REG - BP PLC - 3Q16 Part 1 of 1 <Origin Href="QuoteRef">BP.L</Origin> - Part 1
RNS Number : 9263NBP PLC01 November 2016
BP p.l.c.
Group results
Third quarter and nine months 2016
Top of page1
FOR IMMEDIATE RELEASE London 1 November 2016
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
46
(1,419)
1,620
Profit (loss) for the period(a)
(382)
(3,175)
1,188
(828)
41
Inventory holding (gains) losses*, net of tax
(689)
246
1,234
(2,247)
1,661
Replacement cost profit (loss)*
(1,071)
(2,929)
Net (favourable) unfavourable
impact of non-operating items* and
585
2,967
(728)
fair value accounting effects*, net of tax
3,256
8,638
1,819
720
933
Underlying replacement cost profit*
2,185
5,709
Replacement cost profit (loss)*
6.73
(12.03)
8.82
per ordinary share (cents)
(5.74)
(16.01)
0.40
(0.72)
0.53
per ADS (dollars)
(0.34)
(0.96)
Underlying replacement cost profit*
9.92
3.85
4.96
per ordinary share (cents)
11.70
31.18
0.60
0.23
0.30
per ADS (dollars)
0.70
1.87
BP's third-quarter replacement cost (RC) profit was $1,661 million, compared with $1,234 million a year ago. After adjusting for a net gain for non-operating items of $949 million and net unfavourable fair value accounting effects of $221 million (both on a post-tax basis), underlying RC profit for the third quarter was $933 million, compared with $1,819 million for the same period in 2015. For the first nine months of 2016 the RC loss was $1,071 million, compared with a loss of $2,929 million for the first nine months of 2015. Both periods were impacted by charges associated with the Deepwater Horizon accident and oil spill following the settlement of federal, state and local government claims in 2015 and additional provisions this year, when a reliable estimate for all the remaining material liabilities was determined. After adjusting for a net charge for non-operating items of $2,648 million and net unfavourable fair value accounting effects of $608 million (both on a post-tax basis), underlying RC profit for the nine months was $2,185 million, compared with $5,709 million for the same period in 2015. RC profit or loss for the group and underlying RC profit or loss are non-GAAP measures and further information is provided on page 3.
Non-operating items for the quarter reflect impairment reversals in the Upstream segment and for the nine months also reflect additional provisions recorded in the second quarter in relation to the Gulf of Mexico oil spill. Non-operating items also include a restructuring charge of $154 million for the quarter and $568 million for the nine months. Cumulative restructuring charges from the beginning of the fourth quarter 2014 totalled $2.1 billion by the end of the third quarter 2016. We now expect restructuring to continue throughout 2017.
All amounts, including finance costs, relating to the Gulf of Mexico oil spill have been treated as non-operating items, with a net pre-tax charge of $189million for the third quarter and $6,335million for the nine months. For further information on the Gulf of Mexico oil spill and its consequences see page 9 and Note 2 on page 16. See also Legal proceedings on page 31.
Net cash provided by operating activities for the third quarter and nine months was $2.5billion and $8.3billion respectively, compared with $5.2billion and $13.3billion for the same periods in 2015. Excluding post-tax amounts related to the Gulf of Mexico oil spill, net cash provided by operating activities* for the third quarter and nine months was $4.8 billion and $13.1billion respectively, compared with $5.4billion and $14.3 billion for the same periods in 2015.
Net debt* at 30 September 2016 was $32.4billion, compared with $25.6billion a year ago. The net debt ratio* at 30 September 2016 was 25.9%, compared with 20.0% a year ago. Net debt and the net debt ratio are non-GAAP measures. See page 22 for more information.
BP today announced a quarterly dividend of 10.00cents per ordinary share ($0.600 per ADS), which is expected to be paid on 16 December 2016. The corresponding amount in sterling will be announced on 6December 2016. See page 21 for further information.
*
For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 28.
(a)
Profit attributable to BP shareholders.
The commentaries above and following should be read in conjunction with the cautionary statement on page32.
Top of page 2
Group headlines (continued)
Capital expenditure on an accruals basis* for the third quarter was $3.7billion, of which organic capital expenditure* was $3.6 billion, compared with $4.3billion for the same period in 2015, almost all of which was organic. For the nine months, capital expenditure on an accruals basis was $11.8billion, of which organic capital expenditure was $11.5billion, compared with $13.3billion for the same period in 2015, of which organic capital expenditure was $13.2billion. See page 24 for further information. Organic capital expenditure for 2016 is now expected to be around $16 billion, and in the range $15-17 billion in 2017.
Disposal proceeds, as per the cash flow statement, were $0.6billion for the third quarter and $2.2billion for the nine months, compared with $0.3billion and $2.6billion for the same periods in 2015. In addition, $0.3 billion was received in the third quarter in relation to the sale of 8.5% from our shareholding in Castrol India Limited (for the nine months, $0.6 billion was received in relation to the sale of 20% of the shareholding).
The effective tax rate (ETR) on RC profit or loss* for the third quarter and nine months was -16% and 73% respectively, compared with 52% and 45% for the same periods in 2015. Excluding non-operating items, fair value accounting effects and the impact of the reduction in the rate of the UK North Sea supplementary charge in the third quarter (and the first quarter 2015), the adjusted ETR* for the third quarter and nine months was 37% and 25% respectively, compared with 39% and 32% for the same periods in 2015. The adjusted ETR for the quarter and the nine months is lower than a year ago mainly due to foreign exchange effects and changes in the geographical mix of profits.
Top of page 3
Analysis of RC profit (loss) before interest and tax
and reconciliation to profit (loss) for the period
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
RC profit (loss) before interest and tax*
743
(109)
1,196
Upstream
(118)
1,343
2,562
1,405
978
Downstream
4,263
6,273
382
246
120
Rosneft
432
1,075
(689)
(5,525)
(441)
Other businesses and corporate(a)
(7,040)
(12,522)
67
(121)
17
Consolidation adjustment - UPII*
(64)
(101)
3,065
(4,104)
1,870
RC profit (loss) before interest and tax
(2,527)
(3,932)
Finance costs and net finance expense relating to
(474)
(460)
(481)
pensions and other post-retirement benefits
(1,381)
(1,196)
(1,347)
2,346
229
Taxation on a RC basis
2,848
2,298
(10)
(29)
43
Non-controlling interests
(11)
(99)
1,234
(2,247)
1,661
RC profit (loss) attributable to BP shareholders
(1,071)
(2,929)
(1,726)
1,188
(60)
Inventory holding gains (losses)
996
(343)
Taxation (charge) credit on inventory holding
538
(360)
19
gains and losses
(307)
97
Profit (loss) for the period attributable to
46
(1,419)
1,620
BP shareholders
(382)
(3,175)
(a)
Includes costs related to the Gulf of Mexico oil spill. See page 9 and also Note 2 on page 16 for further information on the accounting for the Gulf of Mexico oil spill.
Analysis of underlying RC profit before interest and tax
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Underlying RC profit before interest and tax*
823
29
(224)
Upstream
(942)
1,921
2,302
1,513
1,431
Downstream
4,757
6,327
382
246
120
Rosneft
432
1,075
(231)
(376)
(260)
Other businesses and corporate
(814)
(922)
67
(121)
17
Consolidation adjustment - UPII
(64)
(101)
3,343
1,291
1,084
Underlying RC profit before interest and tax
3,369
8,300
Finance costs and net finance expense relating to
(359)
(337)
(358)
pensions and other post-retirement benefits
(1,012)
(1,064)
(1,155)
(205)
164
Taxation on an underlying RC basis
(161)
(1,428)
(10)
(29)
43
Non-controlling interests
(11)
(99)
1,819
720
933
Underlying RC profit attributable to BP shareholders
2,185
5,709
Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 4-9 for the segments.
Top of page 4
Upstream
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
716
(24)
1,183
Profit (loss) before interest and tax
(77)
1,331
27
(85)
13
Inventory holding (gains) losses*
(41)
12
743
(109)
1,196
RC profit (loss) before interest and tax
(118)
1,343
Net (favourable) unfavourable impact
of non-operating items* and
80
138
(1,420)
fair value accounting effects*
(824)
578
823
29
(224)
Underlying RC profit (loss) before interest and tax*(a)
(942)
1,921
(a)
See page 5 for a reconciliation to segment RC profit before interest and tax by region.
Financial results
The replacement cost result before interest and tax for the third quarter and nine months was a profit of $1,196million and a loss of $118million respectively, compared with a profit of $743million and $1,343million for the same periods in 2015. The third quarter and nine months included a net non-operating gain of $1,465million and $1,117million respectively, compared with a net non-operating charge of $118million and $596million for the same periods a year ago. The net non-operating gain for the quarter arises mainly due to impairment reversals, predominantly relating to assets in Angola and the North Sea (see Notes 1 and 4 for further information). The net non-operating gain for the quarter and nine months also include other charges, gain on sale and restructuring costs. Fair value accounting effects in the third quarter and nine months had an unfavourable impact of $45million and $293 million respectively, compared with a favourable impact of $38million and $18million in the same periods of 2015.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost loss before interest and tax for the third quarter and nine months was $224million and $942million respectively, compared with a profit of $823million and $1,921million for the same periods in 2015. The result for the third quarter reflected lower liquids and gas realizations, lower gas marketing and trading results, higher rig cancellation costs and exploration write-offs partly offset by lower costs reflecting the benefits of simplification and efficiency activities. The result for the nine months reflected lower liquids and gas realizations and lower gas marketing and trading results partly offset by lower costs reflecting the benefits of simplification and efficiency activities, lower depreciation, depletion and amortization expense, lower exploration write-offs and lower rig cancellation costs.
Production
Production for the quarter was 2,110mboe/d, 5.9% lower than the third quarter of 2015. Underlying production* for the quarter decreased by 2.0%, mainly due to seasonal turnaround and maintenance activities, and the impact of weather and the Pascagoula plant outage in the Gulf of Mexico. For the nine months, production was 2,209mboe/d, broadly flat versus the same period in 2015. Underlying production for the nine months was broadly flat versus the same period in 2015.
Key events
On 29 July, BP and Atlantic LNG announced the sanction of the Trinidad onshore compression project. The project is 100% funded and owned by BP Trinidad and Tobago LLC and will be operated by Atlantic LNG.
On 1 September, BP announced the signing of a second production-sharing agreement* with China National Petroleum Corporation (CNPC, operator) for shale gas exploration, development and production at Rong Chang Bei in the Sichuan Basin covering an area of approximately 1,000 square kilometres.
On 27 September, BP announced it has signed concession amendments for the Temsah, Ras El Barr and Nile Delta Offshore concessions in Egypt, enabling the fast track development of the Nooros field.
On 30 September, BP and Det norske oljeselskap completed the creation of Aker BP ASA, an independent oil and gas company, into which BP contributed its Norwegian upstream business. Aker BP is owned by Det norske shareholder Aker (40%), other Det norske shareholders (30%) and BP (30%).
In September, BP completed and installed the first jacket for Shah Deniz Stage 2.
On 11 October, BP announced the decision not to progress its exploration drilling programme in the Great Australian Bight, offshore South Australia.
In October, BP and Rosneft completed the transaction to create a new joint venture, Yermak Neftegaz LLC (Rosneft 51% and BP 49%).
Top of page 5
Upstream
Outlook
Looking ahead, we expect fourth-quarter reported production to be slightly higher than the third quarter, mainly reflecting recovery from planned seasonal turnaround and maintenance activity.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page32.
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Underlying RC profit (loss) before interest and tax
(152)
(305)
(151)
US
(1,123)
(763)
975
334
(73)
Non-US
181
2,684
823
29
(224)
(942)
1,921
Non-operating items(a)
(139)
(57)
326
US
106
(342)
21
64
1,139
Non-US
1,011
(254)
(118)
7
1,465
1,117
(596)
Fair value accounting effects
26
(57)
(15)
US
(105)
(32)
12
(88)
(30)
Non-US
(188)
50
38
(145)
(45)
(293)
18
RC profit (loss) before interest and tax
(265)
(419)
160
US
(1,122)
(1,137)
1,008
310
1,036
Non-US
1,004
2,480
743
(109)
1,196
(118)
1,343
Exploration expense
61
48
22
US
182
333
295
302
781
Non-US(b)
1,225
1,097
356
350
803
1,407
1,430
234
260
687
Of which: Exploration expenditure written off(b)
1,108
1,132
Production (net of royalties)(c)
Liquids* (mb/d)
390
401
353
US
386
372
94
117
112
Europe
119
118
747
584
664
Rest of World
708
710
1,231
1,102
1,128
1,213
1,200
Natural gas (mmcf/d)
1,569
1,666
1,679
US
1,649
1,521
232
238
262
Europe
263
259
4,062
3,829
3,753
Rest of World
3,867
4,138
5,864
5,733
5,695
5,779
5,918
Total hydrocarbons* (mboe/d)
661
688
643
US
670
634
135
158
157
Europe
164
163
1,447
1,244
1,311
Rest of World
1,375
1,424
2,242
2,090
2,110
2,209
2,220
Average realizations*(d)
44.01
44.99
41.23
Total liquids(e) ($/bbl)
36.71
48.87
3.49
2.66
2.77
Natural gas ($/mcf)
2.76
3.91
33.25
30.63
29.46
Total hydrocarbons ($/boe)
27.28
36.68
(a)
See Notes 1 and 4 for more information on impairment of fixed assets in the third quarter and nine months 2016. See also footnote (b) below.
(b)
Third quarter and nine months include $601 million relating to the BM-C-34 licence in Brazil, of which $334 million relates to the value ascribed to the licence as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. The $334 million write-off has been classified within the 'other' category of non-operating items. Nine months 2015 includes a
$432-million write-off in Libya.(c)
Includes BP's share of production of equity-accounted entities in the Upstream segment.
(d)
Realizations are based on sales by consolidated subsidiaries only - this excludes equity-accounted entities.
(e)
Includes condensate, natural gas liquids and bitumen.
Because of rounding, some totals may not agree exactly with the sum of their component parts.
Top of page 6
Downstream
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
875
2,463
943
Profit before interest and tax
5,189
5,892
1,687
(1,058)
35
Inventory holding (gains) losses*
(926)
381
2,562
1,405
978
RC profit before interest and tax
4,263
6,273
Net (favourable) unfavourable
impact of non- operating items*
(260)
108
453
and fair value accounting effects*
494
54
2,302
1,513
1,431
Underlying RC profit before interest and tax*(a)
4,757
6,327
(a)
See page7 for a reconciliation to segment RC profit before interest and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the third quarter and nine months was $978million and $4,263million respectively, compared with $2,562million and $6,273million for the same periods in 2015.
The 2016 results include a net non-operating charge of $196 million for the third quarter and a net non-operating gain of $53million for the nine months, compared with a net non-operating gain of $43million and a net non-operating charge of $42million for the same periods in 2015. Fair value accounting effects had unfavourable impacts of $257 million in the third quarter and $547million in the nine months, compared with a favourable impact of $217million and an unfavourable impact of $12million in the same periods of 2015.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the third quarter and nine months was $1,431million and $4,757million respectively, compared with $2,302million and $6,327million for the same periods in 2015.
Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page7.
Fuels business
The fuels business reported an underlying replacement cost profit before interest and tax of $983million for the third quarter and $3,310million for the nine months, compared with $1,917million and $5,107million for the same periods in 2015. The result for the quarter reflects a significantly weaker refining environment and a higher level of turnaround activity, partially offset by an increased retail performance and lower costs from simplification and efficiency programmes. The nine-months result reflects a significantly weaker refining environment and a lower contribution from supply and trading, partially offset by lower costs from simplification and efficiency programmes, an increased retail performance and stronger refining operations.
Lubricants business
The lubricants business reported an underlying replacement cost profit before interest and tax of $370million for the third quarter and $1,166million for the nine months, compared with $348million and $1,090million for the same periods in 2015. The results for the quarter and nine months reflect continued momentum in our growth markets and premium brands.
During the third quarter we sold an 8.5% shareholding in Castrol India Limited reducing our shareholding to 51%.
Petrochemicals business
The petrochemicals business reported an underlying replacement cost profit before interest and tax of $78million for the third quarter and $281million for the nine months, compared with $37million and $130million for the same periods in 2015. The result for the nine months reflects stronger operations and margin capture.
Outlook
In the fourth quarter we expect a higher level of turnaround activity compared with the third quarter, and that industry refining margins will continue to be under pressure.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page32.
Top of page 7
Downstream
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Underlying RC profit before interest and tax-
by region
885
386
298
US
1,224
2,122
1,417
1,127
1,133
Non-US
3,533
4,205
2,302
1,513
1,431
4,757
6,327
Non-operating items
51
17
(56)
US
74
110
(8)
(54)
(140)
Non-US
(21)
(152)
43
(37)
(196)
53
(42)
Fair value accounting effects
153
(78)
(178)
US
(343)
(22)
64
7
(79)
Non-US
(204)
10
217
(71)
(257)
(547)
(12)
RC profit before interest and tax
1,089
325
64
US
955
2,210
1,473
1,080
914
Non-US
3,308
4,063
2,562
1,405
978
4,263
6,273
Underlying RC profit before interest and tax-
by business(a)(b)
1,917
1,011
983
Fuels
3,310
5,107
348
412
370
Lubricants
1,166
1,090
37
90
78
Petrochemicals
281
130
2,302
1,513
1,431
4,757
6,327
Non-operating items and fair value
accounting effects(c)
295
(93)
(455)
Fuels
(493)
83
(25)
(3)
1
Lubricants
(3)
(126)
(10)
(12)
1
Petrochemicals
2
(11)
260
(108)
(453)
(494)
(54)
RC profit before interest and tax(a)(b)
2,212
918
528
Fuels
2,817
5,190
323
409
371
Lubricants
1,163
964
27
78
79
Petrochemicals
283
119
2,562
1,405
978
4,263
6,273
20.0
13.8
11.6
BP average refining marker margin (RMM)* ($/bbl)
12.0
18.2
Refinery throughputs (mb/d)
681
668
613
US
660
642
785
805
795
Europe
802
800
230
231
242
Rest of World
237
259
1,696
1,704
1,650
1,699
1,701
94.9
95.7
95.4
Refining availability* (%)
95.4
94.4
Marketing sales of refined products (mb/d)
1,121
1,115
1,205
US
1,130
1,122
1,272
1,170
1,236
Europe
1,184
1,202
479
515
503
Rest of World
502
479
2,872
2,800
2,944
2,816
2,803
2,781
2,875
2,581
Trading/supply sales of refined products
2,755
2,731
5,653
5,675
5,525
Total sales volumes of refined products
5,571
5,534
Petrochemicals production (kte)
877
558
564
US
2,018
2,728
976
909
898
Europe
2,799
2,800
2,004
1,967
1,987
Rest of World
5,863
5,565
3,857
3,434
3,449
10,680
11,093
(a)
Segment-level overhead expenses are included in the fuels business result.
(b)
BP's share of income from petrochemicals at our Gelsenkirchen and Mlheim sites in Germany is reported in the fuels business.
(c)
For Downstream, fair value accounting effects arise solely in the fuels business.
Top of page 8
Rosneft
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016(a)
$ million
2016(a)
2015
370
291
108
Profit before interest and tax(b)
461
1,125
12
(45)
12
Inventory holding (gains) losses*
(29)
(50)
382
246
120
RC profit before interest and tax
432
1,075
-
-
-
Net charge (credit) for non-operating items*
-
-
382
246
120
Underlying RC profit before interest and tax*
432
1,075
Financial results
Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the third quarter and nine months was $120million and $432million respectively, compared with $382million and $1,075million for the same periods in 2015. There were no non-operating items in the third quarter and nine months of either year.
Compared with the same period last year, the result for the third quarter was primarily affected by adverse foreign exchange, lower oil prices and increased government take, partially offset by favourable duty lag effects. For the nine months, the result was primarily affected by lower oil prices and increased government take, partially offset by favourable duty lag effects.
In June 2016 Rosneft's annual general meeting adopted a resolution to pay a dividend of 11.75Russian roubles per ordinary share in relation to the 2015 annual results. BP received a dividend of $332 million, after the deduction of withholding tax, in July 2016.
Key events
On 12 October Rosneft acquired from the Russian government a 50.0755% stake in Bashneft, a Russian oil company, for 329.69 billion Russian roubles (approximately $5.3 billion). This acquisition is expected to provide Rosneft with significant synergies, additional refining throughput and additional liquid hydrocarbon production, which will be reflected in BP's production and reserves through BP equity accounting for its 19.75% share in Rosneft.
On 15 October Rosneft announced the signing of an agreement for the purchase, subject to regulatory approval, of a 49% stake in Essar Oil Limited, an Indian downstream business, from the Essar group.
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016(a)
2016(a)
2015
Production(net of royalties) (BP share)
810
812
820
Liquids* (mb/d)
813
813
1,125
1,266
1,221
Natural gas (mmcf/d)
1,256
1,173
1,003
1,030
1,030
Total hydrocarbons* (mboe/d)
1,030
1,016
(a)
The operational and financial information of the Rosneft segment for the third quarter and nine months of the year is based on preliminary operational and financial results of Rosneft for the nine months ended 30 September 2016. 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 disposal of BP's interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the third quarter and nine months of 2016, as shown in the table above, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own financial statements under IFRS. BP's share of Rosneft's profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date. BP's share of Rosneft's earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation.
Top of page 9
Other businesses and corporate
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Profit (loss) before interest and tax
(311)
(5,106)
(66)
Gulf of Mexico oil spill
(5,966)
(11,381)
(378)
(419)
(375)
Other
(1,074)
(1,141)
(689)
(5,525)
(441)
Profit (loss) before interest and tax
(7,040)
(12,522)
-
-
-
Inventory holding (gains) losses*
-
-
(689)
(5,525)
(441)
RC profit (loss) before interest and tax
(7,040)
(12,522)
Net charge (credit) for non-operating items*
311
5,106
66
Gulf of Mexico oil spill
5,966
11,381
147
43
115
Other
260
219
458
5,149
181
Net charge (credit) for non-operating items
6,226
11,600
(231)
(376)
(260)
Underlying RC profit (loss) before interest and tax*
(814)
(922)
Underlying RC profit (loss) beforeinterest and tax
(126)
(109)
(107)
US
(326)
(332)
(105)
(267)
(153)
Non-US
(488)
(590)
(231)
(376)
(260)
(814)
(922)
Non-operating items
(438)
(5,136)
(168)
US
(6,152)
(11,519)
(20)
(13)
(13)
Non-US
(74)
(81)
(458)
(5,149)
(181)
(6,226)
(11,600)
RC profit (loss) before interest and tax
(564)
(5,245)
(275)
US
(6,478)
(11,851)
(125)
(280)
(166)
Non-US
(562)
(671)
(689)
(5,525)
(441)
(7,040)
(12,522)
Other businesses and corporate comprises biofuels and wind businesses, shipping, treasury (which includes interest income on the group's cash and cash equivalents), corporate activities including centralized functions, and the costs of the Gulf of Mexico oil spill.
Financial results
The replacement cost loss before interest and tax for the third quarter and nine months was $441 million and $7,040 million respectively, compared with $689 million and $12,522 million for the same periods in 2015.
The third-quarter result included a net non-operating charge of $181 million, primarily relating to environmental provisions and costs for the Gulf of Mexico oil spill, compared with a net non-operating charge of $458 million a year ago. For the nine months, the net non-operating charge was $6,226 million, compared with a net non-operating charge of $11,600 million a year ago, both primarily relating to costs for the Gulf of Mexico oil spill. For further information see Note 2 on page 16.
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the third quarter and nine months was $260 million and $814 million respectively, compared with $231 million and $922 million for the same periods in 2015. The nine-months result reflects lower corporate costs and favourable foreign exchange impacts.
Biofuels
The net ethanol-equivalent production (which includes ethanol and sugar) for the third quarter and nine months was 352 million litres and 635 million litres, compared with 359 million litres and 606 million litres for the same periods in 2015.
Wind
Net wind generation capacity*(a) was 1,474MW at 30 September 2016 compared with 1,588MW at 30 September 2015. BP's net share of wind generation for the third quarter and nine months was 828GWh and 3,235GWh respectively, compared with 894GWh and 3,171GWh for the same periods in 2015.
(a)
Capacity figures include 22.5MW in the Netherlands managed by our Downstream segment at 30 September 2016, and 32MW at 30 September 2015.
Top of page 10
Financial statements
Group income statement
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
56,152
46,442
47,047
Sales and other operating revenues (Note 6)
132,001
173,722
327
274
174
Earnings from joint ventures-after interest and tax
477
587
504
380
209
Earnings from associates-after interest and tax
731
1,536
151
101
146
Interest and other income
392
466
167
79
467
Gains on sale of businesses and fixed assets
884
438
57,301
47,276
48,043
Total revenues and other income
134,485
176,749
42,485
32,752
34,981
Purchases
94,336
127,897
6,407
10,446
5,517
Production and manufacturing expenses(a)
22,482
30,592
238
258
212
Production and similar taxes (Note 7)
484
773
3,737
3,637
3,496
Depreciation, depletion and amortization
10,863
11,338
Impairment and losses on sale of businesses and
40
52
(1,424)
fixed assets
(1,359)
523
356
350
803
Exploration expense
1,407
1,430
2,699
2,697
2,648
Distribution and administration expenses
7,803
8,471
1,339
(2,916)
1,810
Profit (loss) before interest and taxation
(1,531)
(4,275)
398
414
433
Finance costs(a)
1,241
968
Net finance expense relating to pensions and other
76
46
48
post-retirement benefits
140
228
865
(3,376)
1,329
Profit (loss) before taxation
(2,912)
(5,471)
809
(1,986)
(248)
Taxation(a)
(2,541)
(2,395)
56
(1,390)
1,577
Profit (loss) for the period
(371)
(3,076)
Attributable to
46
(1,419)
1,620
BP shareholders
(382)
(3,175)
10
29
(43)
Non-controlling interests
11
99
56
(1,390)
1,577
(371)
(3,076)
Earnings per share (Note 8)
Profit (loss) for the period attributable to
BP shareholders
Per ordinary share (cents)
0.25
(7.60)
8.61
Basic
(2.05)
(17.35)
0.25
(7.60)
8.56
Diluted
(2.05)
(17.35)
Per ADS (dollars)
0.02
(0.46)
0.52
Basic
(0.12)
(1.04)
0.02
(0.46)
0.51
Diluted
(0.12)
(1.04)
(a)
See Note 2 for information on the impact of the Gulf of Mexico oil spill on these income statement line items.
Top of page 11
Financial statements (continued)
Group statement of comprehensive income
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
56
(1,390)
1,577
Profit (loss) for the period
(371)
(3,076)
Other comprehensive income
Items that may be reclassified subsequently to
profit or loss
(2,247)
(35)
192
Currency translation differences
1,031
(3,161)
Exchange gains (losses) on translation of foreign
operations reclassified to gain or loss on sale of
7
-
-
businesses and fixed assets
6
23
-
-
1
Available-for-sale investments
1
1
(70)
(289)
(84)
Cash flow hedges marked to market
(435)
(154)
Cash flow hedges reclassified to the income
65
16
71
statement
110
220
7
6
30
Cash flow hedges reclassified to the balance sheet
49
16
Share of items relating to equity-accounted
(830)
197
174
entities, net of tax
661
(581)
268
80
(78)
Income tax relating to items that may be reclassified
(84)
300
(2,800)
(25)
306
1,339
(3,336)
Items that will not be reclassified to profit or loss
Remeasurements of the net pension and other
(551)
(1,763)
(2,995)
post-retirement benefit liability or asset
(5,980)
1,569
Share of items relating to equity-accounted
(1)
-
-
entities, net of tax
-
(1)
Income tax relating to items that will not be
80
592
510
reclassified
1,504
(516)
(472)
(1,171)
(2,485)
(4,476)
1,052
(3,272)
(1,196)
(2,179)
Other comprehensive income
(3,137)
(2,284)
(3,216)
(2,586)
(602)
Total comprehensive income
(3,508)
(5,360)
Attributable to
(3,204)
(2,604)
(558)
BP shareholders
(3,513)
(5,423)
(12)
18
(44)
Non-controlling interests
5
63
(3,216)
(2,586)
(602)
(3,508)
(5,360)
Top of page 12
Financial statements (continued)
Group statement of changes in equity
BP
shareholders'
Non-controlling
Total
$ million
equity
interests
equity
At 1 January 2016
97,216
1,171
98,387
Total comprehensive income
(3,513)
5
(3,508)
Dividends
(3,429)
(83)
(3,512)
Share-based payments, net of tax
622
-
622
Share of equity-accounted entities' change in equity, net of tax
49
-
49
Transactions involving non-controlling interests
431
328
759
At 30 September 2016
91,376
1,421
92,797
BP
shareholders'
Non-controlling
Total
$ million
equity
interests
equity
At 1 January 2015
111,441
1,201
112,642
Total comprehensive income
(5,423)
63
(5,360)
Dividends
(5,118)
(71)
(5,189)
Share-based payments, net of tax
486
-
486
Share of equity-accounted entities' change in equity, net of tax
(3)
-
(3)
Transactions involving non-controlling interests
-
23
23
At 30 September 2015
101,383
1,216
102,599
Top of page 13
Financial statements (continued)
Group balance sheet
30 September
31 December
$ million
2016
2015
Non-current assets
Property, plant and equipment
128,262
129,758
Goodwill
11,204
11,627
Intangible assets
17,163
18,660
Investments in joint ventures
8,240
8,412
Investments in associates
13,326
9,422
Other investments
1,005
1,002
Fixed assets
179,200
178,881
Loans
497
529
Trade and other receivables
2,146
2,216
Derivative financial instruments
5,437
4,409
Prepayments
1,036
1,003
Deferred tax assets
4,797
1,545
Defined benefit pension plan surpluses
96
2,647
193,209
191,230
Current assets
Loans
261
272
Inventories
15,897
14,142
Trade and other receivables
21,230
22,323
Derivative financial instruments
3,012
4,242
Prepayments
1,841
1,838
Current tax receivable
568
599
Other investments
46
219
Cash and cash equivalents
25,520
26,389
68,375
70,024
Assets classified as held for sale (Note 3)
632
578
69,007
70,602
Total assets
262,216
261,832
Current liabilities
Trade and other payables
34,662
31,949
Derivative financial instruments
2,325
3,239
Accruals
5,220
6,261
Finance debt
5,689
6,944
Current tax payable
1,411
1,080
Provisions
5,586
5,154
54,893
54,627
Liabilities directly associated with assets classified as held for sale (Note 3)
148
97
55,041
54,724
Non-current liabilities
Other payables
14,025
2,910
Derivative financial instruments
4,322
4,283
Accruals
483
890
Finance debt
53,308
46,224
Deferred tax liabilities
6,926
9,599
Provisions
23,039
35,960
Defined benefit pension plan and other post-retirement benefit plan deficits
12,275
8,855
114,378
108,721
Total liabilities
169,419
163,445
Net assets
92,797
98,387
Equity
BP shareholders' equity
91,376
97,216
Non-controlling interests
1,421
1,171
Total equity
92,797
98,387
Top of page 14
Financial statements (continued)
Condensed group cash flow statement
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Operating activities
865
(3,376)
1,329
Profit (loss) before taxation
(2,912)
(5,471)
Adjustments to reconcile profit (loss) before taxation
to net cash provided by operating activities
Depreciation, depletion and amortization and
3,971
3,897
4,183
exploration expenditure written off
11,971
12,470
Impairment and (gain) loss on sale of businesses
(127)
(27)
(1,891)
and fixed assets
(2,243)
85
Earnings from equity-accounted entities,
(295)
(485)
259
less dividends received
(250)
(1,225)
Net charge for interest and other finance
196
113
204
expense less net interest paid
485
338
137
204
166
Share-based payments
629
154
Net operating charge for pensions and other post-
retirement benefits, less contributions and
(41)
(56)
(96)
benefit payments for unfunded plans
(120)
(128)
113
4,565
(184)
Net charge for provisions, less payments
5,116
11,201
Movements in inventories and other current and
1,231
(863)
(1,001)
non-current assets and liabilities
(3,591)
(2,135)
(867)
(89)
(461)
Income taxes paid
(822)
(1,962)
5,183
3,883
2,508
Net cash provided by operating activities
8,263
13,327
Investing activities
(4,357)
(4,283)
(3,379)
Capital expenditure
(12,043)
(13,522)
33
-
-
Acquisitions, net of cash acquired
-
33
(55)
(8)
(1)
Investment in joint ventures
(13)
(178)
(119)
(196)
(185)
Investment in associates
(474)
(424)
88
153
590
Proceeds from disposal of fixed assets
981
1,049
Proceeds from disposal of businesses, net of
200
291
(21)
cash disposed
1,181
1,511
61
6
9
Proceeds from loan repayments
61
109
(4,149)
(4,037)
(2,987)
Net cash used in investing activities
(10,307)
(11,422)
Financing activities
117
2,710
3,925
Proceeds from long-term financing
9,373
7,988
(18)
(1,318)
(75)
Repayments of long-term financing
(4,952)
(2,867)
(115)
300
(512)
Net increase (decrease) in short-term debt
(324)
597
-
368
323
Net increase (decrease) in non-controlling interests
761
-
(1,718)
(1,169)
(1,161)
Dividends paid
-BP shareholders
(3,429)
(5,118)
(29)
(43)
(31)
-non-controllinginterests
(83)
(71)
(1,763)
848
2,469
Net cash provided by (used in) financing activities
1,346
529
Currency translation differences relating to cash
(158)
(226)
13
and cash equivalents
(171)
(495)
(887)
468
2,003
Increase (decrease) in cash and cash equivalents
(869)
1,939
32,589
23,049
23,517
Cash and cash equivalents at beginning of period
26,389
29,763
31,702
23,517
25,520
Cash and cash equivalents at end of period
25,520
31,702
Top of page 15
Financial statements (continued)
Notes
1.Basis of preparation
The interim financial information included in this report has been prepared in accordance with IAS 34 'Interim Financial Reporting'.
The results for the interim periods are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31December 2015 included in BP Annual Report and Form 20-F 2015.
BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the group's consolidated financial statements for the periods presented.
The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing BP Annual Report and Form 20-F 2016, which do not differ significantly from those used in BP Annual Report and Form 20-F 2015.
In BP Annual Report and Form 20-F 2015 we disclosed a significant estimate or judgement relating to provisions arising from the Gulf of Mexico oil spill in 2010. At that time, no reliable estimate could be made of any business economic loss (BEL) claims under the Plaintiffs' Steering Committee (PSC) settlement that were not yet processed or processed but not yet paid, except where an eligibility notice had been issued and was not subject to appeal by BP within the Deepwater Horizon Court Supervised Settlement Program claims facility (DHCSSP). A reliable estimate could also not be made in relation to securities-related litigation and other litigation, including economic loss and property damage claims from parties excluded from and/or who opted out of the PSC settlement. No amounts were provided for these items and they were disclosed as contingent liabilities.
As a result of developments during the second quarter of 2016 sufficient information now exists in order to make a reliable estimate of the amounts that BP will pay relating to all outstanding BEL claims under the DHCSSP, securities class actions and economic loss and property damage claims from parties who were excluded from and/or opted out of the PSC settlement. Liabilities for these items were therefore recognized in the financial statements in the second quarter of 2016. See Note 2 for further information.
In BP Annual Report and Form 20-F 2015 - Financial statements - Note 1 we disclosed a significant estimate or judgement relating to the recoverability of asset values, including oil and natural gas price assumptions used to estimate future cash flows and the discount rates applied to determine the recoverable amounts of assets when performing impairment tests. During the third quarter of 2016, the price assumptions and discount rates used in impairment tests were revised.
In the third quarter, the long-term price assumptions used to determine recoverable amount based on fair value less costs of disposal from 2022 onwards were derived from $75 per barrel for Brent and $4/mmBtu for Henry Hub (both in 2015 prices) inflated for the remaining life of the asset. To determine the recoverable amount based on value in use, the price assumption was inflated to 2022 but from 2022 onwards was not inflated.
For both value-in-use and fair value less costs of disposal impairment tests performed during the third quarter, the price assumptions used have been set such that there is a gradual transition over a five-year period from current market prices to the long-term price assumptions for 2022, as noted above.
The post-tax discount rate applied to Upstream asset cash flows used to calculate fair value less costs of disposal in the third quarter was 6%. For value-in-use calculations the pre-tax discount rate applied in the third quarter was 9%. For both calculations a premium of 2% continues to be added for assets located in higher-risk countries.
See Note 4 for further information on impairment charges and reversals in the third quarter.
Top of page 16
Financial statements (continued)
Notes
2.Gulf of Mexico oil spill
(a) Overview
The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2015 - Financial statements - Note2 and Legal proceedings on page237 and on page31 of this report.
During the second quarter, significant progress was made in resolving outstanding claims arising from the 2010 Deepwater Horizon accident and oil spill and a reliable estimate was determined for all remaining material liabilities arising from the incident.
The group income statement includes a pre-tax charge of $189million for the third quarter and $6,335million for the nine months in relation to the Gulf of Mexico oil spill. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $61,786million. The charge for the third quarter comprises finance costs relating to unwinding of discounting effects, functional costs and other items. As previously described in BP p.l.c. Group results - Second quarter and half year 2016, it is now possible to reliably estimate the cost of resolving all outstanding business economic loss claims under the Plaintiffs' Steering Committee (PSC) settlement and the cost of resolving economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement. The charge for the nine months is primarily attributable to the recognition of additional provisions for these claims, as well as the cost of the securities claims settlement with the certified class of post-explosion ADS purchasers which was agreed in June 2016.
The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Income statement
311
5,106
66
Production and manufacturing expenses
5,966
11,381
(311)
(5,106)
(66)
Profit (loss) before interest and taxation
(5,966)
(11,381)
115
123
123
Finance costs
369
132
(426)
(5,229)
(189)
Profit (loss) before taxation
(6,335)
(11,513)
(87)
2,533
53
Taxation
2,837
3,626
(513)
(2,696)
(136)
Profit (loss) for the period
(3,498)
(7,887)
30 September
31 December
$ million
2016
2015
Balance sheet
Current assets
Trade and other receivables
330
686
Prepayments
4
-
Current liabilities
Trade and other payables
(1,979)
(693)
Accruals
-
(40)
Provisions
(3,348)
(3,076)
Net current assets (liabilities)
(4,993)
(3,123)
Non-current assets
Deferred tax assets
7,824
-
Non-current liabilities
Other payables
(13,293)
(2,057)
Accruals
-
(186)
Provisions
(1,784)
(13,431)
Deferred tax liabilities
-
5,200
Net non-current assets (liabilities)
(7,253)
(10,474)
Net assets (liabilities)
(12,246)
(13,597)
Top of page 17
Financial statements (continued)
Notes
2.Gulf of Mexico oil spill (continued)
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Cashflowstatement-Operating activities
(426)
(5,229)
(189)
Profit (loss) before taxation
(6,335)
(11,513)
Adjustments to reconcile profit (loss)
before taxation to net cash provided
by operating activities
Net charge for interest and other finance
115
123
123
expense, less net interest paid
369
132
235
4,466
(494)
Net charge for provisions, less payments
4,729
11,069
Movements in inventories and other current
(135)
(971)
(1,766)
and non-current assets and liabilities
(3,825)
(696)
(211)
(1,611)
(2,326)
Pre-tax cash flows
(5,062)
(1,008)
Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $2,326million and an outflow of $4,849million in the third quarter and nine months of 2016 respectively. For the same periods in 2015, the amounts were an outflow of $196million and an outflow of $993million respectively.
Trust fund
During the first half of 2016, the remaining cash in the Deepwater Horizon Oil Spill Trust (the Trust) was exhausted and BP commenced paying claims and other costs previously funded from the Trust. For certain costs, these payments are made by BP into a qualified settlement fund, the fund then distributes the amounts to claimants; $835 million was paid into a qualified settlement fund during the third quarter ($2,234million during the nine months).
(b) Provisions and contingent liabilities
Provisions
BP had recorded provisions relating to the Gulf of Mexico oil spill in relation to environmental expenditure, litigation and claims, and Clean Water Act penalties. Movements in the third quarter, all of which relate to litigation and claims provisions, are presented in the table below.
$ million
Total
At 1 July 2016
6,490
Net increase (decrease) in provision
50
Utilization
-paid by BP
(544)
-paid by settlement fund or Trust
(864)
At 30 September 2016
5,132
Of which
-current
3,348
-non-current
1,784
Movements in each class of provision during the nine months are presented in the table below.
Litigation
Clean
and
Water Act
Environmental
claims
penalties
Total
$ million
At 1 January 2016
5,919
6,459
4,129
16,507
Net increase (decrease) in provision
-
5,765
-
5,765
Unwinding of discount
52
25
38
115
Reclassified to Other payables
(5,970)
(3,741)
(4,167)
(13,878)
Utilization
-paid by BP
(1)
(1,035)
-
(1,036)
-paid by settlement fund or
Trust
-
(2,341)
-
(2,341)
At 30 September 2016
-
5,132
-
5,132
Top of page 18
Financial statements (continued)
Notes
2.Gulf of Mexico oil spill (continued)
Environmental
The environmental provisions relating to natural resource damage costs and the early restoration framework agreement were reclassified to Other payables during the first quarter following approval by the Court in April 2016 of the Consent Decree between the United States, the Gulf states and BP. Remaining amounts related to early restoration were paid during the second quarter.
Litigation and claims
The litigation and claims provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources. Claims administration costs and legal costs have also been provided for.
At 31 December 2015, the litigation and claims provision included amounts provided under the state claims settlement agreement with the Gulf states in relation to state claims that had not yet been paid. These amounts were reclassified to Other payables during the first quarter and are payable over 18 years; $0.9billion was paid during the third quarter.
Litigation and claims - PSC settlement
BP has provided for its best estimate of the cost associated with the 2012 PSC settlement. The provision has been determined based upon an expected value of the remaining claims, including business economic loss claims. Claims are determined by the DHCSSP in accordance with the PSC settlement agreement. Amounts to settle these claims are expected to be paid by 2019. The amounts ultimately payable may differ from the amount provided.
Litigation and claims - Other claims
An estimate of the cost of the economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement, most of which is expected to be paid by the end of 2016, is also recognized in provisions.
Clean Water Act penalties
The provision previously recognized for penalties under Section 311 of the Clean Water Act, as determined by the civil settlement with the United States, was reclassified to Other payables during the first quarter following approval by the Court of the Consent Decree. The amount is payable in instalments over 15 years, commencing April 2017. The unpaid balance of this penalty accrues interest at a fixed rate.
Further information on provisions is provided in BP Annual Report and Form 20-F 2015 - Financial statements-Note2.
Contingent liabilities
Any further outstanding Deepwater Horizon related claims are not expected to have a material impact on the group's financial performance.
3.Non-current assets held for sale
On 15 January 2016 BP and Rosneft announced that they had signed definitive agreements to dissolve the German refining joint operation Ruhr Oel GmbH (ROG). The restructuring will result in Rosneft taking ownership of ROG's interests in the Bayernoil, MiRO Karlsruhe and PCK Schwedt refineries. In exchange, BP will take sole ownership of the Gelsenkirchen refinery and the solvent production facility DHC Solvent Chemie. Assets and associated liabilities relating to BP's share of ROG's interests in the Bayernoil, MiRO Karlsruhe and PCK Schwedt refineries are classified as held for sale in the group balance sheet.
Top of page 19
Financial statements (continued)
Notes
4.Impairment of 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 reversal for the third quarter and nine months of $1,456million and $1,550million respectively.
The net impairment reversal in Upstream was $1,465million for the third quarter and $1,561million for the nine months. For the third quarter, impairment reversals were $2,038million offset by impairment charges of $573million. The impairment reversals relate predominantly to assets in Angola and the North Sea, the recoverable amounts for which were calculated on a value-in-use basis.
The impairment reversals arose following a reduction in the discount rate applied and changes to future price assumptions as explained in Note 1.
5.Analysis of replacement cost profit (loss) before interest and tax and
reconciliation to profit (loss) before taxation
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
743
(109)
1,196
Upstream
(118)
1,343
2,562
1,405
978
Downstream
4,263
6,273
382
246
120
Rosneft
432
1,075
(689)
(5,525)
(441)
Other businesses and corporate(a)
(7,040)
(12,522)
2,998
(3,983)
1,853
(2,463)
(3,831)
67
(121)
17
Consolidation adjustment-UPII*
(64)
(101)
3,065
(4,104)
1,870
RC profit (loss) before interest and tax*
(2,527)
(3,932)
Inventory holding gains (losses)*
(27)
85
(13)
Upstream
41
(12)
(1,687)
1,058
(35)
Downstream
926
(381)
(12)
45
(12)
Rosneft (net of tax)
29
50
1,339
(2,916)
1,810
Profit (loss) before interest and tax
(1,531)
(4,275)
398
414
433
Finance costs
1,241
968
Net finance expense relating to pensions
76
46
48
and other post-retirement benefits
140
228
865
(3,376)
1,329
Profit (loss) before taxation
(2,912)
(5,471)
RC profit (loss) before interest and tax
324
(5,394)
(15)
US
(6,665)
(10,814)
2,741
1,290
1,885
Non-US
4,138
6,882
3,065
(4,104)
1,870
(2,527)
(3,932)
(a)
Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.
Top of page 20
Financial statements (continued)
Notes
6.Sales and other operating revenues
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
By segment
10,357
8,176
8,452
Upstream
24,059
33,023
50,921
42,809
43,488
Downstream
120,849
157,106
552
422
425
Other businesses and corporate
1,243
1,492
61,830
51,407
52,365
146,151
191,621
Less: sales and other operating revenues
between segments
5,809
4,301
4,952
Upstream
12,886
16,962
(377)
475
175
Downstream
768
201
246
189
191
Other businesses and corporate
496
736
5,678
4,965
5,318
14,150
17,899
Third party sales and other operating revenues
4,548
3,875
3,500
Upstream
11,173
16,061
51,298
42,334
43,313
Downstream
120,081
156,905
306
233
234
Other businesses and corporate
747
756
56,152
46,442
47,047
Total sales and other operating revenues
132,001
173,722
By geographical area
20,680
17,701
18,853
US
50,130
61,345
39,200
32,482
31,762
Non-US
91,390
123,746
59,880
50,183
50,615
141,520
185,091
Less: sales and other operating revenues
3,728
3,741
3,568
between areas
9,519
11,369
56,152
46,442
47,047
132,001
173,722
7.Production and similar taxes
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
30
67
32
US
117
97
208
191
180
Non-US
367
676
238
258
212
484
773
Top of page 21
Financial statements (continued)
Notes
8.Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.
For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method.
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Results for the period
Profit (loss) for the period
46
(1,419)
1,620
attributable to BP shareholders
(382)
(3,175)
-
1
-
Less: preference dividend
1
1
Profit (loss) attributable to BP
46
(1,420)
1,620
ordinary shareholders
(383)
(3,176)
Number of shares (thousand)(a)(b)
Basic weighted average number of
18,329,701
18,685,199
18,824,739
shares outstanding
18,660,397
18,304,504
3,054,950
3,114,200
3,137,456
ADS equivalent
3,110,066
3,050,750
Weighted average number of shares
outstanding used to calculate
18,371,656
18,685,199
18,920,920
diluted earnings per share
18,660,397
18,304,504
3,061,942
3,114,200
3,153,486
ADS equivalent
3,110,066
3,050,750
18,349,963
18,777,156
18,912,989
Shares in issue at period-end
18,912,989
18,349,963
3,058,327
3,129,526
3,152,164
ADS equivalent
3,152,164
3,058,327
(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.
9.Dividends
Dividends payable
BP today announced an interim dividend of 10.00cents per ordinary share which is expected to be paid on 16December 2016 to shareholders and American Depositary Share (ADS) holders on the register on 11November 2016. The corresponding amount in sterling is due to be announced on 6December2016, calculated based on the average of the market exchange rates for the four dealing days commencing on 30November2016. Holders of ADSs are expected to receive $0.600per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the third-quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
Top of page 22
Financial statements (continued)
Notes
9.Dividends (continued)
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
2016
2015
Dividends paid per ordinary share
10.000
10.000
10.000
cents
30.000
30.000
6.549
6.917
7.558
pence
21.487
19.749
60.00
60.00
60.00
Dividends paid per ADS (cents)
180.00
180.00
Scrip dividends
18.5
134.4
130.0
Number of shares issued (millions)
418.8
53.1
110
695
714
Value of shares issued ($ million)
2,148
353
10.Net debt*
Net debt ratio*
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
57,405
55,727
58,997
Gross debt
58,997
57,405
Fair value (asset) liability of hedges related
(57)
(1,279)
(1,113)
to finance debt(a)
(1,113)
(57)
57,348
54,448
57,884
57,884
57,348
31,702
23,517
25,520
Less: cash and cash equivalents
25,520
31,702
25,646
30,931
32,364
Net debt
32,364
25,646
102,599
94,108
92,797
Equity
92,797
102,599
20.0%
24.7%
25.9%
Net debt ratio
25.9%
20.0%
Analysis of changes in net debt
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Opening balance
57,104
54,012
55,727
Finance debt
53,168
52,854
Fair value (asset) liability of hedges
315
(967)
(1,279)
related to finance debt(a)
379
(445)
32,589
23,049
23,517
Less: cash and cash equivalents
26,389
29,763
24,830
29,996
30,931
Opening net debt
27,158
22,646
Closing balance
57,405
55,727
58,997
Finance debt
58,997
57,405
Fair value (asset) liability of hedges
(57)
(1,279)
(1,113)
related to finance debt(a)
(1,113)
(57)
31,702
23,517
25,520
Less: cash and cash equivalents
25,520
31,702
25,646
30,931
32,364
Closing net debt
32,364
25,646
(816)
(935)
(1,433)
Decrease (increase) in net debt
(5,206)
(3,000)
Movement in cash and cash equivalents
(729)
694
1,990
(excluding exchange adjustments)
(698)
2,434
Net cash outflow (inflow) from financing
16
(1,692)
(3,338)
(excluding share capital and dividends)
(4,097)
(5,718)
40
36
29
Other movements
424
50
(673)
(962)
(1,319)
Movement in net debt before exchange effects
(4,371)
(3,234)
(143)
27
(114)
Exchange adjustments
(835)
234
(816)
(935)
(1,433)
Decrease (increase) in net debt
(5,206)
(3,000)
(a)
Derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $1,323million (second quarter 2016 liability of $1,440million and third quarter 2015 liability of $1,349million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.
Top of page 23
Financial statements (continued)
Notes
11.Inventory valuation
A provision of $509million was held at 30 September 2016 ($689million at 30 June 2016 and $722million at 30September 2015) to write inventories down to their net realizable value. The net movement credited to the income statement during the third quarter 2016 was $178million (second quarter 2016 was a charge of $12million and third quarter 2015 was a charge of $144million).
12.Statutory accounts
The financial information shown in this publication, which was approved by the Board of Directors on 31 October2016, is unaudited and does not constitute statutory financial statements. BP Annual Report and Form 20-F 2015 has been filed with the Registrar of Companies in England and Wales. The report of the auditor on those accounts was unqualified and did not contain a statement under section 498(2) or section 498(3) of the UK Companies Act 2006.
Top of page 24
Additional information
Capital expenditure on an accruals basis*
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Capital expenditure on an accruals basis
4,287
3,919
3,622
Organic capital expenditure*
11,485
13,216
(33)
276
45
Inorganic capital expenditure*
321
126
4,254
4,195
3,667
11,806
13,342
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Organic capital expenditure by segment
Upstream
1,107
754
458
US
2,272
3,205
2,673
2,699
2,642
Non-US
7,924
8,531
3,780
3,453
3,100
10,196
11,736
Downstream
143
191
166
US
467
478
300
237
306
Non-US
698
789
443
428
472
1,165
1,267
Other businesses and corporate
11
12
2
US
15
33
53
26
48
Non-US
109
180
64
38
50
124
213
4,287
3,919
3,622
11,485
13,216
Organic capital expenditure by geographical area
1,261
957
626
US
2,754
3,716
3,026
2,962
2,996
Non-US
8,731
9,500
4,287
3,919
3,622
11,485
13,216
Reconciliation of additions to non-current assets to capital expenditure on an accruals basis
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
4,138
3,993
5,773
Additions to non-current assets(a)
13,701
13,704
8
12
7
Additions to other investments
25
19
Element of business combinations not related to
(41)
-
-
non-current assets
-
(24)
164
190
(565)
(Additions to) reductions in decommissioning asset
(321)
(307)
(15)
-
(1,548)
Asset exchanges(b)
(1,599)
(50)
4,254
4,195
3,667
Capital expenditure on an accruals basis
11,806
13,342
(a)
Includes additions to property, plant and equipment; goodwill; intangible assets; investments in joint ventures; and investments in associates.
(b)
Third quarter and nine months 2016 principally relates to the contribution of BP's Norwegian upstream business into Aker BP ASA in exchange for a 30% interest in Aker BP ASA.
Top of page 25
Additional information (continued)
Non-operating items*
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Upstream
Impairment and gain (loss) on sale of businesses
(44)
-
1,908
and fixed assets(a)
1,912
(351)
(35)
-
(8)
Environmental and other provisions
(8)
(24)
(92)
(3)
(36)
Restructuring, integration and rationalization costs
(302)
(340)
40
28
8
Fair value gain (loss) on embedded derivatives
49
102
13
(18)
(407)
Other(b)
(534)
17
(118)
7
1,465
1,117
(596)
Downstream
Impairment and gain (loss) on sale of businesses
182
23
(11)
and fixed assets
333
316
(92)
(3)
(72)
Environmental and other provisions
(75)
(99)
(46)
(54)
(108)
Restructuring, integration and rationalization costs
(197)
(256)
-
-
-
Fair value gain (loss) on embedded derivatives
-
-
(1)
(3)
(5)
Other
(8)
(3)
43
(37)
(196)
53
(42)
Rosneft
Impairment and gain (loss) on sale of businesses
-
-
-
and fixed assets
-
-
-
-
-
Environmental and other provisions
-
-
-
-
-
Restructuring, integration and rationalization costs
-
-
-
-
-
Fair value gain (loss) on embedded derivatives
-
-
-
-
-
Other
-
-
-
-
-
-
-
Other businesses and corporate
Impairment and gain (loss) on sale of businesses
(11)
4
(6)
and fixed assets
(2)
(50)
(123)
(35)
(99)
Environmental and other provisions
(134)
(127)
(13)
(11)
(10)
Restructuring, integration and rationalization costs
(69)
(42)
-
-
-
Fair value gain (loss) on embedded derivatives
-
-
(311)
(5,106)
(66)
Gulf of Mexico oil spill(c)
(5,966)
(11,381)
-
(1)
-
Other
(55)
-
(458)
(5,149)
(181)
(6,226)
(11,600)
(533)
(5,179)
1,088
Total before interest and taxation
(5,056)
(12,238)
(115)
(123)
(123)
Finance costs(c)
(369)
(132)
(648)
(5,302)
965
Total before taxation
(5,425)
(12,370)
(108)
2,483
(16)
Taxation credit (charge)
2,777
3,715
(756)
(2,819)
949
Total after taxation for period
(2,648)
(8,655)
(a)
See Notes 1 and 4 for further information on impairment charges and reversals.
(b)
Third quarter and nine months 2016 include the write-off of $334 million in relation to the value ascribed to the BM-C-34 licence in Brazil as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011 (see footnote (b) on page 5).
(c)
See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.
Top of page 26
Additional information (continued)
Non-GAAP information on fair value accounting effects
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Favourable (unfavourable) impact relative to
management's measure of performance
38
(145)
(45)
Upstream
(293)
18
217
(71)
(257)
Downstream
(547)
(12)
255
(216)
(302)
(840)
6
(84)
68
81
Taxation credit (charge)
232
11
171
(148)
(221)
(608)
17
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 income 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 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 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 requires that inventory held for trading is recorded at its fair value using period-end spot prices whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices resulting in measurement differences.
BP enters into contracts for pipelines and storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments, which are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.
The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management's internal measure of performance. Under management's internal measure of performance the inventory and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period, the fair values of certain derivative instruments used to risk manage LNG and oil and gas contracts are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management's estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to management's internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
$ million
2016
2015
Upstream
Replacement cost profit (loss) before interest and
705
36
1,241
tax adjusted for fair value accounting effects
175
1,325
38
(145)
(45)
Impact of fair value accounting effects
(293)
18
743
(109)
1,196
Replacement cost profit before interest and tax
(118)
1,343
Downstream
Replacement cost profit before interest and tax
2,345
1,476
1,235
adjusted for fair value accounting effects
4,810
6,285
217
(71)
(257)
Impact of fair value accounting effects
(547)
(12)
2,562
1,405
978
Replacement cost profit before interest and tax
4,263
6,273
Total group
Profit (loss) before interest and tax adjusted for fair
1,084
(2,700)
2,112
value accounting effects
(691)
(4,281)
255
(216)
(302)
Impact of fair value accounting effects
(840)
6
1,339
(2,916)
1,810
Profit (loss) before interest and tax
(1,531)
(4,275)
Top of page 27
Additional information (continued)
Realizations and marker prices
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
2016
2015
Average realizations(a)
Liquids* ($/bbl)
46.22
34.89
39.16
US
34.20
47.70
47.68
43.62
42.87
Europe
39.18
53.06
41.80
55.10
42.41
Rest of World
37.95
48.77
44.01
44.99
41.23
BP Average
36.71
48.87
Natural gas ($/mcf)
2.18
1.53
2.19
US
1.77
2.24
6.44
4.64
3.94
Europe
4.28
7.72
3.88
3.10
2.98
Rest of World
3.14
4.34
3.49
2.66
2.77
BP Average
2.76
3.91
Total hydrocarbons* ($/boe)
32.85
24.00
27.71
US
24.15
33.62
44.76
39.25
37.10
Europe
35.19
50.78
32.05
33.90
29.41
Rest of World
28.00
36.35
33.25
30.63
29.46
BP Average
27.28
36.68
Average oil marker prices ($/bbl)
50.47
45.59
45.86
Brent
41.88
55.31
46.45
45.53
44.88
West Texas Intermediate
41.41
50.93
31.93
33.78
31.60
Western Canadian Select
29.26
39.37
51.52
45.74
44.65
Alaska North Slope
41.58
55.39
45.34
42.08
41.83
Mars
38.14
51.34
49.19
43.37
43.73
Urals (NWE - cif)
39.67
54.20
Average natural gas marker prices
2.77
1.95
2.81
Henry Hub gas price ($/mmBtu)(b)
2.28
2.80
41.48
31.37
31.00
UK Gas - National Balancing Point (p/therm)
30.93
44.64
(a)
Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
(b)
Henry Hub First of Month Index.
Exchange rates
Third
Second
Third
Nine
Nine
quarter
quarter
quarter
months
months
2015
2016
2016
2016
2015
1.55
1.43
1.31
$/ average rate for the period
1.39
1.53
1.51
1.34
1.30
$/ period-end rate
1.30
1.51
1.11
1.13
1.12
$/ average rate for the period
1.12
1.11
1.12
1.11
1.12
$/ period-end rate
1.12
1.12
63.08
65.86
64.60
Rouble/$ average rate for the period
68.37
59.68
65.63
63.64
63.14
Rouble/$ period-end rate
63.14
65.63
Top of page 28
Glossary
Non-GAAP measures are provided for investors because they are closely tracked by management to evaluate BP's operating performance and to make financial, strategic and operating decisions.
Adjusted effective tax rate (ETR) is a non-GAAP measure. The adjusted ETR is calculated by dividing taxation on an underlying RC basis excluding the impact of reductions in the rate of the UK North Sea supplementary charge (in the third quarter 2016 and the first quarter 2015) 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 adjusted ETR because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.
Capital expenditure on an accruals basis is a non-GAAP measure. It comprises additions to property, plant and equipment, intangible assets and investments in joint ventures and associates, and reflects consideration payable in business combinations. It does not include additions arising from asset exchanges and certain other non-cash items. The nearest equivalent measure on an IFRS basis for the group is Additions to non-current assets. BP believes that Capital expenditure on an accruals basis provides useful information for investors as it is the measure used by management to plan and prioritize the group's investment of its resources and allows investors to understand how the group balances funds between shareholder distributions and investment for the future. Further information and a reconciliation to GAAP information is provided on page 24.
Consolidation adjustment - UPIIis unrealized profit in inventory arising on inter-segment transactions.
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) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information is provided on page 26.
Hydrocarbons - Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
Inorganic capital expenditureis a subset of Capital expenditure on an accruals basis, which 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 an accruals 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 24.
Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation's production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.
Liquids - Liquids for Upstream and Rosneft comprises crude oil, condensate and natural gas liquids. For Upstream, liquids also includes bitumen.
Major projectshave a BP net investment of at least $250 million, or are considered to be of strategic importance to BP or of a high degree of complexity.
Top of page 29
Glossary (continued)
Net cash provided by operating activities excluding amounts related to the Gulf of Mexico oil spill is a non-GAAP measure calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill as reported in Note 2 from Net cash provided by operating activities as reported in the Condensed group cash flow statement. BP believes it is helpful to disclose net cash provided by operating activities excluding amounts related to the Gulf of Mexico oil spill because this measure allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is Net cash provided by operating activities.
Net debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents. The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders' equity. All components of equity are included in the denominator of the calculation. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'.
Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP's share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
Non-operating items are charges and credits included in the financial statements that BP discloses separately because it considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the group's reported financial performance. Non-operating items within equity-accounted earnings are reported net of incremental income tax reported by the equity-accounted entity. An analysis of non-operating items by region is shown on pages 5, 7 and 9, and by segment and type is shown on page 25.
Organic capital expenditure is a subset of Capital expenditure on an accruals basis, which is a non-GAAP measure. Organic capital expenditure comprises capital expenditure on an accruals basis 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 24.
Production-sharing agreement (PSA) is an arrangement through which an oil company bears the risks and costs of exploration, development and production. In return, if exploration is successful, the oil company receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of the production remaining after such cost recovery.
Realizations are the result of dividing revenue generated from hydrocarbon sales, excluding revenue generated from purchases made for resale and royalty volumes, by revenue generating hydrocarbon production volumes. Revenue generating hydrocarbon production reflects the BP share of production as adjusted for any production which does not generate revenue. Adjustments may include losses due to shrinkage, amounts consumed during processing, and contractual or regulatory host committed volumes such as royalties.
Refining availability represents Solomon Associates' operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory downtime.
The Refining marker margin (RMM) is the average of regional indicator margins weighted for BP's crude refining capacity in each region. Each regional marker margin is based on product yields and a marker crude oil deemed appropriate for the region. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP's particular refinery configurations and crude and product slate.
Replacement cost (RC) profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss. RC profit or loss is the measure of profit or loss that is required to be disclosed for each operating segment under IFRS. RC profit or loss for the group is not a recognized GAAP measure. BP believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP's management believes it is helpful to disclose this measure. The nearest equivalent measure on an IFRS basis is profit or loss attributable to BP shareholders.
Top of page 30
Glossary (continued)
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.
Underlying productionis production after adjusting for 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 25 and 26 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.
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.
Top of page 31
Legal proceedings
The following discussion sets out the material developments in the group's material legal proceedings during the recent period. For a full discussion of the group's material legal proceedings, see pages 237-242 of BP Annual Report and Form 20-F 2015 and pages 33 to 34 of BP p.l.c. Group results - Second quarter and half year 2016.
Matters relating to the Deepwater Horizon accident and oil spill (the Incident)
Oil Pollution Act (OPA) Test Case Proceedings Six OPA test cases were before the federal district court in New Orleans to address certain OPA liability questions focusing on, among other issues, whether the plaintiffs' alleged losses tied to the 2010 federal government moratoria on deepwater drilling and federal permit delays are compensable. In December 2015, BP filed a motion to dismiss the plaintiffs' claims arising from the moratoria or permit process, and the plaintiffs filed a motion asking the court to prevent BP from arguing that government action and/or inaction following the oil spill is a "superseding" cause with respect to some or all of the damages that plaintiffs claim. On 10 March 2016, the court granted BP's motion and denied the plaintiffs' motion, ruling that BP is not, as a "Responsible Party" under OPA, liable for economic losses that resulted from the 2010 deepwater drilling moratoria. The court's order dismissed the plaintiffs' claims with prejudice. On 19 March 2016, the plaintiffs appealed the court's ruling to the Fifth Circuit. Subsequently, BPXP settled the claims of each of the test case plaintiffs and their cases and the pending appeals to the Fifth Circuit have been dismissed.
Securities Class Action Since the Incident, shareholders have sued BP and various of its current and former officers and directors asserting class securities fraud claims. On 31 May 2016, the federal district court in Houston issued a decision on the parties' summary judgment motions in relation to the certification of the class of post-explosion ADS purchasers from 26 April 2010 to 28 May 2010. In that decision, the court denied the plaintiffs' motion and granted in part and denied in part BP's motion. Following that decision, on 2 June 2016, BP announced that it agreed with the plaintiffs' representatives to settle the post explosion class claims for the amount of $175 million, payable during 2016-2017, subject to approval by the court. The parties filed the settlement agreement and other papers in support of approval with the court on 15 September 2016, with a final hearing date for approval of the settlements to be scheduled.
ERISA In an ERISA case related to BP share funds in several employee benefit savings plans, on 15 January 2015 the federal district court in Houston allowed the plaintiffs to amend their complaint to allege some of their proposed claims against certain defendants. The district court certified that decision for appeal; the Fifth Circuit accepted that appeal on 20 May 2015. On 26 September 2016, the Fifth Circuit reversed the decision of the district court, holding that the amended complaint is insufficient to state a claim against defendants, that the district court erred in granting the plaintiffs' motion to amend, and remanding the case to the district court for further proceedings.
Top of page 32
Cautionary statement
In order to utilize the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995 (the 'PSLRA'), BP is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events - with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as 'will', 'expects', 'is expected to', 'aims', 'should', 'may', 'objective', 'is likely to', 'intends', 'believes', 'anticipates', 'plans', 'we see' or similar expressions. In particular, among other statements, expectations regarding the continuance of restructuring activities throughout 2017; the expected quarterly dividend payment and timing of such payment; expectations regarding the amount of organic capital expenditure for 2016 and 2017; plans and expectations regarding Upstream activities in Trinidad and Tobago and Egypt; expectations regarding the planned restructuring of the German refining joint operation with Rosneft and Rosneft's acquisition of Bashneft ; expectations regarding Upstream fourth-quarter 2016 reported production and Downstream fourth-quarter 2016 turnaround activity and industry refining margins; statements regarding Rosneft's profit before interest as it will be reported in Rosneft's financial statements; expectations with respect to the total amounts that will ultimately be paid by BP in relation to the Gulf of Mexico incident and the timing thereof; statements regarding price assumptions; and certain statements regarding the legal and trial proceedings, court decisions, claims, penalties, potential investigations and civil actions by regulators, government entities and/or other entities or parties and the risks associated with such proceedings; are all forward looking in nature. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the specific factors identified in the discussions accompanying such forward-looking statements; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; 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 under "Principal risks and uncertainties" in our Form 6-K for the period ended 30 June 2016 and under "Risk factors" in BP Annual Report and Form 20-F 2015 as filed with the US Securities and Exchange Commission.
Contacts
London
Houston
Press Office
David Nicholas
Brett Clanton
+44 (0)20 7496 4708
+1 281 366 8346
Investor Relations
Jessica Mitchell
Craig Marshall
bp.com/investors
+44 (0)20 7496 4962
+1 281 892 4312
This information is provided by RNSThe company news service from the London Stock ExchangeENDQRTAKDDKCBDDOKN
Recent news on BP
See all newsREG - BP PLC - Director/PDMR Shareholding
AnnouncementREG - BP PLC - Annual Report and Form 20-F 2025 & Notice of AGM
AnnouncementREG - BP PLC - Directorate Change
AnnouncementREG - BP PLC - Total Voting Rights
AnnouncementREG - BP PLC - Director/PDMR Shareholding
Announcement