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| FOR IMMEDIATE RELEASE | |
| London 1 November 2022 | |
| BP p.l.c. Group results | |
| Third quarter and nine months 2022 |
http://www.rns-pdf.londonstockexchange.com/rns/8138E_1-2022-10-31.pdf
| Performing while transforming |
| Financial summary | Third | Second | Third | Nine | Nine | ||
| quarter | quarter | quarter | months | months | |||
| $ million | 2022 | 2022 | 2021 | 2022 | 2021 | ||
| Profit (loss) for the period attributable to bp shareholders | (2,163) | 9,257 | (2,544) | (13,290) | 5,239 | ||
| Inventory holding (gains) losses*, net of tax | 2,186 | (1,607) | (390) | (2,085) | (2,468) | ||
| Replacement cost (RC) profit (loss)* | 23 | 7,650 | (2,934) | (15,375) | 2,771 | ||
| Net (favourable) adverse impact of adjusting items*, net of tax | 8,127 | 801 | 6,256 | 38,221 | 5,979 | ||
| Underlying RC profit* | 8,150 | 8,451 | 3,322 | 22,846 | 8,750 | ||
| Operating cash flow* | 8,288 | 10,863 | 5,976 | 27,361 | 17,496 | ||
| Capital expenditure* | (3,194) | (2,838) | (2,903) | (8,961) | (9,215) | ||
| Divestment and other proceeds(a) | 606 | 722 | 313 | 2,509 | 5,367 | ||
| Surplus cash flow* | 3,530 | 6,590 | 933 | 14,209 | 3,315 | ||
| Net issue (repurchase) of shares(b) | (2,876) | (2,288) | (926) | (6,756) | (1,426) | ||
| Net debt*(c) | 22,002 | 22,816 | 31,971 | 22,002 | 31,971 | ||
| Announced dividend per ordinary share (cents per share) | 6.006 | 6.006 | 5.460 | 17.472 | 16.170 | ||
| Underlying RC profit per ordinary share* (cents) | 43.15 | 43.58 | 16.48 | 118.61 | 43.22 | ||
| Underlying RC profit per ADS* (dollars) | 2.59 | 2.61 | 0.99 | 7.12 | 2.59 |
| • Net debt reduced to $22.0 billion | • Further $2.5 billion share buyback announced | • High-grading hydrocarbons portfolio – formation of Azule Energy; final investment decision at Cypre; agreed divestment of Algeria | • Accelerating transformation to an IEC – agreed to acquire Archaea Energy – a leading US biogas producer; agreement with Hertz to advance North America fleet EV charging strategy |
| This quarter’s results reflect us continuing to perform while transforming. We remain focused on helping to solve the energy trilemma – secure, affordable and lower carbon energy. We are providing the oil and gas the world needs today – while at the same time – investing to accelerate the energy transition. Our agreement on Archaea Energy is the most recent step in our strategic transformation of bp. |
| Bernard LooneyChief executive officer |
(a) Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. See page 3 for more information on divestment and other proceeds.
(b) Nine months 2022 excludes the ordinary shares issued as non-cash consideration for the acquisition of the public units of BP Midstream Partners LP. See Note 7 for more information.
(c) See Note 9 for more information.
RC profit (loss), underlying RC profit (loss), surplus cash flow and net debt are non-GAAP measures. Inventory holding (gains) losses and adjusting items are non-GAAP adjustments.
* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 33 .
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| Highlights | ||
| Underlying replacement cost profit* $8.2 billion | ||
| • Underlying replacement cost profit was $8.2 billion, compared with $8.5 billion for the previous quarter. Compared to the second quarter, the result was impacted by weaker refining margins, an average oil trading result and lower liquids realizations, partly offset by an exceptional gas marketing and trading result and higher gas realizations.• Reported loss for the quarter was $2.2 billion, compared with a profit of $9.3 billion for the second quarter 2022. The reported result for the third quarter includes inventory holding losses net of tax of $2.2 billion and a charge for adjusting items* net of tax of $8.1 billion. This charge includes adverse fair value accounting effects* of $10.1 billion, primarily due to further increases in forward gas prices compared to the end of the second quarter, partly offset by $2.0 billion gain on sale relating to the formation of Azule Energy. | ||
| Operating cash flow* $8.3 billion; net debt* reduced to $22.0 billion | ||
| • Operating cash flow in the quarter was $8.3 billion including a working capital build (after adjusting for inventory holding losses* and fair value accounting effects) of $6.2 billion, mainly due to the increase in the forward price of LNG.• Looking forward, the outlook for working capital remains subject to a number of factors, including price. However, following the build in working capital as a result of rising gas prices since 2021, we now expect the working capital movement to include a release of around $7 billion, weighted toward the second-half of 2023 and 2024, primarily as LNG cargoes are delivered.• Capital expenditure* in the quarter was $3.2 billion. bp now expects capital expenditure of around $15.5 billion in 2022, if the acquisition of Archaea Energy completes before year end.• During the third quarter, bp completed share buybacks of $2.9 billion. The $3.5 billion share buyback programme announced with the second quarter results was completed on 27 October 2022.• Net debt fell for the tenth successive quarter to reach $22.0 billion at the end of the third quarter. | ||
| Further $2.5 billion share buyback within disciplined financial frame | ||
| • During the third quarter bp generated surplus cash flow* of $3.5 billion and intends to execute a $2.5 billion share buyback prior to announcing its fourth-quarter results, bringing total announced share buybacks from 2022 surplus cash flow to $8.5 billion, equivalent to 60% of 2022 surplus cash flow year to date.• For 2022 and subject to maintaining a strong investment grade credit rating, bp remains committed to using 60% of surplus cash flow for share buybacks and intends to allocate the remaining 40% to further strengthen the balance sheet.• In setting the buyback each quarter, the board will continue to take into account factors including the cumulative level of and outlook for surplus cash flow.• Against the authority granted at bp’s 2022 annual general meeting to repurchase up to 1.95 billion shares, bp had repurchased 677 million shares at 31 October. | ||
| Progressing transformation to an Integrated Energy Company | ||
| • In resilient hydrocarbons bp is accelerating its biogas strategy – part of its bioenergy Transition Growth Engine – agreeing to acquire Archaea Energy a leading US biogas company. bp has also continued to make progress high-grading its portfolio: completing the creation of Azule Energy a 50:50 joint venture combining its Angolan assets with those of Eni; taking the final investment decision on the Cypre project offshore Trinidad; and announcing an agreement to sell its upstream business in Algeria to Eni.• In convenience and mobility bp continued to advance its growth strategy in EV charging and convenience: announcing plans to collaborate with Hertz in North America to install a national network of EV charging solutions for Hertz and its customers powered by bp pulse; and expanding its partnership with leading retailer REWE in Germany, to install fast, reliable, convenient charging for customers while they shop.• In low carbon energy bp continued to progress its renewables and hydrogen strategy. In Australia, bp closed its acquisition of a 40.5% stake in AREH, one of the world’s largest planned renewables and green hydrogen* energy hubs. And in the UK, two bp-led projects – H2Teesside and Net Zero Teesside Power – have been shortlisted in Phase 2 of the UK government’s cluster sequencing process for support of carbon capture, use and storage (CCUS). |
| Third quarter results show bp continuing to execute its disciplined financial frame. Net debt fell for the tenth successive quarter; we are investing with discipline; and we are delivering on our commitment to shareholder distributions – announcing a further $2.5 billion share buyback. |
| Murray AuchinclossChief financial officer |
| The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 39. |
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Financial results
At 31 December 2021, the group’s reportable segments were gas & low carbon energy, oil production & operations, customers & products and Rosneft. The group has ceased to report Rosneft as a separate segment in the group’s financial reporting for 2022. From the first quarter of 2022, the group’s reportable segments are gas & low carbon energy, oil production & operations and customers & products. For more information see Note 1 Basis of preparation – Investment in Rosneft. For the period from 1 January 2022 to 27 February 2022, any net income from Rosneft is classified as an adjusting item.
In addition to the highlights on page 2:
• Loss attributable to bp shareholders in the third quarter was $2.2 billion compared with a loss of $2.5 billion in the same period of 2021. Loss attributable to bp shareholders in the nine months was $13.3 billion compared with a profit of $5.2 billion in the same period of 2021.
• Adjusting items* in the third quarter and nine months were an adverse pre-tax impact of $8.3 billion and $39.4 billion respectively, compared with an adverse pre-tax impact of $6.4 billion and $5.7 billion in the same periods of 2021.
• As a result of bp’s two nominated directors stepping-down from the Rosneft board on 27 February, bp determined that it no longer meets the criteria set out under IFRS for having “significant influence” over Rosneft. bp therefore no longer equity accounts for its interest in Rosneft from that date, treating it prospectively as a financial asset measured at fair value. Within the nine-month result, the loss of significant influence and an impairment assessment led to a net pre-tax charge of $24.0 billion classified as an adjusting item, reducing equity by $14.4 billion. A further $1.5 billion pre-tax charge relating to bp’s decision to exit its other businesses with Rosneft in Russia is also included in the nine-month result, reducing equity by $1.2 billion. See Note 1 for further information.
• Adjusting items for the third quarter and nine months 2022 also include adverse fair value accounting effects* of $10.1 billion and $16.7 billion respectively compared to an adverse pre-tax impact of $6.1 billion and $7.2 billion respectively in the same periods of 2021. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges and recognises changes in value of the LNG contracts being risk managed.
• Adjusting items for the third quarter and nine months 2022 also include a non-taxable gain of $2.0 billion arising from the contribution of bp’s Angolan business to Azule Energy.
• There were pre-tax inventory holding losses of $2.9 billion and gains of $2.8 billion for the third quarter and nine months 2022 respectively. The loss arose in the third quarter due to falls in crude and product prices, compared to the significant increases in the first half of the year.
• The effective tax rate (ETR) on RC profit or loss* for the third quarter and nine months was 96% and -242% respectively, compared with -175% and 57% for the same periods in 2021. Excluding adjusting items, the underlying ETR* for the third quarter and nine months was 37% and 33% respectively, compared with 35% and 31% for the same periods a year ago. The higher underlying ETR for the third quarter and nine months reflects the UK Energy Profits Levy on North Sea profits and the absence of equity-accounted earnings from Rosneft, partly offset by changes in the geographical mix of profits. ETR on RC profit or loss and underlying ETR are non-GAAP measures.
• Operating cash flow* for the third quarter and nine months 2022 was $8.3 billion and $27.4 billion respectively, compared with $6.0 billion and $17.5 billion for the same periods last year.
• Capital expenditure* in the third quarter and nine months 2022 was $3.2 billion and $9.0 billion respectively, compared with $2.9 billion and $9.2 billion in the same periods of 2021.
• Total divestment and other proceeds for the third quarter and nine months were $0.6 billion and $2.5 billion respectively, compared with $0.3 billion and $5.4 billion for the same periods in 2021. Other proceeds for the nine months 2022 consist of $0.6 billion of proceeds from the disposal of a loan note related to the Alaska divestment. See page 31 for further information.
• At the end of the third quarter, net debt* was $22.0 billion, compared with $22.8 billion at the end of the second quarter 2022 and $32.0 billion at the end of the third quarter 2021.
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Analysis of RC profit (loss) before interest and tax and reconciliation to profit (loss) for the period
| Third | Second | Third | Nine | Nine | |||
| quarter | quarter | quarter | months | months | |||
| $ million | 2022 | 2022 | 2021 | 2022 | 2021 | ||
| RC profit (loss) before interest and tax | |||||||
| gas & low carbon energy | (2,956) | 2,737 | (4,135) | (1,743) | 222 | ||
| oil production & operations | 6,965 | 7,237 | 2,692 | 18,033 | 7,289 | ||
| customers & products | 2,586 | 3,531 | 1,060 | 8,098 | 2,634 | ||
| other businesses & corporate(a) | (1,093) | (1,028) | 118 | (26,840) | 21 | ||
| Of which: | |||||||
| other businesses & corporate excluding Rosneft | (1,093) | (1,028) | (750) | (2,807) | (1,853) | ||
| Rosneft | – | – | 868 | (24,033) | 1,874 | ||
| Consolidation adjustment – UPII* | (21) | (21) | (42) | (8) | (60) | ||
| RC profit (loss) before interest and tax | 5,481 | 12,456 | (307) | (2,460) | 10,106 | ||
| Finance costs and net finance expense relating to pensions and other post-retirement benefits | (633) | (539) | (688) | (1,816) | (2,104) | ||
| Taxation on a RC basis | (4,646) | (3,988) | (1,740) | (10,327) | (4,561) | ||
| Non-controlling interests | (179) | (279) | (199) | (772) | (670) | ||
| RC profit (loss) attributable to bp shareholders* | 23 | 7,650 | (2,934) | (15,375) | 2,771 | ||
| Inventory holding gains (losses)* | (2,868) | 2,146 | 500 | 2,779 | 3,183 | ||
| Taxation (charge) credit on inventory holding gains and losses | 682 | (539) | (110) | (694) | (715) | ||
| Profit (loss) for the period attributable to bp shareholders | (2,163) | 9,257 | (2,544) | (13,290) | 5,239 |
Analysis of underlying RC profit (loss) before interest and tax
| Third | Second | Third | Nine | Nine | |||
| quarter | quarter | quarter | months | months | |||
| $ million | 2022 | 2022 | 2021 | 2022 | 2021 | ||
| Underlying RC profit (loss) before interest and tax | |||||||
| gas & low carbon energy | 6,240 | 3,080 | 1,807 | 12,915 | 5,317 | ||
| oil production & operations | 5,211 | 5,902 | 2,461 | 15,796 | 6,268 | ||
| customers & products | 2,725 | 4,006 | 1,158 | 8,887 | 2,641 | ||
| other businesses & corporate(a) | (405) | (201) | 550 | (865) | 1,127 | ||
| Of which: | |||||||
| other businesses & corporate excluding Rosneft | (405) | (201) | (373) | (865) | (848) | ||
| Rosneft | – | – | 923 | – | 1,975 | ||
| Consolidation adjustment – UPII | (21) | (21) | (42) | (8) | (60) | ||
| Underlying RC profit before interest and tax | 13,750 | 12,766 | 5,934 | 36,725 | 15,293 | ||
| Finance costs and net finance expense relating to pensions and other post-retirement benefits | (565) | (509) | (513) | (1,560) | (1,579) | ||
| Taxation on an underlying RC basis | (4,856) | (3,527) | (1,900) | (11,547) | (4,294) | ||
| Non-controlling interests | (179) | (279) | (199) | (772) | (670) | ||
| Underlying RC profit attributable to bp shareholders* | 8,150 | 8,451 | 3,322 | 22,846 | 8,750 |
Reconciliations of underlying RC profit attributable to bp shareholders to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-15 for the segments.
(a) From first quarter 2022 the results of Rosneft, previously reported as a separate segment, are also included in other businesses & corporate. Comparative information for 2021 has been restated to reflect the changes in reportable segments. For more information see Note 1 Basis of preparation – Investment in Rosneft.
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Operating Metrics
| Operating metrics | Nine months 2022 | vs Nine months 2021 | ||
| Tier 1 and tier 2 process safety events* | 32 | -18 | ||
| Reported recordable injury frequency* | 0.184 | +23.0% | ||
| upstream* production(a) (mboe/d) | 2,249 | +3.2% | ||
| upstream unit production costs*(b) ($/boe) | 6.25 | -10.2% | ||
| bp-operated hydrocarbon plant reliability* | 95.8% | +1.5 | ||
| bp-operated refining availability*(a) | 94.4% | -0.2 |
(a) See Operational updates on pages 6, 9 and 11.
(b) Reflecting higher volumes and lower cost including impact of conversion to equity-accounted entities.
Outlook & Guidance
Macro outlook
• bp expects oil prices to remain elevated in the fourth quarter due to the recent OPEC+ supply cut reducing supply amid ongoing uncertainty associated with Russian oil exports.
• bp expects global gas prices to remain elevated and volatile during the fourth quarter due to a lack of supply to Europe with the outlook heavily dependent on Russian pipeline flows or other supply disruptions.
• bp expects industry refining margins to remain elevated in the fourth quarter due to sanctioning of Russian crude and product and energy prices are also expected to remain high.
4Q22 guidance
• bp expects fourth-quarter 2022 upstream* production on a reported basis to be slightly lower compared with the third-quarter 2022, primarily in our gas regions.
• In our customers and products business, we expect lower marketing margins and seasonally lower volumes and, in Castrol, base oil prices to remain elevated. There also remains an elevated level of uncertainty due to the ongoing impacts of the conflict in Ukraine, COVID-19 restrictions and inflationary pressure. In refining, we expect margins to remain high, the benefits of which will be partially offset by elevated energy prices, a higher level of turnaround activity, and operational impacts following the shutdown of the bp-Husky Toledo refinery in Ohio, US.
2022 Guidance
In addition to the guidance on page 2:
• bp now expects reported upstream production to be slightly higher compared with 2021 despite the absence of production from our Russia incorporated joint ventures. On an underlying basis, we expect upstream production to be higher.
• bp continues to expect the other businesses & corporate underlying annual charge to be in a range of $1.2-1.4 billion for 2022. The charge may vary from quarter to quarter.
• bp continues to expect the depreciation, depletion and amortization to be at a similar level to 2021.
• The underlying ETR* for 2022 is expected to be around 35% but is sensitive to the impact that volatility in the current price environment may have on the geographical mix of the group’s profits and losses.
• bp now expects capital expenditure of around $15.5 billion in 2022, if the acquisition of Archaea Energy completes before year end.
• bp now expects divestment and other proceeds to be slightly over $3 billion in 2022. Against a target of $25 billion of divestment and other proceeds between the second half of 2020 and 2025 bp has now received $15.3 billion of proceeds.
• bp continues to expect Gulf of Mexico oil spill payments for the year to be around $1.4 billion pre-tax including the $1.2 billion pre-tax paid during the second quarter.
• For 2022, and subject to maintaining a strong investment grade credit rating, bp remains committed to using 60% of surplus cash flow* for share buybacks and intends to allocate the remaining 40% to further strengthen the balance sheet.
• On average, based on bp’s current forecasts, at around $60 per barrel Brent and subject to the board’s discretion each quarter, bp continues to expect to be able to deliver share buybacks of around $4.0 billion per annum and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025.
• In setting the dividend per ordinary share and the buyback each quarter, the board will take into account factors including the cumulative level of and outlook for surplus cash flow, the cash balance point* and the maintenance of a strong investment grade credit rating.