6-K 1 bp201007276k.htm HALF YEARLY REPORT

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 27 July 2010


BP p.l.c.
(Translation of registrant's name into English)
 
 

1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, 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|
      ---------------           ----------------
 
 

BP p.l.c.
Group results
Second quarter and half year 2010
(a)
 
 
London 27 July 2010
Top of page 1
 
Second 
First 
Second 



quarter 
quarter 
quarter 

             First half
2009 
2010 
2010 

2010 
2009 



$ million


4,385 
6,079 
(17,150)
Profit (loss) for the period
(b)
(11,071)
6,947 



Inventory holding (gains)


(1,245)
(481)
177 
  losses, net of tax
(304)
(1,420)
3,140 
5,598 
(16,973)
Replacement cost profit (loss)
(11,375)
5,527 






16.76 
29.82 
(90.35)
-    per ordinary share (cents)
(60.58)
29.51 
1.01 
1.79 
(5.42)
-    per ADS (dollars)
(3.63)
1.77 
 
 
·      
Following the explosion and subsequent sinking of the Transocean Holdings LLC operated Deepwater Horizon drilling rig in the Gulf of Mexico in April 2010, BP and US Government authorities have been conducting unprecedented oil spill response activities. These ongoing efforts have sought to halt the flow of hydrocarbons from the well, capture and contain oil that has been leaking, protect the shores and clean up oil that has reached the shores. BP's own investigation, as well as several independent investigations, into the cause of the accident are ongoing.
 
·      
BP's second quarter replacement cost loss was $16,973 million, compared with a profit of $3,140 million a year ago. For the half year, replacement cost loss was $11,375 million compared with a profit of $5,527 million a year ago.
 
·      
The group income statement for the second quarter reflects a pre-tax charge of $32.2 billion related to the Gulf of Mexico oil spill. This includes $2.9 billion which has been charged for costs incurred to 30 June 2010. All charges relating to the incident have been treated as non-operating items. For further information on the Gulf of Mexico oil spill and its consequences see pages 2 - 5, Note 2 on pages 25 - 28, Principal risks and uncertainties on pages 33 -39 and Legal proceedings on pages 40 - 43. Further information on BP's second quarter results is provided below.
 
·      
Non-operating items and fair value accounting effects for the second quarter, on a post-tax basis, had a net unfavourable impact of $21,953 million compared with a net favourable impact of $202 million in the second quarter of 2009. For the half year, the respective amounts were $22,002 million unfavourable and $8 million favourable. See pages 6, 21 and 22 for further details.
 
·      
Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $214 million for the second quarter, compared with $321 million for the same period last year. For the half year, the respective amounts were $442 million and $689 million.
 
·      
The effective tax rate on replacement cost profit or loss for the second quarter and half year was 30% and 27% respectively, compared with 35% and 36% a year ago. Excluding the impact of the Gulf of Mexico oil spill, the effective tax rate for the second quarter was 35% and for the half year was 34%.
 
·      
Net cash provided by operating activities for the quarter and half year was $6.8 billion and $14.4 billion, including a $2.1-billion cash outflow relating to the Gulf of Mexico oil spill response, compared with $6.8 billion and $12.3 billion respectively a year ago.
 
·      
Total capital expenditure for the second quarter and half year was $6.2 billion and $10.9 billion respectively. Organic capital expenditure
(c)
in the second quarter and half year was $4.4 billion and $8.2 billion respectively. Organic capital expenditure for 2010 and 2011 is expected to be around $18 billion a year. Disposal proceeds were $0.7 billion for the quarter and $0.8 billion for the half year. The group plans to dispose of assets with a value of up to $30 billion over the next 18 months, including $7 billion from the recently announced disposals to Apache Corporation.
 
·      
Net debt at the end of the quarter was $23.2 billion, compared with $27.1 billion a year ago. The ratio of net debt to net debt plus equity was 21% compared with 22% a year ago. The net debt ratio at the end of the second quarter 2010 was impacted by the reduction in equity arising from the liabilities we have recognized in relation to the Gulf of Mexico oil spill. The group intends to reduce net debt to $10-15 billion within the next 18 months.
 
·      
Cash costs
(d)
for the second quarter and half year were slightly lower than a year ago. Cash costs do not include amounts relating to the Gulf of Mexico oil spill.
 
(a)
This results announcement also represents BP's half-yearly financial report for the purposes of the Disclosure and Transparency Rules made by the UK Financial Services Authority. In this context: (i) the condensed set of financial statements can be found on pages 15 - 20 and 24 - 32; (ii) pages 1 - 13, 21 - 23 and 33 - 43 comprise the interim management report; and (iii) the directors' responsibility statement and auditors' independent review report can be found on pages 13 - 14.
(b)
Profit (loss) attributable to BP shareholders.
(c)
Organic capital expenditure excludes acquisitions and asset exchanges and the accounting for our transaction with Value Creation Inc. (see page 19).
(d)
Cash costs are a subset of production and manufacturing expenses plus distribution and administration expenses. They represent the substantial majority of the expenses in these line items but exclude associated non-operating items, and certain costs that are variable, primarily with volumes (such as freight costs). They are the principal operating and overhead costs that management considers to be most directly under their control although they include certain foreign exchange and commodity price effects.

 
The commentaries above and following are based on replacement cost profit and should be read in conjunction with the cautionary statement on page 13.
 
 
 
Top of page 2
Gulf of Mexico oil spill

 
On 20 April 2010 an explosion and fire occurred on the semi-submersible rig Deepwater Horizon in the Gulf of Mexico and on 22 April the vessel sank. The accident resulted in the tragic loss of 11 lives and the significant loss of containment of hydrocarbons. The rig, operated by Transocean Holdings LLC, was drilling the Mississippi Canyon 252 exploration well (MC252 well) in respect of which BP Exploration & Production Inc. is the named party on the lease and operator with a 65% working interest.
 
From the time of the incident until 15 July, oil and gas was flowing into the Gulf of Mexico from the well. The National Incident Command's Flow Rate Technical Group has estimated a flow rate of between 35,000 and 60,000 barrels of oil per day as issued on 15 June. Since the incident occurred, BP has been pursuing multiple parallel tracks to stop the flow of hydrocarbons, to contain and capture, or disperse, the oil subsea, to collect or disperse oil that has reached the surface, to protect the shores, and to clean up oil that has reached the shores. These efforts are being carried out in conjunction with government authorities and other industry experts. Since oil first reached the shore, a total of 836 miles of Gulf Coast shoreline in Louisiana, Mississippi, Alabama and Florida have been oiled. BP has committed to
 
clean up the oil and to pay all legitimate claims arising from the spill.
 
BP is subject to a number of legal proceedings and investigations related to the incident, including: a
US Department of Justice investigation to determine whether US civil or criminal laws have been violated; a US Presidential Commission to examine the causes of the incident; a joint investigation by the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement (which until June 2010 was named the Minerals Management Service); the Securities and Exchange Commission and other investigations by US state and federal agencies including the US Chemical Safety and Hazard Investigation Board as well as the US Congress. In addition, BP group companies are among those named as defendants in more than 300 private civil lawsuits. Further information is provided in
Legal proceedings on pages 40
-
43.
 
In the period following the incident, the BP board has met 14 times, and its committees held 16 meetings, at which actions responsive to the incident were considered and assessed. A Gulf Coast Restoration organisation has been established to manage all aspects of the response to the incident, and board director Bob Dudley has been appointed its president and chief executive officer. Mr Dudley reports directly to the group chief executive officer Tony Hayward. A new board committee has been established to provide oversight to this organisation. The following is a summary of the actions undertaken in response to the oil spill and a current assessment of the financial and other implications for BP. Additional information is provided in Note 2 on pages 25
-
28 and under Principal risks and uncertainties on pages 33
-
39.
 
Subsea operations response
 
BP believes that the drilling of relief wells constitutes the ultimate means to seal and isolate the well permanently and stop the flow of oil and gas. Two relief wells are being drilled, the first of which started on 2 May and had reached a depth of 17,864 feet prior to the suspension of operations in preparation for potentially adverse weather associated with tropical storm Bonnie. The first relief well is at its last casing end point and, following the casing set, additional ranging runs will be used to guide the drill bit to a MC252 well intercept point at approximately 18,000 feet. After interception, operations are expected to begin to kill the flow of oil and gas from the reservoir by pumping specialized heavy fluids down the relief well. As a contingency, a second relief well was started on 16 May and had reached a depth of 15,874 feet before operations were suspended to ensure that there is no interference with the first relief well. Although uncertainty still exists, the first well is anticipated to be completed during August subject to weather delays from tropical storms or hurricanes. The second well will only be progressed further if the first well is not successful.
 
On 23 July, relief well activities at the MC252 well site were temporarily suspended because of potentially adverse weather associated with tropical storm Bonnie. Following the passing of the weather system, the rig that is drilling the first relief well returned to its site on 24 July and is taking the steps necessary to reconnect with the well and resume drilling operations. These steps are expected to take a number of days. The rig that is drilling the second relief well is also moving back into position, and will take steps necessary to reconnect to the second relief well. However, work on the second relief well has been suspended so as not to interfere with the first.
 
Efforts to contain or stop the flow of oil to date have included multiple attempts to activate the blow-out preventer (BOP), the deployment of a containment dome, the deployment of a riser insertion tube tool (RITT), an effort to 'top kill' the well, the deployment of the lower marine riser package cap containment system (LMRP) connected to the drill-ship 'Discoverer Enterprise', an enhanced production system used to flare oil and gas through the 'Q4000' intervention vessel and finally through a free-standing riser system connecting the kill line of the BOP to the floating production unit 'Helix Producer'. Together, these systems have successfully collected or flared approximately 827,000 barrels of oil.
 
On 12 July, the containment cap was removed from the LMRP and a three-ram sealed capping stack was installed in its place. On 15 July, the valves of the capping stack were closed and the well currently remains shut in, with no oil flowing into the Gulf. A well integrity test has been under way and should the test conclude successfully, it may be possible for the MC252 well to remain shut in until the completion of the relief well. If not, we would expect to resume containment activities unless prevented by adverse weather.
 
Current containment capacity is around 35,000 barrels of oil per day. Plans are being progressed for additional containment capacity and flexibility that would be expected to ultimately increase recoverable oil volumes to 60,000 - 80,000 barrels per day. This is intentionally designed with more capacity than the Flow Rate Technical Group has estimated to have been leaking from the well to ensure redundancy in the system in case of operational interruptions and to allow us to capture as much of the hydrocarbon spillage as possible from the well.
 
All of these operations are complex and involve risks and uncertainties as they have not previously been carried out under these conditions or at these depths under water. The continued operation of the containment systems and ability to contain the oil and gas cannot be assured. The timing for a relief well to successfully seal and isolate the MC252 well permanently is uncertain.
 
 
Top of page 3
Gulf of Mexico oil spill (continued)

 
Surface operations response
(a)
 
On the surface, BP is working closely with the National Incident Command and numerous governmental agencies to remove oil from the water and to protect the shoreline from oil impact. Due to the risk that tropical storm Bonnie posed to the safety of the personnel and equipments, many of the vessels and rigs moved away from the area. Following the passing of the storm, they have since begun to return. This temporary suspension of activities had an impact on the response operations and the drilling of the relief wells. There have been more than 6,390 vessels (including skimmers, tugs, barges and recovery vessels) and over 11 million feet of boom deployed offshore to reduce the amount of oil reaching the shoreline. The operations had recovered, in total, approximately 825,000 barrels of oily liquid. In addition, a total of 409 controlled burns had been carried out, removing an estimated 261,400 barrels of oil from the surface of the sea.
 
Altogether, we have mobilized an unprecedented spill response. This includes the deployment of approximately 40,000 people across five states to protect and clean up the shoreline. It includes shoreline clean-up and assessment teams and the use of specialized clean-up equipment deployed to respond to oiling. Specialized marsh-cleaning experts have been employed and we are working closely with experts to minimize the impact on wildlife.
 
Claims process and escrow account
 
BP has established a claims process in accordance with the requirements of the Oil Pollution Act of 1990 (OPA 90), which allows claimants to make a claim against BP as a designated responsible party. BP is working to pay all legitimate claims as promptly as possible. It is expected that during August, responsibility for the administration of individual and business claims will transfer to the Gulf Coast Claims Facility (GCCF) headed by Ken Feinberg. Mr. Feinberg was jointly appointed by BP and the President of the United States and will independently manage the GCCF.
 
In addition, BP has agreed to establish a $20-billion escrow account to be funded over the next three and a half years.
While the escrow account is building, BP's commitments will be assured by the setting aside of US assets with a value of $20 billion. The terms of such security are still under discussion.
The escrow account will be available to satisfy legitimate claims adjudicated by the GCCF, final judgments in litigation and litigation settlements, state and local response costs, and natural resource damages and related costs. Fines and penalties will be paid separately and not from the escrow account. Payments from the escrow account will be made as costs are finally determined or claims are adjudicated, whether by the GCCF, or by a court, or as agreed by BP. The GCCF will evaluate all individual and business OPA 90 claims excluding all government claims. The establishment of this account does not represent a cap or floor on BP's liabilities and BP does not admit to a liability of this amount. Any amounts left in the account once all legitimate claims have been resolved and paid will revert to BP. To date, approximately 127,400 claims have been submitted and payments totalling approximately $243 million have been made. See Note 2 on pages 25
-
28 for further information on the escrow account and on contingent liabilities arising from the incident.
 
Restoration, research and other donations
 
BP has committed that its share of the revenue (net of royalties and transportation costs) from the sale of oil recovered from skimming operations and the well containment systems will be donated to the National Fish and Wildlife Foundation (NFWF). This commitment is in addition to BP's obligations under OPA 90. NFWF will direct this money to projects to benefit the wildlife of the affected Gulf Coast States. To date, BP's donations to NFWF have amounted to $10 million. The sums committed to NFWF will be dependent upon the amount of oil collected during operations and the price at which the oil is sold.
 
BP has committed to fund up to $500 million for a 10-year research programme studying the impact of the Gulf of Mexico oil spill, and its associated response, on the marine and shoreline environment of the Gulf of Mexico. To date, initial grants have been awarded to three academic research groups with a total value of $25 million.
 
BP has agreed as part of the spill response to fund the $360-million cost of six berms in the Louisiana barrier islands project, through six equal payments. The first two payments of $60 million each have been made in June and July and the remaining four payments will occur in line with project completion milestones to be certified by the Coastal Protection and Restoration Authority of Louisiana.
 
BP has agreed to provide $100 million as a voluntary contribution to help compensate oil rig workers in the Gulf of Mexico who are unable to work as a result of the six-month moratorium imposed by the US Government on certain offshore drilling activities through 30 November 2010.
 
Financial impact of the response
 
The group income statement for the second quarter reflects a pre-tax charge of $32,192 million in relation to the Gulf of Mexico oil spill. This amount comprises costs incurred up to 30 June 2010, obligations for future costs which can be estimated reliably at this time and rights and obligations under the escrow account.
 
Costs incurred to 30 June 2010 include the cost of the spill response, containment, relief well drilling, grants to the states whose shorelines are affected, claims paid and federal costs (including the involvement of the U.S. Coast Guard).
 
(a)
Operational
data is derived from the Joint Information Centre of the Deepwater Horizon Unified Command. The data changes on a daily basis and the numbers are not cumulated.
 
 
Top of page 4
Gulf of Mexico oil spill (continued)

 
The amount provided for future costs reflects offshore and onshore oil spill response, BP's commitment to a 10-year environmental research programme, and the funding of the Louisiana barrier islands project, estimated legal costs expected to be incurred in relation to litigation, and an amount for estimated penalties for strict liability under the Clean Water Act. The calculation for fines and penalties under the Clean Water Act assumes that the flow of hydrocarbons will have been permanently halted during August and an estimate of the flow rate within the range of figures published and is based upon BP's belief that it was not grossly negligent. The charge does not reflect any amounts in relation to fines and penalties except for those relating to the Clean Water Act, as it is not possible to estimate reliably either the amount or timing of such additional amounts.
 
BP has committed to establish and fund an escrow account of $20 billion to be funded over the next three and a half years which will be available to satisfy legitimate claims payable under the GCCF, final judgments in litigation and litigation settlements, state and local response costs, and natural resource damages and related costs. The charge for the period includes $20 billion in relation to these items,
adjusted to take account of the time value of money
. Fines and penalties are not covered by the escrow account.
 
Contingent liabilities
 
BP has provided for its best estimate of items that will be paid through the $20-billion escrow account. At the present time, BP considers it is not possible to measure reliably any obligation in relation to future claims, including natural resource damage under OPA 90, or litigation actions which have been received to date and which may be received in the future. Although it is not possible at the current time to estimate a liability in excess of the amount currently provided, BP's full obligation under the $20-billion escrow account has been expensed in the income statement, taking account of the time value of money, in the current period.
 
For those items not covered by the escrow account it is not possible to measure reliably any obligation in relation to potential fines and penalties except, subject to certain assumptions noted above, for those relating to the Clean Water Act.
 
The magnitude and timing of possible obligations in relation to the Gulf of Mexico oil spill are subject to a very high degree of uncertainty as described further in Principal risks and uncertainties on pages 33
-
39. Any such possible obligations are therefore contingent liabilities and, at present, it is not practicable to estimate their magnitude or possible timing of payment. Therefore no amounts have been provided as at 30 June 2010 in relation to these. Furthermore, other material unanticipated obligations may arise in future in relation to the incident.
 
Co-owner recovery
 
BP is the operator of the MC252 well and holds a 65% working interest, with the remaining 35% interest held by two joint venture partners. Under International Financial Reporting Standards (IFRS), recovery must be virtually certain for receivables to be recognized. While BP believes that it has a contractual right to recover the partners' shares of the costs incurred, no amounts have been recognized in the financial statements. To date $1,433 million has been billed to the joint venture partners which BP believes to be contractually recoverable. Of this amount, $1,010 million relates to costs incurred relating to the incident for the period to 30 June 2010. The June bill in the amount of $384 million was submitted to our joint venture partners under the joint operating agreement but they have each written to BP indicating that they are withholding payment in light of the investigations surrounding the incident.
 
Liquidity and capital resources
 
Following the incident, the group has incurred significant costs and there is uncertainty in relation to both the amount and timing of future expenditures and the implications for future activities. Information on the principal risks and uncertainties faced by the group is included on pages 33
-
39.
 
Since the incident the credit rating of BP p.l.c. has been downgraded, as explained more fully in Principal risks and uncertainties on pages 33
-
39. In addition, the adverse news flow and market speculation has led to the group's credit default swap spreads widening to levels that imply significantly weaker ratings. Consequently the group has not accessed some of the financing options that were available on more acceptable terms in the past.
 
In response to the incident the group has increased the banking facilities available to it and has initiated certain actions to improve cash flows. The group is actively managing short- and longer-term liquidity in the current environment in order to fund current operations and capital expenditure, to meet its commitments in respect of the clean-up operations, to settle all legitimate claims as well as fines and penalties, and to build contingency and resilience into the group's financial framework. Actions being taken include increased disposals, decreased capital expenditure, and other activities.
 
The group has agreed to fund a $20-billion escrow account over the next three and a half years to cover claims under OPA 90. No dividend has been paid for the first quarter and no dividend payments will be paid in relation to the second and third quarters of 2010. The board will consider its position on future ordinary share dividend payments in 2011 at the time of issuance of the fourth quarter 2010 results in February 2011.
 
 
Top of page 5
Gulf of Mexico oil spill (continued)

 
Liquidity position at 30 June 2010
 
During the first six months of the year net cash provided by operating activities was $14.4 billion. As at 30 June 2010 the group's liquidity position can be summarised as follows.
 
·      
Cash and cash equivalents were $7.3 billion.
·      
The group's finance debt amounted to $30.6 billion of which $8.3 billion was due for repayment within the following 12 months. 
·      
The group had available undrawn committed borrowing facilities
(a)
of $
16 billion, made up of:
$5.25 billion, of which $0.4 billion is available until mid-September 2011, $4.55 billion until
mid-October 2011 and $0.3 billion until mid-January 2013
(b)
;
$6 billion which can be drawn up until the end of May 2011, and is repayable 364 days from the date of drawing
(c)
;
$4.75 billion available until mid-December 2010
(b)
.
 
(a)
See Principal risks and uncertainties on page 33 - 39 regarding risks to BP's ability to make a drawdown on its committed facilities.
(b)
Any drawings under these facilities would also be repayable by these dates.
(c)
An additional facility of $0.75 billion was established after the end of the second quarter, which is available until early July 2011 on the same terms.
 
In addition to debt repayment of $8.3 billion, the group is committed to acquisition payments in relation to our transaction with Devon Energy of $4.4 billion in the next 12 months. Also in the next 12 months, the group is committed to estimated payments of $13.9 billion in relation to the Gulf of Mexico oil spill related costs, including escrow funding, which has been provided for in the accounts. Certain costs have not been provided for because it is not possible to measure reliably the obligations. See Note 2 on pages 25
-
28 for further information.
 
Organic capital expenditure for 2010 and 2011 is expected to be around $18 billion a year. Organic capital expenditure excludes acquisitions and asset exchanges and the accounting for our transaction with Value Creation Inc. in the first quarter of 2010.
 
On 20 July, BP announced the disposal of certain assets to Apache Corporation. The aggregate proceeds for the deals is $7 billion, subject to customary post-completion price adjustments. Proceeds are to be paid in cash with a deposit of $5 billion expected to be paid on 30 July 2010 and a further $2 billion on closing. Each sale will take place through a separate agreement between BP and Apache. Although these disposals are subject to certain regulatory approvals and other customary conditions to closing, it is expected that they will all be completed during the third quarter of 2010. The group plans to dispose of assets with a value of up to $30 billion over the next 18 months, including the disposals to Apache Corporation.
 
The group intends to reduce net debt to $10-15 billion within the next 18 months.
 
Liquidity review
 
The group conducted a liquidity review in conjunction with the preparation of the interim financial statements. Monthly cash flow forecasts have been prepared for the period to the end of 2011. These forecasts have been subject to sensitivity testing under various downside scenarios which have been designed to model the impact of the reasonably foreseeable uncertainties faced by the group. The scenarios considered included a later than anticipated date for halting the flow of hydrocarbons from the damaged well, restrictions on financing, a further downgrade in credit rating resulting in increased collateral requirements, and lower hydrocarbon prices.
 
BP believes that, taking into account its undrawn borrowing facilities and its ability to generate cash, including disposal proceeds, the group has sufficient working capital for foreseeable requirements.
 
Other impacts on the business
 
A six-month moratorium on deepwater exploration and development drilling has been imposed by the US Government and similar actions may be taken by governments elsewhere in the world.
 
More widespread moves to change regulatory standards elsewhere in the world are under consideration but have yet to be taken. These could materially impact the timing and cost of future exploration, development and production activity. See Principal risks and uncertainties on pages 33 - 39 for further information.
 
The incident has damaged BP's reputation and brand, with adverse public and political sentiment evident. This could persist into the longer term, which could impede our ability to deliver long-term growth. See Principal risks and uncertainties on pages 33 - 39 for further information.
 
 
Top of page 6
Analysis of replacement cost profit (loss) before interest and tax and reconciliation to profit (loss) for the period

 
Second 
First 
Second 



quarter 
quarter 
quarter 

          First half
2009 
2010 
2010 

2010 
2009 



$ million


5,046 
8,292 
6,244 
Exploration and Production
14,536 
9,366 
680 
729 
2,075 
Refining and Marketing
2,804 
1,770 
(583)
(328)
(70)
Other businesses and corporate
(398)
(1,344)
(32,192)
Gulf of Mexico oil spill response
(a)
(32,192)
76 
208 
98 
Consolidation adjustment
306 
(329)
5,219 
8,901 
(23,845)
RC profit (loss) before interest and tax
(b)
(14,944)
9,463 









Finance costs and net finance income or





  expense relating to pensions and other


(321)
(228)
(214)
  post-retirement benefits
(442)
(689)
(1,714)
(2,966)
7,188 
Taxation on a replacement cost basis
4,222 
(3,168)
(44)
(109)
(102)
Minority interest
(211)
(79)



Replacement cost profit (loss) attributable


3,140 
5,598 
(16,973)
 
to
BP shareholders
(11,375)
5,527 






1,874 
705 
(284)
Inventory holding gains (losses)
421 
2,128 



Taxation (charge) credit on inventory holding


(629)
(224)
107 
  gains and losses
(117)
(708)



Profit (loss) for the period attributable


4,385 
6,079 
(17,150)
  to BP shareholders
(11,071)
6,947 
 
(a)
See Note 2 on pages 25
-
28 for further information on the accounting for the Gulf of Mexico oil spill response.
(b)
Replacement cost profit or loss reflects the replacement cost of supplies. For further information see page 20.
 
 
Total of non-operating items and fair value accounting effects
(a)(b)
 

 
Second 
First 
Second 



quarter 
quarter 
quarter 

           First half
2009 
2010 
2010 

2010 
2009 



$ million


642 
104 
(61)
Exploration and Production
43 
1,111 
(292)
(60)
351 
Refining and Marketing
291 
(751)
(39)
(118)
71 
Other businesses and corporate
(47)
(360)
(32,192)
Gulf of Mexico oil spill response
(32,192)
311 
(74)
(31,831)

(31,905)
-
 
(109)
25 
9,878 
Taxation credit (charge)
(c)
9,903 
202 
(49)
(21,953)

(22,002)
 
(a)
An analysis of non-operating items by type is provided on page 21 and an analysis by region is shown on pages 9, 11 and 12.
(b)
Information on fair value accounting effects is non-GAAP. For further details, see page 22.
(c)
Tax is calculated using the quarter's effective tax rate (excluding the impact of the Gulf of Mexico oil spill) on replacement cost profit or loss, except in the case of the Gulf of Mexico oil spill response costs where tax has been calculated based on the US statutory tax rate.
 
 
Top of page 7
Per share amounts

 
Second 
First 
Second 



quarter 
quarter 
quarter 

          First half
2009 
2010 
2010 

2010 
2009 



Per ordinary share
(cents)
(a)


23.41 
32.39 
(91.29)
Profit (loss) for the period
(58.96)
37.10 
16.76 
29.82 
(90.35)
RC profit (loss) for the period
(60.58)
29.51 









Per ADS
(dollars)
(a)


1.40 
1.94 
(5.48)
Profit (loss) for the period
(3.54)
2.23 
1.01 
1.79 
(5.42)
RC profit (loss) for the period
(3.63)
1.77 
 
(a)
See Note 6
on page 30 for details of the calculation of earnings per share.
 
 
Net debt ratio - net debt: net debt + equity

 
Second 
First 
Second 



quarter 
quarter 
quarter 

           First half
2009 
2010 
2010 

2010 
2009 



$ million


36,240 
32,153 
30,580 
Gross debt
30,580 
36,240 



Less: fair value asset (liability) of


179 
152 
53 
  hedges related to finance debt
53 
179 
36,061 
32,001 
30,527 

30,527 
36,061 
8,959 
6,841 
7,310 
Cash and cash equivalents
7,310 
8,959 
27,102 
25,160 
23,217 
Net debt
23,217 
27,102 
96,949 
104,978 
86,362 
Equity
86,362 
96,949 
22% 
19% 
21% 
Net debt ratio
21% 
22% 
 
Net debt and net debt ratio are non-GAAP measures. Net debt includes the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt, for which hedge accounting is claimed. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'. We believe that net debt and net debt ratio provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders.
 
 
Dividends

 
Dividends payable
 
Following the Gulf of Mexico oil spill and the agreement to establish the $20-billion escrow account, the BP board reviewed its dividend policy and decided to cancel the previously announced first-quarter interim ordinary share dividend scheduled for payment on 21 June, and further decided that no interim ordinary share dividends will be paid in respect of the second and third quarters of 2010. The board will consider its position on future ordinary share dividend payments in 2011 at the time of issuance of the fourth quarter 2010 results in February 2011.
 
Dividends paid









Second 
First 
Second 



quarter 
quarter 
quarter 

           First half
2009 
2010 
2010 

2010 
2009 



Dividends paid per ordinary share


14.000 
14.000 
    cents
14.000 
28.000 
9.584 
8.679 
    pence
8.679 
19.402 
84.00 
84.00 
Dividends paid per ADS
(cents)
84.00 
168.00 
 
 
Top of page 8
Exploration and Production

 
Second 
First 
Second 



quarter 
quarter 
quarter 

           First half
2009 
2010 
2010 

2010 
2009 



$ million


5,062 
8,316 
6,189 
Profit before interest and tax
(a)
14,505 
9,348 
(16)
(24)
55 
Inventory holding (gains) losses
31 
18 



Replacement cost profit before


5,046 
8,292 
6,244 
  interest and tax
14,536 
9,366 









By region


1,161 
2,762 
1,798 
US
4,560 
2,304 
3,885 
5,530 
4,446 
Non-US
9,976 
7,062 
5,046 
8,292 
6,244 

14,536 
9,366 
 
(a)
Includes profit after interest and tax of equity-accounted entities.
 
The replacement cost profit before interest and tax for the second quarter and half year was $6,244 million and $14,536 million respectively, increases of 24% and 55% compared with the same periods in 2009. The increase in both periods was primarily due to higher realizations and lower depreciation, partly offset by lower volumes. In addition, gas marketing and trading fell to a loss in the second quarter resulting in a reduction in the reported result for the second quarter and half year, compared with the same periods last year, of more than $500 million. The current half year also reflected higher earnings from equity-accounted entities, primarily TNK-BP, and higher production taxes.
 
In addition, the second quarter and half year benefited from net non-operating gains of $61 million and $102 million respectively, primarily reflecting gains on the sale of operations partly offset by fair value losses on embedded derivatives. The corresponding periods in 2009 included net non-operating gains of $507 million and $818 million respectively. In the second quarter and half year, fair value accounting effects had unfavourable impacts of $122 million and $59 million respectively compared with favourable impacts of $135 million and $293 million in the same periods of last year.
 
Production for the quarter was 3,846mboe/d, 4% lower than the second quarter of 2009. After adjusting for entitlement impacts in our production-sharing agreements (PSAs) the decrease was 2%. This reflects higher seasonal turnarounds compared with a year ago, mainly in the Gulf of Mexico, and impacts to production as a consequence of the Gulf of Mexico oil spill. Seasonal turnaround activities will continue in the third quarter and will affect costs and margins as well as volumes.
 
Reported production for the half year was 3,928mboe/d, 2% lower than the same period of 2009. After adjusting for the effect of entitlement changes in our PSAs, production was slightly lower.
 
We have continued to make strategic progress. During the quarter, we completed two components of our transaction with Devon Energy
-
the acquisition of assets in the Gulf of Mexico and the sale of a 50% stake in our Kirby oil sands interests in Alberta, Canada. Separately, in China we have reached agreement with Devon Energy to acquire a 40.8% interest in the exploration period, equivalent to a 20% interest during the development period, in Block 42/05 in the deepwater South China Sea. The transaction is currently going through the Chinese government's approval process. In Indonesia, we were awarded a joint study on the West Sanga Sanga block to assess coalbed methane options.
 
After the end of the quarter, we announced that we have entered
i
nto several agreements to sell upstream assets in the US, Canada and Egypt to Apache Corporation. The deals, together worth a total of $7 billion, comprise BP's Permian Basin assets in Texas and south-east New Mexico, US; its Western Canadian upstream gas assets; and the Western Desert business concessions and East Badr El-din exploration concession in Egypt. Production in 2010 will be impacted by these transactions and potentially by further divestments of non-core assets.
 
Also after the end of the quarter, a key milestone in the gas negotiations for Shah Deniz Phase 2 was reached as a result of memoranda of understanding agreed between the governments of Azerbaijan and Turkey and between the State Oil Company of the Azerbaijan Republic (SOCAR) and BOTAS Petroleum Corporation. These memoranda set key terms (including volumes, prices and tariffs) for the transit of gas from Azerbaijan to Turkey and ultimately to Europe, thus unlocking access to this market for Shah Deniz gas. Also in Azerbaijan, SOCAR and BP signed a heads of agreement that defines the basic commercial principles for a PSA for the Shafag and Asiman offshore block.
 
In Egypt, BP announced that it has signed a new agreement with the Egyptian Ministry of Petroleum and the Egyptian General Petroleum Corporation to develop the significant hydrocarbon resources in the North Alexandria (BP 60% and operator) and West Mediterranean (BP 80% and operator) deepwater concessions.
 
In line with UK regulatory requirements, the following is a summary of the principal disclosures made in our first-quarter results announcement. Two major projects started up - Great White (BP 33.3%) in the Gulf of Mexico and Noel in Canada. We announced that BP will pay Devon Energy $7 billion for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico (subject to regulatory approvals and other third-party consents) and that BP will sell to Devon Energy a 50% stake in its Kirby oil sands interests in Alberta, Canada for $500 million cash and a $150 million funding commitment on BP's behalf (as noted above, two components of that transaction completed in the second quarter); BP and Value Creation Inc. of Calgary agreed to form a partnership to explore and develop the Terre de Grace oil sands acreage in Alberta, Canada; and BP agreed with Total to acquire its 15.7% interest in Valhall and its 25% interest in Hod (fields in the southern part of the Norwegian continental shelf) for $991 million. Hess subsequently exercised pre-emption rights meaning BP will acquire half of Total's interests in those fields for $496 million.
 
Top of page 9
Exploration and Production

 
Second 
First 
Second 



quarter 
quarter 
quarter 

            First half
2009 
2010 
2010 

2010 
2009 



$ million





Non-operating items


118 
(62)
(156)
US
(218)
189 
389 
103 
217 
Non-US
320 
629 
507 
41 
61 

102 
818 



Fair value accounting effects
(a)


92 
81 
(35)
US
46 
300 
43 
(18)
(87)
Non-US
(105)
(7)
135 
63 
(122)

(59)
293 



Exploration expense


235 
69 
64 
US
133 
279 
112 
51 
68 
Non-US
119 
187 
347 
120 
132 

252 
466 



Production
(net of royalties)
(b)





Liquids
(mb/d) (net of royalties)
(c) 


661 
665 
581 
US
623 
652 
201 
215 
184 
Europe
199 
206 
837 
849 
859 
Russia
854 
830 
827 
798 
759 
Rest of World
779 
827 
2,526 
2,527 
2,383 

2,455 
2,515 



Natural gas
(mmcf/d) (net of royalties)


2,339 
2,221 
2,240 
US
2,231 
2,337 
645 
599 
551 
Europe
575 
741 
555 
673 
647 
Russia
660 
598 
5,041 
5,107 
5,046 
Rest of World
5,076 
4,997 
8,580 
8,600 
8,484 

8,542 
8,673 



Total hydrocarbons
(mboe/d)
(d)


1,064 
1,048 
968 
US
1,007 
1,055 
312 
318 
279 
Europe
298 
334 
933 
965 
971 
Russia
968 
933 
1,696 
1,679 
1,628 
Rest of World
1,655 
1,689 
4,005 
4,010 
3,846 

3,928 
4,011 



Average realizations
(e)


52.33 
71.86 
72.90 
Total liquids ($/bbl)
72.35 
46.84 
2.86 
4.26 
3.76 
Natural gas ($/mcf)
4.01 
3.25 
35.02 
49.16 
47.08 
Total hydrocarbons ($/boe)
48.16 
33.22 
 
(a)
These effects represent the favourable (unfavourable) impact relative to management's measure of performance. Further information on fair value accounting effects is provided on page 22.
(b)
Includes BP's share of production of equity-accounted entities.
(c)
Crude oil and natural gas liquids.
(d)
Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
(e)
Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
 
Because of rounding, some totals may not agree exactly with the sum of their component parts.
 
 
Top of page 10
Refining and Marketing

 
Second 
First 
Second 



quarter 
quarter 
quarter 

           First half
2009 
2010 
2010 

2010 
2009 



$ million


2,536 
1,408 
1,850 
Profit before interest and tax
(a)
3,258 
3,953 
(1,856)
(679)
225 
Inventory holding (gains) losses
(454)
(2,183)



Replacement cost profit before


680 
729 
2,075 
  interest and tax
2,804 
1,770 









By region


(326)
(63)
757 
US
694 
(18)
1,006 
792 
1,318 
Non-US
2,110 
1,788 
680 
729 
2,075 

2,804 
1,770 
 
(a)
Includes profit after interest and tax of equity-accounted entities.
 
The replacement cost profit before interest and tax for the second quarter and half year was $2,075 million and $2,804 million respectively. The results in the equivalent periods of 2009 were $680 million and $1,770 million respectively. The 2010 results included net non-operating gains of $232 million for the second quarter and $162 million for the half year. A year ago, there were net non-operating charges of $166 million and $516 million respectively. Fair value accounting effects had favourable impacts of $119 million for the second quarter and $129 million for the half year. A year ago, there were unfavourable impacts of $126 million and $235 million respectively.
 
Compared with a year ago, the result for the second quarter and the first half of 2010 reflected improved operational performance in the fuels value chains, and continued strong margin capture in the international businesses, with both lubricants and petrochemicals performing very well. In the first half these improvements were offset by a significantly weaker supply and trading contribution in contrast to the particularly strong contribution in the same period of 2009.
 
In the second quarter the refining environment continued its recovery, following the 15-year low recorded for the GIM in the fourth quarter of 2009. Compared with a year ago, the overall refining and marketing environment was slightly weaker in both the second quarter and half year.
 
In the first half, refining throughputs in the fuels value chains increased by over 170mb/d and Solomon refining availability was up by two percentage points at 94.9%.
 
In the international businesses, the petrochemicals business was able to capture the benefit of demand recovery, particularly in China, through high reliability and record sales volumes.
 
In the second quarter, our US businesses returned to profitability. Compared with a year ago, the increase for the second quarter was primarily due to improvements in operational performance, margin capture and cost efficiency. Strong operational performance and cost efficiency also contributed to an improved half year result, although we did not see a repeat of last year's particularly strong supply and trading contribution.
 
On 23 June, BP executed agreements confirming the sale of BP's fuels and convenience retail business in France to Delek Europe B.V. for €180 million (approximately $251 million) plus working capital adjustments. The transaction is expected to close in the second half of 2010, subject to regulatory approvals.
 
On 13 July, BP executed agreements confirming the sale of 7.8 million barrels of crude oil storage in Cushing, Oklahoma and more than 100 miles of active petroleum pipelines to Magellan Midstream Partners, L.P. for $289 million plus working capital adjustments, subject to regulatory approval. This is part of the ongoing intent announced in the fourth quarter of 2009 to explore options to divest a number of non-strategic pipelines and terminals in the US Mid-West, Gulf Coast and West Coast during 2010 and 2011.
 
Looking ahead, we expect the usual seasonal decline in refining margins in the third quarter.
 
Finally, in line with UK regulatory requirements, the following is a summary of the principal disclosures made in our first-quarter results announcement.
In March, following a strategic review of
its refining and marketing businesses in southern Africa,
 
BP announced to governments and employees in the countries of Namibia, Malawi, Tanzania, Zambia and Botswana that it intends to sell the marketing businesses in these countries.
 
In future BP intends to focus its activities on South Africa and Mozambique, as we believe these countries offer the greatest synergies with our supply portfolio in the region.
 
 
Top of page 11
 
Refining and Marketing

 
Second 
First 
Second 



quarter 
quarter 
quarter 

            First half
2009 
2010 
2010 

2010 
2009 



$ million





Non-operating items


(27)
(3)
151 
US
148 
(161)
(139)
(67)
81 
Non-US
14 
(355)
(166)
(70)
232 

162 
(516)









Fair value accounting effects
(a)


(46)
16 
37 
US
53 
19 
(80)
(6)
82 
Non-US
76 
(254)
(126)
10 
119 

129 
(235)









Refinery throughputs
(mb/d)


1,188 
1,366 
1,350 
US
1,358 
1,176 
763 
780 
770 
Europe
775 
773 
318 
282 
309 
Rest of World
295 
308 
2,269 
2,428 
2,429 
Total throughput
2,428 
2,257 
93.6 
95.3 
94.6 
Refining availability
(%)
(b)
94.9 
92.9 









Sales volumes
(mb/d)
(c)





Marketing sales by region


1,431 
1,418 
1,466 
US
1,442 
1,417 
1,457 
1,428 
1,312 
Europe
1,369 
1,493 
634 
629 
622 
Rest of World
626 
625 
3,522 
3,475 
3,400 
Total marketing sales
3,437 
3,535 
2,228 
2,622 
2,544 
Trading/supply sales
2,583 
2,270 
5,750 
6,097 
5,944 
Total refined product sales
6,020 
5,805 









Global Indicator Refining Margin





  (GIM)
($/bbl)
(d)


7.14 
3.32 
8.18 
US West Coast
5.76 
8.54 
6.00 
3.50 
6.59 
US Gulf Coast
5.05 
6.34 
8.54 
1.86 
7.54 
US Midwest
4.72 
7.79 
3.10 
4.29 
3.84 
North West Europe
4.06 
3.88 
2.55 
3.11 
3.92 
Mediterranean
3.52 
3.05 
(0.11)
0.97 
0.85 
Singapore
0.91 
1.19 
4.98 
3.08 
5.49 
BP Average GIM
4.29 
5.59 









Chemicals production
(kte)


744 
940 
1,088 
US
2,028 
1,457 
867 
981 
985 
Europe
1,966 
1,655 
1,221 
1,887 
1,846 
Rest of World
3,733 
2,465 
2,832 
3,808 
3,919 
Total production
7,727 
5,577 
 
(a)
These effects represent the favourable (unfavourable) impact relative to management's measure of performance. Further information on fair value accounting effects is provided on page 22.
(b)
Refining availability represents Solomon Associates' operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory maintenance downtime.
(c)
Does not include volumes relating to crude oil.
(d)
The Global Indicator Refining Margin (GIM) is the average of regional indicator margins weighted for BP's crude refining capacity in each region. Each regional indicator margin is based on a single representative crude with product yields characteristic of the typical level of upgrading complexity. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP's particular refinery configurations and crude and product slate.
 
 
Top of page 12
Other businesses and corporate

 
Second 
First 
Second 



quarter 
quarter 
quarter 

            First half
2009 
2010 
2010 

2010 
2009 



$ million


(581)
(326)
(74)
Profit (loss) before interest and tax
(a)
(400)
(1,381)
(2)
(2)
Inventory holding (gains) losses
37 



Replacement cost profit (loss)


(583)
(328)
(70)
  before interest and tax
(398)
(1,344)









By region


(129)
(231)
(119)
US
(350)
(408)
(454)
(97)
49 
Non-US
(48)
(936)
(583)
(328)
(70)

(398)
(1,344)



Results include





Non-operating items


(33)
(106)
(7)
US
(113)
(149)
(6)
(12)
78 
Non-US
66 
(211)
(39)
(118)
71 

(47)
(360)
 
(a)
Includes profit after interest and tax of equity-accounted entities.
 
Other businesses and corporate comprises the Alternative Energy business, Shipping, the group's aluminium asset, Treasury (which includes interest income on the group's cash and cash equivalents), and corporate activities worldwide.
 
The replacement cost loss before interest and tax for the second quarter and half year was $70 million and $398 million respectively, compared with losses of $583 million and $1,344 million a year ago. The net non-operating gain for the second quarter was $71
million and a net charge of $47 million for the half year, compared with net charges of $39 million and $360 million a year ago.
 
Compared with a year ago, the result for the second quarter and the first half of 2010 reflected improved business results, lower costs and favourable foreign exchange effects.
 
In Alternative Energy, our solar business achieved sales of 58MW, compared with 27MW a year ago. For the half year, solar sales were 112MW (2009 42MW). In our US wind business, net wind generation capacity
(b)
at the end of the second quarter was 711MW (1,237MW gross), compared with 678MW (1,113MW gross) at the end of the same period a year ago.
 
On 15 April, we completed the sale of our 35% interest in K-Power, a gas fired power asset in Gwangyang, South Korea, to SK Holdings Co Ltd for $316 million.
 
On 15 July, we announced an agreement to acquire Verenium Corporation's biofuels business, for consideration of $98 million.
 
Finally, in line with UK regulatory requirements, the following is a summary of the principal disclosures made in our first-quarter results announcement. In March, BP Solar announced the closure of manufacturing at its Frederick facility, in Maryland, US, as it moves its manufacturing to lower-cost locations. BP Solar will maintain its US presence in sales and marketing, research and technology, project development, and key business support activities. In our US wind business, construction commenced at the 125MW Goshen North wind farm (BP 50%) in Bonneville County, Idaho.
 
 
(b)
Net wind capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP's share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
 
 
Top of page 13
Cautionary statement regarding forward-looking statements: The discussion in this results announcement contains forward-looking statements particularly those regarding production and quarterly phasing of production, third quarter seasonal turn around effect and its impact on costs, margins and volumes; refining and petrochemicals margins; movements in oil and gas prices; refinery turnaround activities; expected supply and trading contribution in the third quarter; planned capital expenditures; planned disposals and divestments over the next 18 months; anticipated reductions in net debt over the next 18 months; the ongoing legal proceedings in relation to the Texas City refinery explosion, the Exxon Valdez oil spill and certain claims against Atlantic Richfield; the continued operations to permanently seal and isolate the MC252 well, including the anticipated timing for completion of the two relief wells; the effect of a hurricane or severe tropical storm in proximity to the containment and control operations; the anticipated timing for halting the flow of hydrocarbons and for completion of the ongoing clean-up operations, and the long-term environmental impact of the spill; payments from the escrow account, the setting aside of assets while the fund is building and adjudication of claims by the Gulf Coast Claims Facility; and the impact of the incident on the group, including (i) the magnitude and timing of possible obligations in relation to the incident, (ii) the impact on the group's cash flows and liquidity, (iii) the impact on the group's access to new opportunities and ability to implement its strategic plans and deliver long-term growth, including the impact of damage to BP's brand and reputation, (iv) future ratings downgrades arising out of the incident, (v) the impact on the group's financing costs, access to financing, ability to draw down on its committed borrowing facilities and trading activities, (vi) the types of enforcement action that US authorities could seek to take against BP as a result of the incident and (vii) changes in regulation arising out of the incident. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors including the timing of bringing new fields onstream; future levels of  industry product supply; demand and pricing; OPEC quota restrictions; PSA effects; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions; exchange rate fluctuations; development and use of new technology; the success or otherwise of partnering; the actions of competitors, trading partners, creditors, rating agencies and others; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism or sabotage; and other factors discussed in this Announcement, including under 'Principal risks and uncertainties' on pages 33
-
39. For more information you should refer to our Annual Report and Accounts 2009 and our 2009 Annual Report on Form 20-F filed with the US Securities and Exchange Commission (SEC).
 
Notice to investors:  BP has received written comments from the SEC regarding its 2009 Annual Report on Form 20-F and a Form 6-K in a letter dated 19 July 2010.
 
 
Statement of directors' responsibilities

 
The directors confirm that, to the best of their knowledge
,
the condensed set of financial statements on pages
15 - 20 and 24 - 32 has been prepared in accordance with IAS 34 'Interim Financial Reporting', and that the interim management report on pages 1 - 13, 21 - 23 and 33 - 43 includes a fair review of the information required by the Disclosure and Transparency Rules.
 
The directors draw attention to Note 2 to the condensed set of financial statements on pages 25 - 28 which describes the uncertainties surrounding the amounts and timings of liabilities arising from the Gulf of Mexico oil spill.
 
The directors of BP p.l.c. are listed on page 66 of
BP Annual Report and Accounts 2009
, with the exception of
I E L Davis, who was appointed as a non-executive director on 2 April 2010, and Sir Ian Prosser and E B Davis, Jr, who retired at the 2010 Annual General Meeting.
 
By order of the board
 
Tony Hayward
Byron Grote
Group Chief Executive
Chief Financial Officer
26 July 2010
26 July 2010
 
 
Top of page 14
Independent review report to BP p.l.c

 
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the group income statement, group statement of comprehensive income, group statement of changes in equity, group balance sheet, condensed group cash flow statement, the related tables on pages 19 and 20, and Notes 1 to
12
. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
 
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom (ISRE 2410). To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
 
Directors' responsibilities
 
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
 
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union (EU). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as issued by the IASB and as adopted by the EU.
 
Our responsibility
 
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
 
Scope of review
 
We conducted our review in accordance with ISRE 2410. A review of interim financial information consists of making enquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
 
Conclusion
 
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and as adopted by the EU and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
 
Emphasis of matter
 
We draw attention to Note 2 to the condensed set of financial statements which describes the uncertainties surrounding the amounts and timings of liabilities arising from the Gulf of Mexico oil spill. Our conclusion is not qualified in respect of this matter.
 
Ernst & Young LLP
London
26 July 2010
 
 
Top of page 15
Group income statement

 
Second 
First 
Second 



quarter 
quarter 
quarter 

           First half
2009 
2010 
2010 

2010 
2009 



$ million


54,777 
73,071 
73,725 
Sales and other operating revenues (Note 4)
146,796 
102,073 



Earnings from jointly controlled entities -


357 
403 
257 
  after interest and tax
660 
577 



Earnings from associates - after interest


714 
763 
760 
  and tax
1,523 
999 
191 
142 
158 
Interest and other income
300 
394 



Gains on sale of businesses and


522 
38 
971 
  fixed assets
1,009 
603 
56,561 
74,417 
75,871 
Total revenues and other income
150,288 
104,646 






36,007 
51,641 
54,536 
Purchases
106,177 
66,784 



Production and manufacturing


5,683 
5,740 
37,979 
  expenses
(a)
(Note 5)
43,719 
11,577 
987 
1,276 
1,238 
Production and similar taxes (Note 5)
2,514 
1,661 
3,092 
2,996 
2,780 
Depreciation, depletion and amortization
5,776 
5,915 



Impairment and losses on sale of


216 
164 
(56)
  businesses and fixed assets
108 
353 
347 
120 
132 
Exploration expense
252 
466 
3,290 
3,020 
2,939 
Distribution and administration expenses
5,959 
6,639 



Fair value (gain) loss on embedded


(154)
(146)
452 
  derivatives
306 
(340)
7,093 
9,606 
(24,129)
Profit (loss) before interest and taxation
(14,523)
11,591