretionary inventory held by IST and to see builds or releases of liquid trading inventory.

See the Glossary on page 32 for a more detailed definition of RMI. RMI, RMI at fair value and paid-up RMI are non-GAAP measures. A reconciliation of total inventory as reported on the group balance sheet to paid-up RMI is provided below.

 

   $ million                      30 September
2017
               31 December 
2016 
 

Reconciliation of total inventory to paid-up RMI

       

Inventories as reported on the group balance sheet

       18,078        17,655   

Less:  (a) inventories which are not oil and oil products and (b) oil and oil product inventories which are not risk-managed by IST

       (12,787)        (12,131)   

RMI on an IFRS basis

       5,291        5,524   

Plus:  difference between RMI at fair value and RMI on an IFRS basis

       423        428   

RMI at fair value

       5,714        5,952   

Less:  unpaid RMI* at fair value

       (3,198)        (3,247)   

Paid-up RMI

       2,516        2,705   

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

Reconciliation of basic earnings per ordinary share to replacement cost (RC) profit (loss) per share and to underlying RC profit (loss) per share

Per ordinary share (cents)         Third
      quarter
2017
     Third
      quarter
2016
          Nine
      months
2017
     Nine 
      months 
2016 
 

Profit (loss) for the period

        8.95        8.61           17.10        (2.05)   

Inventory holding (gains) losses*, before tax

        (2.82)        0.31           (0.19)        (5.34)   

Taxation charge (credit) on inventory holding gains and losses

        0.85        (0.10)           0.10        1.65   

RC profit (loss)*

        6.98        8.82           17.01        (5.74)   

Net (favourable) unfavourable impact of non-operating items*and fair value accounting effects*, before tax

        3.38        (3.51)           5.96        33.57   

Taxation charge (credit) on non-operating items and fair value accounting effects

        (0.92)        (0.35)           (2.32)        (16.13)   

Underlying RC profit*

        9.44        4.96           20.65        11.70   
Reconciliation of effective tax rate (ETR) to ETR on RC profit or loss and adjusted ETR  
Taxation (charge) credit  
   $ million         Third
      quarter
2017
     Third
      quarter
2016
          Nine
      months
2017
     Nine 
      months 
2016 
 

Taxation on profit or loss

        (1,198)        248           (2,593)        2,541   

Taxation on inventory holding gains and losses

        (167)        19           (19)        (307)   

Taxation on a RC profit or loss basis

        (1,031)        229           (2,574)        2,848   

Taxation on non-operating items and fair value accounting effects

        181        65           456        3,009   

Adjusted for the impact of the reduction in the rate of the UK North Sea supplementary charge

        -        434           -        434   

Adjusted taxation

        (1,212)        (270)           (3,030)        (595)   
Effective tax rate  
   %         Third
      quarter
2017
     Third
      quarter
2016
          Nine
      months
2017
     Nine 
months 
2016 
 

ETR on profit or loss

        41        (19)           43        87  

Adjusted for inventory holding gains or losses

        2        3           -        (14)  

ETR on RC profit or loss*

        43        (16)           43        73  

Adjusted for non-operating items and fair value accounting effects

        (3)        (7)           (1)        (66)  

Adjusted for the impact of the reduction in the rate of the UK North Sea supplementary charge

        -        60           -        18  

Adjusted ETR*

        40        37           42        25  

 

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Table of Contents

Group results third quarter and nine months 2017

 

 

Realizations* and marker prices

           Third
      quarter
2017
     Third
      quarter
2016
          Nine
      months
2017
     Nine 
      months 
2016 
 

Average realizations(a)

                 

Liquids* ($/bbl)

                 

US

        43.58        39.16           44.87        34.20   

Europe

        50.02        42.87           50.32        39.18   

Rest of World(b)

        49.54        41.92           49.49        37.54   

BP Average(b)

        47.45        40.99           47.87        36.50   

Natural gas ($/mcf)

                 

US

        2.34        2.19           2.39        1.77   

Europe

        5.10        3.94           4.98        4.28   

Rest of World

        3.03        2.98           3.42        3.14   

BP Average

        2.89        2.77           3.18        2.76   

Total hydrocarbons* ($/boe)

                 

US

        31.30        27.71           32.68        24.15   

Europe

        45.26        37.10           44.33        35.19   

Rest of World(b)

        33.13        29.24           34.76        27.85   

BP Average(b)

        33.23        29.37           34.63        27.20   

Average oil marker prices ($/bbl)

                 

Brent

        52.08        45.86           51.84        41.88   

West Texas Intermediate

        48.18        44.88           49.32        41.41   

Western Canadian Select

        38.16        31.60           38.49        29.26   

Alaska North Slope

        52.04        44.65           52.15        41.58   

Mars

        48.46        41.83           48.31        38.14   

Urals (NWE - cif)

        50.73        43.73           50.39        39.67   

Average natural gas marker prices

                 

Henry Hub gas price(c) ($/mmBtu)

        2.99        2.81           3.17        2.28   

UK Gas - National Balancing Point (p/therm)

        41.59        31.00           42.61        30.93   

 

  (a)  Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
  (b)  Production volume recognition methodology for our Technical Service Contract arrangement in Iraq has been simplified to exclude the impact of oil price movements on lifting imbalances. A minor adjustment has been made to third quarter and nine months 2016. There is no impact on the financial results.
  (c)  Henry Hub First of Month Index.

Exchange rates

           Third
      quarter
2017
     Third
      quarter
2016
          Nine
      months
2017
     Nine 
      months 
2016 
 

$/£ average rate for the period

        1.31        1.31           1.28        1.39   

$/£ period-end rate

        1.34        1.30           1.34        1.30   

$/ average rate for the period

        1.17        1.12           1.11        1.12   

$/ period-end rate

        1.18        1.12           1.18        1.12   

Rouble/$ average rate for the period

        58.99        64.60           58.33        68.37   

Rouble/$ period-end rate

        57.94        63.14           57.94        63.14   

 

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Group results third quarter and nine months 2017

 

 

Glossary

Non-GAAP measures are provided for investors because they are closely tracked by management to evaluate BP’s operating performance and to make financial, strategic and operating decisions.

Adjusted effective tax rate (ETR) is a non-GAAP measure. The adjusted ETR is calculated by dividing taxation on an underlying RC basis by underlying RC profit or loss before tax. Taxation on an underlying RC basis is taxation on a RC basis for the period adjusted for taxation on non-operating items and fair value accounting effects. For the 2016 calculation, taxation on an underlying RC basis also reflects an adjustment to eliminate a $434-million credit that arises from the reduction in the rate of the North Sea supplementary charge in the third quarter of 2016. Information on underlying RC profit or loss is provided below. BP believes it is helpful to disclose the adjusted ETR because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period. A reconciliation to GAAP information is provided on page 30.

Capital expenditure is total cash capital expenditure as stated in the condensed group cash flow statement.

Consolidation adjustment - UPII is unrealized profit in inventory arising on inter-segment transactions.

Divestment proceeds are disposal proceeds as per the condensed group cash flow statement.

Effective tax rate (ETR) on replacement cost (RC) profit or loss is a non-GAAP measure. The ETR on RC profit or loss is calculated by dividing taxation on a RC basis by RC profit or loss before tax. Information on RC profit or loss is provided below. BP believes it is helpful to disclose the ETR on RC profit or loss because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period. A reconciliation to GAAP information is provided on page 30.

Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information is provided on page 28.

Gearing - See Net debt and net debt ratio definition.

Hydrocarbons - Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.

Inorganic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Inorganic capital expenditure comprises consideration in business combinations and certain other significant investments made by the group. It is reported on a cash basis. BP believes that this measure provides useful information as it allows investors to understand how BP’s management invests funds in projects which expand the group’s activities through acquisition. Further information and a reconciliation to GAAP information is provided on page 26.

Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation’s production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.

Liquids - Liquids for Upstream and Rosneft comprises crude oil, condensate and natural gas liquids. For Upstream, liquids also includes bitumen.

Major projects have a BP net investment of at least $250 million, or are considered to be of strategic importance to BP or of a high degree of complexity.

 

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Glossary (continued)

 

Net debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents. The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders’ equity. All components of equity are included in the denominator of the calculation. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The derivatives are reported on the balance sheet within the headings ‘Derivative financial instruments’. The nearest equivalent GAAP measures are gross debt and gross debt ratio. A reconciliation of gross debt to net debt is provided on page 25.

We are unable to present reconciliations of forward-looking information for net debt ratio to gross debt ratio, because without unreasonable efforts, we are unable to forecast accurately certain adjusting items required to present a meaningful comparable GAAP forward-looking financial measure. These items include the fair value asset (liability) of hedges related to finance debt and cash and cash equivalents, that are difficult to predict in advance in order to include in a GAAP estimate.

Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP’s share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.

Non-operating items are charges and credits included in the financial statements that BP discloses separately because it considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the group’s reported financial performance. Non-operating items within equity-accounted earnings are reported net of incremental income tax reported by the equity-accounted entity. An analysis of non-operating items by region is shown on pages 9, 11 and 13, and by segment and type is shown on page 27.

Operating cash flow is net cash provided by (used in) operating activities as stated in the condensed group cash flow statement. When used in the context of a segment rather than the group, the terms refer to the segment’s share thereof.

Operating cash flow excluding Gulf of Mexico oil spill payments or Underlying operating cash flow is a non-GAAP measure

calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill as reported in Note 2 from Net cash provided by operating activities as reported in the condensed group cash flow statement. The nearest equivalent measure on an IFRS basis is Net cash provided by operating activities.

Organic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Organic capital expenditure comprises capital expenditure less inorganic capital expenditure. BP believes that this measure provides useful information as it allows investors to understand how BP’s management invests funds in developing and maintaining the group’s assets. An analysis of organic capital expenditure by segment and region, and a reconciliation to GAAP information is provided on page 26.

We are unable to present reconciliations of forward-looking information for organic capital expenditure to total cash capital expenditure, because without unreasonable efforts, we are unable to forecast accurately the adjusting item, inorganic capital expenditure, that is difficult to predict in advance in order to derive the nearest GAAP estimate.

Production-sharing agreement (PSA) is an arrangement through which an oil company bears the risks and costs of exploration, development and production. In return, if exploration is successful, the oil company receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of the production remaining after such cost recovery.

 

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Glossary (continued)

 

Readily marketable inventory (RMI) is inventory held and price risk-managed by our integrated supply and trading function (IST) which could be sold to generate funds if required. It comprises oil and oil products for which liquid markets are available and excludes inventory which is required to meet operational requirements and other inventory which is not price risk-managed. RMI is reported at fair value. Inventory held by the Downstream fuels business for the purpose of sales and marketing, and all inventories relating to the lubricants and petrochemicals businesses, are not included in RMI.

Paid-up RMI excludes RMI which has not yet been paid for. For inventory that is held in storage, a first-in first-out (FIFO) approach is used to determine whether inventory has been paid for or not. Unpaid RMI is RMI which has not yet been paid for by BP. RMI, Paid-up RMI and Unpaid RMI are non-GAAP measures. Further information is provided on page 29.

Realizations are the result of dividing revenue generated from hydrocarbon sales, excluding revenue generated from purchases made for resale and royalty volumes, by revenue generating hydrocarbon production volumes. Revenue generating hydrocarbon production reflects the BP share of production as adjusted for any production which does not generate revenue. Adjustments may include losses due to shrinkage, amounts consumed during processing, and contractual or regulatory host committed volumes such as royalties.

Refining availability represents Solomon Associates’ operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory downtime.

The Refining marker margin (RMM) is the average of regional indicator margins weighted for BP’s crude refining capacity in each region. Each regional marker margin is based on product yields and a marker crude oil deemed appropriate for the region. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP’s particular refinery configurations and crude and product slate.

Replacement cost (RC) profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss. RC profit or loss is the measure of profit or loss that is required to be disclosed for each operating segment under IFRS. RC profit or loss for the group is not a recognized GAAP measure. BP believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP’s management believes it is helpful to disclose this measure. The nearest equivalent measure on an IFRS basis is profit or loss attributable to BP shareholders.

RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 7. RC profit or loss per share is calculated using the same denominator. The numerator used is RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the RC profit or loss per share because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders. A reconciliation to GAAP information is provided on page 30.

Reported recordable injury frequency measures the number of reported work-related employee and contractor incidents that result in a fatality or injury per 200,000 hours worked. This represents reported incidents occurring within BP’s operational HSSE reporting boundary. That boundary includes BP’s own operated facilities and certain other locations or situations.

Tier 1 process safety events are losses of primary containment from a process of greatest consequence – causing harm to a member of the workforce, costly damage to equipment or exceeding defined quantities. This represents reported incidents occurring within BP’s operational HSSE reporting boundary. That boundary includes BP’s own operated facilities and certain other locations or situations.

Underlying production is production after adjusting for divestments and entitlement impacts in our production-sharing agreements. 2017 underlying production does not include the Abu Dhabi onshore concession renewal.

Underlying RC profit or loss is RC profit or loss after adjusting for non-operating items and fair value accounting effects. Underlying RC profit or loss and adjustments for fair value accounting effects are not recognized GAAP measures. See pages 27 and 28 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact. BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by management to evaluate BP’s operating performance and to make financial, strategic and operating decisions and because it may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss attributable to BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and taxation.

 

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Glossary (continued)

 

Underlying RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 7. Underlying RC profit or loss per share is calculated using the same denominator. The numerator used is underlying RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the underlying RC profit or loss per share because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders. A reconciliation to GAAP information is provided on page 30.

Upstream operating efficiency is calculated as production for BP operated sites, excluding US Lower 48 and adjusted for certain items including entitlement impacts in our production-sharing agreements divided by installed production capacity for BP operated sites, excluding US Lower 48. Installed production capacity is the agreed rate achievable (measured at the export end of the system) when the installed production system (reservoir, wells, plant and export) is fully optimized and operated at full rate with no planned or unplanned deferrals.

Upstream unit production cost is calculated as production cost divided by units of production. Production cost does not include ad valorem and severance taxes. Units of production are barrels for liquids and thousands of cubic feet for gas. Amounts disclosed are for BP subsidiaries only and do not include BP’s share of equity-accounted entities.

 

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Legal proceedings

The following discussion sets out the material developments in the group’s material legal proceedings during the recent period. For a full discussion of the group’s material legal proceedings, see pages 261-265 of BP Annual Report and Form 20-F 2016, and page 35 of BP p.l.c. Group results second quarter and half year 2017.

Matters relating to the Deepwater Horizon accident and oil spill (the Incident)

Plaintiffs’ Steering Committee (PSC) settlements - Economic and Property Damages Settlement Agreement The Economic and Property Damages Settlement established a court-supervised settlement claims programme to resolve certain economic and property damage claims arising from the Incident.

Following numerous court decisions, on 31 March 2015, the United States district court in New Orleans denied the PSC motion seeking to alter or amend a revised policy relating to business economic loss claims. Such policy required the matching of revenue with the expenses incurred by claimants to generate that revenue, even where the revenue and expenses were recorded at different times. The PSC appealed the district court decision and, on 22 May 2017, the Fifth Circuit issued an opinion upholding the policy in part and reversing the policy in part. The Fifth Circuit ordered that the portion of the policy upheld, which covers the substantial majority of the remaining business economic loss claims, be applied as the governing methodology for all applicable business economic loss claims. BP filed a petition for a rehearing which was denied on 21 June 2017. On 25 May 2017, 13 June 2017, and 5 July 2017, the district court issued a series of orders instructing the court supervised settlement programme on how to implement the Fifth Circuit’s opinion. On 10 August 2017, the district court denied BP’s motion to clarify or reconsider these orders. BP appealed all of these orders and decisions on 8 September 2017; the appeals have been consolidated with four appeals filed by claimants in September 2017 challenging the same set of orders and decisions. These appeals are currently pending before the Fifth Circuit.

 

 

Cautionary statement

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), BP is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events - with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. In particular, the following, among other statements, are all forward looking in nature: plans for recommencing a share buyback programme; expectations regarding the expected quarterly dividend payment and timing of such payment; expectations regarding 2017 organic capital expenditure; plans and expectations to target gearing within a 20-30% band; expectations regarding divestment transactions and the amount and timing of divestment proceeds; expectations regarding the adjusted effective tax rate in 2017; plans and expectations regarding the formation of Pan American Energy Group; plans and expectations regarding the joint development and production-sharing agreement with the State Oil Company of the Republic of Azerbaijan; expectations regarding Aker BP ASA’s agreement to acquire Hess Norge AS; expectations regarding BP’s divestment of its shareholding in SECCO; expectations regarding Upstream fourth-quarter 2017 reported production; expectations regarding Downstream fourth-quarter 2017 refining margins and turnaround activity; plans and expectations with respect to the start-up and development of new Upstream projects; expectations regarding Rosneft interim dividends for 2017 and Rosneft operational and financial information for the third quarter of 2017; expectations regarding the determination of business economic loss claims in respect of the PSC settlement; expectations with respect to the timing and amount of future payments relating to the Gulf of Mexico oil spill; and expectations that claims arising under the 2012 PSC settlement will be substantially paid in 2018. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the specific factors identified in the discussions accompanying such forward-looking statements; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report, under “Principal risks and uncertainties” in our Form 6-K for the period ended 30 June 2017 and under “Risk factors” in BP Annual Report and Form 20-F 2016 as filed with the US Securities and Exchange Commission.

 

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Computation of ratio of earnings to fixed charges

 

   

 

   $ million except ratio       Nine  
        months  
2017  
   

 

Earnings available for fixed charges:

   

Pre-tax profit from continuing operations before adjustment for income or loss from joint ventures and associates

    4,598  

Fixed charges

    2,134  

Amortization of capitalized interest

    166  

Distributed income of joint ventures and associates

    966  

Interest capitalized

    (222)  

Preference dividend requirements, gross of tax

    (2)  

Non-controlling interest of subsidiaries’ income not incurring fixed charges

    1  

 

   

 

Total earnings available for fixed charges

    7,641  

 

   

 

Fixed charges:

   

Interest expensed

    977  

Interest capitalized

    222  

Rental expense representative of interest

    933  

Preference dividend requirements, gross of tax

    2  

 

   

 

Total fixed charges

    2,134  

 

   

 

Ratio of earnings to fixed charges

    3.58  

 

   

 

 

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The following table shows the unaudited consolidated capitalization and indebtedness of the BP group as of 30 September 2017 in accordance with IFRS:

Capitalization and indebtedness

   

 

  $ million                    30 September  
2017  

 

   

 

Share capital and reserves

   

Capital shares (1-2)

    5,343  

Paid-in surplus (3)

    13,573  

Merger reserve (3)

    27,206  

Treasury shares

    (17,060)  

Available-for-sale investments

    6  

Cash flow hedge reserve

    (820)  

Foreign currency translation reserve

    (5,262)  

Profit and loss account

    75,535  

 

   

 

BP shareholders’ equity

    98,521  

 

   

 

Finance debt (4-6)

   

Due within one year

    8,891  

Due after more than one year

    56,893  

 

   

 

Total finance debt

    65,784  

 

   

 

Total capitalization (7)

    164,305  

 

   

 

 

  (1) Issued share capital as of 30 September 2017 comprised 19,807,032,377 ordinary shares, par value US$0.25 per share, and 12,706,252 preference shares, par value £1 per share. This excludes 1,479,182,123 ordinary shares which have been bought back and are held in treasury by BP. These shares are not taken into consideration in relation to the payment of dividends and voting at shareholders’ meetings.

 

  (2) Capital shares represent the ordinary and preference shares of BP which have been issued and are fully paid.

 

  (3) Paid-in surplus and merger reserve represent additional paid-in capital of BP which cannot normally be returned to shareholders.

 

  (4) Finance debt recorded in currencies other than US dollars has been translated into US dollars at the relevant exchange rates existing on 30 September 2017.

 

  (5) Finance debt presented in the table above consists of borrowings and obligations under finance leases. Other contractual obligations are not presented in the table above – see BP Annual Report and Form 20-F 2016 – Liquidity and capital resources for further information.

 

  (6) At 30 September 2017, the parent company, BP p.l.c., had issued guarantees totalling $62,808 million relating to finance debt of subsidiaries. Thus 95% of the group’s finance debt had been guaranteed by BP p.l.c.

 

       At 30 September 2017, $150 million of finance debt was secured by the pledging of assets. The remainder of finance debt was unsecured.

 

  (7) At 30 September 2017 the group had issued third-party guarantees under which amounts outstanding, incremental to amounts recognized on the group balance sheet, were $321 million in respect of the borrowings of equity-accounted entities and $398 million in respect of the borrowings of other third parties.

 

  (8) There has been no material change since 30 September 2017 in the consolidated capitalization and indebtedness of BP.

 

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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:   31 October 2017    

  /s/ David J Jackson

      DAVID J JACKSON
      Company Secretary

 

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