6-K 1 bp6k3q01.txt 6-K, QUARTERLY 6-K FILING 3Q 2001 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 September 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| ------------------ ------------------ 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333-67206) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. Page 2 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GROUP RESULTS JANUARY - SEPTEMBER 2001
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Turnover - $m 43,580 42,631 137,401 103,500 Total replacement cost operating profit - $m 3,757 4,695 14,228 12,993 Replacement cost profit before exceptional items - $m 2,355 2,947 8,824 8,415 Replacement cost profit for the period - $m 2,345 2,807 9,018 8,171 Historical cost profit for the period - $m 1,940 3,351 8,415 9,460 Profit per Ordinary Share - cents 8.66 14.85 37.48 44.32 Dividends per Ordinary Share - cents 5.50 5.25 16.25 15.25
(a) For further information on replacement cost profit see Note 6 of Notes to Consolidated Financial Statements The following discussion should be read in conjunction with the consolidated financial statements provided elsewhere in this Form 6-K and with the consolidated financial statements and related notes for the year ended December 31, 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 nine months ended September 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 third quarter reflect significant increases in Gas and Power due to higher gas sales volumes, partially offset by the effect of lower oil and gas prices in Exploration and Production. Turnover for the nine months also reflects the inclusion of ARCO for the whole of the nine months in 2001, compared to around six 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. Replacement cost profit before exceptional items (which excludes inventory holding gains and losses) was $2,355 million for the three months ended September 30, 2001, compared with $2,947 million for the equivalent period of 2000. These results are after charging special items of $122 million ($91 million after tax) for the three months ended September 30, 2001, and $392 million ($289 million after tax) for the equivalent period of 2000. The results for the three months ended September 30, 2001 and 2000 are also after charging acquisition amortization of $603 million and $560 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 September 30, 2001 comprised in Refining and Marketing, Castrol integration costs of $112 million, in Chemicals, Erdolchemie rationalization costs of $8 million and a bond redemption charge of $2 million. Those for the corresponding period of 2000 related to ARCO, Vastar and Castrol integration costs, rationalization costs post the BP/Amoco merger, and an asset writedown. For the nine months ended September 30, 2001, the replacement cost profit before exceptional items was $8,824 million, up from $8,415 million in 2000. The results for 2001 are after charging special items of $344 million ($250 million after tax) and acquisition amortization of $1,900 million. The results for 2000 include special charges of $1,032 million ($761 million after tax), and acquisition amortization of $937 million. The historical cost profit for the three months ended September 30, 2001 was $1,940 million after inventory holding losses of $405 million and including net exceptional gains of $184 million ($10 million charge 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 $3,351 million including inventory holding gains of $544 million, and net exceptional gains of $138 million ($140 million charge after tax) in respect of net profits on the sale of fixed assets and businesses and termination of operations. For the nine months ended September 30, 2001, the historical cost profit was $8,415 million, after inventory holding losses of $603 million and including net exceptional gains of $573 million ($194 million after tax) in respect of net profits on sale of fixed assets and businesses and terminations of operations. For the nine months ended September 30, 2000, the historical cost profit was $9,460 million, including inventory holding gains of $1,289 million and net exceptional gains of $142 million ($244 million charge after tax) in respect of net profits on sale of fixed assets and businesses and terminations of operations. Page 3 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 September 30, 2001 was $1,212 million compared with $1,554 million in the equivalent period last year. The third quarter 2001 included a tax charge of $194 million in respect of exceptional items compared with a tax charge of $278 million for the third quarter of 2000. The effective tax rate on replacement cost profit before exceptional items was 30% for the three months ended September 30, 2001 and 32% for the nine months, compared with 29% and 28% for the equivalent period of 2000. The increase in the tax rate for the third quarter is primarily due to the non-availability of prior year tax credits in 2001. For the nine months, the non-deductibility for tax purposes of the acquisition amortization was also a factor as 2001 includes a full nine months of acquisition amortization compared to around six months (from April 14) in 2000. Interest expense for the three months ended September 30, 2001 was $369 million (including $2 million relating to a bond redemption charge) compared with $460 million in the equivalent period of 2000 reflecting lower interest rates. For the nine months ended September 30, 2001 interest expense was $1,256 million (including $62 million relating to bond redemption charges) compared to $1,159 million a year ago, reflecting inclusion of ARCO for the full nine months of 2001 compared to around six months in 2000, partly offset by lower interest rates. Net cash inflow for the three months ended September 30, 2001 was $0.9 billion, compared with an outflow of $2.4 billion for the equivalent period of 2000. The third quarter of 2000 included an outflow of $5.1 billion net of cash acquired, related to the acquisition of Burmah Castrol and the minority interest in Vastar. In the third quarter of 2001, lower operating cash flow and higher capital expenditure net of divestment proceeds were partly offset by lower tax payments due to phasing effects. For the first nine months of 2001, net cash inflow was $2.0 billion compared with a net cash inflow of $5.4 billion in the same period in 2000. For the nine months ended September 30, 2001 the overall decreased cash flow is primarily driven by higher capital expenditure and significantly lower divestment proceeds (the second quarter of 2000 included the proceeds from the sale of the ARCO Alaska assets). Capital expenditure and acquisitions in the third quarter and nine months of 2001 were $3.4 billion and $9.7 billion, respectively. Expenditure for the nine months of 2001 included the acquisition of Bayer's 50% interest in Erdolchemie. Excluding acquisitions, capital expenditure for the third quarter and nine months of 2001 was $3.3 billion and $9.1 billion, up $0.7 billion and $2.4 billion, respectively, on the corresponding periods in 2000. For the three months and nine months ended September 30, 2000 capital expenditure and acquisitions were $9.6 billion and $15.1 billion, respectively. Expenditure for the three months and nine months ended September 30, 2000 included the acquisition of Burmah Castrol, the Mobil share of the European Joint Venture and the minority interest in Vastar, and in addition for the nine months ended September 30, 2000 a 2.2% interest in PetroChina. Excluding the effect of these acquisitions, capital expenditure for the third quarter and nine months of 2000 was $2.6 billion and $6.7 billion, respectively. BP expects total capital expenditure for 2001 to be approximately $13 billion excluding acquisitions. Net debt at September 30, 2001 was $18.5 billion. The ratio of net debt to net debt plus equity was 19% compared to the 20% rate at June 30, 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 24% at September 30, 2001 compared with 25% 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 September 30, 2001 was 11% compared with 14% for the equivalent period of 2000. For the nine months ended September 30, 2001, the return on average capital employed was 14%. For further information on the return on average capital employed calculation see Note 12 of Notes to Consolidated Financial Statements. BP purchased for cancellation approximately 49 million of its own shares during the third quarter of 2001 at a cost of $400 million. Total share purchases over the nine months to September 30, 2001 amounted to approximately 140 million at a cost of $1,182 million. BP announced a third quarterly dividend for 2001 of 5.50 cents per ordinary share. Holders of ordinary shares will receive 3.805 pence per share and holders of American Depositary Receipts (ADRs) $0.33 per ADS. The dividend for the nine months was 16.25 cents per share, up 7%, which is equivalent to 11.381 pence per share, up 12% over last year. The dividend is payable on December 10, 2001 to shareholders on the register on November 16, 2001. Participants in the Dividend Reinvestment Plan or the dividend reinvestment facility in the US Direct Access Plan will receive the dividend in the form of shares on December 10, 2001. BP intends to continue to pay dividends in the future of around 50% of its replacement cost profit before exceptional items after adjusting for special items and acquisition amortization, adjusted to mid-cycle business conditions. Mid-cycle conditions are our best estimate of likely average prices and margins over the long term. Page 4 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued Owing to the significant acquisitions that took place in 2000, in addition to its reported results, BP is presenting pro forma results adjusted for special items in order to enable shareholders to assess current performance in the context of BP's past performance and against that of its competitors. The pro forma result, adjusted for special items, has been derived from BP's UK GAAP accounting information but is not in itself a recognized UK or US GAAP measure.
Pro forma Reconciliation of reported result profit (loss) to pro forma result Acquisition Special adjusted for adjusted for special items Reported amortization(a) items(b) special items --------- ------------ ------- ------------- ($ million) Three months ended September 30, 2001 Exploration and Production 2,641 429 - 3,070 Gas and Power 130 - - 130 Refining and Marketing 1,003 174 112 1,289 Chemicals 105 - 8 113 Other businesses and corporate (122) - - (122) --------- ---------- --------- --------- Replacement cost operating profit 3,757 603 120 4,480 Interest expense (369) - 2 (367) Taxation (1,018) - (31) (1,049) Minority shareholders' interest (15) - - (15) --------- ---------- --------- --------- Replacement cost profit before 2,355 603 91 3,049 exceptional items --------- ========== ========= --------- per ordinary share (cents) 10.50 13.60 ========= ========= Three months ended September 30, 2000 Exploration and Production 3,552 412 192 4,156 Gas and Power 132 - - 132 Refining and Marketing 964 185 110 1,259 Chemicals 263 - 4 267 Other businesses and corporate (216) - 86 (130) --------- ---------- --------- --------- Replacement cost operating profit 4,695 597 392 5,684 Interest expense (460) - - (460) Taxation (1,276) - (103) (1,379) Minority shareholders' interest (12) (37) - (49) --------- ---------- --------- --------- Replacement cost profit before 2,947 560 289 3,796 exceptional items --------- ========== ========= --------- per ordinary share (cents) 13.04 16.91 ========= =========
--------------- (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 third quarter 2001 comprise Castrol integration costs, Erdolchemie rationalization costs and a bond redemption charge. The special items for the third quarter 2000 comprise ARCO, Vastar and Castrol integration costs, rationalization costs post the BP/Amoco merger, and an asset writedown. Page 5 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) Nine months ended September 30, 2001 Exploration and Production 10,762 1,362 - 12,124 Gas and Power 415 - - 415 Refining and Marketing 3,233 538 274 4,045 Chemicals 195 - 8 203 Other businesses and corporate (377) - - (377) --------- ---------- --------- --------- Replacement cost operating profit 14,228 1,900 282 16,410 Interest expense (1,256) - 62 (1,194) Taxation (4,101) - (94) (4,195) Minority shareholders' interest (47) - - (47) --------- ---------- --------- --------- Replacement cost profit before 8,824 1,900 250 10,974 exceptional items --------- ========== ========= --------- per ordinary share (cents) 39.30 48.88 ========= ========= Nine months ended September 30, 2000 Exploration and Production 9,774 761 475 11,010 Gas and Power 388 - - 388 Refining and Marketing 2,731 255 251 3,237 Chemicals 842 - 54 896 Other businesses and corporate (742) - 252 (490) --------- ---------- --------- --------- Replacement cost operating profit 12,993 1,016 1,032 15,041 Interest expense (1,159) - - (1,159) Taxation (3,344) - (271) (3,615) Minority shareholders' interest (75) (79) - (154) --------- ---------- --------- --------- Replacement cost profit before 8,415 937 761 10,113 exceptional items --------- ========== ========= --------- per ordinary share (cents) 39.42 47.38 ========= =========
--------------- (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 nine months 2001 comprise Castrol integration costs, Erdolchemie rationalization costs and a bond redemption charge. The special items for the nine months 2000 comprise ARCO, Vastar and Castrol integration costs, rationalization costs post the BP/Amoco merger, and an asset writedown. 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Crude oil and natural gas liquids production (thousand barrels per day), (net of royalties) UK 457 521 480 540 Rest of Europe 96 86 95 89 USA 741 691 735 730 Rest of World 589 604 592 568 ------- ------- ------- ------- Total crude oil and liquids production 1,883 1,902 1,902 1,927 ======= ======= ======= ======= Natural gas production (million cubic feet per day), (net of royalties) UK 1,305 1,340 1,713 1,571 Rest of Europe 139 104 143 129 USA 3,577 3,362 3,531 2,950 Rest of World 3,298 2,991 3,200 2,619 ------- ------- ------- ------- Total natural gas production 8,319 7,797 8,587 7,269 ======= ======= ======= ======= Total production (a) (thousand barrels of oil equivalent per day), (net of royalties) UK 682 752 775 811 Rest of Europe 120 104 120 111 USA 1,358 1,271 1,344 1,239 Rest of World 1,157 1,119 1,144 1,019 ------- ------- ------- ------- Total production 3,317 3,246 3,383 3,180 ======= ======= ======= ======= Natural gas sales volumes (million cubic feet per day) UK 2,170 2,289 2,682 2,360 Rest of Europe 170 151 207 162 USA 8,692 6,845 8,403 5,960 Rest of World 7,331 5,535 7,191 4,916 ------- ------- ------- ------- Total natural gas sales volumes (b) 18,363 14,820 18,483 13,398 ======= ======= ======= ======= NGL sales volumes (thousand barrels per day) UK - - - - Rest of Europe - - - - USA 233 195 220 149 Rest of World 162 171 180 179 ------- ------- ------- ------- Total NGL sales volumes 395 366 400 328 ======= ======= ======= =======
--------------- (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 7 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued OPERATING INFORMATION
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Oil sales volumes (thousand barrels per day) Refined products UK 269 276 266 242 Rest of Europe 1,058 981 1,055 843 USA 1,863 1,911 1,897 1,719 Rest of World 612 489 599 461 ------- ------- ------- ------- Total marketing sales 3,802 3,657 3,817 3,265 Trading/supply sales 2,744 1,843 2,308 1,845 ------- ------- ------- ------- Total refined product sales 6,546 5,500 6,125 5,110 Crude oil 4,680 5,725 4,431 6,164 ------- ------- ------- ------- Total oil sales 11,226 11,225 10,556 11,274 ======= ======= ======= ======= Refinery throughputs (thousand barrels per day) UK 414 359 347 302 Rest of Europe 646 627 654 560 USA 1,568 1,765 1,578 1,637 Rest of World 375 362 379 359 ------- ------- ------- ------- Total throughput 3,003 3,113 2,958 2,858 ======= ======= ======= ======= Chemicals production (thousand tonnes) UK 804 779 2,333 2,304 Rest of Europe 2,164 1,680 5,648 5,012 USA 2,299 2,438 6,664 7,619 Rest of World 703 591 2,023 1,745 ------- ------- ------- ------- Total production 5,970 5,488 16,668 16,680 ======= ======= ======= =======
Page 8 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Turnover - $m 6,335 8,195 22,893 21,977 Total replacement cost operating profit - $m 2,641 3,552 10,762 9,774 Results included: Exploration expense - $m 86 143 336 442 Key Statistics: Average prices :Crude oil (a) - $/bbl 23.08 27.84 24.22 26.13 realized by BP :Natural gas - $/mcf 2.49 3.01 3.66 2.57 Brent oil price - $/bbl 25.30 30.42 26.14 28.07 West Texas intermediate oil price - $/bbl 26.72 31.71 27.77 29.84 Henry Hub gas price (b) - $/mmBtu 2.93 4.27 4.88 3.41
--------------- (a) Crude oil and natural gas liquids (b) Henry Hub First of the Month Index Total replacement cost operating profit for the three months and nine months ended September 30, 2001 were $2,641 million and $10,762 million, respectively. This compares with $3,552 million and $9,774 million for the corresponding periods in 2000. Significantly lower oil and gas prices are reflected in both turnover and replacement cost operating profit for the third quarter 2001. The turnover and replacement cost operating profit results for the nine months ended September 30, 2001 also reflect the inclusion of ARCO and other portfolio changes for the whole nine months, compared to only around six months (from April 14) for the same period in 2000. Lower exploration expense reflects a more focused exploration programme and lower write-offs in 2001. In addition, the results are after charging depreciation and amortization arising from the fixed asset revaluation adjustment and goodwill consequent upon the ARCO acquisition of $429 million for the three months and $1,362 million for the nine months ended September 30, 2001. For the equivalent periods in 2000, the amounts were $412 million and $761 million, respectively. Special items in the three months ended September 30, 2000 principally comprised ARCO and Vastar integration costs and an asset write-down. The special items for the nine months ended September 30, 2000 also included the settlement of a lawsuit. Total hydrocarbon production for the third quarter was up 2% on the third quarter of 2000, with natural gas up 7% and liquids broadly flat. On a consistent current portfolio basis, total hydrocarbon production increased by around 3% over a year ago. Crude oil production from the deepwater Gulf of Mexico increased by 25% as new capacity continues to be added. The increase in natural gas resulted from strong output growth in our joint venture in Argentina, up 40%, and in North America, up 6%. For the first nine months of 2001, total production was up 6% with natural gas up 18%. On a consistent current portfolio basis the total hydrocarbon production increase for the nine months was 1%. In support of continued growth, capital expenditure during the quarter was $2.4 billion, 31% higher than the same quarter a year ago, and $6.7 billion for the nine months, up 58% on a year ago. BP approved the Clair development (BP 28.6% and operator) in the UK Continental Shelf, and agreed with its partners to invest $940 million to develop the field. Other developments approved were Jasmin, a Girassol satellite offshore Angola, and the first stage of the Cuenca Marina Austral field in Argentina. In early November, the third phase of Schiehallion, west of Shetland was also approved. Page 9 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Turnover - $m 9,241 5,481 31,756 12,460 Total replacement cost operating profit - $m 130 132 415 388
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 third quarter and nine months of 2001 is primarily due to higher sales volumes in the natural gas marketing and trading business. The replacement cost operating profit for the third quarter and nine months was $130 million and $415 million, respectively, compared with $132 million and $388 million a year ago. In the third quarter, natural gas marketing and trading performance has improved on the back of a continued increase in activity with gas sales volumes up 24% on a year ago. This has largely offset the effect of lower margins in the NGL business. The nine months profit reflected improved marketing and trading performance, partly offset by a reduction in the NGL result. In September, BP announced that it had agreed to purchase a set of natural gas marketing and trading assets from TransCanada PipeLines Limited, subject to regulatory approval in Canada. This acquisition will reinforce BP's position as a leader in the North American energy marketing and merchant business. Page 10 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Turnover - $m 30,925 31,311 93,705 75,175 Total replacement cost operating profit - $m 1,003 964 3,233 2,731 Global Indicator Refining - $/bbl 3.83 4.83 4.62 3.99 Margin (a)
--------------- (a) The Global Indicator Refining Margin (GIM) is the average of seven regional indicator margins weighted for BP's crude refining capacity in each region. Each regional indicator margin is based on a single representative crude with product yields characteristic of the typical level of upgrading complexity. Turnover for the nine months primarily reflects the inclusion of ARCO for the whole of the nine months in 2001, compared to around six months (from April 14) 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 nine months ended September 30, 2001 was $1,003 million and $3,233 million, respectively. This compares with $964 million and $2,731 million for the equivalent periods in 2000. The results include acquisition amortization of $174 million and $538 million for the three months and nine months ended September 30, 2001. For the equivalent periods in 2000 the acquisition amortization was $185 million and $255 million, respectively. Special items for the three months and nine months ended September 30, 2001 were $112 million and $274 million, respectively. The special items comprised Castrol integration costs. Specials for the nine months also include rationalization costs in the European downstream commercial business. Specials for the nine months also include rationalization costs in the European downstream commercial business. Special items in the three months and nine months ended September 30, 2000 comprised rationalization costs post the BP/Amoco merger, ARCO and Burmah Castrol integration costs and litigation costs. The main drivers of the improvement on the corresponding quarter last year were higher retail margins and volumes. Retail margins reflected lower wholesale prices in several regions. Refining margins were volatile throughout the quarter and were down $1 per barrel versus the prior year as particularly strong US Midwest refining margins only partially offset lower refining margins in other areas. The nine months result benefited from higher refining margins and volume improvements compared to a year ago. Third quarter refinery throughputs decreased by 3.5% compared to a year ago as a result of the impact of refinery disposals, which more than offset underlying throughput increases (for the nine months throughput increased by 3% over the same period in 2000). Third quarter marketing sales increased by 4% compared to a year ago (the nine months ended September 30, 2001 showed a 17% increase over the same period in 2000) and store sales were up 7% in the third quarter reflecting the consolidation of the European fuels business and the increasing number of BP Connect stores. We are on track to deliver our unit cost reduction target of 2.5% in 2001. The roll-out of BP Connect continued during the quarter with over 230 BP Connect stores now open in the UK, USA, Australia and New Zealand. BP's leadership position in clean fuels continues to grow as BP is now providing clean fuels to 76 cities. In September 2001, BP completed the sale of its Salt Lake City, Utah, and Mandan, North Dakota, refineries in the USA. Page 11 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued CHEMICALS
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Turnover - $m 3,272 2,798 9,034 8,493 Total replacement cost operating profit - $m 105 263 195 842 Chemicals Indicator Margin (a) - $/te 110(b) 128 107(b) 130
--------------- (a) The Chemicals Indicator Margin (CIM) is a weighted average of externally-based product margins reflecting industry supply/demand conditions. It is based on market data collected by Chem Systems in their quarterly market analyses, then weighted based on BP's product portfolio. 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, speciality intermediates, and the remaining parts of the solvents and acetyls businesses. This quarter the margin indicator has been adjusted to reflect the Erdolchemie purchase and the impact of recently divested businesses. Prior quarters have been restated. (b) Provisional. The data for the quarter and nine months is based on two months' and eight months' actual data, respectively, and one month of provisional data. Increased turnover for the third quarter and the nine months primarily reflects the inclusion of 100% of Erdolchemie results in 2001. Chemicals' replacement cost operating profit for the three months and nine months ended September 30, 2001 was $105 million and $195 million, respectively, after special charges of $8 million related to Erdolchemie rationalization. For the corresponding periods in 2000 the replacement cost operating profit was $263 million and $842 million, after special charges of $4 million and $54 million, respectively. The third quarter result was a decrease of $158 million over the equivalent quarter in 2000. The lower result was caused by a deterioration in the trading environment associated with weaker economic growth. The nine months result was significantly lower than a year ago due to the poor margin environment, higher restructuring costs and the effect of unscheduled shutdowns. Third quarter production of 5,970kte is 9% above the same quarter of 2000. This record production benefits from full ownership of Erdolchemie for the whole quarter and restored operations at three major cracker sites. Production for the first nine months of 2001 is flat compared to 2000. BP continues to progress the restructuring programme, announced in August, which is fundamental to its chemicals business. This is designed to lower significantly the business' cost structure and to focus its portfolio. Actions taken during the third quarter included announcement of the cessation of production of polybutenes and panasols at Texas City in the USA and of butyl acetate at Hull, England. We also announced the closure of our low-density polyethylene manufacturing operation at Wilton, England. The third quarter and nine months results include $27 million and $67 million, respectively, of restructuring costs, in addition to the special item relating to Erdolchemie. In early November, BP completed its deal with Solvay, originally announced in late 2000. This deal will significantly strengthen BP's polyolefins business in Europe and in the USA. As a result of the deal BP has added Solvay's global polypropylene business to its existing business and the two companies have combined their high-density polyethylene businesses into two joint ventures - BP Solvay Polyethylene Europe (50% BP, 50% Solvay) and BP Solvay Polyethylene North America (49% BP, 51% Solvay). BP has also transferred its non-core engineering polymers business to Solvay. Page 12 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Turnover - $m 204 106 567 198 Replacement cost operating profit - $m (122) (216) (377) (742)
Other Businesses and Corporate comprises Finance, BP Solar, the Group's coal asset, 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 nine months ended September 30, 2001 was $122 million and $377 million, respectively. This compares with $216 million and $742 million for the corresponding periods in 2000. There were special items of $86 and $252 million in the third quarter and nine months of 2000, respectively, relating primarily to rationalization costs post the BP Amoco merger and ARCO integration costs. There were no special items for the three months and nine months ended September 30, 2001. BP Solar production for the nine months ended September 30, 2001 was 25% higher than a year ago. A total of 38 megawatts of solar panel generating capacity was sold in the nine months ended September 30, 2001. EXCEPTIONAL ITEMS
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Profit (loss) on sale of fixed assets and businesses and termination of operations - $m 184 138 573 142 Taxation credit (charge) - $m (194) (278) (379) (386) ------- ------- ------- ------ Exceptional items after taxation - $m (10) (140) 194 (244) ------- ------- ------- ------
Exceptional items for the three months ended September 30, 2001 include profit from the sale of the Salt Lake City and Mandan refineries in the USA and losses associated with the closure of certain chemical operations. Exceptional items for the nine months ended September 30, 2001 also include profit on the sale of the Kashagan discovery in Kazakhstan, loss on the sale of the Carbon Fibers business in the USA, and profit on the sale of the Alliance Refinery pipeline system. Exceptional items for the three months ended September 30, 2000 primarily represent the profit on sale of the Alliance Refinery. In addition, exceptional items for the nine months ended September 30, 2000 include the profit on sale of BP's interest in Altura Energy, the losses on sale of certain Venezuelan upstream interests and the subvention of Singapore Aromatics Company bank loans. OUTLOOK Oil prices have softened as demand has weakened, particularly for aviation fuel, after the tragic events of 11 September, while OPEC has continued to produce beyond its quotas. The critical issue, as we look forward, is whether OPEC will curb that output sufficiently to pull the crude price back within its target range. US natural gas prices have settled at more normal levels, though we should expect the usual seasonal variations. Refining margins continue to show significant regional differences but, overall, are likely to be down on last year because of lower product demand. Retail margins have benefited recently from falling product prices, but chemicals margins look set to stay pretty flat due to weakening demand and excess capacity. While the climate is unsettled, the world is still open for business. For our part we are intensifying our focus on cost and investment discipline to ensure we sustain underlying performance, keep growth fully profitable and maintain our robust financial health. Production growth remains on target, at a very competitive level. Page 13 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - concluded RECENT DEVELOPMENTS BP announced on November 13, 2001 that it will restructure operations at the Company's Grangemouth refining and petrochemical complex in Scotland. The move is part of a series of initiatives and investments to radically improve the plant's ability to compete in an increasingly difficult international refining and chemicals environment. It will lead to the loss of up to 1,000 jobs over the next two years. The decision follows a fundamental ten-week review of the site's organisation, asset structure and, most particularly, its financial performance, which has been severely impacted by the economic downturn, unprecedentedly depressed chemicals markets, and a series of operational problems. The reorganization will streamline Grangemouth's three main businesses - refining, petrochemicals and the Forties pipeline terminal - into a single organization, designed to simplify site operations while increasing reliability and efficiency. FORWARD-LOOKING STATEMENTS In order to utilize the 'Safe Harbor' provisions of the United States Private Securities Litigation Reform Act of 1995, BP is providing the following cautionary statement. The foregoing discussion, in particular, although not limited to, the statements under `Outlook', with regard to trends in the trading environment, oil and gas prices, refining, marketing, NGL and chemicals margins, inventory and product stock levels, supply capacity, capital expenditure, working capital, profitability, results of operation, dividend payments liquidity or financial position and statements regarding our targets are all forward-looking in nature. Forward-looking statements are identified by such phrases as `will', `expects', `is expected to', `may', `is likely to', `intends' and `believes'. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including the specific factors identified in the discussions accompanying such forward-looking statements; future levels of industry product supply, demand and pricing; political stability and economic growth in relevant areas of the world; development and use of new technology and successful partnering; the actions of competitors; natural disasters and other changes to business conditions; 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 November 6, 2001, BP p.l.c. announced a third 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 $1,232 million in total. The record date for qualifying US resident holders of American Depositary Shares as well as holders of ordinary shares was November 16, 2001, with payment to be made on December 10, 2001. The dividend payable on December 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 $0.037 per ADS. There is a Dividend Reinvestment Plan whereby holders of ordinary shares can elect to reinvest the net cash dividend in shares purchased on the London Stock Exchange. This plan is not available to any person resident in the USA or Canada, or in any jurisdiction outside the UK where such an offer requires compliance by the Company with any governmental or regulatory procedures or any similar formalities. A dividend reinvestment facility is, however, available for holders of ADSs through the Direct Access Plan of Morgan Guaranty Trust Company of New York. Participants in the Dividend Reinvestment Plan or the dividend reinvestment facility included in the US Direct Access Plan will receive the dividend in the form of shares on December 10, 2001. Page 14 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million, except per share amounts) Turnover - Note 3 43,886 44,862 138,275 116,980 Less: joint ventures 306 2,231 874 13,480 ------- ------ ------- ------- Group turnover 43,580 42,631 137,401 103,500 Replacement cost of sales 36,994 35,365 114,444 84,689 Production taxes - Note 4 337 511 1,353 1,497 ------- ------ ------- ------- Gross profit 6,249 6,755 21,604 17,314 Distribution and administration expenses 2,865 2,466 8,419 5,660 Exploration expense - Note 5 86 143 336 442 ------- ------ ------- ------- 3,298 4,146 12,849 11,212 Other income 179 73 486 533 ------- ------ ------- ------- Group replacement cost operating profit 3,477 4,219 13,335 11,745 Share of profits of joint ventures 125 283 352 716 Share of profits of associated undertakings 155 193 541 532 ------- ------ ------- ------- Total replacement cost operating profit - Notes 6 & 7 3,757 4,695 14,228 12,993 Profit (loss) on sale of fixed assets and businesses and termination of operations - Note 8 184 138 573 142 ------- ------ ------- ------- Replacement cost profit before interest and tax - Note 6 3,941 4,833 14,801 13,135 Inventory holding gains (losses) - Note 9 (405) 544 (603) 1,289 ------- ------ ------- ------- Historical cost profit before interest and tax 3,536 5,377 14,198 14,424 Interest expense - Note 10 369 460 1,256 1,159 ------- ------ ------- ------- Profit before taxation 3,167 4,917 12,942 13,265 Taxation - Note 11 1,212 1,554 4,480 3,730 ------- ------ ------- ------- Profit after taxation 1,955 3,363 8,462 9,535 Minority shareholders' interest 15 12 47 75 ------- ------ ------- ------- Profit for the period 1,940 3,351 8,415 9,460 ======= ====== ======= ======= Earnings per ordinary share - cents (a) Basic 8.66 14.85 37.48 44.32 Diluted 8.59 14.75 37.24 44.01 ------- ------ ------- ------- Earnings per American depositary share - cents (a) Basic 51.96 89.10 224.88 265.92 Diluted 51.54 88.50 223.44 264.06 ------- ------ ------- ------- Average number of outstanding ordinary shares (millions) 22,425 22,597 22,449 21,343 ======= ====== ======= =======
--------------- (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 16. Page 15 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
September 30, 2001 December 31, 2000 (Unaudited) ($ million) Fixed assets Intangible assets 16,353 16,893 Tangible assets 77,624 75,173 Investments 11,542 11,753 -------- -------- 105,519 103,819 Current assets Business held for resale - 636 Inventories 9,027 9,234 Receivables 28,151 28,418 Investments 519 661 Cash at bank and in hand 1,438 1,170 -------- -------- 39,135 40,119 -------- -------- Current liabilities - falling due within one year Finance debt 6,625 6,418 Accounts payable and accrued liabilities 30,449 30,729 -------- -------- 37,074 37,147 -------- -------- Net current assets 2,061 2,972 -------- -------- Total assets less current liabilities 107,580 106,791 Noncurrent liabilities Finance debt 13,849 14,772 Accounts payable and accrued liabilities 3,803 5,223 Provisions for liabilities and charges 12,819 12,795 -------- -------- 30,471 32,790 -------- -------- Net assets 77,109 74,001 Minority shareholders' interest 646 585 -------- -------- BP shareholders' interest (a) - Note 15 76,463 73,416 ======== ======== Represented by: Capital shares Preference 21 21 Ordinary 5,611 5,632 Paid-in surplus 3,995 3,770 Merger reserve 26,982 26,869 Retained earnings 39,630 36,668 Other reserves 224 456 -------- -------- 76,463 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 16. Page 16 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) Net cash inflow from operating activities 5,046 6,604 16,862 14,637 ------- ------- ------- ------- Dividends from joint ventures 26 118 92 645 ------- ------- ------- ------- Dividends from associated undertakings 155 100 424 274 ------- ------- ------- ------- Servicing of finance and returns on investments Interest received 23 195 173 344 Interest paid (308) (315) (1,053) (883) Dividends received 59 9 97 12 Dividends paid to minority shareholders (11) (12) (16) (20) ------- ------- ------- ------- Net cash outflow from servicing of financing and returns on investments (237) (123) (799) (547) ------- ------- ------- ------- Taxation UK corporation tax (231) (177) (604) (441) Overseas tax (486) (2,532) (2,634) (3,758) ------- ------- ------- ------- Tax paid (717) (2,709) (3,238) (4,199) ------- ------- ------- ------- Capital expenditure Payments for fixed assets (2,933) (2,226) (8,526) (6,412) Proceeds from the sale of fixed assets 824 1,524 1,750 2,112 ------- ------- ------- ------- Net cash outflow for capital expenditure (2,109) (702) (6,776) (4,300) ------- ------- ------- ------- Acquisitions and disposals Investments in associated undertakings (139) (456) (407) (897) Acquisitions, net of cash acquired (48) (5,095) (608) (4,704) Net investment in joint ventures (144) (95) (277) (218) Proceeds from the sale of businesses 307 1,106 307 7,931 ------- ------- ------- ------- Net cash (outflow) inflow for acquisitions and disposals (24) (4,540) (985) 2,112 ------- ------- ------- ------- Equity dividends paid (1,235) (1,128) (3,595) (3,232) ------- ------- ------- ------- Net cash inflow (outflow) 905 (2,380) 1,985 5,390 ======= ======= ======= ======= Financing 630 1,068 1,827 4,472 Management of liquid resources (44) (1,755) (146) 610 Increase (decrease) in cash 319 (1,693) 304 308 ------- ------- ------- ------- 905 (2,380) 1,985 5,390 ======= ======= ======= =======
--------------- (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 16. Page 17 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - continued
Three months ended Nine months ended September 30 September 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 3,536 5,377 14,198 14,424 Depreciation and amounts provided 2,077 2,093 6,320 5,221 Exploration expenditure written off 23 51 153 191 Share of profits of joint ventures and associated undertakings (278) (515) (891) (1,503) Interest and other income (116) (121) (346) (281) (Profit) loss on sale of fixed assets and businesses (184) (136) (573) (118) Charge for provisions 115 232 821 669 Utilization of provisions (263) (210) (898) (543) Decrease (increase) in stocks 135 (398) 122 (1,264) Decrease (increase) in debtors 2,216 (49) 748 (3,635) Increase (decrease) in creditors (2,215) 280 (2,792) 1,476 ------- ------- ------- ------- Net cash inflow from operating activities 5,046 6,604 16,862 14,637 ======= ======= ======= ======= Financing Long-term borrowing (7) (132) (1,029) (1,584) Repayments of long-term borrowing 988 483 2,168 994 Short-term borrowing (743) (345) (3,493) (1,048) Repayments of short-term borrowing 40 610 3,167 4,673 ------- ------- ------- ------- 278 616 813 3,035 Issue of ordinary share capital (48) (102) (168) (241) Repurchase of ordinary share capital 400 554 1,182 1,383 Stamp duty reserve tax - - - 295 ------- ------- ------- ------- Net cash outflow from financing 630 1,068 1,827 4,472 ======= ======= ======= =======
--------------- (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 16. Page 18 BP p.l.c. AND SUBSIDIARIES CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) By business Exploration and Production UK 326 159 783 599 Rest of Europe 79 50 230 110 USA 1,123 1,082 3,293 2,282 Rest of World 891 562 2,402 1,267 ------- ------- ------- ------- 2,419 1,853 6,708 4,258 ------- ------- ------- ------- Gas and Power UK (a) 37 78 51 108 Rest of Europe 16 1 37 3 USA (b) 11 37 48 68 Rest of World 10 9 14 30 ------- ------- ------- ------- 74 125 150 209 ------- ------- ------- ------- Refining and Marketing UK (c) (d) 89 4,098 267 5,016 Rest of Europe (d) 10 1,275 171 1,384 USA 281 30 688 440 Rest of World 62 90 173 253 ------- ------- ------- ------- 442 5,493 1,299 7,093 ------- ------- ------- ------- Chemicals UK 50 122 179 410 Rest of Europe (e) 69 28 623 95 USA 119 92 293 183 Rest of World 112 60 237 385 ------- ------- ------- ------- 350 302 1,332 1,073 ------- ------- ------- ------- Other businesses and corporate (f) 78 1,814 207 2,514 ------- ------- ------- ------- 3,363 9,587 9,696 15,147 ======= ======= ======= ======= By geographical area UK 541 4,547 1,383 6,294 Rest of Europe 181 1,354 1,078 1,598 USA 1,564 2,965 4,402 4,735 Rest of World 1,077 721 2,833 2,520 ------- ------- ------- ------- 3,363 9,587 9,696 15,147 ======= ======= ======= =======
--------------- (a) 3Q and nine months 2000 included $63 million for the first instalment on two LNG ships and nine months 2000 also included investment in Great Yarmouth Power Station. (b) Nine months 2000 included investment in Green Mountain Energy Company. (c) 3Q 2000 included $3,817 million and nine months 2000 included $4,686 million for the purchase of Burmah Castrol's issued share capital. (d) 3Q and nine months 2000 included $1,450 million for the acquisition of the Mobil share of the European Joint Venture. (e) Nine months 2001 included the acquisition of Bayer's 50% interest in Erdolchemie. (f) 3Q and nine months 2000 included $1,688 million for the acquisition of the minority interest in Vastar. Nine months 2000 also included $578 million for the acquisition of a 2.2% interest in PetroChina. Page 19 BP p.l.c. AND SUBSIDIARIES ENVIRONMENTAL INDICATORS
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Average oil realizations (a) - $/bbl UK 24.34 28.46 25.33 27.01 USA 22.38 27.44 23.58 25.22 Rest of World 22.71 27.54 23.40 26.15 BP average 23.08 27.84 24.22 26.13 Brent oil price 25.30 30.42 26.14 28.07 West Texas Intermediate oil price 26.72 31.71 27.77 29.84 Alaska North Slope US West Coast 24.05 29.82 25.01 27.99 Average natural gas realizations - $/mcf UK 2.52 2.33 3.05 2.18 USA 2.63 3.87 4.68 3.17 Rest of World 2.27 2.29 2.73 2.11 BP average 2.49 3.01 3.66 2.57 Henry Hub gas price (b) ($/mmBtu) 2.93 4.27 4.88 3.41 Global Indicator Refining Margins (c) - $/bbl Northwest Europe 1.74 3.44 2.48 3.26 US Gulf Coast 3.24 3.87 5.87 3.92 Midwest 7.20 3.06 7.20 4.18 US West Coast 8.17 12.54 9.40 8.31 Singapore 0.75 3.19 0.80 2.08 BP average 3.83 4.83 4.62 3.99 Chemicals Indicator Margin (d) - $/te 110 (e) 128 107 (e) 130
--------------- (a) Crude oil and natural gas liquids. (b) Henry Hub First of Month Index. (c) The Global Indicator Refining Margin (GIM) is the average of seven regional indicator margins weighted for BP's crude refining capacity in each region. Each regional indicator margin is based on a single representative crude with product yields characteristic of the typical level of upgrading complexity. (d) The Chemicals Indicator Margin (CIM) is a weighted average of externally-based product margins reflecting industry supply/demand conditions. It is based on market data collected by Chem Systems in their quarterly market analyses, then weighted based on BP's product portfolio. The products and businesses covered in the CIM are olefins and derivatives, aromatics and derivatives, linear alpha olefins, acetic acid, vinyl acetate monomer and nitriles. Not included are fabrics and fibres, plastic fabrications, poly alpha olefins, anhydrides, engineering polymers and carbon fibres, speciality intermediates, and the remaining parts of the solvents and acetyls businesses. This quarter the margin indicator has been adjusted to reflect the Erdolchemie purchase and the impact of recently divested businesses. Prior quarters have been restated. (e) Provisional. The data for the third quarter is based on two months' actual and one month of provisional data. US dollar/sterling exchange rates
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ Average rates for the period 1.44 1.48 1.44 1.54 Period-end rates 1.48 1.46 1.48 1.46 ======= ======= ====== =======
Page 19 BP p.l.c. AND SUBSIDIARIES SPECIAL ITEMS AND ACQUISITION AMORTIZATION BY SEGMENT (PRE-TAX)
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) Special items Exploration and Production UK - 42 - 112 Rest of Europe - - - - USA - 135 - 287 Rest of World - 15 - 76 ------- ------- ------- ------- - 192 - 475 ------- ------- ------- ------- Gas and Power UK - - - - Rest of Europe - - - - USA - - - - Rest of World - - - - ------- ------- ------- ------- - - - - ------- ------- ------- ------- Refining and Marketing UK 18 14 61 14 Rest of Europe 33 22 123 51 USA 11 58 19 170 Rest of World 50 16 71 16 ------- ------- ------- ------- 112 110 274 251 ------- ------- ------- ------- Chemicals UK - 2 - 5 Rest of Europe 8 1 8 2 USA - 1 - 47 Rest of World - - - - ------- ------- ------- ------- 8 4 8 54 ------- ------- ------- ------- Other businesses and corporate UK - 37 - 56 Rest of Europe - - - - USA - 49 - 196 Rest of World - - - - ------- ------- ------- ------- - 86 - 252 ------- ------- ------- ------- Total special items before interest 120 392 282 1,032 Interest - bond redemption charges 2 - 62 - ------- ------- ------- ------- Total 122 392 344 1,032 ======= ======= ======= ======= Acquisition amortization Exploration and Production UK 42 29 110 55 USA 353 372 1,151 685 Rest of World 34 11 101 21 ------- ------- ------- ------- 429 412 1,362 761 ------- ------- ------- ------- Refining and Marketing UK 93 104 295 104 USA 81 81 243 151 ------- ------- ------- ------- 174 185 538 255 ======= ======= ======= ======= Total 603 597 1,900 1,016 ======= ======= ======= =======
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. 2. Business held for resale The sale of Foseco was completed during the third quarter of 2001. The other former Burmah Castrol chemicals businesses originally categorized as businesses held for resale will for now be retained and have been included within the Chemicals segment from July 1, 2001.
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) 3. Turnover By business Exploration and Production 6,335 8,195 22,893 21,977 Gas and Power 9,241 5,481 31,756 12,460 Refining and Marketing 30,925 31,311 93,705 75,175 Chemicals 3,272 2,798 9,034 8,493 Other businesses and corporate 204 106 567 198 ------- ------ -------- -------- 49,977 47,891 157,955 118,303 Less: sales between businesses 6,397 5,260 20,554 14,803 ------- ------ -------- -------- Group excluding joint ventures 43,580 42,631 137,401 103,500 Sales of joint ventures 306 2,231 874 13,480 ------- ------ -------- -------- 43,886 44,862 138,275 116,980 ======= ====== ======== ======== By geographical area UK 12,272 11,956 36,186 33,418 Rest of Europe 9,026 5,603 28,044 9,336 USA 21,375 21,513 68,657 52,061 Rest of World 8,006 8,271 26,626 21,608 ------- ------ -------- -------- 50,679 47,343 159,513 116,423 Less: Sales between areas 7,099 4,712 22,112 12,923 ------- ------ -------- -------- Group excluding joint ventures 43,580 42,631 137,401 103,500 ======= ====== ======== ======== Sales of joint ventures UK - 540 - 3,314 Rest of Europe - 1,951 - 12,316 USA 49 24 236 183 Rest of World 257 240 638 489 ------- ------ -------- -------- 306 2,755 874 16,302 Less: sales between areas - 524 - 2,822 ------- ------ -------- -------- 306 2,231 874 13,480 ======= ====== ======== ======== 4. Production taxes UK petroleum revenue tax 80 171 453 545 Overseas production taxes 257 340 900 952 ------- ------ -------- -------- 337 511 1,353 1,497 ======= ====== ======== ========
Page 22 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) 5. Exploration expense Exploration and Production UK 1 - 5 23 Rest of Europe 10 20 15 32 USA 41 60 174 185 Rest of World 34 63 142 202 ------- ------ ------- ------- 86 143 336 442 ======= ====== ======= =======
6. Replacement cost profit Replacement cost profits reflect the current cost of supplies. The replacement cost profit for the period is arrived at by excluding from the historical cost profit inventory holding gains and losses. These are the difference between the amount that is charged to cost of sales on a first-in, first-out (FIFO) basis of inventory valuation and the amount charged to cost of sales based on the average cost of supplies incurred during the period. The former basis is used in arriving at the historical cost result whereas the latter basis is used in arriving at the replacement cost result. For further discussion of replacement cost operating profit see Item 3 of BP`s Annual Report on Form 20-F for the year ended December 31, 2000.
7. Total replacement cost operating profit By business Exploration and Production UK 729 997 2,853 2,961 Rest of Europe 188 221 604 594 USA 850 1,247 4,189 3,436 Rest of World 874 1,087 3,116 2,783 ------- ------ ------- ------- 2,641 3,552 10,762 9,774 ------- ------ ------- ------- Gas and Power UK 36 14 87 13 Rest of Europe 24 28 120 94 USA 89 14 220 75 Rest of World (19) 76 (12) 206 ------- ------ ------- ------- 130 132 415 388 ------- ------ ------- ------- Refining and Marketing UK (51) 63 (278) 244 Rest of Europe 222 233 535 399 USA 696 600 2,578 1,823 Rest of World 136 68 398 265 ------- ------ ------- ------- 1,003 964 3,233 2,731 ------- ------ ------- ------- Chemicals UK (58) (17) (141) (81) Rest of Europe 87 75 186 271 USA 59 161 71 525 Rest of World 17 44 79 127 ------- ------ ------- ------- 105 263 195 842 ------- ------ ------- ------- Other businesses and corporate (122) (216) (377) (742) ------- ------ ------- ------- 3,757 4,695 14,228 12,993 ======= ======= ======= ======= By geographical area UK 552 999 2,293 2,939 Rest of Europe 512 578 1,426 1,405 USA 1,582 1,856 6,806 5,270 Rest of World 1,111 1,262 3,703 3,379 ------- ------- ------- ------- 3,757 4,695 14,228 12,993 ======= ======= ======= =======
Page 23 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) 8. Analysis of exceptional items Profit (loss) on sale of fixed assets and businesses and termination of operations Exploration and Production 3 9 280 215 Gas and Power - (1) (1) (1) Refining and Marketing 247 161 453 185 Chemicals (81) (30) (167) (240) Other businesses and corporate 15 (1) 8 (17) ------- ------- ------- ------- Exceptional items before taxation 184 138 573 142 Taxation charge (194) (278) (379) (386) ------- ------- ------- ------- Exceptional items after taxation (10) (140) 194 (244) ======= ======= ======= ======= 9. Inventory holding gains (losses) Exploration and Production (1) 3 (1) 5 Gas and Power (17) - (61) 22 Refining and Marketing (301) 524 (445) 1,140 Chemicals (86) 17 (96) 122 ------- ------- ------- ------- (405) 544 (603) 1,289 ======= ======= ======= ======= 10.Interest expense Group interest payable (a) 292 384 1,022 950 Capitalized (19) (32) (74) (77) ------- ------- ------- ------- 273 352 948 873 Joint ventures 16 24 49 59 Associated undertakings 33 36 109 98 Unwinding of discount on provisions 47 48 150 129 ------- ------- ------- ------- 369 460 1,256 1,159 ======= ======= ======= ======= (a) Includes charges relating to the early redemption of debt 2 - 62 - ------- ------- ------- ------- 11.Charge for taxation United Kingdom 244 269 766 873 Overseas 968 1,285 3,714 2,857 ------- ------- ------- ------- 1,212 1,554 4,480 3,730 ======= ======= ======= =======
Page 24 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) 12.Return on average capital employed (ROACE) Replacement cost basis Replacement cost profit before exceptional items 2,355 2,947 8,824 8,415 Interest 369 460 1,256 1,159 Minority shareholders' interest 15 12 47 75 ------ ------- ------- ------- 2,739 3,419 10,127 9,649 ====== ======= ======= ======= Average capital employed 96,906 96,333 96,387 * ROACE 11.3% 14.2% 14.0% * ------ ------- ------- ------- Acquisitions and special items adjustments Acquisition amortization 603 560 1,900 937 Special items (post tax) 89 289 204 761 Average capital employed 19,677 22,172 20,325 * ROACE - pro forma basis adjusted for special items 17.8% 23.0% 21.4% * ------ ------- ------- ------- Historical cost basis Historical cost profit after exceptional items 1,940 3,351 8,415 9,460 Interest 369 460 1,256 1,159 Minority shareholders' interest 15 12 47 75 ------ ------- ------- ------- 2,324 3,823 9,718 10,694 ====== ======= ======= ======= ROACE 9.6% 16.4% 13.4% * ====== ======= ======= =======
* As the acquisition of ARCO was completed in April and of Burmah Castrol in July, it is not meaningful to show ROACE for the nine months ended September 30, 2000.
13.Analysis of changes in net debt Opening balance Finance debt 20,498 19,187 21,190 14,544 Less: Cash 1,103 3,313 1,170 1,331 Current asset investments 563 2,616 661 220 ------ ------- ------- ------- Opening net debt 18,832 13,258 19,359 12,993 ------ ------- ------- ------- Closing balance Finance debt 20,474 19,688 20,474 19,688 Less: Cash 1,438 1,607 1,438 1,607 Current asset investments 519 862 519 862 ------ ------- ------- ------- Closing net debt 18,517 17,219 18,517 17,219 ------ ------- ------- ------- Decrease (increase) in net debt 315 (3,961) 842 (4,226) ======= ======= ======= ======= Movement in cash/bank overdrafts 319 (1,693) 304 308 (Decrease) increase in current asset investments (43) (1,755) (145) 610 Net cash (inflow) outflow from financing (excluding share capital) 278 616 813 3,035 Other movements (102) (27) (20) (20) Debt acquired - (949) (47) (8,072) ------ ------- ------- ------- Movements in net debt before exchange effects 452 (3,808) 905 (4,139) Exchange adjustments (137) (153) (63) (87) ------ ------- ------- ------- Decrease (increase) in net debt 315 (3,961) 842 (4,226) ======= ======= ======= =======
Page 25 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) 14.Net debt ratio - net debt: net debt + equity Gross debt 20,474 19,688 20,474 19,688 Cash and current asset investments 1,957 2,469 1,957 2,469 ------- ------- ------- ------- Net debt 18,517 17,219 18,517 17,219 Equity 77,109 73,673 77,109 73,673 ------- ------- ------- ------- Net debt ratio 19% 19% 19% 19% Acquisition adjustment (a) 19,375 21,137 19,375 21,137 ------- ------- ------- ------- Net debt ratio - pro forma basis (b) 24% 25% 24% 25% ======= ======= ======= =======
--------------- (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. 15. Movement in BP shareholders' interest $ million (Unaudited) Balance at December 31, 2000 73,416 Profit for the period 8,415 Distribution to shareholders (3,646) Currency translation differences (592) Employee share schemes 168 Share buyback (1,182) Redemption of ARCO preference shares (116) ------- Balance at September 30, 2001 76,463 ======= Page 26 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16. 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) Profit as reported in the consolidated statement of income 1,940 3,351 8,415 9,460 Adjustments: ------- ------- ------- -------- Depreciation charge (265) (138) (844) (258) Decommissioning and environmental expense (129) (48) (313) (214) Onerous property leases (7) (9) (41) (21) Derivative financial instruments (58) - (257) - Interest expense 47 48 150 129 Deferred taxation 238 48 185 (665) Other 4 14 14 45 ------- ------- ------- -------- (170) (85) (1,106) (984) ------- ------- ------- -------- Profit for the period before cumulative effect of accounting change as adjusted to accord with US GAAP 1,770 3,266 7,309 8,476 Cumulative effect of accounting change: Derivative financial instruments - - (18) - ------- ------- ------- -------- Profit for the period as adjusted to 1,770 3,266 7,291 8,476 accord with US GAAP ======= ====== ======= ======= Profit for the period as adjusted: Per ordinary share - cents Basic - before cumulative effect of accounting change 7.89 14.48 32.56 39.71 Cumulative effect of accounting change - - (0.08) - ------- ------- ------- -------- 7.89 14.48 32.48 39.71 ------- ------- ------- -------- Diluted - before cumulative effect of accounting change 7.85 14.37 32.35 39.44 Cumulative effect of accounting change - - (0.08) - ------- ------- ------- -------- 7.85 14.37 32.27 39.44 ------- ------- ------- -------- Per American Depositary Share - cents (a) Basic - before cumulative effect of accounting change 47.34 86.88 195.36 238.26 Cumulative effect of accounting change - - (0.48) - ------- ------- ------- -------- 47.34 86.88 194.88 238.26 ------- ------- ------- -------- Diluted - before cumulative effect of accounting change 47.10 86.22 194.10 236.64 Cumulative effect of accounting change - - (0.48) - ------- ------- ------- -------- 47.10 86.22 193.62 236.64 ------- ------- ------- --------
Page 27 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16.US generally accepted accounting principles - continued
BP shareholders' interest September 30, 2001 December 31, 2000 (b) (Unaudited) ----------------- -------------------- ($ million) BP shareholders' interest as reported in the consolidated balance sheet 76,463 73,416 Adjustments: ------ ------ Fixed assets 7,926 8,777 Ordinary shares held for future awards to employees (293) (360) Sale and leaseback of Chicago office building (413) (413) Decommissioning and environmental provisions (1,106) (921) Onerous property leases 67 105 Derivative financial instruments (273) - Deferred taxation (15,700) (15,843) Quarterly dividend 1,232 1,178 Pension liability adjustment (145) (145) Other (112) (128) ------ ------ (8,817) (7,750) ------ ------ BP shareholders' interest as adjusted to accord with US GAAP 67,646 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 28 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16.US generally accepted accounting principles - continued The consolidated statement of cash flows presented in accordance with SFAS 95 is as follows:
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) Operating activities Profit after taxation 1,955 3,363 8,462 9,535 Adjustments to reconcile profits after tax to net cash provided by operating activities Depreciation and amounts provided 2,077 2,093 6,320 5,221 Exploration expenditure written off 23 51 153 191 Share of profits of joint ventures and associates less dividends received 17 (187) (8) (299) (Profit) loss on sale of businesses and fixed assets (184) (136) (573) (118) Working capital movement (see analysis below) 561 281 (768) (2,270) Other (145) (1,431) (154) (1,257) ------- ------- ------- ------- Net cash provided by operating activities 4,304 4,034 13,432 11,003 ------- ------- ------- ------- Investing activities Capital expenditures (2,952) (2,258) (8,600) (6,489) Acquisitions, net of cash acquired (48) (5,095) (608) (4,704) Investment in associated undertakings (139) (456) (407) (897) Net investment in joint ventures (144) (95) (277) (218) Proceeds from disposal of assets 1,131 2,630 2,057 10,043 ------- ------- ------- ------- Net cash used in investing activities (2,152) (5,274) (7,835) (2,265) ------- ------- ------- ------- Financing activities Net proceeds from shares (repurchased) issued (352) (452) (1,014) (1,437) Proceeds from long-term financing 7 132 1,029 1,584 Repayments of long-term financing (988) (483) (2,168) (994) Net increase (decrease) in short-term debt 703 (265) 326 (3,625) Dividends paid - BP shareholders (1,235) (1,128) (3,595) (3,232) - Minority shareholders (11) (12) (16) (20) ------- ------- ------- ------- Net cash used in financing activities (1,876) (2,208) (5,438) (7,724) ------- ------- ------- ------- Currency translation differences relating to cash and cash equivalents 15 (12) (33) - ------- ------- ------- ------- (Decrease) increase in cash and cash equivalents 291 (3,460) 126 1,014 ------- ------- ------- ------- Cash and cash equivalents at beginning of period 1,666 5,929 1,831 1,455 ------- ------- ------- ------- Cash and cash equivalents at end of period 1,957 2,469 1,957 2,469 ======= ======= ======= ======= Analysis of working capital movement Decrease (increase) in inventories 135 (398) 122 (1,264) Decrease (increase) in receivables 2,249 (57) 703 (3,597) (Decrease) increase in current liabilities (excluding finance debt) (1,823) 736 (1,593) 2,591 ------- ------- ------- ------- Total working capital movement 561 281 (768) (2,270) ======= ======= ======= =======
Page 29 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16. 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 Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ (shares million) Weighted average number of ordinary shares 22,425 22,560 22,449 21,344 Ordinary shares issuable under employee share schemes 134 168 142 148 -------- ------- ------- ------- 22,559 22,728 22,591 21,492 ======== ======= ======= =======
Comprehensive income The components of comprehensive income, net of related tax are as follows:
Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------------ ------------------ ($ million) Profit for the period as adjusted to accord with US GAAP 1,770 3,266 7,291 8,476 Currency translation differences 1,007 (1,163) (592) (2,379) Derivative financial instruments (7) - 8 - Pension liability - - - - -------- ------- ------- ------- Comprehensive income 2,770 2,103 6,707 6,097 ======== ======= ======= =======
Accumulated other comprehensive income at September 30, 2001 and December 31, 2000 comprised losses of $4,611 million and $4,027 million, respectively. Page 30 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16.US generally accepted accounting principles - continued Accounting for associated undertakings and joint ventures Under the provisions of UK Financial Reporting Standard No.9 `Associates and Joint Ventures', the Company includes its share of the results of associated undertakings and joint ventures (JVs) within various captions in the consolidated statement of income. Under US GAAP, the Company's share of the after tax profit or loss of associated undertakings and joint ventures would be recognized as a single amount. The following summarizes the reclassifications necessary to accord with US GAAP.
Three months ended September 30, 2001 (Unaudited) ------------------------------------------ As US GAAP Reported Reclassification Presentation ------------------------------------------ ($ million) Consolidated statement of income Other income 179 164 343 Share of profits of JVs and associated undertakings 280 (280) - Exceptional items before taxation 184 - 184 Inventory holding gains (losses) (405) 2 (403) Interest expense 369 (49) 320 Taxation 1,212 (65) 1,147 Profit for the period 1,940 - 1,940 Nine months ended September 30, 2001 (Unaudited) ------------------------------------------ As US GAAP Reported Reclassification Presentation ------------------------------------------ ($ million) Consolidated statement of income Other income 486 524 1,010 Share of profits of JVs and associated undertakings 893 (893) - Exceptional items before taxation 573 1 574 Inventory holding gains (losses) (603) 1 (602) Interest expense 1,256 (158) 1,098 Taxation 4,480 (209) 4,271 Profit for the period 8,415 - 8,415 Three months ended September 30, 2000 (Unaudited) ------------------------------------------ As US GAAP Reported Reclassification Presentation ------------------------------------------ ($ million) Consolidated statement of income Other income 73 405 478 Share of profits of JVs and associated undertakings 476 (476) - Exceptional items before taxation 138 (2) 136 Inventory holding gains (losses) 544 (37) 507 Interest expense 460 (60) 400 Taxation 1,554 (50) 1,504 Profit for the period 3,351 - 3,351 Nine months ended September 30, 2000 (Unaudited) ------------------------------------------ As US GAAP Reported Reclassification Presentation ------------------------------------------ ($ million) Consolidated statement of income Other income 533 1,218 1,751 Share of profits of JVs and associated undertakings 1,248 (1,248) - Exceptional items before taxation 142 (24) 118 Inventory holding gains (losses) 1,289 (231) 1,058 Interest expense 1,159 (157) 1,002 Taxation 3,730 (128) 3,602 Profit for the period 9,460 - 9,460
Page 31 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16.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, the Group trades derivatives in conjunction with these risk management activities. All oil price derivatives and all derivatives held for trading are carried on the Group's balance sheet at fair value with changes in that value recognized in earnings of the period. For those derivative instruments, there was 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. For these derivatives, the cumulative effect of adopting SFAS 133 resulted in a pre tax charge to income, as adjusted to accord with US GAAP, of $27 million ($18 million after tax) 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 nine months of 2001 a pre-tax credit of $45 million ($29 million after tax) included in other comprehensive income was reclassified into earnings. Under US GAAP the fair values of derivative financial instruments is 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 32 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 16.US generally accepted accounting principles - concluded Recently issued accounting standards In June 2001 the Financial Accounting Standards Board (FASB) 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. 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 FASB issued Statement of Financial Accounting Standards No. 143 `Accounting for Asset Retirement Obligations' (SFAS 143). SFAS 143 requires companies to record liabilities equal to the fair value of their asset retirement obligations when they are incurred (typically when the asset is installed at the production location). When the liability is initially recorded, companies capitalize an equivalent amount as part of the cost of the asset. Over time the liability is accreted for the change in its present value each period, and the initial capitalized cost is depreciated over the useful life of the related asset. SFAS 143 is effective for accounting periods beginning after June 15, 2002. The provisions of SFAS 143 are similar to the accounting policy used by the Group in preparing its financial statements under UK GAAP. The Company has not yet determined the effect of adopting SFAS 143 on its results of operations or shareholders' interest as adjusted to accord with US GAAP. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, `Accounting for the Impairment or Disposal of Long-Lived Assets' (SFAS 144). SFAS 144 retains the requirement to recognize an impairment loss only where the carrying value of a long-lived asset is not recoverable from its undiscounted cash flows and to measure such loss as the difference between the carrying amount and fair value of the asset. SFAS 144, among other things, changes the criteria that have to be met in order to classify an asset as held-for-sale and requires that operating losses from discontinued operations be recognized in the period that the losses are incurred rather than as of the measurement date. SFAS 144 is effective for accounting periods beginning after December 15, 2001. The Company has not yet determined the effect of adopting SFAS 144 on its results of operations and shareholders' interest as adjusted to accord with US GAAP. Page 33 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 17.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 34 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 17.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 =================================================
18.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 35 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.Condensed consolidating information - continued
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 September 30, 2001 Turnover 549 300 - 43,337 (300) 43,886 Less: Joint ventures - - - 306 - 306 ---------------------------------------------------------------------------------------- Group turnover 549 300 - 43,031 (300) 43,580 Replacement cost of sales 541 231 - 36,526 (304) 36,994 Production taxes - 44 - 293 - 337 ---------------------------------------------------------------------------------------- Gross profit 8 25 - 6,212 4 6,249 Distribution and administration expenses - - (2) 2,867 - 2,865 Exploration expense - 5 - 81 - 86 ---------------------------------------------------------------------------------------- 8 20 2 3,264 4 3,298 Other income 3 - 368 176 (368) 179 ---------------------------------------------------------------------------------------- Group replacement cost operating profit 11 20 370 3,440 (364) 3,477 Share of profits of joint ventures - - - 125 - 125 Share of profits of associated undertakings - - - 155 - 155 Equity accounted income of subsidiaries 3,108 335 3,738 - (7,181) - ---------------------------------------------------------------------------------------- Total replacement cost operating profit 3,119 355 4,108 3,720 (7,545) 3,757 Profit (loss) on sale of fixed assets and businesses and termination of operations 168 - 184 184 (352) 184 ---------------------------------------------------------------------------------------- Replacement cost profit before interest and tax 3,287 355 4,292 3,904 (7,897) 3,941 Inventory holding gains (losses) (205) (6) (405) (404) 615 (405) ---------------------------------------------------------------------------------------- Historical cost profit before interest and tax 3,082 349 3,887 3,500 (7,282) 3,536 Interest expense 367 8 735 739 (1,480) 369 ---------------------------------------------------------------------------------------- Profit before taxation 2,715 341 3,152 2,761 (5,802) 3,167 Taxation 825 7 1,212 1,293 (2,125) 1,212 ---------------------------------------------------------------------------------------- Profit after taxation 1,890 334 1,940 1,468 (3,677) 1,955 Minority shareholders' interest - - - 15 - 15 ---------------------------------------------------------------------------------------- Profit for the period 1,890 334 1,940 1,453 (3,677) 1,940 ========================================================================================
Page 36 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2001 Profit as reported 1,890 334 1,940 1,453 (3,677) 1,940 Adjustments: Depreciation charge (283) (9) (265) (256) 548 (265) Decommissioning and environmental expense (127) (2) (129) (127) 256 (129) Onerous property leases (25) - (7) (7) 32 (7) Derivative financial instruments 14 - (58) (34) 20 (58) Interest expense 24 2 47 45 (71) 47 Sale and leaseback of fixed assets - - - - - - Deferred taxation (143) (32) 238 268 (93) 238 Other 1 - 4 4 (5) 4 ---------------------------------------------------------------------------------------- Profit for the period as adjusted to accord with US GAAP 1,351 293 1,770 1,346 (2,990) 1,770 ========================================================================================
Page 37 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2000 Turnover - 722 - 44,862 (722) 44,862 Less: Joint ventures - - - 2,231 - 2,231 --------------------------------------------------------------------------------------- Group turnover - 722 - 42,631 (722) 42,631 Replacement cost of sales - 274 - 35,821 (730) 35,365 Production taxes - 68 - 443 - 511 --------------------------------------------------------------------------------------- Gross profit - 380 - 6,367 8 6,775 Distribution and administration expenses - - 72 2,394 - 2,466 Exploration expense - 4 - 139 - 143 --------------------------------------------------------------------------------------- - 376 (72) 3,834 8 4,146 Other income - 15 45 55 (42) 73 --------------------------------------------------------------------------------------- Group replacement cost operating profit - 391 (27) 3,889 (34) 4,219 Share of profits of joint ventures - - - 283 - 283 Share of profits of associated undertakings - - - 193 - 193 Equity accounted income of subsidiaries 3,895 161 4,855 - (8,911) - --------------------------------------------------------------------------------------- Total replacement cost operating profit 3,895 552 4,828 4,365 (8,945) 4,695 Profit (loss) on sale of fixed assets and businesses and termination of operations 192 (1) 138 138 (329) 138 --------------------------------------------------------------------------------------- Replacement cost profit before interest and tax 4,087 551 4,966 4,503 (9,274) 4,833 Inventory holding gains (losses) 276 (5) 544 544 (815) 544 --------------------------------------------------------------------------------------- Historical cost profit before interest and tax 4,363 546 5,510 5,047 (10,089) 5,377 Interest expense 455 3 494 501 (993) 460 --------------------------------------------------------------------------------------- Profit before taxation 3,908 543 5,016 4,546 (9,096) 4,917 Taxation 1,178 182 1,554 1,395 (2,755) 1,554 --------------------------------------------------------------------------------------- Profit after taxation 2,730 361 3,462 3,151 (6,341) 3,363 Minority shareholders' interest - - - 12 - 12 --------------------------------------------------------------------------------------- Profit for the period 2,730 361 3,462 3,139 (6,341) 3,351 =======================================================================================
Page 38 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2000 Profit as reported 2,730 361 3,462 3,139 (6,341) 3,351 Adjustments: Depreciation charge (123) (12) (138) (126) 261 (138) Decommissioning and environmental expense (10) (2) (48) (46) 58 (48) Onerous property leases (16) - (9) (9) 25 (9) Interest expense 26 2 48 46 (74) 48 Sale and leaseback of fixed assets - - - - - - Deferred taxation (192) (74) 48 108 158 48 Other - - 14 14 (14) 14 --------------------------------------------------------------------------------------- Profit for the period as adjusted 2,415 275 3,377 3,126 (5,927) 3,266 to accord with US GAAP =======================================================================================
Page 39 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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) Nine months ended September 30, 2001 Turnover 878 1,428 - 137,397 (1,428) 138,275 Less: Joint ventures - - - 874 - 874 --------------------------------------------------------------------------------------- Group turnover 878 1,428 - 136,523 (1,428) 137,401 Replacement cost of sales 870 753 - 114,268 (1,447) 114,444 Production taxes - 153 - 1,200 - 1,353 --------------------------------------------------------------------------------------- Gross profit 8 522 - 21,055 19 21,604 Distribution and administration expenses - - 115 8,304 - 8,419 Exploration expense - 17 - 319 - 336 --------------------------------------------------------------------------------------- 8 505 115 12,432 19 12,849 Other income 16 - 1,069 470 (1,069) 486 --------------------------------------------------------------------------------------- Group replacement cost operating profit 24 505 954 12,902 (1,050) 13,335 Share of profits of joint ventures - - - 352 - 352 Share of profits of associated undertakings - - - 541 - 541 Equity accounted income of subsidiaries 11,595 610 14,279 - (26,484) - --------------------------------------------------------------------------------------- Total replacement cost operating profit 11,619 1,115 15,233 13,795 (27,534) 14,228 Profit (loss) on sale of fixed assets and businesses and termination of operations 326 1 573 572 (899) 573 --------------------------------------------------------------------------------------- Replacement cost profit before interest and tax 11,945 1,116 15,806 14,367 (28,433) 14,801 Inventory holding gains (losses) (414) (12) (603) (602) 1,028 (603) --------------------------------------------------------------------------------------- Historical cost profit before interest and tax 11,531 1,104 15,203 13,765 (27,405) 14,198 Interest expense 1,251 27 2,308 2,314 (4,644) 1,256 --------------------------------------------------------------------------------------- Profit before taxation 10,280 1,077 12,895 11,451 (22,761) 12,942 Taxation 3,424 214 4,480 4,437 (8,075) 4,480 --------------------------------------------------------------------------------------- Profit after taxation 6,856 863 8,415 7,014 (14,686) 8,462 Minority shareholders' interest - - - 47 - 47 --------------------------------------------------------------------------------------- Profit for the period 6,856 863 8,415 6,967 (14,686) 8,415 =======================================================================================
Page 40 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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) Nine months ended September 30, 2001 Profit as reported 6,856 863 8,415 6,967 (14,686) 8,415 Adjustments: Depreciation charge (851) (28) (844) (816) 1,695 (844) Decommissioning and environmental expense (188) (7) (313) (306) 501 (313) Onerous property leases (41) - (41) (41) 82 (41) Derivative financial instruments (124) - (257) (229) 353 (257) Interest expense 93 6 150 144 (243) 150 Sale and leaseback of fixed assets - - - - - - Deferred taxation (66) (103) 185 281 (112) 185 Other 3 - 14 14 (17) 14 --------------------------------------------------------------------------------------- Profit for the period before cumulative effect of accounting change as adjusted to accord with US GAAP 5,682 731 7,309 6,014 (12,427) 7,309 Cumulative effect of accounting change: Derivative financial instruments (13) - (18) (5) 18 (18) --------------------------------------------------------------------------------------- Profit for the period as adjusted to accord with US GAAP 5,669 731 7,291 6,009 (12,409) 7,291 =======================================================================================
Page 41 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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) Nine months ended September 30, 2000 Turnover - 2,035 - 116,980 (2,035) 116,980 Less: Joint ventures - - - 13,480 - 13,480 --------------------------------------------------------------------------------------- Group turnover - 2,035 - 103,500 (2,035) 103,500 Replacement cost of sales - 823 - 85,923 (2,057) 84,689 Production taxes - 202 - 1,295 - 1,497 --------------------------------------------------------------------------------------- Gross profit - 1,010 - 16,282 22 17,314 Distribution and administration expenses - - 158 5,502 - 5,660 Exploration expense - 26 - 416 - 442 --------------------------------------------------------------------------------------- - 984 (158) 10,364 22 11,212 Other income 1 (12) 321 540 (317) 533 --------------------------------------------------------------------------------------- Group replacement cost operating profit 1 972 163 10,904 (295) 11,745 Share of profits of joint ventures - - - 716 - 716 Share of profits of associated undertakings - - - 532 - 532 Equity accounted income of subsidiaries 10,072 220 13,161 - (23,453) - --------------------------------------------------------------------------------------- Total replacement cost operating profit 10,073 1,192 13,324 12,152 (23,748) 12,993 Profit (loss) on sale of fixed assets and businesses and termination of operations 309 (1) 142 160 (468) 142 --------------------------------------------------------------------------------------- Replacement cost profit before interest and tax 10,382 1,191 13,466 12,312 (24,216) 13,135 Inventory holding gains (losses) 682 58 1,289 1,289 (2,029) 1,289 --------------------------------------------------------------------------------------- Historical cost profit before interest and tax 11,064 1,249 14,755 13,601 (26,245) 14,424 Interest expense 1,032 25 1,454 1,459 (2,811) 1,159 --------------------------------------------------------------------------------------- Profit before taxation 10,032 1,224 13,301 12,142 (23,434) 13,265 Taxation 2,717 420 3,730 3,406 (6,543) 3,730 --------------------------------------------------------------------------------------- Profit after taxation 7,315 804 9,571 8,736 (16,891) 9,535 Minority shareholders' interest - - - 75 - 75 --------------------------------------------------------------------------------------- Profit for the period 7,315 804 9,571 8,661 (16,891) 9,460 =======================================================================================
Page 42 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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) Nine months ended September 30, 2000 Profit as reported 7,315 804 9,571 8,661 (16,891) 9,460 Adjustments: Depreciation charge (235) (40) (258) (218) 493 (258) Decommissioning and environmental expense (83) (28) (214) (186) 297 (214) Onerous property leases (28) - (21) (21) 49 (21) Interest expense 73 7 129 122 (202) 129 Sale and leaseback of fixed assets 2 - - - (2) - Deferred taxation (713) 24 (665) (661) 1,350 (665) Other - - 45 45 (45) 45 ---------------------------------------------------------------------------------------- Profit for the period as adjusted to accord with US GAAP 6,331 767 8,587 7,742 (14,951) 8,476 ========================================================================================
Page 43 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2001 Fixed assets Intangible assets - 510 - 15,843 - 16,353 Tangible assets 7 6,325 - 71,292 - 77,624 Investments Subsidiaries - equity accounted basis 70,725 1,040 84,486 - (156,251) - Other - - 296 11,246 - 11,542 ---------------------------------------------------------------------------------------- 70,725 1,040 84,782 11,246 (156,251) 11,542 ---------------------------------------------------------------------------------------- Total fixed assets 70,732 7,875 84,782 98,381 (156,251) 105,519 ---------------------------------------------------------------------------------------- Current assets Business held for resale - - - - - - Inventories 5 71 - 8,951 - 9,027 Receivables 7,524 8,783 21,652 43,223 (53,031) 28,151 Investments - - - 519 - 519 Cash at bank and in hand (3) - - 1,441 - 1,438 ---------------------------------------------------------------------------------------- 7,526 8,854 21,652 54,134 (53,031) 39,135 ---------------------------------------------------------------------------------------- Current liabilities -falling due within one year Finance debt 6,473 137 - 6,625 (6,610) 6,625 Accounts payable and accrued liabilities 381 336 4,379 29,300 (3,947) 30,449 ---------------------------------------------------------------------------------------- Net current assets (liabilities) 672 8,381 17,273 18,209 (42,474) 2,061 ---------------------------------------------------------------------------------------- Total assets less current liabilities 71,404 16,256 102,055 116,590 (198,725) 107,580 Noncurrent liabilities Finance debt - - - 13,849 - 13,849 Accounts payable and accrued liabilities 1,423 4,632 162 37,960 (40,374) 3,803 Provisions for liabilities and charges 50 274 217 12,278 - 12,819 ---------------------------------------------------------------------------------------- Net assets 69,931 11,350 101,676 52,503 (158,351) 77,109 Minority shareholders' interest - - - 646 - 646 ---------------------------------------------------------------------------------------- BP shareholders' interest 69,931 11,350 101,676 51,857 (158,351) 76,463 ========================================================================================
Page 44 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2001 Capital and reserves Capital shares 8 - 5,632 - (8) 5,632 Paid in surplus 30,865 3,145 3,575 - (34,010) 3,575 Merger reserve - - 26,285 697 - 26,982 Other reserves - - 644 - - 644 Retained earnings 39,058 8,205 65,540 51,160 (124,333) 39,630 --------------------------------------------------------------------------------------- 69,931 11,350 101,676 51,857 (158,351) 76,463 =======================================================================================
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 69,931 11,350 101,676 51,857 (158,351) 76,463 Adjustments: Fixed assets 7,878 510 7,926 7,424 (15,812) 7,926 Ordinary shares held for future awards to employees - - (293) - - (293) Sale and leaseback of Chicago office building (413) - (413) (413) 826 (413) Decommissioning and environmental provisions (1,041) (314) (1,106) (778) 2,133 (1,106) Onerous property leases 67 - 67 67 (134) 67 Derivative financial instruments (144) - (273) (226) 370 (273) Deferred taxation (14,737) (1,879) (15,700) (13,933) 30,549 (15,700) Quarterly dividend - - 1,232 - - 1,232 Pension liability adjustment (38) - (145) (145) 183 (145) Other (31) - (112) (112) 143 (112) --------------------------------------------------------------------------------------- Shareholders' interest as adjusted to accord with US GAAP 61,472 9,667 92,859 43,741 (140,093) 67,646 =======================================================================================
Page 45 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18. 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 46 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18. 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 47 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2001 Net cash inflow (outflow) from operating activities 39 163 1,027 3,818 (1) 5,046 Dividends from joint ventures - - - 26 - 26 Dividends from associated undertakings - - - 155 - 155 Dividends from subsidiaries 231 - 97 - (328) - Net cash inflow (outflow) from servicing of finance and returns on investment 2 - 370 (609) - (237) Tax (paid) refund (282) (32) - (403) - (717) Net cash inflow (outflow) for capital expenditure and financial investment (40) (197) 94 (1,966) - (2,109) Net cash inflow (outflow) for acquisitions and disposals - - (1) (24) 1 (24) Equity dividends paid - - (1,235) (328) 328 (1,235) ------------------------------------------------------------------------------------------- Net cash inflow (outflow) (50) (66) 352 669 - 905 =========================================================================================== Financing (48) (99) 352 425 - 630 Management of liquid resources - - - (44) - (44) Increase (decrease) in cash (2) 33 - 288 - 319 ------------------------------------------------------------------------------------------- (50) (66) 352 669 - 905 ===========================================================================================
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 (10) 131 1,494 2,988 (299) 4,304 Net cash provided by (used in) investing activities (40) (197) 93 (1,990) (18) (2,152) Net cash provided by (used in) financing activities 48 99 (1,587) (753) 317 (1,876) Currency translation differences relating to cash and cash equivalents - - - 15 - 15 --------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (2) 33 - 260 - 291 Cash and cash equivalents at beginning of period (1) (33) - 1,700 - 1,666 --------------------------------------------------------------------------------------- Cash and cash equivalents at end of period (3) - - 1,960 - 1,957 =======================================================================================
Page 48 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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 September 30, 2000 Net cash inflow (outflow) from operating activities (31) 525 5,880 4,664 (4,434) 6,604 Dividends from joint ventures - - - 118 - 118 Dividends from associated undertakings - - - 100 - 100 Dividends from subsidiaries 463 - - - (463) - Net cash inflow (outflow) from servicing of finance and returns on investments 1 - 34 (267) 109 (123) Tax (paid) refund 14 (28) 3 (2,698) - (2,709) Net cash inflow (outflow) for capital expenditure and financial investment - (127) (16) (559) - (702) Net cash inflow (outflow) for acquisitions and disposals - 1 (4,325) (4,541) 4,325 (4,540) Equity dividends paid - - (1,128) (463) 463 (1,128) ---------------------------------------------------------------------------------------- Net cash inflow (outflow) 447 371 448 (3,646) - (2,380) ======================================================================================== Financing 447 367 452 (198) - 1,068 Management of liquid resources - - - (1,755) - (1,755) Increase (decrease) in cash - 4 (4) (1,693) - (1,693) ---------------------------------------------------------------------------------------- 447 371 448 (3,646) - (2,380) =========================================================================================
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 446 497 5,916 1,917 (4,742) 4,034 Net cash provided by (used in) investing activities 1 (126) (4,340) (5,100) 4,291 (5,274) Net cash provided by (used in) financing activities (447) (367) (1,580) (265) 451 (2,208) Currency translation differences relating to cash and cash equivalents - - - (12) - (12) ---------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents - 4 (4) (3,460) - (3,460) Cash and cash equivalents at beginning of period (1) (20) 4 5,946 - 5,929 ---------------------------------------------------------------------------------------- Cash and cash equivalents at end of period (1) (16) - 2,486 - 2,469 ========================================================================================
Page 49 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 18.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) Nine months ended September 30, 2001 Net cash inflow (outflow) from operating activities 364 714 3,487 12,314 (17) 16,862 Dividends from joint ventures - - - 92 - 92 Dividends from associated undertakings - - - 424 - 424 Dividends from subsidiaries 925 - 113 - (1,038) - Net cash inflow (outflow) from servicing of finance and returns on investments 2 - 1,052 (1,853) - (799) Tax (paid) refund (1,248) (345) (1) (1,644) - (3,238) Net cash inflow (outflow) for capital expenditure and financial investment (740) (598) (26) (5,412) - (6,776) Net cash inflow (outflow) for acquisitions and disposals - - (17) (985) 17 (985) Equity dividends paid - - (3,595) (1,038) 1,038 (3,595) ----------------------------------------------------------------------------------------- Net cash inflow (outflow) (697) (229) 1,013 1,898 - 1,985 ========================================================================================= Financing (696) (260) 1,015 1,768 - 1,827 Management of liquid resources - - - (146) - (146) Increase (decrease) in cash (1) 31 (2) 276 - 304 ---------------------------------------------------------------------------------------- (697) (229) 1,013 1,898 - 1,985 ========================================================================================
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 43 370 4,650 9,333 (964) 13,432 Net cash provided by (used in) investing activities (740) (598) (43) (6,397) (57) (7,835) Net cash provided by (used in) financing activities 696 260 (4,609) (2,806) 1,021 (5,438) Currency translation differences relating to cash and cash equivalents - - - (33) - (33) --------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (1) 32 (2) 97 - 126 Cash and cash equivalents at beginning of period (2) (32) 2 1,863 - 1,831 --------------------------------------------------------------------------------------- Cash and cash equivalents at end of period (3) - - 1,960 - 1,957 =======================================================================================
Page 50 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded 18.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) Nine months ended September 30, 2000 Net cash inflow (outflow) from (120) 1,486 10,345 9,010 (6,084) 14,637 operating activities Dividends from joint ventures - - - 645 - 645 Dividends from associated undertakings - - - 274 - 274 Dividends from subsidiaries 463 - 18 - (481) - Net cash inflow (outflow) from servicing of finance and returns on investments (2) - 293 (974) 136 (547) Tax (paid) refund 44 (736) 7 (3,514) - (4,199) Net cash inflow (outflow) for capital expenditure and financial investment - (387) (49) (3,864) - (4,300) Net cash inflow (outflow) for acquisitions and disposals 13 23 (5,948) 2,076 5,948 2,112 Equity dividends paid - - (3,232) (481) 481 (3,232) --------------------------------------------------------------------------------------- Net cash inflow (outflow) 398 386 1,434 3,172 - 5,390 ======================================================================================== Financing 396 384 1,437 2,255 - 4,472 Management of liquid resources - - - 610 - 610 Increase (decrease) in cash 2 2 (3) 307 - 308 ---------------------------------------------------------------------------------------- 398 386 1,434 3,172 - 5,390 ========================================================================================
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 384 750 10,662 5,537 (6,330) 11,003 Net cash provided by (used in) investing activities 14 (364) (5,996) (1,788) 5,869 (2,265) Net cash provided by (used in) financing activities (396) (384) (4,669) (2,736) 461 (7,724) Currency translation differences relating to cash and cash equivalents - - - - - - --------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 2 2 (3) 1,013 - 1,014 Cash and cash equivalents at beginning of period (3) (18) 3 1,473 - 1,455 ---------------------------------------------------------------------------------------- Cash and cash equivalents at end of period (1) (16) - 2,486 - 2,469 ========================================================================================
Page 51 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: November 21, 2001 ........................ D. J. PEARL Deputy Company Secretary