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 September 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NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.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 - SEPTEMBER 2002
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------------- ----------------------------
($ million)
Turnover 49,054 43,580 128,999 137,401
======== ======== ======== ========
Reconciliation of historical cost and pro forma results
Historical cost profit for the period 2,835 1,588 6,171 7,159
Inventory holding (gains) losses (a) (305) 405 (1,278) 603
-------- -------- -------- --------
Replacement cost profit for the period (b) 2,530 1,993 4,893 7,762
Exceptional items, net of tax (1,769) (57) (1,915) (177)
-------- -------- -------- --------
Replacement cost profit before exceptional items 761 1,936 2,978 7,585
Special items, net of tax (c) 556 79 1,027 222
Acquisition amortization (d) 977 630 2,052 1,981
-------- -------- -------- --------
Pro forma result adjusted for special items 2,294 2,645 6,057 9,788
======== ======== ======== ========
Per Ordinary Share - cents
Historical cost profit 12.65 7.09 27.53 31.89
Replacement cost profit before exceptional items 3.39 8.63 13.28 33.78
Pro forma result adjusted for special items 10.24 11.80 27.02 43.60
Dividends per Ordinary Share - cents 6.00 5.50 17.75 16.25
---------------
(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 third quarter trading environment was similar to a year ago for Exploration
and Production but less favourable for Refining and Marketing. The nine months
trading environment was significantly less favourable than a year ago for both
businesses.
Turnover for the three months and nine months ended September 30, 2002 was
$49,054 million and $128,999 million respectively, compared with $43,580 million
and $137,401 million for 2001. The increase in turnover for the third quarter
primarily reflects volume increases in Refining and Marketing and Chemicals as a
result of acquisitions and improved site reliability. Compared with a year ago,
lower oil and gas prices in the nine months more than offset the effect of
volume increases.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) was $761 million for the three months ended September
30, 2002, compared with $1,936 million for the equivalent period of 2001. For
the nine months ended September 30, 2002, the replacement cost profit before
exceptional items was $2,978 million compared with $7,585 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 presents 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 nine months ended September
30, 2002 was $2,294 million and $6,057 million respectively, compared with
$2,645 million and $9,788 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 on pages 5 and 6.
Acquisition amortization for the three months and nine months ended September
30, 2002 was $977 million (including $405 million accelerated depreciation of
the revaluation adjustment in respect of the impairment of former ARCO assets)
and $2,052 million, respectively, compared with $630 million and $1,981 million
for the equivalent periods of 2001.
Special items refer to non-recurring charges and credits. For the three months
ended September 30, 2002, special items were $1,081 million ($556 million after
tax), and comprised impairment charges and restructuring costs in Exploration
and Production, an impairment charge in Gas, Power and Renewables, integration
and certain other costs in Refining and Marketing, an impairment charge in
Chemicals, and a provision to cover future rental payments on surplus leasehold
office accommodation in Other Businesses and Corporate. For the third quarter of
2001, special items were $120 million ($79 million after tax), comprising
Castrol integration costs, Erdolchemie rationalization costs and a bond
redemption charge. Special items for the nine months ended September 30, 2002
were $1,285 million ($1,027 million after tax) compared with $282 million ($222
million after tax) in 2001. The special items for the nine months of both 2002
and 2001 are comprised of the same elements as those in the respective third
quarter periods. In addition, the nine months of 2002 includes litigation costs
in Exploration and Production, business interruption insurance proceeds in
Refining and Marketing, Solvay and Erdolchemie integration costs and
restructuring charges in Chemicals and an adjustment to the North Sea deferred
tax balance for the supplementary UK corporation tax. The nine months of 2001
also includes rationalization costs in the European downstream commercial
business.
Underlying performance improvements were $0.8 billion before tax for the nine
months of 2002. Performance improvements have been impacted by weaker than
expected production. The total for the year is expected to be in the range of
$1.2-$1.4 billion. 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 around 4% and 3% in the quarter and nine
months respectively. Full year hydrocarbon production growth is expected to be
about 3%.
The historical cost profit for the three months ended September 30, 2002 was
$2,835 million including inventory holding gains of $305 million and net
exceptional gains of $1,794 million ($1,769 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 $1,588 million, after
inventory holding losses of $405 million and including net exceptional gains of
$184 million ($57 million after tax) in respect of net profits on the sale of
fixed assets and businesses or termination of operations.
For the nine months ended September 30, 2002, the historical cost profit was
$6,171 million, including inventory holding gains of $1,278 million net of
minority shareholders' interest and net exceptional gains of $2,061 million
($1,915 million after tax) in respect of net profits on the sale of fixed assets
and businesses or termination of operations. For the nine months ended September
30, 2001, the historical cost profit was $7,159 million, after inventory holding
losses of $603 million and including net exceptional gains of $573 million ($177
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
tables on pages 5 and 6 and discussed in the following pages on this basis.
Interest expense for the three months and nine months ended September 30, 2002
was $300 million and $947 million respectively, compared with $369 million
(including $2 million bond redemption charges) and $1,256 million (including $62
million bond redemption charges) in 2001 reflecting lower interest rates for
both periods in 2002.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Net taxation, other than production taxes, charged for the three months and nine
months ended September 30, 2002 was $713 million and $3,217 million
respectively, compared with $1,540 million and $5,664 million in the equivalent
period last year. The tax charge in respect of exceptional items was $25 million
compared with $127 million for the third quarter of 2001. The effective tax rate
on replacement cost profit before exceptional items was 47% and 50% respectively
for the three months and nine months ended September 30, 2002, compared with 42%
and 41% for the equivalent periods of 2001. The third quarter rate reflects the
higher acquisition amortization charge in 2002, partly offset by the higher tax
relief on asset impairment charges and related restructuring. The nine month
rate also reflects higher acquisition amortization (and its rateably greater
effect on lower pre-tax income in 2002), together with the $355 million charge
in the second quarter to increase the North Sea deferred tax provision for the
supplementary UK tax rate.
Capital expenditure and acquisitions in the third quarter of 2002 was $3.2
billion, compared with $3.4 billion for the equivalent period in 2001. For the
nine months ended September 30, 2002, capital expenditure and acquisitions was
$15.0 billion, including $5.0 billion for the Veba purchase, compared with $9.7
billion in 2001. There were no significant acquisitions in the third quarter of
2002. Excluding acquisitions, capital expenditure for the nine months 2002 was
$9.3 billion, and is on track for the upper end of the year's target range at
around $13 billion. Disposal proceeds in the third quarter were $2.9 billion,
including $2.3 billion from the sale of our investment in Ruhrgas, and $5.8
billion in the nine months.
Net cash outflow for the three months ended September 30, 2002 was $0.5 billion,
compared with an inflow of $0.9 billion for the equivalent period of 2001, as
higher disposal proceeds were more than offset by the payment for the remaining
interest in Veba and lower operating cash flow. For the nine months ended
September 30, 2002, the net cash outflow was $1.1 billion compared with an
inflow of $2.0 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 $4.4 billion and $13.1 billion for
the three months and nine months ended September 30, 2002 respectively, compared
with $5.0 billion and $16.9 billion in the equivalent periods in 2001. For the
third quarter, lower profit before exceptional items and a net increase in
working capital were partly offset by higher depreciation. For the nine months,
lower profit was partly offset by higher depreciation.
Net debt at September 30, 2002 was $21.0 billion. The ratio of net debt to net
debt plus equity was 23% at September 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 29% at September 30, 2002 and 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.
The Group has access to other sources of liquidity in the form of committed
facilities and other funding through the capital markets. BP believes that,
taking into account the substantial amounts of undrawn borrowing facilities
available, the Group has sufficient working capital for foreseeable
requirements.
In the normal course of business the Group has entered into certain long term
purchase commitments principally relating to take or pay contracts for the
purchase of natural gas, crude oil and chemicals feedstocks and throughput
arrangements for pipelines. The Group expects to fulfil its obligations under
these arrangements with no adverse consequences to the Group's results of
operations or financial condition.
The return on average capital employed on a replacement cost basis for the three
months ended September 30, 2002 was 5% compared with 11% for the equivalent
period of 2001. For the nine months ended September 30, 2002, the return on
average capital employed was 6% compared with 14% for 2001. The return on
average capital employed on a historical cost basis was 14% for the third
quarter and 11% for the nine months. For further information on the return on
average capital employed calculation see page 66 of this report.
BP announced a third quarterly dividend for 2002 of 6.0 cents per ordinary
share. Holders of ordinary shares will receive 3.897 pence per share and holders
of American Depositary Receipts (ADRs) $0.36 per ADS. The dividend is payable on
December 9, 2002 to shareholders on the register on November 15, 2002.
Participants in the Dividend Reinvestment Plan or the dividend reinvestment
facility in the US Direct Access Plan will receive the dividend in the form of
shares also on December 9, 2002.
BP intends to continue to pay dividends in the future of around 60% of its
replacement cost profit before exceptional items after adjusting for special
items and acquisition amortization, adjusted to mid-cycle operating conditions.
The target dividend payout ratio has been restated following adoption of FRS 19
on January 1, 2002 in order to maintain the substance of the existing financial
framework.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
The following tables provide a breakdown of pro forma results and reconcile
those results to replacement cost operating profit by operating segment.
Pro forma
Reconciliation of replacement cost Replacement result
profit (loss) to pro forma result cost Acquisition Special adjusted for
adjusted for special items profit (loss) amortization(a) items(b) special items
-------------- ------------- -------- -------------
($ million)
Three months ended September 30, 2002
Exploration and Production 1,572 775 703 3,050
Gas, Power and Renewables 57 - 30 87
Refining and Marketing 237 202 83 522
Chemicals 132 - 140 272
Other businesses and corporate (241) - 125 (116)
------ ------ ------ ------
Replacement cost operating profit 1,757 977 1,081 3,815
Interest expense (300) - - (300)
Taxation (688) - (525) (1,213)
Minority shareholders' interest (8) - - (8)
------ ------ ------ ------
Replacement cost profit before
exceptional items 761 977 556 2,294
------ ====== ====== ======
Exceptional items before tax 1,794
Taxation on exceptional items (25)
------
RC profit after exceptional items 2,530
Stock holding gains (losses) 305
------
HC profit 2,835
======
Three months ended September 30, 2001
Exploration and Production 2,627 443 - 3,070
Gas, Power and Renewables 125 - - 125
Refining and Marketing 990 187 112 1,289
Chemicals 105 - 8 113
Other businesses and corporate (117) - - (117)
------ ------ ------ ------
Replacement cost operating profit 3,730 630 120 4,480
Interest expense (369) - 2 (367)
Taxation (1,413) - (43) (1,456)
Minority shareholders' interest (12) - - (12)
------ ------ ------ ------
Replacement cost profit before
exceptional items 1,936 630 79 2,645
------ ====== ====== ======
Exceptional items before tax 184
Taxation on exceptional items (127)
------
RC profit after exceptional items 1,993
Stock holding gains (losses) (405)
------
HC profit 1,588
======
---------------
(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 third quarter of 2002 include impairment charges and
restructuring costs in Exploration and Production, an impairment charge in
Gas, Power and Renewables, integration and certain other costs in Refining
and Marketing, an impairment charge in Chemicals, and a provision to cover
future rental payments on surplus leasehold office accommodation in Other
Businesses and Corporate. The effective tax rate on special items was 49%,
reflecting the tax relief expected on asset impairments in Exploration and
Production and related restructuring. The special items for the third
quarter of 2001 comprise Castrol integration costs, Erdoelchemie
rationalization costs and a bond redemption charge; the taxation credit
relating to these special items has been calculated using a tax rate of
35%.
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)
Nine months ended September 30, 2002
Exploration and Production 5,958 1,461 920 8,339
Gas, Power and Renewables 282 - 30 312
Refining and Marketing 908 591 (5) 1,494
Chemicals 411 - 215 626
Other businesses and corporate (494) - 125 (369)
------ ------ ------ ------
Replacement cost operating profit 7,065 2,052 1,285 10,402
Interest expense (947) - - (947)
Taxation (3,071) - (242)(c) (3,313)
Minority shareholders' interest (69) - (16) (85)
------ ------ ------ ------
Replacement cost profit before
exceptional items 2,978 2,052 1,027 6,057
------ ====== ====== ======
Exceptional items before tax 2,061
Taxation on exceptional items (146)
------
RC profit after exceptional items 4,893
Stock holding gains (losses) 1,278
------
HC profit 6,171
======
Nine months ended September 30, 2001
Exploration and Production 10,720 1,404 - 12,124
Gas, Power and Renewables 386 - - 386
Refining and Marketing 3,194 577 274 4,045
Chemicals 195 - 8 203
Other businesses and corporate (348) - - (348)
------ ------ ------ ------
Replacement cost operating profit 14,147 1,981 282 16,410
Interest expense (1,256) - 62 (1,194)
Taxation (5,268) - (122) (5,390)
Minority shareholders' interest (38) - - (38)
------ ------ ------ ------
Replacement cost profit before
exceptional items 7,585 1,981 222 9,788
------ ====== ====== ======
Exceptional items before tax 573
Taxation on exceptional items (396)
------
RC profit after exceptional items 7,762
Stock holding gains (losses) (603)
------
HC profit 7,159
======
---------------
(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 nine months of 2002 comprise impairment charges,
restructuring and litigation costs for Exploration and Production; and an
impairment charge in Gas, Power and Renewables; Veba and other European
integration costs, business interruption insurance proceeds, costs related
to a pipeline incident and settlement of a US MTBE supply contract in
Refining and Marketing; Solvay and Erdolchemie integration costs and a
writedown of our Indonesian manufacturing assets in Chemicals; and a
provision to cover future rental payments on surplus leasehold office
accommodation in Other businesses and corporate. The special items for the
first nine months of 2001 comprise Burmah Castrol integration costs,
rationalization costs in Erdoelchemie and the downstream European
commercial business and bond redemption charges. The effective tax rate on
the special items for 2002 was 46%, reflecting the tax relief expected on
third quarter asset impairments in Exploration and Production and related
restructuring. The effective tax rate on special items for 2001 was 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 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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- -------------------------
Turnover - $m 6,220 6,335 18,397 22,893
Total replacement cost operating profit - $m 1,572 2,627 5,958 10,720
Results include:
Exploration expense - $m 119 86 465 336
Of which: Exploration expenditure written off - $m 55 23 261 153
Key Statistics:
Liquids(a) Average prices
realized by BP - $/bbl 24.40 23.08 21.99 24.22
Production - mb/d 1,983 1,883 2,008 1,902
Natural gas Average prices
realized by BP - $/mcf 2.25 2.49 2.32 3.66
Production - mmcf/d 8,482 8,319 8,631 8,587
Brent oil price - $/bbl 26.91 25.30 24.40 26.14
West Texas Intermediate oil price - $/bbl 28.26 26.72 25.40 27.77
Alaska North Slope US West Coast - $/bbl 27.26 24.05 24.06 25.01
Henry Hub gas price (b) - $/mmBtu 3.16 2.93 2.94 4.88
UK Gas - National Balancing Point - p/therm 12.74 17.07 14.53 22.17
---------------
(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 ended September 30, 2002 was $6,220 million
compared with $6,335 million in the corresponding period in 2001, with the
effect of higher production and oil price increases offset by lower gas prices.
Turnover for the nine months ended September 30, 2002 was $18,397 million
compared with $22,893 million for the corresponding period of 2001, with the
effect of higher production more than offset by lower oil and natural gas
prices.
Replacement cost operating profit for the three months and nine months ended
September 30, 2002 was $1,572 million and $5,958 million respectively, compared
with $2,627 million and $10,720 million for the equivalent periods in 2001. The
result for the third quarter 2002 includes special charges of $686 million and
accelerated acquisition amortization of $405 million related to the impairments
of Shearwater in the North Sea, Rhourde El Baguel in Algeria, LL652 and Boqueron
in Venezuela, Pagerungan in Indonesia and Badami in Alaska, following full
technical reassessments and evaluations of future investment opportunities. In
addition, there were special restructuring charges of $17 million. The nine
months 2002 also includes special charges of $217 million relating to
significant restructuring to reposition the business in North America and the
North Sea and litigation costs. The results also include depreciation and
amortization arising from the fixed asset revaluation adjustments and goodwill
consequent upon the ARCO acquisition in 2000 of $775 million and $1,461 million
for the third quarter and nine months of 2002, including $405 million
accelerated depreciation of the revaluation adjustment in respect of former ARCO
assets included in the impairments described above, and $443 million and $1,404
million for the corresponding periods in 2001.
Overall hydrocarbon production for the quarter at 3,445 mboe/d was up around 4%
on a year ago reflecting new production from Alaska, Deep Water Gulf of Mexico,
Trinidad, Angola and China and from our increased holding in Sidanco. These
increases were partly offset by the impact of operational problems in the UK and
USA and tropical storms in the Gulf of Mexico. During the quarter, King's Peak
in the Gulf of Mexico and Trinidad LNG train 2 came on stream. Horn Mountain,
Aspen, Princess and the Vietnam integrated gas project are expected to come on
stream in the fourth quarter.
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)
The third quarter result reflected an increase in liquids realizations of
$1.32/bbl. There was some offset from the charge of $64 million for Unrealized
Profit In Stock (UPIS) to remove the upstream margin from downstream inventories
following price rises since the second quarter. There was a negligible UPIS
effect in the equivalent quarter last year. Overall natural gas realizations
were down by $0.24 per thousand cubic feet. North American natural gas
realizations suffered from widening regional differentials to the Henry Hub
marker caused by continued transportation capacity restrictions and weak local
demand in the Rockies region.
The nine months result at $5,958 million, down $4,762 million on a year ago,
reflected the impact of significantly lower oil and gas prices and higher
exploration expense, mainly due to the second quarter write-off of the Neptune
project in the Gulf of Mexico, and a charge of $203 million for UPIS. These
adverse factors were partly offset by volume growth and unit lifting cost
reductions. Total hydrocarbon production for the nine months at 3,496 mboe/d was
up 3% compared with a year ago.
During the quarter BP participated in three discoveries: in Angola, the Plutao
oil discovery in Block 31 (BP 26.7% and operator), offshore Trinidad, the Iron
Horse gas discovery (BP 90% and operator) and in the Gulf of Mexico, the Great
White prospect (BP 33%).
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- ------------------------
Turnover - $m 9,313 9,307 25,316 31,920
Total replacement cost operating profit - $m 57 125 282 386
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 nine months ended September 30, 2002 was
$9,313 million and $25,316 million, compared with $9,307 million and $31,920
million for the same periods in 2001. Despite increased gas sales volumes,
turnover was flat in the third quarter and decreased for the nine months due to
lower natural gas prices, particularly in North America.
Replacement cost operating profit for the three months and nine months ended
September 30, 2002 was $57 million and $282 million respectively, compared with
$125 million and $386 million a year ago. The result for the third quarter 2002
includes special charges of $30 million related to the impairment of a
cogeneration power plant in the UK. The third quarter's marketing and trading
result was down, despite a 15% increase in gas sales volumes, due to lower
margins in North America and losses associated with the unscheduled shutdown of
the UK/Belgium Interconnector. The NGL business result was up on a year ago due
to improved margins. The result includes only one month of contribution from
Ruhrgas due to the disposal of this investment during the third quarter. The
nine months result reflects lower marketing and trading margins and a lower
Ruhrgas contribution, partly offset by an improvement in the NGL business.
During the quarter BP and its partners entered into two liquefied natural gas
(LNG) agreements with China National Offshore Oil Corporation. The Australian
North West Shelf consortium (BP 16.6%) was selected to supply up to 3.3 million
tonnes a year to China's Guangdong terminal (BP 30%). In addition, an agreement
was signed to supply LNG to the Fujian terminal from Indonesia's Tangguh natural
gas project (BP 49.7%). The 25-year LNG Sales and Purchase Agreement will
involve the supply of up to 2.6 million tonnes of LNG a year to Fujian. Both
projects are due to start up in 2006 or 2007. Separately, a supply and purchase
agreement has been signed with Qatar Liquefied Gas Company Ltd. (Qatargas) for
the delivery of 750,000 tonnes of LNG per year to the Spanish market over a
three year period. The first LNG cargo to Spain is scheduled for delivery in the
third quarter of 2003.
In North America, BP announced a multi-year agreement with Kinder Morgan that
will provide BP with natural gas supply and gas transportation and storage
facilities on Kinder Morgan's Texas intra-state pipeline systems.
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
----------------------- ------------------------
Turnover - $m 35,634 30,925 92,393 93,705
Total replacement cost operating profit - $m 237 990 908 3,194
Total refined product sales - mb/d 6,911 6,546 6,630 6,125
Refinery throughputs - mb/d 3,154 3,003 3,084 2,958
Global Indicator Refining Margin (a) - $/bbl 1.98 3.83 1.90 4.62
---------------
(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 nine months ended September 30, 2002 was
$35,634 million and $92,393 million respectively, compared with $30,925 million
and $93,705 million, for the same periods in the prior year. The increase in
turnover for the third quarter is due to volume increases from the Veba
acquisition. The decrease in turnover for the nine months primarily reflects
lower product prices, which more than offset volume increases from Veba. Results
for Veba have been included from February 1, 2002.
Replacement cost operating profit for the three months and nine months ended
September 30, 2002 was $237 million and $908 million respectively. This compares
with $990 million and $3,194 million in the corresponding periods of 2001. The
results for the third quarter and nine months of 2002 include special charges of
$83 million and a net credit to income for special items of $5 million
respectively. For the third quarter 2002, special items include Veba and other
European integration costs of $54 million, settlement costs associated with a
pre-acquisition ARCO US MTBE supply contract of $22 million, and costs
associated with an Olympic pipeline incident in 1999 of $7 million. Special
items for the nine months also included business interruption proceeds of $184
million, partly offset by additional costs associated with the Olympic pipeline
incident of $47 million and Veba integration costs of $49 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 $202 million and $591 million for the third
quarter and nine months respectively, and $187 million and $577 million for the
corresponding periods in 2001. Although not classified as a special item, the
third quarter 2002 result also included a charge of $80 million in respect of
environmental liabilities, following a reassessment of certain existing
liabilities.
Significantly lower refining margins are the primary reason for the decreases
versus last year. Refining margins declined in the third quarter compared with
the second quarter, reflecting high product inventories early in the quarter and
pressure from higher crude prices. Retail margins for the quarter were lower
than a year ago, particularly in the US, with the nine months similar to the
prior year. Partly offsetting the poorer trading environment were the
contributions from Veba and improved refining and marketing operational
performance.
Refining throughputs increased by 5% compared with the third quarter of 2001 due
to the Veba acquisition and better availability; these factors more than offset
the Yorktown, Mandan and Salt Lake City refinery divestments. Marketing volumes
increased by 14%, largely due to Veba. Excluding Veba, marketing volumes were
flat. Shop sales increased by 64%, primarily due to Veba. Excluding Veba, shop
sales increased by 11%, reflecting the growing number of BP Connect stations and
same store sales growth.
During the quarter, BP opened an additional 13 BP Connect stations, primarily in
the USA and UK, bringing the total number of BP Connect stations worldwide to
446. An additional 1,900 sites were reimaged in the third quarter, bringing the
total number of sites with the BP Helios to some 8,800 worldwide.
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- ------------------------
Turnover - $m 3,720 3,272 9,946 9,034
Total replacement cost operating profit - $m 132 105 411 195
Production (a) - kte 6,880 5,970 20,379 16,668
Chemicals Indicator Margin (b) - $/te 115 (c) 114 101 (c) 109
---------------
(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 third quarter is based on two months' actual
and one month of provisional data.
Turnover for the three months and nine months ended September 30, 2002 was
$3,720 million and $9,946 million respectively, compared with $3,272 million and
$9,034 million for the equivalent periods in 2001. The increase in turnover for
the third quarter and nine months primarily reflects higher production as a
result of acquisitions, organic growth and improved site reliability.
Replacement cost operating profit for the three months ended September 30, 2002,
was $132 million, down from $203 million in the second quarter and up from $105
million a year ago. The results for the third quarter and nine months 2002
include special charges of $140 million and $215 million respectively. The
special item for the third quarter 2002 is a writedown of our Indonesian
manufacturing assets following a review of its immediate prospects and
opportunities for future growth in a highly competitive regional market. Special
items for the nine months 2002 also include Solvay and Erdoelchemie integration
costs and costs related to restructuring our Research and Technology facilities
and the closure of polypropylene capacity in the USA.
The third quarter result, excluding special items, increased $159 million over a
year ago, primarily reflecting a lower cost structure and the benefits of
portfolio additions, restructuring and reliability improvements. The increase in
the nine months result was due to volume growth through improved operations,
organic growth and acquisitions, and lower costs, against a weaker margin
environment.
Chemicals production for the third quarter and nine months was up 15% and 22%
respectively, as a result of the Solvay, Erdoelchemie and Veba transactions, new
plants and improved reliability.
During the quarter we completed the sale of two-thirds of our interest in the
European ethylene pipeline company, ARG, in accordance with EU commission
requirements in relation to the Veba acquisition.
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- -----------------------
Turnover - $m 108 138 379 403
Replacement cost operating profit (loss) - $m (241) (117) (494) (348)
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. The results for the third quarter and
nine months 2002 include a special charge of $125 million for a provision to
cover future rental payments on surplus leasehold office accommodation.
EXCEPTIONAL ITEMS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- -----------------------
Profit (loss) on sale of fixed assets and
businesses or termination of operations - $m 1,794 184 2,061 573
Taxation credit (charge) - $m (25) (127) (146) (396)
------- ------ ------ -----
Exceptional items after taxation - $m 1,769 57 1,915 177
------- ------ ------ -----
Exceptional items for the third quarter include the profit on disposal of BP's
Ruhrgas interest and an electronic payment system.
OUTLOOK
The world economy sustained its gradual recovery in the third quarter, and some
modest growth is expected to continue in the fourth quarter, though the current
environment has little upside and significant downside risks. BP's overall
trading environment remained broadly at "mid-cycle" during the third quarter.
Recent demand growth has been partly met by increased OPEC production, though
quotas remain unchanged. Oil inventories are below normal seasonal levels. In
the fourth quarter, assuming a normal seasonal demand increase and no material
increase in OPEC production beyond high September levels, crude oil prices
should remain around third quarter levels.
Though storage levels for US natural gas remain high relative to seasonal norms,
prices have strengthened recently. This reflects declining production and the
expectation of firming seasonal demand.
Refining margins have improved in recent weeks, and are now above the weak third
quarter level, with commercial product inventories below the 1997-2001 average.
Oil product inventories are likely to tighten further during the fourth quarter
and should underpin margins.
Average third quarter retail margins were broadly in line with the second
quarter, though US margins came under pressure in the latter part of the
quarter. Retail margins may come under further pressure in the fourth quarter
reflecting a seasonal slowdown in demand and an increasingly competitive market.
The Chemicals business environment has weakened in recent weeks with demand
softening and margins under pressure from high feedstock prices.
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 third quarter and is likely to
remain relatively stable around this level for the remainder of the year.
Page 12
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - concluded
FORWARD-LOOKING STATEMENTS
In order to utilize the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, BP is providing the following
cautionary statement. The foregoing discussion, in particular, although not
limited to, the statements under `Group Results' and 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, prolonged
adverse weather 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 October 29, 2002, BP p.l.c. announced a third 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 $1,340 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares is November 15, 2002, with payment to be made
on December 9, 2002.
The dividend payable on December 9, 2002 entitles qualifying US ADS shareholders
to a refund of the 1/9th UK tax credit (approximately $0.04) 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
$0.36, a gross dividend for tax purposes of $0.40 and a potential tax credit of
$0.04 per ADS.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan will receive the dividend in the form of shares on December 9, 2002.
Page 13
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
--------------------- ---------------------
($ million, except per share amounts)
Turnover - Note 3 49,558 43,886 130,186 138,275
Less: joint ventures 504 306 1,187 874
------- ------- ------- -------
Group turnover 49,054 43,580 128,999 137,401
Replacement cost of sales 43,940 37,208 112,670 115,102
Production taxes - Note 4 350 337 912 1,353
------- ------- ------- -------
Gross profit 4,764 6,035 15,417 20,946
Distribution and administration expenses 3,214 2,678 9,028 7,842
Exploration expense - Note 5 119 86 465 336
------- ------- ------- -------
1,431 3,271 5,924 12,768
Other income 151 179 423 486
------- ------- ------- -------
Group replacement cost operating profit 1,582 3,450 6,347 13,254
Share of profits of joint ventures 104 125 263 352
Share of profits of associated undertakings 71 155 455 541
------- ------- ------- -------
Total replacement cost operating profit - Note 6 1,757 3,730 7,065 14,147
Profit (loss) on sale of fixed assets and
businesses 1,794 184 2,061 573
or termination of operations - Note 7
------- ------- ------- -------
Replacement cost profit before interest
and tax - Note 6 3,551 3,914 9,126 14,720
Inventory holding gains (losses) - Note 8 305 (405) 1,303 (603)
------- ------- ------- -------
Historical cost profit before interest and tax 3,856 3,509 10,429 14,117
Interest expense - Note 9 300 369 947 1,256
------- ------- ------- -------
Profit before taxation 3,556 3,140 9,482 12,861
Taxation - Note 10 713 1,540 3,217 5,664
------- ------- ------- -------
Profit after taxation 2,843 1,600 6,265 7,197
Minority shareholders' interest 8 12 94 38
------- ------- ------- -------
Profit for the period (a) 2,835 1,588 6,171 7,159
======= ======= ======= =======
Earnings per ordinary share - cents (a)
Basic 12.65 7.08 27.53 31.88
Diluted 12.59 7.03 27.39 31.68
------- ------- ------- -------
Earnings per American depositary share - cents (a)
Basic 75.90 42.48 165.18 191.28
Diluted 75.54 42.18 164.34 190.08
------- ------- ------- -------
Average number of outstanding ordinary
shares (thousands) 22,408,297 22,425,374 22,412,655 22,449,041
=========== =========== =========== ===========
---------------
(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
September 30, 2002 December 31, 2001
(Unaudited)
----------------------- -----------------------
($ million)
Fixed assets
Intangible assets 15,902 16,489
Tangible assets 85,521 77,410
Investments 11,646 11,963
----------- ----------
113,069 105,862
Current assets
Inventories 9,917 7,631
Receivables 31,781 26,669
Investments 285 450
Cash at bank and in hand 1,005 1,358
---------- -----------
42,988 36,108
---------- -----------
Current liabilities - falling due within one year
Finance debt 10,582 9,090
Accounts payable and accrued liabilities 34,870 28,524
---------- -----------
45,452 37,614
---------- -----------
Net current liabilities (2,464) (1,506)
----------- ----------
Total assets less current liabilities 110,605 104,356
Noncurrent liabilities
Finance debt 11,694 12,327
Accounts payable and accrued liabilities 3,261 3,086
Provisions for liabilities and charges
Deferred tax 13,391 11,702
Other 13,056 11,482
---------- -----------
41,402 38,597
----------- ----------
Net assets 69,203 65,759
Minority shareholders' interest 556 598
----------- ----------
BP shareholders' interest (a) - Note 14 68,647 65,161
=========== ==========
Represented by:
Capital shares
Preference 21 21
Ordinary 5,594 5,608
Paid-in surplus 4,226 4,014
Merger reserve 27,029 26,983
Retained earnings 31,600 28,312
Other reserves 177 223
----------- ----------
68,647 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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
--------------------- ---------------------
($ million)
Net cash inflow from operating activities 4,376 5,046 13,145 16,862
------- ------- ------- -------
Dividends from joint ventures 30 26 129 92
------- ------- ------- -------
Dividends from associated undertakings 96 155 303 424
------- ------- ------- -------
Servicing of finance and returns on investments
Interest received 63 23 168 173
Interest paid (218) (308) (869) (1,053)
Dividends received 4 59 64 97
Dividends paid to minority shareholders (13) (11) (29) (16)
------- ------- ------- -------
Net cash outflow from servicing of finance
and returns on investments (164) (237) (666) (799)
------- ------- ------- -------
Taxation
UK corporation tax (206) (231) (560) (604)
Overseas tax (455) (486) (1,473) (2,634)
------- ------- ------- -------
Tax paid (661) (717) (2,033) (3,238)
------- ------- ------- -------
Capital expenditure
Payments for fixed assets (2,980) (2,933) (8,572) (8,526)
Proceeds from the sale of fixed assets 488 824 1,744 1,750
------- ------- ------- -------
Net cash outflow for capital expenditure (2,492) (2,109) (6,828) (6,776)
------- ------- ------- -------
Acquisitions and disposals
Investments in associated undertakings (125) (139) (756) (407)
Proceeds from sale of investment in Ruhrgas 2,338 - 2,338 -
Acquisitions, net of cash acquired (2,607) (48) (4,296) (608)
Net investment in joint ventures (23) (144) (137) (277)
Proceeds from the sale of businesses 55 307 1,670 307
------- ------- ------- -------
Net cash (outflow) inflow for acquisitions
and disposals (362) (24) (1,181) (985)
------- ------- ------- -------
Equity dividends paid (1,346) (1,235) (3,924) (3,595)
------- ------- ------- -------
Net cash inflow (outflow) (523) 905 (1,055) 1,985
======= ======= ======= =======
Financing (219) 630 (485) 1,827
Management of liquid resources (32) (44) (164) (146)
Increase (decrease) in cash (272) 319 (406) 304
------- ------- ------- -------
(523) 905 (1,055) 1,985
======= ======= ======= =======
---------------
(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 - concluded
Three months ended Nine months ended
September 30 September 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 3,856 3,509 10,429 14,117
Depreciation and amounts provided 3,506 2,104 7,886 6,401
Exploration expenditure written off 55 23 261 153
Share of profits of joint ventures and associated
undertakings (172) (278) (716) (891)
Interest and other income (62) (116) (243) (346)
(Profit) loss on sale of fixed assets and businesses (1,796) (184) (2,061) (573)
Charge for provisions 332 115 826 821
Utilization of provisions (392) (263) (1,003) (898)
Decrease (increase) in stocks (155) 135 (1,458) 122
Decrease (increase) in debtors (379) 2,216 (2,403) 748
Increase (decrease) in creditors (417) (2,215) 1,627 (2,792)
------- ------- ------- -------
Net cash inflow from operating activities 4,376 5,046 13,145 16,862
======= ======= ======= =======
Financing
Long-term borrowing (558) (7) (3,056) (1,029)
Repayments of long-term borrowing 567 988 1,464 2,168
Short-term borrowing (1,627) (743) (5,879) (3,493)
Repayments of short-term borrowing 704 40 6,414 3,167
------- ------- ------- -------
(914) 278 (1,057) 813
Issue of ordinary share capital (55) (48) (178) (168)
Repurchase of ordinary share capital 750 400 750 1,182
------- ------- ------- -------
Net cash (inflow) outflow from financing (219) 630 (485) 1,827
======= ======= ======= =======
---------------
(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.
Page 18
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement of comparative information (continued)
Income statement Three months ended Nine months ended
September 30, 2001 September 30, 2001
(Unaudited) (Unaudited)
Restated Reported Restated Reported
------------------------- --------------------------
($ million, except per share amounts)
Turnover 43,886 43,886 138,275 138,275
Less: joint ventures 306 306 874 874
-------- -------- -------- --------
Group turnover 43,580 43,580 137,401 137,401
Replacement cost of sales 37,208 37,181 115,102 115,021
Production taxes 337 337 1,353 1,353
-------- -------- -------- --------
Gross profit 6,035 6,062 20,946 21,027
Distribution and administration expenses 2,678 2,678 7,842 7,842
Exploration expense 86 86 336 336
-------- -------- -------- --------
3,271 3,298 12,768 12,849
Other income 179 179 486 486
-------- -------- -------- --------
Group replacement cost operating profit 3,450 3,477 13,254 13,335
Share of profits of joint ventures 125 125 352 352
Share of profits of associated undertakings 155 155 541 541
-------- -------- -------- --------
Total replacement cost operating profit (a) 3,730 3,757 14,147 14,228
Profit (loss) on sale of fixed assets and
businesses or termination of operations 184 184 573 573
-------- -------- -------- --------
Replacement cost profit before interest and tax 3,914 3,941 14,720 14,801
Inventory holding gains (losses) (405) (405) (603) (603)
-------- -------- -------- --------
Historical cost profit before interest and tax 3,509 3,536 14,117 14,198
Interest expense 369 369 1,256 1,256
-------- -------- -------- --------
Profit before taxation 3,140 3,167 12,861 12,942
Taxation 1,540 1,212 5,664 4,480
-------- -------- -------- --------
Profit after taxation 1,600 1,955 7,197 8,462
Minority shareholders' interest 12 15 38 47
-------- -------- -------- --------
Profit for the period 1,588 1,940 7,159 8,415
-------- -------- -------- --------
Distribution to shareholders 1,232 1,232 3,646 3,646
-------- -------- -------- --------
Earnings per ordinary share - cents
Basic 7.08 8.66 31.88 37.48
Diluted 7.03 8.59 31.68 37.24
======== ======== ======== ========
--------
(a) Total replacement cost operating profit, by business
Exploration and Production 2,627 2,641 10,720 10,762
Gas, Power and Renewables 125 130 386 415
Refining and Marketing 990 1,003 3,194 3,233
Chemicals 105 105 195 195
Other businesses and corporate (117) (122) (348) (377)
-------- -------- -------- --------
3,730 3,757 14,147 14,228
======== ======== ======== ========
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
--------------------------- ---------------------------
($ million)
3. Turnover (a)
By business
Exploration and Production 6,220 6,335 18,397 22,893
Gas, Power and Renewables 9,313 9,307 25,316 31,920
Refining and Marketing 35,634 30,925 92,393 93,705
Chemicals 3,720 3,272 9,946 9,034
Other businesses and corporate 108 138 379 403
------- ------- ------- -------
54,995 49,977 146,431 157,955
Less: sales between businesses 5,941 6,397 17,432 20,554
------- ------- ------- -------
Group excluding joint ventures 49,054 43,580 128,999 137,401
Sales of joint ventures 504 306 1,187 874
------- ------- ------- -------
49,558 43,886 130,186 138,275
======= ======= ======= =======
By geographical area
UK 12,160 12,272 35,664 36,186
Rest of Europe 13,460 9,026 34,798 28,044
USA 22,880 21,375 57,808 68,657
Rest of World 8,537 8,006 23,556 26,626
------- ------- ------- -------
57,037 50,679 151,826 159,513
Less: sales between areas 7,983 7,099 22,827 22,112
------- ------- ------- -------
49,054 43,580 128,999 137,401
======= ======= ======= =======
(a) Contracts for the sale and purchase of crude oil, refined products, natural
gas and power, which are held for trading purposes and marked-to-market,
that require delivery of the underlying commodity are reported on a gross
basis.
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- -----------------------
($ million)
4 Production taxes
UK petroleum revenue tax 92 80 245 453
Overseas production taxes 258 257 667 900
----- ----- ----- -----
350 337 912 1,353
===== ===== ===== =====
5 Exploration expense
Exploration and Production
UK 16 1 26 5
Rest of Europe 5 10 41 15
USA 53 41 228 174
Rest of World 45 34 170 142
----- ----- ----- -----
119 86 465 336
===== ===== ===== =====
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 Nine months ended
September 30 September 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 (25) 3 407 280
Gas, Power and Renewables 1,585 - 1,584 (1)
Refining and Marketing 262 247 248 453
Chemicals 11 (81) (134) (167)
Other businesses and corporate (39) 15 (44) 8
------ ------ ------ ------
Exceptional items before taxation 1,794 184 2,061 573
Taxation charge (25) (127) (146) (396)
------ ------ ------ ------
Exceptional items after taxation 1,769 57 1,915 177
====== ====== ====== ======
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
---------------------- ---------------------
($ million)
8. Inventory holding gains (losses)
Exploration and Production 3 (1) 5 (1)
Gas, Power and Renewables 2 (17) 10 (61)
Refining and Marketing 311 (301) 1,250 (445)
Chemicals (11) (86) 38 (96)
------ ------ ------ ------
305 (405) 1,303 (603)
Minority shareholders' interest - - 25 -
------ ------ ------ ------
305 (405) 1,278 (603)
====== ====== ====== ======
9 Interest expense
Group interest payable (a) 250 292 778 1,022
Capitalized (27) (19) (67) (74)
------ ------ ------ ------
223 273 711 948
Joint ventures 15 16 44 49
Associated undertakings 19 33 64 109
Unwinding of discount on provisions 43 47 128 150
------ ------ ------ ------
300 369 947 1,256
====== ====== ====== ======
------
(a) Includes charges relating to the early redemption of debt - 2 - 62
------ ------ ------ ------
10. Charge for taxation
Current 463 1,206 2,036 4,581
Deferred (a) 250 334 1,181 1,083
------ ------ ------ ------
713 1,540 3,217 5,664
====== ====== ====== ======
United Kingdom 235 244 1,070 766
Overseas 478 1,296 2,147 4,898
------ ------ ------ ------
713 1,540 3,217 5,664
====== ====== ====== ======
------
(a) Includes the adjustment to the North Sea deferred tax - - 355 -
balance for the supplementary UK corporation tax of 10%
------ ------ ------ ------
11. Reconciliation of replacement cost results
Historical cost profit (loss) for the period 2,835 1,588 6,171 7,159
Inventory holding (gains) losses (a) (305) 405 (1,278) 603
------ ------ ------ ------
Replacement cost profit for the period 2,530 1,993 4,893 7,762
Exceptional items (b) (1,769) (57) (1,915) (177)
------ ------ ------ ------
Replacement cost profit before exceptional items 761 1,936 2,978 7,585
------ ------ ------ ------
Earnings per ordinary share - cents
On replacement cost profit before exceptional items 3.39 8.63 13.28 33.78
====== ====== ====== ======
------
(a) Net of minority shareholders' interest - - (25) -
(b) Net of tax charge 25 127 146 396
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 September 30, 2002
Group turnover
- third parties 1,628 9,218 34,723 3,377 108 - 49,054
- sales between businesses 4,592 95 911 343 - (5,941) -
------------- ------------- ------------ ------------ ------------ --------------- ---------
6,220 9,313 35,634 3,720 108 (5,941) 49,054
------------- ------------- ------------ ------------ ------------ --------------- ---------
Share of sales by joint ventures 146 - 135 223 - - 504
------------- ------------- ------------ ------------ ------------ --------------- ---------
Equity accounted income 174 13 63 (88) 13 - 175
------------- ------------- ------------ ------------ ------------ --------------- ---------
Total replacement cost
operating profit (loss) 1,572 57 237 132 (241) - 1,757
Exceptional items (25) 1,585 262 11 (39) - 1,794
Inventory holding gains
(losses) 3 2 311 (11) - - 305
------------- ------------- ------------ ------------ ------------ --------------- ---------
Historical cost profit (loss)
before interest and tax 1,550 1,644 810 132 (280) - 3,856
------------- ------------- ------------ ------------ ------------ --------------- ---------
Capital expenditure and
acquisitions 2,240 107 605 180 48 - 3,180
Three months
ended September 30, 2001
Group turnover
- third parties 1,298 8,591 30,351 3,202 138 - 43,580
- sales between businesses 5,037 716 574 70 - (6,397) -
------------- ------------- ------------ ------------ ------------ --------------- ---------
6,335 9,307 30,925 3,272 138 (6,397) 43,580
------------- ------------- ------------ ------------ ------------ --------------- ---------
Share of sales by joint ventures 217 - 89 - - - 306
------------- ------------- ------------ ------------ ------------ --------------- ---------
Equity accounted income 124 27 80 23 26 - 280
------------- ------------- ------------ ------------ ------------ --------------- ---------
Total replacement cost
operating profit (loss) 2,627 125 990 105 (117) - 3,730
Exceptional items 3 - 247 (81) 15 - 184
Inventory holding gains
(losses) (1) (17) (301) (86) - - (405)
------------- ------------- ------------ ------------ ------------ --------------- ---------
Historical cost profit (loss)
before interest and tax 2,629 108 936 (62) (102) - 3,509
------------- ------------- ------------ ------------ ------------ --------------- ---------
Capital expenditure and
acquisitions 2,419 87 442 350 65 - 3,363
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis (continued)
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
---------- --------- ---------- --------- ------------- ----------
($ million)
Three months ended September 30, 2002
Group turnover - third parties 8,316 11,095 22,770 6,873 - 49,054
- sales between areas 3,844 2,365 110 1,664 (7,983) -
---------- --------- ---------- --------- ------------- ----------
12,160 13,460 22,880 8,537 (7,983) 49,054
---------- --------- ---------- --------- ------------- ----------
Share of sales by joint ventures 3 197 78 226 - 504
---------- --------- ---------- --------- ------------- ----------
Equity accounted income (1) 27 62 87 - 175
---------- --------- ---------- --------- ------------- ----------
Total replacement cost operating profit (131) 620 672 596 - 1,757
Exceptional items (18) 1,672 161 (21) - 1,794
Inventory holding gains (losses) 43 128 105 29 - 305
---------- --------- ---------- --------- ------------- ----------
Historical cost profit before interest and tax (106) 2,420 938 604 - 3,856
---------- --------- ---------- --------- ------------- ----------
Capital expenditure and acquisitions 394 353 1,389 1,044 - 3,180
Three months ended September 30, 2001
Group turnover -third parties 8,975 6,864 21,297 6,444 - 43,580
-sales between areas 3,297 2,162 78 1,562 (7,099) -
---------- --------- ---------- --------- ------------- ----------
12,272 9,026 21,375 8,006 (7,099) 43,580
---------- --------- ---------- --------- ------------- ----------
Share of sales by joint ventures - - 49 257 - 306
---------- --------- ---------- --------- ------------- ----------
Equity accounted income 3 38 80 159 - 280
---------- --------- ---------- --------- ------------- ----------
Total replacement cost operating profit 552 512 1,555 1,111 - 3,730
Exceptional items (64) (8) 258 (2) - 184
Inventory holding gains (losses) (65) (111) (195) (34) - (405)
---------- --------- ---------- --------- ------------- ----------
Historical cost profit before interest and tax 423 393 1,618 1,075 - 3,509
---------- --------- ---------- --------- ------------- ----------
Capital expenditure and acquisitions 541 181 1,564 1,077 - 3,363
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)
Nine months
ended September 30, 2002
Group turnover
- third parties 4,965 24,347 89,866 9,442 379 - 128,999
- sales between businesses 13,432 969 2,527 504 - (17,432) -
------------- ------------- ------------ ------------ ------------ --------------- ---------
18,397 25,316 92,393 9,946 379 (17,432) 128,999
------------- ------------- ------------ ------------ ------------ --------------- ---------
Share of sales by joint ventures 378 - 314 495 - - 1,187
------------- ------------- ------------ ------------ ------------ --------------- ---------
Equity accounted income 426 105 165 (20) 42 - 718
------------- ------------- ------------ ------------ ------------ --------------- ---------
Total replacement cost
operating profit (loss) 5,958 282 908 411 (494) - 7,065
Exceptional items 407 1,584 248 (134) (44) - 2,061
Inventory holding gains
(losses) 5 10 1,250 38 - - 1,303
------------- ------------- ------------ ------------ ------------ --------------- ---------
Historical cost profit (loss)
before interest and tax 6,370 1,876 2,406 315 (538) - 10,429
------------- ------------- ------------ ------------ ------------ --------------- ---------
Capital expenditure and
acquisitions 7,126 285 6,707 538 367 - 15,023
Nine months
ended September 30, 2001
Group turnover
- third parties 7,050 29,654 91,442 8,852 403 - 137,401
- sales between businesses 15,843 2,266 2,263 182 - (20,554) -
------------- ------------- ------------ ------------ ------------ --------------- ---------
22,893 31,920 93,705 9,034 403 (20,554) 137,401
------------- ------------- ------------ ------------ ------------ --------------- ---------
Share of sales by joint ventures 543 - 331 - - - 874
------------- ------------- ------------ ------------ ------------ --------------- ---------
Equity accounted income 441 112 182 100 58 - 893
------------- ------------- ------------ ------------ ------------ --------------- ---------
Total replacement cost
operating profit (loss) 10,720 386 3,194 195 (348) - 14,147
Exceptional items 280 (1) 453 (167) 8 - 573
Inventory holding gains
(losses) (1) (61) (445) (96) - - (603)
------------- ------------- ------------ ------------ ------------ --------------- ---------
Historical cost profit (loss)
before interest and tax 10,999 324 3,202 (68) (340) - 14,117
------------- ------------- ------------ ------------ ------------ --------------- ---------
Capital expenditure and
acquisitions 6,708 191 1,299 1,332 166 - 9,696
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis (concluded)
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
---------- --------- ---------- --------- ------------- ----------
($ million)
Nine months ended September 30, 2002
Group turnover -third parties 24,900 28,724 56,411 18,964 - 128,999
-sales between areas 10,764 6,074 1,397 4,592 (22,827) -
---------- --------- ---------- --------- ------------- ----------
35,664 34,798 57,808 23,556 (22,827) 128,999
---------- --------- ---------- --------- ------------- ----------
Share of sales by joint ventures
107 323 181 576 - 1,187
---------- --------- ---------- --------- ------------- ----------
Equity accounted income (4) 138 191 393 - 718
---------- --------- ---------- --------- ------------- ----------
Total replacement cost operating profit 903 1,532 1,933 2,697 - 7,065
Exceptional items (51) 1,637 534 (59) - 2,061
Inventory holding gains (losses) 101 310 804 88 - 1,303
---------- --------- ---------- --------- ------------- ----------
Historical cost profit before interest and 953 3,479 3,271 2,726 - 10,429
tax
---------- --------- ---------- --------- ------------- ----------
Capital expenditure and acquisitions 1,203 6,158 4,387 3,275 - 15,023
Nine months ended September 30, 2001
Group turnover -third parties 26,168 22,025 67,772 21,436 - 137,401
-sales between areas 10,018 6,019 885 5,190 (22,112) -
---------- --------- ---------- --------- ------------- ----------
36,186 28,044 68,657 26,626 (22,112) 137,401
---------- --------- ---------- --------- ------------- ----------
Share of sales by joint ventures - - 236 638 - 874
---------- --------- ---------- --------- ------------- ----------
Equity accounted income 5 162 222 504 - 893
---------- --------- ---------- --------- ------------- ----------
Total replacement cost operating profit 2,293 1,426 6,725 3,703 - 14,147
Exceptional items (78) (7) 364 294 - 573
Inventory holding gains (losses) (98) (106) (376) (23) - (603)
---------- --------- ---------- --------- ------------- ----------
Historical cost profit before interest and 2,117 1,313 6,713 3,974 - 14,117
tax
---------- --------- ---------- --------- ------------- ----------
Capital expenditure and acquisitions 1,383 1,078 4,402 2,833 - 9,696
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
----------------------- ------------------------
($ million)
13. Analysis of changes in net debt
Opening balance
Finance debt 21,409 20,498 21,417 21,190
Less: Cash 1,284 1,103 1,358 1,170
Current asset investments 285 563 450 661
------- -------- -------- -------
Opening net debt 19,840 18,832 19,609 19,359
------- -------- -------- -------
Closing balance
Finance debt 22,276 20,474 22,276 20,474
Less: Cash 1,005 1,438 1,005 1,438
Current asset investments 285 519 285 519
------- -------- -------- -------
Closing net debt 20,986 18,517 20,986 18,517
------- -------- -------- -------
(Increase) decrease in net debt (1,146) 315 (1,377) 842
======= ======== ======== =======
Movement in cash/bank overdrafts (272) 319 (406) 304
(Decrease) increase in current asset investments (32) (43) (164) (145)
Net cash (inflow) outflow from financing
(excluding share capital) (914) 278 (1,057) 813
Partnership interests exchanged for BP loan notes - - 1,135 -
Other movements 13 (102) 57 (20)
Debt acquired - - (999) (47)
------- -------- -------- -------
Movements in net debt before exchange effects (1,205) 452 (1,434) 905
Exchange adjustments 59 (137) 57 (63)
------- -------- -------- -------
(Increase) decrease in net debt (1,146) 315 (1,377) 842
======= ======== ======== =======
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 6,171
Distribution to shareholders (3,977)
Currency translation differences 1,864
Employee share schemes 178
Share buyback (750)
-------
Balance at September 30, 2002 68,647
=======
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 September 30, 2002
(Unaudited)
--------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Other income 151 76 227
Share of profits of JVs
and associated undertakings 175 (175) -
Exceptional items before taxation 1,794 2 1,796
Inventory holding gains (losses) 305 - 305
Interest expense 300 (34) 266
Taxation 713 (63) 650
Profit for the period 2,835 - 2,835
Nine months ended September 30, 2002
(Unaudited)
--------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Other income 423 421 844
Share of profits of JVs and
associated undertakings 718 (718) -
Exceptional items before taxation 2,061 - 2,061
Inventory holding gains (losses) 1,303 2 1,305
Interest expense 947 (108) 839
Taxation 3,217 (187) 3,030
Profit for the period 6,171 - 6,171
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 September 30, 2001
(Unaudited)
--------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Other income 179 164 343
Share of profits of JVs and
associated undertakings 280 (280) -
Exceptional items before taxation 184 - 184
Inventory holding gains (losses) (405) 2 (403)
Interest expense 369 (49) 320
Taxation 1,540 (65) 1,475
Profit for the period 1,588 - 1,588
Nine months ended September 30, 2001
(Unaudited)
--------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Other income 486 524 1,010
Share of profits of JVs and 893 (893) -
associated undertakings
Exceptional items before taxation 573 1 574
Inventory holding gains (losses) (603) 1 (602)
Interest expense 1,256 (158) 1,098
Taxation 5,664 (209) 5,455
Profit for the period 7,159 - 7,159
(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.
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iii) Turnover
In addition to the risk management activities related to equity crude
disposal, refinery supply and marketing, BP's supply and trading
organization undertakes trading in the full range of conventional
derivative financial and commodity instruments and physical cargoes
available in the oil markets. The Group also uses financial and
commodity derivatives to manage certain of its exposures to price
fluctuations on natural gas and power transactions. For BP's reporting
under UK GAAP, contracts for the sale and purchase of crude oil,
refined products, natural gas and power, which are held for trading
purposes and marked-to-market, that are capable of physical settlement
are reported on a gross basis as turnover for sales and cost of sales
for purchases.
The BP entities that engage in oil trading, natural gas trading and
certain gas supply and marketing arrangements and power trading are
categorized as energy trading activities as defined by FASB Emerging
Issues Task Force (EITF) Abstract 98-10 'Accounting for Contracts
Involved in Energy Trading and Risk Management Activities' and
consequently all their activities are marked-to-market for the group's
UK and US GAAP reporting.
In June 2002, the EITF reached a consensus with regards to EITF Issue
No. 02-3, 'Issues Involved in Accounting for Contracts Under EITF
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading
and Risk Management Activities"' (EITF 02-3). Under this consensus,
among other things, all gains and losses (realized and unrealized) on
energy trading contracts are shown net in the income statement,
irrespective of whether the contract is physically or financially
settled. The consensus is effective for financial statements issued
for interim periods ending after July 15, 2002, with prior periods
restated.
The EITF is still discussing issues regarding the reporting of energy
trading activities which could lead to further changes and amendments
to the information disclosed by the Group.
This change in accounting classification to accord with US GAAP has no
impact on profit for the period or on BP shareholders' interest as
adjusted to accord with US GAAP.
The adjustments to Group turnover and replacement cost of sales for
the three months and nine months ended September 30, 2002 and 2001 to
accord with US GAAP are summarized below.
Three months ended September 30, 2002
(Unaudited)
--------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Group turnover 49,054 (14,456) 34,598
Replacement cost of sales 43,940 (14,456) 29,484
Profit for the period 2,835 - 2,835
Nine months ended September 30, 2002
(Unaudited)
--------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Group turnover 128,999 (38,225) 90,774
Replacement cost of sales 112,670 (38,225) 74,445
Profit for the period 6,171 - 6,171
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iii) Turnover (concluded)
Three months ended September 30, 2001
(Unaudited)
--------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Group turnover 43,580 (14,241) 29,339
Replacement cost of sales 37,208 (14,241) 22,967
Profit for the period 1,588 - 1,588
Nine months ended September 30, 2001
(Unaudited)
--------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------
($ million)
Consolidated statement of income
Group turnover 137,401 (42,775) 94,626
Replacement cost of sales 115,102 (42,775) 72,327
Profit for the period 7,159 - 7,159
(iv) 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.
(v) Deferred taxation/business combinations
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of assets acquired and liabilities assumed in a purchase
business combination, whereas under UK GAAP no such deferred tax asset
or liability is recognized. Under US GAAP the deferred tax asset or
liability is amortized over the same period as the assets and
liabilities to which it relates.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 380 279 670 846
Taxation (321) (517) (495) (1,189)
Profit for the period (59) 238 (175) 343
======== ======== ======== ========
At At
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Tangible assets 6,948 7,032
Deferred taxation 6,882 6,789
BP shareholders' interest 66 243
========= ========
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) 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 Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 61 96 170 253
Interest expense (43) (47) (128) (150)
Taxation (8) (20) (24) (68)
Profit for the period (10) (29) (18) (35)
======== ======== ======== ========
At At
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Tangible assets (877) (785)
Provisions 772 780
Deferred taxation (540) (511)
BP shareholders' interest (1,109) (1,054)
======== ========
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vii)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. A further
provision has been recognized in 2002 under UK GAAP, which has also
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 Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales (51) 8 (44) 45
Taxation 18 (4) 16 (2)
Profit for the period 33 (4) 28 (43)
======== ======== ======== ========
At At
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Tangible assets 164 171
Other accounts payable and accrued liabilities 27 30
Provisions (116) (65)
Finance debt 413 413
Deferred taxation (55) (73)
BP shareholders' interest (105) (134)
======== ========
(viii)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 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii)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 Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales (334) (15) (977) (45)
Taxation - - - -
Profit for the period 334 15 977 45
======== ======== ======== ========
At At
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Intangible assets (422) (1,414)
Deferred taxation - -
BP shareholders' interest (422) (1,414)
======== ========
Profit for the period, as adjusted to accord with US GAAP, for the
three month and nine month periods ended September 30, 2001, adjusted
to exclude amortization of goodwill no longer being amortized pursuant
to SFAS 142 is shown below.
Three months ended Nine months ended
September 30, 2001 September 30, 2001
(Unaudited) (Unaudited)
------------------ ------------------
($ million)
Profit for the period as adjusted to accord with
US GAAP, as reported 1,417 6,938
Add back goodwill amortization 295 916
------- ------
Profit for the period as adjusted to
accord with US GAAP, as adjusted 1,712 7,854
------- ------
Per ordinary share - cents
Basic - as reported 6.32 30.91
Adjustment 1.32 4.08
------- ------
Basic - as adjusted 7.64 34.99
------- ------
Diluted - as reported 6.29 30.71
Adjustment 1.31 4.05
------- ------
Diluted - as adjusted 7.60 34.76
------- ------
Per American Depositary Share - cents
Basic - as reported 37.92 185.46
Adjustment 7.92 24.48
------- ------
Basic - as adjusted 45.84 209.94
------- ------
Diluted - as reported 37.74 184.26
Adjustment 7.86 24.30
------- ------
Diluted - as adjusted 45.60 208.56
------- ------
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii)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 September 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 (261) - (53) (314)
Other movements 219 225 275 719
-------------------------------------------
At September 30, 2002 5,292 9,678 510 15,480
===========================================
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.
(ix) 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 that certain criteria are met, SFAS
133 permits, but does not require, hedge accounting.
In the normal course of business the Group is a party to derivative
financial instruments with off-balance sheet risk, primarily to manage
its exposure to fluctuations in foreign currency exchange rates and
interest rates, including management of the balance between floating
rate and fixed rate debt. The Group also manages certain of its
exposures to movements in oil and natural gas prices. In addition, the
Group trades derivatives in conjunction with these risk management
activities.
All oil price derivatives and all derivatives held for trading are
carried on the Group's balance sheet at fair value with changes in
that value recognized in earnings of the period for both UK and US
GAAP. Certain financial derivatives used to manage foreign currency
and interest rate risk that qualify for hedge accounting under UK GAAP
are marked to market under SFAS 133. 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 ($18
million after tax). Under US GAAP the fair values of derivative
financial instruments are shown as current assets and liabilities as
appropriate.
The Group has a number of long-term natural gas contracts which have
been in place for many years. The pricing structure for those
contracts is not directly related to the market price of natural gas
but to the price of other commodities or indices, such as fuel oil or
consumer price indices. On the basis of SFAS 133 Implementation Issue
C11, these contracts have been marked to market with effect from July
1, 2001.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(ix) Derivative financial instruments and hedging activities (concluded)
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 71 73 (896) 271
Taxation (14) (25) 332 (95)
Profit for the period before cumulative
effect of accounting change (57) (48) 564 (176)
Cumulative effect of accounting
change, net of taxation - (344) - (362)
Profit for the period (57) (392) 564 (538)
======== ======== ======== ========
At At
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Accounts payable and accrued liabilities 142 1,038
Deferred taxation (31) (363)
BP shareholders' interest (111) (675)
======== ========
(x) 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
($157 million after tax).
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Nine months ended
September 30 September 30
Increase (decrease) in caption heading (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- ----------------
($ million)
Replacement cost of sales 6 - 21 -
Taxation (2) - (7) -
Profit for the period (4) - (14) -
======== ======== ======== ========
At At
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Intangible assets 172 188
Accounts payable and accrued liabilities (52) (54)
Deferred taxation 78 85
BP shareholders' interest 146 157
======== ========
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xi) 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
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Fixed assets - Investments (188) (266)
BP shareholders' interest (188) (266)
======== ========
(xii)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
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Other accounts payable and accrued liabilities (1,340) (1,288)
BP shareholders' interest 1,340 1,288
======== ========
(xiii)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
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Fixed assets - Investments 169 (3)
Deferred taxation 59 (1)
BP shareholders' interest 110 (2)
======== ========
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xiv)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
September 30, December 31,
2002 2001
(Unaudited)
--------- -----------
($ million)
Intangible assets 112 112
Other receivables falling due after more than one year (1,015) (1,015)
year
Noncurrent liabilities - accounts payable accrued liabilities 548 548
Deferred taxation (509) (509)
BP shareholders' interest (942) (942)
======== ========
Page 38
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001(a) 2002 2001(a)
------------------ ----------------
($ million)
Profit as reported in the consolidated
statement of income 2,835 1,588 6,171 7,159
Adjustments:
Deferred taxation/business combinations (v) (59) 238 (175) 343
Provisions (vi) (10) (29) (18) (35)
Sale and leaseback (vii) 33 (4) 28 (43)
Goodwill (viii) 334 15 977 45
Derivative financial instruments (ix) (57) (48) 564 (176)
Gain arising on asset exchange (x) (4) - (14) -
Other 2 1 8 7
------ ------ ------ ------
239 173 1,370 141
------ ------ ------ ------
Profit for the period before cumulative effect
of accounting change as adjusted to accord with US GAAP 3,074 1,761 7,541 7,300
Cumulative effect of accounting change:
Derivative financial instruments (ix) - (344) - (362)
------ ------ ------ ------
Profit for the period as adjusted to accord with US GAAP 3,074 1,417 7,541 6,938
======= ======= ======= =======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of accounting change 13.72 7.85 33.64 32.52
Cumulative effect of accounting change - (1.53) - (1.61)
------ ------ ------ ------
13.72 6.32 33.64 30.91
------ ------ ------ ------
Diluted - before cumulative effect of
accounting change 13.66 7.81 33.47 32.31
Cumulative effect of accounting change - (1.52) - (1.60)
------ ------ ------ ------
13.66 6.29 33.47 30.71
------ ------ ------ ------
Per American Depositary Share - cents (b)
Basic - before cumulative effect of accounting change 82.32 47.10 201.84 195.12
Cumulative effect of accounting change - (9.18) - (9.66)
------ ------ ------ ------
82.32 37.92 201.84 185.46
------ ------ ------ ------
Diluted - before cumulative effect of
accounting change 81.96 46.86 200.82 193.86
Cumulative effect of accounting change - (9.12) - (9.60)
------ ------ ------ ------
81.96 37.74 200.82 184.26
------ ------ ------ ------
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest September 30, 2002 December 31, 2001 (a)
(Unaudited)
--------------------------------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 68,647 65,161
Adjustments:
Deferred taxation/business combinations (v) 66 243
Provisions (vi) (1,109) (1,054)
Sale and leaseback (vii) (105) (134)
Goodwill (viii) (422) (1,414)
Derivative financial instruments (ix) (111) (675)
Gain arising on asset exchange (x) 146 157
Ordinary shares held for future
awards to employees (xi) (188) (266)
Dividends (xii) 1,340 1,288
Investments (xiii) 110 (2)
Additional minimum pension liability (xiv) (942) (942)
Other (47) (40)
------- -------
(1,262) (2,839)
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 67,385 62,322
======= =======
(a) The profit reported under UK GAAP for the three month and nine month
periods ended September 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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------------ -----------------------
(shares thousands)
Weighted average number of
ordinary shares 22,408,297 22,425,374 22,412,655 22,449,041
Ordinary shares issuable under
employee share schemes 96,998 133,365 113,159 141,945
---------- ---------- ---------- ----------
22,505,295 22,558,739 22,525,814 22,590,986
========== ========== ========== ==========
Page 40
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001(a) 2002 2001(a)
------------------ ----------------
($ million)
Profit for the period as adjusted to accord
with US GAAP 3,074 1,417 7,541 6,938
Currency translation differences 279 1,007 1,864 (592)
Derivative financial instruments - (7) - 8
Net unrealized gain on investments (69) (195) 112 74
Additional minimum pension liability - - - -
------ ------ ------ ------
Comprehensive income 3,284 2,222 9,517 6,428
====== ====== ====== ======
Accumulated other comprehensive income at September 30, 2002 and December
31, 2001 comprised losses of $3,758 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 41
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
----------------- -----------------
($ million)
Operating activities
Profit after taxation 2,843 1,600 6,265 7,197
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 3,506 2,104 7,886 6,401
Exploration expenditure written off 55 23 261 153
Share of profits of joint ventures and associated
undertakings less dividends received 51 17 11 (8)
(Profit) loss on sale of businesses and fixed assets (1,796) (184) (2,061) (573)
Working capital movement (a) (1,002) 561 (2,323) (768)
Deferred Taxation 250 334 1,181 1,083
Other (191) (151) (247) (53)
------- ------- ------- -------
Net cash provided by operating activities 3,716 4,304 10,973 13,432
------- ------- ------- -------
Investing activities
Capital expenditures (3,007) (2,952) (8,639) (8,600)
Acquisitions, net of cash acquired (2,607) (48) (4,296) (608)
Investment in associated undertakings (125) (139) (756) (407)
Net investment in joint ventures (23) (144) (137) (277)
Proceeds from disposal of assets 2,881 1,131 5,752 2,057
------- ------- ------- -------
Net cash used in investing activities (2,881) (2,152) (8,076) (7,835)
------- ------- ------- -------
Financing activities
Proceeds from shares issued (repurchased) (695) (352) (572) (1,014)
Proceeds from long-term financing 558 7 3,056 1,029
Repayments of long-term financing (567) (988) (1,464) (2,168)
Net decrease (increase) in short-term debt 923 703 (535) 326
Dividends paid - BP Shareholders (1,346) (1,235) (3,924) (3,595)
- Minority shareholders (13) (11) (29) (16)
------- ------- ------- -------
Net cash used in financing activities (1,140) (1,876) (3,468) (5,438)
------- ------- ------- -------
Currency translation differences relating to cash
and cash equivalents 26 15 53 (33)
------- ------- ------- -------
Increase (decrease) in cash and cash equivalents (279) 291 (518) 126
Cash and cash equivalents at beginning of period 1,569 1,666 1,808 1,831
------- ------- ------- -------
Cash and cash equivalents at end of period 1,290 1,957 1,290 1,957
======= ======= ======= =======
(a) Working capital:
Inventories (increase) decrease (155) 135 (1,458) 122
Receivables (increase) decrease (345) 2,249 (2,479) 703
Current liabilities - excluding finance debt
increase (decrease) (502) (1,823) 1,614 (1,593)
------- ------- ------- -------
(1,002) 561 (2,323) (768)
======= ======= ======= =======
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Impact of new US accounting standards
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 nine month periods ended
September 30, 2002 or on BP shareholders' interest, as adjusted to accord
with US GAAP, at September 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.
Contracts involved in energy trading activities: In October 2002, the EITF
reached a consensus which rescinded EITF Issue No. 98-10, 'Accounting for
Contracts Involved in Energy Trading and Risk Management Activities' (EITF
98-10). As a result of this consensus, all energy-related, non-derivative
contracts (such as transportation, storage, tolling, and requirements
contracts that do not meet the definition of a derivative) that are
accounted for at fair value pursuant to EITF 98-10 will no longer be
accounted for at fair value upon application of the consensus. Rather, such
contracts will be accounted for as executory contacts on an accrual basis.
The consensus is applicable for all contracts executed after October 25,
2002. Application of the consensus to existing contracts is required to be
accounted for as a cumulative effect of a change in accounting principle
effective for periods beginning after December 15, 2002.
For BP's reporting under UK GAAP, energy-related non-derivative contracts
associated with trading activities are marked to market with gains and
losses recognized in the income statement. The Company has not yet
determined the effect of adopting this consensus on its results of
operations or shareholders' interest as adjusted to accord with US GAAP.
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - concluded
Impact of new UK accounting standards
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 to IAS 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 44
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 September 30, 2002
Turnover 635 - 49,558 (635) 49,558
Less: Joint ventures - - 504 - 504
------ ------ ------ ------ ------
Group turnover 635 - 49,054 (635) 49,054
Replacement cost of sales 427 - 44,159 (646) 43,940
Production taxes 49 - 301 - 350
------ ------ ------ ------ ------
Gross profit 159 - 4,594 11 4,764
Distribution and administration expenses - 77 3,137 - 3,214
Exploration expense 3 - 116 - 119
------ ------ ------ ------ ------
156 (77) 1,341 11 1,431
Other income 5 192 92 (138) 151
------ ------ ------ ------ ------
Group replacement cost operating profit 161 115 1,433 (127) 1,582
Share of profits of joint ventures - - 104 - 104
Share of profits of associated undertakings - - 71 - 71
Equity accounted income of subsidiaries 45 1,761 - (1,806) -
------ ------ ------ ------ ------
Total replacement cost operating profit 206 1,876 1,608 (1,933) 1,757
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 1,794 1,769 (1,769) 1,794
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 206 3,670 3,377 (3,702) 3,551
Inventory holding gains (losses) 4 305 305 (309) 305
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 210 3,975 3,682 (4,011) 3,856
Interest expense 23 427 416 (566) 300
------ ------ ------ ------ ------
Profit before taxation 187 3,548 3,266 (3,445) 3,556
Taxation 55 713 666 (721) 713
------ ------ ------ ------ ------
Profit after taxation 132 2,835 2,600 (2,724) 2,843
Minority shareholders' interest - - 8 - 8
------ ------ ------ ------ ------
Profit for the period 132 2,835 2,592 (2,724) 2,835
====== ====== ====== ====== ======
Page 45
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 September 30, 2002
Profit as reported 132 2,835 2,592 (2,724) 2,835
Adjustments:
Deferred taxation/business combinations (32) (59) (39) 71 (59)
Provisions 10 (10) (20) 10 (10)
Sale and leaseback - 33 33 (33) 33
Goodwill - 334 334 (334) 334
Derivative financial instruments - (57) (57) 57 (57)
Gain arising on asset exchange - (4) (4) 4 (4)
Other - 2 2 (2) 2
------ ------ ------ ------ ------
Profit for the period as adjusted
to accord with US GAAP 110 3,074 2,841 (2,951) 3,074
====== ====== ====== ====== ======
Page 46
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 September 30, 2001
Turnover 300 - 43,886 (300) 43,886
Less: Joint ventures - - 306 - 306
------ ------ ------ ------ ------
Group turnover 300 - 43,580 (300) 43,580
Replacement cost of sales 231 - 37,286 (309) 37,208
Production taxes 44 - 293 - 337
------ ------ ------ ------ ------
Gross profit 25 - 6,001 9 6,035
Distribution and administration expenses - (2) 2,680 - 2,678
Exploration expense 5 - 81 - 86
------ ------ ------ ------ ------
20 2 3,240 9 3,271
Other income - 368 178 (367) 179
------ ------ ------ ------ ------
Group replacement cost operating profit 20 370 3,418 (358) 3,450
Share of profits of joint ventures - - 125 - 125
Share of profits of associated undertakings - - 155 - 155
Equity accounted income of subsidiaries 337 3,714 - (4,051) -
------ ------ ------ ------ ------
Total replacement cost operating profit 357 4,084 3,698 (4,409) 3,730
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 184 184 (184) 184
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 357 4,268 3,882 (4,593) 3,914
Inventory holding gains (losses) (6) (405) (405) 411 (405)
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 351 3,863 3,477 (4,182) 3,509
Interest expense 8 735 741 (1,115) 369
------ ------ ------ ------ ------
Profit before taxation 343 3,128 2,736 (3,067) 3,140
Taxation 45 1,540 1,581 (1,626) 1,540
------ ------ ------ ------ ------
Profit after taxation 298 1,588 1,155 (1,441) 1,600
Minority shareholders' interest - - 12 - 12
------ ------ ------ ------ ------
Profit for the period 298 1,588 1,143 (1,441) 1,588
====== ====== ====== ====== ======
Page 47
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 September 30, 2001
Profit as reported 298 1,588 1,143 (1,441) 1,588
Adjustments:
Deferred taxation/business combinations (4) 238 224 (220) 238
Provisions (1) (29) (29) 30 (29)
Sale and leaseback - (4) (4) 4 (4)
Goodwill - 15 15 (15) 15
Derivative financial instruments - (48) (48) 48 (48)
Gain arising on asset exchange - - - - -
Other - 1 1 (1) 1
------ ------ ------ ------ ------
Profit for the period before cumulative
effect of accounting change as adjusted
to accord with US GAAP 293 1,761 1,302 (1,595) 1,761
Cumulative effect of accounting change:
Derivative financial instruments - (344) (344) 344 (344)
------ ------ ------ ------ ------
Profit for the period as adjusted to
accord with US GAAP 293 1,417 958 (1,251) 1,417
====== ====== ====== ====== ======
Page 48
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)
Nine months ended September 30, 2002
Turnover 1,729 - 130,122 (1,665) 130,186
Less: Joint ventures - - 1,187 - 1,187
------ ------ ------ ------ ------
Group turnover 1,729 - 128,935 (1,665) 128,999
Replacement cost of sales 1,047 - 113,318 (1,695) 112,670
Production taxes 146 - 766 - 912
------ ------ ------ ------ ------
Gross profit 536 - 14,851 30 15,417
Distribution and administration expenses - 403 8,625 - 9,028
Exploration expense 16 - 449 - 465
------ ------ ------ ------ ------
520 (403) 5,777 30 5,924
Other income 26 500 254 (357) 423
------ ------ ------ ------ ------
Group replacement cost operating profit 546 97 6,031 (327) 6,347
Share of profits of joint ventures - - 263 - 263
Share of profits of associated undertakings - - 455 - 455
Equity accounted income of subsidiaries 145 7,201 - (7,346) -
------ ------ ------ ------ ------
Total replacement cost operating profit 691 7,298 6,749 (7,673) 7,065
Profit (loss) on sale of fixed assets
and businesses or termination of operations - 2,898 2,873 (3,710) 2,061
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 691 10,196 9,622 (11,383) 9,126
Inventory holding gains (losses) 9 1,303 1,303 (1,312) 1,303
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 700 11,499 10,925 (12,695) 10,429
Interest expense 63 1,274 1,176 (1,566) 947
------ ------ ------ ------ ------
Profit before taxation 637 10,225 9,749 (11,129) 9,482
Taxation 232 3,217 3,018 (3,250) 3,217
------ ------ ------ ------ ------
Profit after taxation 405 7,008 6,731 (7,879) 6,265
Minority shareholders' interest - - 94 - 94
------ ------ ------ ------ ------
Profit for the period 405 7,008 6,637 (7,879) 6,171
====== ====== ====== ======
Page 49
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)
Nine months ended September 30, 2002
Profit as reported 405 7,008 6,637 (7,879) 6,171
Adjustments:
Deferred taxation/business combinations (97) (175) (113) 210 (175)
Provisions 9 (18) (27) 18 (18)
Sale and leaseback - 28 28 (28) 28
Goodwill - 977 977 (977) 977
Derivative financial instruments - 564 564 (564) 564
Gain arising on asset exchange - (14) (14) 14 (14)
Other - 8 8 (8) 8
------ ------ ------ ------ ------
Profit for the period as adjusted
to accord with US GAAP 317 8,378 8,060 (9,214) 7,541
====== ====== ====== ====== ======
Page 50
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)
Nine months ended September 30, 2001
Turnover 1,428 - 138,275 (1,428) 138,275
Less: Joint ventures - - 874 - 874
------ ------ ------ ------ ------
Group turnover 1,428 - 137,401 (1,428) 137,401
Replacement cost of sales 753 - 115,801 (1,452) 115,102
Production taxes 153 - 1,200 - 1,353
------ ------ ------ ------ ------
Gross profit 522 - 20,400 24 20,946
Distribution and administration expenses - 115 7,727 - 7,842
Exploration expense 17 - 319 - 336
------ ------ ------ ------ ------
505 (115) 12,354 24 12,768
Other income - 1,069 485 (1,068) 486
------ ------ ------ ------ ------
Group replacement cost operating profit 505 954 12,839 (1,044) 13,254
Share of profits of joint ventures - - 352 - 352
Share of profits of associated undertakings - - 541 - 541
Equity accounted income of subsidiaries 610 14,207 - (14,817) -
------ ------ ------ ------ ------
Total replacement cost operating profit 1,115 15,161 13,732 (15,861) 14,147
Profit (loss) on sale of fixed assets
and businesses or termination of operations 1 573 572 (573) 573
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 1,116 15,734 14,304 (16,434) 14,720
Inventory holding gains (losses) (12) (603) (603) 615 (603)
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 1,104 15,131 13,701 (15,819) 14,117
Interest expense 27 2,308 2,324 (3,403) 1,256
------ ------ ------ ------ ------
Profit before taxation 1,077 12,823 11,377 (12,416) 12,861
Taxation 363 5,664 5,581 (5,944) 5,664
------ ------ ------ ------ ------
Profit after taxation 714 7,159 5,796 (6,472) 7,197
Minority shareholders' interest - - 38 - 38
------ ------ ------ ------ ------
Profit for the period 714 7,159 5,758 (6,472) 7,159
====== ====== ====== ====== ======
Page 51
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
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Nine months ended September 30, 2001
Profit as reported 714 7,159 5,758 (6,472) 7,159
Adjustments:
Deferred taxation/business combinations 20 343 322 (342) 343
Provisions (3) (35) (32) 35 (35)
Sale and leaseback - (43) (43) 43 (43)
Goodwill - 45 45 (45) 45
Derivative financial instruments - (176) (176) 176 (176)
Gain arising on asset exchange - - - - -
Other - 7 7 (7) 7
------ ------ ------ ------ ------
Profit for the period before cumulative
effect of accounting change as adjusted
to accord with US GAAP 731 7,300 5,881 (6,612) 7,300
Cumulative effect of accounting change:
Derivative financial instruments - (362) (362) 362 (362)
------ ------ ------ ------ ------
Profit for the period as adjusted to
accord with US GAAP 731 6,938 5,519 (6,250) 6,938
====== ====== ====== ====== ======
Page 52
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
Balance sheet (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At September 30, 2002
Fixed assets
Intangible assets 518 - 15,384 - 15,902
Tangible assets 6,391 - 79,130 - 85,521
Investments
Subsidiaries - equity accounted basis 1,926 84,781 - (86,707) -
Other - 191 11,455 - 11,646
------ ------ ------ ------ ------
1,926 84,972 11,455 (86,707) 11,646
------ ------ ------ ------ ------
Total fixed assets 8,835 84,972 105,969 (86,707) 113,069
------ ------ ------ ------ ------
Current assets
Inventories 85 - 9,832 - 9,917
Receivables 16,970 22,661 52,454 (60,304) 31,781
Investments - - 285 - 285
Cash at bank and in hand (11) 3 1,013 - 1,005
------ ------ ------ ------ ------
17,044 22,664 63,584 (60,304) 42,988
------ ------ ------ ------ ------
Current liabilities
- falling due within one year
Finance debt 1,874 - 10,527 (1,819) 10,582
Accounts payable and accrued liabilities 486 12,631 34,481 (12,728) 34,870
------ ------ ------ ------ ------
Net current assets (liabilities) 14,684 10,033 18,576 (45,757) (2,464)
------ ------ ------ ------ ------
Total assets less current liabilities 23,519 95,005 124,545 (132,464) 110,605
Noncurrent liabilities
Finance debt - - 11,694 - 11,694
Accounts payable and accrued liabilities 10,371 155 38,492 (45,757) 3,261
Provisions for liabilities and charges
Deferred taxation 1,707 - 11,684 - 13,391
Other provisions 436 153 12,467 - 13,056
------ ------ ------ ------ ------
Net assets 11,005 94,697 50,208 (86,707) 69,203
Minority shareholders' interest - - 556 - 556
------ ------ ------ ------ ------
BP shareholders' interest 11,005 94,697 49,652 (86,707) 68,647
====== ====== ====== ====== ======
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
Balance sheet (continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At September 30, 2002
Capital and reserves
Capital shares 1,050 5,615 - (1,050) 5,615
Paid in surplus 3,145 4,226 - (3,145) 4,226
Merger reserve - 26,332 697 - 27,029
Other reserves - 177 - - 177
Retained earnings 6,810 58,347 48,955 (82,512) 31,600
------ ------ ------ ------ ------
11,005 94,697 49,652 (86,707) 68,647
====== ====== ====== ====== ======
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 11,005 94,697 49,652 (86,707) 68,647
Adjustments:
Deferred taxation/business combinations 106 66 (29) (77) 66
Provisions (179) (1,109) (932) 1,111 (1,109)
Sale and leaseback - (105) (105) 105 (105)
Goodwill - (422) (422) 422 (422)
Derivative financial instruments - (111) (111) 111 (111)
Gain arising on asset exchange - 146 146 (146) 146
Ordinary shares held for future
awards to employees - (188) - - (188)
Quarterly dividend - 1,340 - - 1,340
Investments - 110 110 (110) 110
Additional minimum pension liability - (942) (942) 942 (942)
Other - (47) (47) 47 (47)
------ ------ ------ ------ ------
Shareholders' interest as adjusted
to accord with US GAAP 10,932 93,435 47,320 (84,302) 67,385
====== ====== ====== ====== ======
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
Balance sheet (continued) (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 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
Balance sheet (concluded) (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 56
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 September 30, 2002
Net cash inflow (outflow) from
operating activities 119 1,955 2,239 63 4,376
Dividends from joint ventures - - 30 - 30
Dividends from associated undertakings - - 96 - 96
Dividends from subsidiaries 11 - - (11) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 63 (164) (63) (164)
Tax (paid) refund (29) (1) (631) - (661)
Net cash inflow (outflow) for capital (139) 25 (2,378) - (2,492)
expenditure and financial investment
Net cash inflow (outflow) for acquisitions
and disposals - - (362) - (362)
Equity dividends paid - (1,346) (11) 11 (1,346)
------ ------ ------ ------ ------
Net cash inflow (outflow) (38) 696 (1,181) - (523)
====== ====== ====== ====== ======
Financing (33) 695 (881) - (219)
Management of liquid resources - - (32) - (32)
Increase (decrease) in cash (5) 1 (268) - (272)
------ ------ ------ ------ ------
(38) 696 (1,181) - (523)
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 101 2,017 1,569 29 3,716
Net cash provided by (used in)
investing activities (139) 25 (2,740) (27) (2,881)
Net cash provided by (used in)
financing activities 33 (2,041) 870 (2) (1,140)
Currency translation differences relating to
cash and cash equivalents - - 26 - 26
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents (5) 1 (275) - (279)
Cash and cash equivalents at beginning
of period (6) 2 1,573 - 1,569
------ ------ ------ ------ ------
Cash and cash equivalents at end
of period (11) 3 1,298 - 1,290
====== ====== ====== ====== ======
Page 57
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 September 30, 2001
Net cash inflow (outflow) from
operating activities 163 1,027 3,857 (1) 5,046
Dividends from joint ventures - - 26 - 26
Dividends from associated undertakings - - 155 - 155
Dividends from subsidiaries - 97 - (97) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 370 (607) - (237)
Tax (paid) refund (32) - (685) - (717)
Net cash inflow (outflow) for capital
expenditure and financial investment (197) 94 (2,006) - (2,109)
Net cash inflow (outflow) for acquisitions
and disposals - (1) (24) 1 (24)
Equity dividends paid - (1,235) (97) 97 (1,235)
------ ------ ------ ------ ------
Net cash inflow (outflow) (66) 352 619 - 905
====== ====== ====== ====== ======
Financing (99) 352 377 - 630
Management of liquid resources - - (44) - (44)
Increase (decrease) in cash 33 - 286 - 319
------ ------ ------ ------ ------
(66) 352 619 - 905
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 132 1,494 2,746 (68) 4,304
Net cash provided by (used in)
investing activities (197) 93 (2,030) (18) (2,152)
Net cash provided by (used in)
financing activities 99 (1,587) (474) 86 (1,876)
Currency translation differences relating to
cash and cash equivalents - - 15 - 15
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents 34 - 257 - 291
Cash and cash equivalents at beginning
of period (34) - 1,700 - 1,666
------ ------ ------ ------ ------
Cash and cash equivalents at end of period - - 1,957 - 1,957
====== ====== ====== ====== ======
Page 58
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)
Nine months ended September 30, 2002
Net cash inflow (outflow) from
operating activities 334 3,440 8,445 926 13,145
Dividends from joint ventures - - 129 - 129
Dividends from associated undertakings - - 303 - 303
Dividends from subsidiaries 26 - - (26) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 189 (792) (63) (666)
Tax (paid) refund
(75) (2) (1,956) - (2,033)
Net cash inflow (outflow) for capital (427) 7 (6,408) - (6,828)
expenditure and financial investment
Net cash inflow (outflow) for acquisitions
and disposals - 863 (1,181) (863) (1,181)
Equity dividends paid - (3,924) (26) 26 (3,924)
------ ------ ------ ------ ------
Net cash inflow (outflow) (142) 573 (1,486) - (1,055)
====== ====== ====== ====== ======
Financing (160) 573 (898) - (485)
Management of liquid resources - - (164) - (164)
Increase (decrease) in cash 18 - (424) - (406)
------ ------ ------ ------ ------
(142) 573 (1,486) - (1,055)
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 285 3,627 6,143 918 10,973
Net cash provided by (used in)
investing activities (427) 871 (7,604) (916) (8,076)
Net cash provided by (used in)
financing activities 160 (4,498) 872 (2) (3,468)
Currency translation differences relating to
cash and cash equivalents - - 53 - 53
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents 18 - (536) - (518)
Cash and cash equivalents at beginning
of period (29) 3 1,834 - 1,808
------ ------ ------ ------ ------
Cash and cash equivalents at end of period (11) 3 1,298 - 1,290
====== ====== ====== ====== ======
Page 59
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
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)
Nine months ended September 30, 2001
Net cash inflow (outflow) from
operating activities 714 3,487 12,678 (17) 16,862
Dividends from joint ventures - - 92 - 92
Dividends from associated undertakings - - 424 - 424
Dividends from subsidiaries - 113 - (113) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 1,052 (1,851) - (799)
Tax (paid) refund (345) (1) (2,892) - (3,238)
Net cash inflow (outflow) for capital
expenditure and financial investment (598) (26) (6,152) - (6,776)
Net cash inflow (outflow) for acquisitions
and disposals - (17) (985) 17 (985)
Equity dividends paid - (3,595) (113) 113 (3,595)
------ ------ ------ ------ ------
Net cash inflow (outflow) (229) 1,013 1,201 - 1,985
====== ====== ====== ====== ======
Financing (260) 1,015 1,072 - 1,827
Management of liquid resources - - (146) - (146)
Increase (decrease) in cash 31 (2) 275 - 304
------ ------ ------ ------ ------
(229) 1,013 1,201 - 1,985
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (concluded) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 370 4,650 8,451 (39) 13,432
Net cash provided by (used in)
investing activities (598) (43) (7,137) (57) (7,835)
Net cash provided by (used in)
financing activities 260 (4,609) (1,185) 96 (5,438)
Currency translation differences relating to
cash and cash equivalents - - (33) - (33)
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents 32 (2) 96 - 126
Cash and cash equivalents at beginning
of period (32) 2 1,861 - 1,831
------ ------ ------ ------ ------
Cash and cash equivalents at end
of period - - 1,957 - 1,957
====== ====== ====== ====== ======
Page 60
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
Average oil realizations (a) - $/bbl
UK 26.26 24.34 23.74 25.33
USA 22.94 22.38 20.71 23.58
Rest of World 24.43 22.71 21.81 23.40
BP average 24.40 23.08 21.99 24.22
Brent oil price 26.91 25.30 24.40 26.14
West Texas Intermediate oil price 28.26 26.72 25.40 27.77
Alaska North Slope US West Coast 27.26 24.05 24.06 25.01
Average natural gas realizations - $/mcf
UK 2.58 2.52 2.75 3.05
USA 2.34 2.63 2.41 4.68
Rest of World 1.99 2.27 1.99 2.73
BP average 2.25 2.49 2.32 3.66
Henry Hub gas price (b) ($/mmBtu) 3.16 2.93 2.94 4.88
UK Gas - National Balancing point (p/therm) 12.74 17.07 14.53 22.17
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 1.28 1.74 0.66 2.48
US Gulf Coast 1.82 3.24 2.16 5.87
Midwest 3.27 7.20 3.03 7.20
US West Coast 3.54 8.17 4.47 9.40
Singapore 0.47 0.75 0.28 0.80
BP average 1.98 3.83 1.90 4.62
Chemicals Indicator Margin (d) - $/te 115(e) 114 101(e) 109
---------------
(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 Nine months ended
September 30 September 30
US dollar/sterling exchange rates (Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
Average rate for the period 1.55 1.44 1.48 1.44
Period-end rate 1.55 1.48 1.55 1.48
Page 61
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
Crude oil and natural gas liquids production
(thousand barrels per day) (net of royalties)
UK 414 457 459 480
Rest of Europe 107 96 106 95
USA 754 741 768 735
Rest of World 708 589 675 592
------ ------ ------ ------
Total crude oil and liquids production 1,983 1,883 2,008 1,902
====== ====== ====== ======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,240 1,305 1,488 1,713
Rest of Europe 131 139 150 143
USA 3,450 3,577 3,525 3,531
Rest of World 3,661 3,298 3,468 3,200
------ ------ ------ ------
Total natural gas production 8,482 8,319 8,631 8,587
====== ====== ====== ======
Total production (a)
(thousand barrels of oil equivalent per day)
(net of royalties)
UK 628 682 716 775
Rest of Europe 130 120 132 120
USA 1,349 1,358 1,376 1,344
Rest of World 1,339 1,157 1,273 1,144
------ ------ ------ ------
Total production 3,446 3,317 3,497 3,383
====== ====== ====== ======
Natural gas sales volumes (million cubic feet per day)
UK 1,809 2,170 2,256 2,682
Rest of Europe 353 170 385 207
USA 9,332 8,692 8,841 8,403
Rest of World 9,556 7,331 9,155 7,191
------ ------ ------ ------
Total natural gas sales volumes (b) 21,050 18,363 20,637 18,483
====== ====== ====== ======
NGL sales volumes (thousand barrels per day)
UK - - - -
Rest of Europe - - - -
USA 178 233 190 220
Rest of World 185 162 187 180
------ ------ ------ ------
Total NGL sales volumes 363 395 377 400
====== ====== ====== ======
---------------
(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 62
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
Oil sales volumes (thousand barrels per day)
Refined products
UK 258 269 248 266
Rest of Europe 1,604 1,058 1,441 1,055
USA 1,847 1,863 1,874 1,897
Rest of World 613 612 578 599
------ ------ ------ ------
Total marketing sales 4,322 3,802 4,141 3,817
Trading/supply sales 2,589 2,744 2,489 2,308
------ ------ ------ ------
Total refined product sales 6,911 6,546 6,630 6,125
Crude oil 3,648 4,680 4,458 4,431
------ ------ ------ ------
Total oil sales 10,559 11,226 11,088 10,556
====== ====== ====== ======
Refinery throughputs (thousand barrels per day)
UK 394 414 387 347
Rest of Europe 956 646 905 654
USA 1,455 1,568 1,438 1,578
Rest of World 349 375 354 379
------ ------ ------ ------
Total throughput 3,154 3,003 3,084 2,958
====== ====== ====== ======
Chemicals production (thousand tonnes)
UK 858 804 2,523 2,333
Rest of Europe 2,669 2,164 7,847 5,648
USA 2,570 2,299 7,754 6,664
Rest of World 783 703 2,255 2,023
------ ------ ------ ------
Total production 6,880 5,970 20,379 16,668
====== ====== ====== ======
Page 63
BP p.l.c. AND SUBSIDIARIES
Total replacement cost operating profit
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
($ million)
By business
Exploration and Production
UK 185 729 1,561 2,853
Rest of Europe 213 188 537 604
USA 661 836 1,754 4,147
Rest of World 513 874 2,106 3,116
------ ------ ------ ------
1,572 2,627 5,958 10,720
------ ------ ------ ------
Gas, Power and Renewables
UK (66) 34 (63) 81
Rest of Europe 17 27 99 125
USA 28 82 16 193
Rest of World 78 (18) 230 (13)
------ ------ ------ ------
57 125 282 386
------ ------ ------ ------
Refining and Marketing
UK (158) (51) (343) (278)
Rest of Europe 236 222 624 535
USA 55 683 255 2,539
Rest of World 104 136 372 398
------ ------ ------ ------
237 990 908 3,194
------ ------ ------ ------
Chemicals
UK 6 (58) (35) (141)
Rest of Europe 161 87 272 186
USA 54 59 161 71
Rest of World (89) 17 13 79
------ ------ ------ ------
132 105 411 195
------ ------ ------ ------
Other businesses and corporate (241) (117) (494) (348)
------ ------ ------ ------
1,757 3,730 7,065 14,147
====== ====== ====== ======
By geographical area
UK (131) 552 903 2,293
Rest of Europe 620 512 1,532 1,426
USA 672 1,555 1,933 6,725
Rest of World 596 1,111 2,697 3,703
------ ------ ------ ------
1,757 3,730 7,065 14,147
====== ====== ====== ======
Page 64
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
($ million)
By business
Exploration and Production
UK 270 326 778 783
Rest of Europe 61 79 189 230
USA 980 1,123 3,224 3,293
Rest of World (a) 929 891 2,935 2,402
------ ------ ------ ------
2,240 2,419 7,126 6,708
------ ------ ------ ------
Gas, Power and Renewables
UK 7 37 28 51
Rest of Europe (b) 29 23 120 49
USA 52 15 100 72
Rest of World 19 12 37 19
------ ------ ------ ------
107 87 285 191
------ ------ ------ ------
Refining and Marketing
UK 56 89 232 267
Rest of Europe (c) 198 10 5,486 171
USA 298 281 861 688
Rest of World 53 62 128 173
------ ------ ------ ------
605 442 6,707 1,299
------ ------ ------ ------
Chemicals
UK 30 50 55 179
Rest of Europe (d) 58 69 163 623
USA 49 119 146 293
Rest of World 43 112 174 237
------ ------ ------ ------
180 350 538 1,332
------ ------ ------ ------
Other businesses and corporate (e) 48 65 367 166
------ ------ ------ ------
3,180 3,363 15,023 9,696
====== ====== ====== ======
By geographical area
UK 394 541 1,203 1,383
Rest of Europe 353 181 6,158 1,078
USA 1,389 1,564 4,387 4,402
Rest of World 1,044 1,077 3,275 2,833
------ ------ ------ ------
3,180 3,363 15,023 9,696
====== ====== ====== ======
------------
(a) Nine months ended September 30, 2002 included the acquisition of an
additional interest in Sidanco.
(b) Nine months ended September 30, 2002 included the acquisition of a 5% stake
in Enagas.
(c) Nine months ended September 30, 2002 included the acquisition of 100% of
Veba.
(d) Nine months ended September 30, 2001 included the acquisition of Bayer's
50% interest in Erdolchemie.
(e) Nine months ended September 30, 2002 included the acquisition of the
minority interest in Veba's upstream oil and gas assets.
Page 65
BP p.l.c. AND SUBSIDIARIES
SPECIAL ITEMS AND ACQUISITION AMORTIZATION BY SEGMENT (PRE-TAX)
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
($ million)
Special items
Exploration and Production
UK 105 - 237 -
Rest of Europe - - - -
USA 115 - 185 -
Rest of World 483 - 498 -
------ ------ ------ ------
703 - 920 -
------ ------ ------ ------
Gas, Power and Renewables
UK 30 - 30 -
Rest of Europe - - - -
USA - - - -
Rest of World - - - -
------ ------ ------ ------
30 - 30 -
------ ------ ------ ------
Refining and Marketing
UK 16 18 16 61
Rest of Europe 38 33 87 123
USA 29 11 (108) 19
Rest of World - 50 - 71
------ ------ ------ ------
83 112 (5) 274
------ ------ ------ ------
Chemicals
UK - - 22 -
Rest of Europe - 8 18 8
USA - - 35 -
Rest of World 140 - 140 -
------ ------ ------ ------
140 8 215 8
------ ------ ------ ------
Other businesses and corporate
UK 35 - 35 -
Rest of Europe - - - -
USA 90 - 90 -
Rest of World - - - -
------ ------ ------ ------
125 - 125 -
------ ------ ------ ------
Total special items before interest 1,081 120 1,285 282
Interest - bond redemption charges - 2 - 62
------ ------ ------ ------
Total 1,081 122 1,285 344
====== ====== ====== ======
Acquisition amortization
Exploration and Production
UK 378 42 447 110
USA 283 367 832 1,193
Rest of World 114 34 182 101
------ ------ ------ ------
775 443 1,461 1,404
------ ------ ------ ------
Refining and Marketing
UK 106 93 303 295
USA 96 94 288 282
------ ------ ------ ------
202 187 591 577
------ ------ ------ ------
Total 977 630 2,052 1,981
====== ====== ====== ======
Page 66
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
($ million)
Replacement cost basis
Replacement cost profit before exceptional items 761 1,936 2,978 7,585
Interest 300 369 947 1,256
Minority shareholders' interest 8 12 69 38
------ ------ ------ ------
Adjusted replacement cost profit 1,069 2,317 3,994 8,879
====== ====== ====== ======
Average capital employed 90,507 87,892 89,328 87,874
ROACE - replacement cost basis 4.7% 10.5% 6.0% 13.5%
------ ------ ------ ------
Pro forma basis
Adjusted replacement cost profit 1,069 2,317 3,994 8,879
Acquisition amortization 977 630 2,052 1,981
Special items (post tax) 556 77 1,043 160
------ ------ ------ ------
Adjusted replacement cost profit (pro forma basis) 2,602 3,024 7,089 11,020
====== ====== ====== ======
Average capital employed 90,507 87,892 89,328 87,874
Average capital employed acquisition adjustment (a) 17,581 20,673 18,008 21,504
------ ------ ------ ------
Average capital employed (pro forma basis) 72,926 67,219 71,320 66,370
ROACE - pro forma basis adjusted for special items 14.3% 18.0% 13.3% 22.1%
Historical cost basis
Historical cost profit (loss) after exceptional items 2,835 1,588 6,171 7,159
Interest 300 369 947 1,256
Minority shareholders' interest 8 12 94 38
------ ------ ------ ------
Adjusted historical cost profit 3,143 1,969 7,212 8,453
====== ====== ====== ======
Average capital employed 90,507 87,892 89,328 87,874
ROACE - historical cost basis after exceptionals 13.9% 9.0% 10.8% 12.8%
------------
(a) Acquisition adjustment refers to the fixed asset revaluation adjustments
and goodwill consequent upon the ARCO and Burmah Castrol acquisitions.
Page 67
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
Three months ended Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
($ million)
Net debt ratio - net debt: net debt + equity
Gross debt 22,276 20,474 22,276 20,474
Cash and current asset investments 1,290 1,957 1,290 1,957
------ ------ ------ ------
Net debt 20,986 18,517 20,986 18,517
------ ------ ------ ------
Equity 69,203 67,931 69,203 67,931
Net debt ratio 23% 21% 23% 21%
------ ------ ------ ------
Acquisition adjustment (a) 17,134 20,412 17,134 20,412
------ ------ ------ ------
Net debt ratio - pro forma basis (b) 29% 28% 29% 28%
====== ====== ====== ======
---------------
(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 68
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 Nine months ended
September 30 September 30
(Unaudited) (Unaudited)
2002 2001 2002 2001
------------------- --------------------
($ million)
Replacement cost operating profit (RCOP) (reported) (a) 1,757 3,730 7,065 14,147
Depreciation and amounts provided (b) 3,506 2,104 7,886 6,401
Exploration expenditure written off 55 23 261 153
Dividends from joint ventures and associated
undertakings less share of RCOP (49) (99) (286) (377)
Dividends paid to minority shareholders (13) (11) (29) (16)
Adjust provisions to cash basis (c) (60) (148) (177) (77)
Adjust interest and other income to cash basis (d) 5 (34) (11) (76)
------ ------ ------ ------
5,201 5,565 14,709 20,155
Tax paid adjusted for certain items* (702) (682) (2,148) (3,158)
------ ------ ------ ------
Adjusted RCOP after tax paid 4,499 4,883 12,561 16,997
------ ------ ------ ------
* Calculation of tax paid adjusted for certain items
Cash tax paid (661) (717) (2,033) (3,238)
Tax charge on exceptional items 25 127 146 396
Tax shield assumption + (66) (92) (261) (316)
------ ------ ------ ------
(702) (682) (2,148) (3,158)
------ ------ ------ ------
+ Calculation of tax shield assumption
Interest paid (218) (308) (869) (1,053)
Tax rate assumption (e) 30% 30% 30% 30%
------ ------ ------ ------
(66) (92) (261) (316)
------ ------ ------ ------
(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 69
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: November 4, 2002 /s/ D. J. PEARL
..............................
D. J. PEARL
Deputy Company Secretary
Page 70