EARNINGS / The British Petroleum Co P.L.C. Group reports 1st 3 months Results
BP Reports Income Down Just 10% on the Previous Quarter
Despite an Oil Price Over 20% Lower
- First quarter 1998 replacement cost profit, before exceptional items,
was $960 million, down by 10% on the previous quarter and 22% on a
year ago.
- The effect on the upstream result of an oil price $7 per barrel lower
than a year ago was substantially moderated by strong performance
improvements in the downstream businesses.
- Further growth in all three businesses.
- Quarterly dividend 5.75 pence per share.
NEW YORK, May 5 /CNW/ -- The British Petroleum Company (NYSE: BP)
today reported its first quarter 1998 results. BP Group Chief Executive, John
Browne, commented:
'These are good results in a very tough climate. Despite a drop in the
oil
price of over 20% from the last quarter, we have held the fall in profits to
10%.
'We've seen improvement in through-cycle performance in all businesses,
and there is more to come in the rest of the year.
'This will come from our previously planned actions, reinforced by the
rigorous efficiency program we have put in place across the company in the
last two months to counter the effects of the oil price slide. This includes
substantial cuts in costs which we are determined to push through to the
bottom line in a way that won't impair our plans for long-term growth.'
OPERATING RESULTS
Replacement cost profit, before exceptional items of $960 million was 10%
down on the previous quarter and 22% down on a year ago; the decrease
reflecting substantial falls in average oil prices of 22% and 33%
respectively. The group's performance enhancement program continues.
Exploration and Production profits were $865 million despite the
substantially lower oil price. This result was down 24% and 42% on the
previous quarter and the same quarter last year respectively. Production was
up in spite of lower U.K. natural gas production due to the warmer weather.
There was further exploration success in the quarter.
Downstream profits rose by 43% and 32% against the previous quarter and
the same quarter last year respectively. The first quarter saw continuing
improvements in both refining and marketing performance.
The Chemicals result was slightly up reflecting robust volumes and some
margin benefit.
Capital expenditure and acquisitions was $1.8 billion including the
purchase of Styrenix Kunststoffe, the styrene plastics business previously
owned by Huls, and the remainder of the purchases for employee share scheme
programs. Business investment in the U.K. remains a significant proportion of
the total.
Net debt increased by $0.3 billion during the quarter to $7.2 billion.
The
ratio of net debt to net debt plus equity was 24%.
Interest expense in the quarter of $114 million was similar to the
previous quarter and $11 million below that in the equivalent quarter last
year.
Taxation charged in the first quarter, other than production taxes, was
$341 million, compared with $349 million in the previous quarter and $571
million in the equivalent quarter last year. The effective tax rate on
replacement cost profit, before exceptional items, was 27% in the first
quarter compared with 31% a year ago, reflecting the effect of higher tax
relief on inventory holding losses.
Net cash outflow in the first quarter was $353 million compared to an
inflow of $1.3 billion a year ago, when the first quarter benefited from
certain one-off effects.
A quarterly dividend of 5.75 pence per share was announced. For those
shareholders electing to receive dividends in shares instead of cash, the
share dividend is based on the net cash dividend of 5.75 pence plus the
associated tax credit, a total of 7.1875 pence per share. Based upon the price
used for allocating shares under the Share Dividend Plan, this represents 25%
more than the net cash dividend.
OPERATING RESULTS
First Fourth First
HIGHLIGHTS Quarter Quarter Quarter
1998 1997 1997
Replacement cost operating profit
Dollars million 1,422 1,573 1,932
Replacement cost profit
before exceptional items
Dollars million 960 1,065 1,231
Profit after exceptional items
Replacement cost
Dollars million 967 1,031 1,226
Historical cost
Dollars million 446 983 981
Earnings per ADR:
Replacement cost profit before
exceptional items
Dollars 1.00 1.11 1.30
Historical cost profit after
exceptional items
Dollars 0.47 1.02 1.04
Dividends per ADR
Dollars 0.611 0.599 0.542
First Fourth First
EXTERNAL ENVIRONMENT Quarter Quarter Quarter
1998 1997 1997
North Sea oil price
realizations $/bbl 14.4 18.4 21.3
Indicative global
refining margin $/bbl 2.2 1.3 2.0
Chemicals integrated margin DM/te 1,078 900 714
$/pounds 1.65 1.66 1.63
DM/pounds 2.99 2.91 2.70
EXPLORATION AND PRODUCTION
Exploration and Production achieved a replacement cost operating profit
of
$865 million despite an oil price $7 a barrel lower than a year ago and $4 a
barrel lower than in the previous quarter. The result benefited from
continuing tight cost control and lower exploration expense. Production from
recently commissioned fields, including Foinaven and Erskine in U.K. waters,
and Troika in the Gulf of Mexico, exceeded reductions in the mature fields and
the effect of lower U.K. natural gas production due to the warmer weather.
Four exploration discoveries have been announced since the beginning of
the year. Three of these were offshore Angola. In Block 17 (BP 16.67%), there
was the Rosa-1 find which is close to the Girassol and Dalia finds which were
announced last year. In Block 15 (BP 26.67%), drilling began late last year
and the first two wells, Kissanje and Marimba, have been confirmed as
successful discoveries. A discovery has also been made in the Gulf of Mexico,
where BP as 50% interest holder, and operator, has announced the Crosby
discovery close to the Mars field.
Also during the quarter, BP signed a production sharing agreement in
Mozambique. Under the agreement, BP has exclusive rights to 40,000 square
kilometers of prospective acreage in the Zambezi delta, on the east coast of
Africa. Late in April, BP announced an agreement in principle to sell its
exploration and production interests in Papua New Guinea (PNG) to Oil Search
for $400 million. The deal is subject to approval by the PNG authorities and
is due for completion in the third quarter of this year.
1Q 4Q 1Q
HIGHLIGHTS 1998 1997 1997
Replacement cost operating profit $m 865 1,136 1,488
Results include:
Exploration expense $m 66 86 83
Key statistics:
Average realizations: North Sea $/bbl 14.4 18.4 21.3
: Alaskan North Slope (ANS) $/bbl 14.5 18.3 21.8
Crude oil and natural gas
production (Net of royalties)
Crude oil production
U.K. mb/d 443 434 419
Rest of Europe mb/d 86 93 63
U.S. mb/d 547 559 574
Rest of World mb/d 273 223 207
Total crude oil production mb/d 1,349 1,309 1,263
Natural gas production
U.K. mmcf/d 1,226 1,155 1,507
Rest of Europe mmcf/d 30 41 28
U.S. mmcf/d 109 103 93
Rest of World mmcf/d 340 355 335
Total natural gas production mmcf/d 1,705 1,654 1,963
Total production mboe/d 1,643 1,594 1,601
REFINING AND MARKETING
Replacement cost operating profit for the first quarter was $384 million,
up 32% on a year ago. The result reflects further performance improvement
through the delivery of self-help from refining operations and restructuring,
and from marketing volumes. Operating margins improved for retail marketing in
the U.K. and refining in Europe, offset by lower refining margins in the U.S.
and Australasia.
During the quarter, the implementation of the European downstream joint
venture with Mobil continued to deliver very strong improvements, ahead of
plans. Replacement cost operating profit in Europe was up 147% compared with a
year ago.
South East Asia results were not significantly affected by the currency
crisis in the region.
New retail marketing activities commenced in Venezuela in the quarter;
and
results from the retail pilot in Japan have been very encouraging. In the
U.S., an agreement was concluded between BP's Toledo refinery and a regional
electric utility to utilize a major portion of the refinery's by-products.
Grangemouth refinery completed its restructuring program.
1Q 4Q 1Q
HIGHLIGHTS 1998 1997 1997
Replacement cost operating profit $m 384 268 292
Indicative global refining margin $/bbl 2.2 1.3 2.0
Refinery throughput
U.K. mb/d 304 315 283
Rest of Europe mb/d 545 541 644
U.S. mb/d 555 532 540
Rest of World mb/d 378 372 365
Total throughput mb/d 1,782 1,760 1,832
Oil sales volumes
Refined products
U.K. mb/d 257 264 259
Rest of Europe mb/d 768 749 734
U.S. mb/d 613 641 601
Rest of World mb/d 389 409 405
Total marketing sales mb/d 2,027 2,063 1,999
Trading/supply sales mb/d 1,188 1,345 1,266
Total oil product sales mb/d 3,215 3,408 3,265
Crude oil mb/d 3,219 2,983 4,371
Total oil sales mb/d 6,434 6,391 7,636
CHEMICALS
Chemicals' first quarter result of $188 million was slightly above the
previous quarter and the same quarter last year reflecting some lag benefit
from falling naphtha prices particularly in the Olefins and Polymers business
in Europe. In both the Acetyls and Acrylonitrile businesses, margins began to
come under pressure due to emerging over-supply, reflecting also Asian demand
weakness. The first quarter result was achieved despite a further
strengthening of sterling against the deutschmark.
During the quarter, the European Commission approved BP's acquisition of
Styrenix Kunststoffe, the styrene plastics business previously owned by Huls.
The deal was completed on February 26.
BP Chemicals Inc. and Sterling Chemicals Inc. have established a 50/50
acrylonitrile joint venture company, Anexco LLC, to service the acrylonitrile
marketing operations of both partners in Asia and South America. Anexco began
operations on April 1, and has projected annual sales of 500,000 metric
tonnes.
1Q 4Q 1Q
HIGHLIGHTS 1998 1997 1997
Replacement cost operating profit $m 188 184 170
Chemicals production (A) kte 2,400 2,447 2,300
(A) Includes BP share of associated undertakings and other interests in
production.
OTHER BUSINESSES AND CORPORATE
Other Businesses and Corporate comprises BP Finance, BP Solar, the
group's remaining coal asset, interest income and costs relating to corporate
activities worldwide.
1Q 4Q 1Q
HIGHLIGHTS 1998 1997 1997
Replacement cost operating loss $m (15) (15) (18)
EXCEPTIONAL ITEMS
Loss on sale or termination
of operations $m - (147) (2)
Refinery network rationalization $m - 71 -
Sub-total $m - (76) (2)
Taxation credit(charge) $m 7 42 (3)
Exceptional items after taxation $m 7 (34) (5)
INCOME ADJUSTED FOR SPECIAL ITEMS
Underlying
1Q 1998 Results
Reported Special Underlying 4Q 1Q
$ million Earnings Items(A) Results 1997 1997
Exploration &
Production 865 - 865 1,136 1,488
Refining & Marketing 384 - 384 268 292
Chemicals 188 - 188 184 170
Other businesses
& corporate (15) - (15) (15) (18)
RC operating profit 1,422 - 1,422 1,573 1,932
Interest expense (114) - (114) (117) (125)
Taxation (348) - (348) (391) (568)
MSI - - - - (8)
RC profit before
exceptional items 960 - 960 1,065 1,231
Exceptional items
before tax -
Taxation on
exceptional items 7
RC profit after
exceptional items 967
Inventory holding
gains (losses) (521)
HC profit 446
(A) The special items refer to non-recurring charges and credits reported
in the quarter.
OUTLOOK
Crude oil prices declined during the first quarter and were, on average,
significantly below the levels of a year ago, because of lower demand in Asian
economies, warmer weather and surplus supply. They have remained relatively
stable at these levels though subject to market perceptions of the likely
supply side response.
Upstream, it is expected that full year production will be significantly
up on last year. Factors include a full year from the fields commissioned late
in 1997, new production in the second half of 1998 which includes the start-up
of the Eastern Trough Area Project and Schiehallion in U.K. waters and Badami
in Alaska, and further development phases in Colombia and Venezuela. The next
two quarters will be influenced by typical seasonal factors, particularly the
summer decline in natural gas consumption.
Downstream, strong transport fuels demand is expected to continue in
Europe and the U.S., underpinned by typical seasonal demand. Performance
improvements through self-help in both refining and marketing should continue
to feature in comparisons versus the same quarter of the prior year.
In Chemicals, underlying economic growth is expected to remain firm in
the
key European and U.S. markets. However, the impact of new supply brought
onstream outside Europe towards the end of 1997, coupled with lower growth
rates in Asia, is generating a downward pressure on prices and resulting
margins. The continued strength of sterling remains a disadvantage relative to
European competitors.
BP Group Chief Executive, John Browne, concluded:
'Though the oil price has now firmed slightly from its low first quarter
average, we cannot predict where it will go in the future. Nevertheless,
because of the changes made inside BP in recent years, we know we have the
ability to respond strongly.'
The foregoing discussion, in particular the statements under 'Outlook,'
focuses on certain trends and general market and economic conditions and
outlook on production levels or rates, prices, margins and currency exchange
rates and, as such, are forward-looking statements that involve risk and
uncertainty that could cause actual results and developments to differ
materially from those expressed or implied by this discussion. By their
nature, trends and outlook on production, price, margin and currency exchange
rates are difficult to forecast with any precision, and there are a number of
factors, including the dynamic nature of economic conditions, that could 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 the Company's Annual Report and Accounts for 1997 and in the Company's 1997
Annual Report on Form 20-F filed with the U.S. Securities and Exchange
Commission. |
