BP PLC — Earnings Release 2005

Jan 11, 2006

News Details

Ad-hoc | 11 January 2006 07:03

BP p.l.c.: BP Fourth Quarter 2005 Trading Update part 2

Ad hoc announcement processed and transmitted by DGAP. The issuer is solely responsible for the content of this announcement. —————————————————————————— Part 2 of 2 Other Businesses and Corporate (including Olefins and Derivatives) Other Businesses and Corporate The loss in Other Businesses and Corporate, excluding Olefins and Derivatives, is expected to be higher than in 3Q’05 due to cost phasing, but in line with guidance given in our February ’05 investor webcast for an annual charge of $900m +/- $200m. Olefins and Derivatives Results for Innovene, which represents the majority of Olefins and Derivatives, have been treated as a discontinued operation since the announcement of the sale of Innovene on October 7th, with history restated accordingly, as required by International Financial Reporting Standards. We will provide supplemental disclosures in our Stock Exchange Announcement. The sale of Innovene was completed on December 16th. Results for the retained portion of Olefins and Derivatives, primarily equity-accounted investments in China and Malaysia, will be reported within Other Businesses and Corporate. Margins in the Olefins and Derivatives business strengthened in 4Q’05 from the depressed levels of 3Q’05. Consolidation Adjustment The consolidation adjustment, which removes the margin on sales between segments (mainly sales of Alaskan crude oil to US West Coast refining and marketing operations), is expected to amount to a credit of around $250m. Identified Non-Operating Items (NOIs) Non-operating items in 4Q’05 are expected to amount to a total charge of around $1.3bn, primarily as a result of a loss on embedded derivatives, related mainly to the increase in UK gas prices relative to other indices over the full term of BP’s long term sales contracts. Interest Expense The total consolidated interest charge is expected to be similar to 3Q’05. Tax Rate The effective tax rate for the quarter on continuing operations is expected to be around 33 per cent. Gearing Gearing for the quarter is expected to move further below the bottom end of our 20-30 per cent band for net debt to net debt plus equity, reflecting continued strong cash generation and receipt of the proceeds from the sale of Innovene. Distributions to Shareholders During the quarter the company bought back 332 million shares for a total consideration of $3.7bn. Shares outstanding at December 30th 2005, excluding treasury shares, were 20,651 million. As in previous quarters, BP has entered into an arrangement that allows it to continue the share buy back programme during the closed period commencing on January 3rd. The 4Q’05 dividend of 8.925 cents per share announced at the time of our 3Q’05 results was paid in December. The dividend to be paid in 1Q’06 will be announced on February 7th in conjunction with our 4Q’05 Stock Exchange Announcement. Rules of Thumb Important note: The rules of thumb shown below were provided with BP’s strategy update on February 8th, 2005 and were intended to give directional indicators of the impact of changes in the trading environment relative to that of 2004 on BP’s 2005 full year pre-tax results. These rules of thumb are approximate. As prices and margins have deviated sharply from those seen in 2004, and volatility has increased, these rules of thumb have become less accurate in quantifying the impact of changes. Especially over short periods, changes in differentials, seasonal demand patterns, and other factors can be material. Particular differences may arise due to higher government shares of Exploration and Production revenues in some jurisdictions at current price levels, as well as from variations between the refining Global Indicator Margin (GIM) and BP’s realized refining margins due to crude price levels and differentials, product price movements and other factors. The GIM rule of thumb reflects the sensitivity to the overall group to changes in refining margins. Within the refining rule of thumb shown below, about 13 per cent of the sensitivity shown relates to the refineries transferred to the Olefins and Derivatives business. 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 rules of thumb. 2005 Operating Environment Rules of Thumb: impact on operating profit per year of changes relative to 2004 environment Full Year Oil Price – Brent +/- $1/bbl $500m Gas – Henry Hub +/- $ 0.10/mcf $100m Refining – GIM +/- $ 1/bbl $1100m -ENDS- End of part 2 BP p.l.c. 1 St James’s Square London, SW1Y 4PD United Kingdom ISIN: GB0007980591 WKN: 850517 Listed: Amtlicher Markt in Düsseldorf (Dt. Zertifikate DE0008618737), Frankfurt (General Standard) und Hamburg; Freiverkehr in Berlin-Bremen, Hamburg, Hannover, München und Stuttgart; Swiss Exchange End of ad hoc announcement (c)DGAP 11.01.2006