SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended June 30, 2002
BP p.l.c.
(Translation of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
--------------- ----------------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No |X|
--------------- ----------------
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO.
333-9790) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON
FORM F-3 (FILE NO. 333-65996) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-83180) OF BP AUSTRALIA CAPITAL
MARKETS LIMITED, BP CANADA FINANCE COMPANY, BP CAPITAL MARKETS p.l.c., BP
CAPITAL MARKETS AMERICA INC. AND BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 33-21868) OF BP p.l.c., THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-9020) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON
FORM S-8 (FILE NO. 333-9798) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-79399) OF BP p.l.c., THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-34968) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT
ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., AND THE PROSPECTUS INCLUDED IN
THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-74414) OF BP p.l.c., AND TO
BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT
NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.
Page 1
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GROUP RESULTS JANUARY - JUNE 2002
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Turnover 43,655 48,409 79,945 93,821
======= ======= ====== ======
Reconciliation of historical cost and pro forma results
Historical cost profit for the period 2,040 2,741 3,336 5,571
Inventory holding (gains) losses (a) (531) (40) (973) 198
------- ------- ------ ------
Replacement cost profit for the period (b) 1,509 2,701 2,363 5,769
Exceptional items, net of tax (216) (53) (146) (120)
------- ------- ------ ------
Replacement cost profit before exceptional items 1,293 2,648 2,217 5,649
Special items, net of tax (c) 351 103 471 143
Acquisition amortization (d) 537 680 1,075 1,351
------- ------- ------ ------
Pro forma result adjusted for special items 2,181 3,431 3,763 7,143
======= ======= ====== ======
Per Ordinary Share - cents
Historical cost profit 9.10 12.21 14.88 24.80
Replacement cost profit before exception items 5.77 11.80 9.89 25.15
Pro forma result adjusted for special items 9.72 15.29 16.78 31.80
Dividends per Ordinary Share - cents 6.00 5.50 11.75 10.75
---------------
(a) Net of minority shareholders' interest.
(b) Replacement cost is not a UK or US GAAP measure. For further information on
why management believes replacement cost profit is a relevant measure see
Note 6 of Notes to Consolidated Financial Statements.
(c) The special items refer to non-recurring charges and credits as described
in the text below.
(d) Depreciation and amortization relating to the fixed asset revaluation
adjustments and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions in 2000.
The following discussion should be read in conjunction with the consolidated
financial statements and the related notes provided elsewhere in this Form 6-K
and with the information, including the consolidated financial statements and
related notes, for the year ended December 31, 2001 in BP p.l.c.'s Annual Report
on Form 20-F for the year ended December 31, 2001. The financial information for
2001 has been restated to reflect (i) the adoption by the Group of UK Financial
Reporting Standard No. 19 (FRS 19) 'Deferred Tax' with effect from January 1,
2002 and (ii) the transfer of the solar, renewables and alternative fuels
activities from Other businesses and corporate to Gas and Power on January 1,
2002. To reflect this transfer, Gas and Power has been renamed Gas, Power and
Renewables from the same date. See Note 2 of Notes to Consolidated Financial
Statements for further information.
The second quarter and first half results for 2002 reflect a less favourable
environment than a year ago for Exploration and Production and Refining and
Marketing. For the half year, oil realizations were down nearly $4 per barrel,
gas realizations were down nearly $2 per thousand cubic feet, and the indicator
refining margin was down over $3 per barrel. Demand for most chemical products
has improved but margins remain weak.
Turnover for the three months and six months ended June 30, 2002 was $43,655
million and $79,945 million respectively, compared with $48,409 million and
$93,821 million for 2001. The reduction in turnover for the second quarter and
half year primarily reflects lower oil and natural gas prices, offset in part by
higher turnover in Europe attributable to the acquisition of Veba.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) was $1,293 million for the three months ended June 30,
2002, compared with $2,648 million for the equivalent period of 2001. For the
six months ended June 30, 2002, the replacement cost profit before exceptional
items was $2,217 million compared with $5,649 million in 2001.
Page 2
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Owing to the significant acquisitions that took place in 2000, in addition to
its reported results, BP is presenting pro forma results adjusted for special
items in order to enable shareholders to assess current performance in the
context of BP's past performance and against that of its competitors. The pro
forma result, adjusted for special items, for the three months and six months
ended June 30, 2002 was $2,181 million and $3,763 million respectively, compared
with $3,431 million and $7,143 million in the prior year. The pro forma result,
adjusted for special items, has been derived from the Group's reported UK GAAP
accounting information but is not in itself a recognized UK or US GAAP measure.
The pro forma result is replacement cost profit before exceptional items
excluding acquisition amortization. Acquisition amortization refers to
depreciation relating to the fixed asset revaluation adjustments and
amortization of goodwill consequent upon the ARCO and Burmah Castrol
acquisitions in 2000. A tabular breakdown of the reconciliation of pro forma to
reported results on a replacement cost basis is provided below on page 5.
Acquisition amortization for the three months and six months ended June 30, 2002
was $537 million and $1,075 million, respectively, compared with $680 million
and $1,351 million for the equivalent periods of 2001.
Special items refer to non-recurring charges and credits. For the three months
ended June 30, 2002, special items were $19 million ($351 million after tax and
including a tax special item of $355 million), and comprised restructuring
charges for Exploration and Production and Chemicals, business interruption
insurance proceeds and costs related to a pipeline incident in Refining and
Marketing, Veba, Solvay and Erdolchemie integration costs and an adjustment to
the North Sea deferred tax balance for the supplementary UK corporation tax
rate. For the second quarter of 2001, special items were $159 million ($103
million after tax), comprising Burmah Castrol integration costs, rationalization
costs in the downstream European commercial business and bond redemption
charges. Special items for the six months ended June 30, 2002 were $204 million
($471 million after tax and including a tax special item of $355 million)
compared with $222 million ($143 million after tax) in 2001. The special items
for the first half of both 2002 and 2001 are comprised of the same elements as
those in the respective second quarter periods; in addition, the first half of
2002 includes litigation costs charged in the first quarter.
Underlying performance improvements were $0.4 billion before tax for the first
half of 2002. We are on track for the year's target of $1.4 billion before tax.
Underlying performance improvements include cost savings and volume growth, and
represent increases in pre-tax results under mid-cycle operating conditions,
adjusted for acquisition amortization and special items. Mid-cycle operating
conditions reflect not only adjustments to hydrocarbon prices and margins, but
also costs and capacity utilization, to levels which we would expect on average
over the long term. Hydrocarbon production increased by over 5% and over 3% in
the quarter and half year respectively. Full year hydrocarbon production growth
is projected to be in the range of 4.5 to 5 per cent.
The historical cost profit for the three months ended June 30, 2002 was $2,040
million including inventory holding gains of $531 million and net exceptional
gains of $376 million ($216 million after tax) in respect of net profits on the
sale of fixed assets and businesses or termination of operations. For the
equivalent period of 2001 there was a profit of $2,741 million, including
inventory holding gains of $40 million and net exceptional gains of $171 million
($53 million after tax) in respect of net profits on the sale of fixed assets
and businesses or termination of operations.
For the six months ended June 30, 2002, the historical cost profit was $3,336
million, including inventory holding gains of $973 million and net exceptional
gains of $267 million ($146 million after tax) in respect of net profits on the
sale of fixed assets and businesses or termination of operations. For the six
months ended June 30, 2001, the historical cost profit was $5,571 million, after
inventory holding losses of $198 million and including net exceptional gains of
$389 million ($120 million after tax) in respect of net profits on the sale of
fixed assets and businesses or termination of operations.
Performance of operating segments is evaluated by management based on
replacement cost operating profit or loss. Segment results are presented in the
table on page 5 and discussed in the following pages on this basis.
Interest expense for the three months and six months ended June 30, 2002 was
$314 million and $647 million respectively, compared with $441 million
(including $50 million bond redemption charges) and $887 million (including $60
million bond redemption charges) in 2001, reflecting lower interest rates for
both periods in 2002.
Net taxation, other than production taxes, charged for the three months ended
June 30, 2002 was $1,751 million compared with $1,956 million in the equivalent
period last year. The second quarter 2002 included a special charge of $355
million for an adjustment to the North Sea deferred tax liability for the
supplementary UK corporation tax imposed by the UK Finance Act 2002. The tax
charge in respect of exceptional items was $160 million compared with $118
million for the second quarter of 2001. The effective tax rate on replacement
cost profit before exceptional items was 54% and 51% respectively for the three
months and six months ended June 30, 2002, compared with 41% and 40% for the
equivalent periods of 2001, reflecting the impact of the adjustment to the North
Sea deferred tax liability for the supplementary UK tax and the
non-deductibility of acquisition amortization for both the quarter and the half
year.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
The deal with E.ON announced last year has now been completed. Following BP's
acquisition of 51% of Veba in the first quarter of 2002, most of Veba's upstream
oil and gas assets were sold to Petro-Canada in May, with BP receiving $1.5
billion proceeds. On June 30, E.ON's remaining 49% stake in Veba was acquired
for $2.4 billion. In addition, following a decision on July 5 by the German
Minister for Economics and Technology (which is now being challenged in the
German Courts), E.ON acquired BP's 25.5% stake in Ruhrgas for $2.4 billion.
Capital expenditure and acquisitions in the second quarter of 2002 was $6.1
billion, including $2.4 billion for the purchase of the remaining 49% of Veba,
compared with $3.8 billion for the equivalent period in 2001. For the six months
ended June 30, 2002, capital expenditure and acquisitions was $11.8 billion,
including $5.0 billion for the Veba purchase, compared with $6.3 billion in
2001. Excluding acquisitions, capital expenditure for the second quarter 2002
and first half was $3.0 billion and $6.1 billion respectively, and is on track
for the upper end of the year's target range at around $13 billion. Disposal
proceeds in the second quarter were $2.5 billion, including $1.5 billion from
the sale of Veba upstream assets, and $2.9 billion in the first half.
Net cash inflow for the three months ended June 30, 2002 was $1.9 billion,
compared with an outflow of $2.1 billion for the equivalent period of 2001.
Compared to a year ago, tax payments were lower and disposal proceeds were
higher. For the six months ended June 30, 2002, the net cash outflow was $0.5
billion compared with an inflow of $1.1 billion in 2001; lower operating cash
flow and higher acquisition spending were partly offset by lower tax payments
and higher disposal proceeds. Net cash inflow from operating activities was $5.1
billion and $8.8 billion for the three months and six months ended June 30, 2002
respectively, compared with $5.1 billion and $11.8 billion in the equivalent
periods in 2001. A net reduction in working capital offset lower profit in the
second quarter, and partly offset the lower profit for the half year.
Net debt at June 30, 2002 was $19.8 billion. The ratio of net debt to net debt
plus equity was 23% at June 30, 2002 as well as at December 31, 2001. After
adjusting for the fixed asset revaluation adjustments and goodwill consequent
upon the ARCO and Burmah Castrol acquisitions, the ratio of net debt to net debt
plus equity was 28% at June 30, 2002 compared with 29% at December 31, 2001. In
addition to reported debt, BP uses conventional off balance sheet sources of
finance such as operating leases and joint venture and associated undertaking
borrowings.
In the normal course of business the Group has entered into certain long term
purchase commitments principally relating to take or pay contracts for the
purchase of natural gas, crude oil and chemicals feedstocks and throughput
arrangements for pipelines. The Group expects to fulfil its obligations under
these arrangements with no adverse consequences to the Group's results of
operations or financial condition.
At June 30, 2002 the Group's share of third party borrowings of joint ventures
and associated undertakings was $380 million and $1,103 million respectively.
These amounts are not reflected in the Group's debt on the balance sheet.
Payments due by period
----------------------------------------------------------------------
2007 and
Total 2002 2003 2004 2005 2006 thereafter
----------------------------------------------------------------------
($ million)
Long-term borrowings 14,287 1,993 2,535 641 2,566 1,065 5,487
Finance lease obligations 3,648 97 159 165 173 177 2,877
Operating leases 6,498 1,023 746 678 607 555 2,889
Other long-term contractual commitments
Take or pay contracts 8,774 1,233 1,235 678 558 548 4,522
Throughput agreements - pipeline 1,982 264 431 373 342 314 258
Throughput agreements - other 1,852 163 157 123 113 99 1,197
We have in place a European Debt Issuance Programme (DIP) and a US Shelf
Registration under each of which the Group may raise an aggregate of $6 billion
of debt for maturities of one month or longer. At August 30, 2002, the amount
drawn down against the DIP was $2,565 million, and the amount issued under the
US Shelf Registration was $2,000 million.
Commercial paper markets in the US and Europe are a primary source of liquidity
for the Group. At June 30, 2002 the outstanding commercial paper amounted to
$3,854 million.
The Group has access to other sources of liquidity in the form of committed
facilities and other funding through the capital markets. BP believes that,
taking into account the substantial amounts of undrawn borrowing facilities
available, the Group has sufficient working capital for foreseeable
requirements.
The return on average capital employed on a replacement cost basis for the three
months ended June 30, 2002 was 7% compared with 14% for the equivalent period of
2001. For the six months ended June 30, 2002, the return on average capital
employed was also 7%. The return on average capital employed on a historical
cost basis was 11% for the second quarter and 9% for the half year. For further
information on the return on average capital employed calculation see page 64 of
this report.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
BP announced a second quarterly dividend for 2002 of 6.0 cents per ordinary
share. Holders of ordinary shares will receive 3.875 pence per share and holders
of American Depositary Receipts (ADRs) $0.36 per ADS. The dividend is payable on
September 9, 2002 to shareholders on the register on August 16, 2002.
Participants in the Dividend Reinvestment Plan or the dividend reinvestment
facility in the US Direct Access Plan will receive the dividend in the form of
shares also on September 9, 2002.
BP intends to continue to pay dividends in the future of around 60% of its
replacement cost profit before exceptional items after adjusting for special
items and acquisition amortization, adjusted to mid-cycle operating conditions.
The target dividend payout ratio has been restated following adoption of FRS 19
on January 1, 2002 in order to maintain the substance of the existing financial
framework.
The following table provides a breakdown of pro forma results and reconciles
those results to replacement cost operating profit by operating segment.
Pro forma
Reconciliation of replacement cost Replacement result
profit (loss) to pro forma result cost Acquisition Special adjusted for
adjusted for special items Profit (loss) amortization(a) items(b) special items
------------ ------------ ------- -------------
($ million)
Three months ended June 30, 2002
Exploration and Production 2,458 341 90 2,889
Gas, Power and Renewables 114 - - 114
Refining and Marketing 603 196 (114) 685
Chemicals 203 - 43 246
Other businesses and corporate (128) - - (128)
--------- --------- --------- ---------
Replacement cost operating profit 3,250 537 19 3,806
Interest expense (314) - - (314)
Taxation (1,591) - 348 (c) (1,243)
Minority shareholders' interest (52) - (16) (68)
--------- --------- --------- ---------
Replacement cost profit before
exceptional items 1,293 537 351 2,181
--------- ========= ========= ---------
per ordinary share (cents) 5.77 9.72
========= =========
Three months ended June 30, 2001
Exploration and Production 3,427 491 - 3,918
Gas, Power and Renewables 161 - - 161
Refining and Marketing 1,464 189 109 1,762
Chemicals 9 - - 9
Other businesses and corporate (116) - - (116)
--------- --------- --------- ---------
Replacement cost operating profit 4,945 680 109 5,734
Interest expense (441) - 50 (391)
Taxation (1,838) - (56) (1,894)
Minority shareholders' interest (18) - - (18)
--------- --------- --------- ---------
Replacement cost profit before
exceptional items 2,648 680 103 3,431
--------- ========= ========= ---------
per ordinary share (cents) 11.80 15.29
========= =========
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustments and amortization of goodwill consequent upon the
ARCO and Burmah Castrol acquisitions in 2000.
(b) The special items refer to non-recurring charges and credits. The special
items for the second quarter of 2002 comprise restructuring charges for
Exploration and Production and Chemicals, business interruption insurance
proceeds and costs related to a pipeline incident in Refining and
Marketing, Veba, Solvay and Erdolchemie integration costs and an adjustment
to the North Sea deferred tax balance for the supplementary UK corporation
tax. The special items for the second quarter of 2001 comprise Burmah
Castrol integration costs, rationalization costs in the downstream European
commercial business and a bond redemption charge. The taxation credit
relating to special items has been calculated using a tax rate of 36%
(2001, 35%).
(c) Taxation includes a special charge of $355 million for an adjustment to the
North Sea deferred tax liability for the supplementary UK corporation tax.
Page 5
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Pro forma
Reconciliation of replacement cost Replacement result
profit (loss) to pro forma result cost Acquisition Special adjusted for
adjusted for special items Profit (loss) amortization(a) items(b) special items
------------ ------------ ------- -------------
($ million)
Six months ended June 30, 2002
Exploration and Production 4,386 686 217 5,289
Gas, Power and Renewables 225 - - 225
Refining and Marketing 671 389 (88) 972
Chemicals 279 - 75 354
Other businesses and corporate (253) - - (253)
--------- --------- --------- ---------
Replacement cost operating profit 5,308 1,075 204 6,587
Interest expense (647) - - (647)
Taxation (2,383) - 283 (c) (2,100)
Minority shareholders' interest (61) - (16) (77)
--------- --------- --------- ---------
Replacement cost profit before
exceptional items 2,217 1,075 471 3,763
--------- ========= ========= ---------
per ordinary share (cents) 9.89 16.78
========= =========
Six months ended June 30, 2001
Exploration and Production 8,093 961 - 9,054
Gas, Power and Renewables 261 - - 261
Refining and Marketing 2,204 390 162 2,756
Chemicals 90 - - 90
Other businesses and corporate (231) - - (231)
--------- --------- --------- ---------
Replacement cost operating profit 10,417 1,351 162 11,930
Interest expense (887) - 60 (827)
Taxation (3,855) - (79) (3,934)
Minority shareholders' interest (26) - - (26)
--------- --------- --------- ---------
Replacement cost profit before
exceptional items 5,649 1,351 143 7,143
--------- ========= ========= ---------
per ordinary share (cents) 25.15 31.80
========= =========
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustments and amortization of goodwill consequent upon the
ARCO and Burmah Castrol acquisitions in 2000.
(b) The special items refer to non-recurring charges and credits. The special
items for the first half of 2002 comprise restructuring charges for
Exploration and Production and Chemicals, business interruption insurance
proceeds and costs related to a pipeline incident in Refining and
Marketing, Veba, Solvay and Erdolchemie integration costs, litigation costs
and an adjustment to the North Sea deferred tax balance for the
supplementary UK corporation tax. The special items for the first half of
2001 comprise Burmah Castrol integration costs, rationalization costs in
the downstream European commercial business and a bond redemption charge.
The taxation credit relating to special items has been calculated using a
tax rate of 35% for both 2002 and 2001.
(c) Taxation includes a special charge of $355 million for an adjustment to the
North Sea deferred tax liability for the supplementary UK corporation tax.
Page 6
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
DETAILED REVIEW OF BUSINESSES (EXCLUDING EXCEPTIONAL ITEMS)
EXPLORATION AND PRODUCTION
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Turnover - $m 6,539 7,441 12,177 16,558
Total replacement cost operating profit - $m 2,458 3,427 4,386 8,093
Results include:
Exploration expense - $m 222 81 346 250
Of which: Exploration expenditure written off - $m 147 22 206 130
Key Statistics:
Liquids(a) Average prices realized by BP - $/bbl 22.81 24.74 20.81 24.77
Production - mb/d 2,052 1,885 2,020 1,911
Natural gas Average prices realized by BP - $/mcf 2.45 3.43 2.36 4.21
Production - mmcf/d 8,667 8,554 8,706 8,723
Brent oil price - $/bbl 25.07 27.39 23.12 26.57
West Texas Intermediate oil price - $/bbl 26.30 27.88 23.94 28.30
Alaska North Slope US West Coast - $/bbl 25.04 26.05 22.42 25.49
Henry Hub gas price (b) - $/mmBtu 3.38 4.66 2.87 5.86
UK Gas - National Balancing Point - p/therm 12.10 21.66 15.63 22.21
---------------
(a) Crude oil and natural gas liquids
(b) Henry Hub First of the Month Index
(c) Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1
million barrels.
Turnover for the three months and six months ended June 30, 2002 was $6,539
million and $12,177 million respectively, compared with $7,441 million and
$16,558 million for the corresponding periods of 2001. Lower oil and natural gas
prices more than offset the effect of high production.
Replacement cost operating profit for the three months and six months ended June
30, 2002 was $2,458 million and $4,386 million respectively, compared with
$3,427 million and $8,093 million for the equivalent periods in 2001. The result
for the second quarter and half year 2002 includes special charges of $90
million and $217 million respectively, relating to significant restructuring to
reposition the business in North America and the North Sea. The results also
include depreciation and amortization arising from the fixed asset revaluation
adjustments and goodwill consequent upon the ARCO acquisition in 2000 of $341
million and $686 million for the second quarter of and half year 2002, and $491
million and $961 million for the corresponding periods in 2001.
The quarter's result was significantly affected by lower oil and natural gas
prices compared to a year ago. Average liquids realizations declined by some $2
a barrel. Both Brent and WTI marker prices were down, and the realizations were
also impacted by significantly lower North American NGL prices. Overall gas
realizations were down by around $1 a thousand cubic feet. North American gas
realizations also suffered from widening regional differentials to the Henry Hub
marker caused by short term transportation capacity restrictions from the San
Juan and Rockies basins. European gas prices also fell. Higher exploration
expense was mainly due to an $85 million write-off relating to the Neptune
prospect in the deepwater Gulf of Mexico. BP relinquished the lease after
concluding that the discovered volumes did not rank highly enough in BP's
portfolio of investment opportunities. The result included a charge of $83
million for Unrealized Profit In Stock (UPIS) to remove the increased upstream
margin included in downstream inventories, following oil price rises since the
first quarter. The equivalent quarter last year included a UPIS credit of $40
million.
The half year result reflected the impact of significantly lower oil and gas
prices and higher exploration expense, partly offset by strong underlying
improvements through volume growth and lower lifting costs, which were 6% down
on a year ago.
Page 7
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
EXPLORATION AND PRODUCTION (concluded)
Total hydrocarbon production for the quarter at 3,546 mboe/d was at a record
level, up 5.5% on a year ago, with first half production up over 3% from 2001.
The increase for the quarter reflects the continued ramp-up of projects
commissioned in 2001, start-up of the King field in the Gulf of Mexico, improved
operating efficiencies, and the increased interest in Sidanco which more than
offset the impact of OPEC related quota restrictions and divestments. Abnormally
warm weather in the UK early in 2002 was also a factor for the half year.
In support of our long term growth plans, capital expenditure was $4.44 billion
for the half year excluding acquisitions of $0.44 billion. Projected start-ups
in the second half include King's Peak, Horn Mountain and Princess in the Gulf
of Mexico and Trinidad's LNG Train 2. Approvals were given for the second phase
of the Azeri-Chirag-Gunashli development (BP 34% and operator) in Azerbaijan and
the Baku-Tbilisi-Ceyhan pipeline from the Caspian Sea to the Mediterranean.
Page 8
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
GAS, POWER AND RENEWABLES
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Turnover - $m 8,235 10,491 16,003 22,613
Total replacement cost operating profit - $m 114 161 225 261
On January 1, 2002, the solar, renewables and alternative fuels activities were
transferred from Other businesses and corporate to Gas and Power. To reflect
this transfer, Gas and Power has been renamed Gas, Power and Renewables from the
same date and comparative information has been restated.
Turnover for the three months and six months ended June 30, 2002 was $8,235
million and $16,003 million, compared with $10,491 million and $22,613 million
for the same periods in 2001. Despite increased gas sales volumes, turnover
decreased due to lower natural gas prices, particularly in North America.
Replacement cost operating profit for the three months and six months ended June
30, 2002 was $114 million and $225 million respectively, compared with $161
million and $261 million a year ago. The reduction in the second quarter result
is due to less volatile gas trading conditions compared to the second quarter of
2001. The contributions in the second quarter from the NGL business and Ruhrgas
were both slightly up on the comparative period in 2001. The half year result
similarly reflects a lower gas marketing and trading result, partly offset by an
improvement from the NGL business. BP Solar production continues to expand, and
is up over 30% in the first half compared to a year ago.
During the quarter, BP announced it had reached agreement to sell its UK
contract energy management business to Elyo, a subsidiary of Tractebel.
In June, BP purchased a 5% stake in Enagas, the Spanish national gas
infrastructure company, for $70 million. This investment enhances our equity gas
position in Trinidad and Algeria by supporting and growing our access to the
Spanish market.
Page 9
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Turnover - $m 31,870 34,257 56,759 62,780
Total replacement cost operating profit - $m 603 1,464 671 2,204
Total refined product sales - mb/d 6,479 5,878 6,491 5,916
Refinery throughputs - mb/d 3,103 2,955 3,049 2,933
Global Indicator Refining Margin (a) - $/bbl 2.06 5.78 1.85 5.02
---------------
(a) The Global Indicator Refining Margin (GIM) is the average of seven regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity.
Turnover for the three months and six months ended June 30, 2002 was $31,870
million and $56,759 million respectively, compared with $34,257 million and
$62,780 million, for the same periods in the prior year. The decrease in
turnover for the second quarter and first half year 2002 primarily reflects
lower product prices, which more than offset volume increases from the Veba
acquisition. Results for Veba have been included from February 1, 2002.
Replacement cost operating profit for the three months and six months ended June
30, 2002 was $603 million and $671 million, respectively. This compares with
$1,464 million and $2,204 million in the corresponding periods of 2001. The
results for the second quarter and first half include a net credit to income for
special items of $114 million and $88 million, respectively. For the second
quarter 2002, special items comprise business interruption insurance proceeds of
$184 million, partly offset by costs of $47 million associated with an Olympic
pipeline incident in 1999 and Veba integration costs of $23 million. Special
items for the half year include additional Veba integration costs of $26
million. The results are also after charging depreciation and amortization
arising from the fixed asset revaluation adjustments and goodwill, arising from
the ARCO and Burmah Castrol acquisitions in 2000 of $196 million and $389
million for the second quarter and half year respectively, and $189 million and
$390 million for 2001. Compared with 2001, the second quarter 2002 results
reflect substantially lower worldwide refining margins reflecting higher
product inventories for the industry, and the first half also includes the
impact of lower US retail margins in the first quarter.
Refining throughputs increased by 5% in the second quarter and 4% in the first
half compared with 2001, due to the effect of the Veba acquisition, which more
than offset the divestments of the Mandan, Salt Lake City and Yorktown
refineries in the USA. Marketing volumes increased by 7% and 6% for the quarter
and half year respectively, reflecting the Veba acquisition; excluding Veba,
volumes were down 4% in both periods due to lower aviation fuel demand, retail
divestments and reductions in lower-margin marine and commercial sales.
Retail shop sales for the second quarter and half year increased by 67% and 54%
respectively, compared with a year ago, primarily reflecting the Veba
acquisition. Excluding Veba, retail shop sales were up 13% for the quarter and
10% for the first half, reflecting the impact of new BP Connect stations and
worldwide growth in shop sales.
During the quarter, BP opened an additional 62 BP Connect stations, primarily in
the USA and UK, bringing the total number of BP Connect stations worldwide to
433. An additional 1,600 sites were reimaged in the second quarter, bringing the
total number of sites with the BP helios to some 6,900 worldwide.
In May, BP announced that it had taken the first step to phase out MTBE by the
end of 2002, one year ahead of the date required by California law, in the
gasoline it sells in California. Contracts with several ethanol suppliers have
been signed to provide a replacement for the MTBE. In addition, BP has
introduced ultra low sulphur emission control diesel fuel in California.
Page 10
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
CHEMICALS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Turnover - $m 3,584 3,073 6,226 5,762
Total replacement cost operating profit - $m 203 9 279 90
Production (a) - kte 6,889 5,321 13,500 10,698
Chemicals Indicator Margin (b) - $/te 109 (c) 105 95 (c) 104
---------------
(a) Includes BP share of joint ventures, associated undertakings and other
interests in production.
(b) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Amongst the products and businesses
covered in the CIM are olefins and derivatives, aromatics and derivatives,
linear alpha-olefins, acetic acid, vinyl acetate monomer and nitriles. Not
included are fabrics and fibres, plastic fabrications, poly alpha-olefins,
anhydrides, engineering polymers and carbon fibres, speciality
intermediates, and the remaining parts of the solvents and acetyls
businesses.
(c) Provisional. The data for the second quarter is based on two months' actual
and one month of provisional data.
Turnover for the three months and six months ended June 30, 2002 was $3,584
million and $6,226 million respectively, compared with $3,073 million and $5,762
million for the equivalent periods in 2001. The increase in turnover for the
second quarter and first half reflects higher production as a result of
acquisitions and improved site reliability.
Replacement cost operating profit for the three months ended June 30, 2002, was
$203 million, up from $76 million in the first quarter and $9 million a year
ago, reflecting lower unit costs and firmer margins. The half year result is
$189 million above that of a year ago, reflecting increased sales volumes,
partly offset by weaker margins. Operating costs were lower due to restructuring
benefits and reliability improvements. Special charges for the quarter include
$29 million for restructuring of our Research and Technology facilities and
Solvay and Erdolchemie integration costs of $14 million. Special items for the
half year also include costs related to the closure of polypropylene capacity in
the USA.
Record production of 6,889 thousand tonnes in the second quarter was 278
thousand tonnes above the first quarter. Production for the second quarter and
first half was 29% and 26% higher than a year ago, respectively, as a result of
the Solvay, Erdolchemie and Veba transactions, new plants, improved reliability
and improving demand.
During the quarter, we completed the sale of our plastics fabrication business
as part of our overall plan to divest non-core businesses.
Page 11
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
OTHER BUSINESSES AND CORPORATE
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Turnover - $m 136 138 271 265
Replacement cost operating profit (loss) - $m (128) (116) (253) (231)
Other businesses and corporate comprises Finance, the Group's coal asset and
aluminium asset, its investments in PetroChina and Sinopec, interest income and
costs relating to corporate activities.
EXCEPTIONAL ITEMS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Profit (loss) on sale of fixed assets and
businesses or termination of operations - $m 376 171 267 389
Taxation credit (charge) - $m (118) (160) (121) (269)
------- ------- ------- ------
Exceptional items after taxation - $m 216 53 146 120
------- ------- ------- ------
Exceptional items for the second quarter include a gain on the redemption of
certain preferred limited partnership interests BP retained following the Altura
Energy common interest disposal in 2000 in exchange for BP loan notes held by
the partnership, partly offset by a loss on the sale of the plastics fabrication
business.
OUTLOOK
The world economy continued to recover during the second quarter and further
growth is expected in the third quarter, though recent financial market weakness
poses a downside risk to this economic outlook. BP's overall trading environment
improved to around "mid-cycle" during the second quarter, but was below this
level on average for the half year.
Crude oil prices have remained firm. The market has shown some signs of
underlying strength as inventories stabilized rather than built seasonally. OPEC
left its production quotas unchanged at its June meeting. Geopolitical concerns
have remained. Realized prices are expected to remain close to the range
experienced in the second quarter assuming OPEC production continues around
current levels.
US natural gas prices firmed in the second half of August in the face of
stronger crude prices and high late summer temperatures and despite high levels
of gas in storage. Third quarter average realizations are still expected to be
somewhat lower than in the second quarter following low prices in July and early
August.
Third quarter 2002 hydrocarbon production growth is expected to be around 5% -
lower than previously projected, due to operational problems during August
associated with Schiehallion and the Interconnector in the UKCS, shut in wells
in Alaska and gas export constraints in North America. Because of these
operational problems and their impact on the fourth quarter, full-year
hydrocarbon production growth for 2002 is expected to be in the range of 4.5 to
5 per cent. New projects which contribute to production in the second half of
the year include King and Trinidad LNG train 2, already in production, and
King's Peak, Horn Mountain and Princess, in the Gulf of Mexico. BP's medium-term
production target of 5.5 per cent compound annual growth, averaged over the
period 2000 to 2005, remains unchanged.
The third quarter impacts on production arose from: a problem with the
Schiehallion offshore-loading vessel which shut down the field in August, with a
loss to BP of 55,000 barrels a day (the field is now back on stream but faces
reduced operating efficiency until permanent repairs to the ship's swivel
mechanism and umbilical controls are completed); the shutdowns of the
Interconnector pipeline which interrupted gas exports to the continent and
curtailed production; a casing failure in Alaska which caused the precautionary
shutdown for testing of 150 North Slope wells; and reduced North American gas
output resulting from throughput constraints in third-party pipelines and
processing plants.
Refining margins have remained under pressure from firm crude prices and high
product inventories. Although in aggregate OECD product inventories have moved
downward to close to 1997-2001 average levels, distillate stocks remain high and
are likely to limit near term upward potential in refining margins.
Page 12
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - concluded
Retail margins have stabilized, having recovered from the low levels experienced
during the first quarter. Competitive pressure, especially in the USA, remains
strong.
During the second quarter, demand for most chemical products improved, in part
reflecting restocking by end-users. Margins, however, still remain weak and any
strengthening is dependent upon continued global economic recovery.
Capital expenditure is on track for the upper end of the year's target range at
around $13 billion, excluding acquisitions. The net debt ratio was below the
mid-point of the 25-35% range at the end of the second quarter and is likely to
remain relatively stable around this level as the payment for the purchase of
the remaining interest in Veba has been offset by the receipt of Ruhrgas
proceeds in July. The company restarted its share buyback programme in early
August and intends to continue that programme whilst the trading environment is
above mid-cycle.
FORWARD-LOOKING STATEMENTS
In order to utilize the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, BP is providing the following
cautionary statement. The foregoing discussion, in particular, although not
limited to, the statements under 'Outlook', with regard to hydrocarbon
production growth and targets, the outlook for economic recovery, trends in the
trading environment, the timing of new projects, oil and gas prices and margins,
refining margins, expected realizations on gas sales, inventory and product
stock levels, planned product phase-outs, capacity utilization, capital
expenditure trends and targets, working capital, profitability, results of
operation, dividend payments and liquidity or financial position are all
forward-looking in nature. Forward-looking statements are also identified by
such phrases as 'will', 'expects', 'is expected to', 'should', 'may', 'is likely
to', 'intends' and 'believes'. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future and are outside the control of BP.
Actual results may differ materially from those expressed in such statements,
depending on a variety of factors, including the specific factors identified in
the discussions accompanying such forward-looking statements, future levels of
industry product supply, the timing of bringing new fields onstream, demand and
pricing, operational problems, political stability and economic growth in
relevant areas of the world, development and use of new technology, successful
partnering, the actions of competitors, the actions of third party suppliers of
facilities and services, natural disasters and other changes to business
conditions, wars and acts of terrorism or sabotage, and other factors discussed
elsewhere in this report. These and other factors may cause actual results and
developments to differ materially from those expressed or implied by these
forward-looking statements. Additional information, including information on
factors which may affect BP's business, is contained in BP's Annual Report and
Annual Accounts for 2001 and the Annual Report on Form 20-F for 2001 filed with
the US Securities and Exchange Commission.
2002 DIVIDENDS
On July 30, 2002, BP p.l.c. announced a second quarterly dividend for 2002 of
6.0 cents per ordinary share of 25 cents (ordinary shares), representing $0.36
per American Depositary Share (ADS) amounting to $1,347 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares is August 16, 2002, with payment to be made
on September 9, 2002.
The dividend payable on September 9, 2002 entitles qualifying US ADS
shareholders to a refund of the 1/9th UK tax credit (approximately $0.038)
attaching to the dividend less a UK withholding tax limited to the amount of the
tax credit. The effect of these arrangements for ADS holders is currently a cash
payment of $0.345, a gross dividend for tax purposes of $0.383 and a potential
tax credit of $0.038 per ADS.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan will receive the dividend in the form of shares on September 9,
2002.
Page 13
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million, except per share amounts)
Turnover - Note 3 44,059 48,689 80,628 94,389
Less: joint ventures 404 280 683 568
------- ------ ------ -------
Group turnover 43,655 48,409 79,945 93,821
Replacement cost of sales 37,177 40,706 68,730 77,894
Production taxes - Note 4 315 433 562 1,016
------- ------ ------ -------
Gross profit 6,163 7,270 10,653 14,911
Distribution and administration expenses 3,123 2,638 5,814 5,164
Exploration expense - Note 5 222 81 346 250
------- ------ ------ -------
2,818 4,551 4,493 9,497
Other income 147 112 272 307
------- ------ ------ -------
Group replacement cost operating profit 2,965 4,663 4,765 9,804
Share of profits of joint ventures 89 125 159 227
Share of profits of associated undertakings 196 157 384 386
------- ------ ------ -------
Total replacement cost operating profit - Note 6 3,250 4,945 5,308 10,417
Profit (loss) on sale of fixed assets and businesses
or termination of operations - Note 7 376 171 267 389
------- ------ ------ -------
Replacement cost profit before interest and tax - Note 6 3,626 5,116 5,575 10,806
Inventory holding gains (losses) - Note 8 525 40 998 (198)
------- ------ ------ -------
Historical cost profit before interest and tax 4,151 5,156 6,573 10,608
Interest expense - Note 9 314 441 647 887
------- ------ ------ -------
Profit before taxation 3,837 4,715 5,926 9,721
Taxation - Note 10 1,751 1,956 2,504 4,124
------- ------ ------ -------
Profit after taxation 2,086 2,759 3,422 5,597
Minority shareholders' interest 46 18 86 26
------- ------ ------ -------
Profit for the period (a) 2,040 2,741 3,336 5,571
======= ====== ====== =======
Earnings per ordinary share - cents (a)
Basic 9.10 12.21 14.88 24.80
Diluted 9.05 12.14 14.80 24.65
------- ------ ------ -------
Earnings per American depositary share - cents (a)
Basic 54.60 73.26 89.28 148.80
Diluted 54.30 72.84 88.80 147.90
------- ------ ------- -------
Average number of outstanding ordinary shares(millions) 22,427 22,448 22,415 22,461
======= ====== ====== =======
---------------
(a) A summary of the material adjustments to profit for the period which would
be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 14
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 2002 December 31, 2001
(Unaudited)
---------------- -----------------
($ million)
Fixed assets
Intangible assets 16,163 16,489
Tangible assets 85,587 77,410
Investments 12,257 11,963
-------- --------
114,007 105,862
Current assets
Inventories 9,818 7,631
Receivables 32,344 26,669
Investments 285 450
Cash at bank and in hand 1,284 1,358
-------- --------
43,731 36,108
-------- --------
Current liabilities - falling due within one year
Finance debt 8,854 9,090
Accounts payable and accrued liabilities 38,400 28,524
-------- --------
47,254 37,614
-------- --------
Net current liabilities (3,523) (1,506)
-------- --------
Total assets less current liabilities 110,484 104,356
Noncurrent liabilities
Finance debt 12,555 12,327
Accounts payable and accrued liabilities 3,380 3,086
Provisions for liabilities and charges
Deferred tax 13,318 11,702
Other 13,105 11,482
-------- --------
42,358 38,597
-------- --------
Net assets 68,126 65,759
Minority shareholders' interest 558 598
-------- --------
BP shareholders' interest (a) - Note 14 67,568 65,161
======== ========
Represented by:
Capital shares
Preference 21 21
Ordinary 5,616 5,608
Paid-in surplus 4,131 4,014
Merger reserve 27,026 26,983
Retained earnings 30,594 28,312
Other reserves 180 223
-------- --------
67,568 65,161
======== ========
---------------
(a) A summary of the material adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 15
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Net cash inflow from operating activities 5,133 5,076 8,769 11,816
------- ------- ------- -------
Dividends from joint ventures 16 54 99 66
------- ------- ------- -------
Dividends from associated undertakings 154 159 207 269
------- ------- ------- -------
Servicing of finance and returns on investments
Interest received 57 59 105 150
Interest paid (342) (384) (651) (745)
Dividends received 58 30 60 38
Dividends paid to minority shareholders (3) (5) (16) (5)
------- ------- ------- -------
Net cash outflow from servicing of finance
and returns on investments (230) (300) (502) (562)
------- ------- ------- -------
Taxation
UK corporation tax (167) (169) (354) (373)
Overseas tax (760) (2,213) (1,018) (2,148)
------- ------- ------- -------
Tax paid (927) (2,382) (1,372) (2,521)
------- ------- ------- -------
Capital expenditure
Payments for fixed assets (2,793) (3,016) (5,592) (5,593)
Proceeds from the sale of fixed assets 939 232 1,256 926
------- ------- ------- -------
Net cash outflow for capital expenditure (1,854) (2,784) (4,336) (4,667)
------- ------- ------- -------
Acquisitions and disposals
Investments in associated undertakings (488) (148) (631) (268)
Acquisitions, net of cash acquired (139) (560) (1,689) (560)
Net investment in joint ventures (68) (72) (114) (133)
Proceeds from the sale of businesses 1,584 - 1,615 -
------- ------- ------- -------
Net cash (outflow) inflow for
acquisitions and disposals 889 (780) (819) (961)
------- ------- ------- -------
Equity dividends paid (1,290) (1,179) (2,578) (2,360)
------- ------- ------- -------
Net cash inflow (outflow) 1,891 (2,136) (532) 1,080
======= ======= ======= =======
Financing 2,017 (1,669) (266) 1,197
Management of liquid resources 33 (404) (132) (102)
Increase (decrease) in cash (159) (63) (134) (15)
------- ------- ------- -------
1,891 (2,136) (532) 1,080
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 16
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Reconciliation of historical cost profit before interest
and tax to net cash inflow from operating activities
Historical cost profit before interest and tax 4,151 5,156 6,573 10,608
Depreciation and amounts provided 2,227 2,130 4,380 4,297
Exploration expenditure written off 147 22 206 130
Share of profits of joint ventures and
associated undertakings (288) (282) (544) (613)
Interest and other income (118) (127) (181) (230)
(Profit) loss on sale of fixed assets and businesses (374) (171) (265) (389)
Charge for provisions 325 541 494 706
Utilization of provisions (373) (329) (611) (635)
Decrease (increase) in stocks (807) (371) (1,303) (13)
Decrease (increase) in debtors (1,614) (399) (2,024) (1,468)
Increase (decrease) in creditors 1,857 (1,094) 2,044 (577)
------- ------- ------- -------
Net cash inflow from operating activities 5,133 5,076 8,769 11,816
------- ------- ------- -------
Financing
Long-term borrowing (752) (505) (2,498) (1,022)
Repayments of long-term borrowing 663 1,034 897 1,180
Short-term borrowing (753) (2,589) (4,252) (2,750)
Repayments of short-term borrowing 2,891 172 5,710 3,127
------- ------- ------- -------
2,049 (1,888) (143) 535
Issue of ordinary share capital (32) (64) (123) (120)
Repurchase of ordinary share capital - 283 - 782
------- ------- ------- -------
Net cash (inflow) outflow from financing 2,017 (1,669) (266) 1,197
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 17
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the interim periods are unaudited and in the opinion of
management include all adjustments necessary for a fair presentation of the
results for the periods presented. The interim financial statements and
notes included in this Report should be read in conjunction with the
consolidated financial statements and related notes for the year ended
December 31, 2001 included in BP's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
2. Restatement of comparative information
Comparative information for 2001 has been restated to reflect the changes
described below.
(a) Transfer of solar, renewables and alternative fuels activities
With effect from January 1, 2002, the solar, renewables and
alternative fuels activities have been transferred from Other
businesses and corporate to Gas and Power. To reflect this transfer
Gas and Power has been renamed Gas, Power and Renewables from the same
date.
(b) New accounting standard for deferred tax
With effect from January 1, 2002 BP has adopted Financial Reporting
Standard No.19 'Deferred Tax' (FRS 19). This standard generally
requires that deferred tax should be provided on a full liability
basis rather than on a restricted liability basis as required by
Statement of Standard Accounting Practice No.15 'Accounting for
Deferred Tax'. The adoption of FRS 19 has been treated as a change in
accounting policy.
Under FRS 19 deferred tax is recognised in respect of all timing
differences that have originated but not reversed at the balance sheet
date where transactions or events have occurred at that date that will
result in an obligation to pay more, or right to pay less tax in the
future. In particular:
o Provision is made for tax on gains arising from the disposal of
fixed assets that have been rolled over into replacement assets,
only to the extent that, at the balance sheet date, there is a
binding agreement to dispose of the replacement assets concerned.
However, no provision is made where, on the basis of all
available evidence at the balance sheet date, it is more likely
than not that the taxable gain will be rolled over into
replacement assets and charged to tax only where the replacement
assets are sold.
o Provision is made for deferred tax that would arise on remittance
of the retained earnings of overseas subsidiaries, joint ventures
and associated undertakings only to the extent that, at the
balance sheet date, dividends have been accrued as receivable.
Deferred tax assets are recognised only to the extent that it is
considered more likely than not that there will be suitable taxable
profits from which the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates
that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted
at the balance sheet date.
As a consequence of adopting FRS 19 acquisitions have been restated as
if the new standard applied at that time. This leads to the creation
of higher deferred tax liabilities and greater amounts of goodwill on
those acquisitions.
Page18
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement of comparative information (continued)
Income statement Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million, except per share amounts)
Turnover 48,689 48,689 94,389 94,389
Less: joint ventures 280 280 568 568
------- ------- ------- -------
Group turnover 48,409 48,409 93,821 93,821
Replacement cost of sales 40,706 40,679 77,894 77,840
Production taxes 433 433 1,016 1,016
------- ------- ------- -------
Gross profit 7,270 7,297 14,911 14,965
Distribution and administration expenses 2,638 2,638 5,164 5,164
Exploration expense 81 81 250 250
------- ------- ------- -------
4,551 4,578 9,497 9,551
Other income 112 112 307 307
------- ------- ------- -------
Group replacement cost operating profit 4,663 4,690 9,804 9,858
Share of profits of joint ventures 125 125 227 227
Share of profits of associated undertakings 157 157 386 386
------- ------- ------- -------
Total replacement cost operating profit(a) 4,945 4,972 10,417 10,471
Profit (loss) on sale of fixed assets and and
businesses or termination of operations 171 171 389 389
------- ------- ------- -------
Replacement cost profit before interest and tax 5,116 5,143 10,806 10,860
Inventory holding gains (losses) 40 40 (198) (198)
------- ------- ------- -------
Historical cost profit before interest and tax 5,156 5,183 10,608 10,662
Interest expense 441 441 887 887
------- ------- ------- -------
Profit before taxation 4,715 4,742 9,721 9,775
Taxation 1,956 1,550 4,124 3,268
------- ------- ------- -------
Profit after taxation 2,759 3,192 5,597 6,507
Minority shareholders' interest 18 21 26 32
------- ------- ------- -------
Profit for the period 2,741 3,171 5,571 6,475
------- ------- ------- -------
Distribution to shareholders 1,236 1,236 2,414 2,414
------- ------- ------- -------
Earnings per ordinary share - cents
Basic 12.21 14.12 24.80 28.82
Diluted 12.14 14.04 24.65 28.65
======= ======= ======= =======
---------------
(a) Total replacement cost operating profit, by business
Exploration and Production 3,427 3,441 8,093 8,121
Gas, Power and Renewables 161 173 261 285
Refining and Marketing 1,464 1,477 2,204 2,230
Chemicals 9 9 90 90
Other businesses and corporate (116) (128) (231) (255)
------- ------- ------- -------
4,945 4,972 10,417 10,471
======= ======= ======= =======
Page 19
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement of comparative information (concluded)
Balance sheet at December 31, 2001 Restated Reported
-----------------------------
($ million)
Fixed assets
Intangible assets 16,489 15,593
Tangible assets 77,410 77,410
Investments 11,963 12,047
-----------------------------
105,862 105,050
-----------------------------
Current assets 36,108 36,108
Current liabilities - amounts falling due within one year 37,614 37,614
-----------------------------
Net current liabilities (1,506) (1,506)
-----------------------------
Total assets less current liabilities 104,356 103,544
Noncurrent liabilities 15,413 15,413
Provisions for liabilities and charges
Deferred taxation 11,702 1,655
Other provisions 11,482 11,482
-----------------------------
Net assets 65,759 74,994
Minority shareholders' interest 598 627
-----------------------------
BP shareholders' interest 65,161 74,367
=============================
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
3. Turnover
By business
Exploration and Production 6,539 7,441 12,177 16,558
Gas, Power and Renewables 8,235 10,491 16,003 22,613
Refining and Marketing 31,870 34,257 56,759 62,780
Chemicals 3,584 3,073 6,226 5,762
Other businesses and corporate 136 138 271 265
------- ------- ------- -------
50,364 55,400 91,436 107,978
Less: sales between businesses 6,709 6,991 11,491 14,157
------- ------- ------- -------
Group excluding joint ventures 43,655 48,409 79,945 93,821
Sales of joint ventures 404 280 683 568
------- ------- ------- -------
44,059 48,689 80,628 94,389
======= ======= ======= =======
By geographical area
UK 12,509 11,974 23,504 23,914
Rest of Europe 12,219 10,043 21,338 19,018
USA 19,663 24,791 34,928 47,282
Rest of World 8,035 8,929 15,019 18,620
------- ------- ------- -------
52,426 55,737 94,789 108,834
Less: Sales between areas 8,771 7,328 14,844 15,013
------- ------- ------- -------
43,655 48,409 79,945 93,821
======= ======= ======= =======
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
4. Production taxes
UK petroleum revenue tax 90 135 153 373
Overseas production taxes 225 298 409 643
------- ------- ------- -------
315 433 562 1,016
======== ======= ======= =======
5. Exploration expense
Exploration and Production
UK 4 - 10 4
Rest of Europe 13 3 36 5
USA 133 40 175 133
Rest of World 72 38 125 108
------- ------- ------- -------
222 81 346 250
======== ======= ======= =======
6. Replacement cost profit
Replacement cost profits reflect the current cost of supplies. The
replacement cost profit for the period is arrived at by excluding from the
historical cost profit inventory holding gains and losses. These are the
difference between the amount that is charged to cost of sales on a
first-in, first-out (FIFO) basis of inventory valuation and the amount
charged to cost of sales based on the average cost of supplies incurred
during the period. The former basis is used in arriving at the historical
cost result whereas the latter basis is used in arriving at the replacement
cost result. BP presents financial information on a replacement cost basis
in order to provide better comparability to the major US oil companies,
which apply the last in, first out (LIFO) basis of inventory valuation. The
LIFO basis is not permitted under UK GAAP. BP management believes that
where inventory volumes remain constant or increase in a period, operating
profit on the LIFO basis will not differ materially from operating profit
on BP's replacement cost basis. For further discussion of replacement cost
operating profit see Item 3 of BP`s Annual Report on Form 20-F for the year
ended December 31, 2001.
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
7. Analysis of exceptional items
Profit (loss) on sale of fixed assets and
businesses or termination of operations
Exploration and Production 427 319 432 277
Gas, Power and Renewables (1) - (1) (1)
Refining and Marketing 31 (59) (14) 206
Chemicals (85) (80) (145) (86)
Other businesses and corporate 4 (9) (5) (7)
------- ------- ------- -------
Exceptional items before taxation 376 171 267 389
Taxation charge (160) (118) (121) (269)
------- ------- ------- -------
Exceptional items after taxation 216 53 146 120
======= ======= ======= =======
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Income statement Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million, except per share amounts)
8. Inventory holding gains (losses)
Exploration and Production (1) (9) 2 -
Gas, Power and Renewables 4 (33) 8 (44)
Refining and Marketing 444 99 939 (144)
Chemicals 78 (17) 49 (10)
------- ------- ------- -------
525 40 998 (198)
Minority shareholders' interest (6) - 25 -
------- ------- ------- -------
531 40 973 (198)
======= ======= ======= =======
9. Interest expense
Group interest payable (a) 261 363 528 730
Capitalized (25) (21) (40) (55)
------- ------- ------- -------
236 342 488 675
Joint ventures 15 13 29 33
Associated undertakings 21 36 45 76
Unwinding of discount on provisions 42 50 85 103
------- ------- ------- -------
314 441 647 887
======= ======= ======= =======
---------------
(a) Includes charges relating to the
early redemption of debt - 50 - 60
------- ------- ------- -------
10. Charge for taxation
Current 1,040 1,640 1,573 3,375
Deferred (a) 711 316 931 749
------- ------- ------- -------
1,751 1,956 2,504 4,124
======= ======= ======= =======
United Kingdom 646 250 835 522
Overseas 1,105 1,706 1,669 3,602
------- ------- ------- -------
1,751 1,956 2,504 4,124
======= ======= ======= =======
---------------
(a) Includes the charge relating to
the supplementary UK corporation tax of 10% 355 - 355 -
------- ------- ------- -------
11. Reconciliation of replacement cost results
Historical cost profit (loss) for the period 2,040 2,741 3,336 5,571
Inventory holding (gains) losses (a) (531) (40) (973) 198
------- ------- -------- -------
Replacement cost profit for the period 1,509 2,701 2,363 5,769
Exceptional items (b) (216) (53) (146) (120)
------- ------- ------- -------
Replacement cost profit before exceptional items 1,293 2,648 2,217 5,649
------- ------- ------- -------
Earnings per ordinary share - cents
On replacement cost profit before
exceptional items 5.77 11.80 9.89 25.15
======= ======= ======= =======
--------------
(a) Net of minority shareholders' interest 6 - (25) -
(b) Net of tax charge 160 118 121 269
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis
Gas, Other
Exploration Power Refining businesses
By business and and and and
Production Renewables Marketing Chemicals corporate Eliminations Total
----------- ---------- --------- --------- ---------- ------------ -----
($ million)
Three months ended June 30, 2002
Group turnover
- third parties 1,246 7,816 30,922 3,535 136 - 43,655
- sales between between businesses 5,293 419 948 49 - (6,709) -
-----------------------------------------------------------------------------------
6,539 8,235 31,870 3,584 136 (6,709) 43,655
-----------------------------------------------------------------------------------
Share of sales by joint ventures 137 - 102 165 - - 404
-----------------------------------------------------------------------------------
Equity accounted income 127 38 51 57 12 - 285
-----------------------------------------------------------------------------------
Total replacement cost
operating profit (loss) 2,458 114 603 203 (128) - 3,250
Exceptional items 427 (1) 31 (85) 4 - 376
Inventory holding gains (losses) (1) 4 444 78 - - 525
-----------------------------------------------------------------------------------
Historical cost profit (loss) 2,884 117 1,078 196 (124) - 4,151
before interest and tax
-----------------------------------------------------------------------------------
Capital expenditure and acquisitions 2,573 132 2,965 170 267 - 6,107
Three months ended June 30, 2001
Group turnover
- third parties 2,254 9,730 33,273 3,014 138 - 48,409
- sales between businesses 5,187 761 984 59 - (6,991) -
-----------------------------------------------------------------------------------
7,441 10,491 34,257 3,073 138 (6,991) 48,409
-----------------------------------------------------------------------------------
Share of sales by joint ventures 131 - 149 - - - 280
-----------------------------------------------------------------------------------
Equity accounted income 138 29 60 33 22 - 282
-----------------------------------------------------------------------------------
Total replacement cost
operating profit (loss) 3,427 161 1,464 9 (116) - 4,945
Exceptional items 319 - (59) (80) (9) - 171
Inventory holding gains (losses) (9) (33) 99 (17) - - 40
-----------------------------------------------------------------------------------
Historical cost profit (loss)
before interest and tax 3,737 128 1,504 (88) (125) - 5,156
-----------------------------------------------------------------------------------
Capital expenditure and acquisitions 2,423 68 487 766 52 - 3,796
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis (continued)
By geographical area Rest of Rest of
UK Europe USA World Eliminations Total
--------------------------------------------------------------
($ million)
Three months ended June 30, 2002
Group turnover - third parties 8,172 10,311 18,643 6,529 - 43,655
- sales between areas 4,337 1,908 1,020 1,506 (8,771) -
--------------------------------------------------------------
12,509 12,219 19,663 8,035 (8,771) 43,655
--------------------------------------------------------------
Share of sales by joint ventures 72 70 60 202 - 404
--------------------------------------------------------------
Equity accounted income (3) 50 74 164 - 285
-------------------------------------------------------------
Total replacement cost operating profit 504 526 1,103 1,117 - 3,250
Exceptional items (24) (45) 482 (37) - 376
Inventory holding gains (losses) 12 70 415 28 - 525
-------------------------------------------------------------
Historical cost profit before
interest and tax 492 551 2,000 1,108 - 4,151
-------------------------------------------------------------
Capital expenditure and acquisitions 400 2,953 1,467 1,287 - 6,107
Three months ended June 30, 2001
Group turnover - third parties 8,629 8,157 24,525 7,098 - 48,409
- sales between areas 3,345 1,886 266 1,831 (7,328) -
--------------------------------------------------------------
11,974 10,043 24,791 8,929 (7,328) 48,409
--------------------------------------------------------------
Share of sales by joint ventures - - 100 180 - 280
--------------------------------------------------------------
Equity accounted income (10) 42 78 172 - 282
--------------------------------------------------------------
Total replacement cost operating profit 814 429 2,485 1,217 - 4,945
Exceptional items (24) (1) (133) 329 - 171
Inventory holding gains (losses) 14 80 (35) (19) - 40
--------------------------------------------------------------
Historical cost profit before
interest and tax 804 508 2,317 1,527 - 5,156
--------------------------------------------------------------
Capital expenditure and acquisitions 448 758 1,628 962 - 3,796
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis (continued)
Gas, Other
Exploration Power Refining businesses
By business and and and and
Production Renewables Marketing Chemicals corporate Eliminations Total
-----------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2002
Group turnover
- third parties 3,337 15,129 55,143 6,065 271 - 79,945
- sales between businesses 8,840 874 1,616 161 - (11,491) -
-----------------------------------------------------------------------------------
12,177 16,003 56,759 6,226 271 (11,491) 79,945
-----------------------------------------------------------------------------------
Share of sales by joint ventures 232 - 179 272 - - 683
-----------------------------------------------------------------------------------
Equity accounted income 252 92 102 68 29 - 543
-----------------------------------------------------------------------------------
Total replacement cost
operating profit (loss) 4,386 225 671 279 (253) - 5,308
Exceptional items 432 (1) (14) (145) (5) - 267
Inventory holding gains (losses) 2 8 939 49 - - 998
-----------------------------------------------------------------------------------
Historical cost profit (loss)
before interest and tax 4,820 232 1,596 183 (258) - 6,573
-----------------------------------------------------------------------------------
Capital expenditure and acquisitions 4,886 178 6,102 358 319 - 11,843
Six months ended June 30, 2001
Group turnover
- third parties 5,752 21,063 61,091 5,650 265 - 93,821
- sales between between 10,806 1,550 1,689 112 - (14,157) -
-----------------------------------------------------------------------------------
16,558 22,613 62,780 5,762 265 (14,157) 93,821
-----------------------------------------------------------------------------------
Share of sales by joint ventures 326 - 242 - - - 568
-----------------------------------------------------------------------------------
Equity accounted income 317 85 102 77 32 - 613
-----------------------------------------------------------------------------------
Total replacement cost
operating profit (loss) 8,093 261 2,204 90 (231) - 10,417
Exceptional items 277 (1) 206 (86) (7) - 389
Inventory holding gains (losses) - (44) (144) (10) - - (198)
-----------------------------------------------------------------------------------
Historical cost profit (loss)
before interest and tax 8,370 216 2,266 (6) (238) - 10,608
-----------------------------------------------------------------------------------
Capital expenditure and acquisitions 4,289 104 857 982 101 - 6,333
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis (concluded)
By geographical area Rest of Rest of
UK Europe USA World Eliminations Total
--------------------------------------------------------------
($ million)
Six months ended June 30, 2002
Group turnover - third parties 16,584 17,629 33,641 12,091 - 79,945
- sales between areas 6,920 3,709 1,287 2,928 (14,844) -
--------------------------------------------------------------
23,504 21,338 34,928 15,019 (14,844) 79,945
--------------------------------------------------------------
Share of sales by joint ventures 104 126 103 350 - 683
--------------------------------------------------------------
Equity accounted income (3) 111 129 306 - 543
--------------------------------------------------------------
Total replacement cost operating profit 1,034 912 1,261 2,101 - 5,308
Exceptional items (33) (35) 373 (38) - 267
Inventory holding gains (losses) 58 182 699 59 - 998
--------------------------------------------------------------
Historical cost profit before
interest and tax 1,059 1,059 2,333 2,122 - 6,573
--------------------------------------------------------------
Capital expenditure and acquisitions 809 5,805 2,998 2,231 - 11,843
Six months ended June 30, 2001
Group turnover - third parties 17,193 15,161 46,475 14,992 - 93,821
- sales between areas 6,721 3,857 807 3,628 (15,013) -
--------------------------------------------------------------
23,914 19,018 47,282 18,620 (15,013) 93,821
--------------------------------------------------------------
Share of sales by joint ventures - - 187 381 - 568
--------------------------------------------------------------
Equity accounted income 2 124 142 345 - 613
--------------------------------------------------------------
Total replacement cost operating profit 1,741 914 5,170 2,592 - 10,417
Exceptional items (14) 1 106 296 - 389
Inventory holding gains (losses) (33) 5 (181) 11 - (198)
--------------------------------------------------------------
Historical cost profit before
interest and tax 1,694 920 5,095 2,899 - 10,608
--------------------------------------------------------------
Capital expenditure and acquisitions 842 897 2,838 1,756 - 6,333
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
13. Analysis of changes in net debt
Opening balance
Finance debt 24,531 18,788 21,417 21,190
Less: Cash 1,379 1,188 1,358 1,170
Current asset investments 286 959 450 661
------- ------- ------- -------
Opening net debt 22,866 16,641 19,609 19,359
------- ------- ------- -------
Closing balance
Finance debt 21,409 20,498 21,409 20,498
Less: Cash 1,284 1,103 1,284 1,103
Current asset investments 285 563 285 563
------- ------- ------- -------
Closing net debt 19,840 18,832 19,840 18,832
------- ------- ------- -------
(Increase) decrease in net debt 3,026 (2,191) (231) 527
======= ======= ======= =======
Movement in cash/bank overdrafts (159) (63) (134) (15)
(Decrease) increase in current asset investments 33 (404) (132) (102)
Net cash (inflow) outflow from financing
(excluding share capital) 2,049 (1,888) (143) 535
Partnership interests exchanged for BP loan notes 1,135 - 1,135 -
Other movements 19 51 44 82
Debt acquired - (47) (999) (47)
------- ------- ------- -------
Movements in net debt before exchange effect 3,077 (2,351) (229) 453
Exchange adjustments (51) 160 (2) 74
------- ------- ------- -------
(Increase) decrease in net debt 3,026 (2,191) (231) 527
======= ======= ======= =======
14. Movement in BP shareholders' interest $ million
(Unaudited)
Balance at December 31, 2001 74,367
Prior year adjustment - change in accounting policy (see Note 2) (9,206)
-------
As restated 65,161
Profit for the period 3,336
Distribution to shareholders (2,637)
Currency translation differences 1,585
Employee share schemes 123
-------
Balance at June 30, 2002 67,568
=======
Page 27
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles
The consolidated financial statements of the BP Group are prepared in
accordance with UK GAAP which differs in certain respects from US GAAP. The
principal differences between US GAAP and UK GAAP for BP Group reporting
relate to the following:
(i) Group consolidation
Where the Group conducts activities through a joint arrangement that
is not carrying on a trade or business in its own right the Group
accounts for its own assets, liabilities and cash flows of the
activity measured according to the terms of the arrangement. For the
Group this method of accounting applies to certain oil and natural gas
activities and undivided interests in pipelines. US GAAP permits these
activities to be accounted for by proportional consolidation, which is
equivalent to UK GAAP.
Joint ventures and associated undertakings are accounted for by the
equity method. UK GAAP requires the consolidated financial statements
to show separately the Group proportion of operating profit or loss,
exceptional items, inventory holding gains or losses, interest expense
and taxation of associated undertakings and joint ventures. In
addition the turnover of joint ventures should be disclosed. For US
GAAP the after tax profits or losses (i.e. operating results after
exceptional items, inventory holding gains or losses, interest expense
and taxation) are included in the income statement as a single line
item.
UK GAAP requires the Group's share of the gross assets and gross
liabilities of joint ventures to be shown on the face of the balance
sheet whereas under US GAAP the net investment is included as a single
line item.
The following summarizes the reclassifications for joint ventures and
associated undertakings necessary to accord with US GAAP.
Three months ended June 30, 2002
(Unaudited)
---------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------------
($ million)
Consolidated statement of income
Other income 147 192 339
Share of profits of JVs and
associated undertakings 285 (285) -
Exceptional items before taxation 376 (2) 374
Inventory holding gains (losses) 525 - 525
Interest expense 314 (36) 278
Taxation 1,751 (59) 1,692
Profit for the period 2,040 - 2,040
Six months ended June 30, 2002
(Unaudited)
---------------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------------
($ million)
Consolidated statement of income
Other income 272 345 617
Share of profits of JVs and
associated undertakings 543 (543) -
Exceptional items before taxation 267 (2) 265
Inventory holding gains (losses) 998 2 1,000
Interest expense 647 (74) 573
Taxation 2,504 (124) 2,380
Profit for the period 3,336 - 3,336
Page 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(i) Group consolidation (concluded)
Three months ended June 30, 2001
(Unaudited)
---------------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------------
($ million)
Consolidated statement of income
Other income 112 175 287
Share of profits of JVs and 282 (282) -
associated undertakings
Exceptional items before taxation 171 1 172
Inventory holding gains (losses) 40 (1) 39
Interest expense 441 (49) 392
Taxation 1,956 (58) 1,898
Profit for the period 2,741 - 2,741
Six months ended June 30, 2001
(Unaudited)
---------------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------------
($ million)
Consolidated statement of income
Other income 307 360 667
Share of profits of JVs and
associated undertakings 613 (613) -
Exceptional items before taxation 389 1 390
Inventory holding gains (losses) (198) (1) (199)
Interest expense 887 (109) 778
Taxation 4,124 (144) 3,980
Profit for the period 5,571 - 5,571
(ii) Income statement
The income statement prepared under UK GAAP shows sub-totals for
replacement cost profit before interest and tax, historical cost profit
before interest and tax and profit after taxation. These line items are not
recognized under US GAAP.
(iii)Exceptional items
Under UK GAAP certain exceptional items are shown separately on the face of
the income statement after operating profit. These items are profits or
losses on the sale of fixed assets and businesses or sale or termination of
operations and fundamental restructuring charges. Under US GAAP these items
are classified as operating income or expenses.
(iv) Deferred taxation/business combinations
US GAAP requires the recognition of a deferred tax asset or liability for
the tax effects of differences between the assigned values and the tax
bases of assets acquired and liabilities assumed in a purchase business
combination, whereas under UK GAAP no such deferred tax asset or liability
is recognized. Under US GAAP the deferred tax asset or liability is
amortized over the same period as the assets and liabilities to which it
relates.
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iv) Deferred taxation/business combinations (concluded)
The adjustments to profit for the year and to BP shareholders' interest to
accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 139 304 290 567
Taxation (80) (335) (174) (672)
Profit for the year (59) 31 (116) 105
====== ====== ===== =====
At At
June 30, December 31,
2002 2001
(Unaudited)
---------- -----------
($ million)
Tangible assets 7,339 7,032
Deferred taxation 7,217 6,789
BP shareholders' interest 122 243
======== ========
(v) Provisions
UK GAAP requires provisions for decommissioning, environmental
liabilities and onerous contracts to be determined on a discounted
basis if the effect of the time value of money is material. Unwinding
of the discount and the effect of a change in the discount rate is
included in interest expense in the period. When a decommissioning
provision is set up, a tangible fixed asset of the same amount is also
recognized and is subsequently depreciated as part of the capital
costs of the facilities. Under US GAAP (i) environmental liabilities
are discounted only where the timing and amounts of payments are fixed
and reliably determinable and (ii) provisions for decommissioning are
provided on a unit-of-production basis over field lives; there is no
corresponding tangible fixed asset.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 32 68 109 157
Interest expense (42) (50) (85) (103)
Taxation (8) (30) (16) (48)
Profit for the year 18 12 (8) (6)
====== ====== ====== ======
At At
June 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Tangible assets (871) (785)
Provisions 747 780
Deferred taxation (531) (511)
BP shareholders' interest (1,087) (1,054)
======== ========
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Sale and leaseback
The sale and leaseback of an office building in Chicago, Illinois
in 1998 was treated as a sale for UK GAAP whereas for US GAAP it
was treated as a financing transaction.
A provision was recognized under UK GAAP in 1999 to cover the
likely shortfall on rental income from subletting the Chicago
office building. As the original sale and leaseback was not
treated as a sale for US GAAP the provision has been reversed for
US GAAP.
Under UK GAAP the profit arising on the sale and operating
leaseback of certain railcars in 1999 was taken to income in the
period in which the transaction occurred. Under US GAAP this
profit was not recognized immediately but amortized over the term
of the operating lease.
The adjustments to profit for the year and BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 2 31 7 37
Taxation (1) (1) (2) 2
Profit for the year (1) (30) (5) (39)
====== ====== ====== ======
At At
June 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Tangible assets 166 171
Other accounts payable and accrued liabilities 29 30
Provisions (64) (65)
Finance debt 413 413
Deferred taxation (74) (73)
BP shareholders' interest (138) (134)
======== ========
(vii)Goodwill and intangible assets
Various differences in the basis for determining goodwill between UK
and US GAAP result in goodwill for US GAAP reporting differing from
the amount recognized under UK GAAP.
On January 1, 2002 the Group adopted Statement of Financial Accounting
Standards No. 142 `Goodwill and Other Intangible Assets' (SFAS 142)
for US GAAP reporting. This standard eliminates the requirement to
amortize goodwill and indefinite lived intangible assets. Rather, such
assets are subject to periodic impairment testing. Intangible assets
that are not deemed to have an indefinite life continue to be
amortized over their estimated useful lives. Amortization of goodwill
charged to income under UK GAAP has been reversed for US GAAP.
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vii)Goodwill and intangible assets (continued)
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales (322) (15) (643) (30)
Taxation - - - -
Profit for the year 322 15 643 30
====== ===== ===== =====
At At
June 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Intangible assets (760) (1,414)
Deferred taxation - -
BP shareholders' interest (760) (1,414)
====== ======
Profit for the period, as adjusted to accord with US GAAP, for the
three month and six month periods ended June 30, 2001, adjusted to
exclude amortization of goodwill no longer being amortized pursuant to
SFAS 142 is shown below.
Three months ended Six months ended
June 30, 2001 June 30, 2001
(Unaudited) (Unaudited)
-------------------- ----------------
($ million)
Profit for the period as adjusted to
accord with US GAAP, as reported 2,743 5,521
Add back goodwill amortization 315 621
------- ------
Profit for the period as adjusted to
accord with US GAAP, as adjusted 3,058 6,142
------- ------
Per ordinary share - cents
Basic - as reported 12.22 24.58
Adjustment 1.40 2.76
------- ------
Basic - as adjusted 13.62 27.34
------- ------
Diluted - as reported 12.15 24.43
Adjustment 1.39 2.75
------- ------
Diluted - as adjusted 13.54 27.18
------- ------
Per American Depositary Share - cents
Basic - as reported 73.32 147.48
Adjustment 8.40 16.56
------- ------
Basic - as adjusted 81.72 164.04
------- ------
Diluted - as reported 72.90 146.58
Adjustment 8.34 16.50
------- ------
Diluted - as adjusted 81.24 163.08
------- ------
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vii)Goodwill and intangible assets (concluded)
Changes to exploration expenditure, goodwill and other intangible
assets, as adjusted to accord with US GAAP, during the three months
ended June 30, 2002 are shown below.
Exploration Other
expenditure Goodwill intangibles Total
-------------------------------------------------
($ million)
Net book amount
At January 1, 2002 5,334 9,453 288 15,075
Amortization expense (206) - (28) (234)
Other movements 278 140 144 562
-------------------------------------------------
At June 30, 2002 5,406 9,593 404 15,403
=================================================
Amortization expense relating to other intangibles is expected to be
in the range $60-$100 million in each of the succeeding five years.
During the second quarter of 2002 the Group completed a goodwill
impairment review using the two-step process prescribed in SFAS 142.
The first step includes a comparison of the fair value of a reporting
unit to its carrying value, including goodwill. Where the carrying
value exceeds the fair value, the goodwill of the reporting unit is
potentially impaired and the second step is then completed in order to
measure the impairment loss, if any. No impairment charge resulted
from this review.
(viii)Derivative financial instruments and hedging activities
On January 1, 2001 the Group adopted Statement of Financial Accounting
Standards No. 133 'Accounting for Derivative Instruments and Hedging
Activities' (SFAS 133) as amended by Statement Nos. 137 and 138, for
US GAAP reporting.
SFAS 133, as amended, requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of
hedge transaction. To the extent certain criteria are met, SFAS 133
permits, but does not require, hedge accounting.
In the normal course of business the Group is a party to derivative
financial instruments with off-balance sheet risk, primarily to manage
its exposure to fluctuations in foreign currency exchange rates and
interest rates, including management of the balance between floating
rate and fixed rate debt. The Group also manages certain of its
exposures to movements in oil and natural gas prices. In addition, the
Group trades derivatives in conjunction with these risk management
activities.
All oil price derivatives and all derivatives held for trading are
carried on the Group's balance sheet at fair value with changes in
that value recognized in earnings of the period for both UK and US
GAAP. Certain financial derivatives used to manage foreign currency
and interest rate risk that qualify for hedge accounting under UK GAAP
are marked to market under SFAS 133. For these derivatives, the
cumulative effect of adopting SFAS 133 resulted in a pre-tax charge to
income, as adjusted to accord with US GAAP, of $27 million ($18
million after tax). Under US GAAP the fair values of derivative
financial instruments are shown as current assets and liabilities as
appropriate.
The Group has a number of long-term natural gas contracts which have
been in place for many years. The pricing structure for those
contracts is not directly related to the market price of natural gas
but to the price of other commodities or indices, such as fuel oil or
consumer price indices. On the basis of SFAS 133 Implementation Issue
C11, these contracts have been marked to market with effect from July
1, 2001.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii) Derivative financial instruments and hedging activities (concluded)
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales (163) 46 (967) 198
Taxation 65 (17) 346 (70)
Profit for the year before cumulative
effect of accounting change 98 (29) 621 (128)
Cumulative effect of accounting change,
net of taxation - - - (18)
Profit for the year 98 (29) 621 (146)
===== ====== ===== =====
At At
June 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Accounts payable and accrued liabilities 71 1,038
Deferred taxation (17) (363)
BP shareholders' interest (54) (675)
===== =====
(ix) Gain arising on asset exchange
For UK GAAP the transaction with Solvay in the fourth quarter of 2001,
which led to the exchange of businesses for an interest in a joint
venture and an associated undertaking, has been treated as an asset
swap which does not give rise to a gain or loss. Under US GAAP the
transaction has been treated as a disposal and acquisition at fair
value which gives rise to a pre-tax gain on disposal of $242 million
($157 million after tax).
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Six months ended
June 30 June 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 6 - 15 -
Taxation (1) - (5) -
Profit for the year (5) - (10) -
===== ===== ===== =====
At At
June 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Intangible assets 177 188
Accounts payable and accrued liabilities (53) (54)
Deferred taxation 80 85
BP shareholders' interest 150 157
===== =====
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(x) Ordinary shares held for future awards to employees
Under UK GAAP, Company shares held by an Employee Share Ownership Plan
to meet future requirements of employee share schemes are recorded in
the balance sheet as Fixed assets -- investments. Under US GAAP, such
shares are recorded in the balance sheet as a reduction of
shareholders' interest.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
June 30, December 31,
Increase (decrease) in caption heading 2002 2001
(Unaudited)
--------- -----------
($ million)
Fixed assets - Investments (218) (266)
BP shareholders' interest (218) (266)
===== =====
(xi) Dividends
Under UK GAAP, dividends are recorded in the period in respect of
which they are announced or declared by the board of directors to the
shareholders. Under US GAAP, dividends are recorded in the period in
which dividends are declared.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
June 30, December 31,
Increase (decrease) in caption heading 2002 2001
(Unaudited)
--------- -----------
($ million)
Other accounts payable and accrued liabilities (1,346) (1,288)
BP shareholders' interest 1,346 1,288
====== ======
(xii)Investments
Under UK GAAP the Group's equity investments in Lukoil, Sinopec and
PetroChina are held for the long term and reported as fixed asset
investments and carried on the balance sheet at cost subject to review
for impairment. For US GAAP these investments are classified as
available-for-sale securities. Consequently they are reported at fair
value, with unrealized holding gains and losses, net of tax, reported
in accumulated other comprehensive income. If a decline in fair value
below cost is 'other than temporary' the unrealized loss is accounted
for as a realized loss and charged against income.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
June 30, December 31,
Increase (decrease) in caption heading 2002 2001
(Unaudited)
--------- -----------
($ million)
Fixed assets - Investments 275 (3)
Deferred taxation 96 (1)
BP shareholders' interest 179 (2)
===== =====
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xiii)Additional minimum pension liability
Where a pension plan has an unfunded accumulated benefit obligation,
US GAAP requires such amount to be recognized as a liability in the
balance sheet. The adjustment resulting from the recognition of any
such minimum liability, including the elimination of amounts
previously recognized as a prepaid benefit cost, is reported as an
intangible asset to the extent of unrecognized prior service cost with
the remaining amount reported in comprehensive income.
The adjustments to BP shareholders' interest to accord with US GAAP
are summarized below.
At At
June 30, December 31,
Increase (decrease) in caption heading 2002 2001
(Unaudited)
--------- -----------
($ million)
Intangible assets 112 112
Other receivables falling due after more than one year (1,015) (1,015)
Noncurrent liabilities - accounts payable accrued liabilities 548 548
Deferred taxation (509) (509)
BP shareholders' interest (942) (942)
====== ======
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The following is a summary of the adjustments to profit for the year and to
BP shareholders' interest which would be required if generally accepted
accounting principles in the USA (US GAAP) had been applied instead of
those generally accepted in the United Kingdom (UK GAAP).
These results are stated using the first-in first-out method of inventory
valuation.
Profit for the period Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001(a) 2002 2001(a)
------------------ ----------------
($ million)
Profit as reported in the consolidated
statement of income 2,040 2,741 3,336 5,571
Adjustments:
Deferred taxation/business combinations (iv) (59) 31 (116) 105
Provisions (v) 18 12 (8) (6)
Sale and leaseback (vi) (1) (30) (5) (39)
Goodwill (vii) 322 15 643 30
Derivative financial instruments (viii) 98 (29) 621 (128)
Gain arising on asset exchange (ix) (5) - (10) -
Other 3 3 6 6
------ ------ ------ ------
376 2 1,131 (32)
------ ------ ------ ------
Profit for the period before cumulative effect of
accounting change as adjusted to accord with US GAAP 2,416 2,743 4,467 5,539
Cumulative effect of accounting change:
Derivative financial instruments (viii) - - - (18)
------ ------ ------ ------
Profit for the period as adjusted to
accord with US GAAP 2,416 2,743 4,467 5,521
====== ====== ====== ======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of
accounting change 10.77 12.22 19.92 24.66
Cumulative effect of accounting change - - - (0.08)
------ ------ ------ ------
10.77 12.22 19.92 24.58
------ ------ ------ ------
Diluted - before cumulative effect of
accounting change 10.71 12.15 19.82 24.51
Cumulative effect of accounting change - - - (0.08)
------ ------ ------ ------
10.71 12.15 19.82 24.43
------ ------ ------ ------
Per American Depositary Share - cents (b)
Basic - before cumulative effect of accounting change 64.62 73.32 119.52 147.96
Cumulative effect of accounting - - - (0.48)
------ ------ ------ ------
64.62 73.32 119.52 147.48
------ ------ ------ ------
Diluted - before cumulative effect of
accounting change 64.26 72.90 118.92 147.06
Cumulative effect of accounting change - - - (0.48)
------ ------ ------ ------
64.26 72.90 118.92 146.58
------ ------ ------ ------
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest June 30, 2002 December 31, 2001 (a)
(Unaudited)
----------------------------------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 67,568 65,161
Adjustments:
Deferred taxation/business combinations (iv) 122 243
Provisions (v) (1,087) (1,054)
Sale and leaseback (vi) (138) (134)
Goodwill (vii) (760) (1,414)
Derivative financial instruments (viii) (54) (675)
Gain arising on asset exchange (ix) 150 157
Ordinary shares held for future awards to employees (x) (218) (266)
Dividends (xi) 1,346 1,288
Investments (xii) 179 (2)
Additional minimum pension liability (xiii) (942) (942)
Other (50) (40)
-------- --------
(1,452) (2,839)
-------- --------
BP shareholders' interest as adjusted
to accord with US GAAP 66,116 62,322
======= =======
---------------
(a) The profit reported under UK GAAP for the three month and six month
periods ended June 30, 2001 and BP shareholders' interest reported
under UK GAAP at December 31, 2001 have been restated to reflect the
adoption of FRS 19. Consequently certain of the adjustments in the
UK/US GAAP reconciliation have also been restated. Profit and BP
shareholders' interest, as adjusted to accord with US GAAP, are
unaffected by the adoption of FRS 19.
(b) One American Depositary Share is equivalent to six ordinary shares.
Earnings per share
Basic earnings per share excludes the dilutive effects of options, warrants
and convertible securities. Diluted earnings per share reflects the potential
dilution that could occur if options, warrants or convertible securities were
exercised or converted into ordinary shares that shared in the earnings of
the Group. The dilutive effect of outstanding share options is as follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
(shares million)
Weighted average number of ordinary shares 22,427 22,448 22,415 22,461
Ordinary shares issuable under
employee share schemes 112 135 119 140
------- ------- ------- -------
22,539 22,583 22,534 22,601
======= ======= ======= =======
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Comprehensive income
The components of comprehensive income, net of related tax are as follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Profit for the period as adjusted to
accord with US GAAP 2,416 2,743 4,467 5,521
Currency translation differences 1,941 (605) 1,585 (1,599)
Derivative financial instruments - (8) - 15
Net unrealized gain on investments 20 205 181 269
Additional minimum pension liability - - - -
------- ------- ------- -------
Comprehensive income 4,377 2,335 6,233 4,206
======= ======= ======= =======
Accumulated other comprehensive income at June 30, 2002 and December 31,
2001 comprised losses of $3,968 million and $5,734 million, respectively.
Consolidated statement of cash flows
The Group's financial statements include a consolidated statement of cash
flows in accordance with the revised UK Financial Reporting Standard No. 1
(FRS 1). The statement prepared under FRS 1 presents substantially the same
information as that required under FASB Statement of Financial Accounting
Standards No. 95 'Statement of Cash Flows' (SFAS 95).
Under FRS 1 cash flows are presented for (i) operating activities; (ii)
dividends from joint ventures; (iii) dividends from associated
undertakings; (iv) servicing of finance and returns on investments; (v)
taxation; (vi) capital expenditure and financial investment; (vii)
acquisitions and disposals; (viii) dividends; (ix) financing; and (x)
management of liquid resources. SFAS 95 only requires presentation of cash
flows from operating, investing and financing activities.
Cash flows under FRS 1 in respect of dividends from joint ventures and
associated undertakings, taxation and servicing of finance and returns on
investments are included within operating activities under SFAS 95.
Interest paid includes payments in respect of capitalized interest, which
under SFAS 95 are included in capital expenditure under investing
activities. Cash flows under FRS 1 in respect of capital expenditure and
acquisitions and disposals are included in investing activities under SFAS
95. Dividends paid are included within financing activities. All short-term
investments are regarded as liquid resources for FRS 1. Under SFAS 95
short-term investments with original maturities of three months or less are
classified as cash equivalents and aggregated with cash in the cash flow
statement. Cash flows in respect of short-term investments with original
maturities exceeding three months are included in operating activities.
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Operating activities
Profit after taxation 2,086 2,759 3,422 5,597
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,227 2,130 4,380 4,297
Exploration expenditure written off 147 22 206 130
Share of profits of joint ventures and associated
undertakings less dividends received (23) 38 (40) (25)
(Profit) loss on sale of businesses and fixed assets (374) (171) (265) (389)
Working capital movement (a) (652) (2,683) (1,321) (1,329)
Deferred Taxation 711 316 931 749
Other 52 222 (56) 98
------- ------- ------- -------
Net cash provided by operating activities 4,174 2,633 7,257 9,128
------- ------- ------- -------
Investing activities
Capital expenditures (2,818) (3,037) (5,632) (5,648)
Acquisitions, net of cash acquired (139) (560) (1,689) (560)
Investment in associated undertakings (488) (148) (631) (268)
Net investment in joint ventures (68) (72) (114) (133)
Proceeds from disposal of assets 2,523 232 2,871 926
------- ------- ------- -------
Net cash used in investing activities (990) (3,585) (5,195) (5,683)
------- ------- ------- -------
Financing activities
Proceeds from shares issued (repurchased) 32 (219) 123 (662)
Proceeds from long-term financing 752 505 2,498 1,022
Repayments of long-term financing (663) (1,034) (897) (1,180)
Net decrease (increase) in short term debt (2,138) 2,417 (1,458) (377)
Dividends paid - BP Shareholders (1,290) (1,179) (2,578) (2,360)
- Minority shareholders (3) (5) (16) (5)
------- ------- ------- -------
Net cash used in financing activities (3,310) 485 (2,328) (3,562)
------- ------- ------- -------
Currency translation differences relating to
cash and cash equivalents 30 (14) 27 (48)
------- ------- ------- -------
Increase (decrease) in cash and cash equivalents (96) (481) (239) (165)
------- ------- ------- -------
Cash and cash equivalents at begining of period 1,665 2,147 1,808 1,831
------- ------- ------- -------
Cash and cash equivalents at end of period 1,569 1,666 1,569 1,666
======= ======= ======= =======
(a) Working capital:
Inventories (increase) decrease (807) (371) (1,303) (13)
Receivables (increase) decrease (1,691) (502) (2,134) (1,546)
Current liabilities - excluding finance debt
increase (decrease) 1,846 (1,810) 2,116 230
------- ------- ------- -------
(652) (2,683) (1,321) (1,329)
======= ======= ======= =======
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - concluded
Impact of new US accounting standards
New US accounting standards adopted: The Group has adopted Statement of
Financial Accounting Standards No. 141 `Business Combinations' (SFAS 141)
for US GAAP reporting with effect from January 1, 2002. Under SFAS 141, the
pooling of interest method of accounting is no longer permitted. Also on
January 1, 2002 the Group adopted Statement of Financial Accounting
Standards No. 144 `Accounting for the Impairment or Disposal of Long-Lived
Assets' (SFAS 144). SFAS 144 retains the requirement to recognize an
impairment loss only where the carrying value of a long-lived asset is not
recoverable from its undiscounted cash flows and to measure such loss as
the difference between the carrying amount and fair value of the asset.
SFAS 144, among other things, changes the criteria that have to be met in
order to classify an asset as held-for-sale and requires that operating
losses from discontinued operations be recognized in the period that the
losses are incurred rather than as of the measurement date.
The adoption of SFAS 141 and SFAS 144 had no impact on profit, as adjusted
to accord with US GAAP, for the three month and six month periods ended
June 30, 2002 or on BP shareholders' interest, as adjusted to accord with
US GAAP, at June 30, 2002.
Asset retirement obligations: In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 143 'Accounting for Asset Retirement
Obligations' (SFAS 143). SFAS 143 requires companies to record liabilities
equal to the fair value of their asset retirement obligations when they are
incurred (typically when the asset is installed at the production
location). When the liability is initially recorded, companies capitalize
an equivalent amount as part of the cost of the asset. Over time the
liability is accreted for the change in its present value each period, and
the initial capitalized cost is depreciated over the useful life of the
related asset. SFAS 143 is effective for accounting periods beginning after
June 15, 2002.
The provisions of SFAS 143 are similar to the accounting policy used by the
Group in preparing its financial statements under UK GAAP. The Company has
not yet determined the effect of adopting SFAS 143 on its results of
operations or shareholders' interest as adjusted to accord with US GAAP.
Costs associated with exit or disposal activities: In June 2002, the FASB
issued Statement of Financial Accounting Standards No. 146 "Accounting for
Costs Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146
requires that a liability for costs associated with an exit or disposal
activity be recognized only when the liability is incurred, rather than at
the date of an entity's commitment to an exit plan. SFAS 146 requires that
the liability be initially measured at fair value. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002.
The Company has not yet determined the effect of adopting SFAS 146 on its
results of operations or shareholders' interest as adjusted to accord with
US GAAP.
Impact of new UK accounting standards
Retirement benefits: In December 2000, the UK Accounting Standards Board
issued Financial Reporting Standard No. 17 `Retirement Benefits' (FRS 17).
This standard was to be fully effective for accounting periods ending on or
after June 22, 2003 with certain of the disclosure requirements effective
for periods prior to 2003. FRS 17 requires that financial statements
reflect at fair value the assets and liabilities arising from an employer's
retirement benefit obligations and any related funding. The operating costs
of providing retirement benefits are recognized in the period in which they
are earned together with any related finance costs and changes in the value
of related assets and liabilities. The Company has not yet completed its
evaluation of the impact of adopting FRS 17 on the Group's results of
operations, and there will be no significant effect on the Group's
financial position.
In July 2002, the UK Accounting Standards Board issued a proposed amendment
to FRS17, which would defer full adoption until January 1, 2005.
Impact of international accounting standards
In June 2002, the European Union Council of Ministers adopted a Regulation
which would require the Group to prepare its primary consolidated financial
statements in accordance with International Accounting Standards (IAS)
beginning January 1, 2005, with restatement of prior periods presented. IAS
differ in several respects from UK and US GAAP. In addition, significant
revisions are currently being contemplated and other revisions may be
adopted prior to January 1, 2005. The Group has not determined the effects
of adopting IAS.
16. Condensed consolidating information
The following information is presented in accordance with the financial
reporting rules of the Securities and Exchange Commission regarding issuers
and guarantors of guaranteed securities.
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2002
Turnover 588 - 43,995 (524) 44,059
Less: Joint ventures - - 404 - 404
----------------------------------------------------------------------------
Group turnover 588 - 43,591 (524) 43,655
Replacement cost of sales 301 - 37,411 (535) 37,177
Production taxes 53 - 262 - 315
----------------------------------------------------------------------------
Gross profit 234 - 5,918 11 6,163
Distribution and administration expenses - 272 2,851 - 3,123
Exploration expense 7 - 215 - 222
----------------------------------------------------------------------------
227 (272) 2,852 11 2,818
Other income 6 155 106 (120) 147
----------------------------------------------------------------------------
Group replacement cost operating profit 233 (117) 2,958 (109) 2,965
Share of profits of joint ventures - - 89 - 89
Share of profits of associated undertakings - - 196 - 196
Equity accounted income of subsidiaries 77 3,430 - (3,507) -
----------------------------------------------------------------------------
Total replacement cost operating profit 310 3,313 3,243 (3,616) 3,250
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 1,213 1,213 (2,050) 376
----------------------------------------------------------------------------
Replacement cost profit before
interest and tax 310 4,526 4,456 (5,666) 3,626
Inventory holding gains (losses) (21) 525 525 (504) 525
----------------------------------------------------------------------------
Historical cost profit before
interest and tax 289 5,051 4,981 (6,170) 4,151
Interest expense 27 423 367 (503) 314
----------------------------------------------------------------------------
Profit before taxation 262 4,628 4,614 (5,667) 3,837
Taxation 95 1,751 1,666 (1,761) 1,751
----------------------------------------------------------------------------
Profit after taxation 167 2,877 2,948 (3,906) 2,086
Minority shareholders' interest - - 46 - 46
----------------------------------------------------------------------------
Profit for the period 167 2,877 2,902 (3,906) 2,040
============================================================================
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income Statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2002
Profit as reported 167 2,877 2,902 (3,906) 2,040
Adjustments:
Deferred taxation/business combinations (32) (59) (38) 70 (59)
Provisions (1) 18 18 (17) 18
Sale and leaseback - (1) (1) 1 (1)
Goodwill - 322 322 (322) 322
Derivative financial instruments - 98 98 (98) 98
Gain arising on asset exchange - (5) (5) 5 (5)
Other - 3 3 (3) 3
----------------------------------------------------------------------------
Profit for the period as adjusted
to accord with US GAAP 134 3,253 3,299 (4,270) 2,416
============================================================================
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2001
Turnover 524 - 48,689 (524) 48,689
Less: Joint ventures - - 280 - 280
----------------------------------------------------------------------------
Group turnover 524 - 48,409 (524) 48,409
Replacement cost of sales 249 - 40,990 (533) 40,706
Production taxes 50 - 383 - 433
----------------------------------------------------------------------------
Gross profit 225 - 7,036 9 7,270
Distribution and administration expenses - 48 2,590 - 2,638
Exploration expense 8 - 73 - 81
----------------------------------------------------------------------------
217 (48) 4,373 9 4,551
Other income - 339 110 (337) 112
----------------------------------------------------------------------------
Group replacement cost operating profit 217 291 4,483 (328) 4,663
Share of profits of joint ventures - - 125 - 125
Share of profits of associated undertakings - - 157 - 157
Equity accounted income of subsidiaries 112 4,964 - (5,076) -
----------------------------------------------------------------------------
Total replacement cost operating profit 329 5,255 4,765 (5,404) 4,945
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 171 171 (171) 171
----------------------------------------------------------------------------
Replacement cost profit before
interest and tax 329 5,426 4,936 (5,575) 5,116
Inventory holding gains (losses) 1 40 40 (41) 40
----------------------------------------------------------------------------
Historical cost profit before
interest and tax 330 5,466 4,976 (5,616) 5,156
Interest expense 17 769 775 (1,120) 441
----------------------------------------------------------------------------
Profit before taxation 313 4,697 4,201 (4,496) 4,715
Taxation 144 1,956 1,905 (2,049) 1,956
----------------------------------------------------------------------------
Profit after taxation 169 2,741 2,296 (2,447) 2,759
Minority shareholders' interest - - 18 - 18
----------------------------------------------------------------------------
Profit for the period 169 2,741 2,278 (2,447) 2,741
============================================================================
Page 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income Statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2001
Profit as reported 169 2,741 2,278 (2,447) 2,741
Adjustments:
Deferred taxation/business combinations 14 31 25 (39) 31
Provisions (1) 12 14 (13) 12
Sale and leaseback - (30) (30) 30 (30)
Goodwill - 15 15 (15) 15
Derivative financial instruments - (29) (29) 29 (29)
Gain arising on asset exchange - - - - -
Other - 3 3 (3) 3
----------------------------------------------------------------------------
Profit for the period as adjusted
to accord with US GAAP 182 2,743 2,276 (2,458) 2,743
============================================================================
Page45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2002
Turnover 1,094 - 80,564 (1,030) 80,628
Less: Joint ventures - - 683 - 683
----------------------------------------------------------------------------
Group turnover 1,094 - 79,881 (1,030) 79,945
Replacement cost of sales 620 - 69,159 (1,049) 68,730
Production taxes 97 - 465 - 562
----------------------------------------------------------------------------
Gross profit 377 - 10,257 19 10,653
Distribution and administration expenses - 326 5,488 - 5,814
Exploration expense 13 - 333 - 346
----------------------------------------------------------------------------
364 (326) 4,436 19 4,493
Other income 21 308 162 (219) 272
----------------------------------------------------------------------------
Group replacement cost operating profit 385 (18) 4,598 (200) 4,765
Share of profits of joint ventures - - 159 - 159
Share of profits of associated undertakings - - 384 - 384
Equity accounted income of subsidiaries 100 5,440 - (5,540) -
----------------------------------------------------------------------------
Total replacement cost operating profit 485 5,422 5,141 (5,740) 5,308
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 1,104 1,104 (1,941) 267
----------------------------------------------------------------------------
Replacement cost profit before
interest and tax 485 6,526 6,245 (7,681) 5,575
Inventory holding gains (losses) 5 998 998 (1,003) 998
----------------------------------------------------------------------------
Historical cost profit before
interest and tax 490 7,524 7,243 (8,684) 6,573
Interest expense 40 847 760 (1,000) 647
----------------------------------------------------------------------------
Profit before taxation 450 6,677 6,483 (7,684) 5,926
Taxation 177 2,504 2,352 (2,529) 2,504
----------------------------------------------------------------------------
Profit after taxation 273 4,173 4,131 (5,155) 3,422
Minority shareholders' interest - - 86 - 86
----------------------------------------------------------------------------
Profit for the period 273 4,173 4,045 (5,155) 3,336
============================================================================
Page 46
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income Statement (continued)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2002
Profit as reported 273 4,173 4,045 (5,155) 3,336
Adjustments:
Deferred taxation/business combinations (65) (116) (74) 139 (116)
Provisions (1) (8) (7) 8 (8)
Sale and leaseback - (5) (5) 5 (5)
Goodwill - 643 643 (643) 643
Derivative financial instruments - 621 621 (621) 621
Gain arising on asset exchange - (10) (10) 10 (10)
Other - 6 6 (6) 6
----------------------------------------------------------------------------
Profit for the period as adjusted
to accord with US GAAP 207 5,304 5,219 (6,263) 4,467
============================================================================
Page 47
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2001
Turnover 1,128 - 94,389 (1,128) 94,389
Less: Joint ventures - - 568 - 568
----------------------------------------------------------------------------
Group turnover 1,128 - 93,821 (1,128) 93,821
Replacement cost of sales 522 - 78,515 (1,143) 77,894
Production taxes 109 - 907 - 1,016
----------------------------------------------------------------------------
Gross profit 497 - 14,399 15 14,911
Distribution and administration expenses - 117 5,047 - 5,164
Exploration expense 12 - 238 - 250
----------------------------------------------------------------------------
485 (117) 9,114 15 9,497
Other income - 701 307 (701) 307
----------------------------------------------------------------------------
Group replacement cost operating profit 485 584 9,421 (686) 9,804
Share of profits of joint venture - - 227 - 227
Share of profits of associated undertakings - - 386 - 386
Equity accounted income of subsidaries 273 10,493 - (10,766) -
----------------------------------------------------------------------------
Total replacement cost operating profit 758 11,077 10,034 (11,452) 10,417
Profit (loss) on sale of fixed assets
and businesses or termination of operations 1 389 388 (389) 389
----------------------------------------------------------------------------
Replacement cost profit before
interest and tax 759 11,466 10,422 (11,841) 10,806
Inventory holding gains (losses) (6) (198) (198) 204 (198)
----------------------------------------------------------------------------
Historical cost profit before
interest and tax 753 11,268 10,224 (11,637) 10,608
Interest expense 19 1,573 1,583 (2,288) 887
----------------------------------------------------------------------------
Profit before taxation 734 9,695 8,641 (9,349) 9,721
Taxation 318 4,124 4,000 (4,318) 4,124
----------------------------------------------------------------------------
Profit after taxation 416 5,571 4,641 (5,031) 5,597
Minority shareholders' interest - - 26 - 26
----------------------------------------------------------------------------
Profit for the period 416 5,571 4,615 (5,031) 5,571
============================================================================
Page 48
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income Statement (concluded)
The following is a summary of the adjustments to the profit for the period
which would be required if generally accepted accounting principles in the
United States (US GAAP) had been applied instead of those generally
accepted in the United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2001
Profit as reported 416 5,571 4,615 (5,031) 5,571
Adjustments:
Deferred taxation/business combinations 24 105 98 (122) 105
Provisions (2) (6) (3) 5 (6)
Sale and leaseback - (39) (39) 39 (39)
Goodwill - 30 30 (30) 30
Derivative financial instruments - (128) (128) 128 (128)
Gain arising on asset exchange - - - - -
Other - 6 6 (6) 6
----------------------------------------------------------------------------
Profit for the period before cumulative
effect of accounting change as adjusted
to accord with US GAAP 438 5,539 4,579 (5,017) 5,539
Cumulative effect of accounting change:
Derivative financial instruments - (18) (18) 18 (18)
----------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 438 5,521 4,561 (4,999) 5,521
============================================================================
Page 49
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At June 30, 2002
Fixed assets
Intangible assets 517 - 15,646 - 16,163
Tangible assets 6,479 - 79,108 - 85,587
Investments
Subsidiaries - equity accounted basis 1,898 81,774 - (83,672) -
Other - 221 12,035 - 12,257
----------------------------------------------------------------------------
1,898 81,996 12,035 (83,672) 12,257
----------------------------------------------------------------------------
Total fixed assets 8,894 81,996 106,789 (83,672) 114,007
----------------------------------------------------------------------------
Current assets
Inventories 82 - 9,736 - 9,818
Receivables 16,336 21,204 49,224 (54,420) 32,344
Investments - - 285 - 285
Cash at bank and in hand (6) 2 1,288 - 1,284
----------------------------------------------------------------------------
16,412 21,206 60,533 (54,420) 43,731
----------------------------------------------------------------------------
Current liabilities - falling due
within one year
Finance debt 1,440 - 8,799 (1,385) 8,854
Accounts payable and accrued liabilities 423 9,210 36,919 (8,152) 38,400
----------------------------------------------------------------------------
Net current assets (liabilities) 14,549 11,996 14,815 (44,883) (3,523)
----------------------------------------------------------------------------
Total assets less current liabilities 23,443 93,992 121,604 (128,555) 110,484
Noncurrent liabilities
Finance debt - - 12,555 - 12,555
Accounts payable and accrued liabilities 10,448 152 38,052 (45,272) 3,380
Provisions for liabilities and charges
Deferred taxation 1,707 - 13,318 (1,707) 13,318
Other provisions 409 222 10,768 1,706 13,105
----------------------------------------------------------------------------
Net assets 10,879 93,618 46,911 (83,282) 68,126
Minority shareholders' interest - - 558 - 558
----------------------------------------------------------------------------
BP shareholders' interest 10,879 93,618 46,353 (83,282) 67,568
============================================================================
Page 50
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At June 30, 2002
Capital and reserves
Capital shares 1,050 5,637 - (1,050) 5,637
Paid in surplus 3,145 4,131 - (3,145) 4,131
Merger reserve - 26,329 697 - 27,026
Other reserves - 180 - - 180
Retained earnings 6,684 57,341 45,656 (79,087) 30,594
----------------------------------------------------------------------------
10,879 93,618 46,353 (83,282) 67,568
============================================================================
The following is a summary of the adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States (US GAAP) had been applied instead of those generally accepted in the
United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 10,879 93,618 46,353 (83,282) 67,568
Adjustments:
Deferred taxation/business combinations 138 122 7 (145) 122
Provisions (187) (1,087) (901) 1,088 (1,087)
Sale and leaseback - (138) (138) 138 (138)
Goodwill - (760) (760) 760 (760)
Derivative financial instruments - (54) (54) 54 (54)
Gain arising on asset exchange - 150 150 (150) 150
Ordinary shares held for future
awards to employees - (218) - - (218)
Quarterly dividend - 1,346 - - 1,346
Investments - 179 179 (179) 179
Additional minimum pension liability - (942) (942) 942 (942)
Other - (50) (50) 50 (50)
----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 10,830 92,166 43,844 (80,724) 66,116
============================================================================
Page 51
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At December 31, 2001
Fixed assets
Intangible assets 489 - 16,000 - 16,489
Tangible assets 6,418 - 70,992 - 77,410
Investments
Subsidiaries - equity accounted basis 1,846 76,877 - (78,723) -
Other - 269 11,694 - 11,963
----------------------------------------------------------------------------
1,846 77,146 11,694 (78,723) 11,963
----------------------------------------------------------------------------
Total fixed assets 8,753 77,146 98,686 (78,723) 105,862
----------------------------------------------------------------------------
Current assets
Inventories 92 - 7,539 - 7,631
Receivables 15,333 21,272 41,858 (51,794) 26,669
Investments - - 450 - 450
Cash at bank and in hand (29) 3 1,384 - 1,358
----------------------------------------------------------------------------
15,396 21,275 51,231 (51,794) 36,108
----------------------------------------------------------------------------
Current liabilities - falling due
within one year
Finance debt 406 - 9,035 (351) 9,090
Accounts payable and accrued liabilities 260 7,642 27,797 (7,175) 28,524
----------------------------------------------------------------------------
Net current assets (liabilities) 14,730 13,633 14,399 (44,268) (1,506)
----------------------------------------------------------------------------
Total assets less current liabilities 23,483 90,779 113,085 (122,991) 104,356
Noncurrent liabilities
Finance debt - - 12,327 - 12,327
Accounts payable and accrued liabilities 10,795 191 36,433 (44,333) 3,086
Provisions for liabilities and charges
Deferred taxation 1,668 - 11,702 (1,668) 11,702
Other provisions 392 216 10,879 (5) 11,482
----------------------------------------------------------------------------
Net assets 10,628 90,372 41,744 (76,985) 65,759
Minority shareholders' interest - - 598 - 598
----------------------------------------------------------------------------
BP shareholders' interest 10,628 90,372 41,146 (76,985) 65,161
============================================================================
Page 52
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At December 31, 2001
Capital and reserves
Capital shares 1,050 5,629 - (1,050) 5,629
Paid in surplus 3,145 4,014 - (3,145) 4,014
Merger reserve - 26,286 697 - 26,983
Other reserves - 223 - - 223
Retained earnings 6,433 54,220 40,449 (72,790) 28,312
----------------------------------------------------------------------------
10,628 90,372 41,146 (76,985) 65,161
============================================================================
The following is a summary of the adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States (US GAAP) had been applied instead of those generally accepted in the
United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 10,628 90,372 41,146 (76,985) 65,161
Adjustments:
Deferred taxation/business combinations 203 243 86 (289) 243
Provisions (186) (1,054) (869) 1,055 (1,054)
Sale and leaseback - (134) (134) 134 (134)
Goodwill - (1,414) (1,414) 1,414 (1,414)
Derivative financial instruments - (675) (675) 675 (675)
Gain arising on asset exchange - 157 157 (157) 157
Ordinary shares held for future
awards to employees - (266) - - (266)
Quarterly dividend - 1,288 - - 1,288
Investments - (2) (2) 2 (2)
Additional minimum pension liability - (942) (942) 942 (942)
Other - (40) (40) 40 (40)
----------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 10,645 87,533 37,313 (73,169) 62,322
============================================================================
Page 53
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2002
Net cash inflow (outflow) from
operating activities 22 434 3,913 764 5,133
Dividends from joint ventures - - 16 - 16
Dividends from associated undertakings - - 154 - 154
Dividends from subsidiaries - - - - -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 61 (291) - (230)
Tax (paid) refund (46) (1) (880) - (927)
Net cash inflow (outflow) for capital
expenditure and financial investment (138) (1) (1,715) - (1,854)
Net cash inflow (outflow) for acquisitions
and disposals - 764 889 (764) 889
Equity dividends paid - (1,290) - - (1,290)
----------------------------------------------------------------------------
Net cash inflow (outflow) (162) (33) 2,086 - 1,891
============================================================================
Financing (167) (32) 2,216 - 2,017
Management of liquid resources - - 33 - 33
Increase (decrease) in cash 5 (1) (163) - (159)
----------------------------------------------------------------------------
(162) (33) 2,086 - 1,891
============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities (24) 494 2,912 792 4,174
Net cash provided by (used in)
investing activities (138) 763 (826) (789) (990)
Net cash provided by (used in)
financing activities 167 (1,258) (2,216) (3) (3,310)
Currency translation differences relating
to cash and cash equivalents - - 30 - 30
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 5 (1) (100) - (96)
Cash and cash equivalents at
beginning of period (11) 3 1,673 - 1,665
----------------------------------------------------------------------------
Cash and cash equivalents at
end of period (6) 2 1,573 - 1,569
============================================================================
Page 54
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement(continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended June 30, 2001
Net cash inflow (outflow) from
operating activities 220 1,159 3,697 - 5,076
Dividends from joint ventures - - 54 - 54
Dividends from associated undertakings - - 159 - 159
Dividends from subsidiaries - 16 - (16) -
Net cash inflow (outflow) from servicing
of finance and returns on investments - 328 (628) - (300)
Tax (paid) refund (56) - (2,326) - (2,382)
Net cash inflow (outflow) for capital
expenditure and financial investment (208) (104) (2,472) - (2,784)
Net cash inflow (outflow) for
acquisitions and disposals (1) - (779) - (780)
Equity dividends paid - (1,179) (16) 16 (1,179)
----------------------------------------------------------------------------
Net cash inflow (outflow) (45) 220 (2,311) - (2,136)
============================================================================
Financing (30) 220 (1,859) - (1,669)
Management of liquid resources - - (404) - (404)
Increase (decrease) in cash (15) - (48) - (63)
----------------------------------------------------------------------------
(45) 220 (2,311) - (2,136)
============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 163 1,502 956 12 2,633
Net cash provided by (used in)
investing activities (208) (104) (3,251) (22) (3,585)
Net cash provided by (used in)
financing activities 30 (1,398) 1,843 10 485
Currency translation differences relating
to cash and cash equivalents - - (14) - (14)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (15) - (466) - (481)
Cash and cash equivalents at
beginning of period (19) - 2,166 - 2,147
----------------------------------------------------------------------------
Cash and cash equivalents at
end of period (34) - 1,700 - 1,666
============================================================================
Page 55
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2002
Net cash inflow (outflow) from
operating activities 215 1,485 6,206 863 8,769
Dividends from joint ventures - - 99 - 99
Dividends from associated undertakings - - 207 - 207
Dividends from subsidiaries 15 - - (15) -
Net cash inflow (outflow) from servicing
of finance and returns on investments - 126 (628) - (502)
Tax (paid) refund (46) (1) (1,325) - (1,372)
Net cash inflow (outflow) for capital
expenditure and financial investment (288) (18) (4,030) - (4,336)
Net cash inflow (outflow) for
acquisitions and disposals - 863 (819) (863) (819)
Equity dividends paid - (2,578) (15) 15 (2,578)
----------------------------------------------------------------------------
Net cash inflow (outflow) (104) (123) (305) - (532)
============================================================================
Financing (127) (122) (17) - (266)
Management of liquid resources - - (132) - (132)
Increase (decrease) in cash 23 (1) (156) - (134)
----------------------------------------------------------------------------
(104) (123) (305) - (532)
============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 184 1,610 4,574 889 7,257
Net cash provided by (used in)
investing activities (288) 846 (4,864) (889) (5,195)
Net cash provided by (used in)
financing activities 127 (2,457) 2 - (2,328)
Currency translation differences
relating to cash and cash equivalents - - 27 - 27
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 23 (1) (261) - (239)
Cash and cash equivalents at
beginning of period (29) 3 1,834 - 1,808
----------------------------------------------------------------------------
Cash and cash equivalents at
end of period (6) 2 1,573 - 1,569
============================================================================
Page 56
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
16. Condensed consolidating information - concluded
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (concluded) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Six months ended June 30, 2001
Net cash inflow (outflow) from
operating activities 551 2,460 8,821 (16) 11,816
Dividends from joint ventures - - 66 - 66
Dividends from associated undertakings - - 269 - 269
Dividends from subsidiaries - 16 - (16) -
Net cash inflow (outflow) from servicing
of finance and returns on investments - 682 (1,244) - (562)
Tax (paid) refund (313) (1) (2,207) - (2,521)
Net cash inflow (outflow) for capital
expenditure and financial investment (401) (120) (4,146) - (4,667)
Net cash inflow (outflow) for
acquisitions and disposals - (16) (961) 16 (961)
Equity dividends paid - (2,360) (16) 16 (2,360)
----------------------------------------------------------------------------
Net cash inflow (outflow) (163) 661 582 - 1,080
============================================================================
Financing (161) 663 695 - 1,197
Management of liquid resources - - (102) - (102)
Increase (decrease) in cash (2) (2) (11) - (15)
----------------------------------------------------------------------------
(163) 661 582 - 1,080
============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 238 3,156 5,705 29 9,128
Net cash provided by (used in)
investing activities (401) (136) (5,107) (39) (5,683)
Net cash provided by (used in)
financing activities 161 (3,022) (711) 10 (3,562)
Currency translation differences relating to
cash and cash equivalents - - (48) - (48)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (2) (2) (161) - (165)
Cash and cash equivalents at
beginning of period (32) 2 1,861 - 1,831
----------------------------------------------------------------------------
Cash and cash equivalents at
end of period (34) - 1,700 - 1,666
============================================================================
Page 57
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Average oil realizations (a) - $/bbl
UK 24.59 26.58 22.59 25.78
USA 21.81 23.58 19.61 24.18
Rest of World 22.20 23.93 20.43 23.72
BP average 22.81 24.74 20.81 24.77
Brent oil price 25.07 27.39 23.12 26.57
West Texas Intermediate oil price 26.30 27.88 23.94 28.30
Alaska North Slope US West Coast 25.04 26.05 22.42 25.49
Average natural gas realizations - $/mcf
UK 2.50 2.85 2.81 3.23
USA 2.76 4.35 2.44 5.73
Rest of World 2.04 2.58 1.98 2.97
BP average 2.45 3.43 2.36 4.21
Henry Hub gas price (b) ($/mmBtu) 3.38 4.66 2.87 5.86
UK Gas - National Balancing point (p/therm) 12.10 21.66 15.63 22.21
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 0.59 3.35 0.34 2.85
US Gulf Coast 2.62 7.71 2.33 7.21
Midwest 3.76 10.51 2.91 7.18
US West Coast 4.46 9.11 4.95 10.02
Singapore 0.18 0.96 0.20 0.83
BP average 2.06 5.78 1.85 5.02
Chemicals Indicator Margin (d) - $/te 109 (e) 105 95 (e) 104
---------------
(a) Crude oil and natural gas liquids.
(b) Henry Hub First of Month Index.
(c) The Global Indicator Refining Margin (GIM) is the average of seven regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity.
(d) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Amongst the products and businesses
covered in the CIM are olefins and derivatives, aromatics and derivatives,
linear alpha-olefins, acetic acid, vinyl acetate monomer and nitriles. Not
included are fabrics and fibres, plastic fabrications, poly alpha-olefins,
anhydrides, engineering polymers and carbon fibres, speciality
intermediates, and the remaining parts of the solvents and acetyls
businesses.
(e) Provisional. The data for the second quarter is based on two months'
actual and one month of provisional data.
Three months ended Six months ended
June 30 June 30
US dollar/sterling exchange rates (Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Average rate for the period 1.46 1.42 1.44 1.44
Period-end rate 1.52 1.41 1.52 1.41
Page 58
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Crude oil and natural gas liquids production
(thousand barrels per day) (net of royalties)
UK 481 471 481 491
Rest of Europe 108 92 106 95
USA 791 742 775 732
Rest of World 672 580 658 593
------- ------- ------- -------
Total crude oil and liquids production 2,052 1,885 2,020 1,911
======= ======= ======= =======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,602 1,690 1,615 1,920
Rest of Europe 157 121 159 144
USA 3,565 3,550 3,563 3,509
Rest of World 3,343 3,193 3,369 3,150
------- ------- ------- -------
Total natural gas production 8,667 8,554 8,706 8,723
======= ======= ======= =======
Total production (a)
(thousand barrels of oil equivalent per day)
(net of royalties)
UK 757 762 759 822
Rest of Europe 135 113 133 120
USA 1,406 1,354 1,389 1,337
Rest of World 1,248 1,131 1,239 1,136
------- ------- ------- -------
Total production 3,546 3,360 3,520 3,415
======= ======= ======= =======
Natural gas sales volumes (million cubic feet per day)
UK 2,349 2,481 2,483 2,938
Rest of Europe 390 201 402 226
USA 8,451 8,516 8,591 8,259
Rest of World 8,618 6,839 8,952 7,121
------- ------- ------- -------
Total natural gas sales volumes (b) 19,808 18,037 20,428 18,544
======= ======= ======= =======
NGL sales volumes (thousand barrels per day)
UK - - - -
Rest of Europe - - - -
USA 189 206 196 214
Rest of World 196 171 189 189
------- ------- ------- -------
Total NGL sales volumes 385 377 385 403
======= ======= ======= =======
---------------
(a) Expressed in thousand barrels of oil equivalent per day (mboe/d). Natural
gas is converted to oil equivalent at 5.8 billion cubic feet: 1 million
barrels.
(b) Encompasses sales by Exploration and Production and Gas, Power and
Renewables, including marketing, trading and supply sales.
Page 59
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
Oil sales volumes (thousand barrels per day)
Refined products
UK 230 270 243 265
Rest of Europe 1,444 1,031 1,360 1,057
USA 1,941 1,954 1,888 1,914
Rest of World 522 601 561 590
------- ------- ------- -------
Total marketing sales 4,137 3,856 4,052 3,826
Trading/supply sales 2,342 2,022 2,439 2,090
------- ------- ------- -------
Total refined product sales 6,479 5,878 6,491 5,916
Crude oil 4,915 4,131 4,862 4,307
------- ------- ------- -------
Total oil sales 11,394 10,009 11,353 10,223
======= ======= ======= =======
Refinery throughputs (thousand barrels per day)
UK 376 315 384 313
Rest of Europe 924 623 879 658
USA 1,464 1,642 1,429 1,582
Rest of World 339 375 357 380
------- ------- ------- -------
Total throughput 3,103 2,955 3,049 2,933
======= ======= ======= =======
Chemicals production (thousand tonnes)
UK 837 799 1,666 1,529
Rest of Europe 2,595 1,796 5,178 3,484
USA 2,695 2,108 5,184 4,365
Rest of World 762 618 1,472 1,320
------- ------- ------- -------
Total production 6,889 5,321 13,500 10,698
======= ======= ======= =======
Page 60
BP p.l.c. AND SUBSIDIARIES
Total replacement cost operating profit
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
By business
Exploration and Production
UK 649 970 1,376 2,124
Rest of Europe 172 190 324 416
USA 771 1,200 1,093 3,311
Rest of World 866 1,067 1,593 2,242
------- ------- ------- -------
2,458 3,427 4,386 8,093
------- ------- ------- -------
Gas, Power and Renewables
UK 1 37 3 47
Rest of Europe 35 35 82 98
USA 13 86 (12) 111
Rest of World 65 3 152 5
------- ------- ------- -------
114 161 225 261
------- ------- ------- -------
Refining and Marketing
UK (61) (116) (185) (227)
Rest of Europe 249 177 388 313
USA 279 1,262 200 1,856
Rest of World 136 141 268 262
------- ------- ------- -------
603 1,464 671 2,204
------- ------- ------- -------
Chemicals
UK (10) (33) (41) (83)
Rest of Europe 64 19 111 99
USA 84 (1) 107 12
Rest of World 65 24 102 62
------- ------- ------- -------
203 9 279 90
------- ------- ------- -------
Other businesses and corporate (128) (116) (253) (231)
------- ------- ------- -------
3,250 4,945 5,308 10,417
======= ======= ======= =======
By geographical area
UK 504 814 1,034 1,741
Rest of Europe 526 429 912 914
USA 1,103 2,485 1,261 5,170
Rest of World 1,117 1,217 2,101 2,592
------- ------- ------- -------
3,250 4,945 5,308 10,417
======= ======= ======= =======
Page 61
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
By business
Exploration and Production
UK 247 289 508 457
Rest of Europe 57 86 128 151
USA 1,077 1,243 2,244 2,170
Rest of World (a) 1,192 805 2,006 1,511
------- ------- ------- -------
2,573 2,423 4,886 4,289
------- ------- ------- -------
Gas, Power and Renewables
UK 5 6 21 14
Rest of Europe (b) 87 15 91 26
USA (c) 32 40 48 57
Rest of World 8 7 18 7
------- ------- ------- -------
132 68 178 104
------- ------- ------- -------
Refining and Marketing
UK 100 67 176 178
Rest of Europe (d) 2,556 114 5,288 161
USA 260 227 563 407
Rest of World 49 79 75 111
------- ------- ------- -------
2,965 487 6,102 857
------- ------- ------- -------
Chemicals
UK 17 63 25 129
Rest of Europe (e) 60 538 105 554
USA 55 96 97 174
Rest of World 38 69 131 125
------- ------- ------- -------
170 766 358 982
------- ------- ------- -------
Other businesses and corporate (f) 267 52 319 101
------- ------- ------- -------
6,107 3,796 11,843 6,333
======= ======= ======= =======
By geographical area
UK 400 448 809 842
Rest of Europe 2,953 758 5,805 897
USA 1,467 1,628 2,998 2,838
Rest of World 1,287 962 2,231 1,756
------- ------- ------- -------
6,107 3,796 11,843 6,333
======= ======= ======= =======
------------
(a) Three months and six months ended June 30, 2002 included the acquisition of
an additional interest in Sidanco.
(b) Three months and six months ended June 30, 2002 included the acquisition of
a 5% stake in Enagas.
(c) Three months and six months ended June 30, 2001 included investment in
Green Mountain Energy Company.
(d) Three months and six months ended June 30, 2002 included the acquisition of
49% and 100% of Veba respectively.
(e) Three months and six months ended June 30, 2001 included the acquisition of
Bayer's 50% interest in Erdolchemie.
(f) Three months and six months ended June 30, 2002 included the acquisition of
the minority interest in Veba's upstream oil and gas assets.
Page 62
BP p.l.c. AND SUBSIDIARIES
SPECIAL ITEMS AND ACQUISITION AMORTIZATION BY SEGMENT (PRE-TAX)
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Special items
Exploration and Production
UK 82 - 132 -
Rest of Europe - - - -
USA 8 - 70 -
Rest of World - - 15 -
------- ------- ------- -------
90 - 217 -
------- ------- ------- -------
Gas, Power and Renewables
UK - - - -
Rest of Europe - - - -
USA - - - -
Rest of World - - - -
------- ------- ------- -------
- - - -
------- ------- ------- -------
Refining and Marketing
UK - 28 - 43
Rest of Europe 23 64 49 90
USA (137) 4 (137) 8
Rest of World - 13 - 21
------- ------- ------- -------
(114) 109 (88) 162
------- ------- ------- -------
Chemicals
UK 22 - 22 -
Rest of Europe 16 - 18 -
USA 5 - 35 -
Rest of World - - - -
------- ------- ------- -------
43 - 75 -
------- ------- ------- -------
Other businesses and corporate
UK - - - -
Rest of Europe - - - -
USA - - - -
Rest of World - - - -
------- ------- ------- -------
- - - -
------- ------- ------- -------
Total special items before interest 19 109 204 162
Interest - bond redemption charges - 50 - 60
------- ------- ------- -------
Total 19 159 204 222
======= ======= ======= =======
Acquisition amortization
Exploration and Production
UK 37 39 69 68
USA 268 420 549 826
Rest of World 36 32 68 67
------- ------- ------- -------
341 491 686 961
------- ------- ------- -------
Refining and Marketing
UK 100 98 197 202
USA 96 91 192 188
------- ------- ------- -------
196 189 389 390
------- ------- ------- -------
Total 537 680 1,075 1,351
======= ======= ======= =======
Page 63
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Replacement cost basis
Replacement cost profit before exceptional items 1,293 2,648 2,217 5,649
Interest 314 441 647 887
Minority shareholders' interest 52 18 61 26
------- ------- ------- -------
Adjusted replacement cost profit 1,659 3,107 2,925 6,562
======= ======= ======= =======
Average capital employed 90,774 86,241 88,356 87,360
ROACE - replacement cost basis 7.3% 14.4% 6.6% 15.0%
------- ------- ------- -------
Pro forma basis
Adjusted replacement cost profit 1,659 3,107 2,925 6,562
Acquisition amortization 537 680 1,075 1,351
Special items (post tax) 367 53 487 83
------- ------- ------- -------
Adjusted replacement cost profit (pro forma basis) 2,563 3,840 4,487 7,996
======= ======= ======= =======
Average capital employed 90,774 86,241 88,356 87,360
Average capital employed acquisition adjustement (a) 18,163 21,334 18,455 21,765
------- ------- ------- -------
Average capital employed (pro forma basis) 72,611 64,907 69,901 65,595
ROACE - pro forma basis adjusted for special items 14.1% 23.7% 12.8% 24.4%
Historical cost basis
Historical cost profit (loss) after exceptional items 2,040 2,741 3,336 5,571
Interest 314 441 647 887
Minority shareholders' interest 46 18 86 26
------- ------- ------- -------
Adjusted historical cost profit 2,400 3,200 4,069 6,484
======= ======= ======= =======
Average capital employed 90,774 86,241 88,356 87,360
ROACE - historical cost basis after exceptionals 10.6% 14.8% 9.2% 14.8%
------------
(a) Acquisition adjustment refers to the fixed asset revaluation adjustments
and goodwill consequent upon the ARCO and Burmah Castrol acquisitions.
Page 64
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Net debt ratio - net debt: net debt + equity
Gross debt 21,409 20,498 21,409 20,498
Cash and current asset investments 1,569 1,666 1,569 1,666
------- ------- ------- -------
Net debt 19,840 18,832 19,840 18,832
------- ------- ------- -------
Equity 68,126 66,880 68,126 66,880
Net debt ratio 23% 22% 23% 22%
------- ------- ------- -------
Acquisition adjustment (a) 18,028 20,933 18,028 20,933
------- ------- ------- -------
Net debt ratio - pro forma basis (b) 28% 29% 28% 29%
======= ======= ======= =======
---------------
(a) Acquisition adjustment refers to the fixed asset revaluation adjustments
and goodwill consequent upon the ARCO and Burmah Castrol acquisitions.
(b) Based on equity excluding the fixed asset revaluation adjustment and
goodwill resulting from the ARCO and Burmah Castrol acquisitions.
Page 65
BP p.l.c. AND SUBSIDIARIES
REPLACEMENT COST OPERATING PROFIT ADJUSTED FOR NON-CASH
CHARGES AND CERTAIN OTHER ITEMS
Replacement cost operating profit adjusted for non-cash charges and certain
other items essentially represents the Group's cash flow from operations (on a
net of tax paid basis, tax is adjusted for the estimated effect of exceptional
items and interest paid) excluding changes in working capital. BP is presenting
this information as it gives a better insight into underlying cash flow from
operating activities. This measure is derived from BP's UK GAAP accounting
information but is not itself a recognised UK or US GAAP measure.
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------ ----------------
($ million)
Replacement cost operating profit (RCOP) (reported) (a) 3,250 4,945 5,308 10,417
Depreciation and amounts provided (b) 2,227 2,130 4,380 4,297
Exploration expenditure written off 147 22 206 130
Dividends from joint ventures and associated
undertakings less share of RCOP (115) (69) (237) (278)
Dividends paid to minority shareholders (3) (5) (16) (5)
Adjust provisions to cash basis (c) (48) 212 (117) 71
Adjust interest and other income to cash basis (d) (3) (38) (16) (42)
------- ------- ------- -------
5,455 7,197 9,508 14,590
Tax paid adjusted for certain items* (869) (2,379) (1,446) (2,476)
------- ------- ------- -------
Adjusted RCOP after tax paid 4,586 4,818 8,062 12,114
------- ------- ------- -------
* Calculation of tax paid adjusted for certain items
Cash tax paid (927) (2,382) (1,372) (2,521)
Tax charge on exceptional items 160 118 121 269
Tax shield assumption + (102) (115) (195) (224)
------- ------- ------- -------
(869) (2,379) (1,446) (2,476)
------- ------- ------- -------
+ Calculation of tax shield assumption
Interest paid (342) (384) (651) (745)
Tax rate assumption (e) 30% 30% 30% 30%
------- ------- ------- -------
(102) (115) (195) (224)
------- ------- ------- -------
(a) Total replacement cost operating profit is before exceptional items,
inventory holding gains and losses and interest expense.
(b) Includes depreciation and amortization relating to the fixed asset
revaluation adjustments and goodwill consequent upon the ARCO and Burmah
Castrol acquisitions.
(c) Calculated as the net of charge for provisions and utilization of
provisions.
(d) Calculated as interest and other income, less interest received and
dividends received from the Group cash flow statement.
(e) Deemed tax rate for tax shield adjustment is equal to the UK statutory tax
rate.
Page 66
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: September 4, 2002 /s/ D. J. PEARL
..............................
D. J. PEARL
Deputy Company Secretary