REG - BP PLC - 3Q17 Part 1 of 1 <Origin Href="QuoteRef">BP.L</Origin> - Part 2
31/10/2017 07:06
- Part 2: For the preceding part double click ID:nRSe0280Va
payments were $0.6 billion in the third quarter, significantly lower than
in the first two quarters of the year. Payments over the first nine
months of 2017 were $4.9 billion; for the full year payments are now
expected to be around $5.5 billion. BP continues to target a gearing*
range of 20-30%. At the end of the third quarter, gearing was 28.4%.
Operatingmetrics Nine months 2017 Financialmetrics Nine months 2017
(vs. Nine months 2016) (vs. Nine months 2016)
Safety 12(-1) Underlying RC profit $4.1bn (+$1.9bn)
Tier 1 process safety events*
Safety 0.21(-4%) Operating cash flow excluding Gulf of Mexico oil spill payments $17.9bn(+$4.8bn)
Reported recordable injury frequency*
Group production 3,557mboe/d(+10%) Organic capital expenditure $11.9bn (-$0.3bn)
Upstream production (excludes Rosneft segment) 2,427mboe/d (+10%) Gulf of Mexico oil spill payments $4.9bn(+$0.03bn)
Upstream unit production costs $7.17/boe (-16%) Divestment proceeds $1.0bn (-$1.2bn)
BP-operated Upstream operating efficiency*(a) 80.4% Net debt ratio (gearing) 28.4% (+2.5)
Refining availability* 95.0% (-0.4) Dividend per ordinary share(b) 10.00 cents(-)
(a) Reported on a one-quarter lagged basis and represents first half 2017 actuals only.
(b) Represents dividend announced in the quarter (vs. prior year quarter).
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 32.
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BP p.l.c. Group results
Third quarter and nine months 2017
INTENTIONALLY BLANK
Top of page 6
BP p.l.c. Group results
Third quarter and nine months 2017
Upstream
Third Second Third Nine Nine
quarter quarter quarter months months
$ million 2017 2017 2016 2017 2016
Profit (loss) before interest and tax 1,255 796 1,183 3,301 (77)
Inventory holding (gains) losses* (13) (1) 13 (8) (41)
RC profit (loss) before interest and tax 1,242 795 1,196 3,293 (118)
Net (favourable) adverse impact of
non-operating items* and fair value
accounting effects* 320 (85) (1,420) 349 (824)
Underlying RC profit (loss) before interest
and tax*(a) 1,562 710 (224) 3,642 (942)
(a) See page 7 for a reconciliation to segment RC profit before interest and tax by region.
Financial results
The replacement cost profit before interest and tax for the third quarter and nine months was $1,242 million and $3,293
million respectively, compared with a profit of $1,196 million and a loss of $118 million for the same periods in 2016. The
third quarter and nine months included a net non-operating charge of $146 million and $527 million respectively, compared
with a net non-operating gain of $1,465 million and $1,117 million for the same periods in 2016. Fair value accounting
effects in the third quarter and nine months had an adverse impact of $174 million and a favourable impact of $178 million
respectively, compared with an adverse impact of $45 million and $293 million in the same periods of 2016.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before
interest and tax for the third quarter and nine months was $1,562 million and $3,642 million respectively, compared with a
loss of $224 million and a loss of $942 million for the same periods in 2016. The result for the third quarter mainly
reflected higher liquids and gas realizations, higher production including the impact of the Abu Dhabi concession renewal
and major project start-ups, and lower exploration write-offs, partly offset by higher depreciation, depletion and
amortization. The result for the nine months reflected higher liquids and gas realizations, and higher production including
the impact of the Abu Dhabi concession renewal and major project start-ups, partly offset by higher depreciation, depletion
and amortization, and higher exploration write-offs.
Production
Production for the quarter was 2,462mboe/d, 16.3% higher than the third quarter of 2016. Underlying production* for the
quarter increased by 10.9%, due to the ramp-up of major projects. For the nine months, production was 2,427mboe/d, 9.6%
higher than in the same period of 2016. Nine months underlying production was 6.7% higher than the same period of 2016 due
to major project start-ups.
Key events
On 7 August, BP announced that it has brought online a natural gas well (BP 100%) in the Mancos Shale, New Mexico in the US
Lower 48, highlighting the potential of the field to be a significant new source of US natural gas supply.
On 14 August, BP Trinidad and Tobago announced first gas from the Juniper development in Trinidad. On the same day, BP
confirmed that production has started from the Persephone project off the coast of Western Australia (Woodside operator, BP
16.67%).
On 11 September, BP announced an agreement with Bridas Corporation to form a new integrated energy company in Argentina,
Pan American Energy Group (PAEG), by combining their interests in the oil and gas producer Pan American Energy with the
refining and marketing company Axion Energy in a cash-free transaction. PAEG will be owned equally by BP and Bridas
Corporation.
On 14 September, the joint development and production-sharing agreement* (PSA) for the Azeri, Chirag fields and the Deep
Water Portion of the Gunashli field in the Azerbaijan sector of the Caspian Sea (ACG PSA) was extended by signing an
amended and restated PSA between the State Oil Company of the Republic of Azerbaijan (SOCAR) and the contractor parties.
The renewed PSA, expected to be ratified by the Azerbaijani parliament before year end, extends the PSA's term by 25 years
to 2049 and includes an improved contractor parties' profit share at a fixed rate of 25%. Under the terms of the agreement,
BP's interest changes from 35.78% to 30.37% from the agreement's effective date following ratification, with a bonus of
$1.46 billion (BP net), payable to the government of Azerbaijan in equal instalments over 8 years.
On 25 September, BP, together with the Ministry of Oil & Gas of the Sultanate of Oman, announced that first gas had been
achieved from the Khazzan gas field (BP operator 60%, Oman Oil Company 40%).
On 24 October, Aker BP ASA (Aker BP), in which BP holds a 30% ownership interest, announced an agreement to acquire Hess
Norge AS. Upon completion of the transaction, Aker BP will become the sole owner of the Valhall and Hod fields. This
transaction is subject to regulatory approvals.
On 27 October, BP won two licences in the third Pre-Salt Bid Round in Brazil, the Alto De Cabo Frio Central block
(Petrobras operator 50%, BP 50%), and the Peroba block (Petrobras operator 40%, BP 40%, and China National Petroleum
Corporation 20%).
Outlook
Looking ahead, we expect fourth-quarter reported production to be higher than the third quarter reflecting the continued
ramp-up of major projects and recovery from seasonal turnaround and maintenance activities.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 32.
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BP p.l.c. Group results
Third quarter and nine months 2017
Upstream (continued)
Third Second Third Nine Nine
quarter quarter quarter months months
$ million 2017 2017 2016 2017 2016
Underlying RC profit (loss) before interest and tax
US 264 179 (151) 609 (1,123)
Non-US 1,298 531 (73) 3,033 181
1,562 710 (224) 3,642 (942)
Non-operating items(a)
US(b) (97) (34) 326 (143) 106
Non-US(c)(d) (49) 13 1,139 (384) 1,011
(146) (21) 1,465 (527) 1,117
Fair value accounting effects
US (100) 92 (15) 184 (105)
Non-US (74) 14 (30) (6) (188)
(174) 106 (45) 178 (293)
RC profit (loss) before interest and tax
US 67 237 160 650 (1,122)
Non-US 1,175 558 1,036 2,643 1,004
1,242 795 1,196 3,293 (118)
Exploration expense
US(b) 190 25 22 255 182
Non-US(d)(e) 107 825 781 1,304 1,225
297 850 803 1,559 1,407
Of which: Exploration expenditure written off(b)(d)(e) 217 753 687 1,231 1,108
Production (net of royalties)(f)
Liquids*(g) (mb/d)
US 408 418 353 425 386
Europe 123 122 112 120 119
Rest of World(g) 809 812 669 816 714
1,341 1,352 1,134 1,360 1,219
Natural gas (mmcf/d)
US 1,703 1,576 1,679 1,625 1,649
Europe 217 274 262 251 263
Rest of World 4,581 4,410 3,753 4,311 3,867
6,502 6,260 5,695 6,187 5,779
Total hydrocarbons*(g) (mboe/d)
US 702 689 643 705 670
Europe 161 169 157 163 164
Rest of World(g) 1,599 1,572 1,316 1,559 1,381
2,462 2,431 2,116 2,427 2,215
Average realizations*(h)
Total liquids(g)(i) ($/bbl) 47.45 46.27 40.99 47.87 36.50
Natural gas ($/mcf) 2.89 3.19 2.77 3.18 2.76
Total hydrocarbons(g) ($/boe) 33.23 33.59 29.37 34.63 27.20
(a) Third quarter and nine months 2016 principally relate to impairment reversals in Angola and the North Sea.
(b) Third quarter and nine months 2017 include the write-off of $145 million in relation to the value ascribed to certain licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. This has been classified within the 'other' category of non-operating items.
(c) Nine months 2017 includes an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS.
(d) Third quarter and nine months 2016 include $601 million of exploration write-offs relating to a licence in Brazil, of which $334 million relates to the value ascribed to the licence when acquired from Devon Energy in 2011, and has been classified within the 'other' category of non-operating items.
(e) Second quarter and nine months 2017 include the write-off of exploration well and lease costs in Angola. Nine months 2017 also includes the write-off of exploration well costs in Egypt.
(f) Includes BP's share of production of equity-accounted entities in the Upstream segment.
(g) A minor adjustment has been made to comparative periods in 2016. See page 28 for more information.
(h) Realizations are based on sales by consolidated subsidiaries only - this excludes equity-accounted entities.
(i) Includes condensate, natural gas liquids and bitumen.
Because of rounding, some totals may not agree exactly with the sum of their component parts.
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BP p.l.c. Group results
Third quarter and nine months 2017
Downstream
Third Second Third Nine Nine
quarter quarter quarter months months
$ million 2017 2017 2016 2017 2016
Profit (loss) before interest and tax 2,695 988 943 5,487 5,189
Inventory holding (gains) losses* (520) 579 35 (39) (926)
RC profit before interest and tax 2,175 1,567 978 5,448 4,263
Net (favourable) adverse impact of
non-operating items* and fair value
accounting effects* 163 (154) 453 45 494
Underlying RC profit before interest and tax*(a) 2,338 1,413 1,431 5,493 4,757
(a) See page 9 for a reconciliation to segment RC profit before interest and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the third quarter and nine months was $2,175 million and $5,448
million respectively, compared with $978 million and $4,263 million for the same periods in 2016.
The third quarter and nine months include a net non-operating charge of $55 million and a net non-operating gain of $7
million respectively, compared with a net non-operating charge of $196 million and a net non-operating gain of $53 million
for the same periods in 2016. Fair value accounting effects had an adverse impact of $108 million in the third quarter and
$52 million for the nine months, compared with an adverse impact of $257 million and $547 million for the same periods in
2016.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before
interest and tax for the third quarter and nine months was $2,338 million and $5,493 million respectively, compared with
$1,431 million and $4,757 million for the same periods in 2016.
Replacement cost profit before interest and tax for fuels, lubricants and petrochemicals is set out on page 9.
Fuels business
The fuels business reported an underlying replacement cost profit before interest and tax of $1,788 million for the third
quarter and $3,896 million for the nine months, compared with $983 million and $3,310 million for the same periods in 2016
driven by higher refining and fuels marketing results. The result for the quarter also reflects an improved contribution
from supply and trading. The contribution was however lower for the nine months compared to last year.
The refining result for the quarter and nine months reflects continued strong operational performance, capturing higher
industry refining margins which were partially offset by narrower North American heavy crude oil differentials. The result
also benefited from increased commercial optimization and higher levels of advantaged feedstock processed in the US. The
nine-months result also reflects the impact of a higher level of planned turnaround activity.
The fuels marketing result for both the quarter and nine months reflects continued profit growth supported by higher
premium volume and the continued rollout of our convenience partnership sites.
On 30 October, we completed the initial public offering of common units in our subsidiary, BP Midstream Partners LP. As a
result of the initial public offering, we received net proceeds of around $0.7 billion.
Lubricants business
The lubricants business reported an underlying replacement cost profit before interest and tax of $356 million for the
third quarter and $1,104 million for the nine months, compared with $370 million and $1,166 million for the same periods in
2016. The result for the quarter and nine months reflects continued premium brand growth, more than offset by the impact of
higher base oil prices due to temporary supply constraints and increasing crude oil prices.
Petrochemicals business
The petrochemicals business reported an underlying replacement cost profit before interest and tax of $194 million for the
third quarter and $493 million for the nine months, compared with $78 million and $281 million for the same periods in
2016. The result for the quarter and nine months reflects an improved margin environment, stronger margin optimization and
lower costs reflecting the continued benefits from our simplification and efficiency programmes.
In April, we announced our intention to divest our 50% shareholding in our Shanghai SECCO Petrochemical Company Limited
joint venture in China. The transaction is expected to complete in the fourth quarter. As a result, the asset relating to
our shareholding has been classified as held for sale in the group balance sheet at 30 September 2017.
Outlook
While industry refining margins have remained robust coming into the fourth quarter, we would expect a normal seasonal
decline compared with the third quarter. In the fourth quarter, we also expect a higher level of turnaround activity.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 32.
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BP p.l.c. Group results
Third quarter and nine months 2017
Downstream (continued)
Third Second Third Nine Nine
quarter quarter quarter months months
$ million 2017 2017 2016 2017 2016
Underlying RC profit before interest and tax -
by region
US 640 283 298 1,477 1,224
Non-US 1,698 1,130 1,133 4,016 3,533
2,338 1,413 1,431 5,493 4,757
Non-operating items
US (39) 28 (56) (23) 74
Non-US (16) 110 (140) 30 (21)
(55) 138 (196) 7 53
Fair value accounting effects
US 20 10 (178) (32) (343)
Non-US (128) 6 (79) (20) (204)
(108) 16 (257) (52) (547)
RC profit before interest and tax
US 621 321 64 1,422 955
Non-US 1,554 1,246 914 4,026 3,308
2,175 1,567 978 5,448 4,263
Underlying RC profit before interest and tax -
by business(a)(b)
Fuels 1,788 908 983 3,896 3,310
Lubricants 356 355 370 1,104 1,166
Petrochemicals 194 150 78 493 281
2,338 1,413 1,431 5,493 4,757
Non-operating items and fair value
accounting effects(c)
Fuels (154) 159 (455) 9 (493)
Lubricants (3) (2) 1 (8) (3)
Petrochemicals (6) (3) 1 (46) 2
(163) 154 (453) (45) (494)
RC profit before interest and tax(a)(b)
Fuels 1,634 1,067 528 3,905 2,817
Lubricants 353 353 371 1,096 1,163
Petrochemicals 188 147 79 447 283
2,175 1,567 978 5,448 4,263
BP average refining marker margin (RMM)* ($/bbl) 16.3 13.8 11.6 14.0 12.0
Refinery throughputs (mb/d)
US 737 708 613 713 660
Europe 768 782 795 784 802
Rest of World 240 198 242 207 237
1,745 1,688 1,650 1,704 1,699
Refining availability* (%) 95.3 94.5 95.4 95.0 95.4
Marketing sales of refined products (mb/d)
US 1,186 1,177 1,205 1,160 1,130
Europe 1,204 1,153 1,236 1,143 1,184
Rest of World 480 497 503 496 502
2,870 2,827 2,944 2,799 2,816
Trading/supply sales of refined products 3,088 2,996 2,581 3,015 2,755
Total sales volumes of refined products 5,958 5,823 5,525 5,814 5,571
Petrochemicals production (kte)
US 617 672 564 1,787 2,018
Europe 1,285 1,365 898 3,903 2,799
Rest of World 2,025 2,001 1,987 6,099 5,863
3,927 4,038 3,449 11,789 10,680
(a) Segment-level overhead expenses are included in the fuels business result.
(b) BP's share of income from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany is reported in the fuels business.
(c) For Downstream, fair value accounting effects arise solely in the fuels business.
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BP p.l.c. Group results
Third quarter and nine months 2017
Rosneft
Third Second Third Nine Nine
quarter quarter quarter months months
$ million 2017(a) 2017 2016 2017(a) 2016
Profit before interest and tax(b) 161 271 108 505 461
Inventory holding (gains) losses* (24) 8 12 10 (29)
RC profit before interest and tax 137 279 120 515 432
Net charge (credit) for non-operating items* - - - - -
Underlying RC profit before interest and tax* 137 279 120 515 432
Financial results
Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the
third quarter and nine months was $137 million and $515 million respectively, compared with $120 million and $432 million
for the same periods in 2016. There were no non-operating items in the third quarter and nine months of either year.
Compared with the same period in 2016, the result for the third quarter was primarily affected by higher oil prices and
favourable duty lag effects partially offset by adverse foreign exchange effects. For the nine months, the result was
primarily affected by higher oil prices partially offset by adverse foreign exchange effects.
In June 2017 Rosneft's annual general meeting adopted a resolution to pay dividends of 5.98 Russian roubles per ordinary
share. In July BP received a dividend in relation to the 2016 annual results of $190 million, after the deduction of
withholding tax.
BP's two nominees, Bob Dudley and Guillermo Quintero, were re-elected to Rosneft's board by the extraordinary general
meeting (EGM) on 29 September. The EGM also adopted a resolution to pay interim dividends for the first half of 2017 of
3.83 Russian roubles per ordinary share. BP expects to receive a dividend of approximately $120 million after the deduction
of withholding tax, subject to fluctuations in foreign exchange.
Key events
In August, Rosneft completed the acquisition of a 49.13% stake in Essar Oil Limited (EOL), an Indian downstream business,
from the Essar group.
In October Rosneft completed the deal to acquire a 30% stake in a concession agreement to develop the Zohr field in Egypt
from the Italian company Eni S.p.A.
Third Second Third Nine Nine
quarter quarter quarter months months
2017(a) 2017 2016 2017(a) 2016
Production(net of royalties) (BP share)
Liquids* (mb/d) 903 902 820 906 813
Natural gas (mmcf/d) 1,263 1,302 1,221 1,300 1,256
Total hydrocarbons* (mboe/d) 1,120 1,126 1,030 1,130 1,030
(a) The operational and financial information of the Rosneft segment for the third quarter and nine months of the year is based on preliminary operational and financial results of Rosneft for the nine months ended 30 September 2017. Actual results may differ
from these amounts.
(b) The Rosneft segment result includes equity-accounted earnings arising from BP's 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BP's purchase of its interest in Rosneft and the amortization of the deferred gain
relating to the divestment of BP's interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the third quarter and nine months 2017, as shown in the table above, compared with the equivalent amount in Russian
roubles that we expect Rosneft to report in its own financial statements under IFRS. BP's share of Rosneft's profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars
using the average exchange rate for the year to date. BP's share of Rosneft's earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation.
Top of page 11
BP p.l.c. Group results
Third quarter and nine months 2017
Other businesses and corporate
Third Second Third Nine Nine
quarter quarter quarter months months
$ million 2017 2017 2016 2017 2016
Profit (loss) before interest and tax
Gulf of Mexico oil spill (84) (347) (66) (466) (5,966)
Other (376) (374) (375) (1,146) (1,074)
Profit (loss) before interest and tax (460) (721) (441) (1,612) (7,040)
Inventory holding (gains) losses* - - - - -
RC profit (loss) before interest and tax (460) (721) (441) (1,612) (7,040)
Net charge (credit) for non-operating items*
Gulf of Mexico oil spill 84 347 66 466 5,966
Other (22) 8 115 (58) 260
Net charge (credit) for non-operating items 62 355 181 408 6,226
Underlying RC profit (loss) before interest and
tax* (398) (366) (260) (1,204) (814)
Underlying RC profit (loss) beforeinterest and
tax
US (145) (104) (107) (446) (326)
Non-US (253) (262) (153) (758) (488)
(398) (366) (260) (1,204) (814)
Non-operating items
US (92) (350) (168) (480) (6,152)
Non-US 30 (5) (13) 72 (74)
(62) (355) (181) (408) (6,226)
RC profit (loss) before interest and tax
US (237) (454) (275) (926) (6,478)
Non-US (223) (267) (166) (686) (562)
(460) (721) (441) (1,612) (7,040)
Other businesses and corporate comprises our alternative energy business, shipping, treasury, corporate activities
including centralized functions, and the costs of the Gulf of Mexico oil spill.
Financial results
The replacement cost loss before interest and tax for the third quarter and nine months was $460 million and $1,612 million
respectively, compared with $441 million and $7,040 million for the same periods in 2016.
The results included a net non-operating charge of $62 million for the third quarter and $408 million for the nine months,
compared with a net non-operating charge of $181 million and $6,226 million for the same periods in 2016.
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the third quarter
and nine months was $398 million
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