BP PLC (BP.) - BP REPORTS STRONG 3Q RESULTS, RAISES DIVIDEND
RNS Number : 8204P
30 October 2012
30 October 2012
BP REPORTS STRONG THIRD QUARTER RESULTS,
• Underlying 3Q 2012 replacement cost profit $5.2 billion; a 40 per cent
increase on previous quarter.
• Increases quarterly dividend by 12.5 per cent, to 9c a share, payable
in 4Q 2012.
• On track for delivery of strategic 10-point plan to 2014.
• Plans to deliver long-term free cash flow growth; focusing and
de-risking the portfolio and increasing investment in upstream.
BP today announced its financial results for the third quarter of 2012,
reporting underlying replacement cost profit, adjusted for non-operating items
and fair value accounting effects, of $5.2 billion. It also announced an
increase in its quarterly dividend to 9c per share - an increase of 12.5 per
cent - expected to be paid in the fourth quarter.
In a call with financial analysts later today, the company will also provide
an update of progress against its strategic 10-point plan for 2014, and
outline its future direction.
"BP's performance and the strong progress we are making in transforming the
company give us the confidence to increase distributions to our shareholders,"
said group chief executive Bob Dudley. "We are on track with our strategy to
2014 and are laying the right foundations for sustainable growth during the
BP expects to generate future growth through increased investment in new
upstream projects in higher-margin areas and through new access and
exploration. BP's business portfolio is expected to become more tightly
focused around its strong existing positions and its key operating strengths.
3Q 2012 Results
Third quarter underlying replacement cost profit was $5.2 billion, compared to
$3.7 billion reported for the previous quarter and $5.5 billion for the third
quarter of 2011, which was prior to a number of significant divestments.
The quarter's results benefited from a strong performance in BP's downstream
business, where good operational delivery capitalised on increased refining
margins. In the upstream, performance was similar to the second quarter as
increased production from new projects and completion of turnarounds in the
Gulf of Mexico was offset by seasonal maintenance in North Sea and Alaska and
the impact of Hurricane Isaac in the Gulf. In addition, more stable oil prices
in the third quarter resulted in some positive reversal of the unusual price
effects seen in the second quarter earnings, such as Russian duty lag.
Operating cash flow in the quarter was $6.3 billion. At the end of the third
quarter, gearing was 20.9 per cent compared to 21.9 per cent at the end of the
previous quarter. Gearing is expected to reduce as the company works to
complete the divestment programme and ends payments into the $20 billion Trust
Production of oil and gas, excluding TNK-BP, was 2.26 million barrels of oil
equivalent a day (mmboed), broadly similar to the second quarter and 3 per
cent lower than a year ago. Production is expected to increase in the fourth
quarter as the maintenance season completes and the benefit of new projects
continues, but offset partially by the timing of Gulf of Mexico and North Sea
divestments expected to complete in the fourth quarter. BP's share of TNK-BP
production in the quarter was 1mmboed, slightly more than in the same period
BP's downstream segment delivered record quarterly underlying earnings. Strong
operational performance in the fuels business - with refining throughputs at
the highest level for seven years - captured the benefits of the quarter's
notably high refining margins. Contributions from supply and trading also
returned to more normal levels. Refining margins are expected to decline in
the fourth quarter in line with seasonal trends. Refining throughput is also
expected to be lower due to turnarounds and the start of a transitional outage
to replace the largest of three crude units at our Whiting refinery, as part
of the major upgrade project.
On October 22, BP announced that it had agreed heads of terms to sell its
shareholding in TNK-BP to Rosneft for a mixture of shares and cash. Combined
with BP's existing 1.25 per cent shareholding, the proposed sale would result
in BP holding a 19.75 per cent interest in Rosneft and receiving $12.3 billion
in cash. The parties currently anticipate the proposed transaction to complete
in the first half of 2013, subject to certain customary closing conditions
including governmental, regulatory and antitrust approvals.
"Rosneft is a great company with great opportunities," said Dudley. "I believe
our agreement will remove considerable uncertainty for our shareholders about
BP's future in Russia and will secure for BP a valuable and truly distinctive
position in one of the world's largest and most important oil and gas
As set out in the 10-point plan, BP expects to bring 15 new major upstream
projects into production by the end of 2014, 11 of which are in four
higher-margin areas: the Gulf of Mexico, Angola, Azerbaijan and the North Sea.
All of these projects are on track.
With the start of production from the Devenick field in the North Sea in early
October, three of the six projects scheduled for start-up in 2012 are now on
line; the remaining three are expected to start up before the end of the year.
In the downstream, the Whiting refinery modernisation programme remains on
schedule to start-up in the second half of 2013.
As it moves beyond 2014, BP expects to increase its investment into the
upstream to drive development and growth in higher-margin areas and sustain
the pace of new access and exploration.
Since early 2010 BP has accessed twice the new acreage it had accessed in the
previous nine years, creating a much larger exploration prospect inventory.
This has also increased the company's exposure to new exploration areas
outside areas of traditional focus; half of the prospect inventory is now in
new plays and half in proven plays in known basins.
Nine exploration wells are expected to be completed in 2012, increasing to
15-25 exploration wells a year going forward. Between 2012 and 2015, BP's
drilling programme is expected to test 15 new plays, in addition to deepening
in existing core areas.
BP's portfolio of world-class downstream businesses has been focused over
recent years through significant portfolio rationalisation and investments,
including the Whiting upgrade project. With this repositioning expected to be
largely complete by the end of next year, the downstream is expected to become
significantly more free cash flow generative, delivering material and growing
cash to the Group.
BP will continue to reshape and focus its business portfolio around its key
operating strengths. Since the end of the second quarter BP has announced
agreements for divestments with a total value of over $11 billion, including
for the Texas City and Carson refineries and associated assets and a number of
non-strategic deepwater fields in the Gulf of Mexico. Since the start of 2010
BP has now announced disposals for a total of over $35 billion against its
target of $38 billion; this does not include the proposed transaction with
Rosneft for the sale of BP's share in TNK-BP.
"This highly successful divestment programme is about fundamentally reshaping
and repositioning our upstream portfolio. It gives BP a differentiated
competitive position which plays to our strengths in exploration, deepwater
fields, giant fields and gas value chains. It is also biased to oil, which we
believe has higher returns potential," said Dudley.
BP expects to make a final payment of $860 million into the $20 billion Gulf
of Mexico Trust Fund in the fourth quarter of 2012. At the end of the third
quarter, the cash balances in the Trust Fund and the Qualified Settlement
Funds amounted to $10.9 billion, with $19.1 billion contributed and $8.2
billion paid out.
In its results stock exchange announcement also issued today, BP included an
update on the status of the legal proceedings related to Gulf of Mexico oil
The US Department of Justice (DoJ) has been conducting an investigation into
the Gulf of Mexico oil spill regarding civil and criminal laws. BP is in
ongoing discussions with the DoJ and other federal agencies regarding a
possible settlement of these claims and whilst it is ready to settle on
reasonable terms, a number of unresolved issues remain and there is
significant uncertainty as to whether an agreement will ultimately be reached.
BP has repeatedly said that it is willing to settle on reasonable terms but
otherwise continues to prepare vigorously for the start of trial MDL 2179, now
scheduled for late February 2013.
Bob Dudley concluded: "BP is becoming a tightly-focused oil and gas company. I
am confident we will be well-positioned to grow long term sustainable free
cash flow and create value for our shareholders."
· BP press office, London: +44 (0)20 7496 4076, firstname.lastname@example.org
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: expectations regarding the '10-point plan' and BP's
strategy to 2014; expectations regarding future investment and the pace of new
access and exploration in Upstream; BP's plans to deliver long-term free cash
flow growth; expectations regarding BP's portfolio in the future; the expected
quarterly dividend payment; the expected level of gearing; expectations
regarding future levels of reported production, refining margins, refining
throughput and refinery turnarounds; the timing of and prospects for upgrades
to the Whiting refinery; expectations regarding the Rosneft transaction; the
prospects for, timing and composition of future projects; expectations for
drilling and rig activity; expectations regarding the timing and prospects of
BP's re-positioning of Downstream; prospects for BP's $38-billion divestment
programme; the timing and quantum of contributions to the $20-billion Trust
fund; and the prospects for and expected timing of certain investigations,
claims, settlements, hearings, trials and litigation outcomes. By their
nature, forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will or may occur in the
future. Actual results may differ from those expressed in such statements,
depending on a variety of factors including the ability of the parties to the
Rosneft transaction to negotiate satisfactory definitive agreements and the
terms thereof; the actions of regulators and the timing of the receipt of
governmental and regulatory approvals; the timing of bringing new fields
onstream; the timing of divestments; future levels of industry product supply;
demand and pricing; OPEC quota restrictions; PSA effects; operational
problems; general economic conditions; political stability and economic growth
in relevant areas of the world; changes in laws and governmental regulations;
regulatory or legal actions including the types of enforcement action pursued
and the nature of remedies sought; exchange rate fluctuations; development and
use of new technology; the success or otherwise of partnering; the actions of
competitors, trading partners, creditors, rating agencies and others; 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 our Annual Report and Form 20-F 2011 as filed with the US
Securities and Exchange Commission.
-- ENDS --
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QRTURVNRUSARORA -0- Oct/30/2012 07:01 GMT
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