SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended March 31, 2002
BP p.l.c.
(Translation of registrant's name into English)
BRITANNIC HOUSE, 1 FINSBURY CIRCUS, LONDON, EC2M 7BA, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
------------------ ------------------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No |X|
------------------ ------------------
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO.
333-9790) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON
FORM F-3 (FILE NO. 333-65996) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 33-39075) OF BP AMERICA INC. AND BP
p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE
NO. 33-20338) OF BP AMERICA INC. AND BP p.l.c., THE PROSPECTUS INCLUDED IN THE
REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 33-29102) OF THE STANDARD OIL
COMPANY AND BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON
FORM F-3 (FILE NO. 333-83180) OF BP AUSTRALIA CAPITAL MARKETS LIMITED, BP CANADA
FINANCE COMPANY, BP CAPITAL MARKETS p.l.c., BP CAPITAL MARKETS AMERICA INC. AND
BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8
(FILE NO. 33-21868) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION
STATEMENT ON FORM S-8 (FILE NO. 333-9020) OF BP p.l.c., THE PROSPECTUS INCLUDED
IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-9798) OF BP p.l.c., THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-79399) OF BP p.l.c., AND THE PROSPECTUS INCLUDED IN THE REGISTRATION
STATEMENT ON FORM S-8 (FILE NO. 333-34968) OF BP p.l.c., AND THE PROSPECTUS
INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-67206) OF BP
p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE
NO. 333-74414) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH
THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS
SUBSEQUENTLY FILED OR FURNISHED.
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GROUP RESULTS JANUARY - MARCH 2002
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Turnover - $m 36,290 45,412
Total replacement cost operating profit - $m 2,058 5,472
Replacement cost profit before exceptional items - $m 924 3,001
Replacement cost profit for the period - $m 854 3,068
Historical cost profit for the period - $m 1,296 2,830
Profit per Ordinary Share - cents 5.78 12.59
Dividends per Ordinary Share - cents 5.75 5.25
---------------
(a) For further information on replacement cost profit see Note 6 of Notes to
Consolidated Financial Statements.
The following discussion should be read in conjunction with the consolidated
financial statements provided elsewhere in this Form 6-K and with the
consolidated financial statements and related notes for the year ended December
31, 2001 included in BP p.l.c.'s Annual Report on Form 20-F for the year ended
December 31, 2001. The financial information for 2001 has been restated to
reflect (i) the adoption by the Group of UK Financial Reporting Standard No. 19
(FRS 19) `Deferred Tax' with effect from January 1, 2002 and (ii) the transfer
of the solar, renewables and alternative fuels activities from Other businesses
and corporate to Gas and Power on January 1, 2002. To reflect this transfer, Gas
and Power has been renamed Gas, Power and Renewables from the same date. See
Note 2 of Notes to Consolidated Financial Statements for further information.
BP has acquired a 51% interest in and has consolidated Veba Oil with effect from
February 1, 2002.
The reduction in turnover for the first quarter primarily reflects significant
decreases in oil and natural gas prices.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) was $924 million for the three months ended March 31,
2002, compared with $3,001 million for the equivalent period of 2001. These
results are after charging special items of $185 million ($120 million after
tax) for the three months ended March 31, 2002, and $63 million ($40 million
after tax) for the equivalent period of 2001. The results for the three months
ended March 31, 2002 and 2001 are also after charging acquisition amortization
of $538 million and $671 million, respectively. Acquisition amortization refers
to depreciation relating to the fixed asset revaluation adjustments and
amortization of goodwill consequent upon the ARCO and Burmah Castrol
acquisitions in 2000. The special charges for the three months ended March 31,
2002 comprised restructuring charges for Upstream and Chemicals, Veba, Solvay
and Erdoelchemie integration costs and litigation costs. Those for the
corresponding period of 2001 comprise Burmah Castrol integration costs,
rationalization costs in the North European commercial and industrial business
in Refining and Marketing and a bond redemption charge.
The historical cost profit for the three months ended March 31, 2002 was $1,296
million including inventory holding gains of $473 million and after net
exceptional losses of $109 million ($70 million after tax) in respect of net
losses on the sale of fixed assets and businesses or termination of operations.
For the equivalent period of 2001 there was a profit of $2,830 million after
inventory holding losses of $238 million, and including net exceptional gains of
$218 million ($67 million after tax) in respect of net profits on the sale of
fixed assets and businesses or termination of operations.
Interest expense for the three months ended March 31, 2002 was $333 million
compared with $446 million (including $10 million relating to a bond redemption
charge) in the equivalent period of 2001, primarily reflecting lower interest
rates partly offset by higher net debt.
Page 2
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Net debt at March 31, 2002 was $22.9 billion. The ratio of net debt to net debt
plus equity was 25% compared to 23% at December 31, 2001. After adjusting for
the fixed asset revaluation adjustments and goodwill consequent upon the ARCO
and Burmah Castrol acquisitions, the ratio of net debt to net debt plus equity
was 32% at March 31, 2002 compared with 29% at December 31, 2001. In addition to
reported debt, BP uses conventional off balance sheet sources of finance such as
operating leases and associate and joint venture borrowing.
The Group has access to significant sources of liquidity in the form of
committed facilities and other funding through the capital markets. BP believes
that, taking into account the substantial amounts of undrawn borrowing
facilities available, the Group has sufficient working capital for foreseeable
requirements.
The net debt ratio and net cash outflow reflect the Veba acquisition in the
first quarter of 2002. Cash inflows from Veba related disposals will provide a
significant offset in the second quarter.
Net taxation, other than production taxes, charged for the three months ended
March 31, 2002 was $753 million compared with $2,168 million in the equivalent
period last year. The first quarter 2002 included a tax credit of $39 million in
respect of exceptional items compared with a tax charge of $151 million for the
first quarter of 2001. The tax charge for the three months ended March 31, 2002
declined in line with the fall in reported profits compared with the same
quarter last year. The effective tax rate on replacement cost profit before
exceptional items was 46% for the three months ended March 31, 2002, compared
with 40% for the equivalent period of 2001. The non-deductible acquisition
amortization was similar in both periods, consequently the effective tax rate
has risen from 40% to 46%.
The changes to UK North Sea tax announced in the recent budget proposals, under
which a supplementary charge would effectively increase the corporation tax rate
from 30% to 40% and provision would be made for 100% first year allowances on
capital expenditure, have no impact on first quarter results. If the budget
proposals are enacted, the changes will be effective from April 17, 2002. This
would increase the Group's tax charge rateably for the remainder of 2002 by
around an estimated $200 million, representing around a 2% increase in the
effective tax rate, on the basis of average oil prices experienced in the first
quarter, and additionally a one-off charge of around an estimated $350 million
would be made to increase the Group's deferred tax provision for the
supplementary corporation tax. The cash impact for the remainder of 2002 would,
it is anticipated, be broadly neutral, with accelerated capital allowances
offsetting the impact of the tax rate increase.
Capital expenditure and acquisitions in the first quarter of 2002 was $5.7
billion, including $2.6 billion for the Veba transaction, compared with $2.5
billion for the equivalent period in 2001. Excluding acquisitions, capital
expenditure for the first quarter 2002 was $3.1 billion, consistent with our
target of $12-13 billion for the year. Disposal proceeds were $0.3 billion, in
line with expectations.
Net cash outflow for the three months ended March 31, 2002 was $2.4 billion,
including $1.5 billion for the acquisition of 51% of Veba, net of cash acquired,
compared with an inflow of $3.2 billion for the equivalent period of 2001.
Compared to a year ago, operating cash flow was lower and tax, capital and
dividend payments were higher. Net cash inflow from operating activities was
$3.6 billion for the three months ended March 31, 2002, compared with $6.7
billion in the equivalent period in 2001.
The return on average capital employed on a replacement cost basis for the three
months ended March 31, 2002 was 6% compared with 16% for the equivalent period
of 2001. For further information on the return on average capital employed
calculation see page 53 of this report.
BP announced a first quarterly dividend for 2002 of 5.75 cents per ordinary
share. Holders of ordinary shares will receive 4.051 pence per share and holders
of American Depositary Receipts (ADRs) $0.345 per ADS. The dividend is payable
on June 10, 2002 to shareholders on the register on May 17, 2002. Participants
in the Dividend Reinvestment Plan or the dividend reinvestment facility in the
US Direct Access Plan will receive the dividend in the form of shares also on
June 10, 2002.
BP intends to continue to pay dividends in the future of around 60% of its
replacement cost profit before exceptional items after adjusting for special
items and acquisition amortization, adjusted to mid-cycle operating conditions.
Mid-cycle operating conditions reflect not only adjustments to hydrocarbon
prices and margins, but also costs and capacity utilization, to levels which we
would expect on average over the long term. The target dividend payout ratio has
been restated following adoption of FRS 19 on January 1, 2002 in order to
maintain the substance of the existing financial framework.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Owing to the significant acquisitions that took place in 2000, in addition to
its reported results, BP is presenting pro forma results adjusted for special
items in order to enable shareholders to assess current performance in the
context of BP's past performance and against that of its competitors. The pro
forma result is replacement cost profit before exceptional items excluding
acquisition amortization as defined in footnote (a) below. The pro forma result,
adjusted for special items, has been derived from BP's UK GAAP accounting
information but is not in itself a recognized UK or US GAAP measure.
Pro forma
Reconciliation of reported result
profit (loss) to pro forma result Acquisition Special adjusted for
adjusted for special items Reported amortization(a) items(b) special items
--------- ------------ ------- -------------
($ million)
Three months ended March 31, 2002
Exploration and Production 1,928 345 127 2,400
Gas, Power and Renewables 111 - - 111
Refining and Marketing 68 193 26 287
Chemicals 76 - 32 108
Other businesses and corporate (125) - - (125)
--------- --------- --------- ---------
Replacement cost operating profit 2,058 538 185 2,781
Interest expense (333) - - (333)
Taxation (792) - (65) (857)
Minority shareholders' interest (9) - - (9)
--------- --------- --------- ---------
Replacement cost profit before
exceptional items 924 538 120 1,582
--------- ========= ========= ---------
per ordinary share (cents) 4.12 7.06
========= =========
Three months ended March 31, 2001
Exploration and Production 4,666 470 - 5,136
Gas, Power and Renewables 100 - - 100
Refining and Marketing 740 201 53 994
Chemicals 81 - - 81
Other businesses and corporate (115) - - (115)
--------- --------- --------- ---------
Replacement cost operating profit 5,472 671 53 6,196
Interest expense (446) - 10 (436)
Taxation (2,017) - (23) (2,040)
Minority shareholders' interest (8) - - (8)
--------- --------- --------- ---------
Replacement cost profit before
exceptional items 3,001 671 40 3,712
--------- ========= ========= ---------
per ordinary share (cents) 13.35 16.51
========= =========
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustments and amortization of goodwill consequent upon the
ARCO and Burmah Castrol acquisitions in 2000.
(b) The special items refer to non-recurring charges and credits. The special
items for the first quarter 2002 comprise restructuring charges for
Upstream and Chemicals, Veba, Solvay and Erdoelchemie integration costs and
litigation costs. The special items for the first quarter 2001 comprise
Burmah Castrol integration costs, rationalization costs in the North
European commercial and industrial business in Refining and Marketing and a
bond redemption charge. The taxation credit relating to special items has
been calculated using a tax rate of 35% (2001, 36.5%).
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
DETAILED REVIEW OF BUSINESSES (EXCLUDING EXCEPTIONAL ITEMS)
EXPLORATION AND PRODUCTION
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Turnover - $m 5,638 9,117
Total replacement cost operating profit - $m 1,928 4,666
Results included:
Exploration expense - $m 124 169
Of which: Exploration expenditure written off - $m 59 108
Key Statistics:
Crude oil (a) Average prices realized by BP - $/bbl 18.77 24.80
Production - mb/d 1,989 1,937
Natural gas Average prices realized by BP - $/mcf 2.27 4.96
Production - mcf/d 8,746 8,895
Brent oil price - $/bbl 21.13 25.75
West Texas Intermediate oil price - $/bbl 21.54 28.71
Alaska North Slope US West Coast - $/bbl 19.76 24.93
Henry Hub gas price (b) - $/mmBtu 2.35 7.08
---------------
(a) Crude oil and natural gas liquids
(b) Henry Hub First of the Month Index
The reduction in turnover for the three months ended March 31, 2002 compared to
the same quarter in 2001 reflects the lower oil and natural gas prices in the
current quarter.
Total replacement cost operating profit for the three months ended March 31,
2002 was $1,928 million compared with $4,666 million for the equivalent period
in 2001. The result for the first quarter 2002 is after special charges of $127
million comprising severance and litigation costs. The severance costs reflect
the significant restructuring which is underway to reposition the business in
North America and the North Sea. The results are also after charging
depreciation and amortization arising from the fixed asset revaluation
adjustments and goodwill consequent upon the ARCO acquisition in 2000 of $345
million and $470 million for the first quarter of 2002 and 2001, respectively.
Replacement cost operating profit for the quarter was significantly affected by
lower oil and natural gas prices. Average liquids realizations declined by
around $6 a barrel. In particular, US realizations were down over $7 a barrel,
with WTI averaging close to Brent in the current quarter compared with a premium
over Brent of close to $3 a barrel a year ago. Average natural gas realizations
were down some $2.70 per thousand cubic feet. As US natural gas is sold on a
first of the month basis, the improvement in the Henry Hub price late in the
quarter has not benefited first quarter realizations.
Production is on track to deliver 5.5% growth for the year with the overall
growth being back-end loaded due to the timing of project start-ups. First
quarter production of 3,497 mboe/d was up 0.75% on a year ago, reflecting the
benefits of new start-ups at Northstar in Alaska, Tambar in Norway and Girassol
in Angola as well as increased production in the Marlin and Pompano fields in
the Gulf of Mexico. These more than offset the effects of OPEC quota reductions
affecting our production in Abu Dhabi, Venezuela and Norway, abnormally warm
weather in the UK (impacting gas liftings), and the sale of certain UK Southern
North Sea assets in 2001, amounting in total to around 100 mboe/d. Liquids
production increased by 2.7%, with gas production down around 1.7%.
In mid April, the King field in the Gulf of Mexico came on stream, projected to
be followed by other Gulf of Mexico fields, Princess in the second quarter,
King's Peak in the third quarter and Horn Mountain in the fourth quarter. In
addition, the second LNG train in Trinidad is expected to come on stream in the
third quarter.
In support of continued growth, capital expenditure for the quarter was $2.3
billion, $0.4 billion higher than last year. During the quarter, developments
were approved for the Edfu oil discovery in Egypt and Viscount in the UK North
Sea.
In mid April, BP announced that it was acquiring an additional interest in
Sidanco, an integrated Russian oil and gas company, for $375 million. This
increases BP's interest to 25% plus one share, in line with its current voting
rights.
Page 5
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
GAS, POWER AND RENEWABLES
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Turnover - $m 7,768 12,122
Total replacement cost operating profit - $m 111 100
On January 1, 2002, the solar, renewables and alternative fuels activities were
transferred from Other businesses and corporate to Gas and Power. To reflect
this transfer, Gas and Power has been renamed Gas, Power and Renewables from the
same date and comparative information has been restated.
Turnover for the three months ended March 31, 2002 was $7,768 million compared
with $12,122 million for the same period in 2001. Despite increased gas sales
volumes, turnover decreased due to substantially lower gas prices during the
period, particularly in North America.
Replacement cost operating profit for the three months ended March 31, 2002 was
$111 million compared with $100 million for the same period in 2001. The result
reflects higher profit from the NGL business, partly offset by lower profit from
trading and marketing. NGL profit has increased, despite lower volumes, due to
margins returning to more normal levels compared to the exceptionally low levels
of a year ago. The trading and marketing result is down due to lower margins. BP
Solar production was up over 30% on a year ago.
Page 6
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
REFINING AND MARKETING
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Turnover - $m 24,889 28,523
Total replacement cost operating profit - $m 68 740
Total refined product sales - mb/d 6,500 5,953
Refinery throughputs - mb/d 2,994 2,911
Global Indicator Refining Margin (a) - $/bbl 1.64 4.25
---------------
(a) The Global Indicator Refining Margin (GIM) is the average of seven regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity.
Turnover for the three months ended March 31, 2002 was $24,889 million compared
with $28,523 million for the same period in the prior year. The decrease in
turnover for the first quarter 2002 primarily reflects lower fuel prices.
Replacement cost operating profit for the three months ended March 31, 2002 was
$68 million, compared with $740 million a year ago. The result for the first
quarter 2002 is after special charges of $26 million comprising Veba Oil
integration costs. Special charges for the first quarter of 2001 comprise Burmah
Castrol integration costs and rationalization costs in the North European
commercial and industrial business. The results are also after charging
depreciation and amortization arising from the fixed asset revaluation
adjustments and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions in 2000 of $193 million and $201 million for the first quarter of
2002 and 2001, respectively. The first quarter 2002 result includes Veba Oil
results from February 1. The decrease in replacement cost operating profit of
$672 million reflects significantly lower worldwide refining margins and lower
retail margins, particularly in the USA. Refining margins were down some 60%
worldwide versus first quarter 2001 with significant drops in Europe and the USA
where the majority of BP's refineries are located. US retail margins were down
approximately 60% compared to a year ago and 80% compared to last quarter.
Partially offsetting the lower margins were reduced operating costs that
reflected decreased refinery fuel and electricity costs in the US and ongoing
cost reduction programmes.
Refining throughputs increased by 3% compared with the first quarter of 2001,
due to the effect of the Veba acquisition, which more than offset the
divestments of the Mandan, South Dakota and Salt Lake City, Utah, refineries in
the USA. Marketing volumes increased by 5%, reflecting the impact of the Veba
acquisition; excluding Veba, marketing sales were down approximately 3%, due to
lower aviation and commercial sales.
During the quarter, BP opened an additional 32 BP Connect stations, primarily in
the USA and in London, England, bringing the total number of BP Connect stations
worldwide to 371. An additional 300 sites were reimaged in the first quarter,
bringing the total number of sites with the BP Helios to some 5,300 worldwide.
In February, BP reached agreement to sell its Yorktown, Virginia refinery. The
sale is expected to be completed in the second quarter. In addition, BP
completed the sale of its network of 21 service stations in Japan to Japan
Energy at the end of March.
Also in February, Edinburgh, Scotland became the first city in the world where
BP supplies both sulphur-free unleaded gasoline and sulphur-free diesel. The
sulphur-free products will be available at 18 service stations in the Edinburgh
area, supplied from the Grangemouth refinery.
Page 7
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
CHEMICALS
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Turnover - $m 2,642 2,689
Total replacement cost operating profit - $m 76 81
Production (a) - kte 6,611 5,377
Chemicals Indicator Margin (b) - $/te 96(c) 106
---------------
(a) Includes BP share of joint ventures, associated undertakings and other
interests in production.
(b) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Amongst the products and businesses
covered in the CIM are olefins and derivatives, aromatics and derivatives,
linear alpha-olefins, acetic acid, vinyl acetate monomer and nitriles. Not
included are fabrics and fibres, plastic fabrications, poly alpha-olefins,
anhydrides, engineering polymers and carbon fibres, speciality
intermediates, and the remaining parts of the solvents and acetyls
businesses.
(c) Provisional. The data for the first quarter is based on two months' actuals
and one month of provisional data.
Turnover for the three months ended March 31, 2002 was $2,642 million, and was
broadly flat compared with $2,689 million for the equivalent period in 2001.
Replacement cost operating profit for the three months ended March 31, 2002, was
$76 million, compared with $81 million for the equivalent period in 2001. The
result for the first quarter 2002 is after special charges of $32 million
related to major site restructuring and Solvay and Erdoelchemie integration.
Excluding special charges, the result for the first quarter of 2002 reflects
increased volumes due to 100% ownership of Erdoelchemie and the effect of the
Solvay transaction and slightly lower fixed costs, partly offset by lower
margins caused by higher feedstock prices, mainly in Europe.
Chemicals production of 6,611 thousand tonnes in the first quarter was 1,234
thousand tonnes above the same quarter last year. Higher production was the
result of improving demand and increased capacity from both new plants coming on
stream and the Solvay, Erdoelchemie and Veba transactions.
As part of the ongoing restructuring of our portfolio, we announced the closure
of polypropylene capacity: one production line at Chocolate Bayou and the
facility at Cedar Bayou, both in Texas, USA. We also announced the sale of parts
of our plastics fabrication business as part of our overall plan to divest
non-core businesses.
Page 8
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
OTHER BUSINESSES AND CORPORATE
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Turnover - $m 135 127
Replacement cost operating profit - $m (125) (115)
Other businesses and corporate comprises Finance, the Group's coal asset and
aluminium asset, its investments in PetroChina and Sinopec, interest income and
costs relating to corporate activities.
EXCEPTIONAL ITEMS
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Profit (loss) on sale of fixed assets and
businesses and termination of operations - $m (109) 218
Taxation credit (charge) - $m 39 (151)
------- -------
Exceptional items after taxation - $m (70) 67
------- -------
Exceptional items for the first quarter of 2002 include the loss on closure of
certain polypropylene facilities in Texas, USA.
OUTLOOK
Led by the USA, the world economy is showing signs of demand recovery following
its recent growth pause. However, the margin environment for the downsteam and
chemicals businesses remains challenging.
Crude oil prices have risen since the end of February as the market tightens in
response to OPEC's January production cuts and some recovery in demand. The risk
of Middle East supply disruption is keeping the market volatile and providing
some additional support to prices. The crude oil market is expected to be
broadly balanced in the second quarter, with average realizations currently
anticipated to be higher than in the first quarter.
US natural gas prices have risen in line with higher oil prices despite the
overhang of gas in storage. Evidence of a recovery in demand and reduced
drilling activity impacting North American production is creating an expectation
that inventories will reduce and that supply and demand will rebalance over the
course of the year. For the second quarter, North American gas realizations are
currently anticipated to be higher than in the first quarter.
Upstream production growth in 2002 is projected to be biased towards the second
half of the year. Scheduled 2002 second quarter production from both new and
existing fields should see year-on-year second quarter production moving towards
our annual 5.5% growth target - leaving us on track to meet our performance goal
by the end of the year.
During April refining margins recovered towards the levels seen in the fourth
quarter of last year, with relative strength in the USA offset by continued
weakness in Europe and Asia. The recovery in margins was driven by higher US
gasoline refining margins as US gasoline stocks fell close to normal seasonal
levels. More recently, higher crude prices and increased US product stocks have
put pressure on refining margins, which have fallen back to the levels seen in
the first quarter. We expect continued margin volatility .
Since mid-March, US retail marketing margins have shown improvement from the
extremely depressed levels earlier in the first quarter. European marketing
margins have been under pressure recently due to product price increases, but
are still above the second quarter of last year. On average, global second
quarter marketing margins are currently anticipated to be similar to a year ago.
Chemical margins remain depressed and vulnerable to increases in feedstock
prices. There is, however, continued evidence of a pick-up in volumes.
Capital expenditure is on track for the year's target of $12-13 billion,
excluding acquisitions. The net debt ratio, which was above the mid point of the
25-35% range in the first quarter, following the Veba purchase, should move
towards the middle of the range during the second quarter with the expected
receipt of most of the proceeds from the sale of the Veba upstream assets.
Page 9
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - concluded
FORWARD-LOOKING STATEMENTS
In order to utilize the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, BP is providing the following
cautionary statement. The foregoing discussion, in particular, although not
limited to, the statements under 'Outlook', with regard to trends in the trading
environment, oil and gas prices and margins, inventory and product stock levels,
capacity utilization, capital expenditure, working capital, profitability,
results of operation, dividend payments, liquidity or financial position and
statements regarding our targets are all forward-looking in nature.
Forward-looking statements are also identified by such phrases as 'will',
'expects', 'is expected to, 'should', 'may', 'is likely to', 'intends' and
'believes'. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future and are outside the control of BP. Actual results may differ
materially from those expressed in such statements, depending on a variety of
factors, including the specific factors identified in the discussions
accompanying such forward-looking statements; future levels of industry product
supply, demand and pricing; political stability and economic growth in relevant
areas of the world; development and use of new technology and successful
partnering; the actions of competitors; natural disasters and other changes to
business conditions; wars and acts of terrorism or sabotage; and other factors
discussed elsewhere in this report. These and other factors may cause actual
results and developments to differ materially from those expressed or implied by
these forward-looking statements. Additional information, including information
on factors which may affect BP's business, is contained in BP's Annual Report
and Accounts for 2001 and in the Annual Report on Form 20-F for 2001 filed with
the US Securities and Exchange Commission.
2001 DIVIDENDS
On April 30, 2002, BP p.l.c. announced a first quarterly dividend for 2002 of
5.75 cents per ordinary share of 25 cents (ordinary shares), representing $0.345
per American Depositary Share (ADS) amounting to $1,290 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares is May 17, 2002, with payment to be made on
June 10, 2002.
The dividend payable on June 10, 2002 entitles qualifying US ADS shareholders to
a refund of the 1/9th UK tax credit (approximately $0.038) attaching to the
dividend less a UK withholding tax limited to the amount of the tax credit. The
effect of these arrangements for ADS holders is currently a cash payment of
$0.345, a gross dividend for tax purposes of $0.383 and a potential tax credit
of $0.038 per ADS.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan will receive the dividend in the form of shares on June 10, 2002.
Page 10
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million, except per
share amounts)
Turnover - Note 3 36,569 45,700
Less: joint ventures 279 288
------- -------
Group turnover 36,290 45,412
Replacement cost of sales 31,553 37,188
Production taxes - Note 4 247 583
------- -------
Gross profit 4,490 7,641
Distribution and administration expenses 2,691 2,526
Exploration expense - Note 5 124 169
------- -------
1,675 4,946
Other income 125 195
------- -------
Group replacement cost operating profit 1,800 5,141
Share of profits of joint ventures 70 102
Share of profits of associated undertakings 188 229
------- -------
Total replacement cost operating profit - Note 6 2,058 5,472
Profit (loss) on sale of fixed assets and businesses
or termination of operations - Note 7 (109) 218
------- -------
Replacement cost profit before interest and tax - Note 6 1,949 5,690
Inventory holding gains (losses) - Note 8 473 (238)
------- -------
Historical cost profit before interest and tax 2,422 5,452
Interest expense - Note 9 333 446
------- -------
Profit before taxation 2,089 5,006
Taxation - Note 10 753 2,168
------- -------
Profit after taxation 1,336 2,838
Minority shareholders' interest 40 8
------- -------
Profit for the period (a) 1,296 2,830
======= =======
Earnings per ordinary share - cents (a)
Basic 5.78 12.59
Diluted 5.75 12.51
------- -------
Earnings per American depositary share - cents (a)
Basic 34.68 75.54
Diluted 34.50 75.06
------- -------
Average number of outstanding ordinary shares (millions) 22,403 22,474
======= =======
---------------
(a) A summary of the material adjustments to profit for the period which would
be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 11
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2002 December 31, 2001
(Unaudited)
-------------- -----------------
($ million)
Fixed assets
Intangible assets 16,089 16,489
Tangible assets 81,944 77,410
Investments 12,000 11,963
-------- --------
110,033 105,862
Current assets
Business held for resale 2,090 -
Inventories 8,698 7,631
Receivables 28,784 26,669
Investments 286 450
Cash at bank and in hand 1,379 1,358
-------- --------
41,237 36,108
-------- --------
Current liabilities - falling due within one year
Finance debt 11,063 9,090
Accounts payable and accrued liabilities 31,648 28,524
-------- --------
42,711 37,614
-------- --------
Net current assets (liabilities) (1,474) (1,506)
-------- --------
Total assets less current liabilities 108,559 104,356
Noncurrent liabilities
Finance debt 13,468 12,327
Accounts payable and accrued liabilities 3,137 3,086
Provisions for liabilities and charges
Deferred tax 12,021 11,702
Other 12,452 11,482
-------- --------
41,078 38,597
-------- --------
Net assets 67,481 65,759
Minority shareholders' interest 2,579 598
-------- --------
BP shareholders' interest (a) - Note 14 64,902 65,161
======== ========
Represented by:
Capital shares
Preference 21 21
Ordinary 5,614 5,608
Paid-in surplus 4,100 4,014
Merger reserve 27,016 26,983
Retained earnings 27,961 28,312
Other reserves 190 223
-------- --------
64,902 65,161
======== ========
---------------
(a) A summary of the material adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 12
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Net cash inflow from operating activities 3,636 6,740
------- -------
Dividends from joint ventures 83 12
------- -------
Dividends from associated undertakings 53 110
------- -------
Servicing of finance and returns on investments
Interest received 48 91
Interest paid (309) (361)
Dividends received 2 8
Dividends paid to minority shareholders (13) -
------- -------
Net cash outflow from servicing of finance
and returns on investments (272) (262)
------- -------
Taxation
UK corporation tax (187) (204)
Overseas tax (258) 65
------- -------
Tax paid (445) (139)
------- -------
Capital expenditure
Payments for fixed assets (2,799) (2,577)
Proceeds from the sale of fixed assets 317 694
------- -------
Net cash outflow for capital expenditure (2,482) (1,883)
------- -------
Acquisitions and disposals
Investments in associated undertakings (143) (120)
Acquisitions, net of cash acquired (1,550) -
Net investment in joint ventures (46) (61)
Proceeds from the sale of businesses 31 -
------- -------
Net cash (outflow) inflow for acquisitions and disposals (1,708) (181)
------- -------
Equity dividends paid (1,288) (1,181)
------- -------
Net cash inflow (outflow) (2,423) 3,216
======= =======
Financing (2,283) 2,866
Management of liquid resources (165) 302
Increase (decrease) in cash 25 48
------- -------
(2,423) 3,216
======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 13
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - continued
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Reconciliation of historical cost profit before interest
and tax to net cash inflow from operating activities
Historical cost profit before interest and tax 2,422 5,452
Depreciation and amounts provided 2,153 2,167
Exploration expenditure written off 59 108
Share of profits of joint ventures and associated undertakings (256) (331)
Interest and other income (63) (103)
(Profit) loss on sale of fixed assets and businesses 109 (218)
Charge for provisions 169 165
Utilization of provisions (238) (306)
Decrease (increase) in stocks (496) 358
Decrease (increase) in debtors (410) (1,069)
Increase (decrease) in creditors 187 517
------- -------
Net cash inflow from operating activities 3,636 6,740
======= =======
Financing
Long-term borrowing (1,746) (517)
Repayments of long-term borrowing 234 146
Short-term borrowing (3,499) (161)
Repayments of short-term borrowing 2,819 2,955
------- -------
(2,192) 2,423
Issue of ordinary share capital (91) (56)
Repurchase of ordinary share capital - 499
------- -------
Net cash (inflow) outflow from financing (2,283) 2,866
======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 14
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the interim periods are unaudited and in the opinion of
management include all adjustments necessary for a fair presentation of the
results for the periods presented. The interim financial statements and
notes included in this Report should be read in conjunction with the
consolidated financial statements and related notes for the year ended
December 31, 2001 included in BP's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
2. Restatement of comparative information
Comparative information for 2001 has been restated to reflect the changes
described below.
(a) Transfer of solar, renewables and alternative fuels activities
With effect from January 1, 2002, the solar, renewables and
alternative fuels activities have been transferred from Other
businesses and corporate to Gas and Power. To reflect this transfer
Gas and Power has been renamed Gas, Power and Renewables from the same
date.
(b) New accounting standard for deferred tax
With effect from January 1, 2002 BP has adopted Financial Reporting
Standard No.19 'Deferred Tax' (FRS 19). This standard generally
requires that deferred tax should be provided on a full liability
basis rather than on a restricted liability basis as required by
Statement of Standard Accounting Practice No.15 'Accounting for
Deferred Tax'. The adoption of FRS 19 has been treated as a change in
accounting policy.
Under FRS 19 deferred tax is recognised in respect of all timing
differences that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will result in
an obligation to pay more, or right to pay less tax in the future. In
particular:
o Provision is made for tax on gains arising from the disposal of fixed
assets that have been rolled over into replacement assets, only to the
extent that, at the balance sheet date, there is a binding agreement
to dispose of the replacement assets concerned. However, no provision
is made where, on the basis of all available evidence at the balance
sheet date, it is more likely than not that the taxable gain will be
rolled over into replacement assets and charged to tax only where the
replacement assets are sold.
o Provision is made for deferred tax that would arise on remittance of
the retained earnings of overseas subsidiaries, joint ventures and
associated undertakings only to the extent that, at the balance sheet
date, dividends have been accrued as receivable.
Deferred tax assets are recognised only to the extent that it is considered
more likely than not that there will be suitable taxable profits from which
the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are
expected to apply in the periods in which timing differences reverse, based
on tax rates and laws enacted or substantively enacted at the balance sheet
date.
As a consequence of adopting FRS 19 acquisitions have been restated as if
the new standard applied at that time. This leads to the creation of higher
deferred tax liabilities and greater amounts of goodwill on those
acquisitions.
Page 15
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement of comparative information (continued)
Income statement Restated Reported
-------- --------
Three months ended March 31, 2001 ($ million, except per
share amounts)
Turnover
Less: joint ventures 45,700 45,700
Group turnover 288 288
-------- --------
45,412 45,412
Replacement cost of sales 37,188 37,161
Production taxes 583 583
-------- --------
Gross profit 7,641 7,668
Distribution and administration expenses 2,526 2,526
Exploration expense 169 169
-------- --------
4,946 4,973
Other income 195 195
-------- --------
Group replacement cost operating profit 5,141 5,168
Share of profits of joint ventures 102 102
Share of profits of associated undertakings 229 229
-------- --------
Total replacement cost operating profit 5,472 5,499
Profit (loss) on sale of fixed assets and
businesses or termination of operations 218 218
-------- --------
Replacement cost profit before interest and tax 5,690 5,717
Stock holding gains (losses) (238) (238)
-------- --------
Historical cost profit before interest and tax 5,452 5,479
Interest expense 446 446
-------- --------
Profit before taxation 5,006 5,033
Taxation 2,168 1,718
-------- --------
Profit (loss) after taxation 2,838 3,315
Minority shareholders' interest 8 11
-------- --------
Profit (loss) for the period 2,830 3,304
======== ========
Distribution to shareholders 1,178 1,178
-------- --------
Earnings per ordinary share - cents
Basic 12.59 14.70
Diluted 12.51 14.61
========= ========
Total replacement cost operating profit, by business
Exploration and Production 4,666 4,680
Gas, Power and Renewables 100 112
Refining and Marketing 740 753
Chemicals 81 81
Other businesses and corporate (115) (127)
-------- --------
5,472 5,499
======== ========
Page 16
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement of comparative information (concluded)
Balance sheet at December 31, 2001 Restated Reported
-------- --------
($ million)
Fixed assets
Intangible assets 16,489 15,593
Tangible assets 77,410 77,410
Investments 11,963 12,047
-------- --------
105,862 105,050
-------- --------
Current assets 36,108 36,108
Current liabilities - amounts falling due within one year 37,614 37,614
-------- --------
Net current liabilities (1,506) (1,506)
-------- --------
Total assets less current liabilities 104,356 103,544
Noncurrent liabilities 15,413 15,413
Provisions for liabilities and charges
Deferred taxation 11,702 1,655
Other provisions 11,482 11,482
-------- --------
Net assets 65,759 74,994
Minority shareholders' interest 598 627
-------- --------
BP shareholders' interest 65,161 74,367
======== ========
Page 17
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
3. Turnover
By business
Exploration and Production 5,638 9,117
Gas, Power and Renewables 7,768 12,122
Refining and Marketing 24,889 28,523
Chemicals 2,642 2,689
Other businesses and corporate 135 127
------- -------
41,072 52,578
Less: sales between businesses 4,782 7,166
------- -------
Group excluding joint ventures 36,290 45,412
Sales of joint ventures 279 288
------- -------
36,569 45,700
======= =======
By geographical area
UK 10,995 11,940
Rest of Europe 9,119 8,975
USA 15,265 22,491
Rest of World 6,984 9,691
------- -------
42,363 53,097
Less: Sales between areas 6,073 7,685
------- -------
36,290 45,412
======= =======
4. Production taxes
UK petroleum revenue tax 63 238
Overseas production taxes 184 345
------- -------
247 583
======= =======
5. Exploration expense
Exploration and Production
UK 6 4
Rest of Europe 23 2
USA 42 93
Rest of World 53 70
------- -------
124 169
======= =======
6. Replacement cost profit
Replacement cost profits reflect the current cost of supplies. The
replacement cost profit for the period is arrived at by excluding from the
historical cost profit inventory holding gains and losses. These are the
difference between the amount that is charged to cost of sales on a
first-in, first-out (FIFO) basis of inventory valuation and the amount
charged to cost of sales based on the average cost of supplies incurred
during the period. The former basis is used in arriving at the historical
cost result whereas the latter basis is used in arriving at the replacement
cost result. For further discussion of replacement cost operating profit
see Item 3 of BP`s Annual Report on Form 20-F for the year ended December
31, 2001.
Page 18
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
7. Analysis of exceptional items
Profit (loss) on sale of fixed assets and
businesses or termination of operations
Exploration and Production 5 (42)
Gas, Power and Renewables - (1)
Refining and Marketing (45) 265
Chemicals (60) (6)
Other businesses and corporate (9) 2
------- -------
Exceptional items before taxation (109) 218
Taxation (charge) credit 39 (151)
------- -------
Exceptional items after taxation (70) 67
======= =======
8. Inventory holding gains (losses)
Exploration and Production 3 9
Gas, Power and Renewables 4 (11)
Refining and Marketing 495 (243)
Chemicals (29) 7
------- -------
473 (238)
Minority shareholders' interest 31 -
------- -------
442 (238)
======= =======
9. Interest expense
Group interest payable (a) 267 367
Capitalized (15) (34)
------- -------
252 333
Joint ventures 14 20
Associated undertakings 24 40
Unwinding of discount on provisions 43 53
------- -------
333 446
======= =======
(a)Includes charges relating to the early redemption of debt - 10
------- -------
10.Charge for taxation
Current 533 1,735
Deferred 220 433
------- -------
753 2,168
======= =======
United Kingdom 189 272
Overseas 564 1,896
------- -------
753 2,168
======= =======
11.Reconciliation of replacement cost results
Historical cost profit (loss) for the period 1,296 2,830
Inventory holding (gains) losses net of minority
shareholders' interest of $31 million (2001 nil) (442) 238
------- -------
Replacement cost profit for the period 854 3,068
Exceptional items, net of a tax credit of $39 million
(2001 charge $151 million) 70 (67)
------- -------
Replacement cost profit before exceptional items 924 3,001
------- -------
Earnings per ordinary share - cents
On replacement cost profit before exceptional items 4.12 13.35
======= =======
Page 19
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis
Gas, Other
Exploration Power Refining businesses
By business and and and and
Production Renewables Marketing Chemicals corporate Eliminations Total
----------- ---------- --------- --------- ---------- ------------ -----
($ million)
Three months ended March 31, 2002
Group turnover
- third parties 2,091 7,313 24,221 2,530 135 - 36,290
- sales between businesses 3,547 455 668 112 - (4,782) -
------ ------ ------ ------ ------ ------ ------
5,638 7,768 24,889 2,642 135 (4,782) 36,290
------ ------ ------ ------ ------ ------ ------
Share of sales by joint ventures 95 - 77 107 - - 279
------ ------ ------ ------ ------ ------ ------
Equity accounted income 125 54 51 11 17 - 258
------ ------ ------ ------ ------ ------ ------
Total replacement cost
operating profit (loss) 1,928 111 68 76 (125) - 2,058
Exceptional items 5 - (45) (60) (9) - (109)
Inventory holding gains (losses) 3 4 495 (29) - - 473
------ ------ ------ ------ ------ ------ ------
Historical cost profit (loss)
before interest and tax 1,936 115 518 (13) (134) - 2,422
------ ------ ------ ------ ------ ------ ------
Capital expenditure and acquisitions 2,313 46 3,137 188 52 - 5,736
Gas, Other
Exploration Power Refining businesses
By business and and and and
Production Renewables Marketing Chemicals corporate Eliminations Total
----------- ---------- --------- --------- ---------- ------------ -----
($ million)
Three months ended March 31, 2001
Group turnover
- third parties 3,498 11,333 27,818 2,636 127 - 45,412
- sales between businesses 5,619 789 705 53 - (7,166) -
------ ------ ------ ------ ------ ------ ------
9,117 12,122 28,523 2,689 127 (7,166) 45,412
------ ------ ------ ------ ------ ------ ------
Share of sales by joint ventures 195 - 93 - - - 288
------ ------ ------ ------ ------ ------ ------
Equity accounted income 179 56 42 44 10 - 331
------ ------ ------ ------ ------ ------ ------
Total replacement cost
operating profit (loss) 4,666 100 740 81 (115) - 5,472
Exceptional items (42) (1) 265 (6) 2 - 218
Inventory holding gains (losses) 9 (11) (243) 7 - - (238)
------ ------ ------ ------ ------ ------ ------
Historical cost profit (loss)
before interest and tax 4,633 88 762 82 (113) - 5,452
------ ------ ------ ------ ------ ------ ------
Capital expenditure and acquisitions 1,866 36 370 216 49 - 2,537
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis (continued)
By geographical area Rest of Rest of
UK Europe USA World Eliminations Total
----- ------ ----- ------- ------------ -----
($ million)
Three months ended March 31, 2002
Group turnover - third parties 8,412 7,318 14,998 5,562 - 36,290
- sales between areas 2,583 1,801 267 1,422 (6,073) -
------ ------ ------ ------ ------ ------
10,995 9,119 15,265 6,984 (6,073) 36,290
------ ------ ------ ------ ------ ------
Share of sales by joint ventures 32 56 43 148 - 279
------ ------ ------ ------ ------ ------
Equity accounted income - 61 55 142 - 258
------ ------ ------ ------ ------ ------
Total replacement cost operating profit 530 386 158 984 - 2,058
Exceptional items (9) 10 (109) (1) - (109)
Inventory holding gains (losses) 46 112 284 31 - 473
------ ------ ------ ------ ------ ------
Historical cost profit before
interest and tax 567 508 333 1,014 - 2,422
------ ------ ------ ------ ------ ------
Capital expenditure and acquisitions 409 2,852 1,531 944 - 5,736
By geographical area Rest of Rest of
UK Europe USA World Eliminations Total
----- ------ ----- ------- ------------ -----
($ million)
Three months ended March 31, 2001
Group turnover - third parties 8,564 7,004 21,950 7,894 - 45,412
- sales between areas 3,376 1,971 541 1,797 (7,685) -
------ ------ ------ ------ ------ ------
11,940 8,975 22,491 9,691 (7,685) 45,412
------ ------ ------ ------ ------ ------
Share of sales by joint ventures - - 87 201 - 288
------ ------ ------ ------ ------ ------
Equity accounted income 12 82 64 173 - 331
------ ------ ------ ------ ------ ------
Total replacement cost operating profit 927 485 2,685 1,375 - 5,472
Exceptional items 10 2 239 (33) - 218
Inventory holding gains (losses) (47) (75) (146) 30 - (238)
------ ------ ------ ------ ------ ------
Historical cost profit before
interest and tax 890 412 2,778 1,372 - 5,452
------ ------ ------ ------ ------ ------
Capital expenditure and acquisitions 394 139 1,210 794 - 2,537
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
13.Analysis of changes in net debt
Opening balance
Finance debt 21,417 21,190
Less: Cash 1,358 1,170
Current asset investments 450 661
------- -------
Opening net debt 19,609 19,359
------- -------
Closing balance
Finance debt 24,531 18,788
Less: Cash 1,379 1,188
Current asset investments 286 959
------- -------
Closing net debt 22,866 16,641
------- -------
(Increase) decrease in net debt (3,257) 2,718
======= =======
Movement in cash/bank overdrafts 25 48
(Decrease) increase in current asset investments (165) 302
Net cash (inflow) outflow from financing
(excluding share capital) (2,192) 2,423
Other movements 25 31
Debt acquired (999) -
------- -------
Movements in net debt before exchange effects (3,306) 2,804
Exchange adjustments 49 (86)
------- -------
(Increase) decrease in net debt (3,257) 2,718
======= =======
14.Movement in BP shareholders' interest $ million
(Unaudited)
Balance at December 31, 2001 74,367
Prior year adjustment - change in accounting policy
(see Note 2) (9,206)
-------
As restated 65,161
Profit for the period 1,296
Distribution to shareholders (1,290)
Currency translation differences (356)
Employee share schemes 91
-------
Balance at March 31, 2002 64,902
=======
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles
The consolidated financial statements of the BP Group are prepared in
accordance with UK GAAP which differs in certain respects from US GAAP. The
principal differences between US GAAP and UK GAAP for BP Group reporting
relate to the following:
(i) Group consolidation
Where the Group conducts activities through a joint arrangement that
is not carrying on a trade or business in its own right the Group
accounts for its own assets, liabilities and cash flows of the
activity measured according to the terms of the arrangement. For the
Group this method of accounting applies to certain oil and natural gas
activities and undivided interests in pipelines. US GAAP permits these
activities to be accounted for by proportional consolidation, which is
equivalent to UK GAAP.
Joint ventures and associated undertakings are accounted for by the
equity method. UK GAAP requires the consolidated financial statements
to show separately the Group proportion of operating profit or loss,
exceptional items, inventory holding gains or losses, interest expense
and taxation of associated undertakings and joint ventures. In
addition the turnover of joint ventures should be disclosed. For US
GAAP the after tax profits or losses (i.e. operating results after
exceptional items, inventory holding gains or losses, interest expense
and taxation) are included in the income statement as a single line
item.
UK GAAP requires the Group's share of the gross assets and gross
liabilities of joint ventures to be shown on the face of the balance
sheet whereas under US GAAP the net investment is included as a single
line item.
The following summarizes the reclassifications for associates and
joint ventures necessary to accord with US GAAP.
Three months ended March 31, 2002
(Unaudited)
---------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
--------------------------------------------------
($ million)
Consolidated statement of income
Other income 125 153 278
Share of profits of JVs and
associated undertakings 258 (258) -
Exceptional items before taxation (109) - (109)
Inventory holding gains (losses) 473 2 475
Interest expense 333 (38) 295
Taxation 753 (65) 688
Profit for the period 1,296 - 1,296
Three months ended March 31, 2001
(Unaudited)
---------------------------------------------------
As US GAAP
Reported Reclassification Presentation
--------------------------------------------------
($ million)
Consolidated statement of income
Other income 195 185 380
Share of profits of JVs and
associated undertakings 331 (331) -
Exceptional items before taxation 218 - 218
Inventory holding gains (losses) (238) - (238)
Interest expense 446 (60) 386
Taxation 2,168 (86) 2,082
Profit for the year 2,830 - 2,830
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(ii) Income statement
The income statement prepared under UK GAAP shows sub-totals for
replacement cost profit before interest and tax, historical cost
profit before interest and tax and profit after taxation. These line
items are not recognized under US GAAP.
(iii)Exceptional items
Under UK GAAP certain exceptional items are shown separately on the
face of the income statement after operating profit. These items are
profits or losses on the sale of fixed assets and businesses or sale
or termination of operations and fundamental restructuring charges.
Under US GAAP these items are classified as operating income or
expenses.
(iv) Deferred taxation/business combinations
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of assets acquired and liabilities assumed in a purchase
business combination, whereas under UK GAAP no such deferred tax asset
or liability is recognized. Under US GAAP the deferred tax asset or
liability is amortized over the same period as the assets and
liabilities to which it relates.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2002 2001
------------------
($ million)
Replacement cost of sales 151 263
Taxation (94) (337)
Profit for the year (57) 74
======= =======
At March 31, At December 31,
2002 2001
(Unaudited)
------------ --------------
($ million)
Tangible assets 7,417 7,032
Deferred taxation 7,233 6,789
BP shareholders' interest 184 243
======= =======
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(v) Provisions
UK GAAP requires provisions for decommissioning, environmental
liabilities and onerous contracts to be determined on a discounted
basis if the effect of the time value of money is material. Unwinding
of discount and the effect of a change in the discount rate is
included in interest expense in the period. When a decommissioning
provision is set up, a tangible fixed asset of the same amount is also
recognized and is subsequently depreciated as part of the capital
costs of the facilities. Under US GAAP (i) environmental liabilities
are discounted only where the timing and amounts of payments are fixed
and reliably determinable and (ii) provisions for decommissioning are
provided on a unit-of-production basis over field lives, there is no
corresponding tangible fixed asset.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2002 2001
------------------
($ million)
Replacement cost of sales 77 89
Interest expense (43) (53)
Taxation (8) (18)
Profit for the year (26) (18)
======= =======
At March 31, At December 31,
2002 2001
(Unaudited)
------------ --------------
($ million)
Tangible assets (594) (785)
Provisions 1,004 780
Deferred taxation (518) (511)
BP shareholders' interest (1,080) (1,054)
======= =======
(vi) Sale and leaseback
The sale and leaseback of the Amoco building in Chicago, Illinois in
1998 is treated as a sale for UK GAAP whereas for US GAAP it is
treated as a financing transaction.
A provision was recognized under UK GAAP in 1999 to cover the likely
shortfall on rental income from subletting the Chicago office
building. As the original sale and leaseback was not treated as a sale
for US GAAP the provision has been reversed for US GAAP.
Under UK GAAP the profit arising on the sale and operating leaseback
of certain railcars in 1999 is taken to income in the period in which
the transaction occurs. Under US GAAP this profit is not recognized
immediately but amortized over the term of the operating lease.
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Sale and leaseback (concluded)
The adjustments to profit for the year and BP shareholders' interest to
accord with US GAAP are summarized below.
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2002 2001
------------------
($ million)
Replacement cost of sales 5 6
Taxation (1) 3
Profit for the year (4) (9)
======= =======
At March 31, At December 31,
2002 2001
(Unaudited)
------------ --------------
($ million)
Tangible assets 169 171
Other accounts payable and accrued liabilities 30 30
Provisions (63) (65)
Finance debt 413 413
Deferred taxation (74) (73)
BP shareholders' interest (137) (134)
======= =======
(vii)Goodwill
Various differences in the basis for determining goodwill between UK and US
GAAP result in goodwill for US GAAP reporting differing from the amount
recognized under UK GAAP.
On January 1, 2002 the Group adopted Statement of Financial Accounting
Standards No. 142 `Goodwill and Other Intangible Assets' (SFAS 142) for US
GAAP reporting. This standard eliminates the requirement to amortize
goodwill and indefinite lived intangible assets. Rather, such assets are
subject to periodic impairment testing. Intangible assets that are not
deemed to have an indefinite life continue to be amortized over their
estimated useful lives. Amortization of goodwill charged to income under UK
GAAP has been reversed for US GAAP.
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vii)Goodwill (concluded)
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2002 2001
------------------
($ million)
Replacement cost of sales (321) (15)
Taxation - -
Profit for the year 321 15
======= =======
At March 31, At December 31,
2002 2001
(Unaudited)
------------ --------------
($ million)
Intangible assets (1,094) (1,414)
Deferred taxation - -
BP shareholders' interest (1,094) (1,414)
======= =======
(viii) Derivative financial instruments and hedging activities
On January 1, 2001 the Group adopted Statement of Financial Accounting
Standards No. 133 'Accounting for Derivative Instruments and Hedging
Activities' (SFAS 133) as amended by Statement Nos. 137 and 138, for
US GAAP reporting.
SFAS 133, as amended, requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of
hedge transaction. To the extent certain criteria are met, SFAS 133
permits, but does not require, hedge accounting.
In the normal course of business the Group is a party to derivative
financial instruments with off-balance sheet risk, primarily to manage
its exposure to fluctuations in foreign currency exchange rates and
interest rates, including management of the balance between floating
rate and fixed rate debt. The Group also manages certain of its
exposures to movements in oil and natural gas prices. In addition, the
Group trades derivatives in conjunction with these risk management
activities.
All oil price derivatives and all derivatives held for trading are
carried on the Group's balance sheet at fair value with changes in
that value recognized in earnings of the period for both UK and US
GAAP. Certain financial derivatives used to manage foreign currency
and interest rate risk that qualify for hedge accounting under UK GAAP
are marked to market under SFAS 133. For these derivatives, the
cumulative effect of adopting SFAS 133 resulted in a pre-tax charge to
income, as adjusted to accord with US GAAP, of $27 million ($18
million after tax). Under US GAAP the fair values of derivative
financial instruments are shown as current assets and liabilities as
appropriate.
The Group has a number of long-term natural gas contracts which have
been in place for many years. The pricing structure for those
contracts is not directly related to the market price of natural gas
but to the price of other commodities or indices, such as fuel oil or
consumer price indices. On the basis of SFAS 133 Implementation Issue
C11, these contracts have been marked to market with effect from July
1, 2001.
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Page 27
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii) Derivative financial instruments and hedging activities (concluded)
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2002 2001
------------------
($ million)
Replacement cost of sales (804) 152
Taxation 281 (53)
Profit for the year before cumulative effect
of accounting change 523 (99)
Cumulative effect of accounting change, net of taxation - (18)
Profit for the year 523 (117)
======= =======
At March 31, At December 31,
2002 2001
(Unaudited)
------------ --------------
($ million)
Accounts payable and accrued liabilities 234 1,038
Deferred taxation (82) (363)
BP shareholders' interest (152) (675)
======= =======
(ix) Gain arising on asset exchange
For UK GAAP the transaction with Solvay in the fourth quarter of 2001,
which led to the exchange of businesses for an interest in a joint
venture and an associated undertaking, has been treated as an asset
swap which does not give rise to a gain or loss. Under US GAAP the
transaction has been treated as a disposal and acquisition at fair
value which gives rise to a pre-tax gain on disposal of $242 million
($157 million after tax).
The adjustments to profit for the year and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended
March 31
(Unaudited)
Increase (decrease) in caption heading 2002 2001
------------------
($ million)
Replacement cost of sales 9 -
Taxation (4) -
Profit for the year (5) -
======= =======
At March 31, At December 31,
2002 2001
(Unaudited)
------------ --------------
($ million)
Intangible assets 181 188
Accounts payable and accrued liabilities (51) (54)
Deferred taxation 81 85
BP shareholders' interest 151 157
======= =======
Page 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(x) Ordinary shares held for future awards to employees
Under UK GAAP, Company shares held by an Employee Share Ownership Plan
to meet future requirements of employee share schemes are recorded in
the balance sheet as Fixed assets -- investments. Under US GAAP, such
shares are recorded in the balance sheet as a reduction of
shareholders' interest.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At March 31, At December 31,
2002 2001
Increase (decrease) in caption heading (Unaudited)
------------ --------------
($ million)
Fixed assets - Investments (219) (266)
BP shareholders' interest (219) (266)
======= =======
(xi) Dividends
Under UK GAAP, dividends are recorded in the year in respect of which
they are announced or declared by the board of directors to the
shareholders. Under US GAAP, dividends are recorded in the period in
which dividends are declared.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At March 31, At December 31,
2002 2001
Increase (decrease) in caption heading (Unaudited)
------------ --------------
($ million)
Other accounts payable and accrued liabilities (1,290) (1,288)
BP shareholders' interest 1,290 1,288
======= =======
(xii)Investments
Under UK GAAP the Group's equity investments in Lukoil, Sinopec and
PetroChina are held for the long term and reported as fixed asset
investments and carried on the balance sheet at cost subject to review
for impairment. For US GAAP these investments are classified as
available-for-sale securities. Consequently they are reported at fair
value, with unrealized holding gains and losses, net of tax, reported
in accumulated other comprehensive income. If a decline in fair value
below cost is 'other than temporary' the unrealized loss is accounted
for as a realized loss and charged against income.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At March 31, At December 31,
2002 2001
Increase (decrease) in caption heading (Unaudited)
------------ --------------
($ million)
Fixed assets - Investments 245 (3)
Deferred taxation 86 (1)
BP shareholders' interest 159 (2)
======= =======
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xiii)Additional minimum pension liability
Where a pension plan has an unfunded accumulated benefit obligation,
US GAAP requires such amount to be recognized as a liability in the
balance sheet. The adjustment resulting from the recognition of any
such minimum liability, including the elimination of amounts
previously recognized as a prepaid benefit cost, is reported as an
intangible asset to the extent of unrecognized prior cost with the
remaining amount reported in comprehensive income.
The adjustments to BP shareholders' interest to accord with US GAAP
are summarized below.
At March 31, At December 31,
2002 2001
Increase (decrease) in caption heading (Unaudited)
------------ --------------
($ million)
Intangible assets 112 112
Other receivables falling due after more
than one year (1,015) (1,015)
Noncurrent liabilities - accounts payable
accrued liabilities 548 548
Deferred taxation (509) (509)
BP shareholders' interest (942) (942)
======= =======
(xiv)Goodwill and intangible assets
Profit for the period, as adjusted to accord with US GAAP, for the
three months ended March 31, 2001, adjusted to exclude amortization of
goodwill no longer being amortized pursuant to SFAS 142 (see (vii)
Goodwill), is shown below.
Three months ended
March 31, 2001
(Unaudited)
------------------
($ million)
Profit for the period as adjusted to accord
with US GAAP, as reported 2,778
Add back goodwill amortization 306
-------
Profit for the period as adjusted to accord
with US GAAP, as adjusted 3,084
-------
Per ordinary share - cents
Basic - as reported 12.36
Adjustment 1.36
-------
Basic - as adjusted 13.72
-------
Diluted - as reported 12.28
Adjustment 1.35
-------
Diluted - as adjusted 13.63
-------
Per American Depositary Share - cents
Basic - as reported 74.16
Adjustment 8.16
-------
Basic - as adjusted 82.32
-------
Diluted - as reported 73.68
Adjustment 8.10
-------
Diluted - as adjusted 81.78
-------
Page 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xiv)Goodwill and intangible assets (concluded)
Changes to exploration expenditure, goodwill and other intangible
assets, as adjusted to accord with US GAAP, during the three months
ended March 31, 2002 are shown below.
Exploration Other
expenditure Goodwill intangibles Total
($ million)
Net book amount
At January 1, 2002 5,334 9,453 288 15,075
Amortization expense (59) - (16) (75)
Other movements (8) (64) 67 (5)
---------------------------------------------
At March 31, 2002 5,267 9,389 339 14,995
=============================================
Amortization expense relating to other intangibles is expected to be
in the range $60-$100 million in each of the succeeding five years.
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The following is a summary of the adjustments to profit for the year and to
BP shareholders' interest which would be required if generally accepted
accounting principles in the USA (US GAAP) had been applied instead of
those generally accepted in the United Kingdom (UK GAAP).
These results are stated using the first-in first-out method of inventory
valuation.
Three months ended
Profit for the period March 31
(Unaudited)
2002 2001(a)
------------------
($ million)
Profit as reported in the consolidated statement of income 1,296 2,830
Adjustments:
Deferred taxation/business combinations (iv) (57) 74
Provisions (v) (26) (18)
Sale and leaseback (vi) (4) (9)
Goodwill (vii) 321 15
Derivative financial instruments (viii) 523 (99)
Gain arising on asset exchange (ix) (5) -
Other 3 3
------- ------
755 (34)
------- ------
Profit for the period before cumulative effect of
accounting change as adjusted to accord with US GAAP 2,051 2,796
Cumulative effect of accounting change:
Derivative financial instruments (viii) - (18)
-------- -------
Profit for the period as adjusted to accord with US GAAP 2,051 2,778
======== =======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of accounting change 9.16 12.44
Cumulative effect of accounting change - (0.08)
------- ------
9.16 12.36
------- ------
Diluted - before cumulative effect of accounting change 9.11 12.36
Cumulative effect of accounting change - (0.08)
------- ------
9.11 12.28
------- ------
Per American Depositary Share - cents (b)
Basic - before cumulative effect of accounting change 54.96 74.64
Cumulative effect of accounting change - (0.48)
------- ------
54.96 74.16
------- ------
Diluted - before cumulative effect of accounting change 54.66 74.16
Cumulative effect of accounting change - (0.48)
------- ------
54.66 73.68
------- ------
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest March 31, 2002 December 31, 2001 (a)
(Unaudited)
-------------- --------------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 64,902 65,161
Adjustments:
Deferred taxation/business combinations (iv) 184 243
Provisions (v) (1,080) (1,054)
Sale and leaseback (vi) (137) (134)
Goodwill (vii) (1,094) (1,414)
Derivative financial instruments (viii) (152) (675)
Gain arising on asset exchange (ix) 151 157
Ordinary shares held for future awards to employees (x) (219) (266)
Dividends (xi) 1,290 1,288
Investments (xii) 159 (2)
Additional minimum pension liability (xiii) (942) (942)
Other (37) (40)
------- -------
(1,877) (2,839)
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 63,025 62,322
======= =======
---------------
(a) The profit reported under UK GAAP for the three months ended March 31, 2001
and BP shareholders' interest reported under UK GAAP at December 31, 2001
have been restated to reflect the adoption of FRS 19. Consequently certain
of the adjustments in the UK/US GAAP reconciliation have also been
restated. Profit and BP shareholders' interest, as adjusted to accord with
US GAAP, are unaffected by the adoption of FRS 19.
(b) One American Depositary Share is equivalent to six ordinary shares.
Earnings per share
Basic earnings per share excludes the dilutive effects of options, warrants
and convertible securities. Diluted earnings per share reflects the
potential dilution that could occur if options, warrants or convertible
securities were exercised or converted into ordinary shares that shared in
the earnings of the Group. The dilutive effect of outstanding share options
is as follows:
Three months ended
March 31
(Unaudited)
2002 2001
------------------
(shares million)
Weighted average number of ordinary shares 22,403 22,474
Ordinary shares issuable under employee share schemes 117 140
------- -------
22,520 22,614
======= =======
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Comprehensive income
The components of comprehensive income, net of related tax are as follows:
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Profit for the period as adjusted to accord with US GAAP 2,051 2,778
Currency translation differences (356) (994)
Derivative financial instruments - 23
Net unrealized gain on investments 161 64
Additional minimum pension liability - -
------- -------
Comprehensive income 1,856 1,871
======= =======
Accumulated other comprehensive income at March 31, 2002 and December 31,
2001 comprised losses of $5,929 million and $5,734 million, respectively.
Consolidated statement of cash flows
The Group's financial statements include a consolidated statement of cash
flows in accordance with the revised UK Financial Reporting Standard No. 1
(FRS 1). The statement prepared under FRS 1 presents substantially the same
information as that required under FASB Statement of Financial Accounting
Standards No. 95 'Statement of Cash Flows' (SFAS 95).
Under FRS 1 cash flows are presented for (i) operating activities; (ii)
dividends from joint ventures; (iii) dividends from associated
undertakings; (iv) servicing of finance and returns on investments; (v)
taxation; (vi) capital expenditure and financial investment; (vii)
acquisitions and disposals; (viii) dividends; (ix) financing; and (x)
management of liquid resources. SFAS 95 only requires presentation of cash
flows from operating, investing and financing activities.
Cash flows under FRS 1 in respect of dividends from joint ventures and
associated undertakings, taxation and servicing of finance and returns on
investments are included within operating activities under SFAS 95.
Interest paid includes payments in respect of capitalized interest, which
under SFAS 95 are included in capital expenditure under investing
activities. Cash flows under FRS 1 in respect of capital expenditure and
acquisitions and disposals are included in investing activities under SFAS
95. Dividends paid are included within financing activities. All short-term
investments are regarded as liquid resources for FRS 1. Under SFAS 95
short-term investments with original maturities of three months or less are
classified as cash equivalents and aggregated with cash in the cash flow
statement. Cash flows in respect of short-term investments with original
maturities exceeding three months are included in operating activities.
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Operating activities
Profit after taxation 1,336 2,838
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,153 2,167
Exploration expenditure written off 59 108
Share of profits of joint ventures and associated
undertakings less dividends received (17) (63)
(Profit) loss on sale of businesses and fixed assets 109 (218)
Working capital movement (a) (669) 1,354
Deferred Taxation 220 433
Other (108) (124)
------- -------
Net cash provided by operating activities 3,083 6,495
------- -------
Investing activities
Capital expenditures (2,814) (2,611)
Acquisitions, net of cash acquired (1,550) -
Investment in associated undertakings (143) (120)
Net investment in joint ventures (46) (61)
Proceeds from disposal of assets 348 694
------- -------
Net cash used in investing activities (4,205) (2,098)
------- -------
Financing activities
Proceeds from shares issued (repurchased) 91 (443)
Proceeds from long-term financing 1,746 517
Repayments of long-term financing (234) (146)
Net decrease (increase) in short-term debt 680 (2,794)
Dividends paid - BP Shareholders (1,288) (1,181)
- Minority shareholders (13) -
------- -------
Net cash used in financing activities 982 (4,047)
------- -------
Currency translation differences relating to cash
and cash equivalents (3) (34)
------- -------
Increase (decrease) in cash and cash equivalents (143) 316
------- -------
Cash and cash equivalents at beginning of period 1,808 1,831
------- -------
Cash and cash equivalents at end of period 1,665 2,147
======= =======
(a) Working capital:
Inventories (increase) decrease (496) 358
Receivables (increase) decrease (443) (1,044)
Current liabilities - excluding finance
debt increase (decrease) 270 2,040
------- -------
(669) 1,354
======= =======
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - concluded
Impact of new US accounting standards
New US accounting standards adopted: The Group has adopted Statement of
Financial Accounting Standards No. 141 'Business Combinations' (SFAS 141)
for US GAAP reporting with effect from January 1, 2002. Under SFAS 141, the
pooling of interest method of accounting is no longer permitted. Also on
January 1, 2002 the Group adopted Statement of Financial Accounting
Standards No. 144 'Accounting for the Impairment or Disposal of Long-Lived
Assets' (SFAS 144). SFAS 144 retains the requirement to recognize an
impairment loss only where the carrying value of a long-lived asset is not
recoverable from its undiscounted cash flows and to measure such loss as
the difference between the carrying amount and fair value of the asset.
SFAS 144, among other things, changes the criteria that have to be met in
order to classify an asset as held-for-sale and requires that operating
losses from discontinued operations be recognized in the period that the
losses are incurred rather than as of the measurement date.
The adoption of SFAS 141 and SFAS 144 had no impact on profit, as adjusted
to accord with US GAAP, for the three months ended March 31, 2002 or on BP
shareholders' interest, as adjusted to accord with US GAAP, at March 31,
2002.
Asset retirement obligations: In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 143 'Accounting for Asset Retirement
Obligations' (SFAS 143). SFAS 143 requires companies to record liabilities
equal to the fair value of their asset retirement obligations when they are
incurred (typically when the asset is installed at the production
location). When the liability is initially recorded, companies capitalize
an equivalent amount as part of the cost of the asset. Over time the
liability is accreted for the change in its present value each period, and
the initial capitalized cost is depreciated over the useful life of the
related asset. SFAS 143 is effective for accounting periods beginning after
June 15, 2002.
The provisions of SFAS 143 are similar to the accounting policy used by the
Group in preparing its financial statements under UK GAAP. The Company has
not yet determined the effect of adopting SFAS 143 on its results of
operations or shareholders' interest as adjusted to accord with US GAAP.
Impact of new UK accounting standards
Retirement benefits: In December 2000, the UK Accounting Standards Board
issued Financial Reporting Standard No. 17 `Retirement Benefits' (FRS 17).
This standard is fully effective for accounting periods ending on or after
June 22, 2003. Certain of the disclosure requirements are effective for
periods prior to 2003. FRS 17 requires that financial statements reflect at
fair value the assets and liabilities arising from an employer's retirement
benefit obligations and any related funding. The operating costs of
providing retirement benefits are recognized in the period in which they
are earned together with any related finance costs and changes in the value
of related assets and liabilities. The Company has not yet completed its
evaluation of the impact of adopting FRS 17 on the Group's results of
operations, and there will be no significant effect on the Group's
financial position.
16. Condensed consolidating information
The following information is presented in accordance with the financial
reporting rules of the Securities and Exchange Commission regarding issuers
and guarantors of guaranteed securities.
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2002
Turnover 506 - 36,569 (506) 36,569
Less: Joint ventures - - 279 - 279
----------------------------------------------------------------------------
Group turnover 506 - 36,290 (506) 36,290
Replacement cost of sales 319 - 31,748 (514) 31,553
Production taxes 44 - 203 - 247
----------------------------------------------------------------------------
Gross profit 143 - 4,339 8 4,490
Distribution and administration expenses - 54 2,637 - 2,691
Exploration expense 6 - 118 - 124
----------------------------------------------------------------------------
137 (54) 1,584 8 1,675
Other income 15 153 56 (99) 125
----------------------------------------------------------------------------
Group replacement cost operating profit 152 99 1,640 (91) 1,800
Share of profits of joint ventures - - 70 - 70
Share of profits of associated undertakings - - 188 - 188
Equity accounted income of subsidiaries 23 2,010 - (2,033) -
----------------------------------------------------------------------------
Total replacement cost operating profit 175 2,109 1,898 (2,124) 2,058
Profit (loss) on sale of fixed assets
and businesses - (109) (109) 109 (109)
----------------------------------------------------------------------------
Replacement cost profit before
interest and tax 175 2,000 1,789 (2,015) 1,949
Inventory holding gains (losses) 26 473 473 (499) 473
----------------------------------------------------------------------------
Historical cost profit before
interest and tax 201 2,473 2,262 (2,514) 2,422
Interest expense 13 424 393 (497) 333
----------------------------------------------------------------------------
Profit before taxation 188 2,049 1,869 (2,017) 2,089
Taxation 82 753 686 (768) 753
----------------------------------------------------------------------------
Profit after taxation 106 1,296 1,183 (1,249) 1,336
Minority shareholders' interest - - 40 - 40
----------------------------------------------------------------------------
Profit for the period 106 1,296 1,143 (1,249) 1,296
============================================================================
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2002
Profit as reported 106 1,296 1,143 (1,249) 1,296
Adjustments:
Deferred taxation/business combinations (33) (57) (36) 69 (57)
Provisions - (26) (25) 25 (26)
Sale and leaseback - (4) (4) 4 (4)
Goodwill - 321 321 (321) 321
Derivative financial instruments - 523 523 (523) 523
Gain arising on asset exchange - (5) (5) 5 (5)
Other - 3 3 (3) 3
----------------------------------------------------------------------------
Profit for the period as
adjusted to accord with US GAAP 73 2,051 1,920 (1,993) 2,051
============================================================================
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2001
Turnover 604 - 45,700 (604) 45,700
Less: Joint ventures - - 288 - 288
----------------------------------------------------------------------------
Group turnover 604 - 45,412 (604) 45,412
Replacement cost of sales 273 - 37,525 (610) 37,188
Production taxes 59 - 524 - 583
----------------------------------------------------------------------------
Gross profit 272 - 7,363 6 7,641
Distribution and administration expenses - 69 2,457 - 2,526
Exploration expense 4 - 165 - 169
----------------------------------------------------------------------------
268 (69) 4,741 6 4,946
Other income - 362 197 (364) 195
----------------------------------------------------------------------------
Group replacement cost operating profit 268 293 4,938 (358) 5,141
Share of profits of joint ventures - - 102 - 102
Share of profits of associated undertakings - - 229 - 229
Equity accounted income of subsidiaries 161 5,529 - (5,690) -
----------------------------------------------------------------------------
Total replacement cost operating profit 429 5,822 5,269 (6,048) 5,472
Profit (loss) on sale of
fixed assets and businesses 1 218 217 (218) 218
----------------------------------------------------------------------------
Replacement cost profit
before interest and tax 430 6,040 5,486 (6,266) 5,690
Inventory holding gains (losses) (7) (238) (238) 245 (238)
----------------------------------------------------------------------------
Historical cost profit before
interest and tax 423 5,802 5,248 (6,021) 5,452
Interest expense 2 804 808 (1,168) 446
----------------------------------------------------------------------------
Profit before taxation 421 4,998 4,440 (4,853) 5,006
Taxation 174 2,168 2,095 (2,269) 2,168
----------------------------------------------------------------------------
Profit after taxation 247 2,830 2,345 (2,584) 2,838
Minority shareholders' interest - - 8 - 8
----------------------------------------------------------------------------
Profit for the period 247 2,830 2,337 (2,584) 2,830
============================================================================
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2001
Profit as reported 247 2,830 2,337 (2,584) 2,830
Adjustments:
Deferred taxation/business combinations 10 74 73 (83) 74
Provisions (1) (18) (17) 18 (18)
Sale and leaseback - (9) (9) 9 (9)
Goodwill - 15 15 (15) 15
Derivative financial instruments - (99) (99) 99 (99)
Gain arising on asset exchange - - - - -
Other - 3 3 (3) 3
----------------------------------------------------------------------------
Profit for the period before cumulative
effect of accounting change as adjusted
to accord with US GAAP 256 2,796 2,303 (2,559) 2,796
Cumulative effect of accounting change:
Derivative financial instruments - (18) (18) 18 (18)
----------------------------------------------------------------------------
Profit for the period as
adjusted to accord with US GAAP 256 2,778 2,285 (2,541) 2,778
============================================================================
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At March 31, 2002
Fixed assets
Intangible assets 518 - 15,571 - 16,089
Tangible assets 6,461 - 75,483 - 81,944
Investments
Subsidiaries - equity accounted basis 1,873 77,633 - (79,506) -
Other - 223 11,777 - 12,000
----------------------------------------------------------------------------
1,873 77,856 11,777 (79,506) 12,000
----------------------------------------------------------------------------
Total fixed assets 8,852 77,856 102,831 (79,506) 110,033
----------------------------------------------------------------------------
Current assets
Business held for resale - - 2,090 - 2,090
Inventories 76 - 8,622 - 8,698
Receivables 15,780 20,899 44,621 (52,516) 28,784
Investments - - 286 - 286
Cash at bank and in hand (11) 3 1,387 - 1,379
----------------------------------------------------------------------------
15,845 20,902 57,006 (52,516) 41,237
----------------------------------------------------------------------------
Current liabilities - falling
due within one year
Finance debt 992 - 11,008 (937) 11,063
Accounts payable and accrued liabilities 398 8,291 30,338 (7,379) 31,648
----------------------------------------------------------------------------
Net current assets (liabilities) 14,455 12,611 15,660 (44,200) (1,474)
----------------------------------------------------------------------------
Total assets less current liabilities 23,307 90,467 118,491 (123,706) 108,559
Noncurrent liabilities
Finance debt - - 13,468 - 13,468
Accounts payable and accrued liabilities 10,416 148 37,193 (44,620) 3,137
Provisions for liabilities and charges
Deferred taxation 1,674 - 10,347 - 12,021
Other provisions 483 205 11,764 - 12,452
----------------------------------------------------------------------------
Net assets 10,734 90,114 45,719 (79,086) 67,481
Minority shareholders' interest - - 2,579 - 2,579
----------------------------------------------------------------------------
BP shareholders' interest 10,734 90,114 43,140 (79,086) 64,902
============================================================================
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At March 31, 2002
Capital and reserves
Capital shares 1,050 5,635 - (1,050) 5,635
Paid in surplus 3,145 4,100 - (3,145) 4,100
Merger reserve - 26,318 698 - 27,016
Other reserves - 190 - - 190
Retained earnings 6,539 53,871 42,442 (74,891) 27,961
----------------------------------------------------------------------------
10,734 90,114 43,140 (79,086) 64,902
============================================================================
The following is a summary of the adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States (US GAAP) had been applied instead of those generally accepted in the
United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 10,734 90,114 43,140 (79,086) 64,902
Adjustments:
Deferred taxation/business combinations 170 184 48 (218) 184
Provisions (186) (1,080) (894) 1,080 (1,080)
Sale and leaseback - (137) (137) 137 (137)
Goodwill - (1,094) (1,094) 1,094 (1,094)
Derivative financial instruments - (152) (152) 152 (152)
Gain arising on asset exchange - 151 151 (151) 151
Ordinary shares held for future
awards to employees - (219) - - (219)
Quarterly dividend - 1,290 - - 1,290
Investments - 159 159 (159) 159
Additional minimum pension liability - (942) (942) 942 (942)
Other - (37) (37) 37 (37)
----------------------------------------------------------------------------
Shareholders' interest as
adjusted to accord with US GAAP 10,718 88,237 40,242 (76,172) 63,025
============================================================================
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At December 31, 2001
Fixed assets
Intangible assets 489 - 16,000 - 16,489
Tangible assets 6,418 - 70,992 - 77,410
Investments
Subsidiaries - equity accounted basis 1,846 76,877 - (78,723) -
Other - 269 11,694 - 11,963
----------------------------------------------------------------------------
1,846 77,146 11,694 (78,723) 11,963
----------------------------------------------------------------------------
Total fixed assets 8,753 77,146 98,686 (78,723) 105,862
----------------------------------------------------------------------------
Current assets
Business held for resale - - - - -
Inventories 92 - 7,539 - 7,631
Receivables 15,333 21,272 41,858 (51,794) 26,669
Investments - - 450 - 450
Cash at bank and in hand (29) 3 1,384 - 1,358
----------------------------------------------------------------------------
15,396 21,275 51,231 (51,794) 36,108
----------------------------------------------------------------------------
Current liabilities - falling
due within one year
Finance debt 406 - 9,035 (351) 9,090
Accounts payable and accrued liabilities 260 7,642 27,797 (7,175) 28,524
----------------------------------------------------------------------------
Net current assets (liabilities) 14,730 13,633 14,399 (44,268) (1,506)
----------------------------------------------------------------------------
Total assets less current liabilities 23,483 90,779 113,085 (122,991) 104,356
Noncurrent liabilities
Finance debt - - 12,327 - 12,327
Accounts payable and accrued liabilities 10,795 191 36,433 (44,333) 3,086
Provisions for liabilities and charges
Deferred taxation 1,668 - 11,702 (1,668) 11,702
Other provisions 392 216 10,879 (5) 11,482
----------------------------------------------------------------------------
Net assets 10,628 90,372 41,744 (76,985) 65,759
Minority shareholders' interest - - 598 - 598
----------------------------------------------------------------------------
BP shareholders' interest 10,628 90,372 41,146 (76,985) 65,161
============================================================================
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
At December 31, 2001
Capital and reserves
Capital shares 1,050 5,629 - (1,050) 5,629
Paid in surplus 3,145 4,014 - (3,145) 4,014
Merger reserve - 26,286 697 - 26,983
Other reserves - 223 - - 223
Retained earnings 6,433 54,220 40,449 (72,790) 28,312
----------------------------------------------------------------------------
10,628 90,372 41,146 (76,985) 65,161
============================================================================
The following is a summary of the adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States (US GAAP) had been applied instead of those generally accepted in the
United Kingdom.
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 10,628 90,372 41,146 (76,985) 65,161
Adjustments:
Deferred taxation/business combinations 203 243 86 (289) 243
Provisions (186) (1,054) (869) 1,055 (1,054)
Sale and leaseback - (134) (134) 134 (134)
Goodwill - (1,414) (1,414) 1,414 (1,414)
Derivative financial instruments - (675) (675) 675 (675)
Gain arising on asset exchange - 157 157 (157) 157
Ordinary shares held for future
awards to employees - (266) - - (266)
Quarterly dividend - 1,288 - - 1,288
Investments - (2) (2) 2 (2)
Additional minimum pension liability - (942) (942) 942 (942)
Other - (40) (40) 40 (40)
----------------------------------------------------------------------------
Shareholders' interest as
adjusted to accord with US GAAP 10,645 87,533 37,313 (73,169) 62,322
============================================================================
Page 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2002
Net cash inflow (outflow) from
operating activities 193 1,051 2,583 (191) 3,636
Dividends from joint ventures - - 83 - 83
Dividends from associated undertakings - - 53 - 53
Dividends from subsidiaries 15 - - (15) -
Net cash inflow (outflow) from servicing
of finance and returns on investments - 65 (626) 289 (272)
Tax (paid) refund - - (445) - (445)
Net cash inflow (outflow) for capital
expenditure and financial investment (150) (17) (2,315) - (2,482)
Net cash inflow (outflow) for
acquisitions and disposals - 99 (1,708) (99) (1,708)
Equity dividends paid - (1,289) (15) 16 (1,288)
----------------------------------------------------------------------------
Net cash inflow (outflow) 58 (91) (2,390) - (2,423)
============================================================================
Financing 40 (91) (2,232) - (2,283)
Management of liquid resources - - (165) - (165)
Increase (decrease) in cash 18 - 7 - 25
----------------------------------------------------------------------------
58 (91) (2,390) - (2,423)
============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 208 1,116 1,663 96 3,083
Net cash provided by (used in)
investing activities (150) 82 (4,038) (99) (4,205)
Net cash provided by (used in)
financing activities (40) (1,198) 2,217 3 982
Currency translation differences
relating to cash and cash equivalents - - (3) - (3)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 18 - (161) - (143)
Cash and cash equivalents at
beginning of period (29) 3 1,834 - 1,808
----------------------------------------------------------------------------
Cash and cash equivalents at
end of period (11) 3 1,673 - 1,665
============================================================================
Page 45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
16. Condensed consolidating information - concluded
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Three months ended March 31, 2001
Net cash inflow (outflow) from
operating activities 331 1,301 5,124 (16) 6,740
Dividends from joint ventures - - 12 - 12
Dividends from associated undertakings - - 110 - 110
Dividends from subsidiaries - - - - -
Net cash inflow (outflow) from servicing
of finance and returns on investments - 354 (616) - (262)
Tax (paid) refund (257) (1) 119 - (139)
Net cash inflow (outflow) for capital
expenditure and financial investment (193) (16) (1,674) - (1,883)
Net cash inflow (outflow) for
acquisitions and disposals 1 (16) (182) 16 (181)
Equity dividends paid - (1,181) - - (1,181)
----------------------------------------------------------------------------
Net cash inflow (outflow) (118) 441 2,893 - 3,216
============================================================================
Financing (131) 443 2,554 - 2,866
Management of liquid resources - - 302 - 302
Increase (decrease) in cash 13 (2) 37 - 48
----------------------------------------------------------------------------
(118) 441 2,893 - 3,216
============================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Cash flow statement (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 75 1,654 4,783 (17) 6,495
Net cash provided by (used in)
investing activities (193) (32) (1,890) 17 (2,098)
Net cash provided by (used in)
financing activities 131 (1,624) (2,554) - (4,047)
Currency translation differences
relating to cash and cash equivalents - - (34) - (34)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 13 (2) 305 - 316
Cash and cash equivalents at
beginning of period (32) 2 1,861 - 1,831
----------------------------------------------------------------------------
Cash and cash equivalents at
end of period (19) - 2,166 - 2,147
============================================================================
Page 46
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Average oil realizations (a) - $/bbl
UK 20.67 25.04
USA 17.26 24.79
Rest of World 18.63 23.52
BP average 18.77 24.80
Brent oil price 21.13 25.75
West Texas Intermediate oil price 21.54 28.71
Alaska North Slope US West Coast 19.76 24.93
Average natural gas realizations - $/mcf
UK 3.12 3.53
USA 2.13 7.13
Rest of World 1.93 3.37
BP average 2.27 4.96
Henry Hub gas price (b) ($/mmBtu) 2.35 7.08
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 0.09 2.35
US Gulf Coast 2.04 6.69
Midwest 2.06 3.85
US West Coast 5.43 10.94
Singapore 0.21 0.70
BP average 1.64 4.25
Chemicals Indicator Margin (d) - $/te 96(e) 106
---------------
(a) Crude oil and natural gas liquids.
(b) Henry Hub First of Month Index.
(c) The Global Indicator Refining Margin (GIM) is the average of seven regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity.
(d) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Amongst the products and businesses
covered in the CIM are olefins and derivatives, aromatics and derivatives,
linear alpha-olefins, acetic acid, vinyl acetate monomer and nitriles. Not
included are fabrics and fibres, plastic fabrications, poly alpha-olefins,
anhydrides, engineering polymers and carbon fibres, speciality
intermediates, and the remaining parts of the solvents and acetyls
businesses.
(e) Provisional. The data for the first quarter is based on two months' actuals
and one month of provisional data.
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Average rate for the period 1.43 1.46
Period-end rate 1.42 1.44
======= =======
Page 47
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Crude oil and natural gas liquids production
(thousand barrels per day), (net of royalties)
UK 482 511
Rest of Europe 104 97
USA 760 722
Rest of World 643 607
------- -------
Total crude oil and liquids production 1,989 1,937
======= =======
Natural gas production (million cubic feet per day),
(net of royalties)
UK 1,628 2,152
Rest of Europe 162 169
USA 3,561 3,467
Rest of World 3,395 3,107
------- -------
Total natural gas production 8,746 8,895
======= =======
Total production (a)
(thousand barrels of oil equivalent per day),
(net of royalties)
UK 763 882
Rest of Europe 132 126
USA 1,374 1,320
Rest of World 1,228 1,143
------- -------
Total production 3,497 3,471
======= =======
Natural gas sales volumes (million cubic feet per day)
UK 2,619 3,395
Rest of Europe 413 251
USA 8,733 8,001
Rest of World 9,289 7,403
------- -------
Total natural gas sales volumes (b) 21,054 19,050
======= =======
NGL sales volumes (thousand barrels per day)
UK - -
Rest of Europe - -
USA 203 221
Rest of World 181 207
------- -------
Total NGL sales volumes 384 428
======= =======
---------------
(a) Expressed in thousand barrels of oil equivalent per day (mboe/d). Natural
gas is converted to oil equivalent at 5.8 billion cubic feet: 1 million
barrels.
(b) Encompasses sales by Exploration and Production and Gas, Power and
Renewables, including marketing, trading and supply sales.
Page 48
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended
March 31
(Unaudited)
2002 2001
------------------
Oil sales volumes (thousand barrels per day)
Refined products
UK 256 259
Rest of Europe 1,275 1,082
USA 1,834 1,874
Rest of World 600 579
------- -------
Total marketing sales 3,965 3,794
Trading/supply sales 2,535 2,159
------- -------
Total refined product sales 6,500 5,953
Crude oil 4,809 4,482
------- -------
Total oil sales 11,309 10,435
======= =======
Refinery throughputs (thousand barrels per day)
UK 392 310
Rest of Europe 833 693
USA 1,394 1,522
Rest of World 375 386
------- -------
Total throughput 2,994 2,911
======= =======
Chemicals production (thousand tonnes)
UK 829 730
Rest of Europe 2,583 1,688
USA 2,489 2,257
Rest of World 710 702
------- -------
Total production 6,611 5,377
======= =======
Page 49
BP p.l.c. AND SUBSIDIARIES
TOTAL REPLACEMENT COST OPERATING PROFIT
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
By business
Exploration and Production
UK 727 1,154
Rest of Europe 152 226
USA 322 2,111
Rest of World 727 1,175
------- -------
1,928 4,666
------- -------
Gas, Power and Renewables
UK 2 10
Rest of Europe 47 63
USA (25) 25
Rest of World 87 2
------- -------
111 100
------- -------
Refining and Marketing
UK (124) (111)
Rest of Europe 139 136
USA (79) 594
Rest of World 132 121
------- -------
68 740
------- -------
Chemicals
UK (31) (50)
Rest of Europe 47 80
USA 23 13
Rest of World 37 38
------- -------
76 81
------- -------
Other businesses and corporate (125) (115)
------- -------
2,058 5,472
======= =======
By geographical area
UK 530 927
Rest of Europe 386 485
USA 158 2,685
Rest of World 984 1,375
------- -------
2,058 5,472
======= =======
Page 50
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
By business
Exploration and Production
UK 261 168
Rest of Europe 71 65
USA 1,167 927
Rest of World 814 706
------- -------
2,313 1,866
------- -------
Gas, Power and Renewables
UK 16 8
Rest of Europe 4 11
USA 16 17
Rest of World 10 -
------- -------
46 36
------- -------
Refining and Marketing
UK 76 111
Rest of Europe (a) 2,732 47
USA 303 180
Rest of World 26 32
------- -------
3,137 370
------- -------
Chemicals
UK 8 66
Rest of Europe 45 16
USA 42 78
Rest of World 93 56
------- -------
188 216
------- -------
Other businesses and corporate 52 49
------- -------
5,736 2,537
======= =======
By geographical area
UK 409 394
Rest of Europe 2,852 139
USA 1,531 1,210
Rest of World 944 794
------- -------
5,736 2,537
======= =======
------------
(a) The three months ended March 31, 2002 includes the acquisition of 51% of
Veba.
Page 51
BP p.l.c. AND SUBSIDIARIES
SPECIAL ITEMS AND ACQUISITION AMORTIZATION BY SEGMENT (PRE-TAX)
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Special items
Exploration and Production
UK 50 -
Rest of Europe - -
USA 62 -
Rest of World 15 -
------- -------
127 -
------- -------
Gas, Power and Renewables
UK - -
Rest of Europe - -
USA - -
Rest of World - -
------- -------
- -
------- -------
Refining and Marketing
UK - 15
Rest of Europe 26 26
USA - 4
Rest of World - 8
------- -------
26 53
------- -------
Chemicals
UK - -
Rest of Europe 2 -
USA 30 -
Rest of World - -
------- -------
32 -
------- -------
Other businesses and corporate
UK - -
Rest of Europe - -
USA - -
Rest of World - -
------- -------
- -
------- -------
Total special items before interest 185 53
Interest - bond redemption charges - 10
------- -------
Total 185 63
======= =======
Acquisition amortization
Exploration and Production
UK 32 29
USA 281 406
Rest of World 32 35
------- -------
345 470
------- -------
Refining and Marketing
UK 97 104
USA 96 97
------- -------
193 201
------- -------
Total 538 671
======= =======
Page 52
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Replacement cost basis
Replacement cost profit before exceptional items 924 3,001
Interest 333 446
Minority shareholders' interest 9 8
------- -------
Adjusted replacement cost profit 1,266 3,455
======= =======
Average capital employed 89,594 86,223
ROACE - replacement cost basis 6% 16%
------- -------
Pro forma basis
Adjusted replacement cost profit 1,266 3,455
Acquisition amortization 538 671
Special items (post tax) 120 40
------- -------
Adjusted replacement cost profit (pro forma basis) 1,924 4,166
======= =======
Average capital employed 89,594 86,223
Average capital employed acquisition adjustment (a) 18,590 22,165
------- -------
Average capital employed (pro forma basis) 71,004 64,058
ROACE - pro forma basis adjusted for special items 11% 26%
Historical cost basis
Historical cost profit (loss) after exceptional items 1,296 2,830
Interest 333 446
Minority shareholders' interest 40 8
------- -------
Adjusted historical cost profit 1,669 3,284
======= =======
Average capital employed 89,594 86,223
ROACE - historical cost basis after exceptionals 7% 15%
------------
(a) Acquisition adjustment refers to the fixed asset revaluation adjustments
and goodwill consequent upon the ARCO and Burmah Castrol acquisitions.
Page 53
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Net debt ratio - net debt: net debt + equity
Gross debt 24,531 18,788
Cash and current asset investments 1,665 2,147
------- -------
Net debt 22,866 16,641
------- -------
Equity 67,481 66,316
Net debt ratio 25% 20%
------- -------
Acquisition adjustment (a) 18,297 21,734
------- -------
Net debt ratio - pro forma basis (b) 32% 27%
======= =======
---------------
(a) Acquisition adjustment refers to the fixed asset revaluation adjustments
and goodwill consequent upon the ARCO and Burmah Castrol acquisitions.
(b) Based on equity excluding the fixed asset revaluation adjustment and
goodwill resulting from the ARCO and Burmah Castrol acquisitions.
Page 54
BP p.l.c. AND SUBSIDIARIES
REPLACEMENT COST OPERATING PROFIT ADJUSTED FOR NON-CASH
CHARGES AND CERTAIN OTHER ITEMS
Replacement cost operating profit adjusted for non-cash charges and certain
other items essentially represents the Group's cash flow from operations (on a
net of tax paid basis, tax is adjusted for the estimated effect of exceptional
items and interest paid) excluding changes in working capital. BP is presenting
this information as it gives a better insight into underlying cash flow from
operating activities. This measure is derived from BP's UK GAAP accounting
information but is not itself a recognised UK or US GAAP measure.
Three months ended
March 31
(Unaudited)
2002 2001
------------------
($ million)
Replacement cost operating profit (RCOP) (reported) (a) 2,058 5,472
Depreciation and amounts provided (b) 2,153 2,167
Exploration expenditure written off 59 108
Dividends from joint ventures and associated
undertakings less share of RCOP (122) (209)
Dividends paid to minority shareholders (13) -
Adjust provisions to cash basis (c) (69) (141)
Adjust interest and other income to cash basis (d) (13) (4)
------- ------
4,053 7,393
Tax paid adjusted for certain items* (577) (96)
------- ------
Adjusted RCOP after tax paid 3,476 7,297
------- ------
* Calculation of tax paid adjusted for certain items
Cash tax paid (445) (139)
Tax charge on exceptional items (39) 151
Tax shield assumption + (93) (108)
------- ------
(577) (96)
------- ------
+ Calculation of tax shield assumption
Interest paid (309) (361)
Tax rate assumption (e) 30% 30%
------- ------
(93) (108)
------- ------
(a) Total replacement cost operating profit is before exceptional items,
inventory holding gains and losses and interest expense.
(b) Includes depreciation and amortization relating to the fixed asset
revaluation adjustments and goodwill consequent upon the ARCO and Burmah
Castrol acquisitions.
(c) Calculated as the net of charge for provisions and utilization of
provisions.
(d) Calculated as interest and other income, less interest received and
dividends received from the Group cash flow statement.
(e) Deemed tax rate for tax shield adjustment is equal to the UK statutory tax
rate.
Page 55
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BP p.l.c.
(Registrant)
Dated: May 15, 2001 /s/ D. J. PEARL
..............................
D. J. PEARL
Deputy Company Secretary