BP PLC — Management Reports 2005

Feb 8, 2005

News Details

Ad-hoc | 8 February 2005 09:17

BP Plc Statement re Strategy – Part 2 of 2

Ad hoc announcement §15 WpHG – Part 2 BP Plc Statement re Strategy BP Plc Statement re Strategy – Part 2 of 2 Ad hoc announcement processed and transmitted by DGAP. The issuer is solely responsible for the content of this announcement. —————————————————————————— Part 2 of 2 BP BOOSTS DOLLAR DIVIDEND BY 26 PER CENT Group production as a whole grew by 11 per cent in 2004. Output for 2005 would likely hit 4.1 million to 4.2 million barrels a day of oil equivalent before divestments, keeping BP on track to average annual production growth in excess of 5 per cent for the period 2004-2008. The exact level would depend on oil prices, the extent of divestments and various other factors. Capex for Exploration and Production would likely be between $9.5 billion and $10 billion in 2005 and 2006, depending on foreign exchange impacts and inflation. Capex in refining would be level in 2005 at around $1.3 billion. “The majority of our refining capacity is in the US where margins are structurally advantaged and our refineries are in the top quartile on net cash margins and return on investment. In Europe, after the divestment of Lavera and Grangemouth, our position should improve considerably. In retail, where store sales continue to grow, along with sales of BP’s Ultimate premium fuel, capital spending would also remain stable at around $950 million this year,” Browne said. “Our global gas sales rose to 32 billion cubic feet a day in 2004. In North America, where BP is the leading marketer, our gas sales were up 16 per cent over 2003. Going forward, we expect medium-term global growth of 2 to 3 per cent a year, in line with world gas demand, and we will concentrate increasingly on customers who best fit our capabilities.” In petrochemicals the company was on track with plans to divest the bulk of its olefins and derivatives business in phases commencing in the second half of this year, probably by way of an IPO, subject to market conditions and necessary approvals. BP spent $200 million in its high-growth aromatics and acetyls business which generated competitive cash returns in 2004 – a figure likely to rise slightly this year as the company invests to keep its leadership position in the segment. Browne said he expected capital spending for BP as a whole to total some $14 billion in 2005. “The exact level will depend on the level of the dollar and our continuing track record of offsetting normal underlying annual inflation of some 2 per cent. For the medium term an investment level of around $14 billion is a reasonable expectation. “Divestments, with the exception of olefins and derivatives, are not presently expected to be large this year. We expect proceeds of around $1.3 billion, comprised of the balance due from the sale of Ormen Lange and normal portfolio optimisation.” Commenting on the oil price, he said that while he expected that demand for oil in 2005 would moderate compared to last year, “we’ve concluded that on the basis of the supply-demand balance and OPEC’s five-year track record of maintaining production discipline, oil prices are likely to have a support level of around $30 a barrel for at least the medium term. “As far as BP is concerned we will continue to use a Brent oil price of $20 a barrel for the purpose of testing projects and planning our activity level in exploration and production. This allows us to maintain a portfolio of activities with strong returns.” Browne said that, while BP had been helped by the environment, “our success so far is due to our combination of strategy and discipline. Over the past few years we have built a strong base for the Group with material assets and markets into which we are investing. We’re achieving the targets for growth we set ourselves, we’re improving quality and we’re maintaining financial strength. “Importantly, in spite of the significantly better than expected trading environment, we are maintaining a disciplined approach to the execution of our strategy and consequently making sure that excess free cash flows are appropriately distributed to shareholders.” 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 End of ad hoc announcement (c)DGAP 08.02.2005 080917 Feb 05