BP PLC BP. BP Announces Second Quarter 2012 Results

  BP PLC (BP.) - BP Announces Second Quarter 2012 Results

RNS Number : 8828I
BP PLC
31 July 2012
 



press release

 

31 July 2012

 

                        BP Second Quarter 2012 Results

 

BP today  reported its  quarterly  results for  the  second quarter  of  2012. 
Underlying replacement cost profit for the quarter, adjusted for non-operating
items and fair value accounting effects, was $3.7 billion, compared with  $5.7 
billion for the same period in 2011 and $4.8 billion for the first quarter  of 
2012.

 

Compared to the  previous quarter,  the underlying results  were depressed  by 
weaker oil  and  US gas  prices  together with  reductions  in output  due  to 
extensive planned maintenance,  particularly affecting high-margin  production 
from the Gulf of  Mexico, and lower  net income from  TNK-BP. This was  partly 
offset by  a  beneficial  consolidation adjustment  to  unrealised  profit  in 
inventory.

 

BP's share of net  income from TNK-BP  was $700 million  lower than the  first 
quarter, driven by the impact of the rapid fall in oil prices amplified by the
lag in Russian oil export duty, which  is based on earlier higher oil  prices. 
At current Urals prices, net income in  the third quarter is expected to  show 
some positive reversal of the duty lag.

 

Bob Dudley, BP  group chief  executive, said: "We  recognise this  was a  weak 
earnings quarter, driven by a combination of factors affecting both the sector
and BP specifically.

 

"The effects of price movements have impacted our earnings in the quarter. Our
extensive turnaround and maintenance programme,  which will continue into  the 
third quarter, is also affecting some aspects of our near term results. All of
this will take time, but it  is important investment that will enhance  safety 
and reliability for the long term. As we deliver this major transformation, we
are also committed to generating sustainable efficiencies in our operations.

 

"Rebuilding trust  with our  shareholders and  other stakeholders  is  vitally 
important.  We  are  making  progress  against  the  critical  strategic   and 
operational targets we  have set ourselves  and are confident  that this  will 
deliver long-term, sustainable value."

 

Non-operating items included  a number of  significant impairments,  totalling 
$4.8 billion on a pre-tax basis, relating primarily to reductions in value  of 
US shale gas  assets, certain refineries  in the company's  portfolio and  the 
decision to suspend the Liberty project in Alaska.

 

Operating cash flow  for the second  quarter, after $1.7  billion of  post-tax 
Gulf of Mexico expenditure, was $4.4 billion, compared to $3.4 billion in  the 
previous quarter. Gearing was  21.9%, reflecting the impact  on equity due  to 
the impairments. BP announced  a dividend for the  quarter of 8c per  ordinary 
share.

 

BP's production  of oil  and  gas, excluding  TNK-BP, averaged  2.275  million 
barrels of oil equivalent per day (mmboed) in the second quarter, compared  to 
2.457 mmboed for the same period  last year. Reported production in the  third 
quarter is expected to be slightly lower, as the seasonal turnaround programme
continues, before  increasing in  the fourth  quarter. In  line with  previous 
guidance, full  year  underlying  production,  adjusted  for  divestments,  is 
expected to be broadly similar to 2011. BP's share of TNK-BP production in the
second quarter  was  1.016 mmboed,  compared  to 0.976mmboed  for  the  second 
quarter of 2011.

 

BP expects to increase operating cash flow by 50 per cent from 2011 levels  in 
2014, in a $100  a barrel oil  price environment (see  Notes, below). This  is 
expected to be driven both by the completion of contributions into the Gulf of
Mexico Trust Fund -- expected by the end of 2012 -- and the delivery of  major 
projects, focused on 15 new higher-margin upstream projects scheduled to begin
production by the end of 2014. Six are scheduled to start up in 2012, and  two 
- Galapagos in the Gulf of  Mexico and Clochas-Mavacola offshore Angola -  are 
now on  stream. Six  rigs are  now operational  on BP  fields in  the Gulf  of 
Mexico, with a total of eight expected to be in place by year end.

 

"Moving into  2013,  we expect  earnings  momentum  to build  as  we  complete 
payments into the Trust Fund, as high-value production comes back on line, and
as the impact of new projects ramps up," Dudley said.

 

By the end  of the  second quarter, BP  had paid  a total of  $8.8 billion  in 
individual and  business  claims  and government  payments  arising  from  the 
Deepwater Horizon incident. The cash balances  in the Trust and the  Qualified 
Settlement Funds at  June 30, amounted  to $10.1 billion,  with $17.9  billion 
contributed in and $7.8 billion disbursed.

 

BP continues to  reshape and focus  its portfolio and  since the beginning  of 
2010 has  now entered  into agreements  to sell  assets with  a value  of  $24 
billion. Total divestments since 2010 are targeted to reach $38 billion by the
end of 2013.

 

In exploration,  during the  quarter BP  acquired  43 leases  in the  Gulf  of 
Mexico, which are awaiting regulatory approvals. It also resumed operation  of 
its long-term exploration  contracts onshore  and offshore  in Libya.  Seismic 
activities are underway in  Angola and Namibia  and several exploration  wells 
are currently drilling. A  major seismic survey in  BP's Ceduna Basin  acreage 
offshore southern Australia, was also completed.

 

Further information:

 

BP press office: +44 (0)20 7496 4076, bppress@bp.com

 

Notes:

 

·      A pre-tax charge  of $847 million  was taken in  the second quarter  to 
reflect an increase in provision for various costs and litigation relating the
Gulf of Mexico oil spill.

 

·     BP's target to  increase operating cash  flow by 50  per cent from  2011 
levels reflects the company's expectation that all required payments into  the 
$20-billion trust fund will have  been completed by the  end of 2012. It  does 
not  reflect  any  cash  flows  relating  to  other  liabilities,   contingent 
liabilities, settlements or contingent assets arising from the Gulf of  Mexico 
oil spill which may or may not arise at that time. BP is not able to  reliably 
estimate the amount or timing of a number of contingent liabilities. See  Note 
2 of BP plc's Half Year results published today for further information.

 

 

·     Reconciliations to GAAP: This  press release contains certain  financial 
information that  is  not  presented in  accordance  with  generally  accepted 
accounting  principles   (GAAP).  A   quantitative  reconciliation   of   this 
information to the most directly  comparable financial measure calculated  and 
presented in accordance with GAAP can be found on our website at www.bp.com.

 

·       Cautionary Statement:

This press release contains certain forward-looking statements with respect to
the operations and businesses of BP and certain of the plans and objectives of
BP with respect to  these items. These statements  generally, but not  always, 
are identified by the use of words such as "will", "expected to", "is intended
to", "projected" or similar expressions. In particular, these include  certain 
statements regarding: the expected impact  of Russia's crude oil and  products 
export duty on BP's share of TNK-BP  net income in the third quarter of  2012; 
prospects for and the timing of BP's turnaround and maintenance programme; the
expected level of reported production in the third quarter and fourth  quarter 
of 2012; the expected level  of full-year underlying production, adjusted  for 
divestments, in  2012; the  anticipated increase  in operating  cash flow  and 
margins; the timing for completion of  contributions to and payments from  the 
$20-billion Trust fund; the  prospects for, timing  and composition of  future 
projects including expected start up, completion, timing of production,  level 
of production and margins; expectations for  drilling and rig activity in  the 
Gulf of Mexico;  the prospects for  earnings momentum in  2013; prospects  for 
BP's $38-billion divestment programme, and  the intention to make $38  billion 
of disposals by the end of 2013;  prospects for the completion of planned  and 
announced divestments; and  the expected award  of new leases  in the Gulf  of 
Mexico.  Actual results  may differ  materially from those  expressed in  such 
statements, depending on a variety of factors, including the factors such  as: 
the timing  of  bringing new  fields  on  stream; the  timing  and  successful 
completion of certain disposals; OPEC quota restrictions; PSA effects;  future 
levels of industry product supply;  demand and pricing; operational  problems; 
general economic  conditions;  political  stability  and  economic  growth  in 
relevant areas of  the world;  changes in laws  and governmental  regulations; 
actions by regulators; exchange rate fluctuations; development and use of  new 
technology;  the  success   or  otherwise  of   partnering;  the  actions   of 
competitors; natural  disasters and  adverse  weather conditions;  changes  in 
public expectations and other changes to business conditions; wars and acts of
terrorism or sabotage; and other factors discussed under "Principal risks  and 
uncertainties" in our Stock Exchange Announcement for the period ended 30 June
2012 and under "Risk Factors"  in BP's Annual Report  and Form 20-F 2011  (SEC 
File No. 1-06262)  as filed  with the  US Securities  and Exchange  Commission 
(SEC).

 

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IR GUGDRUSXBGDB -0- Jul/31/2012 06:02 GMT