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 December 31, 2002
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|
--------------- ---------------
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. 333-83180) OF BP AUSTRALIA CAPITAL
MARKETS LIMITED, BP CANADA FINANCE COMPANY, BP CAPITAL MARKETS p.l.c., BP
CAPITAL MARKETS AMERICA INC. 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., THE
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO.
333-34968) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT
ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., AND THE PROSPECTUS INCLUDED IN
THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-74414) 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NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.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 1
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GROUP RESULTS JANUARY - DECEMBER 2002
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
----------------------- ------------------------
($ million)
Turnover 49,722 36,817 178,721 174,218
======== ======== ======== ========
Reconciliation of historical cost and pro forma results
Historical cost profit (loss) for the period 651 (603) 6,845 6,556
Inventory holding (gains) losses (a) 174 1,297 (1,104) 1,900
-------- -------- -------- --------
Replacement cost profit for the period (b) 825 694 5,741 8,456
Exceptional items, net of tax 872 12 (1,043) (165)
-------- -------- -------- --------
Replacement cost profit before exceptional items 1,697 706 4,698 8,291
Special items, net of tax (c) 416 461 1,443 683
Acquisition amortization (d) 522 604 2,574 2,585
-------- -------- -------- --------
Pro forma result adjusted for special items 2,635 1,771 8,715 11,559
======== ======== ======== ========
Per Ordinary Share - cents
Historical cost profit 2.92 (2.67) 30.55 29.21
Replacement cost profit before exceptional items 7.58 3.17 20.97 36.95
Pro forma result adjusted for special items 11.78 7.91 38.90 51.51
Dividends per Ordinary Share - cents 6.25 5.75 24.00 22.00
---------------
(a) Net of minority shareholders' interest.
(b) Replacement cost is not a UK or US GAAP measure. For further information on
why management believes replacement cost profit is a relevant measure see
Note 6 of Notes to Consolidated Financial Statements.
(c) The special items refer to non-recurring charges and credits as described
in the text below.
(d) Depreciation and amortization relating to the fixed asset revaluation
adjustments and goodwill consequent upon the ARCO and Burmah Castrol
acquisitions in 2000.
The following discussion should be read in conjunction with the
consolidated financial statements and the related notes provided elsewhere in
this Form 6-K and with the information, including the consolidated financial
statements and related notes, for the year ended December 31, 2001 in BP
p.l.c.'s Annual Report on Form 20-F for the year ended December 31, 2001. The
financial information for 2001 has been restated to reflect (i) the adoption by
the Group of UK Financial Reporting Standard No. 19 (FRS 19) `Deferred Tax' with
effect from January 1, 2002; and (ii) the transfer of the solar, renewables and
alternative fuels activities from Other businesses and corporate to Gas and
Power on January 1, 2002. To reflect this transfer, Gas and Power has been
renamed Gas, Power and Renewables from the same date. See Note 2 of Notes to
Consolidated Financial Statements for further information.
The fourth quarter trading environment was more favourable than a year ago
for Exploration and Production with higher oil and gas realizations, though less
favourable for Refining and Marketing where adverse crude price differentials
depressed BP's refining margins relative to the industry marker.
The trading environment for the year was challenging, with natural gas
prices and refining margins significantly weaker than in the previous year,
owing to the global economic slowdown. Demand improved in most parts of the
business after the first half of the year but economic conditions remained
sluggish. The adverse business conditions had the greatest impact on refining
and marketing. Worldwide refining margins were depressed for much of the year,
at nearly half the average level of 2001. Margins in Chemicals were at levels
similar to the bottom of previous cycles.
Turnover for the three months and year ended December 31, 2002 was $49,722
million and $178,721 million respectively, compared with $36,817 million and
$174,218 million for 2001. The increase in turnover for the fourth quarter
reflects higher oil and natural gas prices, higher production, and higher sales
volumes as a result of acquisitions and improved chemicals site reliability. For
the year, production and sales volume increases and higher liquids realizations
were partly offset by lower natural gas prices.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) was $1,697 million for the three months ended December
31, 2002, compared with $706 million for the equivalent period of 2001. For the
year ended December 31, 2002, the replacement cost profit before exceptional
items was $4,698 million compared with $8,291 million in 2001.
Page 2
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 presents 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, for the three months and year ended
December 31, 2002 was $2,635 million and $8,715 million respectively, compared
with $1,771 million and $11,559 million in the prior year. The pro forma result,
adjusted for special items, has been derived from the Group's reported UK GAAP
accounting information but is not in itself a recognized UK or US GAAP measure.
The pro forma result is replacement cost profit before exceptional items
excluding acquisition amortization. Acquisition amortization refers to
depreciation relating to the fixed asset revaluation adjustments and
amortization of goodwill consequent upon the ARCO and Burmah Castrol
acquisitions in 2000. A tabular breakdown of the reconciliation of pro forma to
reported results on a replacement cost basis is provided on pages 6 and 7.
Acquisition amortization for the three months and year ended December 31,
2002 was $522 million and $2,574 million (including $405 million accelerated
depreciation of the revaluation adjustment in respect of the impairment of
former ARCO assets), respectively, compared with $604 million and $2,585 million
for the equivalent periods of 2001.
Special items refer to non-recurring charges and credits. For the three
months ended December 31, 2002, special items were $630 million ($416 million
after tax), and comprised an asset write-down and restructuring costs in
Exploration and Production, integration and restructuring costs and an
impairment charge in Refining and Marketing, integration and restructuring costs
in Chemicals, provisions to cover future rental payments on surplus leasehold
property and environmental charges in Other businesses and corporate, and a bond
redemption charge. For the fourth quarter of 2001, special items were $714
million ($461 million after tax), comprising additional severance charges,
mainly related to former ARCO employees, an impairment charge for our partner
operated Venezuelan Lake Maracaibo operations, Castrol, Solvay and Erdolchemie
integration costs, Grangemouth restructuring, and litigation costs. Special
items for year ended December 31, 2002 were $1,915 million ($1,443 million after
tax) compared with $1,058 million ($683 million after tax) in 2001. The special
items for the years of both 2002 and 2001 are comprised of the same elements as
those in the respective fourth quarter periods. In addition, the year of 2002
includes litigation costs and impairment charges in Exploration and Production,
business interruption insurance proceeds and costs associated with an Olympic
pipeline incident in Refining and Marketing, Solvay and Erdolchemie integration
costs, restructuring charges and an impairment charge in Chemicals, an
adjustment to the North Sea deferred tax balance for the supplementary UK
corporation tax and tax relief expected on impairments and related
restructuring. The year of 2001 also includes rationalization costs in the
European downstream commercial business.
Underlying performance improvements were $1.2 billion before tax for the
year, against a target of $1.4 billion. Performance improvements have been
impacted by weaker than expected production. Underlying performance improvements
include cost savings and volume growth, and represent increases in pre-tax
results under mid-cycle operating conditions, adjusted for acquisition
amortization and special items. Mid-cycle operating conditions reflect not only
adjustments to hydrocarbon prices and margins, but also costs and capacity
utilization, to levels which we would expect on average over the long-term.
Hydrocarbon production increased by 1.8% and 2.9% in the quarter and year
respectively. The increase for the year reflected 4.5% growth in liquids
production and 0.9% for natural gas. The reserve replacement ratio for 2002 was
175%.
The historical cost profit for the three months ended December 31, 2002 was
$651 million, after inventory holding losses of $174 million and net exceptional
losses of $893 million ($872 million after tax) in respect of net losses on the
sale of fixed assets and businesses or termination of operations. For the
equivalent period of 2001 there was a loss of $603 million, after inventory
holding losses of $1,297 million and net exceptional losses of $38 million ($12
million after tax) in respect of net losses on the sale of fixed assets and
businesses or termination of operations.
For the year ended December 31, 2002, the historical cost profit was $6,845
million, including inventory holding gains of $1,104 million and net exceptional
gains of $1,168 million ($1,043 million after tax) in respect of net profits on
the sale of fixed assets and businesses or termination of operations. For the
year ended December 31, 2001, the historical cost profit was $6,556 million,
after inventory holding losses of $1,900 million and net exceptional gains of
$535 million ($165 million after tax) in respect of net profits on the sale of
fixed assets and businesses or termination of operations.
Page 3
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Performance of operating segments is evaluated by management based on
replacement cost operating profit or loss. Segment results are presented in the
tables on pages 6 and 7 and discussed in the following pages on this basis.
Interest expense for the three months and year ended December 31, 2002 was
$332 million (including $15 million bond redemption charges) and $1,279 million
respectively, compared with $414 million and $1,670 million (including $62
million bond redemption charges) in 2001, primarily reflecting lower interest
rates for both periods in 2002.
Net taxation, other than production taxes, charged for the three months and
year ended December 31, 2002 was $1,125 million and $4,342 million respectively,
compared with $711 million and $6,375 million in the equivalent period last
year. The tax credit in respect of exceptional items was $21 million compared
with $26 million for the fourth quarter of 2001. The effective tax rate on
replacement cost profit before exceptional items was 40% and 47% respectively
for the three months and year ended December 31, 2002, compared with 50% and 42%
for the equivalent periods of 2001. The reduction in the fourth quarter rate
reflects the rateably lower impact of acquisition amortization on higher income.
The increase in the rate for the year reflects the rateably greater effect of
acquisition amortization on lower pre-tax income in 2002, together with the $355
million charge in the second quarter to increase the North Sea deferred tax
provision for the supplementary UK tax rate, partly offset by higher tax relief
on asset impairment charges and related restructuring.
Capital expenditure and acquisitions in the fourth quarter of 2002 was $4.1
billion, compared with $4.4 billion for the equivalent period in 2001. For the
year ended December 31, 2002, capital expenditure and acquisitions was $19.1
billion, including $5.0 billion for the Veba purchase, compared with $14.1
billion in 2001. Excluding acquisitions, capital expenditure for the year 2002
was $13.3 billion, compared with $13.2 billion in 2001. Disposal proceeds in the
fourth quarter were $1.0 billion, and $6.8 billion in the year, including $2.3
billion from the sale of our investment in Ruhrgas.
Net cash inflow for the three months ended December 31, 2002 was $0.7
billion, compared with an outflow of $1.0 billion for the equivalent period of
2001, reflecting higher operating cash flow, lower tax payments and lower
acquisition spending. For the year ended December 31, 2002, the net cash outflow
was $0.3 billion compared with an inflow of $1.0 billion in 2001; lower
operating cash flow and higher acquisition spending were partly offset by lower
tax payments and higher disposal proceeds. Net cash inflow from operating
activities was $6.2 billion and $19.3 billion for the three months and year
ended December 31, 2002 respectively, compared with $5.5 billion and $22.4
billion in the equivalent periods in 2001. For the fourth quarter, higher profit
was partly offset by higher working capital. For the year, lower profit and
higher working capital were partly offset by higher depreciation resulting from
impairments.
Net debt at December 31, 2002 was $20.3 billion. The ratio of net debt to
net debt plus equity was 22% at December 31, 2002 compared with 23% at December
31, 2001. After adjusting for the fixed asset revaluation adjustments and
goodwill consequent upon the ARCO and Burmah Castrol acquisitions, the ratio of
net debt to net debt plus equity was 28% at December 31, 2002 and 29% at
December 31, 2001. In addition to reported debt, BP uses conventional off
balance sheet sources of finance such as operating leases and joint venture and
associated undertaking borrowings.
The Group has access to other sources of liquidity in the form of committed
facilities and other funding through the capital markets. BP believes that,
taking into account the substantial amounts of undrawn borrowing facilities
available, the Group has sufficient working capital for foreseeable
requirements.
In the normal course of business the Group has entered into certain long
term purchase commitments principally relating to take or pay contracts for the
purchase of natural gas, crude oil and chemicals feedstocks and throughput
arrangements for pipelines. The Group expects to fulfil its obligations under
these arrangements with no adverse consequences to the Group's results of
operations or financial condition.
The return on average capital employed on a replacement cost basis for the
three months ended December 31, 2002 was 8% compared with 4% for the equivalent
period of 2001. For the year ended December 31, 2002, the return on average
capital employed was 6% compared with 11% for 2001. The return on average
capital employed on a historical cost basis was 4% for the fourth quarter and 8%
for the year. For further information on the return on average capital employed
calculation see page 67 of this report.
BP announced a fourth quarterly dividend for 2002 of 6.25 cents per
ordinary share. The dividend for the year was 24.0 cents per ordinary share.
Holders of ordinary shares will receive 3.815 pence per share and holders of
American Depositary Receipts (ADRs) $0.375 per ADS. The dividend is payable on
March 24, 2003 to shareholders on the register on February 28, 2003.
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 also on March 24, 2003.
Page 4
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
The board sets the dividend on a balance of a variety of factors. It
considers not only present earnings but also long-term growth prospects and cash
flow. It also considers the Group's competitive position and determines the
payment, which broadly corresponds to around 60% of sustainable earnings,
calculated under standardized assumptions over a run of years. This is not a
mechanical calculation, but judges the balance between all the factors and the
options available.
The company did not repurchase any shares during the quarter. In 2002, 100
million of its own shares were purchased for cancellation at a cost of $750
million. BP has determined to repurchase $2 billion of its own shares, subject
to market conditions and continued support at the April 2003 Annual General
Meeting.
RECENT DEVELOPMENTS
BP and the Alfa Group and Access-Renova (AAR) announced on February 11,
2003 that they have agreed in principle to combine their interests in Russia to
create the country's third biggest oil and natural gas business, in which they
will each have a 50% stake. The assets being contributed by BP to the new
company include its holding in Sidanco, its stake in Rusia Petroleum, its
interest in the Sakhalin V exploration licence and its holding in the BP Moscow
retail network. AAR is contributing its holdings in TNK and Sidanco, its share
of Rusia Petroleum, its stake in the Rospan gasfield in West Siberia and its
interest in the Sakhalin IV & V exploration licence. Neither AAR's association
with Slavneft, nor BP's interest in LukArco or the Russian elements of BP's
international businesses such as lubricants, marine and aviation, are included
in the transaction.
For its stake in the new company, BP will pay AAR $3 billion in cash on
completion of the deal and three subsequent annual tranches of $1.25 billion in
BP shares, valued at market prices prior to each annual payment. The
transaction, which will be effective from January 1, 2003, is scheduled for
completion in the summer.
Page 5
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
The following tables provide a breakdown of pro forma results and reconcile
those results to replacement cost operating profit by operating segment.
Pro forma
Reconciliation of replacement cost Replacement result
profit (loss) to pro forma result cost Acquisition Special adjusted for
adjusted for special items profit (loss) amortization(a) items(b) special items
-------------- ------------- ---------- ---------------
($ million)
Three months ended December 31, 2002
Exploration and Production 3,248 319 99 3,666
Gas, Power and Renewables 72 - - 72
Refining and Marketing (36) 203 420 587
Chemicals 104 - 35 139
Other businesses and corporate (207) - 61 (146)
------ ------ ------ ------
Replacement cost operating profit 3,181 522 615 4,318
Interest expense (332) - 15 (317)
Taxation (1,146) - (214) (1,360)
Minority shareholders' interest (6) - - (6)
------ ------ ------ ------
Replacement cost profit before
exceptional items 1,697 522 416 2,635
------ ====== ====== ======
Exceptional items before tax (893)
Taxation on exceptional items 21
------
RC profit after exceptional items 825
Inventory holding gains (losses) (174)
------
HC profit 651
======
Three months ended December 31, 2001
Exploration and Production 1,641 411 322 2,374
Gas, Power and Renewables 102 - - 102
Refining and Marketing 379 193 213 785
Chemicals (67) - 106 39
Other businesses and corporate (175) - 73 (102)
------ ------ ------ ------
Replacement cost operating profit 1,880 604 714 3,198
Interest expense (414) - - (414)
Taxation (737) - (253) (990)
Minority shareholders' interest (23) - - (23)
------ ------ ------ ------
Replacement cost profit before exceptional items 706 604 461 1,771
------ ====== ====== ======
Exceptional items before tax (38)
Taxation on exceptional items 26
------
RC profit after exceptional items 694
Inventory holding gains (losses) (1,297)
------
HC (loss) (603)
======
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustments 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 fourth quarter include an asset write-down in Exploration and
Production, integration and restructuring costs and an impairment charge in
Refining and Marketing, integration and restructuring costs in Chemicals,
provisions to cover future rental payments on surplus leasehold property
and environmental charges in Other businesses and corporate, and a bond
redemption charge. The effective tax rate on special items was 34%. The
special items for the fourth quarter of 2001 comprise additional severance
charges, mainly related to former ARCO employees, an impairment charge for
our partner operated Venezuelan Lake Maracaibo operations, Castrol, Solvay
and Erdoelchemie integration costs, Grangemouth restructuring and
litigation costs; the taxation credit relating to these special items has
been calculated using a tax rate of 35%.
Page 6
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Pro forma
Reconciliation of replacement cost Replacement result
profit (loss) to pro forma result cost Acquisition Special adjusted for
adjusted for special items profit (loss) amortization(a) items(b) special items
-------------- ------------- ---------- ---------------
($ million)
Year ended December 31, 2002
Exploration and Production 9,206 1,780 1,019 12,005
Gas, Power and Renewables 354 - 30 384
Refining and Marketing 872 794 415 2,081
Chemicals 515 - 250 765
Other businesses and corporate (701) - 186 (515)
-------------- ------------- ---------- ---------------
Replacement cost operating profit 10,246 2,574 1,900 14,720
Interest expense (1,279) - 15 (1,264)
Taxation (4,217) - (456)(c) (4,673)
Minority shareholders' interest (52) - (16) (68)
-------------- ------------- ---------- ---------------
Replacement cost profit before
exceptional items 4,698 2,574 1,443 8,715
-------------- ============= ========== ===============
Exceptional items before tax 1,168
Taxation on exceptional items (125)
--------------
RC profit after exceptional items 5,741
Inventory holding gains (losses) 1,104
--------------
HC profit 6,845
==============
Year ended December 31, 2001
Exploration and Production 12,361 1,815 322 14,498
Gas, Power and Renewables 488 - - 488
Refining and Marketing 3,573 770 487 4,830
Chemicals 128 - 114 242
Other businesses and corporate (523) - 73 (450)
-------------- ------------- ---------- ---------------
Replacement cost operating profit 16,027 2,585 996 19,608
Interest expense (1,670) - 62 (1,608)
Taxation (6,005) - (375) (6,380)
Minority shareholders' interest (61) - - (61)
-------------- ------------- ---------- ---------------
Replacement cost profit before
exceptional items 8,291 2,585 683 11,559
-------------- ============= ========== ===============
Exceptional items before tax 535
Taxation on exceptional items (370)
--------------
RC profit after exceptional items 8,456
Inventory holding gains (losses) (1,900)
--------------
HC profit 6,556
==============
---------------
(a) Acquisition amortization refers to depreciation relating to the fixed asset
revaluation adjustments 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 year 2002 comprise impairment charges, an asset write-down,
restructuring and litigation costs for Exploration and Production; an
impairment charge in Gas, Power and Renewables; integration and
restructuring costs, business interruption insurance proceeds,
restructuring and integration costs and certain other costs in Refining and
Marketing; integration costs and an asset write-down in Chemicals; a
provision to cover future rental payments on surplus leasehold property and
environmental charges in Other businesses and corporate; and a bond
redemption charge. Taxation includes a special charge for an adjustment to
the North Sea deferred tax liability for the supplementary UK corporation
tax as well as tax relief expected on impairments and related
restructuring. The special items for the year 2001 comprise additional
severance charges, mainly related to former ARCO employees, an impairment
charge for our partner operated Venezuelan Lake Maracaibo operations,
rationalization costs in the European downstream commercial business,
Castrol, Solvay and Erdoelchemie integration costs, Grangemouth
restructuring, and litigation costs.
(c) Taxation includes a special charge of $355 million for an adjustment to the
North Sea deferred tax liability for the supplementary UK corporation tax,
and reflects tax relief expected on impairments and related restructuring.
Page 7
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
DETAILED REVIEW OF BUSINESSES (EXCLUDING EXCEPTIONAL ITEMS)
EXPLORATION AND PRODUCTION
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
---------------------- -----------------------
Turnover - $m 7,356 5,336 25,753 28,229
Total replacement cost operating profit - $m 3,248 1,641 9,206 12,361
Results include:
Exploration expense - $m 179 144 644 480
Of which: Exploration expenditure written off - $m 124 85 385 238
Key Statistics:
Liquids(a) Average prices
realized by BP - $/bbl 24.78 17.72 22.69 22.50
Production - mb/d 2,049 2,017 2,018 1,931
Natural gas Average prices
realized by BP - $/mcf 2.87 2.28 2.46 3.30
Production - mmcf/d 8,936 8,764 8,707 8,632
Brent oil price - $/bbl 26.88 19.41 25.03 24.44
West Texas Intermediate oil price - $/bbl 28.31 20.31 26.14 25.89
Alaska North Slope US West Coast - $/bbl 26.86 17.79 24.77 23.18
Henry Hub gas price (b) - $/mmBtu 3.99 2.43 3.22 4.26
UK Gas - National Balancing Point - p/therm 19.09 22.32 15.78 22.21
---------------
(a) Crude oil and natural gas liquids
(b) Henry Hub First of the Month Index
(c) Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1
million barrels.
Turnover for the three months ended December 31, 2002 was $7,356 million
compared with $5,336 million in the corresponding period in 2001, reflecting
higher liquids and natural gas realizations as well as increased production.
Turnover for the year ended December 31, 2002 was $25,753 million compared with
$28,229 million for the corresponding period of 2001, with the effect of higher
production and liquids realizations more than offset by lower natural gas
prices.
Replacement cost operating profit for the three months and year ended
December 31, 2002 was $3,248 million and $9,206 million respectively, compared
with $1,641 million and $12,361 million for the equivalent periods in 2001. The
result for the fourth quarter 2002 includes special charges of $94 million for
the write-off of our Gas to Liquids demonstration plant in Alaska and $5 million
restructuring charges. The year 2002 also includes special charges of $686
million and accelerated acquisition amortization of $405 million related to the
impairments of Shearwater in the North Sea, Rhourde El Baguel in Algeria, LL652
and Boqueron in Venezuela, Pagerungan in Indonesia and Badami in Alaska,
following full technical reassessments and evaluations of future investment
opportunities. In addition, there were special restructuring charges of $179
million relating to significant restructuring to reposition the business in
North America and the North Sea and $55 million litigation costs. The results
also include depreciation and amortization arising from the fixed asset
revaluation adjustments and goodwill consequent upon the ARCO acquisition in
2000 of $319 million and $1,780 million for the fourth quarter and year 2002,
including $405 million accelerated depreciation of the revaluation adjustment in
respect of former ARCO assets included in the impairments described above, and
$411 million and $1,815 million for the corresponding periods in 2001.
Page 8
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
EXPLORATION AND PRODUCTION (concluded)
The result for the quarter benefited from higher average liquids
realizations, up $7.06 on a year ago. There was a benefit from a credit of $49
million for Unrealized Profit in Stock (UPIS) to remove the upstream margin from
downstream inventories following a decrease in the ANS oil price. This compares
to a credit of $119 million in the equivalent quarter of last year. Average
natural gas realizations have increased by $0.59 per thousand cubic feet
compared with the fourth quarter of 2001. North American natural gas
realizations have improved reflecting the strong North American gas market.
Fourth quarter production of 3,590 mboe/d benefited from seven new field
start-ups at Horn Mountain, Aspen and Princess in the Gulf of Mexico; Nam Con
Son in Vietnam; ETAP satellites and Wollaston Whittle in the UK and Edfu in
Egypt. Increased production was partly offset by the effects of Gulf of Mexico
hurricanes, shut-ins in Venezuela and an earthquake in Alaska.
The full year result reflects production growth of 4.5% for liquids and
0.9% for natural gas (2.9% overall), a 6% decrease in unit lifting costs and
slightly higher liquids realizations, which were more than offset by
significantly lower natural gas realizations. Production increases for the year
were lower than planned due to a number of factors, including lower gas demand
resulting from warm weather in the UK, OPEC reductions, severe storm patterns in
the Gulf of Mexico, the general strike in Venezuela and operational problems in
Alaska and in the UK.
The reserve replacement ratio for the year was 175% with 2,016 billion
barrels of oil equivalent booked through discoveries, extensions, revisions and
improved recovery. Reserve replacement has exceeded production for ten
consecutive years at an average ratio of 145% over that period.
In support of growth, 2002 capital expenditure at $9.7 billion (including
$434 million of acquisitions) was 9% higher than 2001. During the quarter the
development of Atlantis in the Gulf of Mexico and an expansion of the
development at In Amenas in Algeria were approved and there were a total of six
discoveries in the Gulf of Mexico, Angola and Egypt.
In December, the sale of the Arbroath, Montrose and Arkwright fields in the
North Sea to Paladin Resources was announced. In January, we announced the sale
of our stake in the North Sea Forties oil field, together with a package of
shallow-water assets in the Gulf of Mexico, to Apache. Also in January, we
completed the sale of 20% of our upstream interests in Trinidad to Repsol. We
also announced a transaction with Amerada Hess, under which BP will exchange its
interest in block A-18 of the Malaysia Thailand Joint Development Area for
Amerada Hess's interests in Colombia. In February, we announced the sale of a
12.5% share in the Tangguh liquefied natural gas project in Indonesia to China
National Offshore Oil Corporation.
Page 9
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
GAS, POWER AND RENEWABLES
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
--------------------- ----------------------
Turnover - $m 12,041 7,522 37,357 39,442
Total replacement cost operating profit - $m 72 102 354 488
On January 1, 2002, the solar, renewables and alternative fuels activities
were transferred from Other businesses and corporate to Gas and Power. To
reflect this transfer, Gas and Power has been renamed Gas, Power and Renewables
from the same date and comparative information has been restated.
Turnover for the three months and year ended December 31, 2002 was $12,041
million and $37,357 million, compared with $7,522 million and $39,442 million
for the same periods in 2001. The increase for the quarter reflects higher
natural gas prices and sales volumes. For the year, higher natural gas sales
volumes were more than offset by lower prices, particularly in North America.
Replacement cost operating profit for the three months and year ended
December 31, 2002 was $72 million and $354 million respectively, compared with
$102 million and $488 million a year ago. The result for the year 2002 includes
special charges of $30 million related to the impairment of a cogeneration power
plant in the UK. The fourth quarter result was down versus the prior year due to
the absence of contributions from Ruhrgas, partly offset by higher volumes and
margins in marketing and trading. The sale of the Ruhrgas shareholding was
effective August 1, 2002.
The full year result is down on 2001 due to a lower contribution from
Ruhrgas and a weaker marketing and trading environment, partly offset by better
performance in the NGL business and increased natural gas sales volumes, up by
15%.
During the fourth quarter, BP announced a restructuring of its Solar
operation and the withdrawal from Thin Film manufacturing. We also announced the
start-up of our 22.5 megawatt wind farm at the Nerefco oil refinery in the
Netherlands and the first commercial sale of green electricity into the Dutch
national power grid. The refinery and the wind farm are jointly (BP 69%) owned
with ChevronTexaco. In the fourth quarter BP took delivery of the British
Trader, the first of three new leased LNG ships.
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 Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
---------------------- -------------------------
Turnover - $m 33,443 26,528 125,836 120,233
Total replacement cost operating (loss) profit - $m (36) 379 872 3,573
Total refined product sales - mb/d 6,360 6,447 6,563 6,206
Refinery throughputs - mb/d 3,157 2,847 3,103 2,929
Global Indicator Refining Margin (a) - $/bbl 2.76 2.40 2.11 4.06
---------------
(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 three months and year ended December 31, 2002 was $33,443
million and $125,836 million respectively, compared with $26,528 million and
$120,233 million, for the same periods in the prior year. The increase in
turnover for the fourth quarter and year is due primarily to volume increases
from the Veba acquisition. Results for Veba have been included from February 1,
2002.
Replacement cost operating loss for the three months ended December 31,
2002 was $36 million compared with profit of $379 million for the corresponding
period of 2001. For the year, replacement cost operating profit was $872 million
in 2002 compared with $3,573 million in the prior year. The results for the
fourth quarter and year 2002 include special charges of $420 million and $415
million respectively. For the fourth quarter 2002, special items include $261
million Veba integration costs, $116 million restructuring costs, a $35 million
write-down of retail assets in Venezuela and $8 million costs associated with
the Olympic pipeline incident. Special items for the year also included business
interruption insurance proceeds of $184 million, mostly offset by additional
Veba integration costs of $87 million, additional costs of $54 million related
to the Olympic pipeline incident, $22 million settlement costs associated with a
pre-acquisition ARCO US MTBE supply contract and $16 million other integration
costs. The results are also after charging depreciation and amortization arising
from the fixed asset revaluation adjustments and goodwill, arising from the ARCO
and Burmah Castrol acquisitions in 2000 of $203 million and $794 million for the
fourth quarter and year respectively, and $193 million and $770 million for the
corresponding periods in 2001.
The decrease in the fourth quarter result was primarily due to lower US
retail and US West Coast refining margins, which more than offset the
contribution from Veba. Refining throughputs increased by 11% compared with a
year ago due to Veba and a smaller maintenance programme in the USA. Marketing
volumes increased by 15%, but were down slightly excluding Veba. Shop sales
increased by 66%, 7% excluding Veba.
The result for the year reflects the impact of a halving of worldwide
refining margins with a further adverse effect from price differentials in BP's
crude oil mix, and lower US retail margins, with some offset from Veba. Refining
throughputs increased by 6% over the previous year and marketing volumes
increased by 10%, primarily due to Veba. Excluding Veba, marketing volumes were
slightly down. Retail shop sales grew 60% due to Veba and the increased number
of BP Connect stations, 10% excluding Veba.
A total of 486 BP Connect stations were open in the USA, Europe, Australia
and New Zealand at year end compared with 339 at the end of 2001. In addition,
BP has reimaged over 10,000 retail stations worldwide to BP's new Helios logo.
In December, BP completed the sale of its interest in the Colonial Pipeline
in the USA. BP also announced that it had signed an agreement to sell 494
service stations to PKN Orlen. On 10 February, BP announced that it had agreed
to sell a 45% stake in the Bayernoil Refinery, an 18% stake in the Trans Alpine
Pipeline (TAL), 247 retail stations in Germany, 55 stations in Hungary and 11 in
Slovakia to OMV AG for (euro)377 million in cash and assumption of debt. The
sale is conditional on regulatory approvals and the nonexercise of certain
pre-emption rights. The sale of the German assets enables BP to fully comply
with the conditions imposed by the German Federal Cartel Office (FCO) when it
approved BP's acquisition of Veba Oil in April 2002.
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 Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
-------------------- ---------------------
Turnover - $m 3,118 2,481 13,064 11,515
Total replacement cost operating profit (loss) - $m 104 (67) 515 128
Production (a) - kte 6,609 6,048 26,988 22,716
Chemicals Indicator Margin (b) - $/te 100(c) 112 102(c) 109
---------------
(a) Includes BP share of joint ventures, associated undertakings and other
interests in production.
(b) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Amongst 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.
(c) Provisional. The data for the fourth quarter is based on two months' actual
and one month of provisional data.
Turnover for the three months and year ended December 31, 2002 was $3,118
million and $13,064 million respectively, compared with $2,481 million and
$11,515 million for the equivalent periods in 2001. The increase in turnover for
the fourth quarter and year primarily reflects higher production as a result of
acquisitions, organic growth and improved site reliability.
Replacement cost operating profit for the three months ended December 31,
2002, was $104 million, down from $132 million in the third quarter and up from
an operating loss of $67 million a year ago. The results for the fourth quarter
and year 2002 include special charges of $35 million and $250 million
respectively. Special items for the fourth quarter include $17 million Solvay
integration costs and $18 million for restructuring. The special items for the
year also include a $140 million write-down of our Indonesian manufacturing
assets following a review of its immediate prospects and opportunities for
future growth in a highly competitive regional market, and $75 million
additional integration and restructuring costs.
The decline in fourth quarter replacement cost operating profit compared
with the third quarter of 2002 was the result of margin compression due to
higher feedstock costs, particularly in Europe, and weaker demand. The fourth
quarter result was an increase of $171 million over a year ago, reflecting
higher production and lower costs than in 2001, despite a weaker environment.
The year's result was an increase of $387 million, in an overall trading
environment which was similar. This improvement was driven by lower costs and
increased production.
Chemicals production of 6,609 thousand tonnes in the fourth quarter was
down 271 thousand tonnes on the previous quarter, as demand weakened. Production
for the year was 26,988 thousand tonnes, up 19%, as a result of new production
from existing and acquired assets.
Major restructuring continued throughout the year, aimed at repositioning
the portfolio and lowering the cost base. The fourth quarter and full year
results include $14 million and $39 million respectively for restructuring costs
not classified as special items.
During the fourth quarter, we announced the intention to exit from a
polyethylene joint venture in Bataan, Philippines and the closure of an older
118 thousand tonnes per annum high-density polyethylene plant at Deer Park,
Texas. Also during the quarter, we sold one of the remaining Burmah Castrol
chemicals businesses and have since announced the sale of the other two. We also
announced the formation of an acetic acid joint venture in Taiwan and plans to
expand our olefins production at Chocolate Bayou, Texas.
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 Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
-------------------- ---------------------
Turnover - $m 131 146 510 549
Replacement cost operating (loss) - $m (207) (175) (701) (523)
Other businesses and corporate comprises Finance, the Group's coal asset
and aluminium asset, its investments in PetroChina and Sinopec, interest income
and costs relating to corporate activities. The result for the fourth quarter
includes special charges of $61 million comprising a provision of $15 million
for future rentals on surplus leasehold property and a charge of $46 million for
environmental liabilities. Special items for the year also include additional
provision of $125 million to cover future rental payments on surplus leasehold
property.
EXCEPTIONAL ITEMS
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
------------------------- -------------------------
Profit (loss) on sale of fixed assets and
businesses or termination of operations - $m (893) (38) 1,168 535
Taxation credit (charge) - $m 21 26 (125) (370)
------- ------ ------ -----
Exceptional items after taxation - $m (872) (12) 1,043 165
------- ------ ------ -----
Exceptional items for the fourth quarter include provisions for losses on
disposal of certain upstream interests announced since the year end and profit
on disposal of BP's interest in the Colonial pipeline in the USA. Exceptional
items for the year also included profits from disposal of our Ruhrgas interest
and a US downstream electronic payment system and a gain on the redemption of
certain preferred partnership interests BP retained following the disposal in
2000 of the Altura Energy common interest in exchange for BP loan notes held by
the partnership.
OUTLOOK
The world economy slowed during the fourth quarter with weaker growth in
both the USA and much of Continental Europe. Evidence of sustained recovery is
limited and confidence fragile.
Brent crude oil prices have recently exceeded $30 per barrel compared to an
average of $27 in the fourth quarter. Venezuelan oil production declined sharply
as a result of the general strike that commenced in early December but has now
begun to recover. Other OPEC producers have raised production to replace some of
this lost output. Crude oil inventories have fallen, especially in the USA, and
are below normal seasonal levels. The prospect for crude oil prices is
particularly uncertain, and will be affected by such issues as the timing and
extent of developments in Venezuela and Iraq and global economic growth.
US natural gas prices have strengthened further as demand has firmed
seasonally, oil prices have increased and production has been weak. Prices are
expected to remain at a premium to residual fuel oil through the winter heating
season.
Refining margins have risen sharply in face of declining US product stocks
and refinery turnarounds. Global oil product demand is recovering but margins
remain susceptible to crude supply uncertainties.
Retail margins weakened towards the end of the fourth quarter, especially
in the USA, and this trend has continued into the first quarter. Margins remain
vulnerable to further volatility in oil product prices.
The Chemicals business environment has remained weak, with demand soft and
margins under pressure from high feedstock prices.
Capital expenditure for 2002 was $13.5 billion, excluding acquisitions, and
is projected to be in the range of $14-14.5 billion in 2003.
Our strategy remains to create value from a distinctive set of
opportunities, biased towards the upstream, which, through a disciplined
approach to long term investment growth, can produce returns which are both
secure and highly competitive.
Page 13
BP p.l.c. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - concluded
FORWARD-LOOKING STATEMENTS
In order to utilize the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, BP is providing the following
cautionary statement. The foregoing discussion, in particular, although not
limited to, the statements under `Group Results' and the statements under
`Outlook', with regard to hydrocarbon production growth and targets, the outlook
for economic recovery, trends in the trading environment, the timing of new
projects, oil and gas prices and margins, refining margins, expected
realizations on gas sales, inventory and product stock levels, planned product
phase-outs, capacity utilization, capital expenditure trends and targets,
working capital, profitability, results of operation, dividend payments and
liquidity or financial position are all forward-looking in nature.
Forward-looking statements are also identified by such phrases as `will',
`expects', `is expected to', `should', `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, the timing of bringing new fields onstream, demand and pricing,
operational problems, political stability and economic growth in relevant areas
of the world, development and use of new technology, successful partnering, the
actions of competitors, the actions of third party suppliers of facilities and
services, natural disasters and other changes to business conditions, prolonged
adverse weather conditions, wars and acts of terrorism or sabotage, and other
factors discussed elsewhere in this report. These and other factors 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 Annual Accounts for 2001 and the Annual Report on Form 20-F
for 2001 filed with the US Securities and Exchange Commission.
2002 DIVIDENDS
On February 11, 2002, BP p.l.c. announced a fourth quarterly dividend for 2002
of 6.25 cents per ordinary share of 25 cents (ordinary shares), representing
$0.375 per American Depositary Share (ADS) amounting to $1,398 million in total.
The record date for qualifying US resident holders of American Depositary Shares
as well as holders of ordinary shares is February 28, 2002, with payment to be
made on March 24, 2003.
The dividend payable on March 24, 2003 entitles qualifying US ADS shareholders
to a refund of the 1/9th UK tax credit (approximately $0.04) 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
$0.36, a gross dividend for tax purposes of $0.40 and a potential tax credit of
$0.04 per ADS.
A dividend reinvestment facility is available for holders of ADSs through
JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company).
Participants in the dividend reinvestment facility included in the US Direct
Access Plan will receive the dividend in the form of shares on March 24, 2003.
Page 14
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
--------------------- ---------------------
($ million, except per share amounts)
Turnover - Note 3 50,135 37,114 180,186 175,389
Less: joint ventures 413 297 1,465 1,171
-------- -------- -------- --------
Group turnover 49,722 36,817 178,721 174,218
Replacement cost of sales 42,858 31,899 155,528 147,001
Production taxes - Note 4 362 336 1,274 1,689
-------- -------- -------- --------
Gross profit 6,502 4,582 21,919 25,528
Distribution and administration expenses 3,604 3,076 12,632 10,918
Exploration expense - Note 5 179 144 644 480
-------- -------- -------- --------
2,719 1,362 8,643 14,130
Other income 218 208 641 694
-------- -------- -------- --------
Group replacement cost operating profit 2,937 1,570 9,284 14,824
Share of profits of joint ventures 83 91 346 443
Share of profits of associated undertakings 161 219 616 760
-------- -------- -------- --------
Total replacement cost operating profit - Note 6 3,181 1,880 10,246 16,027
Profit (loss) on sale of fixed assets and businesses
or termination of operations - Note 7 (893) (38) 1,168 535
-------- -------- -------- --------
Replacement cost profit before interest
and tax - Note 6 2,288 1,842 11,414 16,562
Inventory holding gains (losses) - Note 8 (174) (1,297) 1,129 (1,900)
-------- -------- -------- --------
Historical cost profit before interest and tax 2,114 545 12,543 14,662
Interest expense - Note 9 332 414 1,279 1,670
-------- -------- -------- --------
Profit before taxation 1,782 131 11,264 12,992
Taxation - Note 10 1,125 711 4,342 6,375
-------- -------- -------- --------
Profit (loss) after taxation 657 (580) 6,922 6,617
Minority shareholders' interest 6 23 77 61
-------- -------- -------- --------
Profit (loss) for the period (a) 651 (603) 6,845 6,556
======== ======== ======== ========
Earnings per ordinary share - cents (a)
Basic 2.92 (2.67) 30.55 29.21
Diluted 2.92 (2.64) 30.41 29.04
-------- -------- -------- --------
Earnings per American Depositary Share - cents (a)
Basic 17.52 (16.02) 183.30 175.26
Diluted 17.52 (15.84) 182.46 174.24
-------- -------- -------- --------
Average number of outstanding ordinary
shares (thousands) 22,351,122 22,396,315 22,397,126 22,435,737
========== ========== ========== ==========
---------------
(a) A summary of the material adjustments to profit for the period which would
be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 15
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2002 December 31, 2001
----------------------- -----------------------
($ million)
Fixed assets
Intangible assets 15,566 16,489
Tangible assets 87,682 77,410
Investments 10,811 11,963
------- -------
114,059 105,862
Current assets
Inventories 10,181 7,631
Receivables 33,150 26,669
Investments 215 450
Cash at bank and in hand 1,520 1,358
------- -------
45,066 36,108
------- -------
Current liabilities - falling due within one year
Finance debt 10,086 9,090
Accounts payable and accrued liabilities 36,215 28,524
------- -------
46,301 37,614
------- -------
Net current liabilities (1,235) (1,506)
------- -------
Total assets less current liabilities 112,824 104,356
Noncurrent liabilities
Finance debt 11,922 12,327
Accounts payable and accrued liabilities 3,455 3,086
Provisions for liabilities and charges
Deferred tax 13,514 11,702
Other 13,886 11,482
------- -------
42,777 38,597
------- -------
Net assets 70,047 65,759
Minority shareholders' interest - equity 638 598
------- -------
BP shareholders' interest (a) - Note 14 69,409 65,161
======= =======
Represented by:
Capital shares
Preference 21 21
Ordinary 5,595 5,608
Paid-in surplus 4,243 4,014
Merger reserve 27,033 26,983
Retained earnings 32,344 28,312
Other reserves 173 223
------- -------
69,409 65,161
======= =======
---------------
(a) A summary of the material adjustments to BP shareholders' interest which
would be required if generally accepted accounting principles in the United
States had been applied instead of those generally accepted in the United
Kingdom is given in Note 15.
Page 16
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
------------------------ ------------------------
($ million)
Net cash inflow from operating activities 6,197 5,547 19,342 22,409
------- ------- ------- -------
Dividends from joint ventures 69 12 198 104
------- ------- ------- -------
Dividends from associated undertakings 65 104 368 528
------- ------- ------- -------
Servicing of finance and returns on investments
Interest received 63 83 231 256
Interest paid (335) (229) (1,204) (1,282)
Dividends received 38 35 102 132
Dividends paid to minority shareholders (11) (38) (40) (54)
------- ------- ------- -------
Net cash outflow from servicing of finance
and returns on investments (245) (149) (911) (948)
------- ------- ------- -------
Taxation
UK corporation tax (419) (454) (979) (1,058)
Overseas tax (642) (968) (2,115) (3,602)
------- ------- ------- -------
Tax paid (1,061) (1,422) (3,094) (4,660)
------- ------- ------- -------
Capital expenditure
Payments for fixed assets (3,544) (3,688) (12,116) (12,214)
Proceeds from the sale of fixed assets 726 615 2,470 2,365
------- ------- ------- -------
Net cash outflow for capital expenditure (2,818) (3,073) (9,646) (9,849)
------- ------- ------- -------
Acquisitions and disposals
Investments in associated undertakings (215) (179) (971) (586)
Proceeds from sale of investment in Ruhrgas - - 2,338 -
Acquisitions, net of cash acquired (28) (602) (4,324) (1,210)
Net investment in joint ventures (217) (220) (354) (497)
Proceeds from the sale of businesses 304 231 1,974 538
------- ------- ------- -------
Net cash outflow for acquisitions and disposals (156) (770) (1,337) (1,755)
------- ------- ------- -------
Equity dividends paid (1,340) (1,232) (5,264) (4,827)
------- ------- ------- -------
Net cash inflow (outflow) 711 (983) (344) 1,002
======= ======= ======= =======
Financing 304 (855) (181) 972
Management of liquid resources (56) (65) (220) (211)
Increase (decrease) in cash 463 (63) 57 241
------- ------- ------- -------
711 (983) (344) 1,002
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 17
BP p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - concluded
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
--------------------- ---------------------
($ million)
Reconciliation of historical cost profit before interest
and tax to net cash inflow from operating activities
Historical cost profit before interest and tax 2,114 545 12,543 14,662
Depreciation and amounts provided 2,515 2,457 10,401 8,858
Exploration expenditure written off 124 85 385 238
Share of profits of joint ventures and associated undertakings (250) (303) (966) (1,194)
Interest and other income (115) (132) (358) (478)
(Profit) loss on sale of fixed assets and businesses 895 36 (1,166) (537)
Charge for provisions 451 187 1,277 1,008
Utilization of provisions (424) (221) (1,427) (1,119)
Decrease (increase) in stocks (63) 1,368 (1,521) 1,490
Decrease (increase) in debtors (269) 1,241 (2,672) 1,989
Increase (decrease) in creditors 1,219 284 2,846 (2,508)
------- ------- ------- -------
Net cash inflow from operating activities 6,197 5,547 19,342 22,409
======= ======= ======= =======
Financing
Long-term borrowing (651) (267) (3,707) (1,296)
Repayments of long-term borrowing 905 434 2,369 2,602
Short-term borrowing (3,970) (2,764) (9,849) (6,257)
Repayments of short-term borrowing 4,037 1,656 10,451 4,823
------- ------- ------- -------
321 (941) (736) (128)
Issue of ordinary share capital (17) (13) (195) (181)
Repurchase of ordinary share capital - 99 750 1,281
------- ------- ------- -------
Net cash (inflow) outflow from financing 304 (855) (181) 972
======= ======= ======= =======
---------------
(a) This cash flow statement has been prepared in accordance with UK GAAP. A
cash flow statement presented on a SFAS 95 format is included in Note 15.
Page 18
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial information for the years ended December 31, 2002 and 2001
included in this Report has been extracted from BP's 2002 Annual Report and
Accounts. These accounts were approved by a duly appointed and authorized
committee of the Board of Directors at the Results Committee on February
11, 2003. The report of the auditors on those accounts was unqualified. The
2002 Annual Report and Accounts will be published in mid-March 2003. 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 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, 2001
included in BP's Annual Report on Form 20-F filed with the Securities and
Exchange Commission.
2. Restatement of comparative information
Comparative information for 2001 has been restated to reflect the changes
described below.
(a) Transfer of solar, renewables and alternative fuels activities
With effect from January 1, 2002, the solar, renewables and
alternative fuels activities have been transferred from Other
businesses and corporate to Gas and Power. To reflect this transfer
Gas and Power has been renamed Gas, Power and Renewables from the same
date.
(b) New accounting standard for deferred tax
With effect from January 1, 2002 BP has adopted Financial Reporting
Standard No.19 'Deferred Tax' (FRS 19). This standard generally
requires that deferred tax should be provided on a full liability
basis rather than on a restricted liability basis as required by
Statement of Standard Accounting Practice No.15 'Accounting for
Deferred Tax'. The adoption of FRS 19 has been treated as a change in
accounting policy.
Under FRS 19 deferred tax is recognised in respect of all timing
differences that have originated but not reversed at the balance sheet
date where transactions or events have occurred at that date that will
result in an obligation to pay more, or right to pay less tax in the
future. In particular:
o Provision is made for tax on gains arising from the disposal of
fixed assets that have been rolled over into replacement assets,
only to the extent that, at the balance sheet date, there is a
binding agreement to dispose of the replacement assets concerned.
However, no provision is made where, on the basis of all
available evidence at the balance sheet date, it is more likely
than not that the taxable gain will be rolled over into
replacement assets and charged to tax only where the replacement
assets are sold.
o Provision is made for deferred tax that would arise on remittance
of the retained earnings of overseas subsidiaries, joint ventures
and associated undertakings only to the extent that, at the
balance sheet date, dividends have been accrued as receivable.
Deferred tax assets are recognised only to the extent that it is
considered more likely than not that there will be suitable taxable
profits from which the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates
that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted
at the balance sheet date.
As a consequence of adopting FRS 19 acquisitions have been restated as
if the new standard applied at that time. This leads to the creation
of higher deferred tax liabilities and greater amounts of goodwill on
those acquisitions.
Page 19
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Restatement of comparative information - continued
Income statement Three months ended Year ended
December 31, 2001 December 31, 2001
(Unaudited)
Restated Reported Restated Reported
------------------------- --------------------------
($ million, except per share amounts)
Turnover 37,114 37,114 175,389 175,389
Less: joint ventures 297 297 1,171 1,171
-------- -------- -------- --------
Group turnover 36,817 36,817 174,218 174,218
Replacement cost of sales 31,899 31,872 147,001 146,893
Production taxes 336 336 1,689 1,689
-------- -------- -------- --------
Gross profit 4,582 4,609 25,528 25,636
Distribution and administration expenses 3,076 3,076 10,918 10,918
Exploration expense 144 144 480 480
-------- -------- -------- --------
1,362 1,389 14,130 14,238
Other income 208 208 694 694
-------- -------- -------- --------
Group replacement cost operating profit 1,570 1,597 14,824 14,932
Share of profits of joint ventures 91 91 443 443
Share of profits of associated undertakings 219 219 760 760
-------- -------- -------- --------
Total replacement cost operating profit (a) 1,880 1,907 16,027 16,135
Profit (loss) on sale of fixed assets and
businesses or termination of operations (38) (38) 535 535
-------- -------- -------- --------
Replacement cost profit before interest and tax 1,842 1,869 16,562 16,670
Inventory holding gains (losses) (1,297) (1,297) (1,900) (1,900)
-------- -------- -------- --------
Historical cost profit before interest and tax 545 572 14,662 14,770
Interest expense 414 414 1,670 1,670
-------- -------- -------- --------
Profit before taxation 131 158 12,992 13,100
Taxation 711 537 6,375 5,017
-------- -------- -------- --------
Profit (loss) after taxation (580) (379) 6,617 8,083
Minority shareholders' interest 23 26 61 73
-------- -------- -------- --------
Profit (loss) for the period (603) (405) 6,556 8,010
-------- -------- -------- --------
Distribution to shareholders 1,289 1,289 4,935 4,935
-------- -------- -------- --------
Earnings per ordinary share - cents
Basic (2.67) (1.78) 29.21 35.70
Diluted (2.64) (1.76) 29.04 35.48
======== ======== ======== ========
--------
(a) Total replacement cost operating profit, by business
Exploration and Production 1,641 1,655 12,361 12,417
Gas, Power and Renewables 102 106 488 521
Refining and Marketing 379 392 3,573 3,625
Chemicals (67) (67) 128 128
Other businesses and corporate (175) (179) (523) (556)
-------- -------- -------- --------
1,880 1,907 16,027 16,135
======== ======== ======== ========
Page 20
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Restatement of comparative information - concluded
Balance sheet at December 31, 2001 Restated Reported
--------- ---------
($ million)
Fixed assets
Intangible assets 16,489 15,593
Tangible assets 77,410 77,410
Investments 11,963 12,047
-------- --------
105,862 105,050
-------- --------
Current assets 36,108 36,108
Current liabilities - amounts falling due within one year 37,614 37,614
-------- --------
Net current liabilities (1,506) (1,506)
-------- --------
Total assets less current liabilities 104,356 103,544
Noncurrent liabilities 15,413 15,413
Provisions for liabilities and charges
Deferred taxation 11,702 1,655
Other provisions 11,482 11,482
-------- --------
Net assets 65,759 74,994
Minority shareholders' interest - equity 598 627
-------- --------
BP shareholders' interest 65,161 74,367
======== ========
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
------------------------- -------------------------
($ million)
3 Turnover
By business
Exploration and Production 7,356 5,336 25,753 28,229
Gas, Power and Renewables 12,041 7,522 37,357 39,442
Refining and Marketing 33,443 26,528 125,836 120,233
Chemicals 3,118 2,481 13,064 11,515
Other businesses and corporate 131 146 510 549
------- ------- ------- -------
56,089 42,013 202,520 199,968
Less: sales between businesses 6,367 5,196 23,799 25,750
------- ------- ------- -------
Group excluding joint ventures 49,722 36,817 178,721 174,218
Sales of joint ventures 413 297 1,465 1,171
------- ------- ------- -------
50,135 37,114 180,186 175,389
======= ======= ======= =======
By geographical area
UK 13,084 11,432 48,748 47,618
Rest of Europe 11,720 8,657 46,518 36,701
USA 22,573 16,039 80,381 84,696
Rest of World 10,845 7,285 34,401 33,911
------- ------- ------- -------
58,222 43,413 210,048 202,926
Less: sales between areas 8,500 6,596 31,327 28,708
------- ------- ------- -------
49,722 36,817 178,721 174,218
======= ======= ======= =======
Page 21
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
---------------------- ----------------------
($ million)
4 Production taxes
UK petroleum revenue tax 64 147 309 600
Overseas production taxes 298 189 965 1,089
----- ----- ----- -----
362 336 1,274 1,689
===== ===== ===== =====
5 Exploration expense
Exploration and Production
UK 1 9 27 14
Rest of Europe 6 7 47 22
USA 30 82 258 256
Rest of World 142 46 312 188
----- ----- ----- -----
179 144 644 480
===== ===== ===== =====
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. BP presents financial information on a replacement cost basis
in order to provide better comparability to the major US oil companies,
which apply the last-in, first-out (LIFO) basis of inventory valuation. The
LIFO basis is not permitted under UK GAAP. BP management believes that
where inventory volumes remain constant or increase in a period, operating
profit on the LIFO basis will not differ materially from operating profit
on BP's replacement cost basis. 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, 2001.
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
------------------------- --------------------------
($ million)
7. Analysis of exceptional items
Profit (loss) on sale of fixed assets and
businesses or termination of operations
Exploration and Production (1,133) (85) (726) 195
Gas, Power and Renewables (33) 1 1,551 -
Refining and Marketing 365 18 613 471
Chemicals (122) (130) (256) (297)
Other businesses and corporate 30 158 (14) 166
------ ------ ------ ------
Exceptional items before taxation (893) (38) 1,168 535
Taxation charge 21 26 (125) (370)
------ ------ ------ ------
Exceptional items after taxation (872) (12) 1,043 165
====== ====== ====== ======
Page 22
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
----------------------- -----------------------
($ million)
8. Inventory holding gains (losses)
Exploration and Production (2) (5) 3 (6)
Gas, Power and Renewables 41 (20) 51 (81)
Refining and Marketing (201) (1,138) 1,049 (1,583)
Chemicals (12) (134) 26 (230)
------ ------ ------ ------
(174) (1,297) 1,129 (1,900)
Minority shareholders' interest - - 25 -
------ ------ ------ ------
(174) (1,297) 1,104 (1,900)
====== ====== ====== ======
9 Interest expense
Group interest payable (a) 248 286 1,026 1,308
Capitalized (33) (7) (100) (81)
------ ------ ------ ------
215 279 926 1,227
Joint ventures 14 21 58 70
Associated undertakings 19 26 83 135
Unwinding of discount on provisions 42 46 170 196
Change in discount rate for provisions 42 42 42 42
------ ------ ------ ------
332 414 1,279 1,670
====== ====== ====== ======
------
(a) Includes charges relating to the early redemption of debt 15 - 15 62
------ ------ ------ ------
10. Charge for taxation
Current 1,112 550 3,148 5,131
Deferred (a) 13 161 1,194 1,244
------ ------ ------ ------
1,125 711 4,342 6,375
====== ====== ====== ======
United Kingdom 366 174 1,436 940
Overseas 759 537 2,906 5,435
------ ------ ------ ------
1,125 711 4,342 6,375
====== ====== ====== ======
------
(a) Includes the adjustment to the North Sea deferred tax
balance for the supplementary UK corporation tax of 10% - - 355 -
------ ------ ------ ------
11. Reconciliation of replacement cost results
Historical cost profit (loss) for the period 651 (603) 6,845 6,556
Inventory holding (gains) losses (a) 174 1,297 (1,104) 1,900
------ ------ ------ ------
Replacement cost profit for the period 825 694 5,741 8,456
Exceptional items (b) 872 12 (1,043) (165)
------ ------ ------ ------
Replacement cost profit before exceptional items 1,697 706 4,698 8,291
------ ------ ------ ------
Earnings per ordinary share - cents
On replacement cost profit before exceptional items 7.58 3.17 20.97 36.95
====== ====== ====== ======
--------------
(a) Net of minority shareholders' interest
(b) Net of tax charge
Page 23
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis
Gas, Other
Exploration Power Refining businesses
By business and and and and
Production Renewables Marketing Chemicals corporate Eliminations Total
----------- ---------- --------- --------- ---------- ------------ ------
($ million)
Three months
ended December 31, 2002
Group turnover
- third parties 2,232 11,690 32,604 3,065 131 - 49,722
- sales between businesses 5,124 351 839 53 - (6,367) -
----------- ---------- --------- --------- ---------- ------------ ------
7,356 12,041 33,443 3,118 131 (6,367) 49,722
----------- ---------- --------- --------- ---------- ------------ ------
Share of sales by joint ventures 161 - 101 151 - - 413
----------- ---------- --------- --------- ---------- ------------ ------
Equity accounted income 185 2 39 8 10 - 244
----------- ---------- --------- --------- ---------- ------------ ------
Total replacement cost
operating profit (loss) 3,248 72 (36) 104 (207) - 3,181
Exceptional items (1,133) (33) 365 (122) 30 - (893)
Inventory holding gains
(losses) (2) 41 (201) (12) - - (174)
----------- ---------- --------- --------- ---------- ------------ ------
Historical cost profit (loss)
before interest and tax 2,113 80 128 (30) (177) - 2,114
----------- ---------- --------- --------- ---------- ------------ ------
Capital expenditure and
acquisitions 2,573 123 1,046 285 61 - 4,088
Three months
ended December 31, 2001
Group turnover
- third parties 1,519 6,834 25,888 2,430 146 - 36,817
- sales between businesses 3,817 688 640 51 - (5,196) -
----------- ---------- --------- --------- ---------- ------------ ------
5,336 7,522 26,528 2,481 146 (5,196) 36,817
----------- ---------- --------- --------- ---------- ------------ ------
Share of sales by joint ventures 123 - 73 101 - - 297
----------- ---------- --------- --------- ---------- ------------ ------
Equity accounted income 118 72 96 7 17 - 310
----------- ---------- --------- --------- ---------- ------------ ------
Total replacement cost
operating profit (loss) 1,641 102 379 (67) (175) - 1,880
Exceptional items (85) 1 18 (130) 158 - (38)
Inventory holding gains
(losses) (5) (20) (1,138) (134) - - (1,297)
----------- ---------- --------- --------- ---------- ------------ ------
Historical cost profit (loss)
before interest and tax 1,551 83 (741) (331) (17) - 545
----------- ---------- --------- --------- ---------- ------------ ------
Capital expenditure and
acquisitions 2,153 301 1,116 594 264 - 4,428
Page 24
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis - continued
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------- -------- ------- ------- ------------ -------
($ million)
Three months ended December 31, 2002
Group turnover -third parties 9,175 9,814 21,871 8,862 - 49,722
-sales between areas 3,909 1,906 702 1,983 (8,500) -
------- -------- ------- ------- ------------ -------
13,084 11,720 22,573 10,845 (8,500) 49,722
------- -------- ------- ------- ------------ -------
Share of sales by joint ventures 22 110 55 226 - 413
------- -------- ------- ------- ------------ -------
Equity accounted income (1) (7) 34 218 - 244
------- -------- ------- ------- ------------ -------
Total replacement cost operating profit 793 171 957 1,260 - 3,181
Exceptional items (37) 180 (776) (260) - (893)
Inventory holding gains (losses) (13) (27) (164) 30 - (174)
------- -------- ------- ------- ------------ -------
Historical cost profit before interest and tax 743 324 17 1,030 - 2,114
------- -------- ------- ------- ------------ -------
Capital expenditure and acquisitions 434 398 1,708 1,548 - 4,088
Three months ended December 31, 2001
Group turnover -third parties 7,983 7,073 15,985 5,776 - 36,817
-sales between areas 3,449 1,584 54 1,509 (6,596) -
------- -------- ------- ------- ------------ -------
11,432 8,657 16,039 7,285 (6,596) 36,817
------- -------- ------- ------- ------------ -------
Share of sales by joint ventures 13 30 82 172 - 297
------- -------- ------- ------- ------------ -------
Equity accounted income 6 73 87 144 - 310
------- -------- ------- ------- ------------ -------
Total replacement cost operating profit 375 388 216 901 - 1,880
Exceptional items (241) 40 (75) 238 - (38)
Inventory holding gains (losses) (127) (338) (638) (194) - (1,297)
------- -------- ------- ------- ------------ -------
Historical cost profit before interest and tax 7 90 (497) 945 - 545
------- -------- ------- ------- ------------ -------
Capital expenditure and acquisitions 745 709 1,758 1,216 - 4,428
Page 25
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis - continued
Gas, Other
Exploration Power Refining businesses
By business and and and and
Production Renewables Marketing Chemicals corporate Eliminations Total
----------- ---------- --------- --------- ---------- ------------ -------
($ million)
Year ended December 31, 2002
Group turnover
- third parties 7,197 36,037 122,470 12,507 510 - 178,721
- sales between businesses 18,556 1,320 3,366 557 - (23,799) -
----------- ---------- --------- --------- ---------- ------------ -------
25,753 37,357 125,836 13,064 510 (23,799) 178,721
----------- ---------- --------- --------- ---------- ------------ -------
Share of sales by joint ventures 539 - 415 511 - - 1,465
----------- ---------- --------- --------- ---------- ------------ -------
Equity accounted income 611 107 204 (12) 52 - 962
----------- ---------- --------- --------- ---------- ------------ -------
Total replacement cost
operating profit (loss) 9,206 354 872 515 (701) - 10,246
Exceptional items (726) 1,551 613 (256) (14) - 1,168
Inventory holding gains
(losses) 3 51 1,049 26 - - 1,129
----------- ---------- --------- --------- ---------- ------------ -------
Historical cost profit (loss)
before interest and tax 8,483 1,956 2,534 285 (715) - 12,543
----------- ---------- --------- --------- ---------- ------------ -------
Capital expenditure and
acquisitions 9,699 408 7,753 823 428 - 19,111
Year ended December 31, 2001
Group turnover
- third parties 8,569 36,488 117,330 11,282 549 - 174,218
- sales between businesses 19,660 2,954 2,903 233 - (25,750) -
----------- ---------- --------- --------- ---------- ------------ -------
28,229 39,442 120,233 11,515 549 (25,750) 174,218
----------- ---------- --------- --------- ---------- ------------ -------
Share of sales by joint ventures 666 - 404 101 - - 1,171
----------- ---------- --------- --------- ---------- ------------ -------
Equity accounted income 559 184 278 107 75 - 1,203
----------- ---------- --------- --------- ---------- ------------ -------
Total replacement cost
operating profit (loss) 12,361 488 3,573 128 (523) - 16,027
Exceptional items 195 - 471 (297) 166 - 535
Inventory holding gains
(losses) (6) (81) (1,583) (230) - - (1,900)
----------- ---------- --------- --------- ---------- ------------ -------
Historical cost profit (loss)
before interest and tax 12,550 407 2,461 (399) (357) - 14,662
----------- ---------- --------- --------- ---------- ------------ -------
Capital expenditure and
acquisitions 8,861 492 2,415 1,926 430 - 14,124
Page 26
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Business and geographical analysis - concluded
Rest of Rest of
By geographical area UK Europe USA World Eliminations Total
------- -------- ------- ------- ------------ -------
($ million)
Year ended December 31, 2002
Group turnover - third parties 34,075 38,538 78,282 27,826 - 178,721
- sales between areas 14,673 7,980 2,099 6,575 (31,327) -
------- -------- ------- ------- ------------ -------
48,748 46,518 80,381 34,401 (31,327) 178,721
------- -------- ------- ------- ------------ -------
Share of sales by joint ventures 129 298 236 802 - 1,465
------- -------- ------- ------- ------------ -------
Equity accounted income (5) 131 225 611 - 962
------- -------- ------- ------- ------------ -------
Total replacement cost operating profit 1,696 1,703 2,890 3,957 - 10,246
Exceptional items (88) 1,817 (242) (319) - 1,168
Inventory holding gains (losses) 88 283 640 118 - 1,129
------- -------- ------- ------- ------------ -------
Historical cost profit before interest and tax 1,696 3,803 3,288 3,756 - 12,543
------- -------- ------- ------- ------------ -------
Capital expenditure and acquisitions 1,637 6,556 6,095 4,823 - 19,111
Year ended December 31, 2001
Group turnover - third parties 34,151 29,098 83,757 27,212 - 174,218
- sales between areas 13,467 7,603 939 6,699 (28,708) -
------- -------- ------- ------- ------------ -------
47,618 36,701 84,696 33,911 (28,708) 174,218
------- -------- ------- ------- ------------ -------
Share of sales by joint ventures 13 30 318 810 - 1,171
------- -------- ------- ------- ------------ -------
Equity accounted income 11 235 309 648 - 1,203
------- -------- ------- ------- ------------ -------
Total replacement cost operating profit 2,668 1,814 6,941 4,604 - 16,027
Exceptional items (319) 33 289 532 - 535
Inventory holding gains (losses) (225) (444) (1,014) (217) - (1,900)
------- -------- ------- ------- ------------ -------
Historical cost profit before interest and tax 2,124 1,403 6,216 4,919 - 14,662
------- -------- ------- ------- ------------ -------
Capital expenditure and acquisitions 2,128 1,787 6,160 4,049 - 14,124
Page 27
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
----------------------- ----------------------
($ million)
13. Analysis of changes in net debt
Opening balance
Finance debt 22,276 20,474 21,417 21,190
Less: Cash 1,005 1,438 1,358 1,170
Current asset investments 285 519 450 661
------- ------- ------- -------
Opening net debt 20,986 18,517 19,609 19,359
------- ------- ------- -------
Closing balance
Finance debt 22,008 21,417 22,008 21,417
Less: Cash 1,520 1,358 1,520 1,358
Current asset investments 215 450 215 450
------- ------- ------- -------
Closing net debt 20,273 19,609 20,273 19,609
------- ------- ------- -------
(Increase) decrease in net debt 713 (1,092) (664) (250)
======= ======= ======= =======
Movement in cash/bank overdrafts 463 (63) 57 241
(Decrease) increase in current asset investments (56) (66) (220) (211)
Net cash (inflow) outflow from financing
(excluding share capital) 321 (941) (736) (128)
Partnership interests exchanged for BP loan notes - - 1,135 -
Other movements 19 (16) 76 (36)
Debt acquired (3) (8) (1,002) (55)
------- ------- ------- -------
Movements in net debt before exchange effects 744 (1,094) (690) (189)
Exchange adjustments (31) 2 26 (61)
------- ------- ------- -------
(Increase) decrease in net debt 713 (1,092) (664) (250)
======= ======= ======= =======
14. Movement in BP shareholders' interest
$ million
Balance at December 31, 2001 74,367
Prior year adjustment - change in accounting policy (see Note 2) (9,206)
------
As restated 65,161
Profit for the year 6,845
Distribution to shareholders (5,375)
Currency translation differences 3,333
Issue of ordinary share capital for employee share schemes 195
Repurchase of ordinary share capital (750)
------
Balance at December 31, 2002 69,409
======
Page 28
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles
The consolidated financial statements of the BP Group are prepared in
accordance with UK GAAP which differs in certain respects from US GAAP. The
principal differences between US GAAP and UK GAAP for BP Group reporting
relate to the following:
(i) Group consolidation
Where the Group conducts activities through a joint arrangement that
is not carrying on a trade or business in its own right, the Group
accounts for its own assets, liabilities and cash flows of the
activity measured according to the terms of the arrangement. For the
Group this method of accounting applies to certain oil and natural gas
activities and undivided interests in pipelines. US GAAP permits these
activities to be accounted for by proportional consolidation, which is
equivalent to UK GAAP.
Joint ventures and associated undertakings are accounted for by the
equity method. UK GAAP requires the consolidated financial statements
to show separately the Group proportion of operating profit or loss,
exceptional items, inventory holding gains or losses, interest expense
and taxation of joint ventures and associated undertakings. In
addition the Group's share of turnover of joint ventures should be
disclosed. For US GAAP the after tax profits or losses (i.e. operating
results after exceptional items, inventory holding gains or losses,
interest expense and taxation) are included in the income statement as
a single line item.
UK GAAP requires the Group's share of the gross assets and gross
liabilities of joint ventures to be shown on the face of the balance
sheet whereas under US GAAP the net investment is included as a single
line item.
The following summarizes the reclassifications for joint ventures and
associated undertakings necessary to accord with US GAAP.
Three months ended December 31, 2002
(Unaudited)
------------------------------------------------
As US GAAP
Increase (decrease) in caption heading Reported Reclassification Presentation
------------------------------------------------
($ million)
Consolidated statement of income
Other income 218 142 360
Share of profits of JVs and associated undertakings 244 (244) -
Exceptional items before taxation (893) (2) (895)
Inventory holding gains (losses) (174) (4) (178)
Interest expense 332 (33) 299
Taxation 1,125 (75) 1,050
Profit for the period 651 - 651
Year ended December 31, 2002
------------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------------
($ million)
Consolidated statement of income
Other income 641 563 1,204
Share of profits of JVs and associated undertakings 962 (962) -
Exceptional items before taxation 1,168 (2) 1,166
Inventory holding gains (losses) 1,129 (2) 1,127
Interest expense 1,279 (141) 1,138
Taxation 4,342 (262) 4,080
Profit for the year 6,845 - 6,845
Page 29
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(i) Group consolidation (concluded)
Three months ended December 31, 2001
(Unaudited)
------------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------------
($ million)
Consolidated statement of income
Other income 208 168 376
Share of profits of JVs and associated undertakings 310 (310) -
Exceptional items before taxation (38) 1 (37)
Inventory holding gains (losses) (1,297) 6 (1,291)
Interest expense 414 (47) 367
Taxation 711 (88) 623
Profit for the period (603) - (603)
Year ended December 31, 2001
------------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------------------------------------------
($ million)
Consolidated statement of income
Other income 694 692 1,386
Share of profits of JVs and associated undertakings 1,203 (1,203) -
Exceptional items before taxation 535 2 537
Inventory holding gains (losses) (1,900) 7 (1,893)
Interest expense 1,670 (205) 1,465
Taxation 6,375 (297) 6,078
Profit for the year 6,556 - 6,556
(ii) Income statement
The income statement prepared under UK GAAP shows sub-totals for
replacement cost profit before interest and tax, historical cost
profit before interest and tax and profit after taxation. These line
items are not recognized under US GAAP.
Page 30
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(iii)Exceptional items
Under UK GAAP certain exceptional items are shown separately on the
face of the income statement after operating profit. These items are
profits or losses on the sale of fixed assets and businesses or
termination of operations and fundamental restructuring charges. Under
US GAAP these items are classified as operating income or expenses.
(iv) Deferred taxation/business combinations
US GAAP requires the recognition of a deferred tax asset or liability
for the tax effects of differences between the assigned values and the
tax bases of assets acquired and liabilities assumed in a purchase
business combination, whereas under UK GAAP no such deferred tax asset
or liability is recognized. Under US GAAP the deferred tax asset or
liability is amortized over the same period as the assets and
liabilities to which it relates.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
------------------------ ------------------------
($ million)
Replacement cost of sales 182 245 852 1,091
Taxation (42) 913 (537) (276)
Profit for the period (140) (1,158) (315) (815)
====== ====== ====== ======
At At
December 31, December 31,
2002 2001
----------- ------------
($ million)
Tangible assets 7,408 7,032
Deferred taxation 7,486 6,789
BP shareholders' interest (78) 243
============ ============
Page 31
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(v) Provisions
UK GAAP requires provisions for decommissioning, environmental
liabilities and onerous contracts to be determined on a discounted
basis if the effect of the time value of money is material. Unwinding
of the discount and the effect of a change in the discount rate is
included in interest expense in the period. When a decommissioning
provision is set up, a tangible fixed asset of the same amount is also
recognized and is subsequently depreciated as part of the capital
costs of the facilities. Under US GAAP (i) environmental liabilities
are discounted only where the timing and amounts of payments are fixed
and reliably determinable; and (ii) provisions for decommissioning are
provided on a unit-of-production basis over field lives; there is no
corresponding tangible fixed asset.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
------------------------ -------------------------
($ million)
Replacement cost of sales 164 270 334 523
Interest expense (84) (88) (212) (238)
Taxation (106) (35) (130) (103)
Profit for the period 26 (147) 8 (182)
====== ====== ======= ======
At At
December 31, December 31,
2002 2001
----------- ------------
($ million)
Tangible assets (1,297) (785)
Provisions 412 780
Deferred taxation (621) (511)
BP shareholders' interest (1,088) (1,054)
====== s=====
(vi) Impairment
Both UK and US GAAP require that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. US GAAP
requires, in performing the review for recoverability, the entity to
estimate the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future
cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset, an impairment loss is recognized.
Otherwise, no impairment loss is recognized. Measurement of an
impairment loss for long-lived assets and identifiable intangibles
that an entity expects to hold and use is based on the fair value of
the assets.
For UK GAAP to the extent that the carrying amount exceeds the
recoverable amount, that is the higher of net realizable value and
value in use (fair value) the fixed asset is written down to its
recoverable amount.
UK GAAP permits assets and liabilities acquired on a business
combination to be revised in the year following that in which the
acquisition was made. US GAAP does not permit such adjustments.
In 2001 a revision of $911 million to the previously reported fair
values for tangible fixed assets relating to the 2000 acquisition of
Atlantic Richfield Company (ARCO) under UK GAAP has been reflected as
a charge for impairment under US GAAP.
Page 32
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(vi) Impairment (concluded)
The adjustments to profit for the period to accord with US GAAP are
shown below. There is no impact on BP shareholders' interest. The
consequential Balance Sheet adjustments are reflected in (iv) Deferred
Taxation/Business Combinations and (viii) Goodwill.
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
------------------------ -------------------------
($ million)
Replacement cost of sales - 1,150 - 1,150
Taxation - (239) - (239)
Profit for the period - (911) - (911)
====== ====== ======= ======
(vii)Sale and leaseback
The sale and leaseback of an office building in Chicago, Illinois in
1998 was treated as a sale for UK GAAP whereas for US GAAP it was
treated as a financing transaction.
A provision was recognized under UK GAAP in 1999 to cover the likely
shortfall on rental income from subletting the Chicago office
building. As the original sale and leaseback was not treated as a sale
for US GAAP the provision has been reversed for US GAAP. A further
provision has been recognized in 2002 under UK GAAP, which has also
been reversed for US GAAP.
Under UK GAAP the profit arising on the sale and operating leaseback
of certain railcars in 1999 was taken to income in the period in which
the transaction occurred. Under US GAAP this profit was not recognized
immediately but amortized over the term of the operating lease.
The adjustments to profit for the period and BP shareholders' interest
to accord with US GAAP are summarized below.
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
----------------------------- -----------------------------
($ million)
Replacement cost of sales 4 6 (40) 51
Taxation - (13) 16 (15)
Profit for the period (4) 7 24 (36)
=========== =========== =========== ===========
At At
December 31, December 31,
2002 2001
----------- ------------
($ million)
Tangible assets 161 171
Other accounts payable and accrued liabilities 27 30
Provisions (117) (65)
Finance debt 413 413
Deferred taxation (56) (73)
BP shareholders' interest (106) (134)
============ ============
Page 33
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii)Goodwill and intangible assets
Various differences in the basis for determining goodwill between UK
and US GAAP result in goodwill for US GAAP reporting differing from
the amount recognized under UK GAAP.
On January 1, 2002 the Group adopted Statement of Financial Accounting
Standards No. 142 `Goodwill and Other Intangible Assets' (SFAS 142)
for US GAAP reporting. This standard 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 continue to be
amortized over their estimated useful lives. Amortization of goodwill
charged to income under UK GAAP has been reversed for US GAAP.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
-------------------------- --------------------------
($ million)
Replacement cost of sales (325) (15) (1,302) (60)
Taxation - - - -
Profit for the period 325 15 1,302 60
======== ======= =========== ===========
At At
December 31, December 31,
2002 2001
----------- ------------
($ million)
Intangible assets (84) (1,414)
Deferred taxation - -
BP shareholders' interest (84) (1,414)
=========== ============
Profit for the period, as adjusted to accord with US GAAP, for the
three month and twelve month periods ended December 31, 2001, adjusted
to exclude amortization of goodwill no longer being amortized pursuant
to SFAS 142 is shown below.
Three months ended Year ended
December 31, 2001 December 31, 2001
(Unaudited)
------------------ -----------------
($ million)
(Loss) profit for the period applicable
to ordinary shares as adjusted to accord
with US GAAP, as reported (2,775) 4,162
Add back goodwill amortization 312 1,228
------ ------
(Loss) profit for the period as adjusted to accord
with US GAAP, as adjusted (2,463) 5,390
------ ------
Per ordinary share - cents
Basic - as reported (12.39) 18.55
Adjustment 1.39 5.47
------ ------
Basic - as adjusted (11.00) 24.02
------ ------
Diluted - as reported (12.32) 18.44
Adjustment 1.39 5.44
------ ------
Diluted - as adjusted (10.93) 23.88
------ ------
Per American Depositary Share - cents
Basic - as reported (74.34) 111.30
Adjustment 8.34 32.82
------ ------
Basic - as adjusted (66.00) 144.12
------ ------
Diluted - as reported (73.92) 110.64
Adjustment 8.34 32.64
------ ------
Diluted - as adjusted (65.58) 143.28
------ ------
Page 34
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(viii)Goodwill and intangible assets (concluded)
Changes to exploration expenditure, goodwill and other intangible
assets, as adjusted to accord with US GAAP, during the year ended
December 31, 2002 are shown below.
Exploration Other
expenditure Goodwill intangibles Total
----------- -------- ----------- --------
($ million)
Net book amount
At January 1, 2002 5,334 9,453 588 15,375
Amortization expense (385) - (189) (574)
Acquisitions - 545 - 545
Other movements (5) 356 89 440
------- ------- ------- -------
At December 31, 2002 4,944 10,354 488 15,786
======= ======= ======= =======
Amortization expense relating to other intangibles is expected to be
in the range $100-$200 million in each of the succeeding five years.
During the second quarter of 2002 the Group completed a goodwill
impairment review using the two-step process prescribed in SFAS 142.
The first step includes a comparison of the fair value of a reporting
unit to its carrying value, including goodwill. Where the carrying
value exceeds the fair value, the goodwill of the reporting unit is
potentially impaired and the second step is then completed in order to
measure the impairment loss, if any. No impairment charge resulted
from this review.
(ix) Derivative financial 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 that certain criteria are met, SFAS
133 permits, but does not require, hedge accounting.
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 both UK and 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 ($18
million after tax). Under US GAAP the fair values of derivative
financial instruments are shown as current assets and liabilities as
appropriate.
The Group has a number of long-term natural gas contracts which have
been in place for many years. The pricing structure for those
contracts is not directly related to the market price of natural gas
but to the price of other commodities or indices, such as fuel oil or
consumer price indices. On the basis of SFAS 133 Implementation Issue
C11, these contracts have been marked to market with effect from July
1, 2001.
In October 2002, the FASB Emerging Issues Task Force (EITF) reached a
consensus with regards to EITF Issue No. 02-3, 'Issues Involved in
Accounting for Contracts Under EITF Issue No. 98-10 "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities"'
(EITF 02-3). Under this consensus trading inventories should be
recorded on the balance sheet at historical cost. The Group marks
trading inventories to market at the balance sheet date. Thus a UK/US
GAAP difference arises which impacts both profit for the year and BP
shareholders' interest due to the difference in inventory valuations.
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Page 35
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(ix) Derivative financial instruments and hedging activities (concluded)
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
----------------------------- -----------------------------
($ million)
Replacement cost of sales 54 210 (842) 481
Taxation (30) (73) 302 (168)
Profit for the period before cumulative
effect of accounting change (24) (137) 540 (313)
Cumulative effect of accounting
change, net of taxation - - - (362)
Profit for the period (24) (137) 540 (675)
====== ====== ====== ======
At At
December 31, December 31,
2002 2001
----------- ------------
($ million)
Inventories (209) -
Accounts payable and accrued liabilities (13) 1,038
Deferred taxation (61) (363)
BP shareholders' interest (135) (675)
======= =======
(x) Gain arising on asset exchange
For UK GAAP the transaction with Solvay in the fourth quarter of 2001,
which led to the exchange of businesses for an interest in a joint
venture and an associated undertaking, has been treated as an asset
swap which does not give rise to a gain or loss. Under US GAAP the
transaction has been treated as a disposal and acquisition at fair
value which gives rise to a pre-tax gain on disposal of $242 million
($157 million after tax).
The adjustments to profit for the period and to BP shareholders'
interest to accord with US GAAP are summarized below.
Three months ended Year ended
December 31 December 31
Increase (decrease) in caption heading (Unaudited)
2002 2001 2002 2001
----------------------------- -----------------------------
($ million)
Profit (loss) on sale of fixed assets and
businesses or termination of operations - 242 - 242
Replacement cost of sales 6 - 27 -
Taxation (2) 85 (9) 85
Profit for the period (4) 157 (18) 157
=========== =========== =========== ===========
At At
December 31, December 31,
2002 2001
----------- ------------
($ million)
Intangible assets 167 188
Accounts payable and accrued liabilities (52) (54)
Deferred taxation 77 85
BP shareholders' interest 142 157
=========== ===========
Page 36
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xi) Ordinary shares held for future awards to employees
Under UK GAAP, Company shares held by an Employee Share Ownership Plan
to meet future requirements of employee share schemes are recorded in
the balance sheet as Fixed assets -- investments. Under US GAAP, such
shares are recorded in the balance sheet as a reduction of
shareholders' interest.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
December 31, December 31,
Increase (decrease) in caption heading 2002 2001
------------ ------------
($ million)
Fixed assets - Investments (159) (266)
BP shareholders' interest (159) (266)
============ ============
(xii)Dividends
Under UK GAAP, dividends are recorded in the period in respect of
which they are announced or declared by the board of directors to the
shareholders. Under US GAAP, dividends are recorded in the period in
which dividends are declared.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
December 31, December 31,
Increase (decrease) in caption heading 2002 2001
----------- ------------
($ million)
Other accounts payable and accrued liabilities (1,398) (1,288)
BP shareholders' interest 1,398 1,288
=========== ============
(xiii)Investments
Under UK GAAP certain of the Group's equity investments are reported
as either fixed asset or current asset investments and carried on the
balance sheet at cost subject to review for impairment. For US GAAP
these investments are classified as available-for-sale securities.
Consequently they are reported at fair value, with unrealized holding
gains and losses, net of tax, reported in accumulated other
comprehensive income. If a decline in fair value below cost is 'other
than temporary' the unrealized loss is accounted for as a realized
loss and charged against income.
The adjustment to BP shareholders' interest to accord with US GAAP is
shown below.
At At
December 31, December 31,
Increase (decrease) in caption heading 2002 2001
------------ -----------
($ million)
Fixed assets - Investments 52 (3)
Deferred taxation 18 (1)
BP shareholders' interest 34 (2)
============ ===========
Page 37
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
(xiv)Additional minimum pension liability
Where a pension plan has an unfunded accumulated benefit obligation,
US GAAP requires such amount to be recognized as a liability in the
balance sheet. The adjustment resulting from the recognition of any
such minimum liability, including the elimination of amounts
previously recognized as a prepaid benefit cost, is reported as an
intangible asset to the extent of unrecognized prior service cost with
the remaining amount reported in comprehensive income.
The adjustments to BP shareholders' interest to accord with US GAAP
are summarized below.
At At
December 31, December 31,
Increase (decrease) in caption heading 2002 2001
------------- ------------
($ million)
Intangible assets 137 112
Other receivables falling due after more than one year (1,211) (1,015)
Noncurrent liabilities - accounts payable accrued liabilities 2,459 548
Deferred taxation (1,247) (509)
BP shareholders' interest (2,286) (942)
=========== ===========
Page 38
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
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 USA (US GAAP) had been applied instead of
those generally accepted in the United Kingdom (UK GAAP).
These results are stated using the first-in first-out method of inventory
valuation.
Profit for the period Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001(a) 2002 2001(a)
-------------------- ---------------------
($ million)
Profit as reported in the consolidated statement of income 651 (603) 6,845 6,556
Adjustments:
------ ------ ------ ------
Deferred taxation/business combinations (iv) (140) (1,158) (315) (815)
Provisions (v) 26 (147) 8 (182)
Impairment (vi) - (911) - (911)
Sale and leaseback (vii) (4) 7 24 (36)
Goodwill (viii) 325 15 1,302 60
Derivative financial instruments (ix) (24) (137) 540 (313)
Gain arising on asset exchange (x) (4) 157 (18) 157
Other 3 3 11 10
------ ------ ------ ------
182 (2,171) 1,552 (2,030)
------ ------ ------ ------
Profit (loss) for the period before cumulative effect of
accounting change as adjusted to accord with US GAAP 833 (2,774) 8,397 4,526
Cumulative effect of accounting change:
Derivative financial instruments (ix) - - - (362)
------ ------ ------ ------
Profit (loss) for the period as adjusted to accord with US GAAP 833 (2,774) 8,397 4,164
Dividend requirements on preference shares 1 1 2 2
Profit (loss) for the period applicable to ordinary shares as
adjusted to accord with US GAAP 832 (2,775) 8,395 4,162
====== ====== ====== ======
Profit for the period as adjusted:
Per ordinary share - cents
Basic - before cumulative effect of accounting change 3.72 (12.39) 37.48 20.16
Cumulative effect of accounting change - - - (1.61)
------ ------ ------ ------
3.72 (12.39) 37.48 18.55
------ ------ ------ ------
Diluted - before cumulative effect of accounting change 3.71 (12.32) 37.30 20.04
Cumulative effect of accounting change - - - (1.60)
------ ------ ------ ------
3.71 (12.32) 37.30 18.44
------ ------ ------ ------
Per American Depositary Share - cents (b)
Basic - before cumulative effect of accounting change 22.32 (74.34) 224.88 120.96
Cumulative effect of accounting change - - - (9.66)
------ ------ ------ ------
22.32 (74.34) 224.88 111.30
------ ------ ------ ------
Diluted - before cumulative effect of
accounting change 22.26 (73.92) 223.80 120.24
Cumulative effect of accounting change - - - (9.60)
------ ------ ------ ------
22.26 (73.92) 223.80 110.64
------ ------ ------ ------
Page 39
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
BP shareholders' interest December 31, 2002 December 31, 2001 (a)
--------------------------------------
($ million)
BP shareholders' interest as reported
in the consolidated balance sheet 69,409 65,161
Adjustments:
Deferred taxation/business combinations (iv) (78) 243
Provisions (v) (1,088) (1,054)
Sale and leaseback (vii) (106) (134)
Goodwill (viii) (84) (1,414)
Derivative financial instruments (ix) (135) (675)
Gain arising on asset exchange (x) 142 157
Ordinary shares held for future
awards to employees (xi) (159) (266)
Dividends (xii) 1,398 1,288
Investments (xiii) 34 (2)
Additional minimum pension liability (xiv) (2,286) (942)
Other (48) (40)
------- -------
(2,410) (2,839)
------- -------
BP shareholders' interest as adjusted
to accord with US GAAP 66,999 62,322
======= =======
---------------
(a) The profit reported under UK GAAP for the three months and year ended
December 31, 2001 and BP shareholders' interest reported under UK GAAP
at December 31, 2001 have been restated to reflect the adoption of FRS
19. Consequently certain of the adjustments in the UK/US GAAP
reconciliation have also been restated. Profit and BP shareholders'
interest, as adjusted to accord with US GAAP, are unaffected by the
adoption of FRS 19.
(b) One American Depositary Share is equivalent to six ordinary shares.
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 Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
------------------------ -----------------------
(shares thousands)
Weighted average number
of ordinary shares 22,351,122 22,396,315 22,397,126 22,435,737
Ordinary shares issuable under
employee share schemes 72,071 120,044 107,322 137,988
---------- ---------- ---------- ----------
22,423,193 22,516,359 22,504,448 22,573,725
========== ========== ========== ==========
Page 40
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Comprehensive income
The components of comprehensive income, net of related tax are as follows:
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
-------------------- ---------------------
($ million)
Profit (loss) for the period as adjusted to accord
with US GAAP 833 (2,774) 8,397 4,164
Currency translation differences 1,469 (316) 3,333 (908)
Derivative financial instruments - (8) - -
Net unrealized gain (loss) on investments (76) 36 36 110
Additional minimum pension liability (1,344) (797) (1,344) (797)
------ ------ ------ ------
Comprehensive income 882 (3,859) 10,422 2,569
====== ====== ====== ======
Accumulated other comprehensive income at December 31, 2002 and December
31, 2001 comprised losses of $3,709 million and $5,734 million,
respectively.
Consolidated statement of cash flows
The Group's financial statements include a consolidated statement of cash
flows in accordance with the revised UK Financial Reporting Standard No. 1
(FRS 1). The statement prepared under FRS 1 presents substantially the same
information as that required under FASB Statement of Financial Accounting
Standards No. 95 'Statement of Cash Flows' (SFAS 95).
Under FRS 1 cash flows are presented for (i) operating activities; (ii)
dividends from joint ventures; (iii) dividends from associated
undertakings; (iv) servicing of finance and returns on investments; (v)
taxation; (vi) capital expenditure and financial investment; (vii)
acquisitions and disposals; (viii) dividends; (ix) financing; and (x)
management of liquid resources. SFAS 95 only requires presentation of cash
flows from operating, investing and financing activities.
Cash flows under FRS 1 in respect of dividends from joint ventures and
associated undertakings, taxation and servicing of finance and returns on
investments are included within operating activities under SFAS 95.
Interest paid includes payments in respect of capitalized interest, which
under SFAS 95 are included in capital expenditure under investing
activities. Cash flows under FRS 1 in respect of capital expenditure and
acquisitions and disposals are included in investing activities under SFAS
95. Dividends paid are included within financing activities. All short-term
investments are regarded as liquid resources for FRS 1. Under SFAS 95
short-term investments with original maturities of three months or less are
classified as cash equivalents and aggregated with cash in the cash flow
statement. Cash flows in respect of short-term investments with original
maturities exceeding three months are included in operating activities.
Page 41
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
-------------------- ---------------------
($ million)
Operating activities
Profit after taxation 657 (580) 6,922 6,617
Adjustments to reconcile profits after tax to
net cash provided by operating activities
Depreciation and amounts provided 2,515 2,457 10,401 8,858
Exploration expenditure written off 124 85 385 238
Share of profits of joint ventures and associated
undertakings less dividends received (8) (52) 3 (60)
(Profit) loss on sale of businesses and fixed assets 895 36 (1,166) (537)
Working capital movement (a) 907 2,087 (1,416) 1,319
Deferred taxation 13 161 1,194 1,244
Other (33) (58) (280) (111)
------ ------ ------ ------
Net cash provided by operating activities 5,070 4,136 16,043 17,568
------ ------ ------ ------
Investing activities
Capital expenditures (3,577) (3,695) (12,216) (12,295)
Acquisitions, net of cash acquired (28) (602) (4,324) (1,210)
Investment in associated undertakings (215) (179) (971) (586)
Net investment in joint ventures (217) (220) (354) (497)
Proceeds from disposal of assets 1,030 846 6,782 2,903
------ ------ ------ ------
Net cash used in investing activities (3,007) (3,850) (11,083) (11,685)
------ ------ ------ ------
Financing activities
Proceeds from shares issued (repurchased) 17 (86) (555) (1,100)
Proceeds from long-term financing 651 267 3,707 1,296
Repayments of long-term financing (905) (434) (2,369) (2,602)
Net decrease (increase) in short-term debt (67) 1,108 (602) 1,434
Dividends paid - BP Shareholders (1,340) (1,232) (5,264) (4,827)
- Minority shareholders (11) (38) (40) (54)
------ ------ ------ ------
Net cash used in financing activities (1,655) (415) (5,123) (5,853)
------ ------ ------ ------
Currency translation differences relating to cash
and cash equivalents 37 (20) 90 (53)
------ ------ ------ ------
Increase (decrease) in cash and cash equivalents 445 (149) (73) (23)
Cash and cash equivalents at beginning of period 1,290 1,957 1,808 1,831
------ ------ ------ ------
Cash and cash equivalents at end of period 1,735 1,808 1,735 1,808
====== ====== ====== ======
(a) Working capital:
Inventories (increase) decrease (63) 1,368 (1,521) 1,490
Receivables (increase) decrease (271) 1,202 (2,750) 1,905
Current liabilities - excluding finance debt
increase (decrease) 1,241 (483) 2,855 (2,076)
------ ------ ------ ------
907 2,087 (1,416) 1,319
====== ====== ====== ======
Page 42
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - continued
Impact of new US accounting standards
New US accounting standards adopted: The Group has adopted Statement of
Financial Accounting Standards No. 141 `Business Combinations' (SFAS 141)
for US GAAP reporting with effect from January 1, 2002. Under SFAS 141, the
pooling of interest method of accounting is no longer permitted. Also on
January 1, 2002 the Group adopted 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.
The adoption of SFAS 141 and SFAS 144 had no impact on profit, as adjusted
to accord with US GAAP, for the three months and year ended December 31,
2002 or on BP shareholders' interest, as adjusted to accord with US GAAP,
at December 31, 2002.
Asset retirement obligations: 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.
Costs associated with exit or disposal activities: In June 2002, the FASB
issued Statement of Financial Accounting Standards No. 146 `Accounting for
Costs Associated with Exit or Disposal Activities' (SFAS 146). SFAS 146
requires that a liability for costs associated with an exit or disposal
activity be recognized only when the liability is incurred, rather than at
the date of an entity's commitment to an exit plan. SFAS 146 requires that
the liability be initially measured at fair value. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002.
The Company has not yet determined the effect of adopting SFAS 146 on its
results of operations or shareholders' interest as adjusted to accord with
US GAAP.
Contracts involved in energy trading activities: In October 2002, the FASB
Emerging Issues Task Force (EITF) reached a consensus which rescinded EITF
Issue No. 98-10, `Accounting for Contracts Involved in Energy Trading and
Risk Management Activities' (EITF 98-10). As a result of this consensus,
all energy-related, non-derivative contracts (such as transportation,
storage, tolling, and requirements contracts that do not meet the
definition of a derivative) and trading inventories that are accounted for
at fair value pursuant to EITF 98-10 will no longer be accounted for at
fair value upon application of the consensus. Rather, such contracts will
be accounted for as executory contacts on an accruals basis.
The consensus is applicable for all contracts executed after October 25,
2002. Application of the consensus to contracts existing prior to October
26, 2002 is required to be accounted for as a cumulative effect of a change
in accounting principle effective for periods beginning after December 15,
2002.
For BP's reporting under UK GAAP, energy-related non-derivative contracts
associated with trading activities are marked to market with gains and
losses recognized in the income statement.
Page 43
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. US generally accepted accounting principles - concluded
Impact of new US accounting standards (concluded)
Stock-based compensation: In December 2002, the FASB issued Statement of
Financial Accounting Standards No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure" (SFAS 148). SFAS 148 amends SFAS
123 to permit alternative methods of transition for adopting a fair value
based method of accounting for stock-based employee compensation. As
required by UK GAAP, the Group uses the intrinsic value method to account
for stock-based employee compensation.
Guarantees: In November 2002, the FASB issued FASB Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" (Interpretation
45). Interpretation 45 elaborates on existing disclosure requirements for
guarantees and clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and
measurement provisions of Interpretation 45 apply on a prospective basis to
guarantees issued or modified after December 31, 2002.
Consolidation: In January 2003, the FASB issued FASB Interpretation No. 46
"Consolidation of Variable Interest Entities" (Interpretation 46).
Interpretation 46 clarifies the application of existing consolidation
requirements to entities where a controlling financial interest is achieved
through arrangements that do not involve voting interests. Under
Interpretation 46, a variable interest entity is consolidated if a company
is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's
residual returns. Interpretation 46 applies to variable interest entities
created or acquired after January 31, 2003. For variable interest entities
existing at January 31, 2003, Interpretation 46 is effective for accounting
periods beginning after June 15, 2003.
Impact of new UK accounting standards
Retirement benefits: In December 2000, the UK Accounting Standards Board
issued Financial Reporting Standard No. 17 `Retirement Benefits' (FRS 17).
This standard was to be fully effective for accounting periods ending on or
after June 22, 2003 with certain of the disclosure requirements effective
for periods prior to 2003. FRS 17 requires that financial statements
reflect at fair value the assets and liabilities arising from an employer's
retirement benefit obligations and any related funding. The operating costs
of providing retirement benefits are recognized in the period in which they
are earned together with any related finance costs and changes in the value
of related assets and liabilities.
In November 2002, the UK Accounting Standards Board issued an amendment to
FRS 17, which defers full adoption until January 1, 2005.
Impact of International accounting standards
In June 2002, the European Union Council of Ministers adopted a Regulation
which would require the Group to prepare its primary consolidated financial
statements in accordance with International Accounting Standards (IAS)
beginning January 1, 2005, with restatement of prior periods presented. IAS
differ in several respects from UK and US GAAP. In addition, significant
revisions to IAS are currently being contemplated and other revisions may
be adopted prior to January 1, 2005. The Group has not determined the
effects of adopting IAS.
16. 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 44
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended December 31, 2002
Turnover 627 - 50,135 (627) 50,135
Less: Joint ventures - - 413 - 413
------ ------ ------ ------ ------
Group turnover 627 - 49,722 (627) 49,722
Replacement cost of sales 412 - 43,198 (752) 42,858
Production taxes 53 - 309 - 362
------ ------ ------ ------ ------
Gross profit 162 - 6,215 125 6,502
Distribution and administration expenses 12 594 2,998 - 3,604
Exploration expense 2 - 161 16 179
------ ------ ------ ------ ------
148 (594) 3,056 109 2,719
Other income 5 252 192 (231) 218
------ ------ ------ ------ ------
Group replacement cost operating profit 153 (342) 3,248 (122) 2,937
Share of profits of joint ventures - - 83 - 83
Share of profits of associated undertakings - - 161 - 161
Equity accounted income of subsidiaries 138 3,623 - (3,761) -
------ ------ ------ ------ ------
Total replacement cost operating profit 291 3,281 3,492 (3,883) 3,181
Profit (loss) on sale of fixed assets
and businesses or termination of operations (4) (813) (889) 813 (893)
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 287 2,468 2,603 (3,070) 2,288
Inventory holding gains (losses) - (174) (174) 174 (174)
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 287 2,294 2,429 (2,896) 2,114
Interest expense 30 438 426 (562) 332
------ ------ ------ ------ ------
Profit before taxation 257 1,856 2,003 (2,334) 1,782
Taxation 112 1,125 1,047 (1,159) 1,125
------ ------ ------ ------ ------
Profit after taxation 145 731 956 (1,175) 657
Minority shareholders' interest - - 6 - 6
------ ------ ------ ------ ------
Profit for the period 145 731 950 (1,175) 651
====== ====== ====== ====== ======
Page 45
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the 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 Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended December 31, 2002
Profit as reported 145 731 950 (1,175) 651
Adjustments:
Deferred taxation/business combinations (32) (140) (119) 151 (140)
Provisions (10) 26 36 (26) 26
Sale and leaseback - (4) (4) 4 (4)
Goodwill - 325 325 (325) 325
Derivative financial instruments (50) (24) (24) 74 (24)
Gain arising on asset exchange - (4) (4) 4 (4)
Other - 3 3 (3) 3
------ ------ ------ ------ ------
Profit for the period as adjusted
to accord with US GAAP 53 913 1,163 (1,296) 833
====== ====== ====== ====== ======
Page 46
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended December 31, 2001
Turnover 491 - 37,114 (491) 37,114
Less: Joint ventures - - 297 - 297
------ ------ ------ ------ ------
Group turnover 491 - 36,817 (491) 36,817
Replacement cost of sales 218 - 32,276 (595) 31,899
Production taxes 39 - 297 - 336
------ ------ ------ ------ ------
Gross profit 234 - 4,244 104 4,582
Distribution and administration expenses 5 731 2,340 - 3,076
Exploration expense 38 - 106 - 144
------ ------ ------ ------ ------
191 (731) 1,798 104 1,362
Other income 1 296 183 (272) 208
------ ------ ------ ------ ------
Group replacement cost operating profit 192 (435) 1,981 (168) 1,570
Share of profits of joint ventures - - 91 - 91
Share of profits of associated undertakings - - 219 - 219
Equity accounted income of subsidiaries (58) 2,458 - (2,400) -
------ ------ ------ ------ ------
Total replacement cost operating profit 134 2,023 2,291 (2,568) 1,880
Profit (loss) on sale of fixed assets
and businesses or termination of operations - (40) 186 (184) (38)
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 134 1,983 2,477 (2,752) 1,842
Inventory holding gains (losses) 1 (1,297) (1,297) 1,296 (1,297)
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 135 686 1,180 (1,456) 545
Interest expense 74 578 577 (815) 414
------ ------ ------ ------ ------
Profit before taxation 61 108 603 (641) 131
Taxation 115 711 704 (819) 711
------ ------ ------ ------ ------
Loss after taxation (54) (603) (101) 178 (580)
Minority shareholders' interest - - 23 - 23
------ ------ ------ ------ ------
Loss for the period (54) (603) (124) 178 (603)
====== ====== ====== ====== ======
Page 47
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the 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 Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended December 31, 2001
Loss as reported (54) (603) (124) 178 (603)
Adjustments:
Deferred taxation/business combinations (80) (1,158) (1,172) 1,252 (1,158)
Provisions (2) (147) (147) 149 (147)
Impairment - (911) (911) 911 (911)
Sale and leaseback - 7 7 (7) 7
Goodwill - 15 15 (15) 15
Derivative financial instruments - (137) (137) 137 (137)
Gain arising on asset exchange - 157 157 (157) 157
Other - 3 3 (3) 3
------ ------ ------ ------ ------
Loss for the period as adjusted
to accord with US GAAP (136) (2,774) (2,309) 2,445 (2,774)
====== ====== ====== ====== ======
Page 48
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Year ended December 31, 2002
Turnover 2,356 - 180,122 (2,292) 180,186
Less: Joint ventures - - 1,465 - 1,465
------ ------ ------ ------ ------
Group turnover 2,356 - 178,657 (2,292) 178,721
Replacement cost of sales 1,459 - 156,516 (2,447) 155,528
Production taxes 199 - 1,075 - 1,274
------ ------ ------ ------ ------
Gross profit 698 - 21,066 155 21,919
Distribution and administration expenses 12 997 11,623 - 12,632
Exploration expense 18 - 610 16 644
------ ------ ------ ------ ------
668 (997) 8,833 139 8,643
Other income 31 752 446 (588) 641
------ ------ ------ ------ ------
Group replacement cost operating profit 699 (245) 9,279 (449) 9,284
Share of profits of joint ventures - - 346 - 346
Share of profits of associated undertakings - - 616 - 616
Equity accounted income of subsidiaries 283 10,847 - (11,130) -
------ ------ ------ ------ ------
Total replacement cost operating profit 982 10,602 10,241 (11,579) 10,246
Profit (loss) on sale of fixed assets
and businesses or termination of operations (4) 2,085 1,984 (2,897) 1,168
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 978 12,687 12,225 (14,476) 11,414
Inventory holding gains (losses) 9 1,129 1,129 (1,138) 1,129
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 987 13,816 13,354 (15,614) 12,543
Interest expense 93 1,712 1,602 (2,128) 1,279
------ ------ ------ ------ ------
Profit before taxation 894 12,104 11,752 (13,486) 11,264
Taxation 344 4,342 4,065 (4,409) 4,342
------ ------ ------ ------ ------
Profit after taxation 550 7,762 7,687 (9,077) 6,922
Minority shareholders' interest - - 77 - 77
------ ------ ------ ------ ------
Profit for the year 550 7,762 7,610 (9,077) 6,845
====== ====== ====== ====== ======
Page 49
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income statement (continued)
The following is a summary of the adjustments to the 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 Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Year ended December 31, 2002
Profit as reported 550 7,762 7,610 (9,077) 6,845
Adjustments:
Deferred taxation/business combinations (129) (315) (232) 361 (315)
Provisions (1) 8 9 (8) 8
Sale and leaseback - 24 24 (24) 24
Goodwill - 1,302 1,302 (1,302) 1,302
Derivative financial instruments (50) 540 540 (490) 540
Gain arising on asset exchange - (18) (18) 18 (18)
Other - 11 11 (11) 11
------ ------ ------ ------ ------
Profit for the year as adjusted
to accord with US GAAP 370 9,314 9,246 (10,533) 8,397
====== ====== ====== ====== ======
Page 50
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Income statement (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Year ended December 31, 2001
Turnover 1,919 - 175,389 (1,919) 175,389
Less: Joint ventures - - 1,171 - 1,171
------ ------ ------ ------ ------
Group turnover 1,919 - 174,218 (1,919) 174,218
Replacement cost of sales 971 - 148,077 (2,047) 147,001
Production taxes 192 - 1,497 - 1,689
------ ------ ------ ------ ------
Gross profit 756 - 24,644 128 25,528
Distribution and administration expenses 5 846 10,067 - 10,918
Exploration expense 55 - 425 - 480
------ ------ ------ ------ ------
696 (846) 14,152 128 14,130
Other income 1 1,365 668 (1,340) 694
------ ------ ------ ------ ------
Group replacement cost operating profit 697 519 14,820 (1,212) 14,824
Share of profits of joint ventures - - 443 - 443
Share of profits of associated undertakings - - 760 - 760
Equity accounted income of subsidiaries 552 16,665 - (17,217) -
------ ------ ------ ------ ------
Total replacement cost operating profit 1,249 17,184 16,023 (18,429) 16,027
Profit (loss) on sale of fixed assets
and businesses or termination of operations 1 533 758 (757) 535
------ ------ ------ ------ ------
Replacement cost profit before
interest and tax 1,250 17,717 16,781 (19,186) 16,562
Inventory holding gains (losses) (11) (1,900) (1,900) 1,911 (1,900)
------ ------ ------ ------ ------
Historical cost profit before
interest and tax 1,239 15,817 14,881 (17,275) 14,662
Interest expense 101 2,886 2,901 (4,218) 1,670
------ ------ ------ ------ ------
Profit before taxation 1,138 12,931 11,980 (13,057) 12,992
Taxation 478 6,375 6,285 (6,763) 6,375
------ ------ ------ ------ ------
Profit after taxation 660 6,556 5,695 (6,294) 6,617
Minority shareholders' interest - - 61 - 61
------ ------ ------ ------ ------
Profit for the year 660 6,556 5,634 (6,294) 6,556
====== ====== ====== ====== ======
Page 51
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Income statement (concluded)
The following is a summary of the adjustments to the 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 Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Year ended December 31, 2001
Profit as reported 660 6,556 5,634 (6,294) 6,556
Adjustments:
Deferred taxation/business combinations (60) (815) (850) 910 (815)
Provisions (5) (182) (179) 184 (182)
Impairment - (911) (911) 911 (911)
Sale and leaseback - (36) (36) 36 (36)
Goodwill - 60 60 (60) 60
Derivative financial instruments - (313) (313) 313 (313)
Gain arising on asset exchange - 157 157 (157) 157
Other - 10 10 (10) 10
------ ------ ------ ------ ------
Profit for the year before cumulative
effect of accounting change as adjusted
to accord with US GAAP 595 4,526 3,572 (4,167) 4,526
Cumulative effect of accounting change:
Derivative financial instruments - (362) (362) 362 (362)
------ ------ ------ ------ ------
Profit for the year as adjusted
to accord with US GAAP 595 4,164 3,210 (3,805) 4,164
====== ====== ====== ====== ======
Page 52
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2002
Fixed assets
Intangible assets 427 - 15,139 - 15,566
Tangible assets 6,405 - 81,277 - 87,682
Investments
Joint ventures - - 4,031 - 4,031
Associated undertakings - 3 4,623 - 4,626
Subsidiaries - equity accounted basis 2,561 91,939 - (94,500) -
Other - 159 1,995 - 2,154
------ ------ ------ ------ ------
2,561 92,101 10,649 (94,500) 10,811
------ ------ ------ ------ ------
Total fixed assets 9,393 92,101 107,065 (94,500) 114,059
------ ------ ------ ------ ------
Current assets
Inventories 102 - 10,079 - 10,181
Receivables 18,169 13,581 51,022 (49,622) 33,150
Investments - - 215 - 215
Cash at bank and in hand (11) 1 1,530 - 1,520
------ ------ ------ ------ ------
18,260 13,582 62,846 (49,622) 45,066
------ ------ ------ ------ ------
Current liabilities - falling due within
one year
Finance debt 1,768 - 10,031 (1,713) 10,086
Accounts payable and accrued liabilities 1,129 9,906 35,369 (10,189) 36,215
------ ------ ------ ------ ------
Net current assets (liabilities) 15,363 3,676 17,446 (37,720) (1,235)
------ ------ ------ ------ ------
Total assets less current liabilities 24,756 95,777 124,511 (132,220) 112,824
Noncurrent liabilities
Finance debt - - 11,922 - 11,922
Accounts payable and accrued liabilities 10,586 98 30,491 (37,720) 3,455
Provisions for liabilities and charges
Deferred taxation 1,686 - 11,828 - 13,514
Other provisions 489 142 13,255 - 13,886
------ ------ ------ ------ ------
Net assets 11,995 95,537 57,015 (94,500) 70,047
Minority shareholders' interest - equity - - 638 - 638
------ ------ ------ ------ ------
BP shareholders' interest 11,995 95,537 56,377 (94,500) 69,409
====== ====== ====== ====== ======
Page 53
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2002
Capital and reserves
Capital shares 1,903 5,616 - (1,903) 5,616
Paid-in surplus 3,145 4,243 - (3,145) 4,243
Merger reserve - 26,336 697 - 27,033
Other reserves - 173 - - 173
Retained earnings 6,947 59,169 55,680 (89,452) 32,344
------ ------ ------ ------ ------
11,995 95,537 56,377 (94,500) 69,409
====== ====== ====== ====== ======
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 Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 11,995 95,537 56,377 (94,500) 69,409
Adjustments:
Deferred taxation/business combinations 74 (78) (152) 78 (78)
Provisions (190) (1,088) (902) 1,092 (1,088)
Sale and leaseback - (106) (106) 106 (106)
Goodwill - (84) (84) 84 (84)
Derivative financial instruments 50 (135) (135) 85 (135)
Gain arising on asset exchange - 142 142 (142) 142
Ordinary shares held for future
awards to employees - (159) - - (159)
Quarterly dividend - 1,398 - - 1,398
Investments - 34 34 (34) 34
Additional minimum pension liability - (2,286) (2,286) 2,286 (2,286)
Other - (48) (48) 48 (48)
------ ------ ------ ------ ------
Shareholders' interest as adjusted
to accord with US GAAP 11,929 93,127 52,840 (90,897) 66,999
====== ====== ====== ====== ======
Page 54
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (continued) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2001
Fixed assets
Intangible assets 489 - 16,000 - 16,489
Tangible assets 6,418 - 70,992 - 77,410
Investments
Joint ventures - - 3,861 - 3,861
Associated undertakings - 3 5,480 - 5,483
Subsidiaries - equity accounted basis 1,846 76,877 - (78,723) -
Other - 266 2,353 - 2,619
------ ------ ------ ------ ------
1,846 77,146 11,694 (78,723) 11,963
------ ------ ------ ------ ------
Total fixed assets 8,753 77,146 98,686 (78,723) 105,862
------ ------ ------ ------ ------
Current assets
Inventories 92 - 7,539 - 7,631
Receivables 15,333 21,272 41,858 (51,794) 26,669
Investments - - 450 - 450
Cash at bank and in hand (29) 3 1,384 - 1,358
------ ------ ------ ------ ------
15,396 21,275 51,231 (51,794) 36,108
------ ------ ------ ------ ------
Current liabilities - falling due within
one year
Finance debt 406 - 9,035 (351) 9,090
Accounts payable and accrued liabilities 260 7,642 27,797 (7,175) 28,524
------ ------ ------ ------ ------
Net current assets (liabilities) 14,730 13,633 14,399 (44,268) (1,506)
------ ------ ------ ------ ------
Total assets less current liabilities 23,483 90,779 113,085 (122,991) 104,356
Noncurrent liabilities
Finance debt - - 12,327 - 12,327
Accounts payable and accrued liabilities 10,795 191 36,433 (44,333) 3,086
Provisions for liabilities and charges
Deferred taxation 1,668 - 11,702 (1,668) 11,702
Other provisions 392 216 10,879 (5) 11,482
------ ------ ------ ------ ------
Net assets 10,628 90,372 41,744 (76,985) 65,759
Minority shareholders' interest - equity - - 598 - 598
------ ------ ------ ------ ------
BP shareholders' interest 10,628 90,372 41,146 (76,985) 65,161
====== ====== ====== ====== ======
Page 55
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Balance sheet (concluded) Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
At December 31, 2001
Capital and reserves
Capital shares 1,050 5,629 - (1,050) 5,629
Paid-in surplus 3,145 4,014 - (3,145) 4,014
Merger reserve - 26,286 697 - 26,983
Other reserves - 223 - - 223
Retained earnings 6,433 54,220 40,449 (72,790) 28,312
------ ------ ------ ------ ------
10,628 90,372 41,146 (76,985) 65,161
====== ====== ====== ====== ======
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 Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Shareholders' interest as reported 10,628 90,372 41,146 (76,985) 65,161
Adjustments:
Deferred taxation/business combinations 203 243 86 (289) 243
Provisions (186) (1,054) (869) 1,055 (1,054)
Sale and leaseback - (134) (134) 134 (134)
Goodwill - (1,414) (1,414) 1,414 (1,414)
Derivative financial instruments - (675) (675) 675 (675)
Gain arising on asset exchange - 157 157 (157) 157
Ordinary shares held for future
awards to employees - (266) - - (266)
Quarterly dividend - 1,288 - - 1,288
Investments - (2) (2) 2 (2)
Additional minimum pension liability - (942) (942) 942 (942)
Other - (40) (40) 40 (40)
------ ------ ------ ------ ------
Shareholders' interest as adjusted
to accord with US GAAP 10,645 87,533 37,313 (73,169) 62,322
====== ====== ====== ====== ======
Page 56
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended December 31, 2002
Net cash inflow (outflow) from
operating activities 423 5,668 5,400 (5,294) 6,197
Dividends from joint ventures - - 69 - 69
Dividends from associated undertakings - - 65 - 65
Dividends from subsidiaries - 761 - (761) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (28) 46 (263) - (245)
Tax (paid) refund - - (1,061) - (1,061)
Net cash inflow (outflow) for capital
expenditure and financial investment (670) 144 (2,292) - (2,818)
Net cash inflow (outflow) for acquisitions
and disposals - (5,294) (156) 5,294 (156)
Equity dividends paid - (1,340) (761) 761 (1,340)
------ ------ ------ ------ ------
Net cash inflow (outflow) (275) (15) 1,001 - 711
====== ====== ====== ====== ======
Financing (275) (13) 592 - 304
Management of liquid resources - - (56) - (56)
Increase (decrease) in cash - (2) 465 - 463
------ ------ ------ ------ ------
(275) (15) 1,001 - 711
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 422 6,475 4,210 (6,037) 5,070
Net cash provided by (used in)
investing activities (670) (5,150) (2,448) 5,261 (3,007)
Net cash provided by (used in)
financing activities 248 (1,327) (1,352) 776 (1,655)
Currency translation differences relating to
cash and cash equivalents - - 37 - 37
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents - (2) 447 - 445
Cash and cash equivalents at beginning
of period (11) 3 1,298 - 1,290
------ ------ ------ ------ ------
Cash and cash equivalents at end
of period (11) 1 1,745 - 1,735
====== ====== ====== ====== ======
Page 57
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
16. Condensed consolidating information - concluded
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (concluded) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Three months ended December 31, 2001
Net cash inflow (outflow) from
operating activities 241 2,712 5,572 (2,978) 5,547
Dividends from joint ventures - - 12 - 12
Dividends from associated undertakings - - 104 - 104
Dividends from subsidiaries - 1,424 - (1,424) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 166 (315) - (149)
Tax (paid) refund - - (1,422) - (1,422)
Net cash inflow (outflow) for capital
expenditure and financial investment (1,272) (7) (1,794) - (3,073)
Net cash inflow (outflow) for acquisitions
and disposals - (2,978) (770) 2,978 (770)
Equity dividends paid - (1,232) (1,424) 1,424 (1,232)
------ ------ ------ ------ ------
Net cash inflow (outflow) (1,031) 85 (37) - (983)
====== ====== ====== ====== ======
Financing (1,002) 82 65 - (855)
Management of liquid resources - - (65) - (65)
Increase (decrease) in cash (29) 3 (37) - (63)
------ ------ ------ ------ ------
(1,031) 85 (37) - (983)
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS 95 is
as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (concluded) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 241 4,303 3,950 (4,358) 4,136
Net cash provided by (used in)
investing activities (1,272) (2,985) (2,564) 2,971 (3,850)
Net cash provided by (used in)
financing activities 1,002 (1,315) (1,489) 1,387 (415)
Currency translation differences relating to
cash and cash equivalents - - (20) - (20)
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents (29) 3 (123) - (149)
Cash and cash equivalents at beginning
of period - - 1,957 - 1,957
------ ------ ------ ------ ------
Cash and cash equivalents at end
of period (29) 3 1,834 - 1,808
====== ====== ====== ====== ======
Page 58
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Year ended December 31, 2002
Net cash inflow (outflow) from
operating activities 1,357 9,108 13,308 (4,431) 19,342
Dividends from joint ventures - - 198 - 198
Dividends from associated undertakings - - 368 - 368
Dividends from subsidiaries 26 761 - (787) -
Net cash inflow (outflow) from servicing of
finance and returns on investments (28) 235 (1,118) - (911)
Tax (paid) refund (75) (2) (3,017) - (3,094)
Net cash inflow (outflow) for capital
expenditure and financial investment (1,097) 151 (8,700) - (9,646)
Net cash inflow (outflow) for acquisitions
and disposals - (4,431) (1,337) 4,431 (1,337)
Equity dividends paid - (5,264) (787) 787 (5,264)
------ ------ ------ ------ ------
Net cash inflow (outflow) 183 558 (1,085) - (344)
====== ====== ====== ====== ======
Financing 165 560 (906) - (181)
Management of liquid resources - - (220) - (220)
Increase (decrease) in cash 18 (2) 41 - 57
------ ------ ------ ------ ------
183 558 (1,085) - (344)
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 1,307 10,102 9,753 (5,119) 16,043
Net cash provided by (used in)
investing activities (1,097) (4,279) (10,052) 4,345 (11,083)
Net cash provided by (used in)
financing activities (192) (5,825) 120 774 (5,123)
Currency translation differences relating to
cash and cash equivalents - - 90 - 90
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents 18 (2) (89) - (73)
Cash and cash equivalents at beginning
of period (29) 3 1,834 - 1,808
------ ------ ------ ------ ------
Cash and cash equivalents at end
of period (11) 1 1,745 - 1,735
====== ====== ====== ====== ======
Page 59
BP p.l.c. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Condensed consolidating information - continued
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
Cash flow statement (continued) (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Year ended December 31, 2001
Net cash inflow (outflow) from
operating activities 956 6,199 18,249 (2,995) 22,409
Dividends from joint ventures - - 104 - 104
Dividends from associated undertakings - - 528 - 528
Dividends from subsidiaries - 1,537 - (1,537) -
Net cash inflow (outflow) from servicing of
finance and returns on investments - 1,218 (2,166) - (948)
Tax (paid) refund (345) (1) (4,314) - (4,660)
Net cash inflow (outflow) for capital
expenditure and financial investment (1,870) (33) (7,946) - (9,849)
Net cash inflow (outflow) for acquisitions
and disposals - (2,995) (1,755) 2,995 (1,755)
Equity dividends paid - (4,827) (1,537) 1,537 (4,827)
------ ------ ------ ------ ------
Net cash inflow (outflow) (1,259) 1,098 1,163 - 1,002
====== ====== ====== ====== ======
Financing (1,262) 1,097 1,137 - 972
Management of liquid resources - - (211) - (211)
Increase (decrease) in cash 3 1 237 - 241
------ ------ ------ ------ ------
(1,259) 1,098 1,163 - 1,002
====== ====== ====== ====== ======
The consolidated statement of cash flows presented in accordance with SFAS
95 is as follows:
Issuer Guarantor
--------------------------
BP Eliminations
Exploration Other and BP
(Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group
-----------------------------------------------------------------------------
($ million)
Net cash provided by (used in)
operating activities 611 8,953 12,401 (4,397) 17,568
Net cash provided by (used in)
investing activities (1,870) (3,028) (9,701) 2,914 (11,685)
Net cash provided by (used in)
financing activities 1,262 (5,924) (2,674) 1,483 (5,853)
Currency translation differences relating to
cash and cash equivalents - - (53) - (53)
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents 3 1 (27) - (23)
Cash and cash equivalents at beginning
of period (32) 2 1,861 - 1,831
------ ------ ------ ------ ------
Cash and cash equivalents at end
of period (29) 3 1,834 - 1,808
====== ====== ====== ====== ======
Page 60
BP p.l.c. AND SUBSIDIARIES
ENVIRONMENTAL INDICATORS
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
Average oil realizations (a) - $/bbl
UK 26.54 18.53 24.44 23.55
USA 23.28 17.05 21.34 21.87
Rest of World 25.06 17.70 22.65 21.90
BP average 24.78 17.72 22.69 22.50
Brent oil price 26.88 19.41 25.03 24.44
West Texas Intermediate oil price 28.31 20.31 26.14 25.89
Alaska North Slope US West Coast 26.86 17.79 24.77 23.18
Average natural gas realizations - $/mcf
UK 2.88 3.15 2.78 3.07
USA 3.31 2.06 2.63 3.99
Rest of World 2.40 1.99 2.10 2.52
BP average 2.87 2.28 2.46 3.30
Henry Hub gas price (b) ($/mmBtu) 3.99 2.43 3.22 4.26
UK Gas - National Balancing point (p/therm) 19.09 22.32 15.78 22.21
Global Indicator Refining Margins (c) - $/bbl
Northwest Europe 2.19 1.53 1.04 2.24
US Gulf Coast 2.98 1.79 2.36 4.84
Midwest 4.09 2.63 3.30 6.05
US West Coast 3.95 6.25 4.34 8.60
Singapore 1.41 1.20 0.57 0.90
BP average 2.76 2.40 2.11 4.06
Chemicals Indicator Margin (d) - $/te 100 (e) 112 102 (e) 110
---------------
(a) Crude oil and natural gas liquids.
(b) Henry Hub First of Month Index.
(c) The Global Indicator Refining Margin (GIM) is the average of seven regional
indicator margins weighted for BP's crude refining capacity in each region.
Each regional indicator margin is based on a single representative crude
with product yields characteristic of the typical level of upgrading
complexity.
(d) The Chemicals Indicator Margin (CIM) is a weighted average of
externally-based product margins. It is based on market data collected by
Chem Systems in their quarterly market analyses, then weighted based on
BP's product portfolio. While it does not cover our entire portfolio, it
includes a broad range of products. Amongst the products and businesses
covered in the CIM are olefins and derivatives, aromatics and derivatives,
linear alpha-olefins, acetic acid, vinyl acetate monomer and nitriles. Not
included are fabrics and fibres, plastic fabrications, poly alpha-olefins,
anhydrides, engineering polymers and carbon fibres, speciality
intermediates, and the remaining parts of the solvents and acetyls
businesses.
(e) Provisional. The data for the fourth quarter is based on two months' actual
and one month of provisional data.
Three months ended Year ended
December 31 December 31
US dollars/sterling exchange rates (Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
Average rate for the period 1.57 1.44 1.50 1.44
Period-end rate 1.60 1.45 1.60 1.45
Page 61
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
Crude oil and natural gas liquids production
(thousand barrels per day) (net of royalties)
UK 472 500 462 485
Rest of Europe 96 116 104 100
USA 756 772 765 744
Rest of World 725 629 687 602
------ ------ ------ ------
Total crude oil and liquids production 2,049 2,017 2,018 1,931
====== ====== ====== ======
Natural gas production (million cubic feet per day)
(net of royalties)
UK 1,752 1,715 1,555 1,713
Rest of Europe 140 160 147 147
USA 3,360 3,621 3,483 3,554
Rest of World 3,684 3,268 3,522 3,218
------ ------ ------ ------
Total natural gas production 8,936 8,764 8,707 8,632
====== ====== ====== ======
Total production (a)
(thousand barrels of oil equivalent per day)
(net of royalties)
UK 774 802 730 780
Rest of Europe 120 144 129 125
USA 1,335 1,396 1,366 1,357
Rest of World 1,360 1,192 1,294 1,157
------ ------ ------ ------
Total production 3,589 3,534 3,519 3,419
====== ====== ====== ======
Natural gas sales volumes (million cubic feet per day)
UK 2,715 2,534 2,372 2,641
Rest of Europe 442 232 399 213
USA 10,723 8,094 9,315 8,327
Rest of World 10,659 8,867 9,535 7,613
------ ------ ------ ------
Total natural gas sales volumes (b) 24,539 19,727 21,621 18,794
====== ====== ====== ======
NGL sales volumes (thousand barrels per day)
UK - - - -
Rest of Europe - - - -
USA 262 226 208 221
Rest of World 244 215 202 189
------ ------ ------ ------
Total NGL sales volumes 506 441 410 410
====== ====== ====== ======
---------------
(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, Power and
Renewables, including marketing, trading and supply sales.
Page 62
BP p.l.c. AND SUBSIDIARIES
OPERATING INFORMATION - concluded
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
Oil sales volumes (thousand barrels per day)
Refined products
UK 269 268 253 266
Rest of Europe 1,541 1,084 1,467 1,062
USA 1,875 1,773 1,874 1,866
Rest of World 611 612 586 603
------ ------ ------ ------
Total marketing sales 4,296 3,737 4,180 3,797
Trading/supply sales 2,064 2,710 2,383 2,409
------ ------ ------ ------
Total refined product sales 6,360 6,447 6,563 6,206
Crude oil 5,314 4,599 4,671 4,473
------ ------ ------ ------
Total oil sales 11,674 11,046 11,234 10,679
====== ====== ====== ======
Refinery throughputs (thousand barrels per day)
UK 392 415 389 364
Rest of Europe 959 692 918 663
USA 1,439 1,371 1,439 1,526
Rest of World 367 369 357 376
------ ------ ------ ------
Total throughput 3,157 2,847 3,103 2,929
====== ====== ====== ======
Chemicals production (thousand tonnes)
UK 698 792 3,221 3,126
Rest of Europe 2,679 2,278 10,526 7,925
USA 2,447 2,279 10,201 8,943
Rest of World 785 699 3,040 2,722
------ ------ ------ ------
Total production 6,609 6,048 26,988 22,716
====== ====== ====== ======
Page 63
BP p.l.c. AND SUBSIDIARIES
TOTAL REPLACEMENT COST OPERATING PROFIT
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
-------------------- --------------------
($ million)
By business
Exploration and Production
UK 965 571 2,526 3,424
Rest of Europe 177 144 714 748
USA 1,081 426 2,835 4,573
Rest of World 1,025 500 3,131 3,616
------ ------ ------ ------
3,248 1,641 9,206 12,361
------ ------ ------ ------
Gas, Power and Renewables
UK (31) (29) (94) 52
Rest of Europe 1 64 100 189
USA 9 36 25 229
Rest of World 93 31 323 18
------ ------ ------ ------
72 102 354 488
------ ------ ------ ------
Refining and Marketing
UK (155) (197) (498) (475)
Rest of Europe (53) 227 571 762
USA 80 46 335 2,585
Rest of World 92 303 464 701
------ ------ ------ ------
(36) 379 872 3,573
------ ------ ------ ------
Chemicals
UK (47) (75) (82) (216)
Rest of Europe 65 (1) 337 185
USA 37 (9) 198 62
Rest of World 49 18 62 97
------ ------ ------ ------
104 (67) 515 128
------ ------ ------ ------
Other businesses and corporate (207) (175) (701) (523)
------ ------ ------ ------
3,181 1,880 10,246 16,027
====== ====== ====== ======
By geographical area
UK 793 375 1,696 2,668
Rest of Europe 171 388 1,703 1,814
USA 957 216 2,890 6,941
Rest of World 1,260 901 3,957 4,604
------ ------ ------ ------
3,181 1,880 10,246 16,027
====== ====== ====== ======
Page 64
BP p.l.c. AND SUBSIDIARIES
CAPITAL EXPENDITURE AND ACQUISITIONS
Three months ended Year ended
December 31 December 31
(Unaudited)
2002 2001 2002 2001
-------------------- --------------------
($ million)
By business
Exploration and Production
UK 177 312 955 1,095
Rest of Europe 73 99 262 329
USA 1,079 862 4,303 4,155
Rest of World (a) 1,244 880 4,179 3,282
------ ------ ------ ------
2,573 2,153 9,699 8,861
------ ------ ------ ------
Gas, Power and Renewables
UK - 51 28 102
Rest of Europe (b) 41 107 161 156
USA 60 83 160 155
Rest of World 22 60 59 79
------ ------ ------ ------
123 301 408 492
------ ------ ------ ------
Refining and Marketing
UK 163 127 395 394
Rest of Europe (c) 273 209 5,759 380
USA 430 623 1,291 1,311
Rest of World 180 157 308 330
------ ------ ------ ------
1,046 1,116 7,753 2,415
------ ------ ------ ------
Chemicals
UK 57 26 112 205
Rest of Europe (d) 10 294 173 917
USA 116 167 262 460
Rest of World 102 107 276 344
------ ------ ------ ------
285 594 823 1,926
------ ------ ------ ------
Other businesses and corporate (e) 61 264 428 430
------ ------ ------ ------
4,088 4,428 19,111 14,124
====== ====== ====== ======
By geographical area
UK 434 745 1,637 2,128
Rest of Europe 398 709 6,556 1,787
USA 1,708 1,758 6,095 6,160
Rest of World 1,548 1,216 4,823 4,049
------ ------ ------ ------
4,088 4,428 19,111 14,124
====== ====== ====== ======
------------
(a) Year ended December 31, 2002 included the acquisition of an additional
interest in Sidanco.
(b) Year ended December 31, 2002 included the acquisition of a 5% stake in
Enagas.
(c) Year ended December 31, 2002 included the acquisition of 100% of Veba.
(d) Three months ended December 31, 2001 included the formation of the joint
venture with Solvay. Year ended December 31, 2001 also included the
acquisition of Bayer's 50% interest in Erdoelchemie.
(e) Year ended December 31, 2002 included the acquisition of the minority
interest in Veba's upstream oil and gas assets.
Page 65
BP p.l.c. AND SUBSIDIARIES
SPECIAL ITEMS AND ACQUISITION AMORTIZATION BY SEGMENT (PRE-TAX)
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
($ million)
Special items
Exploration and Production
UK 5 70 242 70
Rest of Europe - - - -
USA 94 77 279 77
Rest of World - 175 498 175
------ ------ ------ ------
99 322 1,019 322
------ ------ ------ ------
Gas, Power and Renewables
UK - - 30 -
Rest of Europe - - - -
USA - - - -
Rest of World - - - -
------ ------ ------ ------
- - 30 -
------ ------ ------ ------
Refining and Marketing
UK 27 70 43 131
Rest of Europe 278 44 365 167
USA 59 63 (49) 82
Rest of World 56 36 56 107
------ ------ ------ ------
420 213 415 487
------ ------ ------ ------
Chemicals
UK 21 89 43 89
Rest of Europe 9 33 27 41
USA 5 (16) 40 (16)
Rest of World - - 140 -
------ ------ ------ ------
35 106 250 114
------ ------ ------ ------
Other businesses and corporate
UK 20 - 55 -
Rest of Europe 1 - 1 -
USA 40 73 130 73
Rest of World - - - -
------ ------ ------ ------
61 73 186 73
------ ------ ------ ------
Total special items before interest 615 714 1,900 996
Interest - bond redemption charges 15 - 15 62
------ ------ ------ ------
Total 630 714 1,915 1,058
====== ====== ====== ======
Acquisition amortization
Exploration and Production
UK 41 41 488 151
USA 246 337 1,078 1,530
Rest of World 32 33 214 134
------ ------ ------ ------
319 411 1,780 1,815
------ ------ ------ ------
Refining and Marketing
UK 107 99 410 394
USA 96 94 384 376
------ ------ ------ ------
203 193 794 770
------ ------ ------ ------
Total 522 604 2,574 2,585
====== ====== ====== ======
Page 66
BP p.l.c. AND SUBSIDIARIES
RETURN ON AVERAGE CAPITAL EMPLOYED
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
($ million)
Replacement cost basis
Replacement cost profit before exceptional items 1,697 706 4,698 8,291
Interest (a) 140 181 602 798
Minority shareholders' interest 6 23 52 61
------ ------ ------ ------
Adjusted replacement cost profit 1,843 910 5,352 9,150
====== ====== ====== ======
Average capital employed 91,767 87,791 89,616 87,259
ROACE - replacement cost basis 8.0% 4.1% 6.0% 10.5%
------ ------ ------ ------
Pro forma basis
Adjusted replacement cost profit 1,843 910 5,352 9,150
Acquisition amortization 522 604 2,574 2,585
Special items (post tax) 406 461 1,449 643
------ ------ ------ ------
Adjusted replacement cost profit (pro forma basis) 2,771 1,975 9,375 12,378
====== ====== ====== ======
Average capital employed 91,767 87,791 89,616 87,259
Average capital employed acquisition adjustment (b) 16,903 19,647 17,777 20,739
------ ------ ------ ------
Average capital employed (pro forma basis) 74,864 68,144 71,839 66,520
ROACE - pro forma basis adjusted for special items 14.8% 11.6% 13.0% 18.6%
Historical cost basis
Historical cost profit (loss) after exceptional items 651 (603) 6,845 6,556
Interest (a) 140 181 602 798
Minority shareholders' interest 6 23 77 61
------ ------ ------ ------
Adjusted historical cost profit 797 (399) 7,524 7,415
====== ====== ====== ======
Average capital employed 91,767 87,791 89,616 87,259
ROACE - historical cost basis after exceptionals 3.5% (1.8)% 8.4% 8.5%
------------
(a) Excludes interest on joint venture and associated undertakings debt as well
as unwinding of discount on provisions and effect of change in discount
rate on provisions, and is on a post-tax basis, using a deemed tax rate
equal to the US statutory tax rate.
(b) Acquisition adjustment refers to the fixed asset revaluation adjustments
and goodwill consequent upon the ARCO and Burmah Castrol acquisitions.
page 67
BP p.l.c. AND SUBSIDIARIES
NET DEBT RATIO
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
($ million)
Net debt ratio - net debt: net debt + equity
Gross debt 22,008 21,417 22,008 21,417
Cash and current asset investments 1,735 1,808 1,735 1,808
------ ------ ------ ------
Net debt 20,273 19,609 20,273 19,609
------ ------ ------ ------
Equity 70,047 65,759 70,047 65,759
Net debt ratio 22% 23% 22% 23%
------ ------ ------ ------
Acquisition adjustment (a) 16,672 18,882 16,672 18,882
------ ------ ------ ------
Net debt ratio - pro forma basis (b) 28% 29% 28% 29%
====== ====== ====== ======
---------------
(a) Acquisition adjustment refers to the fixed asset revaluation adjustments
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.
Page 68
BP p.l.c. AND SUBSIDIARIES
REPLACEMENT COST OPERATING PROFIT ADJUSTED FOR NON-CASH
CHARGES AND CERTAIN OTHER ITEMS
Replacement cost operating profit adjusted for non-cash charges and certain
other items essentially represents the Group's cash flow from operations (on a
net of tax paid basis, tax is adjusted for the estimated effect of exceptional
items and interest paid) excluding changes in working capital. BP is presenting
this information as it gives a better insight into underlying cash flow from
operating activities. This measure is derived from BP's UK GAAP accounting
information but is not itself a recognised UK or US GAAP measure.
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2002 2001 2002 2001
-------------------- --------------------
($ million)
Replacement cost operating profit (RCOP) (reported) (a) 3,181 1,880 10,246 16,027
Depreciation and amounts provided (b) 2,515 2,457 10,401 8,858
Exploration expenditure written off 124 85 385 238
Dividends from joint ventures and associated
undertakings less share of RCOP (110) (194) (396) (571)
Dividends paid to minority shareholders (11) (38) (40) (54)
Adjust provisions to cash basis (c) 27 (34) (150) (111)
Adjust interest and other income to cash basis (d) (14) (14) (25) (90)
------ ------ ------ ------
5,712 4,142 20,421 24,297
Tax paid adjusted for certain items* (1,199) (1,528) (3,390) (4,738)
------ ------ ------ ------
Adjusted RCOP after tax paid 4,513 2,614 17,031 19,559
------ ------ ------ ------
* Calculation of tax paid adjusted for certain items
Cash tax paid (1,061) (1,422) (3,094) (4,660)
Tax charge on exceptional items (21) (26) 125 370
Tax shield assumption + (117) (80) (421) (448)
------ ------ ------ ------
(1,199) (1,528) (3,390) (4,738)
------ ------ ------ ------
+ Calculation of tax shield assumption
Interest paid (335) (229) (1,204) (1,282)
Tax rate assumption (e) 35% 35% 35% 35%
------ ------ ------ ------
(117) (80) (421) (448)
------ ------ ------ ------
(a) Total replacement cost operating profit is before exceptional items,
inventory holding gains and losses and interest expense.
(b) Includes depreciation and amortization relating to the fixed asset
revaluation adjustments and goodwill consequent upon the ARCO and Burmah
Castrol acquisitions.
(c) Calculated as the net of charge for provisions and utilization of
provisions.
(d) Calculated as interest and other income, less interest received and
dividends received from the Group cash flow statement.
(e) Deemed tax rate for tax shield adjustment is equal to the US statutory tax
rate.
Page 69
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: February 19, 2003 /s/ D. J. PEARL
..............................
D. J. PEARL
Deputy Company Secretary
Page 70