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euro adhoc: BP PLC
Statement re strategy (E)

Disclosure announcement transmitted by euro adhoc. The issuer is
responsible for the content of this announcement.
February 11, 2003
BP REPLACES ANNUAL PRODUCTION BY 175 PER CENT
BP said today that it had replaced 175 per cent of the oil and gas it
produced in 2002, the tenth year in a row it had replenished reserves
by more than its annual output through successful exploration.
It also set out plans to spend more than $20 billion over the next
five years on five new global profit centres which would more than
offset decline in mature provinces such as the UK North Sea.
Speaking to the financial community in London shortly after
announcing full-year profits of $8.7 billion, a nine per cent rise in
the dividend and the intention to buy back $2 billion of company
stock, chief executive Lord Browne said:
"This is a very exciting moment in the history of BP. Our success in
exploration is allowing us to diversify and expand the company's
production portfolio, while also improving its quality."
Browne said the new profit centres - the deepwater Gulf of Mexico,
Trinidad, Angola, Azerbaijan and Asia Pacific LNG - were as
significant in scale, capital and reserves for BP's future as had
been its development of the North Sea and Alaska some 30 years ago.
The five centres would absorb some 50 per cent of likely annual spend
by BP's exploration and production business between now and 2007,
with post-tax earnings and cashflow per barrel expected to rise as
output from the new areas increases.
BP estimated that, of a group total of $14.2 billion, upstream
capital spend would be around $10 billion this year, falling away to
some $9 billion annually after 2004. Investment in a sixth profit
centre, BP's 50 per cent stake in a new Russian business announced
today, should be self-financing.
Before taking into account the impact of sales or acquisitions made
after January 1, 2003 including its new Russian business, BP said oil
and gas production capacity would have stayed flat or grown modestly
by up to three per cent this year. On the same basis, production
capacity would have risen on average by three to four per cent a year
from 2000 to 2005, and around five per cent a year from 2003-2007.
"I would stress these are estimates of capacity, not targets for
production from that capacity. Growth rates will vary from year to
year. Production volumes can be a usefulindicator of growth, but they
are only really useful when combined with a balanced view of all the
other factors which go to create value," Browne told
analysts.
Predicated on standardised assumptions - including a $16 oil price
and a gas price of $2.70 per thousand cubic feet - BP expects return
on capital employed for the group overall to be broadly flat over the
next three years.
It said the impact of temporarily higher spend on the new profit
centres should be offset by cost and productivity improvements and
ongoing high-grading of the portfolio. This would be further helped
by better performance in the petrochemicals business where focus on
seven core products offering clear competitive advantage is expected
to boost capital returns by three per cent by 2006.
Commenting on BP group results for 2002, Browne said that financial
performance "was strongly competitive with that of our peers",
delivering $8.7 billion of income, $19.3 billion of  pre-tax cash
from operations and $6.8 billion pre-tax from disposals. Return on
capital was 13 per cent and the debt to debt-plus-equity ratio fell
by two percentage points to less than 28 per cent.
"In underlying terms - that is, against our standardised assumptions
- our performance improved by $1.2 billion before tax. Results per
share on those standardised assumptions rose by around 15 per cent
per annum on average over the years 2000 to 2002 - exceeding our
target of a ten per cent average annual compound rise through the
period 2000 to 2003."
Looking forward, Browne said he expected divestments to continue at
the rate of $3 billion to $6 billion in 2003 - within BP's recent
historic range - and for gearing to be maintained within the band of
around 25 to 35 per cent.
"Our aim is to deliver value. Clearly the value growth - measured in
terms of results per share - which has come from mergers and
acquisitions was exceptional. In the new phase we've now entered, we
have to find ways of delivering growth in value at a distinctive
rate.
"That means continually managing the portfolio to ensure we have a
distinctive set of assets and markets in which to invest. And it
means managing costs, starting with what we've identified for 2003
but going beyond that in ways we haven't yet quantified," Browne
said.
"Maximising value, of course, involves judgement. Business is not a
cut and dried mechanical process driven solely by financial
frameworks. If we knew far more about the world and the future than
we can ever know, we could manage the maximisation of value with
mathematical levels of precision. But we can't.
"Reality is different - as current circumstances are reminding us -
and that' why we've moved from single-point targets, whether for
production, return on capital or anything else, because such targets
can distort the implementation of strategy.
"We've moved instead to using indicative ranges. We believe that it
is a more transparent way of demonstrating how we actually manage the
business. Taken together in a balanced way, those ranges are
indicators of progress and they capture the next phase of
performance improvement. I hope we have conveyed some sense of how
excited we are about this phase, and of how confident we are that it
will continue to deliver a leading level of performance."
Statements made in this announcement, particularly those regarding
cash flow, costs, earnings, gearing, growth, improvements, portfolio
changes, profit centres, production capacity, returns and spending
plans are or may be forward looking statements. Actual results may
differ from those expressed in such statements, depending on a
variety of factors, including: future levels of industry product
supply; demand and pricing; political stability and economic
growth in relevant areas of the world; development and use of new
technology and successful partnering; the actions of competitors;
natural disasters and other changes in business conditions; and wars
and acts of terrorism or sabotage.
References in this announcement to results and other financial
measures are to such measures calculated on a pro-forma basis, which
in the case of past results have been adjusted for special items. The
pro-forma result is replacement cost profit before exceptional items
excluding acquisition amortisation (ie depreciation relating to the
fixed asset revaluation adjustment and amortisation
of goodwill consequent upon the ARCO and Burmah Castrol
acquisitions). The pro-forma result, adjusted for special items, has
been derived from BP's UK GAAP accounting information but is not in
itself a recognised UK or US GAAP measure.  'Capital employed' and
'debt plus equity' are calculated on a pro-forma basis
which excludes the fixed asset revaluation adjustment and goodwill
consequent upon the ARCO and Burmah Castrol acquisitions. 'Return'
and 'debt to debt-plus-equity' refer to ratios calculated using these
measures.
- ENDS -
This information is provided by RNS
            The company news service from the London Stock Exchange
end of announcement        euro adhoc 11.02.2003

Further inquiry note:

Further information: BP Press Office, London, tel: +44 (0)207 496 4624/4708/4358/4851

Branche: Energy
ISIN: GB0007980591
WKN: 850517
Börsen: Baden-Württembergische Wertpapierbörse / free trade
Bayerische Börse / free trade
Berliner Wertpapierbörse / free trade
Niedersächsische Börse zu Hannover / free trade
Börse Düsseldorf / official dealing
Frankfurter Wertpapierbörse / official dealing
Hamburger Wertpapierbörse / official dealing
London Stock Exchange / official dealing
SWX Swiss Exchange / official dealing

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