TIDMBP.
RNS Number : 8294B
BP PLC
04 February 2020
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FOR IMMEDIATE RELEASE
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London 4 February 2020
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BP p.l.c. Group results
Fourth quarter and full year 2019
==================================== =============
For a printer friendly copy of this announcement, please click
on the link below to open a PDF version
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Highlights Operational momentum, growing cash flow, strategic progress:
dividend increased
Cash flow strong, increased disposal plans
- Underlying replacement cost profit for the fourth quarter and
full year 2019 was $2.6 billion and $10.0 billion respectively,
compared to $3.5 billion and $12.7 billion for the same periods a
year earlier, largely reflecting the impact of the weaker
environment. Reported profit was $19 million for the fourth quarter
and $4.0 billion for the full year.
- Non-operating items in the quarter included a $1.9 billion
after-tax impairment charge, mainly for the disposal of US gas
assets, and a $0.9 billion charge arising from the reclassification
of past foreign exchange losses on the formation of BP's new
biofuels joint venture.
- Full-year operating cash flow, excluding Gulf of Mexico oil
spill payments, was $28.2 billion, including a $0.3 billion working
capital release (after adjusting for net inventory holding
gains).
- Gulf of Mexico oil spill payments for the year totalled $2.4
billion on a post-tax basis, and are expected to be less than $1
billion in 2020.
- Maintaining capital discipline, full-year organic capital
expenditure of $15.2 billion was at the bottom of the guided range.
Divestments and other disposals announced since the start of 2019
now total $9.4 billion, keeping BP ahead of schedule to meet its
target of $10 billion proceeds by end-2020. BP expects to announce
a further $5 billion of agreed disposals by mid-2021.
- In January 2020 BP completed its announced share buyback
programme.
- Net debt reduced by $1.1 billion in the quarter with gearing
at 31.1%, down from 31.7% at the end of the previous quarter.
- A dividend of 10.5 cents per share was announced for the
quarter, an increase of 2.4% on a year earlier.
Continued reliable operations
- Downstream delivered full-year refining availability of 95%
and record refining throughput for the second consecutive year.
Upstream operated plant reliability was 94.4% for the year.
- Reported oil and gas production averaged 3.8 million barrels
of oil equivalent a day in 2019, 2.7% higher than in 2018.
Underlying full year Upstream production, which excludes both
Rosneft and portfolio changes, was broadly flat with 2018.
Low-carbon expansions, new projects, retail growth
- BP expanded its low-carbon businesses in 2019, increasing
ownership in its solar joint venture Lightsource BP to 50%, and
completed formation of its new Brazilian biofuels and biopower
joint venture, BP Bunge Bioenergia.
- Five Upstream major projects began production in 2019, and
final investment decisions were taken for a further five.
- BP continued its expansion into fast-growing fuels markets
during the year and agreed a major fuels joint venture with
Reliance Industries Limited in India.
See chart on PDF
Bob Dudley - Group chief executive:
"BP is performing well, with safe and reliable operations, continued
strategic progress and strong cash delivery. This all supports our commitment
to growing distributions to shareholders over the long term and the dividend
rise we announced today. After almost ten years, this is now my last
quarter as CEO. In that time, we have achieved a huge amount together
and I am proud to be handing over a safer and stronger BP to Bernard
and his team. I am confident that under their leadership, BP will continue
to successfully navigate the rapidly-changing energy landscape."
Financial summary Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ====== ========
Profit (loss) for the period attributable
to BP shareholders 19 (749) 766 4,026 9,383
Inventory holding (gains) losses, net
of tax (23) 398 1,951 (511) 603
RC profit (loss) (4) (351) 2,717 3,515 9,986
Net (favourable) adverse impact of non-operating
items and fair value accounting effects,
net of tax 2,571 2,605 760 6,475 2,737
======
Underlying RC profit 2,567 2,254 3,477 9,990 12,723
=================================================== ====== ====== ======= ===== ======
RC profit (loss) per ordinary share (cents) (0.02) (1.72) 13.58 17.32 50.00
RC profit (loss) per ADS (dollars) 0.00 (0.10) 0.81 1.04 3.00
Underlying RC profit per ordinary share
(cents) 12.67 11.06 17.38 49.24 63.70
Underlying RC profit per ADS (dollars) 0.76 0.66 1.04 2.95 3.82
=================================================== ====== ====== ======= ===== ======
RC profit (loss), underlying RC profit, operating cash flow
excluding Gulf of Mexico oil spill payments, working capital,
organic capital expenditure, net debt and gearing are non-GAAP
measures. These measures and underlying production, refining
availability, inventory holding gains and losses, non-operating
items and fair value accounting effects are defined in the Glossary
on page 32.
The commentary above and following should be read in conjunction with
the cautionary statement on page 36.
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Group headlines
Results
For the full year, underlying replacement a cost of $1,511 million (including
cost (RC) profit* was $9,990 million, fees and stamp duty) for the full
compared with $12,723 million in 2018. year. In January 2020, the share buyback
Underlying RC profit is after adjusting programme had fully offset the impact
RC profit* for a net charge for non-operating of scrip dilution since the third
items* of $7,186 million and net favourable quarter 2017.
fair value accounting effects* of Operating cash flow*
$711 million (both on a post-tax basis). Operating cash flow excluding Gulf
RC profit was $3,515 million for the of Mexico oil spill payments* was
full year, compared with $9,986 million $7.6 billion for the fourth quarter
in 2018. and $28.2 billion for the full year.
For the fourth quarter, underlying These amounts include a working capital*
RC profit was $2,567 million, compared build of $0.2 billion in the fourth
with $3,477 million in 2018. Underlying quarter and a release of $0.3 billion
RC profit is after adjusting RC loss in the full year, after adjusting
for a net charge for non-operating for net inventory holding losses or
items of $3,142 million primarily gains* and working capital effects
divestment-related impairment charges of the Gulf of Mexico oil spill. The
(see Note 3 and page 27) and reclassification comparable amounts for the same periods
of past foreign exchange losses on in 2018 were $7.1 billion and $26.1
the formation of the BP Bunge Bioenergia billion (prior to the implementation
joint venture, as well as net favourable of IFRS 16).
fair value accounting effects of $571 Operating cash flow as reported in
million (both on a post-tax basis). the group cash flow statement was
RC loss was $4 million for the fourth $7.6 billion for the fourth quarter
quarter, compared with a profit of and $25.8 billion for the full year.
$2,717 million in 2018. These amounts include a working capital
BP's profit for the fourth quarter build of $0.3 billion and $2.9 billion
and full year was $19 million and respectively. The comparable amounts
$4,026 million respectively, compared for the same periods in 2018 were
with $766 million and $9,383 million $6.8 billion and $22.9 billion (prior
for the same periods in 2018. to the implementation of IFRS 16).
See further information on pages 3, See page 30 and Glossary for further
27 and 28. information on Gulf of Mexico oil
Depreciation, depletion and amortization spill cash flows and on working capital.
The charge for depreciation, depletion Capital expenditure*
and amortization was $4.4 billion Organic capital expenditure* for the
in the quarter and $17.8 billion in fourth quarter and full year was $4.0
the full year. In the same periods billion and $15.2 billion respectively.
in 2018 it was $4.0 billion and $15.5 We reported $4.4 billion and $15.1
billion respectively (prior to the billion for the same periods in 2018
implementation of IFRS 16). In 2020, (prior to the implementation of IFRS
we expect the full-year charge to 16).
be slightly lower than the 2019 level Inorganic capital expenditure* for
reflecting impacts of divestments. the fourth quarter and full year was
Effective tax rate $0.2 billion and $4.2 billion respectively,
The effective tax rate (ETR) on RC including $3.5 billion for the full
profit or loss* for the fourth quarter year relating to the BHP acquisition,
and full year was 102% and 51% respectively, compared with $8.5 billion and $9.9
compared with 45% and 42% for the billion for the same periods in 2018.
same periods in 2018. Adjusting for Organic capital expenditure and inorganic
non-operating items and fair value capital expenditure are non-GAAP measures.
accounting effects, the underlying See page 26 for further information.
ETR* for the fourth quarter and full Divestment and other proceeds
year was 27% and 36% respectively, Divestment proceeds* were $0.8 billion
compared with 38% and 38% for the for the fourth quarter and $2.2 billion
same periods a year ago. The lower for the full year, in addition $0.6
underlying ETR for the fourth quarter billion was received in the fourth
and full year reflects the reassessment quarter in relation to the sale of
of the recognition of deferred tax a 49% interest in BP's retail property
assets. In the current environment portfolio in Australia. Divestment
the underlying ETR in 2020 is expected proceeds for the same periods in 2018
to be lower than 40%. ETR on RC profit were $2.4 billion and $2.9 billion
or loss and underlying ETR are non-GAAP respectively.
measures. Gearing*
Dividend Net debt* at 31 December 2019 was
BP today announced a quarterly dividend $45.4 billion, compared with $43.5
of 10.5 cents per ordinary share ($0.63 billion a year ago. Gearing at 31
per ADS), which is expected to be December 2019 was 31.1%, compared
paid on 27 March 2020. The corresponding with 30.0% a year ago. Net debt and
amount in sterling will be announced gearing are non-GAAP measures. See
on 16 March 2020. See page 23 for page 23 for more information.
more information. Reserves replacement ratio*
Share buybacks The organic reserves replacement ratio
BP repurchased 184 million ordinary on a combined basis of subsidiaries
shares at a cost of $1,171 million and equity-accounted entities was
in the fourth quarter, totalling 235 67% for the year. Including acquisitions
million ordinary shares at and divestments, the total reserves
replacement ratio was 57%.
Brian Gilvary - Chief financial officer:
"We continue to make strong progress on our divestment programme, with
announced transactions totalling $9.4 billion since the start of 2019.
We are ahead of our target of $10 billion of proceeds by end-2020, and
now plan a further $5 billion of agreed disposals by mid-2021. Net debt
fell $1 billion in the fourth quarter, and with further disposal proceeds
expected, and assuming recent average oil prices, we continue to expect
gearing to move towards the middle of the 20 to 30% range through this
year. Together with the continued strong operational momentum, growing
free cash flow, and our confidence in delivery of 2021 free cash flow
targets, this underpins our announcement today of an increase in the dividend
to 10.5 cents per ordinary share."
* For items marked with an asterisk throughout this document,
definitions are provided in the Glossary on page 32.
For more information on the impact of IFRS 16 'Leases' on key
financial metrics, see page 25.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
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Analysis of underlying RC profit* before interest and tax
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
Underlying RC profit before interest and
tax
Upstream 2,678 2,139 3,886 11,158 14,550
Downstream 1,438 1,883 2,169 6,419 7,561
Rosneft 412 802 431 2,419 2,316
Other businesses and corporate (250) (322) (344) (1,280) (1,558)
Consolidation adjustment - UPII* 24 30 142 75 211
Underlying RC profit before interest and
tax 4,302 4,532 6,284 18,791 23,080
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (781) (754) (654) (3,041) (2,176)
Taxation on an underlying RC basis (955) (1,506) (2,148) (5,596) (7,986)
Non-controlling interests 1 (18) (5) (164) (195)
====== ======
Underlying RC profit attributable to BP
shareholders 2,567 2,254 3,477 9,990 12,723
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Reconciliations of underlying RC profit or loss to the nearest
equivalent IFRS measure are provided on page 1 for the group and on
pages 6-11 for the segments.
Analysis of RC profit (loss)* before interest and tax and
reconciliation to profit (loss) for the period
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
RC profit before interest and tax
Upstream 614 (1,050) 4,168 4,917 14,328
Downstream 1,433 2,016 2,138 6,502 6,940
Rosneft 503 802 400 2,316 2,221
Other businesses and corporate (1,432) (412) (1,110) (2,771) (3,521)
Consolidation adjustment - UPII 24 30 142 75 211
RC profit before interest and tax 1,142 1,386 5,738 11,039 20,179
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (903) (899) (776) (3,552) (2,655)
Taxation on a RC basis (244) (820) (2,240) (3,808) (7,343)
Non-controlling interests 1 (18) (5) (164) (195)
RC profit (loss) attributable to BP shareholders (4) (351) 2,717 3,515 9,986
Inventory holding gains (losses)* 10 (512) (2,574) 667 (801)
Taxation (charge) credit on inventory
holding gains and losses 13 114 623 (156) 198
Profit (loss) for the period attributable
to BP shareholders 19 (749) 766 4,026 9,383
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Strategic progress
Upstream The formation of the BP Bunge Bioenergia
Upstream production for the fourth joint venture has completed. BP's
quarter, which excludes Rosneft, was 50% share in the company represents
2,698mboe/d, 2.7% higher than a year a 50% increase in BP's Brazilian biofuels
earlier. Underlying production*, adjusted and biopower business.
for portfolio changes and PSA* impact, BP continued to progress its advanced
increased by 2.1%, mainly due to major mobility agenda in 2019, forming an
project growth. electric vehicle charging joint venture
In 2019 BP announced seven discoveries. in China with DiDi and beginning the
In December, it confirmed the success roll out of 150kW ultra-fast electric
of a three-well drilling campaign chargers on BP forecourts across the
offshore Mauritania and Senegal, offering UK.
the potential for possible future Financial framework
developments. Following the introduction of IFRS
The Alligin project, a tie-back to 16 on 1 January 2019, the positive
the Quad 204 development west of Shetland, impacts on Operating cash flow* and
UK, began production ahead of schedule Organic capital expenditure* are fully
in December and was the fifth Upstream offset in the cash flow statement
major project start-up of 2019. The by a new line, Lease liability payments.
Raven project in Egypt is now expected Lease payments are now included in
to come onstream around the end of the definition of free cash flow*
2020. Final investment decisions for as a use of cash, which means the
five further projects, in the US Gulf net impact on this measure is zero.
of Mexico, UK North Sea, Azerbaijan Operating cash flow excluding Gulf
and India, were taken in 2019. of Mexico oil spill payments* was
In November BP agreed to sell its $28.2 billion for the full year of
interests in the onshore San Juan 2019. For the full year of 2018, we
and Arkoma fields in the US. In early reported $26.1 billion (prior to the
January 2020, BP announced it had implementation of IFRS 16).
agreed terms to sell its interests Organic capital expenditure for the
in the Andrew area and in the Shearwater full year of 2019 was $15.2 billion.
field, both in the central UK North BP expects 2020 organic capital expenditure
Sea. to remain towards the lower end of
our $15-17 billion range.
Downstream Lease liability payments of principal
BP continued to make strategic progress for the full year of 2019 were $2.4
in fuels marketing, with its convenience billion.
partnership model now in around 1,600 Divestment and other transactions
sites across the network. announced have now reached $9.4 billion
BP also made progress towards its since the start of 2019. BP expects
growth ambition in new markets, most this total to be around $15 billion
notably in Mexico, where there are by mid-2021.
now over 520 BP-branded sites and Gulf of Mexico oil spill payments
volumes more than doubled in 2019. on a post-tax basis totalled $2.4
In December, BP signed key agreements billion in the full year. Payments
with Reliance Industries Limited to for 2020 are expected to be less than
form a new fuels marketing joint venture, $1 billion on a post-tax basis.
which will build on Reliance's existing Gearing* at the end of the year was
network of retail sites in India and 31.1%. See page 23 for more information.
include access to the country's aviation We expect gearing to move towards
fuels market. the middle of the 20-30% range through
A consortium of leading companies 2020, assuming recent average oil
across the PET plastics value chain, prices.
including BP, was formed. It aims Safety
to help accelerate the commercialisation Both tier 1 and tier 2 process safety
of BP's enhanced recycling technology, events* were higher in 2019 compared
BP Infinia, which is capable of processing with 2018. The increase in this group
currently-unrecyclable plastic waste. metric mainly reflects performance
Advancing the energy transition in assets acquired over the past year;
In December BP increased its interest excluding these the number of events
in its solar joint venture Lightsource fell slightly. Safety remains our
BP, creating a simplified equal ownership number one priority and we continue
structure with the company's management. to focus on working to reduce all
The cash injection will support Lightsource process safety events.
BP's planned continuing rapid growth.
Operating metrics Year 2019 Financial metrics Year 2019
========================== ============================
(vs. Year 2018) (vs. Year 2018)
========================== ================ ============================ ================
Tier 1 and tier 2 Underlying RC profit*
process safety events 98 $10.0bn
========================== ============================
(+26) (-$2.7bn)
========================== ================ ============================ ================
Reported recordable Operating cash flow
injury frequency* excluding Gulf of
Mexico oil spill payments
0.17 (post-tax)(b) $28.2bn
========================== ============================
(-16%) (+$2.1bn)
========================== ================ ============================ ================
Group production 3,781mboe/d Organic capital expenditure $15.2bn
========================== ============================
(+2.7%) (+$0.1bn)
========================== ================ ============================ ================
Upstream production Gulf of Mexico oil
(excludes Rosneft spill payments (post-tax)
segment) 2,637mboe/d $2.4bn
========================== ============================
(+3.8%) (-$0.8bn)
========================== ================ ============================ ================
Upstream unit production Divestment proceeds*
costs*(a) $6.84/boe $2.2bn
========================== ============================
(-4.4%) (-$0.7bn)
========================== ================ ============================ ================
BP-operated Upstream
plant reliability* 94.4% Gearing 31.1%
=========================== ============================
(-1.3) (+1.1)
================ ============================ ================
BP-operated refining Dividend per ordinary
availability* 94.9% share(c) 10.50 cents
========================== ============================
(-0.1) (2.4%)
================ ============================ ================
Return on average
capital employed* 8.9%
============================
(-2.3)
============================ ================
(a) Slight decrease from the same period in 2018 after excluding
the impacts of IFRS 16 on production costs.
(b) Full year 2019 includes estimated $2.0 billion favourable
impact due to IFRS 16 (see page 25).
(c) Represents dividend announced in the quarter (vs. prior year quarter).
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
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Upstream
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
====== ========
Profit (loss) before interest and tax 614 (1,050) 4,156 4,909 14,322
Inventory holding (gains) losses* - - 12 8 6
======
RC profit (loss) before interest and tax 614 (1,050) 4,168 4,917 14,328
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* 2,064 3,189 (282) 6,241 222
Underlying RC profit before interest and
tax*(a) 2,678 2,139 3,886 11,158 14,550
=================================================== ======= ====== ====== ====== ======
(a) See page 7 for a reconciliation to segment RC profit before interest and tax by region.
Financial results
The replacement cost profit before interest and tax for the
fourth quarter and full year was $614 million and $4,917 million
respectively, compared with $4,168 million and $14,328 million for
the same periods in 2018. The fourth quarter and full year included
a net non-operating charge of $2,723 million and $6,947 million
respectively, which principally relate to impairments arising from
disposal transactions, compared with a net gain of $136 million and
a net charge $183 million for the same periods in 2018. Fair value
accounting effects in the fourth quarter and full year had a
favourable impact of $659 million and $706 million respectively,
compared with a favourable impact of $146 million and an adverse
impact of $39 million in the same periods of 2018.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the fourth quarter and full year was $2,678
million and $11,158 million respectively, compared with $3,886
million and $14,550 million for the same periods in 2018. The
result for the fourth quarter mainly reflected lower liquids and
gas realizations partly offset by higher production. The result for
the full year mainly reflected lower liquids and gas realizations
and higher depreciation, depletion and amortization partly offset
by strong gas marketing and trading results and higher
production.
Production
Production for the quarter was 2,698mboe/d, 2.7% higher than the
fourth quarter of 2018. Underlying production* for the quarter
increased by 2.1%, mainly due to major project growth.
For the full year, production was 2,637mboe/d, 3.8% higher than
2018. Underlying production for the full year was broadly flat
versus full year 2018.
Key events
On 29 October, BP announced the New Gas Consortium (NGC), a
joint venture with Chevron, Eni, Total and Angolan state-owned
Sonangol. This is the first upstream natural gas partnership in
Angola, initially comprised of the Quiluma & Maboqueiro fields
(Eni operator 25.6%, Chevron 31%, Sonangol 18.8%, BP 11.8%, and
Total 11.8%).
On 14 November, BP signed an agreement to acquire KrisEnergy's
30% non-operating working interest in the Andaman II
production-sharing contract* in the Malacca Strait, Indonesia,
subject to government approval.
On 15 November, BP Trinidad and Tobago LLC announced a gas
discovery with the Ginger exploration well, offshore Trinidad. The
well is currently under evaluation.
In November, BP signed agreements to sell its interests in the
San Juan field in Colorado and New Mexico, and in the Arkoma field
in Oklahoma, US. Subject to regulatory approvals, the transactions
are expected to complete by the end of the first quarter of
2020.
On 30 November, the Trans-Anatolian Natural Gas Pipeline (TANAP)
through Turkey and its connection to the Trans Adriatic Pipeline
(TAP) in Greece was completed. TANAP is expected to begin
transporting gas to Turkish and European markets in late 2020
(Azeri state energy company SOCAR 51%, BOTAS 30%, BP 12%, and SOCAR
Turkey 7%).
On 16 December, BP confirmed the production licence extension on
Block 17, offshore Angola, to 2045, and for Sonangol to assume an
equity interest in the block (Total operator 38%, Equinor 22.16%,
ExxonMobil 19%, BP 15.84%, and Sonangol 5%).
On 7 January 2020, BP announced it has agreed terms to sell its
interest in the Andrew area and the Shearwater field, both located
in the UK North Sea, to Premier Oil. Subject to regulatory
approval, the transaction is expected to complete by the end of the
third quarter of 2020.
On 4 February 2020, BP confirmed the start-up of oil production
from the Alligin field in the UK North Sea. This was the fifth
major project start-up in 2019 (BP operator 50% and Shell 50%).
Outlook
We expect full-year 2020 underlying production to be lower than
2019 due to declines in lower margin gas basins. We expect reported
production to be lower due to the above factor and the impact of
the ongoing divestment programme.
We expect first-quarter 2020 reported production to be lower
than fourth-quarter 2019 due to the impact of our ongoing
divestment programme and planned seasonal maintenance and
turnaround activities.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
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Upstream (continued)
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= =========
Underlying RC profit before interest and
tax
US 645 552 1,400 2,670 3,693
Non-US 2,033 1,587 2,486 8,488 10,857
2,678 2,139 3,886 11,158 14,550
====== ====== ====== ====== ======
Non-operating items(a)(b)
US (2,451) (3,338) (267) (6,265) (590)
Non-US (272) (116) 403 (682) 407
(2,723) (3,454) 136 (6,947) (183)
====== ====== ====== ====== ======
Fair value accounting effects
US 120 19 127 (179) (35)
Non-US 539 246 19 885 (4)
659 265 146 706 (39)
====== ====== ====== ====== ======
RC profit (loss) before interest and tax
US (1,686) (2,767) 1,260 (3,774) 3,068
Non-US 2,300 1,717 2,908 8,691 11,260
614 (1,050) 4,168 4,917 14,328
====== ====== ====== ====== ======
Exploration expense
US 86 53 84 233 509
Non-US 180 132 373 731 936
266 185 457 964 1,445
Of which: Exploration expenditure written
off(b) 155 115 351 631 1,085
============================================ ====== ====== ====== ====== ======
Production (net of royalties)(c)(d)
Liquids* (mb/d)
US 517 449 495 482 445
Europe 149 118 154 141 142
Rest of World 662 657 673 666 681
1,328 1,224 1,321 1,288 1,268
====== ====== ====== ====== ======
Natural gas (mmcf/d)
US 2,317 2,396 2,255 2,358 1,900
Europe 275 188 215 185 211
Rest of World 5,354 5,211 5,104 5,279 5,263
7,945 7,795 7,574 7,823 7,374
====== ====== ====== ====== ======
Total hydrocarbons* (mboe/d)
US 916 862 884 888 772
Europe 196 151 191 173 179
Rest of World 1,585 1,555 1,553 1,576 1,589
2,698 2,568 2,627 2,637 2,539
====== ====== ====== ====== ======
Average realizations*(e)
Total liquids(f) ($/bbl) 55.90 55.68 61.80 57.73 64.98
Natural gas ($/mcf) 3.12 3.11 4.33 3.39 3.92
Total hydrocarbons ($/boe) 36.42 35.48 42.98 38.00 43.47
============================================ ====== ====== ====== ====== ======
(a) Fourth quarter and full year 2019 include impairment charges
which principally related to the disposal of heritage BPX Energy
assets, Alaska and GUPCO. Fourth quarter and full year 2018 include
impairment reversals for assets in the North Sea and Angola.
(b) Full year 2018 includes the write-off of $124 million in
relation to the value ascribed to certain licences in the deepwater
Gulf of Mexico as part of the accounting for the acquisition of
upstream assets from Devon Energy in 2011. This has been classified
within the 'other' category of non-operating items.
(c) Includes BP's share of production of equity-accounted entities in the Upstream segment.
(d) Because of rounding, some totals may not agree exactly with
the sum of their component parts.
(e) Realizations are based on sales by consolidated subsidiaries
only - this excludes equity-accounted entities.
(f) Includes condensate, natural gas liquids and bitumen.
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Downstream
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
====== =======
Profit (loss) before interest and tax 1,412 1,583 (332) 7,187 6,078
Inventory holding (gains) losses* 21 433 2,470 (685) 862
RC profit before interest and tax 1,433 2,016 2,138 6,502 6,940
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* 5 (133) 31 (83) 621
Underlying RC profit before interest and
tax*(a) 1,438 1,883 2,169 6,419 7,561
=================================================== ======= ====== ====== ===== =====
(a) See page 9 for a reconciliation to segment RC profit before
interest and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the
fourth quarter and full year was $1,433 million and $6,502 million
respectively, compared with $2,138 million and $6,940 million for
the same periods in 2018.
The fourth quarter and full year include a net non-operating
charge of $28 million and $77 million respectively, compared with a
charge of $401 million and $716 million for the same periods in
2018. Fair value accounting effects in the fourth quarter and full
year had a favourable impact of $23 million and $160 million
respectively, compared with $370 million and $95 million in the
same periods in 2018.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the fourth quarter and full year was $1,438
million and $6,419 million respectively, compared with $2,169
million and $7,561 million for the same periods in 2018.
Replacement cost profit before interest and tax for the fuels,
lubricants and petrochemicals businesses is set out on page 9.
Fuels
The fuels business reported an underlying replacement cost
profit before interest and tax of $1,068 million for the fourth
quarter and $4,759 million for the full year, compared with $1,624
million and $5,642 million for the same periods in 2018. Year on
year we delivered growth in marketing and refining operational
performance, offset by a significantly weaker environment.
The result for the quarter reflects increased refining margin
capture, supported by improved operations, higher levels of
advantaged feedstocks, and a lower level of turnaround activity.
This was more than offset, however, by narrower heavy crude oil
discounts and a lower fuels marketing result compared to a very
strong result in the fourth quarter of 2018.
The full-year result reflects strong refining operational
performance, which led to a second consecutive year of record
refining throughput and higher commercial optimization, despite
high levels of turnaround activity. This was more than offset,
however, by lower refining margins including significantly narrower
heavy crude oil discounts, which together represented one of the
weakest refining environments in the last 10 years. In fuels
marketing we saw volumes and margins grow year on year, offset by
adverse foreign exchange effects. The full-year result also
reflects a higher contribution from supply and trading.
We continued to make strategic progress in fuels marketing, with
our convenience partnership model now in around 1,600 sites across
our network. We also made progress towards our growth ambition in
new markets, most notably in Mexico where we now have over 520
sites, with volumes more than doubling in 2019.
In December we also signed an agreement with Reliance Industries
Limited to form a fuels retail and aviation joint venture in India,
providing access to one of the world's largest and fastest growing
fuels markets.
Lubricants
The lubricants business reported an underlying replacement cost
profit before interest and tax of $333 million for the fourth
quarter and $1,258 million for the full year, compared with $311
million and $1,292 million for the same periods in 2018. The result
for the full year reflects year-on-year unit margin improvement,
offset by adverse foreign exchange effects.
Following the decision by Groupe Renault to select Castrol as
its aftersales' global service fill engine oil lubricants partner
from 1 January 2020, a new Renault Castrol jointly branded product
range has been launched to all Renault dealers globally.
Petrochemicals
The petrochemicals business reported an underlying replacement
cost profit before interest and tax of $37 million for the fourth
quarter and $402 million for the full year, compared with $234
million and $627 million for the same periods in 2018. The result
for the quarter and full year reflects a significantly weaker
margin environment across both aromatics and acetyls.
In October we announced BP Infinia, an enhanced recycling
technology, and in December a consortium of leading companies was
formed which aims to help accelerate the commercialisation of this
technology. These are important steps to enable a stronger circular
economy in the polyethylene terephthalate (PET) plastics industry
and to help reduce plastic waste.
Outlook
Looking to the first quarter of 2020, we expect lower levels of
industry refining margins and wider North American heavy crude oil
discounts compared with the fourth quarter of 2019.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
-----------------------------------------------------------------------
Top of page 9
Downstream (continued)
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
Underlying RC profit before interest and
tax - by region
US 556 537 995 2,190 2,818
Non-US 882 1,346 1,174 4,229 4,743
1,438 1,883 2,169 6,419 7,561
====== ====== ====== ====== ======
Non-operating items
US (40) (5) (109) (42) (295)
Non-US 12 (9) (292) (35) (421)
(28) (14) (401) (77) (716)
====== ====== ====== ====== ======
Fair value accounting effects(a)
US (37) 116 184 148 (155)
Non-US 60 31 186 12 250
23 147 370 160 95
====== ====== ====== ====== ======
RC profit before interest and tax
US 479 648 1,070 2,296 2,368
Non-US 954 1,368 1,068 4,206 4,572
1,433 2,016 2,138 6,502 6,940
====== ====== ====== ====== ======
Underlying RC profit before interest and
tax - by business(b)(c)
Fuels 1,068 1,438 1,624 4,759 5,642
Lubricants 333 332 311 1,258 1,292
Petrochemicals 37 113 234 402 627
1,438 1,883 2,169 6,419 7,561
====== ====== ====== ====== ======
Non-operating items and fair value accounting
effects(a)
Fuels (41) 135 173 32 (381)
Lubricants 39 - (198) 57 (227)
Petrochemicals (3) (2) (6) (6) (13)
(5) 133 (31) 83 (621)
====== ====== ====== ====== ======
RC profit before interest and tax(b)(c)
Fuels 1,027 1,573 1,797 4,791 5,261
Lubricants 372 332 113 1,315 1,065
Petrochemicals 34 111 228 396 614
======
1,433 2,016 2,138 6,502 6,940
====== ====== ====== ====== ======
BP average refining marker margin (RMM)*
($/bbl) 12.4 14.7 11.0 13.2 13.1
Refinery throughputs (mb/d)
US 761 781 691 737 703
Europe 848 815 735 787 781
Rest of World 238 217 240 225 241
1,847 1,813 1,666 1,749 1,725
BP-operated refining availability* (%) 95.7 96.1 95.6 94.9 95.0
================================================ ====== ====== ====== ====== ======
Marketing sales of refined products (mb/d)
US 1,156 1,172 1,138 1,145 1,141
Europe 1,051 1,157 1,053 1,073 1,100
Rest of World 537 459 526 509 495
2,744 2,788 2,717 2,727 2,736
Trading/supply sales of refined products 3,519 3,157 3,199 3,268 3,194
Total sales volumes of refined products 6,263 5,945 5,916 5,995 5,930
================================================ ====== ====== ====== ====== ======
Petrochemicals production (kte)
US 518 564 672 2,267 2,235
Europe 1,141 1,187 1,037 4,714 4,468
Rest of World 1,353 1,325 1,259 5,133 5,154
3,012 3,076 2,968 12,114 11,857
====== ====== ====== ====== ======
(a) For Downstream, fair value accounting effects arise solely
in the fuels business. See page 28 for further information.
(b) Segment-level overhead expenses are included in the fuels business result.
(c) Results from petrochemicals at our Gelsenkirchen and Mülheim
sites in Germany are reported in the fuels business.
Top of page 10
Rosneft
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019(a) 2019 2018 2019(a) 2018
======= ======= ======= ======= ========
Profit before interest and tax(b)(c) 534 723 308 2,306 2,288
Inventory holding (gains) losses* (31) 79 92 10 (67)
RC profit before interest and tax 503 802 400 2,316 2,221
Net charge (credit) for non-operating
items* (91) - 31 103 95
Underlying RC profit before interest and
tax* 412 802 431 2,419 2,316
=========================================== ====== ======= ======= ======= =====
Financial results
Replacement cost (RC) profit before interest and tax for the
fourth quarter and full year was $503 million and $2,316 million
respectively, compared with $400 million and $2,221 million for the
same periods in 2018.
After adjusting for non-operating items, the underlying RC
profit before interest and tax for the fourth quarter and full year
was $412 million and $2,419 million respectively, compared with
$431 million and $2,316 million for the same periods in 2018.
Compared with the same period in 2018, the result for the fourth
quarter primarily reflects lower oil prices partially offset by
duty lag benefit. Compared with 2018, the result for the full year
primarily reflects favourable foreign exchange and certain one-off
items offset by lower oil prices.
The extraordinary general meeting held on 30 September adopted a
resolution to pay interim dividends of 15.34 roubles per ordinary
share which constitute 50% of Rosneft's IFRS net profit for the
first half of 2019. BP received dividends of $451 million (net of
withholding tax) in November.
Fourth Third Fourth
quarter quarter quarter Year Year
2019(a) 2019 2018 2019(a) 2018
========================================== ======= ======= ======= ======= =======
Production (net of royalties) (BP share)
Liquids* (mb/d) 923 920 946 923 923
Natural gas (mmcf/d) 1,306 1,236 1,312 1,279 1,285
Total hydrocarbons* (mboe/d) 1,148 1,133 1,173 1,144 1,144
=========================================== ======= ======= ======= ======= =====
(a) The operational and financial information of the Rosneft
segment for the fourth quarter and full year is based on
preliminary operational and financial results of Rosneft for the
three months and full year ended 31 December 2019. Actual results
may differ from these amounts.
(b) The Rosneft segment result includes equity-accounted
earnings arising from BP's 19.75% shareholding in Rosneft as
adjusted for the accounting required under IFRS relating to BP's
purchase of its interest in Rosneft and the amortization of the
deferred gain relating to the divestment of BP's interest in
TNK-BP. These adjustments increase the segment's reported profit
before interest and tax, as shown in the table above, compared with
the amounts reported in Rosneft's IFRS financial statements.
(c) BP's adjusted share of Rosneft's earnings after Rosneft's own finance costs, taxation and non-controlling interests is included in the BP group income statement within profit before interest and taxation. For each year-to-date period it is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date.
Top of page 11
Other businesses and corporate
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
Profit (loss) before interest and tax (1,432) (412) (1,110) (2,771) (3,521)
Inventory holding (gains) losses* - - - - -
RC profit (loss) before interest and tax (1,432) (412) (1,110) (2,771) (3,521)
Net charge (credit) for non-operating
items* 1,182 90 766 1,491 1,963
====== ====== ====== ====== ======
Underlying RC profit (loss) before interest
and tax* (250) (322) (344) (1,280) (1,558)
============================================== ====== ====== ====== ====== ======
Underlying RC profit (loss) before interest
and tax
US (85) (249) (179) (713) (615)
Non-US (165) (73) (165) (567) (943)
(250) (322) (344) (1,280) (1,558)
====== ====== ====== ====== ======
Non-operating items
US (268) (85) (654) (559) (1,738)
Non-US (914) (5) (112) (932) (225)
(1,182) (90) (766) (1,491) (1,963)
====== ====== ====== ====== ======
RC profit (loss) before interest and tax
US (353) (334) (833) (1,272) (2,353)
Non-US (1,079) (78) (277) (1,499) (1,168)
(1,432) (412) (1,110) (2,771) (3,521)
====== ====== ====== ====== ======
Other businesses and corporate comprises our alternative energy
business, shipping, treasury, BP ventures and corporate activities
including centralized functions, and any residual costs of the Gulf
of Mexico oil spill.
Financial results
The replacement cost loss before interest and tax for the fourth
quarter and full year was $1,432 million and $2,771 million
respectively, compared with $1,110 million and $3,521 million for
the same periods in 2018.
The results included a net non-operating charge of $1,182
million for the fourth quarter and $1,491 million for the full
year, primarily relating to the reclassification of $877 million of
accumulated foreign exchange losses from reserves to the income
statement which arose as a result of the contribution of our
Brazilian biofuels business to BP Bunge Bioenergia, as well as
costs of the Gulf of Mexico oil spill, compared with a charge of
$766 million and $1,963 million for the same periods in 2018.
After adjusting for non-operating items, the underlying
replacement cost loss before interest and tax for the fourth
quarter and full year was $250 million and $1,280 million
respectively, compared with $344 million and $1,558 million for the
same periods in 2018.
Alternative Energy
The net ethanol-equivalent production (which includes ethanol
and sugar) for the fourth quarter and full year was 172 million
litres and 796 million litres respectively, compared with 144
million litres and 765 million litres for the same periods in
2018.
Net wind generation capacity* was 926MW at 31 December 2019,
compared with 1,001MW at 31 December 2018. BP's net share of wind
generation for the fourth quarter and full year was 785GWh and
2,752GWh respectively, compared with 933GWh and 3,821GWh for the
same periods in 2018. The lower production and reduced capacity in
2019 is due to divestments in the fourth quarter of 2018 and second
quarter of 2019.
Lightsource BP has an operating portfolio of 2GW of solar
projects under its management and has plans for 10GW of developed
assets by the end of 2023. During the fourth quarter BP increased
its shareholding, to become an equal partner in the business, with
the balance of shares continuing to be held by Lightsource BP's
management and staff.
In November, Lightsource BP became the first company in the UK
to provide a reactive power service from a solar plant at night
following a successful trial at its East Sussex solar plant. The
trial follows three years of testing and development working with
UK Power Networks and the National Grid Electricity System
Operator.
In December, BP and Bunge Limited completed the formation of BP
Bunge Bioenergia. The joint venture combines the Brazilian biofuels
and biopower assets of the two companies into a 50/50 JV, and has
11 biofuel sites, with 32 million metric tonnes of combined
crushing capacity per year. In 2018 the combined operations
produced around 2.2 billion litres of ethanol equivalent and after
powering the sites, exported 1,200 gigawatt-hours of low-carbon
biopower to the national grid.
In early January 2020, BP participated in an artificial
intelligence (AI) venture by investing in energy management
specialist R&B whose systems are designed to predict, control
and improve a building's energy use. Buildings currently account
for one third of the world's total energy consumption and this
venture will enable building managers to make informed decisions to
optimize energy use and reduce carbon emissions.
Outlook
Other businesses and corporate average quarterly charges,
excluding non-operating items, are expected to be around $350
million although this will fluctuate quarter to quarter.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
-----------------------------------------------------------------------
Top of page 12
Financial statements
Group income statement
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
Sales and other operating revenues (Note
5) 71,109 68,291 75,677 278,397 298,756
Earnings from joint ventures - after interest
and tax 163 90 236 576 897
Earnings from associates - after interest
and tax 640 784 425 2,681 2,856
Interest and other income 210 126 295 769 773
Gains on sale of businesses and fixed
assets 48 1 252 193 456
======
Total revenues and other income 72,170 69,292 76,885 282,616 303,738
Purchases 53,444 52,273 59,019 209,672 229,878
Production and manufacturing expenses 5,809 5,259 6,173 21,815 23,005
Production and similar taxes (Note 7) 412 340 186 1,547 1,536
Depreciation, depletion and amortization
(Note 6) 4,434 4,297 3,987 17,780 15,457
Impairment and losses on sale of businesses
and fixed assets (Note 3) 3,657 3,416 244 8,075 860
Exploration expense 266 185 457 964 1,445
Distribution and administration expenses 2,996 2,648 3,655 11,057 12,179
=======
Profit (loss) before interest and taxation 1,152 874 3,164 11,706 19,378
Finance costs 886 883 742 3,489 2,528
Net finance expense relating to pensions
and other post-retirement benefits 17 16 34 63 127
Profit (loss) before taxation 249 (25) 2,388 8,154 16,723
Taxation 231 706 1,617 3,964 7,145
Profit (loss) for the period 18 (731) 771 4,190 9,578
================================================ ====== ====== ======= ======= =======
Attributable to
BP shareholders 19 (749) 766 4,026 9,383
Non-controlling interests (1) 18 5 164 195
18 (731) 771 4,190 9,578
====== ====== ======= ======= =======
Earnings per share (Note 8)
Profit (loss) for the period attributable
to BP shareholders
Per ordinary share (cents)
Basic 0.09 (3.68) 3.83 19.84 46.98
Diluted 0.09 (3.68) 3.80 19.73 46.67
Per ADS (dollars)
Basic 0.01 (0.22) 0.23 1.19 2.82
Diluted 0.01 (0.22) 0.23 1.18 2.80
================================================ ====== ====== ======= ======= =======
Top of page 13
Condensed group statement of comprehensive income
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ====== =========
Profit (loss) for the period 18 (731) 771 4,190 9,578
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Currency translation differences 1,404 (986) (937) 1,538 (3,771)
Exchange (gains) losses on translation
of foreign operations reclassified to
gain or loss on sale of businesses and
fixed assets 880 - - 880 -
Cash flow hedges and costs of hedging (76) (17) (68) 59 (192)
Share of items relating to equity-accounted
entities, net of tax 43 119 200 82 417
Income tax relating to items that may
be reclassified (39) 12 33 (70) 4
2,212 (872) (772) 2,489 (3,542)
====== ====== ====== ===== ======
Items that will not be reclassified to
profit or loss
Remeasurements of the net pension and
other post-retirement benefit liability
or asset 1,480 (260) (651) 328 2,317
Cash flow hedges that will subsequently
be transferred to the balance sheet 6 (10) (8) (3) (37)
Income tax relating to items that will
not be reclassified (459) 27 223 (157) (718)
1,027 (243) (436) 168 1,562
Other comprehensive income 3,239 (1,115) (1,208) 2,657 (1,980)
====== ====== ====== ===== ======
Total comprehensive income 3,257 (1,846) (437) 6,847 7,598
================================================ ====== ====== ====== ===== ======
Attributable to
BP shareholders 3,240 (1,848) (444) 6,674 7,444
Non-controlling interests 17 2 7 173 154
3,257 (1,846) (437) 6,847 7,598
====== ====== ====== ===== ======
Top of page 14
Condensed group statement of changes in equity
BP shareholders' Non-controlling Total
$ million equity interests equity
At 31 December 2018 99,444 2,104 101,548
Adjustment on adoption of IFRS 16, net
of tax(a) (329) (1) (330)
========================================= ============== ============= =======
At 1 January 2019 99,115 2,103 101,218
=========================================
Total comprehensive income 6,674 173 6,847
Dividends (6,929) (213) (7,142)
Cash flow hedges transferred to the
balance sheet, net of tax 23 - 23
Repurchase of ordinary share capital (1,511) - (1,511)
Share-based payments, net of tax 719 - 719
Share of equity-accounted entities'
changes in equity, net of tax 5 - 5
Transactions involving non-controlling
interests, net of tax 316 233 549
At 31 December 2019 98,412 2,296 100,708
========================================= ============== ============= =======
BP shareholders' Non-controlling Total
$ million equity interests equity
========================================
At 31 December 2017 98,491 1,913 100,404
Adjustment on adoption of IFRS 9, net
of tax(b) (180) - (180)
=========================================
At 1 January 2018 98,311 1,913 100,224
=========================================
Total comprehensive income 7,444 154 7,598
Dividends (6,699) (170) (6,869)
Cash flow hedges transferred to the
balance sheet, net of tax 26 - 26
Repurchase of ordinary share capital (355) - (355)
Share-based payments, net of tax 703 - 703
Share of equity-accounted entities'
changes in equity, net of tax 14 - 14
Transactions involving non-controlling
interests, net of tax - 207 207
At 31 December 2018 99,444 2,104 101,548
========================================= ============== ============= =======
(a) See Note 1 for further information.
(b) See Note 1 in BP Annual Report and Form 20-F 2018 for further information.
Top of page 15
Group balance sheet
31 December 31 December
$ million 2019 2018(a)
Non-current assets
Property, plant and equipment 132,642 135,261
Goodwill 11,868 12,204
Intangible assets 15,539 17,284
Investments in joint ventures 9,991 8,647
Investments in associates 20,334 17,673
Other investments 1,276 1,341
Fixed assets 191,650 192,410
Loans 630 637
Trade and other receivables 2,147 1,834
Derivative financial instruments 6,314 5,145
Prepayments 781 1,179
Deferred tax assets 4,560 3,706
Defined benefit pension plan surpluses 7,053 5,955
213,135 210,866
=========== ===========
Current assets
Loans 339 326
Inventories 20,880 17,988
Trade and other receivables 24,442 24,478
Derivative financial instruments 4,153 3,846
Prepayments 857 963
Current tax receivable 1,282 1,019
Other investments 169 222
Cash and cash equivalents 22,472 22,468
=========================================================
74,594 71,310
Assets classified as held for sale (Note 2) 7,465 -
========================================================= =========== ===========
82,059 71,310
=========== ===========
Total assets 295,194 282,176
========================================================= =========== ===========
Current liabilities
Trade and other payables 46,829 46,265
Derivative financial instruments 3,261 3,308
Accruals 5,066 4,626
Lease liabilities 2,067 44
Finance debt 10,487 9,329
Current tax payable 2,039 2,101
Provisions 2,453 2,564
72,202 68,237
Liabilities directly associated with assets classified
as held for sale (Note 2) 1,393 -
========================================================= =========== ===========
73,595 68,237
=========== ===========
Non-current liabilities
Other payables 12,626 13,830
Derivative financial instruments 5,537 5,625
Accruals 996 575
Lease liabilities 7,655 623
Finance debt 57,237 55,803
Deferred tax liabilities 9,750 9,812
Provisions 18,498 17,732
Defined benefit pension plan and other post-retirement
benefit plan deficits 8,592 8,391
120,891 112,391
=========== ===========
Total liabilities 194,486 180,628
========================================================= =========== ===========
Net assets 100,708 101,548
========================================================= =========== ===========
Equity
BP shareholders' equity 98,412 99,444
Non-controlling interests 2,296 2,104
=========================================================
Total equity 100,708 101,548
========================================================= =========== ===========
(a) Finance debt on the comparative balance sheet has been
re-presented to align with the current period. See Note 1 for
further information.
Top of page 16
Condensed group cash flow statement
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======== ======== ==========
Operating activities
Profit (loss) before taxation 249 (25) 2,388 8,154 16,723
Adjustments to reconcile profit (loss) before
taxation to net cash provided by operating
activities
Depreciation, depletion and amortization
and exploration expenditure written off 4,589 4,412 4,338 18,411 16,542
Impairment and (gain) loss on sale of businesses
and fixed assets 3,609 3,415 (8) 7,882 404
Earnings from equity-accounted entities,
less dividends received (75) (236) (30) (1,295) (2,218)
Net charge for interest and other finance
expense, less net interest paid 250 257 222 657 607
Share-based payments 167 149 126 730 690
Net operating charge for pensions and other
post-retirement benefits, less contributions
and benefit payments for unfunded plans (43) (50) (60) (238) (386)
Net charge for provisions, less payments 270 (132) 617 (176) 986
Movements in inventories and other current
and non-current assets and liabilities (306) 141 778 (2,918) (4,763)
Income taxes paid (1,107) (1,875) (1,542) (5,437) (5,712)
Net cash provided by operating activities 7,603 6,056 6,829 25,770 22,873
===================================================== ====== ====== ======= ======= =======
Investing activities
Expenditure on property, plant and equipment,
intangible and other assets (3,936) (3,954) (5,962) (15,418) (16,707)
Acquisitions, net of cash acquired (33) 13 (6,379) (3,562) (6,986)
Investment in joint ventures (57) (60) (290) (137) (382)
Investment in associates (83) (22) (265) (304) (1,013)
Total cash capital expenditure (4,109) (4,023) (12,896) (19,421) (25,088)
Proceeds from disposal of fixed assets 24 171 660 500 940
Proceeds from disposal of businesses, net
of cash disposed 792 536 1,758 1,701 1,911
Proceeds from loan repayments 64 63 619 246 666
Net cash used in investing activities (3,229) (3,253) (9,859) (16,974) (21,571)
===================================================== ====== ====== ======= ======= =======
Financing activities(a)
Net issue (repurchase) of shares (Note 8) (1,171) (215) (16) (1,511) (355)
Lease liability payments (566) (594) (11) (2,372) (35)
Proceeds from long-term financing 1,879 213 2,118 8,597 9,038
Repayments of long-term financing (360) (516) (1,795) (7,118) (7,175)
Net increase (decrease) in short-term debt 62 (852) 889 180 1,317
Net increase (decrease) in non-controlling
interests 566 - - 566 -
Dividends paid - BP shareholders (2,076) (1,656) (1,733) (6,946) (6,699)
- non-controlling interests (47) (47) (41) (213) (170)
======= =======
Net cash provided by (used in) financing
activities (1,713) (3,667) (589) (8,817) (4,079)
===================================================== ====== ====== ======= ======= =======
Currency translation differences relating
to cash and cash equivalents 119 (118) (105) 25 (330)
Increase (decrease) in cash and cash equivalents 2,780 (982) (3,724) 4 (3,107)
===================================================== ====== ====== ======= ======= =======
Cash and cash equivalents at beginning of
period 19,692 20,674 26,192 22,468 25,575
Cash and cash equivalents at end of period 22,472 19,692 22,468 22,472 22,468
===================================================== ====== ====== ======= ======= =======
(a) Financing cash flows for the fourth quarter and full year
2018 have been re-presented to align with the current period. See
Note 1 for further information.
Top of page 17
Notes
Note 1. Basis of preparation
The results for the interim periods and the year ended 31
December 2019 are unaudited and, in the opinion of management,
include all adjustments necessary for a fair presentation of the
results for each period. All such adjustments are of a normal
recurring nature. This report should be read in conjunction with
the consolidated financial statements and related notes for the
year ended 31 December 2018 included in BP Annual Report and Form
20-F 2018.
BP prepares its consolidated financial statements included
within BP Annual Report and Form 20-F on the basis of International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), IFRS as adopted by the European
Union (EU) and in accordance with the provisions of the UK
Companies Act 2006 as applicable to companies reporting under IFRS.
IFRS as adopted by the EU differs in certain respects from IFRS as
issued by the IASB. The differences have no impact on the group's
consolidated financial statements for the periods presented.
The financial information presented herein has been prepared in
accordance with the accounting policies expected to be used in
preparing BP Annual Report and Form 20-F 2019, which are the same
as those used in preparing BP Annual Report and Form 20-F 2018 with
the exception of the adoption of IFRS 16 'Leases' from 1 January
2019.
Changes in significant accounting estimates
In BP Annual Report and Form 20-F 2018 we disclosed significant
estimates relating to provisions and the recoverability of asset
carrying values. During the fourth quarter 2019 certain key
assumptions used in these estimates were reviewed.
Provisions discount rate
The nominal discount rate applied to provisions was revised to
2.5% (31 December 2018 3.0%). The principal impact of this rate
reduction was a $1.4 billion increase in the decommissioning
provision with a similar increase in the carrying amount of
property, plant and equipment.
Impairment testing assumptions
The price assumptions used in value-in-use impairment testing
were reviewed. The long-term assumption for Brent oil used in the
fourth quarter is derived from $70 per barrel in 2015 prices (31
December 2018 $75 per barrel). The long-term natural gas price
assumption for Henry Hub used in the fourth quarter is unchanged
from 2018. Short-term oil and gas price assumptions were updated to
reflect recent market rates and a gradual transition to the
long-term assumptions over 5 years for Brent oil (2018 5 years),
and 12 years for Henry Hub gas (2018 5 years).
The pre-tax discount rate applied to value-in-use impairment
testing during the fourth quarter typically ranged from 7% to 13%
depending on the applicable tax rate in the geographic location of
the relevant cash-generating unit (31 December 2018 9%). The
additional premium applied to higher-risk countries ranged from 1%
to 4% (31 December 2018 2%).
The revision to the group's oil and gas price assumptions and
impairment discount rates did not result in the recognition of any
significant impairment charges.
Further details will be provided in BP Annual Report and Form
20-F 2019, which is expected to be published in March 2020.
New International Financial Reporting Standards adopted
BP adopted IFRS 16 'Leases', which replaced IAS 17 'Leases' and
IFRIC 4 'Determining whether an arrangement contains a lease', with
effect from 1 January 2019. Further information is included in BP
Annual Report and Form 20-F 2018 - Financial statements - Note 1
Significant accounting policies, judgements, estimates and
assumptions - Impact of new International Financial Reporting
Standards.
IFRS 16 provides a new model for lessee accounting in which the
majority of leases are accounted for by the recognition on the
balance sheet of a right-of-use asset and a lease liability.
Agreements that convey the right to control the use of an
identified asset for a period of time in exchange for consideration
are accounted for as leases. A lease liability is recognized at the
present value of future lease payments over the reasonably certain
lease term. Variable lease payments that do not depend on an index
or a rate are not included in the lease liability. The right-of-use
asset is recognized at a value equivalent to the initial
measurement of the lease liability adjusted for lease prepayments,
lease incentives, initial direct costs and any restoration
obligations. The subsequent amortization of the right-of-use asset
and the interest expense related to the lease liability are
recognized in the income statement over the lease term.
The group recognizes the full lease liability, rather than its
working interest share, for leases entered into on behalf of a
joint operation if the group has the primary responsibility for
making the lease payments. If the right-of-use asset is jointly
controlled by the group and the other joint operators, a receivable
is recognized for the share of the asset transferred to the other
joint operators.
BP elected to apply the modified retrospective transition
approach in which the cumulative effect of initial application is
recognized in opening retained earnings at the date of initial
application with no restatement of comparative periods' financial
information. Comparative information in the group balance sheet and
group cash flow statement has, however, been re-presented to align
with current year presentation, showing lease liabilities and lease
liability payments as separate line items.
Top of page 18
Note 1. Basis of preparation (continued)
These were previously included within the finance debt and
repayments of long-term financing line items respectively. Amounts
presented in these line items for the comparative periods relate to
leases accounted for as finance leases under IAS 17.
IFRS 16 introduces a revised definition of a lease. As permitted
by the standard, BP elected not to reassess the existing population
of leases under the new definition and will only apply the new
definition for the assessment of contracts entered into after the
transition date. On transition the standard permits, on a
lease-by-lease basis, the right-of-use asset to be measured either
at an amount equal to the lease liability (as adjusted for prepaid
or accrued lease payments), or on a historical basis as if the
standard had always applied. BP elected to use the historical asset
measurement for its more material leases and used the asset equals
liability approach for the remainder of the population. BP also
elected to adjust the carrying amounts of the right-of-use assets
as at 1 January 2019 for onerous lease provisions that had been
recognized on the group balance sheet as at 31 December 2018,
rather than performing impairment tests on transition.
The effect of the adoption of IFRS 16 on the group balance sheet
is set out below.
Adjustment
31 December 1 January on adoption
$ million 2018 2019 of IFRS 16
=========== ========= =============
Non-current assets
Property, plant and equipment 135,261 143,950 8,689
Trade and other receivables 1,834 2,159 325
Prepayments 1,179 849 (330)
Deferred tax assets 3,706 3,736 30
Current assets
Trade and other receivables 24,478 24,673 195
Prepayments 963 872 (91)
Current liabilities
Trade and other payables 46,265 46,209 (56)
Accruals 4,626 4,578 (48)
Lease liabilities 44 2,196 2,152
Finance debt 9,329 9,329 -
Provisions 2,564 2,547 (17)
Non-current liabilities
Other payables 13,830 14,013 183
Accruals 575 548 (27)
Lease liabilities 623 7,704 7,081
Finance debt 55,803 55,803 -
Deferred tax liabilities 9,812 9,767 (45)
Provisions 17,732 17,657 (75)
================================== =========== ========= ==========
Net assets 101,548 101,218 (330)
================================== =========== ========= ==========
Equity
BP shareholders' equity 99,444 99,115 (329)
Non-controlling interests 2,104 2,103 (1)
================================== =========== ========= ==========
101,548 101,218 (330)
=========== ========= ==========
The presentation and timing of recognition of charges in the
income statement has changed following the adoption of IFRS 16. The
operating lease expense previously reported under IAS 17, typically
on a straight-line basis, has been replaced by depreciation of the
right-of-use asset and interest on the lease liability. In the cash
flow statement payments are now presented as financing cash flows,
representing payments of principal, and as operating cash flows,
representing payments of interest. Variable lease payments that do
not depend on an index or rate are not included in the lease
liability and will continue to be presented as operating cash
flows. In prior years, operating lease payments were principally
presented within cash flows from operating activities.
Top of page 19
Note 1. Basis of preparation (continued)
The following table provides a reconciliation of the group's
operating lease commitments as at 31 December 2018 to the total
lease liability recognized on the group balance sheet in accordance
with IFRS 16 as at 1 January 2019.
$ million
=========
Operating lease commitments at 31 December 2018 11,979
Leases not yet commenced (1,372)
Leases below materiality threshold (86)
Short-term leases (91)
Effect of discounting (1,512)
Impact on leases in joint operations 836
Variable lease payments (58)
Redetermination of lease term (252)
Other (22)
Total additional lease liabilities recognized on adoption
of IFRS 16 9,422
============================================================ ======
Finance lease obligations at 31 December 2018 667
Adjustment for finance leases in joint operations (189)
============================================================ ======
Total lease liabilities at 1 January 2019 9,900
============================================================ ======
An explanation of each reconciling item shown in the table above
is provided in BP Annual Report and Form 20-F 2018 - Financial
statements - Note 1 Significant accounting policies, judgements,
estimates and assumptions - Impact of new International Financial
Reporting Standards.
The total adjustments to the group's lease liabilities at 1
January 2019 are reconciled as follows:
$ million
========
Total additional lease liabilities recognized on adoption
of IFRS 16 9,422
Less: adjustment for finance leases in joint operations (189)
Total adjustment to lease liabilities 9,233
============================================================ =====
Of which - current 2,152
* non-current 7,081
============================================================ =====
IFRIC agenda decision on IFRS 9 'Financial Instruments'
In March 2019, the IFRS Interpretations Committee (IFRIC) issued
an agenda decision on the application of IFRS 9 to the physical
settlement of contracts to buy or sell a non-financial item. The
agenda decision concluded that where a derivative contract is
settled by the physical receipt (or delivery) of the commodity, the
transaction price reported for the purchase (or sale) should
include the fair value of the derivative instrument in addition to
the cash payable (or receivable). BP is currently assessing the
impact of the agenda decision but expects it to have no effect on
reported earnings. Further details will be provided in BP Annual
Report and Form 20-F 2019.
Note 2. Non-current assets held for sale
The carrying amount of assets classified as held for sale at 31
December 2019 is $7,465 million, with associated liabilities of
$1,393 million. These principally relate to two material disposal
transactions which have been classified as held for sale in the
group balance sheet.
On 27 August 2019, BP announced that it had agreed to sell all
its Alaska operations and interests to Hilcorp Energy for up to
$5.6 billion, subject to customary closing adjustments, of which
$1.6 billion is contingent on future cash flows. The sale will
include BP's entire upstream and midstream business in the state,
including BP Exploration (Alaska) Inc., which owns all of BP's
upstream oil and gas interests in Alaska, and BP Pipelines (Alaska)
Inc.'s 49% interest in the Trans Alaska Pipeline System (TAPS). BP
will retain decommissioning liability relating to TAPS, which will
be partially offset by a 30% cost reimbursement from Hilcorp. The
deal, which is subject to governmental authorizations, is expected
to complete during 2020. Assets of $6,518 million and associated
liabilities of $969 million relating to this transaction are
classified as held for sale at 31 December 2019.
In November 2019, BP agreed to sell its interests in the San
Juan basin in Colorado and New Mexico to IKAV. The deal is expected
to complete during the first half of 2020. Assets and associated
liabilities relating to this transaction are classified as held for
sale at 31 December 2019.
Top of page 20
Note 3. Impairment and losses on sale of businesses and fixed
assets
Included within the line item in the income statement for
impairment and losses on sale of businesses and fixed assets is a
net impairment charge for the fourth quarter of $2,543 million. The
net charge for the year is $6,716 million.
The impairment charges, which are substantially all reported in
the Upstream segment, principally relate to BP's ongoing divestment
programme. They include $1,986 million in the fourth quarter and
$4,703 million in the year relating to heritage BPX Energy assets;
$258 million in the fourth quarter and the $1,264 million in the
year relating to the group's interests in its Alaska business; and
$244 million in the year relating to the group's interests in Gulf
of Suez oil concessions in Egypt. The impairment charges were
determined based on the assets' fair value less costs of disposal
referenced to expected sales proceeds. See Note 1 and Note 2 for
further information.
Also included is an $877 million loss on disposal relating to
the reclassification of accumulated foreign exchange losses from
reserves which arose as a result of the contribution of our
Brazilian biofuels business to BP Bunge Bioenergia.
Note 4. Analysis of replacement cost profit (loss) before
interest and tax and reconciliation to profit (loss) before
taxation
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
Upstream 614 (1,050) 4,168 4,917 14,328
Downstream 1,433 2,016 2,138 6,502 6,940
Rosneft 503 802 400 2,316 2,221
Other businesses and corporate (1,432) (412) (1,110) (2,771) (3,521)
1,118 1,356 5,596 10,964 19,968
Consolidation adjustment - UPII* 24 30 142 75 211
RC profit (loss) before interest and tax* 1,142 1,386 5,738 11,039 20,179
Inventory holding gains (losses)*
Upstream - - (12) (8) (6)
Downstream (21) (433) (2,470) 685 (862)
Rosneft (net of tax) 31 (79) (92) (10) 67
Profit (loss) before interest and tax 1,152 874 3,164 11,706 19,378
Finance costs 886 883 742 3,489 2,528
Net finance expense relating to pensions
and other post-retirement benefits 17 16 34 63 127
Profit (loss) before taxation 249 (25) 2,388 8,154 16,723
============================================ ====== ====== ====== ====== ======
RC profit (loss) before interest and tax*
US (1,603) (2,425) 1,487 (2,759) 3,041
Non-US 2,745 3,811 4,251 13,798 17,138
1,142 1,386 5,738 11,039 20,179
====== ====== ====== ====== ======
Top of page 21
Note 5. Sales and other operating revenues
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
============================================ ======= ======= ======= ======= =========
By segment
Upstream 13,955 12,396 15,050 54,501 56,399
Downstream 64,251 61,834 67,733 250,897 270,689
Other businesses and corporate 538 461 536 1,788 1,678
78,744 74,691 83,319 307,186 328,766
======= ====== ====== ======= =======
Less: sales and other operating revenues
between segments
Upstream 6,823 6,406 8,669 27,034 28,565
Downstream 384 (59) (1,232) 973 574
Other businesses and corporate 428 53 205 782 871
7,635 6,400 7,642 28,789 30,010
======= ====== ====== ======= =======
Third party sales and other operating
revenues
Upstream 7,132 5,990 6,381 27,467 27,834
Downstream 63,867 61,893 68,965 249,924 270,115
Other businesses and corporate 110 408 331 1,006 807
Total sales and other operating revenues 71,109 68,291 75,677 278,397 298,756
============================================= ======= ====== ====== ======= =======
By geographical area
US 24,148 23,413 26,890 95,495 104,759
Non-US 54,450 51,030 53,540 208,031 219,681
============================================= ======= ====== ====== ======= =======
78,598 74,443 80,430 303,526 324,440
Less: sales and other operating revenues
between areas 7,489 6,152 4,753 25,129 25,684
71,109 68,291 75,677 278,397 298,756
======= ====== ====== ======= =======
Revenues from contracts with customers
Sales and other operating revenues include
the following in relation to revenues
from contracts with customers:
Crude oil 16,276 14,502 15,448 62,130 65,276
Oil products 46,279 44,667 47,847 180,528 195,466
Natural gas, LNG and NGLs 5,086 4,465 5,862 20,167 21,745
Non-oil products and other revenues from
contracts with customers 3,280 3,300 3,618 13,254 13,768
70,921 66,934 72,775 276,079 296,255
======= ====== ====== ======= =======
Note 6. Depreciation, depletion and amortization
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
================================ ======= ======= ======= ====== ========
Upstream
US 1,150 1,121 1,137 4,672 4,211
Non-US 2,371 2,295 2,242 9,560 8,907
3,521 3,416 3,379 14,232 13,118
======= ======= ======= ====== ======
Downstream
US 343 336 240 1,335 900
Non-US 417 394 298 1,586 1,177
760 730 538 2,921 2,077
======= ======= ======= ====== ======
Other businesses and corporate
US 14 14 11 55 59
Non-US 139 137 59 572 203
================================= ======= ======= ======= ====== ======
153 151 70 627 262
Total group 4,434 4,297 3,987 17,780 15,457
================================= ======= ======= ======= ====== ======
Top of page 22
Note 7. Production and similar taxes
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ===== =======
US 89 66 99 315 369
Non-US 323 274 87 1,232 1,167
412 340 186 1,547 1,536
======= ======= ======= ===== =====
Note 8. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated
by dividing the profit (loss) for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. During the quarter the
company repurchased for cancellation 184 million ordinary shares
for a total cost of $1,171 million, including transaction costs of
$6 million, as part of the share buyback programme announced on 31
October 2017. This brings the total number of shares repurchased in
the year to 235 million for a total cost of $1,511 million,
including transaction costs of $8 million. A further 120 million of
shares have been repurchased in January 2020 at a total cost of
$776 million. The number of shares in issue is reduced when shares
are repurchased.
The calculation of EpS is performed separately for each discrete
quarterly period, and for the year-to-date period. As a result, the
sum of the discrete quarterly EpS amounts in any particular
year-to-date period may not be equal to the EpS amount for the
year-to-date period.
For the diluted EpS calculation the weighted average number of
shares outstanding during the period is adjusted for the number of
shares that are potentially issuable in connection with employee
share-based payment plans using the treasury stock method.
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
========== =========== ========== ========== ============
Results for the period
Profit (loss) for the period attributable
to BP shareholders 19 (749) 766 4,026 9,383
Less: preference dividend - - - 1 1
Profit (loss) attributable to
BP ordinary shareholders 19 (749) 766 4,025 9,382
=========================================== ========== ========== ========== ========== ==========
Number of shares (thousand)(a)(b)
Basic weighted average number
of shares outstanding 20,254,234 20,371,728 20,007,781 20,284,859 19,970,215
ADS equivalent 3,375,705 3,395,288 3,334,630 3,380,809 3,328,369
=========================================== ========== ========== ========== ========== ==========
Weighted average number of shares
outstanding used to calculate
diluted earnings per share 20,351,808 20,371,728 20,133,087 20,399,670 20,102,493
ADS equivalent 3,391,968 3,395,288 3,355,514 3,399,945 3,350,415
=========================================== ========== ========== ========== ========== ==========
Shares in issue at period-end 20,241,170 20,417,220 20,101,658 20,241,170 20,101,658
ADS equivalent 3,373,528 3,402,870 3,350,276 3,373,528 3,350,276
=========================================== ========== ========== ========== ========== ==========
(a) Excludes treasury shares and includes certain shares that
will be issued in the future under employee share-based payment
plans.
(b) If the inclusion of potentially issuable shares would
decrease loss per share, the potentially issuable shares are
excluded from the weighted average number of shares outstanding
used to calculate diluted earnings per share.
Top of page 23
Note 9. Dividends
Dividends payable
BP today announced an interim dividend of 10.50 cents per
ordinary share which is expected to be paid on 27 March 2020 to
ordinary shareholders and American Depositary Share (ADS) holders
on the register on 14 February 2020. The corresponding amount in
sterling is due to be announced on 16 March 2020, calculated based
on the average of the market exchange rates for the four dealing
days commencing on 10 March 2020. Holders of ADSs are expected to
receive $0.630 per ADS (less applicable fees). The board has
decided not to offer a scrip dividend alternative in respect of the
fourth quarter 2019 dividend. Ordinary shareholders and ADS holders
(subject to certain exceptions) will be able to participate in a
dividend reinvestment programme. Details of the fourth quarter
dividend and timetable are available at bp.com/dividends and
further details of the dividend reinvestment programmes are
available at bp.com/drip.
Fourth Third Fourth
quarter quarter quarter Year Year
2019 2019 2018 2019 2018
======= ======= ======= ====== ========
Dividends paid per ordinary share
cents 10.250 10.250 10.250 41.000 40.500
pence 7.825 8.348 8.025 31.977 30.568
Dividends paid per ADS (cents) 61.50 61.50 61.50 246.00 243.00
=======
Scrip dividends
Number of shares issued (millions) - 72.5 47.5 208.9 195.3
Value of shares issued ($ million) - 440 322 1,387 1,381
===================================== ======= ======= ======= ====== ======
Note 10. Net debt and net debt including leases
Net debt* Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
========== ========== ========== ========== ============
Finance debt(a) 67,724 65,867 65,132 67,724 65,132
Fair value (asset) liability of hedges
related to finance debt(b) 190 319 813 190 813
67,914 66,186 65,945 67,914 65,945
Less: cash and cash equivalents 22,472 19,692 22,468 22,472 22,468
Net debt 45,442 46,494 43,477 45,442 43,477
========================================= ========== ========== ========== ========== ==========
Total equity 100,708 100,015 101,548 100,708 101,548
Gearing* 31.1% 31.7% 30.0% 31.1% 30.0%
========================================= ========== ========== ========== ========== ============
(a) The fair value of finance debt at 31 December 2019 was
$69,376 million (31 December 2018 $65,366 million).
(b) Derivative financial instruments entered into for the
purpose of managing interest rate and foreign currency exchange
risk associated with net debt with a fair value liability position
of $601 million (third quarter 2019 liability of $682 million and
fourth quarter 2018 liability of $827 million) are not included in
the calculation of net debt shown above as hedge accounting is not
applied for these instruments.
As a result of the adoption of IFRS 16 'Leases' from 1 January
2019, leases that were previously classified as finance leases
under IAS 17 are now presented as 'Lease liabilities' on the group
balance sheet and, therefore, do not form part of finance debt.
Comparative information for finance debt (previously termed 'gross
debt'), net debt and gearing (previously termed 'net debt ratio')
have been amended to be on a consistent basis with amounts
presented for 2019. The relevant amount for finance lease
liabilities that has been excluded from comparative information for
the fourth quarter and full year 2018 is $667 million. The
previously disclosed amount for finance debt for the fourth quarter
and full year 2018 was $65,799 million. The previously disclosed
amount for net debt for the fourth quarter and full year 2018 was
$44,144 million. The previously disclosed gearing for the fourth
quarter and full year 2018 was 30.3%.
Net debt including leases* Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
============================================= ======= ======= ======= ======= ========
Net debt 45,442 46,494 43,477 45,442 43,477
Lease liabilities 9,722 9,639 667 9,722 667
Net partner (receivable) payable for leases
entered into on behalf of joint operations (158) (197) - (158) -
Net debt including leases 55,006 55,936 44,144 55,006 44,144
============================================== ====== ====== ======= ====== ======
Top of page 24
Note 11. Inventory valuation
A provision of $290 million was held against hydrocarbon
inventories at 31 December 2019 ($369 million at 30 September 2019
and $604 million at 31 December 2018) to write them down to their
net realizable value. The net movement credited to the income
statement during the fourth quarter 2019 was $80 million (third
quarter 2019 was a charge of $131 million and fourth quarter 2018
was a charge of $562 million).
Note 12. Statutory accounts
The financial information shown in this publication, which was
approved by the Board of Directors on 3 February 2020, is unaudited
and does not constitute statutory financial statements. Audited
financial information will be published in BP Annual Report and
Form 20-F 2019. BP Annual Report and Form 20-F 2018 has been filed
with the Registrar of Companies in England and Wales. The report of
the auditor on those accounts was unqualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain a
statement under section 498(2) or section 498(3) of the UK
Companies Act 2006.
Top of page 25
Additional information
Effects on the financial statements of the adoption of IFRS 16
'Leases'
BP adopted IFRS 16 'Leases' with effect from 1 January 2019. The
principal effects of the adoption are described below. BP elected
to apply the modified retrospective transition approach in which
the cumulative effect of initial application is recognized in
opening retained earnings at the date of initial application with
no restatement of comparative periods' financial information. For
further information of the effects of adoption see Financial
statements - Note 1 and Note 10.
Balance sheet
As a result of the adoption of IFRS 16, $9.0 billion of
right-of-use assets and $9.7 billion of lease liabilities have been
included in the group balance sheet as at 31 December 2019. Lease
liabilities are now presented separately on the group balance sheet
and do not form part of finance debt. Comparative information for
finance debt in the group balance sheet has been re-presented to
align with current year presentation.
31 December 31 December
$ billion 2019 2018
====================================== =========== =============
Property, plant and equipment(a) (b) 9.0 0.5
Lease liabilities(a) 9.7 0.7
Finance debt 67.7 65.1
======================================= =========== ===========
(a) Comparative information represents finance leases accounted for under IAS 17.
(b) Net additions to right-of-use assets for the fourth quarter
and full year 2019 were $0.5 billion and $2.5 billion
respectively.
Income statement
The presentation and timing of recognition of charges in the
income statement has changed following the adoption of IFRS 16. The
operating lease expense reported under the previous lease
accounting standard, IAS 17, typically on a straight-line basis,
has been replaced by depreciation of the right-of-use asset and
interest on the lease liability. Depreciation of right-of-use
assets for the fourth quarter and full year 2019 was $0.5 billion
and $1.9 billion respectively. Interest on the group's lease
liabilities for the fourth quarter and full year 2019 was $0.1
billion and $0.4 billion respectively. Operating lease expenses
were previously principally included within Production and
manufacturing expenses and Distribution and administration expenses
in the income statement. It is estimated that the resulting benefit
to these line items is largely offset, in total, by an equivalent
amount in depreciation and interest charges. Therefore, there has
been no material overall effect on group profit measures in the
fourth quarter and full year 2019.
Cash flow statement
Lease payments are now presented as financing cash flows,
representing payments of principal, and as operating cash flows,
representing payments of interest. In prior years, operating lease
payments were presented as operating cash flows and capital
expenditure. Of the $0.6 billion of lease payments included within
financing activities for the fourth quarter of 2019, it is
estimated that $0.5 billion would have been reported as operating
cash flows and $0.1 billion would have been reported as capital
expenditure cash flows, ignoring the effects of IFRS 16. Of the
$2.4 billion of lease payments included within financing activities
for the full year 2019, it is estimated that $2.0 billion would
have been reported as operating cash flows and $0.4 billion would
have been reported as capital expenditure cash flows, ignoring the
effects of IFRS 16.
Fourth Third Fourth
quarter quarter quarter Year Year
$ billion 2019 2019 2018 2019 2018
============================= ======= ======= ======= ===== ======
Financing activities
Lease liability payments(a) (0.6) (0.6) - (2.4) -
============================== ====== ====== ======= ==== ====
(a) Comparative information represents finance leases accounted for under IAS 17.
Top of page 26
Capital expenditure*
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ====== ========
Capital expenditure on a cash basis
Organic capital expenditure* 3,958 3,946 4,402 15,238 15,140
Inorganic capital expenditure*(a) 151 77 8,494 4,183 9,948
4,109 4,023 12,896 19,421 25,088
======= ======= ======= ====== ======
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ====== ========
Organic capital expenditure by segment
Upstream
US 1,029 1,036 1,048 4,019 3,482
Non-US 2,029 2,110 2,419 7,885 8,545
3,058 3,146 3,467 11,904 12,027
======= ======= ======= ====== ======
Downstream
US 258 197 237 913 877
Non-US 522 558 562 2,084 1,904
780 755 799 2,997 2,781
======= ======= ======= ====== ======
Other businesses and corporate
US 15 8 34 47 54
Non-US 105 37 102 290 278
120 45 136 337 332
3,958 3,946 4,402 15,238 15,140
======= ======= ======= ====== ======
Organic capital expenditure by geographical
area
US 1,302 1,241 1,319 4,979 4,413
Non-US 2,656 2,705 3,083 10,259 10,727
3,958 3,946 4,402 15,238 15,140
======= ======= ======= ====== ======
(a) On 31 October 2018, BP acquired from BHP Billiton Petroleum
(North America) Inc. 100% of the issued share capital of Petrohawk
Energy Corporation, a wholly owned subsidiary of BHP that holds a
portfolio of unconventional onshore US oil and gas assets. The
entire consideration payable of $10,268 million, after customary
closing adjustments, was paid in instalments between July 2018 and
April 2019. The amounts presented as inorganic capital expenditure
include $6,263 million for the fourth quarter 2018, $3,480 million
for the full year 2019 and $6,788 million for the full year 2018
relating to this transaction. Fourth quarter and full year 2018
include $1,739 million relating to the purchase of an additional
16.5% interest in the Clair field west of Shetland in the North
Sea, as part of the agreements with Conoco-Phillips in which
Conoco-Philips simultaneously purchased BP's entire 39.2% interest
in the Greater Kuparuk Area on the North Slope of Alaska. Full year
2019 and 2018 also include amounts relating to the 25-year
extension to our ACG production-sharing agreement* in
Azerbaijan.
Top of page 27
Non-operating items*
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018(a) 2019 2018(a)
======= ======= ======= ======= =========
Upstream
Impairment and gain (loss) on sale of
businesses and fixed assets(b) (2,680) (3,406) 34 (6,893) (90)
Environmental and other provisions (32) - (35) (32) (35)
Restructuring, integration and rationalization
costs (13) (24) (53) (89) (131)
Fair value gain (loss) on embedded derivatives - - - - 17
Other(c) 2 (24) 190 67 56
(2,723) (3,454) 136 (6,947) (183)
====== ====== ====== ====== ======
Downstream
Impairment and gain (loss) on sale of
businesses and fixed assets (16) (9) (20) (72) (54)
Environmental and other provisions (77) (1) (83) (78) (83)
Restructuring, integration and rationalization
costs 71 (4) (279) 85 (405)
Fair value gain (loss) on embedded derivatives - - - - -
Other (6) - (19) (12) (174)
(28) (14) (401) (77) (716)
====== ====== ====== ====== ======
Rosneft
Impairment and gain (loss) on sale of
businesses and fixed assets 91 - (31) (103) (95)
Environmental and other provisions - - - - -
Restructuring, integration and rationalization
costs - - - - -
Fair value gain (loss) on embedded derivatives - - - - -
Other - - - - -
91 - (31) (103) (95)
====== ====== ====== ====== ======
Other businesses and corporate
Impairment and gain (loss) on sale of
businesses and fixed assets(d) (913) - (6) (917) (260)
Environmental and other provisions(e) (203) - (575) (231) (640)
Restructuring, integration and rationalization
costs (1) - (112) 6 (190)
Fair value gain (loss) on embedded derivatives - - - - -
Gulf of Mexico oil spill (63) (84) (67) (319) (714)
Other (2) (6) (6) (30) (159)
(1,182) (90) (766) (1,491) (1,963)
====== ====== ====== ====== ======
Total before interest and taxation (3,842) (3,558) (1,062) (8,618) (2,957)
Finance costs(f) (122) (145) (122) (511) (479)
Total before taxation (3,964) (3,703) (1,184) (9,129) (3,436)
Taxation credit (charge) on non-operating
items 822 772 (2) 1,943 631
Total after taxation for period (3,142) (2,931) (1,186) (7,186) (2,805)
================================================= ====== ====== ====== ====== ======
(a) Amounts reported as restructuring, integration and
rationalization costs relate to the group's restructuring
programme, originally announced in 2014, which was completed in
fourth quarter 2018.
(b) Fourth quarter and full year 2019 include impairment charges
of $2,506 million and $6,621 million respectively, principally
resulting from the announcements to dispose of certain assets in
the US and Egypt. See Note 3 for further information. Fourth
quarter and full year 2018 include impairment reversals for assets
in the North Sea and Angola.
(c) Full year 2018 includes the write-off of $124 million in
relation to the value ascribed to certain licences in the deepwater
Gulf of Mexico as part of the accounting for the acquisition of
upstream assets from Devon Energy in 2011.
(d) Fourth quarter and full year 2019 include $877 million
relating to the reclassification of accumulated foreign exchange
losses from reserves to the income statement upon the contribution
of our Brazilian biofuels business to BP Bunge Bioenergia.
(e) Fourth quarter and full year 2019 and 2018 primarily
reflects charges due to the annual update of environmental
provisions, including asbestos-related provisions for past
operations, together with updates of non-Gulf of Mexico oil spill
related legal provisions.
(f) Relates to the unwinding of discounting effects relating to
Gulf of Mexico oil spill payables.
Top of page 28
Non-GAAP information on fair value accounting effects
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ===== ======
Favourable (adverse) impact relative to
management's measure of performance
Upstream 659 265 146 706 (39)
Downstream 23 147 370 160 95
682 412 516 866 56
Taxation credit (charge) (111) (86) (90) (155) 12
571 326 426 711 68
====== ====== ====== ==== ===
BP uses derivative instruments to manage the economic exposure
relating to inventories above normal operating requirements of
crude oil, natural gas and petroleum products. Under IFRS, these
inventories are recorded at historical cost. The related derivative
instruments, however, are required to be recorded at fair value
with gains and losses recognized in the income statement. This is
because hedge accounting is either not permitted or not followed,
principally due to the impracticality of effectiveness-testing
requirements. Therefore, measurement differences in relation to
recognition of gains and losses occur. Gains and losses on these
inventories are not recognized until the commodity is sold in a
subsequent accounting period. Gains and losses on the related
derivative commodity contracts are recognized in the income
statement, from the time the derivative commodity contract is
entered into, on a fair value basis using forward prices consistent
with the contract maturity.
BP enters into physical commodity contracts to meet certain
business requirements, such as the purchase of crude for a refinery
or the sale of BP's gas production. Under IFRS these physical
contracts are treated as derivatives and are required to be fair
valued when they are managed as part of a larger portfolio of
similar transactions. Gains and losses arising are recognized in
the income statement from the time the derivative commodity
contract is entered into.
IFRS require that inventory held for trading is recorded at its
fair value using period-end spot prices, whereas any related
derivative commodity instruments are required to be recorded at
values based on forward prices consistent with the contract
maturity. Depending on market conditions, these forward prices can
be either higher or lower than spot prices, resulting in
measurement differences.
BP enters into contracts for pipelines and other transportation,
storage capacity, oil and gas processing and liquefied natural gas
(LNG) that, under IFRS, are recorded on an accruals basis. These
contracts are risk-managed using a variety of derivative
instruments that are fair valued under IFRS. This results in
measurement differences in relation to recognition of gains and
losses.
The way that BP manages the economic exposures described above,
and measures performance internally, differs from the way these
activities are measured under IFRS. BP calculates this difference
for consolidated entities by comparing the IFRS result with
management's internal measure of performance. Under management's
internal measure of performance the inventory, transportation and
capacity contracts in question are valued based on fair value using
relevant forward prices prevailing at the end of the period. The
fair values of derivative instruments used to risk manage certain
oil, gas and other contracts, are deferred to match with the
underlying exposure and the commodity contracts for business
requirements are accounted for on an accruals basis. We believe
that disclosing management's estimate of this difference provides
useful information for investors because it enables investors to
see the economic effect of these activities as a whole.
In addition, fair value accounting effects include changes in
the fair value of the near-term portions of LNG contracts that fall
within BP's risk management framework. LNG contracts are not
considered derivatives, because there is insufficient market
liquidity, and they are therefore accrual accounted under IFRS.
However, oil and natural gas derivative financial instruments (used
to risk manage the near-term portions of the LNG contracts) are
fair valued under IFRS. The fair value accounting effect reduces
timing differences between recognition of the derivative financial
instruments used to risk manage the LNG contracts and the
recognition of the LNG contracts themselves, which therefore gives
a better representation of performance in each period.
Top of page 29
Non-GAAP information on fair value accounting effects
(continued)
The impacts of fair value accounting effects, relative to
management's internal measure of performance, are shown in the
table above. A reconciliation to GAAP information is set out
below.
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ====== =========
Upstream
Replacement cost profit (loss) before
interest and tax adjusted for fair value
accounting effects (45) (1,315) 4,022 4,211 14,367
Impact of fair value accounting effects 659 265 146 706 (39)
====== ======
Replacement cost profit (loss) before
interest and tax 614 (1,050) 4,168 4,917 14,328
============================================== ====== ====== ======= ====== ======
Downstream
Replacement cost profit (loss) before
interest and tax adjusted for fair value
accounting effects 1,410 1,869 1,768 6,342 6,845
Impact of fair value accounting effects 23 147 370 160 95
Replacement cost profit (loss) before
interest and tax 1,433 2,016 2,138 6,502 6,940
============================================== ====== ====== ======= ====== ======
Total group
Profit (loss) before interest and tax
adjusted for fair value accounting effects 470 462 2,648 10,840 19,322
Impact of fair value accounting effects 682 412 516 866 56
Profit (loss) before interest and tax 1,152 874 3,164 11,706 19,378
============================================== ====== ====== ======= ====== ======
Readily marketable inventory* (RMI)
31 December 31 December
$ million 2019 2018
=========== =============
RMI at fair value* 6,837 4,202
Paid-up RMI* 3,217 1,641
===================== =========== ===========
Readily marketable inventory (RMI) is oil and oil products
inventory held and price risk-managed by BP's integrated supply and
trading function (IST) which could be sold to generate funds if
required. Paid-up RMI is RMI that BP has paid for.
We believe that disclosing the amounts of RMI and paid-up RMI is
useful to investors as it enables them to better understand and
evaluate the group's inventories and liquidity position by enabling
them to see the level of discretionary inventory held by IST and to
see builds or releases of liquid trading inventory.
See the Glossary on page 32 for a more detailed definition of
RMI. RMI at fair value, paid-up RMI and unpaid RMI are non-GAAP
measures. A reconciliation of total inventory as reported on the
group balance sheet to paid-up RMI is provided below.
31 December 31 December
$ million 2019 2018
=========== =============
Reconciliation of total inventory to paid-up RMI
Inventories as reported on the group balance sheet
under IFRS 20,880 17,988
Less: (a) inventories that are not oil and oil
products and (b) oil and oil product inventories
that are not risk-managed by IST (14,280) (14,066)
6,600 3,922
Plus: difference between RMI at fair value and
RMI on an IFRS basis 237 280
RMI at fair value 6,837 4,202
Less: unpaid RMI* at fair value (3,620) (2,561)
Paid-up RMI 3,217 1,641
===================================================== ========== ==========
Top of page 30
Gulf of Mexico oil spill
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ====== ========
Net cash provided by operating activities
as per condensed group cash flow statement 7,603 6,056 6,829 25,770 22,873
Exclude net cash from operating activities
relating to the Gulf of Mexico oil spill
on a post-tax basis (42) 409 272 2,429 3,218
====== ====== ======
Operating cash flow, excluding Gulf of Mexico
oil spill payments* 7,561 6,465 7,101 28,199 26,091
================================================ ====== ======= ======= ====== ======
Net cash from operating activities relating to the Gulf of
Mexico oil spill on a pre-tax basis amounted to an outflow of $125
million and $2,694 million in the fourth quarter and full year of
2019 respectively. For the same periods in 2018, the amount was an
outflow of $273 million and $3,531 million respectively. Net cash
outflows relating to the Gulf of Mexico oil spill in 2019 and 2018
include payments made under the 2016 consent decree and settlement
agreement with the United States and the five Gulf coast states.
Cash outflows in 2018 also include the final payment made under the
2012 agreement with the US government to resolve all federal
criminal claims arising from the incident.
31 December 31 December
$ million 2019 2018
=========== =============
Trade and other payables (12,480) (14,201)
Provisions (189) (345)
Gulf of Mexico oil spill payables and provisions (12,669) (14,546)
=================================================== ========== ==========
Of which - current (1,800) (2,612)
Deferred tax asset 5,526 5,562
=================================================== ========== ==========
The provision reflects the latest estimate for the remaining
costs associated with the Gulf of Mexico oil spill. The amounts
ultimately payable may differ from the amount provided and the
timing of payments is uncertain. Further information relating to
the Gulf of Mexico oil spill, including information on the nature
and expected timing of payments relating to provisions and other
payables, is provided in BP Annual Report and Form 20-F 2018 -
Financial statements - Note 2 and pages 296 to 298 of Legal
proceedings.
Working capital* reconciliation
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2019 2019 2018 2019 2018
======= ======= ======= ======= =========
Movements in inventories and other current
and non-current assets and liabilities
as per condensed group cash flow statement (306) 141 778 (2,918) (4,763)
Adjustments to exclude movements in inventories
and other current and non-current assets
and liabilities for the Gulf of Mexico
oil spill 91 413 238 2,586 3,057
Adjusted for Inventory holding gains (losses)*
(Note 4)
Upstream - - (12) (8) (6)
Downstream (21) (433) (2,470) 685 (862)
Working capital release (build) (236) 121 (1,466) 345 (2,574)
================================================== ====== ====== ====== ====== ======
Top of page 31
Realizations* and marker prices
Fourth Third Fourth
quarter quarter quarter Year Year
2019 2019 2018 2019 2018
============================================= ======= ======= ======= ===== =======
Average realizations(a)
Liquids* ($/bbl)
US 49.34 50.46 61.61 51.88 61.72
Europe 63.01 61.90 65.07 63.95 69.20
Rest of World 60.34 59.14 61.42 61.50 66.68
BP Average 55.90 55.68 61.80 57.73 64.98
============================================== ======= ======= ======= ===== =====
Natural gas ($/mcf)
US 1.65 1.72 3.10 1.93 2.43
Europe 4.06 3.03 8.80 4.01 7.71
Rest of World 3.77 3.82 4.77 4.10 4.37
BP Average 3.12 3.11 4.33 3.39 3.92
============================================== ======= ======= ======= ===== =====
Total hydrocarbons* ($/boe)
US 31.84 31.23 42.50 33.30 41.59
Europe 51.91 52.47 61.98 56.87 64.11
Rest of World 37.91 36.82 41.64 39.23 42.65
BP Average 36.42 35.48 42.98 38.00 43.47
============================================== ======= ======= ======= ===== =====
Average oil marker prices ($/bbl)
Brent 63.08 62.00 68.81 64.21 71.31
West Texas Intermediate 56.88 56.40 59.98 57.03 65.20
Western Canadian Select 37.70 43.61 25.31 43.42 38.27
Alaska North Slope 64.32 62.98 69.53 65.00 71.54
Mars 57.85 59.19 64.45 60.84 66.86
Urals (NWE - cif) 60.74 60.82 68.02 62.96 69.89
============================================== ======= ======= ======= ===== =====
Average natural gas marker prices
Henry Hub gas price(b) ($/mmBtu) 2.50 2.23 3.65 2.63 3.09
UK Gas - National Balancing Point (p/therm) 31.77 27.46 65.13 34.70 60.38
============================================== ======= ======= ======= ===== =====
(a) Based on sales of consolidated subsidiaries only - this
excludes equity-accounted entities.
(b) Henry Hub First of Month Index.
Exchange rates
Fourth Third Fourth
quarter quarter quarter Year Year
2019 2019 2018 2019 2018
======= ======= ======= ===== =======
$/GBP average rate for the period 1.29 1.23 1.29 1.28 1.33
$/GBP period-end rate 1.31 1.23 1.27 1.31 1.27
$/EUR average rate for the period 1.11 1.11 1.14 1.12 1.18
$/EUR period-end rate 1.12 1.09 1.14 1.12 1.14
Rouble/$ average rate for the period 63.74 64.64 66.48 64.73 62.73
Rouble/$ period-end rate 61.98 64.32 69.57 61.98 69.57
======================================= ======= ======= ======= ===== =====
Top of page 32
Legal proceedings
For a full discussion of the group's material legal proceedings,
see pages 296-298 of BP Annual Report and Form 20-F 2018, and page
35 of BP p.l.c. Group results second quarter and half-year
2019.
Glossary
Non-GAAP measures are provided for investors because they are
closely tracked by management to evaluate BP's operating
performance and to make financial, strategic and operating
decisions. Non-GAAP measures are sometimes referred to as
alternative performance measures.
Capital expenditure is total cash capital expenditure as stated
in the condensed group cash flow statement.
Consolidation adjustment - UPII is unrealized profit in
inventory arising on inter-segment transactions.
Divestment proceeds are disposal proceeds as per the condensed
group cash flow statement.
Effective tax rate (ETR) on replacement cost (RC) profit or loss
is a non-GAAP measure. The ETR on RC profit or loss is calculated
by dividing taxation on a RC basis by RC profit or loss before tax.
Information on RC profit or loss is provided below. BP believes it
is helpful to disclose the ETR on RC profit or loss because this
measure excludes the impact of price changes on the replacement of
inventories and allows for more meaningful comparisons between
reporting periods. The nearest equivalent measure on an IFRS basis
is the ETR on profit or loss for the period.
Fair value accounting effects are non-GAAP adjustments to our
IFRS profit (loss). They reflect the difference between the way BP
manages the economic exposure and internally measures performance
of certain activities and the way those activities are measured
under IFRS. Further information on fair value accounting effects is
provided on page 28.
Free cash flow is operating cash flow less net cash used in
investing activities and lease liability payments included in
financing activities, as presented in the condensed group cash flow
statement.
Gearing and net debt are non-GAAP measures. Net debt is
calculated as finance debt, as shown in the balance sheet, plus the
fair value of associated derivative financial instruments that are
used to hedge foreign currency exchange and interest rate risks
relating to finance debt, for which hedge accounting is applied,
less cash and cash equivalents. Gearing is defined as the ratio of
net debt to the total of net debt plus total equity. BP believes
these measures provide useful information to investors. Net debt
enables investors to see the economic effect of finance debt,
related hedges and cash and cash equivalents in total. Gearing
enables investors to see how significant net debt is relative to
total equity. The derivatives are reported on the balance sheet
within the headings 'Derivative financial instruments'. The nearest
equivalent GAAP measures on an IFRS basis are finance debt and
finance debt ratio. A reconciliation of finance debt to net debt is
provided on page 23.
We are unable to present reconciliations of forward-looking
information for gearing to finance debt and total equity, because
without unreasonable efforts, we are unable to forecast accurately
certain adjusting items required to present a meaningful comparable
GAAP forward-looking financial measure. These items include fair
value asset (liability) of hedges related to finance debt and cash
and cash equivalents, that are difficult to predict in advance in
order to include in a GAAP estimate.
Hydrocarbons - Liquids and natural gas. Natural gas is converted
to oil equivalent at 5.8 billion cubic feet = 1 million
barrels.
Inorganic capital expenditure is a subset of capital expenditure
and is a non-GAAP measure. Inorganic capital expenditure comprises
consideration in business combinations and certain other
significant investments made by the group. It is reported on a cash
basis. BP believes that this measure provides useful information as
it allows investors to understand how BP's management invests funds
in projects which expand the group's activities through
acquisition. Further information and a reconciliation to GAAP
information is provided on page 26.
Inventory holding gains and losses represent the difference
between the cost of sales calculated using the replacement cost of
inventory and the cost of sales calculated on the first-in
first-out (FIFO) method after adjusting for any changes in
provisions where the net realizable value of the inventory is lower
than its cost. Under the FIFO method, which we use for IFRS
reporting, the cost of inventory charged to the income statement is
based on its historical cost of purchase or manufacture, rather
than its replacement cost. In volatile energy markets, this can
have a significant distorting effect on reported income. The
amounts disclosed represent the difference between the charge to
the income statement for inventory on a FIFO basis (after adjusting
for any related movements in net realizable value provisions) and
the charge that would have arisen based on the replacement cost of
inventory. For this purpose, the replacement cost of inventory is
calculated using data from each operation's production and
manufacturing system, either on a monthly basis, or separately for
each transaction where the system allows this approach. The amounts
disclosed are not separately reflected in the financial statements
as a gain or loss. No adjustment is made in respect of the cost of
inventories held as part of a trading position and certain other
temporary inventory positions. See Replacement cost (RC) profit or
loss definition below.
Top of page 33
Glossary (continued)
Liquids - Liquids for Upstream and Rosneft comprises crude oil,
condensate and natural gas liquids. For Upstream, liquids also
includes bitumen.
Net debt including leases is a non-GAAP measure. Net debt
including leases is calculated as net debt plus lease liabilities,
less the net amount of partner receivables and payables relating to
leases entered into on behalf of joint operations. BP believes this
measure provides useful information to investors as it enables
investors to understand the impact of the group's lease portfolio
on net debt. The nearest equivalent GAAP measure on an IFRS basis
is finance debt. A reconciliation of finance debt to net debt
including leases is provided on page 23.
Net wind generation capacity is the sum of the rated capacities
of the assets/turbines that have entered into commercial operation,
including BP's share of equity-accounted entities.
Non-operating items are charges and credits included in the
financial statements that BP discloses separately because it
considers such disclosures to be meaningful and relevant to
investors. They are items that management considers not to be part
of underlying business operations and are disclosed in order to
enable investors better to understand and evaluate the group's
reported financial performance. Non-operating items within
equity-accounted earnings are reported net of incremental income
tax reported by the equity-accounted entity. An analysis of
non-operating items by region is shown on pages 7, 9 and 11, and by
segment and type is shown on page 27.
Operating cash flow is net cash provided by (used in) operating
activities as stated in the condensed group cash flow statement.
When used in the context of a segment rather than the group, the
terms refer to the segment's share thereof.
Operating cash flow excluding Gulf of Mexico oil spill payments
is a non-GAAP measure. It is calculated by excluding post-tax
operating cash flows relating to the Gulf of Mexico oil spill from
net cash provided by operating activities as reported in the
condensed group cash flow statement. BP believes net cash provided
by operating activities excluding amounts related to the Gulf of
Mexico oil spill is a useful measure as it allows for more
meaningful comparisons between reporting periods. The nearest
equivalent measure on an IFRS basis is net cash provided by
operating activities.
Organic capital expenditure is a subset of capital expenditure
and is a non-GAAP measure. Organic capital expenditure comprises
capital expenditure less inorganic capital expenditure. BP believes
that this measure provides useful information as it allows
investors to understand how BP's management invests funds in
developing and maintaining the group's assets. An analysis of
organic capital expenditure by segment and region, and a
reconciliation to GAAP information is provided on page 26.
We are unable to present reconciliations of forward-looking
information for organic capital expenditure to total cash capital
expenditure, because without unreasonable efforts, we are unable to
forecast accurately the adjusting item, inorganic capital
expenditure, that is difficult to predict in advance in order to
derive the nearest GAAP estimate.
Production-sharing agreement/contract (PSA/PSC) is an
arrangement through which an oil and gas company bears the risks
and costs of exploration, development and production. In return, if
exploration is successful, the oil company receives entitlement to
variable physical volumes of hydrocarbons, representing recovery of
the costs incurred and a stipulated share of the production
remaining after such cost recovery.
Readily marketable inventory (RMI) is inventory held and price
risk-managed by our integrated supply and trading function (IST)
which could be sold to generate funds if required. It comprises oil
and oil products for which liquid markets are available and
excludes inventory which is required to meet operational
requirements and other inventory which is not price risk-managed.
RMI is reported at fair value. Inventory held by the Downstream
fuels business for the purpose of sales and marketing, and all
inventories relating to the lubricants and petrochemicals
businesses, are not included in RMI.
Paid-up RMI excludes RMI which has not yet been paid for. For
inventory that is held in storage, a first-in first-out (FIFO)
approach is used to determine whether inventory has been paid for
or not. Unpaid RMI is RMI which has not yet been paid for by BP.
RMI at fair value, Paid-up RMI and Unpaid RMI are non-GAAP
measures. Further information is provided on page 29.
Realizations are the result of dividing revenue generated from
hydrocarbon sales, excluding revenue generated from purchases made
for resale and royalty volumes, by revenue generating hydrocarbon
production volumes. Revenue generating hydrocarbon production
reflects the BP share of production as adjusted for any production
which does not generate revenue. Adjustments may include losses due
to shrinkage, amounts consumed during processing, and contractual
or regulatory host committed volumes such as royalties.
Refining availability represents Solomon Associates' operational
availability for BP-operated refineries, which is defined as the
percentage of the year that a unit is available for processing
after subtracting the annualized time lost due to turnaround
activity and all planned mechanical, process and regulatory
downtime.
The Refining marker margin (RMM) is the average of regional
indicator margins weighted for BP's crude refining capacity in each
region. Each regional marker margin is based on product yields and
a marker crude oil deemed appropriate for the region. The regional
indicator margins may not be representative of the margins achieved
by BP in any period because of BP's particular refinery
configurations and crude and product slate.
Top of page 34
Glossary (continued)
Replacement cost (RC) profit or loss reflects the replacement
cost of inventories sold in the period and is arrived at by
excluding inventory holding gains and losses from profit or loss.
RC profit or loss for the group is not a recognized GAAP measure.
BP believes this measure is useful to illustrate to investors the
fact that crude oil and product prices can vary significantly from
period to period and that the impact on our reported result under
IFRS can be significant. Inventory holding gains and losses vary
from period to period due to changes in prices as well as changes
in underlying inventory levels. In order for investors to
understand the operating performance of the group excluding the
impact of price changes on the replacement of inventories, and to
make comparisons of operating performance between reporting
periods, BP's management believes it is helpful to disclose this
measure. The nearest equivalent measure on an IFRS basis is profit
or loss attributable to BP shareholders. A reconciliation to GAAP
information is provided on page 1. RC profit or loss before
interest and tax is the measure of profit or loss that is required
to be disclosed for each operating segment under IFRS.
RC profit or loss per share is a non-GAAP measure. Earnings per
share is defined in Note 8. RC profit or loss per share is
calculated using the same denominator. The numerator used is RC
profit or loss attributable to BP shareholders rather than profit
or loss attributable to BP shareholders. BP believes it is helpful
to disclose the RC profit or loss per share because this measure
excludes the impact of price changes on the replacement of
inventories and allows for more meaningful comparisons between
reporting periods. The nearest equivalent measure on an IFRS basis
is basic earnings per share based on profit or loss for the period
attributable to BP shareholders.
Reported recordable injury frequency measures the number of
reported work-related employee and contractor incidents that result
in a fatality or injury per 200,000 hours worked. This represents
reported incidents occurring within BP's operational HSSE reporting
boundary. That boundary includes BP's own operated facilities and
certain other locations or situations.
Reserves replacement ratio is the extent to which the year's
production has been replaced by proved reserves added to our
reserve base. The ratio is expressed in oil-equivalent terms and
includes changes resulting from discoveries, improved recovery and
extensions and revisions to previous estimates, but excludes
changes resulting from acquisitions and disposals. The reserves
replacement ratio will be reported in BP Annual Report and Form
20-F 2019.
Return on average capital employed (ROACE) is a non-GAAP measure
and is underlying replacement cost profit, after adding back
non-controlling interest and interest expense net of tax, divided
by average capital employed (total equity plus finance debt),
excluding cash and cash equivalents and goodwill. Interest expense
is finance costs excluding lease interest and the unwinding of the
discount on provisions and other payables, and for full year 2019
interest expense was $2,032 million (2018 $1,779 million) before
tax. BP believes it is helpful to disclose the ROACE because this
measure gives an indication of the company's capital efficiency.
The nearest GAAP measures of the numerator and denominator are
profit or loss for the period attributable to BP shareholders and
average capital employed respectively.
Solomon availability - See Refining availability definition.
Tier 1 and tier 2 process safety events - Tier 1 events are
losses of primary containment from a process of greatest
consequence - causing harm to a member of the workforce, damage to
equipment from a fire or explosion, a community impact or exceeding
defined quantities. Tier 2 events are those of lesser consequence.
These represent reported incidents occurring within BP's
operational HSSE reporting boundary. That boundary includes BP's
own operated facilities and certain other locations or
situations.
Underlying effective tax rate (ETR) is a non-GAAP measure. The
underlying ETR is calculated by dividing taxation on an underlying
replacement cost (RC) basis by underlying RC profit or loss before
tax. Taxation on an underlying RC basis is taxation on a RC basis
for the period adjusted for taxation on non-operating items and
fair value accounting effects. Information on underlying RC profit
or loss is provided below. BP believes it is helpful to disclose
the underlying ETR because this measure may help investors to
understand and evaluate, in the same manner as management, the
underlying trends in BP's operational performance on a comparable
basis, period on period. The nearest equivalent measure on an IFRS
basis is the ETR on profit or loss for the period.
We are unable to present reconciliations of forward-looking
information for underlying ETR to ETR on profit or loss for the
period, because without unreasonable efforts, we are unable to
forecast accurately certain adjusting items required to present a
meaningful comparable GAAP forward-looking financial measure. These
items include the taxation on inventory holding gains and losses,
non-operating items and fair value accounting effects, that are
difficult to predict in advance in order to include in a GAAP
estimate.
Underlying production - 2019 underlying production, when
compared with 2018, is production after adjusting for BPX Energy,
other acquisitions and divestments, and entitlement impacts in our
production-sharing agreements.
Underlying RC profit or loss is RC profit or loss after
adjusting for non-operating items and fair value accounting
effects. Underlying RC profit or loss and adjustments for fair
value accounting effects are not recognized GAAP measures. See
pages 27 and 28 for additional information on the non-operating
items and fair value accounting effects that are used to arrive at
underlying RC profit or loss in order to enable a full
understanding of the events and their financial impact. BP believes
that underlying RC profit or loss is a useful measure for investors
because it is a measure closely tracked by management to evaluate
BP's operating performance and to make financial, strategic and
operating decisions and because it may help investors to understand
and evaluate, in the same manner as management, the underlying
trends in BP's operational performance on a comparable basis,
period on period, by adjusting for the effects of these
non-operating items and fair value accounting effects. The nearest
equivalent measure on an IFRS basis for the group is profit or loss
attributable to BP shareholders. The nearest equivalent measure on
an IFRS basis for segments is RC profit or loss before interest and
taxation. A reconciliation to GAAP information is provided on page
1.
Top of page 35
Glossary (continued)
Underlying RC profit or loss per share is a non-GAAP measure.
Earnings per share is defined in Note 8. Underlying RC profit or
loss per share is calculated using the same denominator. The
numerator used is underlying RC profit or loss attributable to BP
shareholders rather than profit or loss attributable to BP
shareholders. BP believes it is helpful to disclose the underlying
RC profit or loss per share because this measure may help investors
to understand and evaluate, in the same manner as management, the
underlying trends in BP's operational performance on a comparable
basis, period on period. The nearest equivalent measure on an IFRS
basis is basic earnings per share based on profit or loss for the
period attributable to BP shareholders.
Upstream plant reliability (BP-operated) is calculated taking
100% less the ratio of total unplanned plant deferrals divided by
installed production capacity. Unplanned plant deferrals are
associated with the topside plant and where applicable the subsea
equipment (excluding wells and reservoir). Unplanned plant
deferrals include breakdowns, which does not include Gulf of Mexico
weather related downtime.
Upstream unit production cost is calculated as production cost
divided by units of production. Production cost does not include ad
valorem and severance taxes. Units of production are barrels for
liquids and thousands of cubic feet for gas. Amounts disclosed are
for BP subsidiaries only and do not include BP's share of
equity-accounted entities.
Working capital - Change in working capital is movements in
inventories and other current and non-current assets and
liabilities as reported in the condensed group cash flow statement.
Change in working capital adjusted for inventory holding
gains/losses is a non-GAAP measure. It is calculated by adjusting
for inventory holding gains/losses reported in the period and this
therefore represents what would have been reported as movements in
inventories and other current and non-current assets and
liabilities, if the starting point in determining net cash provided
by operating activities had been replacement cost profit rather
than profit for the period. The nearest equivalent measure on an
IFRS basis for this is movements in inventories and other current
and non-current assets and liabilities. In the context of
describing operating cash flow excluding Gulf of Mexico oil spill
payments, change in working capital also excludes movements in
inventories and other current and non-current assets and
liabilities relating to the Gulf of Mexico oil spill. See page 30
for further details.
BP utilizes various arrangements in order to manage its working
capital including discounting of receivables and, in the supply and
trading business, the active management of supplier payment terms,
inventory and collateral.
Top of page 36
Cautionary statement
In order to utilize the 'safe harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995 (the
'PSLRA') and the general doctrine of cautionary statements, BP is
providing the following cautionary statement: The discussion in
this results announcement contains certain forecasts, projections
and forward-looking statements - that is, statements related to
future, not past events and circumstances - with respect to the
financial condition, results of operations and businesses of BP and
certain of the plans and objectives of BP with respect to these
items. These statements may generally, but not always, be
identified by the use of words such as 'will', 'expects', 'is
expected to', 'aims', 'should', 'may', 'objective', 'is likely to',
'intends', 'believes', 'anticipates', 'plans', 'we see' or similar
expressions. In particular, the following, among other statements,
are all forward looking in nature: expectations regarding the
expected quarterly dividend payment and timing of such payment;
expectations regarding the underlying effective tax rate in 2020;
expectations regarding 2020 organic capital expenditure and
depreciation, depletion and amortization charges; expectations for
gearing to move towards the middle of the 20-30% range through
2020; plans and expectations to meet cash flow and returns
objectives and to increase distributions to shareholders over the
long term; plans and expectations relating to divestments and
disposals, including expectations that BP will meet its target of
$10 billion of divestment proceeds by the end of 2020 and announce
a further $5 billion of agreed disposals by mid-2021, for a total
of $15 billion of announced disposals by mid-2021 and expectations
with respect to completion and the timing of receipt of proceeds of
agreed divestments and disposals; plans and expectations regarding
Upstream projects, including for Raven to come onstream around the
end of 2020 and for TANAP to begin transporting gas to Turkish and
European markets in late 2020; expectations regarding Upstream full
year and first-quarter 2020 reported production, seasonal
maintenance and turnaround activities; plans and expectations with
respect to the joint venture in India with Reliance Industries
Limited; expectations regarding Downstream turnaround activity and
first-quarter 2020 industry refining margins and North American
heavy crude oil discounts; plans and expectations regarding
Lightsource BP, including plans to have 10GW of developed assets by
the end of 2023; plans and expectations regarding the joint venture
in China with DiDi, including the roll out of 150kW ultra-fast
chargers across BP's UK retail network; plans and expectations with
respect to BP's AI venture, including the venture's impact on
energy use and carbon emissions of buildings, and plans and
expectations with respect to BP Infinia, including to accelerate
Infinia's commercialisation; expectations regarding the Other
businesses and corporate average quarterly charges excluding
non-operating items; and expectations with respect to the amount of
future payments relating to the Gulf of Mexico oil spill. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
or may occur in the future and are outside the control of BP.
Actual results may differ materially from those expressed in such
statements, depending on a variety of factors, including: the
specific factors identified in the discussions accompanying such
forward-looking statements; the receipt of relevant third party
and/or regulatory approvals; the timing and level of maintenance
and/or turnaround activity; the timing and volume of refinery
additions and outages; the timing of bringing new fields onstream;
the timing, quantum and nature of certain acquisitions and
divestments; future levels of industry product supply, demand and
pricing, including supply growth in North America; OPEC quota
restrictions; PSA effects; operational and safety problems;
potential lapses in product quality; economic and financial market
conditions generally or in various countries and regions; political
stability and economic growth in relevant areas of the world;
changes in laws and governmental regulations; regulatory or legal
actions including the types of enforcement action pursued and the
nature of remedies sought or imposed; the actions of prosecutors,
regulatory authorities and courts; delays in the processes for
resolving claims; amounts ultimately payable and timing of payments
relating to the Gulf of Mexico oil spill; exchange rate
fluctuations; development and use of new technology; recruitment
and retention of a skilled workforce; the success or otherwise of
partnering; the actions of competitors, trading partners,
contractors, subcontractors, creditors, rating agencies and others;
our access to future credit resources; business disruption and
crisis management; the impact on our reputation of ethical
misconduct and non-compliance with regulatory obligations; trading
losses; major uninsured losses; decisions by Rosneft's management
and board of directors; the actions of contractors; natural
disasters and adverse weather conditions; changes in public
expectations and other changes to business conditions; wars and
acts of terrorism; cyber-attacks or sabotage; and other factors
discussed elsewhere in this report, and under "Risk factors" in BP
Annual Report and Form 20-F 2018 as filed with the US Securities
and Exchange Commission.
This announcement contains inside information.
Contacts
London Houston
Press Office David Nicholas Brett Clanton
+44 (0)20 7496 4708 +1 281 366 8346
Investor Relations Craig Marshall Brian Sullivan
bp.com/investors +44 (0)20 7496 4962 +1 281 892 3421
BP p.l.c.'s LEI Code 213800LH1BZH3D16G760
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKNBDNBKBQBK
(END) Dow Jones Newswires
February 04, 2020 02:01 ET (07:01 GMT)
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