Second Quarter 2012 Results (Stock Exchange Announcement)

Release date: 31 July 2012

Download the full version of our second quarter 2012 results using the link below.

Second quarter	First quarter	Second quarter	$ million	First half	First half
2011	2012	2012	$ million	2012	2011

5718	5915	(1,385)	Profit (loss) for the period(b)	4,530	12,972
(311)	(986)	1,623	Inventory holding (gains) losses, net of tax	637	(1,954)

5407	4,929	238	Replacement cost profit (c)	5,167	11,018
298	(130)	3,447	Net (favourable) unfavourable impact of non-operating items and fair value accounting effects, net of tax(d)	3,317	191

5705	4,799	3,685	Underlying replacement cost profit(c)	8,484	11,209

			Replacement cost profit
28.62	25.97	1.25	- per ordinary share (cents)	27.19	58.44
1.72	1.56	0.07	- per ADS (dollars)	1.63	3.51
			Underlying replacement cost profit
30.20	25.29	19.37	- per ordinary share (cents)	44.65	59.45
1.81	1.52	1.16	- per ADS (dollars)	2.68	3.57

BP's second-quarter replacement cost (RC) profit was $238 million, compared with $5,407 million a year ago. After adjusting for a net loss from non-operating items of $3,339 million and net unfavourable fair value accounting effects of $108 million (both on a post-tax basis), underlying RC profit for the second quarter was $3,685 million, compared with $5,705 million for the same period last year. For the half year, RC profit was $5,167 million, compared with $11,018 million a year ago. After adjusting for a net loss from non-operating items of $3,154 million and net unfavourable fair value accounting effects of $163 million (both on a post-tax basis), underlying RC profit for the half year was $8,484 million, compared with $11,209 million for the same period last year. RC profit or loss for the group, underlying RC profit or loss and fair value accounting effects are non-GAAP measures and further information is provided on pages 4, 19 and 21.
Non-operating items for the second quarter on a pre-tax basis amounted to a net loss of $5,002 million and included impairment losses of $4,782 million(d) relating primarily to certain refineries, US shale gas assets and the decision to suspend the Liberty project in Alaska. All amounts relating to the Gulf of Mexico oil spill have been treated as non-operating items, with a net adverse impact on a pre-tax basis of $847 million for the quarter and $823 million for the half year 2012. For further information on the Gulf of Mexico oil spill and its consequences see pages 2 - 3, Note 2 on pages 23 - 28, Principal risks and uncertainties on pages 32 - 38, Legal proceedings on pages 39 - 49 and Legal proceedings on pages 160 - 164 of BPs Annual Report and Form 20-F 2011.
Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $212 million for the second quarter, compared with $249 million for the same period last year. For the half year, the respective amounts were $442 million and $488 million.
Including the impact of the Gulf of Mexico oil spill, net cash provided by operating activities for the quarter and half year was $4.4 billion and $7.8 billion respectively, compared with $7.8 billion and $10.3 billion in the same periods of last year. The amounts for the quarter and half year of 2012 included net cash outflows of $1.7 billion and $2.9 billion respectively relating to the Gulf of Mexico oil spill (second quarter 2011 $1.9 billion outflow, half year 2011 $4.7 billion outflow).
Net debt at the end of the quarter was $31.7 billion, compared with $27.0 billion a year ago. The ratio of net debt to net debt plus equity was 21.9% compared with 19.9% a year ago. Net debt is a non-GAAP measure. See page 5 for further information.
The quarterly dividend expected to be paid on 25 September 2012 is 8 cents per share ($0.48 per ADS). The corresponding amount in sterling will be announced on 11 September 2012. A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the scrip dividend programme are available at bp.com/scrip.
The effective tax rate on RC profit for the second quarter and half year was 44% and 34% respectively, compared with 34% and 36% a year ago. After adjusting for non-operating items and fair value accounting effects the effective tax rate on underlying RC profit for the second quarter and half year was 34% and 33% respectively, compared with 34% and 36% a year ago. Half-year 2011 included the impact of a one-off deferred tax adjustment in respect of the increase in the supplementary charge on UK oil and gas production. In the third quarter we expect a one-off charge of around $250 million to $300 million related to further changes to the UK taxation of North Sea production.
Total capital expenditure for the second quarter and half year was $5.4 billion and $11.1 billion respectively, of which organic capital expenditure was $5.3 billion and $10.6 billion respectively(e). Disposal proceeds were $1.9 billion for the quarter and $3.2 billion for the half year. Since the start of 2010, we have announced disposals for a total of $24 billion.
We now expect depreciation, depletion and amortization for 2012 to be around $1.4 billion higher than for 2011, with the revision mainly due to higher decommissioning costs.

^(a)This results announcement also represents BP’s half-yearly financial report (see page 12).

^(b)Profit (loss) attributable to BP shareholders.

^(c)See footnote (a) on page 4 for definitions of RC profit and underlying RC profit.

^(d)See pages 20 and 21 respectively for further information on non-operating items and fair value accounting effects.

^(e)Organic capital expenditure excludes acquisitions and asset exchanges, and expenditure associated with deepening our natural gas asset base (see page 18).

Forward-looking statements - cautionary statement
This presentation and the associated slides and discussion contain forward-looking statements, particularly those regarding: expectations regarding the ‘10-point plan’; expectations regarding the quarterly dividend payment and future distributions to shareholders; the prospects for financial momentum in 2013 and 2014; the expected full-year effective tax rate; the expected level of production in the third quarter and fourth quarter of 2012, the expected level of full-year production in 2012 and the expected production impact of divestments; the expected levels of full-year underlying and reported production in 2012; the expected impact of Russia’s crude oil and products export duty on BP’s share of TNK-BP net income; the expected level of refining margins and the prospects for the petrochemicals margin environment in the second half of 2012; expected downstream turnaround activity in the second half of 2012; the timing and prospects for upgrades to the Whiting refinery; prospects for BP’s $38 billion divestment programme, and the intention to make $38 billion of disposals by the end of 2013; prospects for the completion of planned and announced divestments, including the sale of BP’s interests in the Jonah and Pinedale operations and in the Alba and Britannia fields in the UK North Sea, and the planned disposals of the Texas City refinery and the southern part of the US West Coast fuels value chain including the Carson refinery; the expected future levels of gearing and net debt; prospects for building the company’s portfolio;

the anticipated increase in operating cash flow and margins; the timing and quantum of and timing for completion of contributions to and payments from the $20-billion Trust fund; the level of full-year organic capital expenditure for 2012; the expected level of full-year depreciation, depletion and amortization; the expected average underlying quarterly charge for Other business and corporate; the prospects for and expected timing of certain investigations, claims, settlements and litigation outcomes; the timing of future MDL 2179 proceedings; the expected cost of the settlement agreements with the PSC, and the source of funding thereof; BP’s plans to enter negotiations regarding the potential sale of its shareholding in TNK-BP; the prospects for, timing and composition of future projects including expected start up, completion, timing of production, level of production and margins; the prospects for BP’s strategic alliance with Reliance, including the development of future projects, recommencement of the exploration programme, sanctioning of a new Floating Storage and Re-gas facility, and future review of pricing terms; the anticipated increase in operating cash flow and margins; BP’s plans for utilizing anticipated additional operating cash flow;

expectations for drilling and rig activity, including the expected completion of exploration wells in Angola, Brazil, the North Sea and Namibia; the expected award of new leases in the Gulf of Mexico; plans to continue to seek opportunities and prospects in BP’s areas of strength, such as deepwater, gas value chains and giant fields; expectations about the future significance of deepwater drilling and unconventional projects for BP; production prospects for Galapagos project and expected timing of start-up of Nakika Phase 3 project; plans to bring Atlantis and Mad Dog back into production in the third quarter 2012; plans to restore production on Thunder Horse and Atlantis; timing of start-up and prospects of new projects currently scheduled for start-up by the end of 2014; timing of anticipated final investment decisions currently expected through the period to 2014; and future operational activity in Gulf of Mexico including new project start-up and production and development activity.

Actual results may differ from those expressed in such statements, depending on a variety of factors including the timing of bringing new fields onstream; the timing of divestments; future levels of industry product supply; demand and pricing; OPEC quota restrictions; PSA effects; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought; the impact on our reputation following the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; the success or otherwise of partnering; the actions of competitors, trading partners, creditors, rating agencies and others; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism or sabotage; and other factors discussed under “Principal risks and uncertainties” in our Stock Exchange Announcement for the period ended 30 June 2012 and under “Risk factors” in our Annual Report and Form 20-F 2011 as filed with the US Securities and Exchange Commission.

Reconciliations to GAAP - This presentation also contains financial information which is not presented in accordance with generally accepted accounting principles (GAAP). A quantitative reconciliation of this information to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on our website at www.bp.com.

Statement of Assumptions - The operating cash flow projection for 2014 stated on slides 22, 27 and 28 of this presentation reflects our expectation that all required payments into the $20 billion US Trust Fund will have been completed prior to 2014. The projection does not reflect any cash flows relating to other liabilities, contingent liabilities, settlements or contingent assets arising from the Gulf of Mexico oil spill which may or may not arise at that time. As disclosed in the Stock Exchange Announcement, we are not today able to reliably estimate the amount or timing of a number of contingent liabilities.

Cautionary note to US investors - U.S. investors are urged to consider closely the disclosures in our Form 20-F, SEC File No. 1-06262. This form is available on our website at www.bp.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or by logging on to their website at www.sec.gov. Tables and projections in this presentation are BP projections unless otherwise stated.

In this section

Quarterly results