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July 2, 2004
BP Second Quarter 2004 Trading Update
This trading update is aimed at providing certain estimates regarding
revenue and trading conditions experienced by BP in the second
quarter ending June 30, 2004, and certain identified non-operating
items expected to be included in that quarter's result.
The second quarter margin, price, realisation, cost,
production and other data referred to below are currently
provisional, some being drawn from figures applicable to the first
month or so of the quarter. All such data are subject to change and
may differ quite considerably from the final numbers that will be
reported on July 27, 2004. The statement is produced in order to
provide greater disclosure to investors and potential investors of
currently expected outcomes, and to ensure that they all receive
equal access to the same information at the same time.
Resources Business : Exploration and Production
Marker Prices 2Q'04 1Q'04 4Q'03 2Q'03
Brent Dated ($/bbl) 35.32 32.03 29.43 26.03
WTI ($/bbl) 38.28 35.30 31.15 29.02
ANS USWC ($/bbl) 36.99 34.22 29.43 27.04
US gas Henry Hub first of
month index ($/mmbtu) 6.00 5.69 4.58 5.40
UK gas price - National
Balance Point (p/therm) 20.70 24.59 27.30 17.44
Overview : Exploration and Production
Overall BP production in 2Q'04 is expected to be around 3,950 mboed,
up by some 17 per cent from 3,366 mboed in 2Q'03, but down by 2 per
cent from 4,016 mboed in 1Q'04. Average production for 2004 as a
whole is expected to be over 4 mboed, an increase of more than 10 per
cent compared to 2003, as indicated in BP's
Strategy Presentation on 29 March 2004.
Profit centres excluding Russia:
Production in 2Q'04, excluding volumes from our Russian operations,
is expected to be approximately 3,060 mboed, compared to 3,253 mboed
in 2Q'03. The decrease relative to 2Q'03 is due primarily to
divestments. 2Q'04 production is expected to be below the 1Q'04 level
of 3,184 mboed due to lower seasonal gas takes in the North Sea;
planned maintenance in Alaska, the Middle East and North Sea;
plus unplanned shutdowns at the Mars platform in the Gulf of Mexico
and in Trinidad, which impacted production by around 35 mboed.
Relative to 1Q'04, liquids realisations moved in line with marker
prices. Relative to 1Q'04, gas differentials in North America moved
in line with the Henry Hub marker, but gas realisations in the UK
decreased significantly from 1Q'04 due to seasonality. Costs rose
relative to 1Q'04 due to seasonal maintenance activity, and planned
revenue investment in well work and seismic.
The 2Q'04 impact of Unrealised Profit in Stock (UPIS) is expected to
reduce earnings by approximately $70m.
Production in mboed 2Q'04* 1Q'04 4Q'03 2Q'03**
TNK-BP: Oil 813 766 669 631
TNK-BP: Gas 77 66 51 46
Urals (NWE - cif) ($/bbl) 32.43 29.01 27.90 24.10
Urals (Med - cif ) ($/bbl)32.71 28.98 28.00 24.18
Domestic Oil ($/bbl) 19.79 17.08 17.21 7.44
* as at 25 June
**BP's acquisition of its 50 per cent share in TNK-BP was completed
on August 29, 2003. BP completed the deal to include Alfa Group and
Access-Renova's (AAR's) 50 per cent interest in Slavneft into TNK-BP
on January 16, 2004. Production information for prior periods is
shown for comparison purposes only.
In 2Q'04, BP's net share of production from TNK-BP is anticipated to
be approximately 890mboed, as shown in the table above. 2004
information includes TNK-BP's interest in Slavneft (2Q'04: 106 mboed
of which 103 mboed oil / 3 mboed gas , 1Q'04: 89 mboed of which 86
mboed oil / 3 mboed gas).
During 2Q'04, Urals marker prices broadly tracked the rise in Brent.
Domestic oil prices increased by $2.71/ bbl relative to 1Q, as
additional export capacity in Russia is supporting a rise in domestic
Customer facing Businesses
·Refining and Marketing
Refining Indicator Margins ($/bbl)
2Q'04 1Q'04 4Q'03 2Q'03
- West Coast 15.41 8.06 6.09 6.34
- Gulf Coast 9.18 6.92 3.53 3.59
- Midwest 9.01 4.67 2.89 4.73
North West Europe 5.29 2.73 2.21 2.15
Singapore 2.80 3.42 2.20 0.66
Refining Global Indicator Margin*
($/bbl.) 7.89 4.62 3.14 3.27
*The refining Global Indicator Margin (GIM) is a weighted average
based on BP's portfolio. Actual margins may vary because of refinery
configuration, crude slate and operating practices.
During the second quarter, refining indicator margins reached new
highs. Because of product spread movements and higher energy costs
not reflected in the indicator margin calculation, these indicator
margins are not an accurate guide to the actual margins experienced
by BP in 2Q'04. The actual margin gains realised by BP's refineries
are expected to be significantly below those indicated by the change
in the Global Indicator Margin. Retail margins were under pressure
from rises in crude prices and product costs for much of the quarter,
but recovered as the quarter closed. Higher marketing expenses
reflected new fuels product launches in Germany and Austria, and in
the continued development of new lubricants offers.
Weighted Chemicals Indicator Margin ($/te)
2Q'04 1Q'04 4Q'03 2Q'03
n/a 125 109 134
*The Chemicals Indicator Margin is a weighted average of
externally-based product margins. It is based on market data
collected by Nexant (formerly Chem Systems) in their quarterly market
analyses, then weighted on BP's product portfolio. This is described
more fully in the Group's quarterly results releases.
BP petrochemical margins and sales volumes improved from 1Q'04.
However compared with 2Q'03, higher product realizations continue to
be more than offset by foreign exchange pressures in Europe, higher
energy costs, and increased feedstock prices.
Gas, Power and Renewables
Gas marketing margins are expected to be lower than 1Q'04 in North
America and in the LNG business, offset by NGL margins which are
expected to be higher than those in 1Q'04.
Identified non-operating items
In 2Q'04, non-operating items are expected to include a loss of
around $115m pre-tax relating to the sale of certain upstream assets,
and an impairment charge of $165m pre tax in respect of a gas asset
in the USA and a field in the Gulf of Mexico Shelf.
We expect interest expense to be broadly unchanged compared with
The effective tax rate for the quarter is expected to be around 35
Gearing for the quarter is expected to remain below the bottom end
of our target 25-35 per cent band.
During the quarter the company bought back for cancellation 225m
shares for a total consideration of $2bn. Year to date the equivalent
figures are 380m shares and $3.25bn respectively. Shares in issue as
at June 28, 2004 were 21,794 million. BP has entered into an
arrangement that will allow it to continue the share buy back program
during the close period commencing July 1.
Rules of Thumb
The following rules of thumb can be used to estimate the impact of
changes in the trading environment on BP's 2004 full yearpre-tax
earnings. These rules of thumb are approximate. In particular the
impact of large movements in the trading environment relative to that
of 2003 may differ from those implied by the rules of thumb. Many
other factors will affect BP's earnings quarter by quarter. Actual
results in individual quarters may therefore differ
significantly from the estimates implied by the application of these
Particular differences may arise between GIM and BP's realized
refining margins due to crude price levels and differentials, product
price movements and other factors.
2004 Operating Environment Rules of Thumb : pre tax per year
Oil Price $570m
Brent +/- $1/bbl
Gas - Henry Hub +/- $ 0.10/mcf $110m
Refining - GIM +/- $ 1/bbl $1120m
Petrochemicals - CIM +/- $10/te $200m
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
end of announcement euro adhoc 02.07.2004
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