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 June 30, 2001
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|
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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 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., 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REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS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 - JUNE 2001
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Total replacement cost operating profit - $m 4,972 4,337 10,471 8,298
Replacement cost profit before
exceptional items - $m 3,032 2,791 6,469 5,468
Replacement cost profit for the period - $m 3,131 2,811 6,673 5,364
Historical cost profit for the period - $m 3,171 3,024 6,475 6,109
Profit per Ordinary Share - cents 14.12 13.59 28.82 29.47
Dividends per Ordinary Share - cents 5.50 5.00 10.75 10.00
(a) For further information on replacement cost profit see Note 5 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, 2000 included in BP p.l.c.'s Annual Report on Form 20-F for the year ended
December 31, 2000. Comparative figures for the three months and six months ended
June 30, 2000 have been restated to reflect the transfer of BP's North American
NGL business from Refining and Marketing to Gas and Power.
The changes in turnover for the second quarter and half year of 2001 reflect
significant increases in Gas and Power and in Refining and Marketing. In Gas and
Power the increases are mainly due to higher marketing sales and increased
trading activity. In Refining and Marketing the increases mainly reflect the
inclusion of ARCO for the whole of the six months in 2001, compared to around
three months (from April 14) in 2000, the acquisition of Burmah Castrol from
July 7, 2000 and the consolidation of the European fuels business with effect
from August 1, 2000. Changes in turnover also reflect movements in price and
other volume changes.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) was $3,032 million for the three months ended June 30,
2001, compared with $2,791 million for the equivalent period of 2000. The
increase in profit reflects the generally favourable trading environment,
performance improvements and the inclusion of ARCO and Burmah Castrol. These
results are after charging special items of $159 million ($114 million after
tax) for the three months ended June 30, 2001, and $600 million ($442 million
after tax) for the equivalent period of 2000. The results for the three months
ended June 30, 2001 and 2000 are also after charging acquisition amortization of
$653 million and $377 million respectively. Acquisition amortization refers to
depreciation relating to the fixed asset revaluation adjustment and amortization
of goodwill consequent upon the ARCO and Burmah Castrol acquisitions. The
special charges for the three months ended June 30, 2001 comprised in Refining
and Marketing, Burmah Castrol integration costs of $35 million, rationalization
costs in the European commercial business of $74 million and a bond redemption
charge of $50 million. Those for the corresponding period of 2000 related to
ARCO integration and rationalization costs and an asset writedown.
For the six months ended June 30, 2001, the replacement cost profit before
exceptional items was $6,469 million, up from $5,468 million in 2000. The
results for 2001 are after charging special items of $222 million ($159 million
after tax) and acquisition amortization of $1,297 million. The results for 2000
include special charges of $640 million ($472 million after tax), and
acquisition amortization of $377 million.
The historical cost profit for the three months ended June 30, 2001 was $3,171
million and included inventory holding gains of $40 million and net exceptional
gains of $171 million ($99 million after tax) in respect of net profits on the
sale of fixed assets and businesses and termination of operations. For the
equivalent period of 2000 there was a profit of $3,024 million including
inventory holding gains of $213 million, and net exceptional gains of $161
million ($20 million after tax) in respect of net profits on the sale of fixed
assets and businesses and termination of operations.
For the six months ended June 30, 2001, the historical cost profit was $6,475
million, after inventory holding losses of $198 million and including net
exceptional gains of $389 million ($204 million after tax) in respect of net
profits on sale of fixed assets and businesses and terminations of operations.
For the six months ended June 30, 2000, the historical cost profit was $6,109
million, after inventory holding gains of $745 million and including net
exceptional gains of $4 million ($104 million losses after tax) in respect of
net profits on sale of fixed assets and businesses and terminations of
operations.
Page 2
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Net taxation, other than production taxes, charged for the three months ended
June 30, 2001 was $1,550 million compared with $1,289 million in the equivalent
period last year. This included a tax charge of $72 million in respect of
exceptional items compared with a tax charge of $141 million for the second
quarter of 2000. The effective tax rate on replacement cost profit before
exceptional items was 32% for the three months ended June 30, 2001, and 32% for
the half year, compared with 28% and 27% for the equivalent periods of 2000. The
increase in the tax rate is due to the non-deductability for tax purposes of the
acquisition amortization and the non-availability of prior year tax credits in
2001.
Interest expense for the three months ended June 30, 2001 was $441 million
(including $50 million relating to bond redemption charges) compared with $403
million in the equivalent period of 2000 reflecting lower interest rates. For
the first half of 2001 interest expense was $887 million (including $60 million
relating to bond redemption charges) compared to $699 million a year ago, also
reflecting the full inclusion of ARCO in the first half of 2001 and for only
around three months in the first half of 2000 partly offset by lower interest
rates.
Net cash outflow for the three months ended June 30, 2001 was $2,136 million,
compared with an inflow of $8,536 million for the equivalent period of 2000. For
the first half of 2001, net cash inflow was $1,080 million compared with a net
cash inflow of $7,770 million in the same period in 2000. The decreased cash
flow in both periods in 2001 is primarily driven by higher tax payments and
capital expenditure and significantly lower divestment proceeds (the second
quarter and first half of 2000 included the proceeds from the sale of the ARCO
Alaska assets).
Capital expenditure in the second quarter of 2001 was $3.8 billion ($3.3 billion
excluding acquisitions), up 25% (38% excluding acquisitions) on a year ago.
Capital expenditure for the first half of 2001 was $6.3 billion ($5.8 billion
excluding acquisitions), an increase of 14% (41% excluding acquisitions) on the
first six months of the previous year. Capital expenditure in the second quarter
and first half of 2001 included the acquisition of Bayer's 50% interest in
Erdolchemie. BP expects total capital expenditure for 2001 to be approximately
$13 billion excluding acquisitions.
Net debt at June 30, 2001 was $18.8 billion. The ratio of net debt to net debt
plus equity was 20% compared with 18% at March 31, 2001 and 21% at December 31,
2000. After adjusting for the fixed asset revaluation adjustment and goodwill
consequent upon the ARCO and Burmah Castrol acquisitions, the ratio of net debt
to net debt plus equity was 25% at June 30, 2001 compared with 19% at June 30,
2000 and 27% at December 31, 2000.
BP believes that, taking into account the substantial amounts of undrawn
borrowing facilities available, the Group has sufficient working capital for
foreseeable requirements.
The return on average capital employed for the three months ended June 30, 2001
was 15% compared with 14% for the equivalent period of 2000. For the six months
ended June 30, 2001, the return on average capital employed was 15%. For further
information on the return on average capital employed calculation see Note 11 of
Notes to Consolidated Financial Statements.
BP purchased for cancellation approximately 32 million of its own shares during
the second quarter of 2001 at a cost of $283 million. Total share purchases over
the six months to June 30, 2001 amounted to approximately 92 million at a cost
of $783 million.
BP announced a second quarterly dividend for 2001 of 5.50 cents per ordinary
share. Holders of ordinary shares will receive 3.911 pence per share and holders
of American Depositary Receipts (ADRs) $0.33 per ADS. The dividend for the half
year was 10.75 cents per share, up 7.5%, which is equivalent to 7.576 pence per
share, up 15% over last year. The dividend is payable on September 10, 2001 to
shareholders on the register on August 17, 2001. 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 on September 10, 2001.
BP intends to continue to pay dividends in the future of around 50% of its
replacement cost profit before exceptional items after adjusting for special
items and acquisition amortization, adjusted to mid-cycle business conditions.
Mid-cycle conditions are our best estimate of likely average prices and margins
over the long term.
BP announced a deal with E.ON in July 2001 which will involve BP taking a
majority stake in Veba Oil which owns Aral, Germany's biggest fuels retailer.
Subject to regulatory approvals, the deal - in the form of a joint venture
between BP and Veba Oil's owner E.ON - involves BP taking 51 per cent and
operational control of Veba Oil and offers the prospect of full ownership as
early as the second quarter of next year. In return, E.ON will receive 51 per
cent of Gelsenberg - which holds BP's 25.5 per cent stake in Ruhrgas, Germany's
leading gas distributor - plus a balancing cash payment from BP of $1.63
billion, subject to adjustments, and an assumption by BP of $950 million of
debt. Terms have also been agreed which could result in BP transferring the
remaining Gelsenberg holding and paying a further $340 million for the remainder
of Veba Oil.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Owing to the significant acquisitions that took place in 2000, in addition to
its reported results, BP is presenting pro forma results adjusted for special
items in order to enable shareholders to assess current performance in the
context of BP's past performance and against that of its competitors. The pro
forma result, adjusted for special items, has been derived from BP's UK GAAP
accounting information but is not in itself a recognized UK or US GAAP measure.
Pro forma
Reconciliation of reported result
profit (loss) to pro forma result Acquisition Special adjusted for
adjusted for special items Reported amortization(a) items(b) special items
--------- ------------ ------- -------------
($ million)
Three months ended June 30, 2001
Exploration and Production 3,441 477 - 3,918
Gas and Power 173 - - 173
Refining and Marketing 1,477 176 109 1,762
Chemicals 9 - - 9
Other businesses and corporate (128) - - (128)
--------- ---------- --------- ---------
Replacement cost operating profit 4,972 653 109 5,734
Interest expense (441) - 50 (391)
Taxation (1,478) - (45) (1,523)
Minority shareholders' interest (21) - - (21)
--------- ---------- --------- ---------
Replacement cost profit before 3,032 653 114 3,799
exceptional items --------- ========== ========= ---------
per ordinary share (cents) 13.51 16.92
========= =========
Three months ended June 30, 2000
Exploration and Production 3,019 349 259 3,627
Gas and Power 114 - - 114
Refining and Marketing 1,183 70 141 1,394
Chemicals 320 - 50 370
Other businesses and corporate (299) - 150 (149)
--------- ---------- --------- ---------
Replacement cost operating profit 4,337 419 600 5,356
Interest expense (403) - - (403)
Taxation (1,148) - (158) (1,306)
Minority shareholders' interest 5 (42) - (37)
--------- ---------- --------- ---------
Replacement cost profit before 2,791 377 442 3,610
exceptional items --------- ========== ========= ---------
per ordinary share (cents) 12.60 16.54
========= =========
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustment 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 quarter and half year comprise, in Refining and Marketing,
Burmah Castrol integration costs and rationalization costs in the European
commercial business, and bond redemption charges.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
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)
Six months ended June 30, 2001
Exploration and Production 8,121 933 - 9,054
Gas and Power 285 - - 285
Refining and Marketing 2,230 364 162 2,756
Chemicals 90 - - 90
Other businesses and corporate (255) - - (255)
--------- ---------- --------- ---------
Replacement cost operating profit 10,471 1,297 162 11,930
Interest expense (887) - 60 (827)
Taxation (3,083) - (63) (3,146)
Minority shareholders' interest (32) - - (32)
--------- ---------- --------- ---------
Replacement cost profit before 6,469 1,297 159 7,925
exceptional items --------- ========== ========= ---------
per ordinary share (cents) 28.80 35.28
========= =========
Six months ended June 30, 2000
Exploration and Production 6,222 349 283 6,854
Gas and Power 256 - - 256
Refining and Marketing 1,767 70 141 1,978
Chemicals 579 - 50 629
Other businesses and corporate (526) - 166 (360)
--------- ---------- --------- ---------
Replacement cost operating profit 8,298 419 640 9,357
Interest expense (699) - - (699)
Taxation (2,068) - (168) (2,236)
Minority shareholders' interest (63) (42) - (105)
--------- ---------- --------- ---------
Replacement cost profit before 5,468 377 472 6,317
exceptional items --------- ---------- --------- ---------
per ordinary share (cents) 26.38 30.47
========= =========
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustment 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 quarter and half year comprise, in Refining and Marketing,
Burmah Castrol integration costs and rationalization costs in the European
commercial business, and bond redemption charges.
Page 5
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
OPERATING INFORMATION
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Crude oil and natural gas liquids production
(thousand barrels per day), (net of royalties)
UK 471 519 491 550
Rest of Europe 92 88 95 90
USA 742 705 732 749
Rest of World 580 585 593 550
------- ------- ------- -------
Total crude oil and liquids production 1,885 1,897 1,911 1,939
======= ======= ======= =======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,690 1,630 1,920 1,688
Rest of Europe 121 99 144 142
USA 3,550 3,188 3,509 2,760
Rest of World 3,193 2,777 3,150 2,412
------- ------- ------- -------
Total natural gas production 8,554 7,694 8,723 7,002
======= ======= ======= =======
Total production (a)
(thousand barrels of oil equivalent per day),
(net of royalties)
UK 762 800 822 841
Rest of Europe 113 105 120 114
USA 1,354 1,255 1,337 1,225
Rest of World 1,131 1,064 1,136 966
------- ------- ------- -------
Total production 3,360 3,224 3,415 3,146
======= ======= ======= =======
Natural gas sales volumes (million cubic feet per day)
UK 2,481 2,424 2,938 2,396
Rest of Europe 201 148 226 168
USA 8,516 6,239 8,259 5,512
Rest of World 6,839 5,006 7,121 4,709
------- ------- ------- -------
Total natural gas sales volumes (b) 18,037 13,817 18,544 12,785
======= ======= ======= =======
NGL sales volumes (thousand barrels per day)
UK - - - -
Rest of Europe - - - -
USA 206 129 214 125
Rest of World 171 138 189 184
------- ------- ------- -------
Total NGL sales volumes 377 267 403 309
======= ======= ======= =======
---------------
(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 and Power,
including marketing, trading and supply sales.
Page 6
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
OPERATING INFORMATION
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Oil sales volumes (thousand barrels per day)
Refined products
UK 270 227 265 225
Rest of Europe 1,031 781 1,057 774
USA 1,954 1,898 1,914 1,624
Rest of World 601 459 590 446
------- ------- ------- -------
Total marketing sales 3,856 3,365 3,826 3,069
Trading/supply sales 2,022 2,071 2,090 1,846
------- ------- ------- -------
Total refined product sales 5,878 5,436 5,916 4,915
Crude oil 4,131 6,271 4,307 6,383
------- ------- ------- -------
Total oil sales 10,009 11,707 10,223 11,298
======= ======= ======= =======
Refinery throughputs (thousand barrels per day)
UK 315 265 313 273
Rest of Europe 623 535 658 528
USA 1,642 1,853 1,582 1,573
Rest of World 375 368 380 360
------- ------- ------- -------
Total throughput 2,955 3,021 2,933 2,734
======= ======= ======= =======
Chemicals production (thousand tonnes)
UK 799 658 1,529 1,525
Rest of Europe 1,796 1,692 3,484 3,332
USA 2,108 2,562 4,365 5,181
Rest of World 618 577 1,320 1,154
------- ------- ------- -------
Total production 5,321 5,489 10,698 11,192
======= ======= ======= =======
Page 7
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 Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Turnover - $m 7,441 7,278 16,558 13,782
Total replacement cost operating profit - $m 3,441 3,019 8,121 6,222
Results included:
Exploration expense - $m 81 168 250 299
Key Statistics:
Average prices :Crude oil (a) - $/bbl 24.74 24.98 24.77 25.30
realized by BP
:Natural gas - $/mcf 3.43 2.51 4.21 2.33
Brent oil price - $/bbl 27.39 26.88 26.57 26.89
West Texas intermediate oil price - $/bbl 27.88 28.96 28.30 28.91
Henry Hub gas price (b) - $/mmBtu 4.66 3.44 5.86 2.98
---------------
(a) Crude oil and natural gas liquids
(b) Henry Hub First of the Month Index
Replacement cost operating profit for the three months and six months ended June
30, 2001 were $3,441 million and $8,121 million respectively. This compares with
$3,019 million and $6,222 million for the corresponding periods in 2000. The
result in 2001 and from April 14, 2000, includes a contribution from ARCO and is
after charging depreciation and amortization arising from the fixed asset
revaluation adjustment and goodwill consequent upon the ARCO acquisition of $477
million for the three months and $933 million for the six months ended June 30,
2001. For the equivalent periods in 2000, the amounts were $349 million in each
period. The anticipated ARCO cost savings have been fully achieved.
Total hydrocarbon production for the quarter was up 4% on the second quarter of
2000, with natural gas volumes up by 11% and oil production stable. Even on a
consistent current portfolio basis, the increase was 2%. This continues the
recent quarterly achievement of a continuously improving growth rate. For the
first six months of 2001, the total production was up 9% and on a consistent
current portfolio basis the increase was 1%. During the second quarter of 2001,
production started up at the Nile and Mica fields in the Gulf of Mexico. In July
the Tambar field in Norway started production.
Capital expenditure during the quarter was $2.4 billion, up 57% on the same
quarter in 2000 and $4.3 billion for the half year, up 78% on a year ago. The
Kizomba development in Angola was approved by BP along with developments for an
NGL plant in Egypt and the Milne Point extension project in Alaska. In July, the
Valhall flank development offshore Norway, the Azeri Chirag Gunashli phase one
development in Azerbaijan and the Atlas Methanol Plant in Trinidad were approved
by BP.
During the quarter, there was a natural gas discovery at Cashima (BP 100% and
operator) offshore Trinidad. Cashima 1 is the first of four exploratory wells
planned for 2001 offshore Trinidad. There were also discoveries in Egypt and in
the Gulf of Mexico. In the quarter, BP (67% and operator) successfully bid for
one block in the UK Continental Shelf 19th round, adjacent to the block won in
the Faeroes in 2000. In addition, BP signed an agreement to take a 25% interest
in Saudi Arabia's largest gas development, the Core Venture 1 project.
In June, BP announced the sale of its 9.5% stake in the Kashagan discovery
offshore Kazakhstan. Shortly after the quarter end, BP acquired a further 9.7%
stake in the Tangguh LNG project in Indonesia. This increases BP's share of the
project to around 50%.
Page 8
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
GAS AND POWER
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Turnover - $m 10,435 3,724 22,515 6,979
Total replacement cost operating profit - $m 173 114 285 256
On January 1, 2001, the natural gas liquids (NGL) business located in North
America was moved to Gas and Power from Refining and Marketing. Comparative
information has been restated.
The increase in turnover for the second quarter and half year of 2001 is mainly
due to higher marketing sales and increased trading activity. The replacement
cost operating profit for the second quarter of 2001 was $173 million compared
with $114 million a year ago. The result reflects improved marketing and trading
performance partly offset by pressure on NGL margins. Profit for the first six
months of 2001 was $285 million, up $29 million on the same period in 2000,
reflecting the above factors and, in addition, growth in natural gas sales in
the first quarter contributed to the result.
During the quarter, Heads of Agreement were signed for the development of
China's first liquefied natural gas (LNG) import terminal at Guangdong. BP also
submitted an initial investment proposal on behalf of a consortium to develop a
4,200 kilometre west-east pipeline.
Agreement has been reached with Statoil to purchase 1.6 billion cubic metres of
gas per annum for 15 years with effect from October 1, 2001. This is the first
significant contract for gas supplies to the UK from the Norwegian continental
shelf since the Frigg contract in 1977. In North America BP announced an
agreement in principle for a strategic alliance with the Energy East
Corporation, enabling the two parties to pool their combined expertise in
natural gas acquisition and supply management.
In the USA, BP increased its stake in Green Mountain Energy Company, a leading
marketer of cleaner and renewable energy, from 18.5% to 22.9%. The original
equity stake was acquired during 2000.
Page 9
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 Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Turnover - $m 34,257 24,168 62,780 43,864
Total replacement cost operating profit - $m 1,477 1,183 2,230 1,767
Global Indicator Refining Margin (a) - $/bbl 5.78 4.69 5.02 3.56
---------------
(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.
The turnover increases in the second quarter and half year mainly reflect the
inclusion of ARCO for the whole of the six months in 2001, compared to around
three months in 2000, the acquisition of Burmah Castrol on July 7, 2000 and the
consolidation of the European fuels business with effect from August 1, 2000.
The replacement cost operating profit for the three months and six months ended
June 30, 2001 was $1,477 million and $2,230 million respectively. This compares
with $1,183 million and $1,767 million for the same periods in 2000. The results
include acquisition amortization of $176 million for the three months and $364
million for the six months ended June 30, 2001 and $70 million for both the
three months and half year ended June 30, 2000. Special items for the three
months and six months ended June 30, 2001 were $109 million and $162 million
respectively. For the second quarter this comprised $35 million of costs arising
from Burmah Castrol integration activities and $74 million relating to
rationalization costs in the European commercial business. For the six months
ended June 30, 2001, special items include $76 million relating to Burmah
Castrol integration and $86 million relating to the European commercial
business. The main drivers of the improvement in both periods were higher
refining margins, the impact of consolidation of the fuels business in Europe,
the Burmah Castrol acquisition and unit cost reductions. The anticipated ARCO
cost savings have been fully achieved and cost savings expected as a result of
the Burmah Castrol acquisition are on track. US refining margins were
particularly strong for some of the second quarter of 2001 due to tight supply
in the Midwest and on the West Coast.
Marketing sales in the second quarter increased by 15% versus a year ago
reflecting consolidation of the European fuels business (the six months ended
June 30, 2001 showed a 25% increase over the same period in 2000); this factor,
together with the roll-out of BP Connect stores, led to an increase in store
sales of 17%, the increase in marketing sales was offset in part by reduced
commercial volumes resulting from the end of the heating season in the northern
hemisphere. The roll-out of BP Connect continued during the quarter with over
155 BP Connect stores now open in the UK, USA, Australia and New Zealand. BP's
leadership position in clean fuels continues to grow with BP now providing clean
fuels to 72 cities.
In July BP announced that, subject to regulatory approval, it is to acquire a
majority stake in Veba Oil which owns Aral, Germany's biggest fuels retailer.
Also in July BP announced that it had reached an agreement with Tesoro Petroleum
Corporation to sell the Mandan, North Dakota and Salt Lake City, Utah refineries
in the USA, with associated storage, pipeline, distribution and gasoline
marketing operations, for $677 million, excluding working capital. The agreement
is subject to regulatory approval.
Page 10
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
CHEMICALS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Turnover - $m 3,073 2,914 5,762 5,695
Total replacement cost operating profit - $m 9 320 90 579
Chemicals Indicator Margin (a) - $/te 103(b) 132 104(b) 123
---------------
(a) 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 BP's entire portfolio, it
includes a broader range of products than BP's previous indicator. Among
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.
(b) Provisional. The data for the quarter and half year is based on two and
five months' actual data respectively and one month of provisional data.
Chemicals' replacement cost operating profit for the three months and six months
ended June 30, 2001 was $9 million and $90 million respectively. For the
corresponding periods in 2000 the replacement cost operating profit was $320
million and $579 million, with special charges of $50 million in each period.
The second quarter and first half 2001 results were sharply down on a year ago,
reflecting the severe deterioration in the trading environment. The results for
the second quarter and half year 2001 include $19 million and $40 million
respectively for restructuring costs.
The first six months of 2001 saw polymer margins and costs under pressure from
high feedstock and energy prices in a period of demand weakness. This was
exacerbated by operational problems at three crackers which have since been
resolved.
Production in the second quarter benefited from full ownership of Erdolchemie
from May 1, 2001, but was adversely impacted by the cracker problems at
Grangemouth in Scotland, Lavera in France and Chocolate Bayou in Texas, USA. In
aggregate, second quarter production of 5,321 ktes was similar to the previous
quarter and 3% below the same quarter in 2000. First half 2001 volumes were 4%
down on the first half of 2000.
In response to the trading environment, actions are underway to improve returns
by focusing the portfolio, reducing capital expenditure and implementing
additional cost reductions.
Page 11
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 Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Turnover - $m 194 51 363 92
Replacement cost operating profit - $m (128) (299) (255) (526)
Other Businesses and Corporate comprises Finance, BP Solar, the Group's coal
asset and aluminium asset, its investments in PetroChina and Sinopec, interest
income and costs relating to corporate activities.
Replacement cost operating loss for the three months and six months ended June
30, 2001 was $128 million and $255 million respectively. This compares with $299
million and $526 million for the corresponding periods in 2000. There were
special items of $150 million for the three months and $166 million for the six
months ended June 30, 2000 in respect of ARCO integration costs and
rationalization costs post the BP Amoco merger. There were no special items for
the three months and six months ended June 30, 2001.
BP Solar production for the half year was 26% higher than a year ago. A total of
25 megawatts of solar panel generating capacity was sold in the first half of
2001.
EXCEPTIONAL ITEMS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
Profit (loss) on sale of fixed assets and - $m 171 161 389 4
businesses and termination of operations
Taxation credit (charge) - $m (72) (141) (185) (108)
------- ------- ------- ------
Exceptional items after taxation - $m 99 20 204 (104)
------- ------- ------- ------
Exceptional items for the second quarter of 2001 include the profit on sale of
the Kashagan discovery in Kazakhstan and loss on the sale of the Carbon Fibers
business in the USA. In addition, exceptional items for the half year include
the profit on sale of the Alliance Refinery pipeline system.
OUTLOOK
BP believes the oil market remains essentially balanced. Oil prices have fallen
from their peaks, but OPEC production cuts earlier in the year have prevented
oversupply. Oil consumption is expected to recover seasonally in the coming
months. OPEC's actions in regard to supply may support prices within its current
target price range. US natural gas prices have fallen sharply in the face of
seasonally lower demand and increasing supply, with rapid stock building. Prices
have returned to levels close to parity with fuel oil. Refining margins have
experienced volatility as product inventories have recovered and margins are
likely to settle at levels somewhat lower than recent historic highs. Retail
margins have recently risen but are likely to soften owing to competitive
pressure. Chemicals margins remain depressed as a result of weak demand and
excess capacity.
BP's focus is now on delivering profitable organic growth, while taking
advantage of any structural opportunities that the market presents. We will
continue our particular focus on cost and investment discipline to enable these
plans to be realized within our financial framework. In the chemicals business,
we are responding to the current trading environment by reducing capital
investment in petrochemicals and implementing additional cost reductions.
Page 12
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 the statements
under `Outlook', with regard to trends in the trading environment, oil and gas
prices, refining, marketing, NGL and chemicals margins, inventory and product
stock levels, supply capacity, profitability, results of operation, liquidity or
financial position and statements regarding our targets are all forward-looking
in nature. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will
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; and other factors discussed elsewhere in this report. In
addition to factors set forth elsewhere in this report, the factors set forth
above are important factors, although not exhaustive, that 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 2000 and in the Annual Report on Form 20-F for 2000 filed with
the US Securities and Exchange Commission.
2001 DIVIDENDS
On August 7, 2001, BP p.l.c. announced a second quarterly dividend for 2001 of
5.5 cents per ordinary share of 25 cents (ordinary shares), representing $0.33
per American Depositary Share (ADS) amounting to $1,236 million in total. The
record date for qualifying US resident holders of American Depositary Shares as
well as holders of ordinary shares was August 17, 2001, with payment to be made
on September 10, 2001.
The dividend payable on September 10, 2001 entitles qualifying US ADS
shareholders to a refund of the 1/9th UK tax credit (approximately $0.037)
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 $0.330, a gross dividend for tax purposes of $0.367 and a potential
tax credit of $0.037 per ADS.
There is a Dividend Reinvestment Plan whereby holders of ordinary shares can
elect to reinvest the net cash dividend in shares purchased on the London Stock
Exchange. This plan is not available to any person resident in the USA or
Canada, or in any jurisdiction outside the UK where such an offer requires
compliance by the Company with any governmental or regulatory procedures or any
similar formalities. A dividend reinvestment facility is, however, available for
holders of ADSs through the Direct Access Plan of Morgan Guaranty Trust Company
of New York. Participants in the Dividend Reinvestment Plan or the dividend
reinvestment facility included in the US Direct Access Plan will receive the
dividend in the form of shares on September 10, 2001.
Page 13
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million, except per share amounts)
Turnover - Note 2 48,689 39,027 94,389 72,118
Less: joint ventures 280 5,869 568 11,249
------- ------ ------- -------
Group turnover 48,409 33,158 93,821 60,869
Replacement cost of sales 40,490 27,158 77,450 49,324
Production taxes - Note 3 433 488 1,016 986
------- ------ ------- -------
Gross profit 7,486 5,512 15,355 10,559
Distribution and administration expenses 2,827 1,815 5,554 3,194
Exploration expense - Note 4 81 168 250 299
------- ------ ------- -------
4,578 3,529 9,551 7,066
Other income 112 354 307 438
------- ------ ------- -------
Group replacement cost operating profit 4,690 3,883 9,858 7,504
Share of profits of joint ventures 125 286 227 455
Share of profits of associated undertakings 157 168 386 339
------- ------ ------- -------
Total replacement cost operating profit - Notes 5 & 6 4,972 4,337 10,471 8,298
Profit (loss) on sale of fixed assets and businesses
and termination of operations - Note 7 171 161 389 4
------- ------ ------- -------
Replacement cost profit before interest and tax - Note 5 5,143 4,498 10,860 8,302
Inventory holding gains (losses) - Note 8 40 213 (198) 745
------- ------ ------- -------
Historical cost profit before interest and tax 5,183 4,711 10,662 9,047
Interest expense - Note 9 441 403 887 699
------- ------ ------- -------
Profit before taxation 4,742 4,308 9,775 8,348
Taxation - Note 10 1,550 1,289 3,268 2,176
------- ------ ------- -------
Profit after taxation 3,192 3,019 6,507 6,172
Minority shareholders' interest 21 (5) 32 63
------- ------ ------- -------
Profit for the period 3,171 3,024 6,475 6,109
======= ====== ======= =======
Earnings per ordinary share - cents (a)
Basic 14.12 13.59 28.82 29.47
Diluted 14.04 13.49 28.65 29.26
------- ------ ------- -------
Earnings per American depositary share - cents (a)
Basic 84.72 81.54 172.92 176.82
Diluted 84.24 80.94 171.90 175.56
------- ------ ------- -------
Average number of outstanding ordinary shares (millions) 22,448 22,030 22,461 20,728
======= ====== ======= =======
---------------
(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 14
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 2001 December 31, 2000
(Unaudited)
($ million)
Fixed assets
Intangible assets 15,844 16,893
Tangible assets 75,704 75,173
Investments 11,144 11,753
-------- --------
102,692 103,819
Current assets
Business held for resale 666 636
Inventories 9,066 9,234
Receivables 29,983 28,418
Investments 563 661
Cash at bank and in hand 1,103 1,170
-------- --------
41,381 40,119
-------- --------
Current liabilities - falling due within one year
Finance debt 6,303 6,418
Accounts payable and accrued liabilities 30,932 30,729
-------- --------
37,235 37,147
-------- --------
Net current assets 4,146 2,972
-------- --------
Total assets less current liabilities 106,838 106,791
Noncurrent liabilities
Finance debt 14,195 14,772
Accounts payable and accrued liabilities 4,316 5,223
Provisions for liabilities and charges 12,597 12,795
-------- --------
31,108 32,790
-------- --------
Net assets 75,730 74,001
Minority shareholders' interest 630 585
-------- --------
BP shareholders' interest (a) - Note 14 75,100 73,416
======== ========
Represented by:
Capital shares
Preference 21 21
Ordinary 5,620 5,632
Paid-in surplus 3,934 3,770
Merger reserve 26,996 26,869
Retained earnings 38,319 36,668
Other reserves 210 456
-------- --------
75,100 73,416
======== ========
---------------
(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 15
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Net cash inflow from operating activities 5,076 5,269 11,816 8,033
------- ------- ------- -------
Dividends from joint ventures 54 332 66 527
------- ------- ------- -------
Dividends from associated undertakings 159 143 269 174
------- ------- ------- -------
Servicing of finance and returns on investments
Interest received 59 114 150 149
Interest paid (384) (344) (745) (568)
Dividends received 30 2 38 3
Dividends paid to minority shareholders (5) (6) (5) (8)
------- ------- ------- -------
Net cash outflow from servicing of finance
and returns on investments (300) (234) (562) (424)
------- ------- ------- -------
Taxation
UK corporation tax (169) (64) (373) (264)
Overseas tax (2,213) (889) (2,148) (1,226)
------- ------- ------- -------
Tax paid (2,382) (953) (2,521) (1,490)
------- ------- ------- -------
Capital expenditure
Payments for fixed assets (3,016) (2,765) (5,593) (4,186)
Proceeds from the sale of fixed assets 232 182 926 588
------- ------- ------- -------
Net cash outflow for capital expenditure (2,784) (2,583) (4,667) (3,598)
------- ------- ------- -------
Acquisitions and disposals
Investments in associated undertakings (148) (244) (268) (441)
Acquisitions (560) 1,260 (560) 391
Net investment in joint ventures (72) (121) (133) (123)
Proceeds from the sale of businesses - 6,800 - 6,825
------- ------- ------- -------
Net cash outflow for acquisitions and disposals (780) 7,695 (961) 6,652
------- ------- ------- -------
Equity dividends paid (1,179) (1,133) (2,360) (2,104)
------- ------- ------- -------
Net cash inflow (outflow) (2,136) 8,536 1,080 7,770
======= ======= ======= =======
Financing (1,669) 3,327 1,197 3,404
Management of liquid resources (404) 2,345 (102) 2,365
Increase (decrease) in cash (63) 2,864 (15) 2,001
------- ------- ------- -------
(2,136) 8,536 1,080 7,770
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement prepared on the basis of US GAAP is included in Note
15.
Page 16
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Reconciliation of historical cost profit before interest
and tax to net cash inflow from operating activities
Historical cost profit before interest and tax 5,183 4,711 10,662 9,047
Depreciation and amounts provided 2,103 1,933 4,243 3,128
Exploration expenditure written off 22 74 130 140
Share of profits of joint ventures and
associated undertakings (282) (557) (613) (1,010)
Interest and other income (127) (113) (230) (160)
(Profit) loss on sale of fixed assets and businesses (171) (153) (389) 18
Charge for provisions 541 282 706 437
Utilization of provisions (329) (129) (635) (333)
Decrease (increase) in stocks (371) (611) (13) (866)
Increase in debtors (399) (2,446) (1,468) (3,586)
Increase (decrease) in creditors (1,094) 2,278 (577) 1,218
------- ------- ------- -------
Net cash inflow from operating activities 5,076 5,269 11,816 8,033
======= ======= ======= =======
Financing
Long-term borrowing (505) (1,140) (1,022) (1,452)
Repayments of long-term borrowing 1,034 418 1,180 511
Short-term borrowing (2,589) (80) (2,750) (703)
Repayments of short-term borrowing 172 3,113 3,127 4,063
------- ------- ------- -------
(1,888) 2,311 535 2,419
Issue of ordinary share capital (64) (108) (120) (139)
Repurchase of share capital 283 829 782 829
Stamp duty reserve tax - 295 - 295
------- ------- ------- -------
Net cash outflow from financing (1,669) 3,327 1,197 3,404
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement prepared on the basis of US GAAP is included in Note
15.
Page 17
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
By business
Exploration and Production
UK 289 277 457 440
Rest of Europe 86 36 151 60
USA 1,243 819 2,170 1,200
Rest of World 805 410 1,511 705
------- ------- ------- -------
2,423 1,542 4,289 2,405
------- ------- ------- -------
Gas and Power
UK (a) 6 28 14 30
Rest of Europe 12 1 21 2
USA (a) 29 30 37 31
Rest of World 4 12 4 21
------- ------- ------- -------
51 71 76 84
------- ------- ------- -------
Refining and Marketing
UK (b) 67 29 178 918
Rest of Europe 114 65 161 109
USA 227 334 407 410
Rest of World 79 76 111 163
------- ------- ------- -------
487 504 857 1,600
------- ------- ------- -------
Chemicals
UK 63 136 129 288
Rest of Europe (c) 538 34 554 67
USA 96 52 174 91
Rest of World 69 58 125 325
------- ------- ------- -------
766 280 982 771
------- ------- ------- -------
Other businesses and corporate (d) 69 647 129 700
------- ------- ------- -------
3,796 3,044 6,333 5,560
======= ======= ======= =======
By geographical area
UK 448 499 842 1,747
Rest of Europe 758 138 897 244
USA 1,628 1,273 2,838 1,770
Rest of World 962 1,134 1,756 1,799
------- ------- ------- -------
3,796 3,044 6,333 5,560
======= ======= ======= =======
---------------
(a) 2Q and first half 2001 and 2000 included investment in Green Mountain
Energy Company. 2Q and first half 2000 included investment in Great
Yarmouth Power Station.
(b) First half 2000 included $869 million for the purchase of some 19.5% of
Burmah Castrol's issued share capital.
(c) 2Q and first half 2001 included the acquisition of Bayer's 50% interest in
Erdolchemie.
(d) 2Q and first half 2000 included $578 million for the acquisition of a 2.2%
interest in PetroChina.
Page 18
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Average oil realizations (a) - $/bbl
UK 26.58 26.24 25.78 26.23
USA 23.58 23.77 24.18 24.18
Rest of World 23.93 24.64 23.72 25.41
BP average 24.74 24.98 24.77 25.30
Brent oil price 27.39 26.88 26.57 26.89
West Texas Intermediate oil price 27.88 28.96 28.30 28.91
Average natural gas realizations - $/mcf
UK 2.85 1.99 3.23 2.12
USA 4.35 3.01 5.73 2.73
Rest of World 2.58 2.20 2.97 2.00
BP average 3.43 2.51 4.21 2.33
Henry Hub gas price (b) ($/mcf) 4.66 3.44 5.86 2.98
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 3.35 4.26 2.85 3.16
US Gulf Coast 7.71 5.22 7.21 3.95
US West Coast 9.11 6.00 10.02 6.17
Singapore 0.96 0.63 0.83 1.53
BP average 5.78 4.69 5.02 3.56
Chemicals Indicator Margin (d) - $/te 103(e) 132 104(e) 123
---------------
(a) Crude oil and natural gas liquids.
(b) Henry Hub First of Month Index.
(c) The Global Indicator Refining Margin (GIM) is the average of seven regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity.
(d) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broader range of products than our previous indicator. Among the
products and businesses covered in the CIM are olefins and derivatives,
aromatics and derivatives, linear alpha olefins, acetic acid, vinyl acetate
monomer and nitriles. Not included are fabrics and fibres, plastic
fabrications, poly alpha olefins, anhydrides, engineering polymers and
carbon fibres, speciality intermediates, and the remaining parts of the
solvents and acetyls businesses.
(e) Provisional. The data for the second quarter is based on two months' actual
and one month of provisional data.
US dollar/sterling exchange rates
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Average rates for the period 1.42 1.53 1.44 1.57
Period-end rates 1.41 1.52 1.41 1.52
======= ======= ====== =======
Page 19
BP p.l.c. AND SUBSIDIARIES
SPECIAL ITEMS AND ACQUISITION AMORTIZATION BY SEGMENT (PRE-TAX)
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Special items
Exploration and Production
UK - 70 - 70
Rest of Europe - - - -
USA - 152 - 152
Rest of World - 37 - 61
------- ------- ------- -------
- 259 - 283
------- ------- ------- -------
Gas and Power
UK - - - -
Rest of Europe - - - -
USA - - - -
Rest of World - - - -
------- ------- ------- -------
- - - -
------- ------- ------- -------
Refining and Marketing
UK 28 - 43 -
Rest of Europe 64 29 90 29
USA 4 112 8 112
Rest of World 13 - 21 -
------- ------- ------- -------
109 141 162 141
------- ------- ------- -------
Chemicals
UK - 3 - 3
Rest of Europe - 1 - 1
USA - 46 - 46
Rest of World - - - -
------- ------- ------- -------
- 50 - 50
------- ------- ------- -------
Other businesses and corporate
UK - 19 - 19
Rest of Europe - - - -
USA - 131 - 147
Rest of World - - - -
------- ------- ------- -------
- 150 - 166
------- ------- ------- -------
Total special items before interest 109 600 162 640
Interest - bond redemption charges 50 - 60 -
------- ------- ------- -------
Total 159 600 222 640
======= ======= ======= =======
Acquisition amortization
Exploration and Production
UK 39 26 68 26
USA 406 313 798 313
Rest of World 32 10 67 10
------- ------- ------- -------
477 349 933 349
------- ------- ------- -------
Refining and Marketing
UK 98 - 202 -
USA 78 70 162 70
------- ------- ------- -------
176 70 364 70
======= ======= ======= =======
Total 653 419 1,297 419
======= ======= ======= =======
Page 21
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, 2000 included in BP's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
2. Turnover
By business
Exploration and Production 7,441 7,278 16,558 13,782
Gas and Power 10,435 3,724 22,515 6,979
Refining and Marketing 34,257 24,168 62,780 43,864
Chemicals 3,073 2,914 5,762 5,695
Other businesses and corporate 194 51 363 92
------- ------- -------- --------
55,400 38,135 107,978 70,412
Less: sales between businesses 6,991 4,977 14,157 9,543
------- ------- -------- --------
Group excluding joint ventures 48,409 33,158 93,821 60,869
Sales of joint ventures 280 5,869 568 11,249
------- ------- -------- --------
48,689 39,027 94,389 72,118
======= ======= ======== ========
By geographical area
UK 11,974 11,112 23,914 21,462
Rest of Europe 10,043 1,859 19,018 3,733
USA 24,791 17,575 47,282 30,548
Rest of World 8,929 6,977 18,620 13,337
------- ------- -------- --------
55,737 37,523 108,834 69,080
Less: Sales between areas 7,328 4,365 15,013 8,211
------- ------- -------- --------
Group excluding joint ventures 48,409 33,158 93,821 60,869
======= ======= ======== ========
Sales of joint ventures
UK - 1,414 - 2,774
Rest of Europe - 5,358 - 10,365
USA 100 159 187 159
Rest of World 180 128 381 249
------- ------- -------- --------
280 7,059 568 13,547
Less: sales between areas - 1,190 - 2,298
------- ------- -------- --------
280 5,869 568 11,249
======= ======= ======== ========
3. Production taxes
UK petroleum revenue tax 135 184 373 374
Overseas production taxes 298 304 643 612
------- ------- -------- --------
433 488 1,016 986
======= ======= ======== ========
4. Exploration expense
Exploration and Production
UK - 15 4 23
Rest of Europe 3 8 5 12
USA 40 90 133 125
Rest of World 38 55 108 139
------- ------- -------- --------
81 168 250 299
======= ======= ======== ========
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
5. 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, 2000.
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
6. Total replacement cost operating profit
By business
Exploration and Production
UK 970 876 2,124 1,964
Rest of Europe 190 185 416 373
USA 1,214 998 3,339 2,189
Rest of World 1,067 960 2,242 1,696
------- ------- ------- -------
3,441 3,019 8,121 6,222
------- ------- ------- -------
Gas and Power
UK 39 4 51 (1)
Rest of Europe 34 11 96 66
USA 96 47 131 61
Rest of World 4 52 7 130
------- ------- ------- -------
173 114 285 256
------- ------- ------- -------
Refining and Marketing
UK (116) 148 (227) 181
Rest of Europe 177 130 313 166
USA 1,275 814 1,882 1,223
Rest of World 141 91 262 197
------- ------- ------- -------
1,477 1,183 2,230 1,767
------- ------- ------- -------
Chemicals
UK (33) (33) (83) (64)
Rest of Europe 19 118 99 196
USA (1) 196 12 364
Rest of World 24 39 62 83
------- ------- ------- -------
9 320 90 579
------- ------- ------- -------
Other businesses and corporate (128) (299) (255) (526)
------- ------- ------- -------
4,972 4,337 10,471 8,298
======= ======= ======= =======
By geographical area
UK 814 966 1,741 1,940
Rest of Europe 429 461 914 827
USA 2,512 1,762 5,224 3,414
Rest of World 1,217 1,148 2,592 2,117
------- ------- ------- -------
4,972 4,337 10,471 8,298
======= ======= ======= =======
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
7. Analysis of exceptional items
Profit (loss) on sale of fixed assets and
businesses and termination of operations
Exploration and Production 319 168 277 206
Gas and Power - - (1) -
Refining and Marketing (59) 5 206 24
Chemicals (80) - (86) (210)
Other businesses and corporate (9) (12) (7) (16)
------- ------- ------- -------
Exceptional items before taxation 171 161 389 4
Taxation charge (72) (141) (185) (108)
------- ------- ------- -------
Exceptional items after taxation 99 20 204 (104)
======= ======= ======= =======
8. Inventory holding gains (losses)
Exploration and Production (9) 1 - 2
Gas and Power (33) 17 (44) 22
Refining and Marketing 99 153 (144) 616
Chemicals (17) 42 (10) 105
------- ------- ------- -------
40 213 (198) 745
======= ======= ======= =======
9. Interest expense
Group interest payable (a) 363 341 730 572
Capitalized (21) (36) (55) (51)
------- ------- ------- -------
342 305 675 521
Joint ventures 13 21 33 35
Associated undertakings 36 32 76 62
Unwinding of discount on provisions 50 45 103 81
------- ------- ------- -------
441 403 887 699
======= ======= ======= =======
----------------
(a) Interest expense includes charges of $10 million and $50 million for
the first and second quarters of 2001 respectively and $60 million for
the six months ended June 30, 2001 relating to the early redemption of
debt.
10.Charge for taxation
United Kingdom 250 287 522 604
Overseas 1,300 1,002 2,746 1,572
------- ------- ------- -------
1,550 1,289 3,268 2,176
======= ======= ======= =======
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
11. Return on average capital employed (ROACE)
Replacement cost basis
RC profit before exceptional items 3,032 2,791 6,469 5,468
Interest 441 403 887 699
Minority shareholders' interest 21 (5) 32 63
------- ------- ------- -------
3,494 3,189 7,388 6,230
======= ======= ======= =======
Average Capital Employed 94,862 94,599 95,710 n/a
ROACE 14.7% 13.5% 15.4% n/a
------- ------- ------- -------
Acquisitions and special items adjustments
Acquisition amortization 653 419 1,297 419
Special items (post tax) 78 442 115 472
Average Capital Employed 20,305 18,028 20,627 n/a
ROACE - Pro forma basis 22.7% 21.2% 23.4% n/a
------- ------- ------- -------
Historical cost basis
Historical cost profit after exceptional items 3,171 3,024 6,475 6,109
Interest 441 403 887 699
Minority shareholders' interest 21 (5) 32 63
------- ------- ------- -------
3,633 3,422 7,394 6,871
======= ======= ======= =======
ROACE 15.3% 14.5% 15.5% n/a
======= ======= ======= =======
12. Analysis of changes in net debt
Opening balance
Finance debt 18,788 14,357 21,190 14,544
Less: Cash 1,188 462 1,170 1,331
Current asset investments 959 274 661 220
------- ------- ------- -------
Opening net debt 16,641 13,621 19,359 12,993
------- ------- ------- -------
Closing balance
Finance debt 20,498 19,187 20,498 19,187
Less: Cash 1,103 3,313 1,103 3,313
Current asset investments 563 2,616 563 2,616
------- ------- ------- -------
Closing net debt 18,832 13,258 18,832 13,258
------- ------- ------- -------
Decrease (increase) in net debt (2,191) 363 527 (265)
======= ======= ======= =======
Movement in cash/bank overdrafts (63) 2,864 (15) 2,001
(Decrease) increase in current asset investments (404) 2,345 (102) 2,365
Net cash (inflow) outflow from financing
(excluding share capital) (1,888) 2,311 535 2,419
Other movements 51 (49) 82 7
Debt acquired (47) (7,123) (47) (7,123)
------- ------- ------- -------
Movements in net debt before exchange effects (2,351) 348 453 (331)
Exchange adjustments 160 15 74 66
------- ------- ------- -------
Decrease (increase) in net debt (2,191) 363 527 (265)
======= ======= ======= =======
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
13. Net debt ratio - net debt: net debt + equity
Gross debt 20,498 19,187 20,498 19,187
Cash and current asset investments 1,666 5,929 1,666 5,929
------- ------- ------- -------
Net debt 18,832 13,258 18,832 13,258
Equity 75,730 74,128 75,730 74,128
------- ------- ------- -------
Net debt ratio 20% 15% 20% 15%
Acquisition adjustment (a) 19,978 17,920 19,978 17,920
------- ------- ------- -------
Net debt ratio - pro forma basis (b) 25% 19% 25% 19%
======= ======= ======= =======
---------------
(a) Acquisition adjustment refers to the fixed asset revaluation
adjustment 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.
14. Movement in BP shareholders' interest $ million
(Unaudited)
Balance at December 31, 2000 73,416
Profit for the period 6,475
Distribution to shareholders (2,414)
Currency translation differences (1,599)
Employee share schemes 120
Share buyback (782)
Redemption of ARCO preference shares (116)
-------
Balance at June 30, 2001 75,100
=======
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles
The following is a summary of the adjustments to profit for the period and
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.
Profit for the period Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Profit as reported in the consolidated
statement of income 3,171 3,024 6,475 6,109
Adjustments:
Depreciation charge (315) (101) (579) (120)
Decommissioning and environmental expense (79) (98) (184) (166)
Onerous property leases (27) (5) (34) (12)
Derivative financial instruments (47) - (199) -
Interest expense 50 45 103 81
Deferred taxation (15) (199) (53) (713)
Other 5 16 10 31
------- ------- ------- -------
(428) (342) (936) (899)
------- ------- ------- -------
Profit for the period before cumulative effect
of accounting change as adjusted to accord
with US GAAP 2,743 2,682 5,539 5,210
Cumulative effect of accounting change:
Derivative financial instruments - - (18) -
------- ------- ------- -------
Profit for the period as adjusted to
accord with US GAAP 2,743 2,682 5,521 5,210
======= ======= ======= =======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of
accounting change 12.22 12.17 24.66 25.14
Cumulative effect of accounting change - - (0.08) -
------- ------- ------- -------
12.22 12.17 24.58 25.14
------- ------- ------- -------
Diluted - before cumulative effect
of accounting change 12.15 12.08 24.51 24.95
Cumulative effect of accounting change - - (0.08) -
------- ------- ------- -------
12.15 12.08 24.43 24.95
------- ------- ------- -------
Per American Depositary Share - cents (a)
Basic - before cumulative effect of
accounting change 73.32 73.02 147.96 150.84
Cumulative effect of accounting change - - (0.48) -
------- ------- ------- -------
73.32 73.02 147.48 150.84
------- ------- ------- -------
Diluted - before cumulative effect of
accounting change 72.90 72.48 147.06 149.70
Cumulative effect of accounting change - - (0.48) -
------- ------- ------- -------
72.90 72.48 146.58 149.70
------- ------- ------- -------
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest June 30, 2001 December 31, 2000 (b)
(Unaudited)
------------- --------------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 75,100 73,416
Adjustments:
Fixed assets 8,218 8,777
Ordinary shares held for future awards to employees (312) (360)
Sale and leaseback of Chicago office building (413) (413)
Decommissioning and environmental provisions (1,132) (921)
Onerous property leases 74 105
Derivative financial instruments (203) -
Deferred taxation (15,880) (15,843)
Quarterly dividend 1,236 1,178
Pension liability adjustment (145) (145)
Other (111) (128)
------- -------
(8,668) (7,750)
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 66,432 65,666
======= =======
---------------
(a) One American Depositary Share is equivalent to six ordinary shares.
(b) As reported in Note 43 of Notes to Financial Statements included in BP's
Annual Report on Form 20-F for the year ended December 31, 2000.
Page 27
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 Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Operating activities
Profit after taxation 3,192 3,019 6,507 6,172
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,103 1,933 4,243 3,128
Exploration expense 22 74 130 140
Share of profits of joint ventures and
associates less dividends received 38 19 (25) (112)
(Profit) loss on sale of businesses and fixed assets (171) (153) (389) 18
Working capital movement (see analysis below) (2,683) (583) (1,329) (2,551)
Other 132 284 (9) 174
------- ------- ------- -------
Net cash provided by operating activities 2,633 4,593 9,128 6,969
------- ------- ------- -------
Investing activities
Capital expenditures (3,037) (2,795) (5,648) (4,231)
Acquisitions, net of cash acquired (560) 1,260 (560) 391
Investment in associated undertakings (148) (244) (268) (441)
Net investment in joint ventures (72) (121) (133) (123)
Proceeds from disposal of assets 232 6,982 926 7,413
------- ------- ------- -------
Net cash used in investing activities (3,585) 5,082 (5,683) 3,009
------- ------- ------- -------
Financing activities
Net proceeds from shares (repurchased) issued (219) (1,016) (662) (985)
Proceeds from long-term financing 505 1,140 1,022 1,452
Repayments of long-term financing (1,034) (418) (1,180) (511)
Net decrease in short-term debt 2,417 (3,033) (377) (3,360)
Dividends paid - BP (1,179) (1,133) (2,360) (2,104)
- Minority shareholders (5) (6) (5) (8)
------- ------- ------- -------
Net cash used in financing activities 485 (4,466) (3,562) (5,516)
------- ------- ------- -------
Currency translation differences relating to
cash and cash equivalents (14) (16) (48) 12
------- ------- ------- -------
(Decrease) increase in cash and cash equivalents (481) 5,193 (165) 4,474
------- ------- ------- -------
Cash and cash equivalents at beginning of period 2,147 736 1,831 1,455
------- ------- ------- -------
Cash and cash equivalents at end of period 1,666 5,929 1,666 5,929
======= ======= ======= =======
Analysis of working capital movement
Increase in inventories (371) (611) (13) (866)
Increase in receivables (502) (2,443) (1,546) (3,540)
(Decrease) increase in current liabilities
(excluding finance debt) (1,810) 2,471 230 1,855
------- ------- ------- -------
Total working capital movement (2,683) (583) (1,329) (2,551)
======= ======= ======= =======
Page 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
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 Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
(shares million)
Weighted average number of ordinary shares 22,448 22,030 22,461 20,728
Ordinary shares issuable under employee share schemes 135 168 140 152
-------- ------- ------- -------
22,583 22,198 22,601 20,880
======== ======= ======= =======
Comprehensive income
The components of comprehensive income, net of related tax are as follows:
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2001 2000 2001 2000
------------------ ------------------
($ million)
Profit for the period as adjusted to accord
with US GAAP 2,743 2,682 5,521 5,210
Currency translation differences (605) (721) (1,599) (1,216)
Derivative financial instruments (8) - 15 -
Pension liability - - - -
-------- ------- ------- -------
Comprehensive income 2,130 1,961 3,937 3,994
======== ======= ======= =======
Accumulated other comprehensive income at June 30, 2001 and December 31,
2000 comprised losses of $5,611 million and $4,027 million, respectively.
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Accounting for associated undertakings and joint ventures
Under the provisions of UK Financial Reporting Standard No.9 `Associates
and Joint Ventures', the Company includes its share of the results of
associated undertakings and joint ventures (JVs) within various captions in
the consolidated statement of income. Under US GAAP, the Company's share of
the after tax profit or loss of associated undertakings and joint ventures
would be recognized as a single amount. The following summarizes the
reclassifications necessary to accord with US GAAP.
Three months ended June 30, 2001
(Unaudited)
------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------
($ million)
Consolidated statement of income
Other income 112 175 287
Share of profits of JVs and associated undertakings 282 (282) -
Exceptional items before taxation 171 1 172
Inventory holding gains (losses) 40 (1) 39
Interest expense 441 (49) 392
Taxation 1,550 (58) 1,492
Profit for the period 3,171 - 3,171
Six months ended June 30, 2001
(Unaudited)
------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------
($ million)
Consolidated statement of income
Other income 307 360 667
Share of profits of JVs and associated undertakings 613 (613) -
Exceptional items before taxation 389 1 390
Inventory holding gains (losses) (198) (1) (199)
Interest expense 887 (109) 778
Taxation 3,268 (144) 3,124
Profit for the period 6,475 - 6,475
Three months ended June 30, 2000
(Unaudited)
------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------
($ million)
Consolidated statement of income
Other income 354 478 832
Share of profits of JVs and associated undertakings 454 (454) -
Exceptional items before taxation 161 (8) 153
Inventory holding gains (losses) 213 (95) 118
Interest expense 403 (53) 350
Taxation 1,289 (26) 1,263
Profit for the period 3,024 - 3,024
Six months ended June 30, 2000
(Unaudited)
------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------
($ million)
Consolidated statement of income
Other income 438 835 1,273
Share of profits of JVs and associated undertakings 794 (794) -
Exceptional items before taxation 4 (22) (18)
Inventory holding gains (losses) 745 (194) 551
Interest expense 699 (97) 602
Taxation 2,176 (78) 2,098
Profit for the period 6,109 - 6,109
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Derivative 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.
The Group's accounting policies under UK GAAP do not satisfy the criteria
for hedge accounting under SFAS 133. The Group does not intend to modify
its practice under UK GAAP.
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, we trade derivatives in
conjunction with these risk management activities.
All oil price derivatives and all derivatives held for trading are
currently carried on the Group's balance sheet at fair value with changes
in that value recognized in earnings of the period. For those derivative
instruments, there is no impact of adopting SFAS 133 on the Group's results
of operations and financial position, as adjusted to accord with 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. 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) and a pre tax credit to other comprehensive
income of $57 million ($37 million after tax). The net gain included in
other comprehensive income as of January 1, 2001 is expected to be
reclassified into earnings during 2001. During the first half of 2001 a
pre-tax credit of $34 million ($22 million after tax) included in other
comprehensive income was reclassified into earnings. Under US GAAP the fair
values of derivative financial instruments would be shown as current assets
and liabilities as appropriate.
Because the Company does not intend to modify its accounting practice to
satisfy the criteria for hedge accounting under SFAS 133, the Group's
results of operations, as adjusted to accord with US GAAP, will not
necessarily be representative of the results it would report if US GAAP
were used to prepare the consolidated financial statements of the Group and
the Group sought to meet the hedge criteria of SFAS 133.
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Recently issued accounting standards
In June 2001 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.141 'Business Combinations' (SFAS 141)
and No. 142 'Goodwill and Other Intangible Assets' (SFAS 142). Under SFAS
141, the pooling of interest method of accounting is no longer permitted;
the purchase method must be used for all business combinations initiated
after June 30, 2001. SFAS 142, which is effective for accounting periods
beginning after December 15, 2001, 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 will continue to be amortized over their
estimated useful lives.
Based on acquisitions completed at June 30, 2001, it is estimated that
application of these new standards would increase the Group's results of
operations, as adjusted to accord with US GAAP, by approximately $1,300
million for the year ended December 31, 2002, assuming no impairment of
goodwill.
Also in June 2001 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143 'Accounting for Asset Retirement
Obligations' (SFAS 143). SFAS 143 requires companies to record liabilities
equal to the fair value of their asset retirement obligations when they are
incurred (typically when the asset is installed at the production
location). When the liability is initially recorded, companies capitalize
an equivalent amount as part of the cost of the asset. Over time the
liability is accreted for the change in its present value each period, and
the initial capitalized cost is depreciated over the useful life of the
related asset. SFAS 143 is effective for accounting periods beginning after
June 15, 2002.
The provisions of SFAS 143 are similar to the accounting policy used by the
Group in preparing its financial statements under UK GAAP. The Company has
not yet determined the effect of adopting SFAS 143 on its results of
operations or shareholders' interest as adjusted to accord with US GAAP.
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Restatement of 2000 segment information
On January 1, 2001 the natural gas liquids (NGL) operations located in the
USA and Canada, were moved to the Gas and Power business from Refining and
Marketing. Comparative information for 2000 has been restated as shown
below.
First Second Third Fourth
Quarter Quarter Quarter Quarter 2000
-------------------------------------------------
($ million)
Replacement cost operating profit
Previously reported Refining and Marketing total 674 1,271 1,048 915 3,908
Previously reported Gas and Power total 52 26 48 60 186
=================================================
Restated as:
Refining and Marketing
UK 33 148 63 (71) 173
Rest of Europe 36 130 233 354 753
USA 409 814 600 388 2,211
Rest of World 106 91 68 121 386
------------------------------------------------
584 1,183 964 792 3,523
=================================================
Gas and Power
UK (5) 4 14 1 14
Rest of Europe 55 11 28 54 148
USA 14 47 14 29 104
Rest of World 78 52 76 99 305
------------------------------------------------
142 114 132 183 571
=================================================
Turnover
Previously reported Refining and Marketing total 20,778 25,120 32,555 34,362 112,815
Previously reported Gas and Power total 2,173 2,772 4,237 6,899 16,081
=================================================
Restated as:
Refining and Marketing 19,696 24,168 31,311 32,708 107,883
Gas and Power 3,255 3,724 5,481 8,553 21,013
=================================================
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Restatement of 2000 segment information - concluded
First Second Third Fourth
Quarter Quarter Quarter Quarter 2000
-------------------------------------------------
($ million)
Exceptional items
Previously reported Refining and Marketing total 19 5 160 (85) 99
Previously reported Gas and Power total - - - - -
=================================================
Restated as:
Refining and Marketing 19 5 161 (87) 98
Gas and Power - - (1) 2 1
=================================================
Capital expenditure and acquisitions
Previously reported Refining and Marketing total 1,102 518 5,504 1,626 8,750
Previously reported Gas and Power total 7 57 114 101 279
=================================================
Restated as:
Refining and Marketing
UK 889 29 4,098 393 5,409
Rest of Europe 44 65 1,275 328 1,712
USA 76 334 30 652 1,092
Rest of World 87 76 90 227 480
-------------------------------------------------
1,096 504 5,493 1,600 8,693
=================================================
Gas and Power
UK 2 28 78 86 194
Rest of Europe 1 1 1 13 16
USA 1 30 37 5 73
Rest of World 9 12 9 23 53
-------------------------------------------------
13 71 125 127 336
=================================================
17. 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 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Income statement BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Three months ended June 30, 2001
Turnover 329 524 - 48,360 (524) 48,689
Less: Joint ventures - - - 280 - 280
----------------------------------------------------------------------------------------
Group turnover 329 524 - 48,080 (524) 48,409
Replacement cost of sales 329 249 - 40,445 (533) 40,490
Production taxes - 50 - 383 - 433
----------------------------------------------------------------------------------------
Gross profit - 225 - 7,252 9 7,486
Distribution and administration expenses - - 48 2,779 - 2,827
Exploration expense - 8 - 73 - 81
----------------------------------------------------------------------------------------
- 217 (48) 4,400 9 4,578
Other income 13 - 339 97 (337) 112
----------------------------------------------------------------------------------------
Group replacement cost operating profit 13 217 291 4,497 (328) 4,690
Share of profits of joint ventures - - - 125 - 125
Share of profits of associated undertakings - - - 157 - 157
Equity accounted income of subsidiaries 4,061 114 4,988 - (9,163) -
----------------------------------------------------------------------------------------
Total replacement cost operating profit 4,074 331 5,279 4,779 (9,491) 4,972
Profit (loss) on sale of fixed assets and
businesses and termination of operations (68) - 171 171 (103) 171
----------------------------------------------------------------------------------------
Replacement cost profit before
interest and tax 4,006 331 5,450 4,950 (9,594) 5,143
Inventory holding gains (losses) (64) 1 40 40 23 40
----------------------------------------------------------------------------------------
Historical cost profit before
interest and tax 3,942 332 5,490 4,990 (9,571) 5,183
Interest expense 474 17 769 768 (1,587) 441
----------------------------------------------------------------------------------------
Profit before taxation 3,468 315 4,721 4,222 (7,984) 4,742
Taxation 1,178 89 1,550 1,494 (2,761) 1,550
----------------------------------------------------------------------------------------
Profit after taxation 2,290 226 3,171 2,728 (5,223) 3,192
Minority shareholders' interest - - - 21 - 21
----------------------------------------------------------------------------------------
Profit for the period 2,290 226 3,171 2,707 (5,223) 3,171
========================================================================================
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to profit for the period
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 Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Three months ended June 30, 2001
Profit as reported 2,290 226 3,171 2,707 (5,223) 3,171
Adjustments:
Depreciation charge (308) (9) (315) (306) 623 (315)
Decommissioning and
environmental expense (14) (3) (79) (76) 93 (79)
Onerous property leases (9) - (27) (27) 36 (27)
Derivative financial instruments (93) - (47) (49) 142 (47)
Interest expense 35 2 50 48 (85) 50
Sale and leaseback of fixed assets 1 - - - (1) -
Deferred taxation (66) (34) (15) 17 83 (15)
Other - - 5 5 (5) 5
---------------------------------------------------------------------------------------
Profit for the period as
adjusted to accord with US GAAP 1,836 182 2,743 2,319 (4,337) 2,743
=======================================================================================
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Income statement (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Three months ended June 30, 2000
Turnover - 500 - 39,027 (500) 39,027
Less: Joint ventures - - - 5,869 - 5,869
---------------------------------------------------------------------------------------
Group turnover - 500 - 33,158 (500) 33,158
Replacement cost of sales - 221 - 27,443 (506) 27,158
Production taxes - 38 - 450 - 488
---------------------------------------------------------------------------------------
Gross profit - 241 - 5,265 6 5,512
Distribution and administration expenses - - 28 1,787 - 1,815
Exploration expense - 8 - 160 - 168
---------------------------------------------------------------------------------------
- 233 (28) 3,318 6 3,529
Other income (2) (13) 124 369 (124) 354
---------------------------------------------------------------------------------------
Group replacement cost operating profit (2) 220 96 3,687 (118) 3,883
Share of profits of joint ventures - - - 286 - 286
Share of profits of associated undertakings - - - 168 - 168
Equity accounted income of subsidiaries 3,557 45 4,364 - (7,966) -
---------------------------------------------------------------------------------------
Total replacement cost operating profit 3,555 265 4,460 4,141 (8,084) 4,337
Profit (loss) on sale of fixed assets and
businesses and termination of operations 292 - 161 170 (462) 161
---------------------------------------------------------------------------------------
Replacement cost profit before
interest and tax 3,847 265 4,621 4,311 (8,546) 4,498
Inventory holding gains (losses) 62 29 213 213 (304) 213
---------------------------------------------------------------------------------------
Historical cost profit before
interest and tax 3,909 294 4,834 4,524 (8,850) 4,711
Interest expense 365 11 521 523 (1,017) 403
---------------------------------------------------------------------------------------
Profit before taxation 3,544 283 4,313 4,001 (7,833) 4,308
Taxation 1,002 114 1,289 1,182 (2,298) 1,289
---------------------------------------------------------------------------------------
Profit after taxation 2,542 169 3,024 2,819 (5,535) 3,019
Minority shareholders' interest - - - (5) - (5)
---------------------------------------------------------------------------------------
Profit for the period 2,542 169 3,024 2,824 (5,535) 3,024
=======================================================================================
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to profit for the period
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 Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Three months ended June 30, 2000
Profit as reported 2,542 169 3,024 2,824 (5,535) 3,024
Adjustments:
Depreciation charge (100) (15) (101) (86) 201 (101)
Decommissioning and
environmental expense (12) (3) (98) (95) 110 (98)
Onerous property leases (5) - (5) (5) 10 (5)
Interest expense 32 2 45 46 (80) 45
Sale and leaseback of fixed assets 1 - - - (1) -
Deferred taxation (384) 91 (199) (246) 539 (199)
Other - - 16 16 (16) 16
---------------------------------------------------------------------------------------
Profit for the period as adjusted to
accord with US GAAP 2,074 244 2,682 2,454 (4,772) 2,682
=======================================================================================
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Income statement (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2001
Turnover 329 1,128 - 94,060 (1,128) 94,389
Less: Joint ventures - - - 568 - 568
---------------------------------------------------------------------------------------
Group turnover 329 1,128 - 93,492 (1,128) 93,821
Replacement cost of sales 329 522 - 77,742 (1,143) 77,450
Production taxes - 109 - 907 - 1,016
---------------------------------------------------------------------------------------
Gross profit - 497 - 14,843 15 15,355
Distribution and administration expenses - - 117 5,437 - 5,554
Exploration expense - 12 - 238 - 250
---------------------------------------------------------------------------------------
- 485 (117) 9,168 15 9,551
Other income 13 - 701 294 (701) 307
---------------------------------------------------------------------------------------
Group replacement cost operating profit 13 485 584 9,462 (686) 9,858
Share of profits of joint ventures - - - 227 - 227
Share of profits of associated undertakings - - - 386 - 386
Equity accounted income of subsidiaries 8,487 275 10,541 - (19,303) -
---------------------------------------------------------------------------------------
Total replacement cost operating profit 8,500 760 11,125 10,075 (19,989) 10,471
Profit (loss) on sale of fixed assets and
businesses and termination of operations 158 1 389 388 (547) 389
---------------------------------------------------------------------------------------
Replacement cost profit before
interest and tax 8,658 761 11,514 10,463 (20,536) 10,860
Inventory holding gains (losses) (209) (6) (198) (198) 413 (198)
---------------------------------------------------------------------------------------
Historical cost profit before
interest and tax 8,449 755 11,316 10,265 (20,123) 10,662
Interest expense 884 19 1,573 1,575 (3,164) 887
---------------------------------------------------------------------------------------
Profit before taxation 7,565 736 9,743 8,690 (16,959) 9,775
Taxation 2,599 207 3,268 3,144 (5,950) 3,268
---------------------------------------------------------------------------------------
Profit after taxation 4,966 529 6,475 5,546 (11,009) 6,507
Minority shareholders' interest - - - 32 - 32
---------------------------------------------------------------------------------------
Profit for the period 4,966 529 6,475 5,514 (11,009) 6,475
=======================================================================================
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to profit for the period
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 Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2001
Profit as reported 4,966 529 6,475 5,514 (11,009) 6,475
Adjustments:
Depreciation charge (568) (19) (579) (560) 1,147 (579)
Decommissioning and
environmental expense (61) (5) (184) (179) 245 (184)
Onerous property leases (16) - (34) (34) 50 (34)
Derivative financial instruments (138) - (199) (195) 333 (199)
Interest expense 69 4 103 99 (172) 103
Sale and leaseback of fixed assets 2 - - - (2) -
Deferred taxation 77 (71) (53) 13 (19) (53)
Other - - 10 10 (10) 10
---------------------------------------------------------------------------------------
Profit for the period before cumulative
effect of accounting change as adjusted
to accord with US GAAP 4,331 438 5,539 4,668 (9,437) 5,539
Cumulative effect of accounting change:
Derivative financial instruments (13) - (18) (5) 18 (18)
---------------------------------------------------------------------------------------
Profit for the period as
adjusted to accord with US GAAP 4,318 438 5,521 4,663 (9,419) 5,521
========================================================================================
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Income statement (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2000
Turnover - 1,313 - 72,118 (1,313) 72,118
Less: Joint ventures - - - 11,249 - 11,249
---------------------------------------------------------------------------------------
Group turnover - 1,313 - 60,869 (1,313) 60,869
Replacement cost of sales - 549 - 50,102 (1,327) 49,324
Production taxes - 134 - 852 - 986
---------------------------------------------------------------------------------------
Gross profit - 630 - 9,915 14 10,559
Distribution and administration expenses - - 86 3,108 - 3,194
Exploration expense - 22 - 277 - 299
---------------------------------------------------------------------------------------
- 608 (86) 6,530 14 7,066
Other income 1 (27) 276 463 (275) 438
---------------------------------------------------------------------------------------
Group replacement cost operating profit 1 581 190 6,993 (261) 7,504
Share of profits of joint ventures - - - 455 - 455
Share of profits of associated undertakings - - - 339 - 339
Equity accounted income of subsidiaries 6,177 59 8,306 - (14,542) -
---------------------------------------------------------------------------------------
Total replacement cost operating profit 6,178 640 8,496 7,787 (14,803) 8,298
Profit (loss) on sale of fixed assets and
businesses and termination of operations 117 - 4 22 (139) 4
---------------------------------------------------------------------------------------
Replacement cost profit before
interest and tax 6,295 640 8,500 7,809 (14,942) 8,302
Inventory holding gains (losses) 406 63 745 745 (1,214) 745
---------------------------------------------------------------------------------------
Historical cost profit before
interest and tax 6,701 703 9,245 8,554 (16,156) 9,047
Interest expense 577 22 960 958 (1,818) 699
---------------------------------------------------------------------------------------
Profit before taxation 6,124 681 8,285 7,596 (14,338) 8,348
Taxation 1,539 238 2,176 2,011 (3,788) 2,176
---------------------------------------------------------------------------------------
Profit after taxation 4,585 443 6,109 5,585 (10,550) 6,172
Minority shareholders' interest - - - 63 - 63
---------------------------------------------------------------------------------------
Profit for the period 4,585 443 6,109 5,522 (10,550) 6,109
=======================================================================================
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Income statement (concluded)
The following is a summary of the adjustments to profit for the period
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 Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2000
Profit as reported 4,585 443 6,109 5,522 (10,550) 6,109
Adjustments:
Depreciation charge (112) (28) (120) (92) 232 (120)
Decommissioning and
environmental expense (73) (26) (166) (140) 239 (166)
Onerous property leases (12) - (12) (12) 24 (12)
Interest expense 47 5 81 76 (128) 81
Sale and leaseback of fixed assets 2 - - - (2) -
Deferred taxation (521) 98 (713) (769) 1,192 (713)
Other - - 31 31 (31) 31
---------------------------------------------------------------------------------------
Profit for the period as
adjusted to accord with US GAAP 3,916 492 5,210 4,616 (9,024) 5,210
=======================================================================================
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Balance sheet BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
At June 30, 2001
Fixed assets
Intangible assets - 591 - 15,253 - 15,844
Tangible assets 7 6,127 - 69,570 - 75,704
Investments
Subsidiaries - equity accounted basis 69,114 771 82,120 - (152,005) -
Other - - 315 10,829 - 11,144
---------------------------------------------------------------------------------------
69,114 771 82,435 10,829 (152,005) 11,144
---------------------------------------------------------------------------------------
Total fixed assets 69,121 7,489 82,435 95,652 (152,005) 102,692
---------------------------------------------------------------------------------------
Current assets
Business held for resale - - - 666 - 666
Inventories 6 61 - 8,999 - 9,066
Receivables 8,137 10,130 19,745 44,249 (52,278) 29,983
Investments - - - 563 - 563
Cash at bank and in hand (1) (33) - 1,137 - 1,103
---------------------------------------------------------------------------------------
8,142 10,158 19,745 55,614 (52,278) 41,381
---------------------------------------------------------------------------------------
Current liabilities -falling due within
one year
Finance debt 7,575 179 - 6,303 (7,754) 6,303
Accounts payable and accrued liabilities 322 405 1,522 34,580 (5,897) 30,932
---------------------------------------------------------------------------------------
Net current assets (liabilities) 245 9,574 18,223 14,731 (38,627) 4,146
---------------------------------------------------------------------------------------
Total assets less current liabilities 69,366 17,063 100,658 110,383 (190,632) 106,838
Noncurrent liabilities
Finance debt - 1,150 - 14,195 (1,150) 14,195
Accounts payable and accrued liabilities 1,274 4,626 156 35,737 (37,477) 4,316
Provisions for liabilities and charges 51 271 189 12,086 - 12,597
---------------------------------------------------------------------------------------
Net assets 68,041 11,016 100,313 48,365 (152,005) 75,730
Minority shareholders' interest - - - 630 - 630
---------------------------------------------------------------------------------------
BP shareholders' interest 68,041 11,016 100,313 47,735 (152,005) 75,100
=======================================================================================
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Balance sheet (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
At June 30, 2001
Capital and reserves
Capital shares 8 - 5,641 - (8) 5,641
Paid in surplus 30,865 3,145 3,526 - (34,010) 3,526
Merger reserve - - 26,299 697 - 26,996
Other reserves - - 618 - - 618
Retained earnings 37,168 7,871 64,229 47,038 (117,987) 38,319
---------------------------------------------------------------------------------------
68,041 11,016 100,313 47,735 (152,005) 75,100
=======================================================================================
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 Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 68,041 11,016 100,313 47,735 (152,005) 75,100
Adjustments:
Fixed assets 8,184 525 8,218 7,699 (16,408) 8,218
Ordinary shares held for future
awards to employees - - (312) - - (312)
Sale and leaseback of Chicago
office building (413) - (413) (413) 826 (413)
Decommissioning and environmental
provisions (771) (314) (1,132) (802) 1,887 (1,132)
Onerous property leases 92 - 74 74 (166) 74
Derivative financial instruments (156) - (203) (180) 336 (203)
Deferred taxation (14,696) (1,851) (15,880) (14,145) 30,692 (15,880)
Quarterly dividend - - 1,236 - - 1,236
Pension liability adjustment (38) - (145) (145) 183 (145)
Other (36) - (111) (111) 147 (111)
---------------------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 60,207 9,376 91,645 39,712 (134,508) 66,432
=======================================================================================
Page 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Balance sheet (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
At December 31, 2000
Fixed assets
Intangible assets - 512 - 16,381 - 16,893
Tangible assets 7 5,942 - 69,224 - 75,173
Investments
Subsidiaries - equity accounted basis 63,718 619 77,826 - (142,163) -
Other - - 363 11,390 - 11,753
---------------------------------------------------------------------------------------
63,718 619 78,189 11,390 (142,163) 11,753
---------------------------------------------------------------------------------------
Total fixed assets 63,725 7,073 78,189 96,995 (142,163) 103,819
---------------------------------------------------------------------------------------
Current assets
Business held for resale - - - 636 - 636
Inventories - 75 - 9,159 - 9,234
Receivables 7,007 10,033 23,395 28,868 (40,885) 28,418
Investments - - - 661 - 661
Cash at bank and in hand (2) (32) 2 1,202 - 1,170
---------------------------------------------------------------------------------------
7,005 10,076 23,397 40,526 (40,885) 40,119
---------------------------------------------------------------------------------------
Current liabilities -falling due within
one year
Finance debt 6,848 - - 6,418 (6,848) 6,418
Accounts payable and accrued liabilities 85 973 2,582 35,556 (8,467) 30,729
---------------------------------------------------------------------------------------
Net current assets (liabilities) 72 9,103 20,815 (1,448) (25,570) 2,972
---------------------------------------------------------------------------------------
Total assets less current liabilities 63,797 16,176 99,004 95,547 (167,733) 106,791
Noncurrent liabilities
Finance debt - 1,150 - 14,772 (1,150) 14,772
Accounts payable and accrued liabilities 1,099 4,275 178 24,091 (24,420) 5,223
Provisions for liabilities and charges 49 264 197 12,285 - 12,795
---------------------------------------------------------------------------------------
Net assets 62,649 10,487 98,629 44,399 (142,163) 74,001
Minority shareholders' interest - - - 585 - 585
---------------------------------------------------------------------------------------
BP shareholders' interest 62,649 10,487 98,629 43,814 (142,163) 73,416
=======================================================================================
Page 45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Balance sheet (concluded) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
At December 31, 2000
Capital and reserves
Capital shares 8 - 5,653 - (8) 5,653
Paid in surplus 30,440 3,145 3,770 - (33,585) 3,770
Merger reserve - - 26,172 697 - 26,869
Other reserves - - 456 - - 456
Retained earnings 32,201 7,342 62,578 43,117 (108,570) 36,668
---------------------------------------------------------------------------------------
62,649 10,487 98,629 43,814 (142,163) 73,416
======================================================================================
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 Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 62,649 10,487 98,629 43,814 (142,163) 73,416
Adjustments:
Fixed assets 8,757 566 8,777 8,215 (17,538) 8,777
Ordinary shares held for future
awards to employees - - (360) - - (360)
Sale and leaseback of Chicago
office building (413) - (413) (413) 826 (413)
Decommissioning and environmental
provisions (927) (317) (921) (586) 1,830 (921)
Onerous property leases 105 - 105 105 (210) 105
Deferred taxation (14,805) (1,784) (15,843) (14,168) 30,757 (15,843)
Quarterly dividend - - 1,178 - - 1,178
Pension liability adjustment (38) - (145) (145) 183 (145)
Other (34) - (128) (128) 162 (128)
---------------------------------------------------------------------------------------
Shareholders' interest as adjusted
to accord with US GAAP 55,294 8,952 90,879 36,694 (126,153) 65,666
=======================================================================================
Page 46
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Cash flow statement BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Three months ended June 30, 2001
Net cash inflow (outflow) from
operating activities 368 220 1,159 3,329 - 5,076
Dividends from joint ventures - - - 54 - 54
Dividends from associated undertakings - - - 159 - 159
Dividends from subsidiaries 138 - 16 - (154) -
Net cash inflow (outflow) from servicing
of finance and returns on investments 1 - 328 (629) - (300)
Tax (paid) refund (1,691) (56) - (635) - (2,382)
Net cash inflow (outflow) for capital
expenditure and financial investment - (208) (104) (2,472) - (2,784)
Net cash inflow (outflow) for acquisitions
and disposals - (1) - (779) - (780)
Equity dividends paid - - (1,179) (154) 154 (1,179)
---------------------------------------------------------------------------------------
Net cash inflow (outflow) (1,184) (45) 220 (1,127) - (2,136)
=======================================================================================
Financing (1,184) (30) 220 (675) - (1,669)
Management of liquid resources - - - (404) - (404)
Increase (decrease) in cash - (15) - (48) - (63)
---------------------------------------------------------------------------------------
(1,184) (45) 220 (1,127) - (2,136)
=======================================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities (1,184) 163 1,502 2,278 (126) 2,633
Net cash provided by (used in)
investing activities - (208) (104) (3,251) (22) (3,585)
Net cash provided by (used in)
financing activities 1,184 30 (1,398) 521 148 485
Currency translation differences
relating to cash and cash equivalents - - - (14) - (14)
---------------------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents - (15) - (466) - (481)
Cash and cash equivalents at beginning
of period (1) (19) - 2,167 - 2,147
---------------------------------------------------------------------------------------
Cash and cash equivalents at
end of period (1) (34) - 1,701 - 1,666
=======================================================================================
Page 47
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Cash flow statement (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Three months ended June 30, 2000
Net cash inflow (outflow) from
operating activities (18) 410 2,795 2,863 (781) 5,269
Dividends from joint ventures - - - 332 - 332
Dividends from associated undertakings - - - 143 - 143
Dividends from subsidiaries - - 2 - (2) -
Net cash inflow (outflow) from servicing of 2 - 116 (379) 27 (234)
finance and returns on investments
Tax (paid) refund 177 (357) 3 (776) - (953)
Net cash inflow (outflow) for capital
expenditure and financial investment - (146) (9) (2,428) - (2,583)
Net cash inflow (outflow) for acquisitions
and disposals 7 22 (754) 7,666 754 7,695
Equity dividends paid - - (1,133) (2) 2 (1,133)
---------------------------------------------------------------------------------------
Net cash inflow (outflow) 168 (71) 1,020 7,419 - 8,536
=======================================================================================
Financing 167 (73) 1,016 2,217 - 3,327
Management of liquid resources - - - 2,345 - 2,345
Increase (decrease) in cash 1 2 4 2,857 - 2,864
---------------------------------------------------------------------------------------
168 (71) 1,020 7,419 - 8,536
=======================================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 161 53 2,916 2,183 (720) 4,593
Net cash provided by (used in)
investing activities 7 (124) (763) 5,238 724 5,082
Net cash provided by (used in)
financing activities (167) 73 (2,149) (2,219) (4) (4,466)
Currency translation differences
relating to cash and cash equivalents - - - (16) - (16)
---------------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 1 2 4 5,186 - 5,193
Cash and cash equivalents at
beginning of period (2) (22) - 760 - 736
---------------------------------------------------------------------------------------
Cash and cash equivalents at
end of period (1) (20) 4 5,946 - 5,929
=======================================================================================
Page 48
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Condensed consolidating information - continued
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Cash flow statement (continued) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2001
Net cash inflow (outflow) from
operating activities 325 551 2,460 8,496 (16) 11,816
Dividends from joint ventures - - - 66 - 66
Dividends from associated undertakings - - - 269 - 269
Dividends from subsidiaries 694 - 16 - (710) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - - 682 (1,244) - (562)
Tax (paid) refund (966) (313) (1) (1,241) - (2,521)
Net cash inflow (outflow) for capital
expenditure and financial investment (700) (401) (120) (3,446) - (4,667)
Net cash inflow (outflow) for acquisitions
and disposals - - (16) (961) 16 (961)
Equity dividends paid - - (2,360) (710) 710 (2,360)
---------------------------------------------------------------------------------------
Net cash inflow (outflow) (647) (163) 661 1,229 - 1,080
=======================================================================================
Financing (648) (161) 663 1,343 - 1,197
Management of liquid resources - - - (102) - (102)
Increase (decrease) in cash 1 (2) (2) (12) - (15)
---------------------------------------------------------------------------------------
(647) (163) 661 1,229 - 1,080
=======================================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 53 238 3,156 6,346 (665) 9,128
Net cash provided by (used in)
investing activities (700) (401) (136) (4,407) (39) (5,683)
Net cash provided by (used in)
financing activities 648 161 (3,022) (2,053) 704 (3,562)
Currency translation differences relating
to cash and cash equivalents - - - (48) - (48)
---------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 1 (2) (2) (162) - (165)
Cash and cash equivalents at
beginning of period (2) (32) 2 1,863 - 1,831
---------------------------------------------------------------------------------------
Cash and cash equivalents at
end of period (1) (34) - 1,701 - 1,666
=======================================================================================
Page 49
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
17. Condensed consolidating information - concluded
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
Cash flow statement (concluded) BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Six months ended June 30, 2000
Net cash inflow (outflow) from (89) 961 4,465 4,346 (1,650) 8,033
operating activities
Dividends from joint ventures - - - 527 - 527
Dividends from associated undertakings - - - 174 - 174
Dividends from subsidiaries - - 18 - (18) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (3) - 259 (707) 27 (424)
Tax (paid) refund 30 (708) 4 (816) - (1,490)
Net cash inflow (outflow) for capital
expenditure and financial investment - (260) (33) (3,305) - (3,598)
Net cash inflow (outflow) for
acquisitions and disposals 13 22 (1,623) 6,617 1,623 6,652
Equity dividends paid - - (2,104) (18) 18 (2,104)
---------------------------------------------------------------------------------------
Net cash inflow (outflow) (49) 15 986 6,818 - 7,770
=======================================================================================
Financing (51) 17 985 2,453 - 3,404
Management of liquid resources - - - 2,365 - 2,365
Increase (decrease) in cash 2 (2) 1 2,000 - 2,001
---------------------------------------------------------------------------------------
(49) 15 986 6,818 - 7,770
=======================================================================================
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Issuer Guarantor
-----------------------------------------
BP Eliminations
BP America Exploration Other and BP
Inc. (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
---------------------------------------------------------------------------------------
($ million)
Net cash provided by (used in) (62) 253 4,746 3,620 (1,588) 6,969
operating activities
Net cash provided by (used in) 13 (238) (1,656) 3,312 1,578 3,009
investing activities
Net cash provided by (used in) 51 (17) (3,089) (2,471) 10 (5,516)
financing activities
Currency translation differences
relating to cash and cash equivalents - - - 12 - 12
---------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 2 (2) 1 4,473 - 4,474
Cash and cash equivalents at
beginning of period (3) (18) 3 1,473 - 1,455
---------------------------------------------------------------------------------------
Cash and cash equivalents at (1) (20) 4 5,946 - 5,929
end of period
========================================================================================
Page 50
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:August 17, 2001 /s/ RICHARD BRADLEY
....................
G. R. BRADLEY
Assistant Secretary
Page 51