This summary is based on the first quarter fiscal 2007 earnings call conducted by BP Plc. (BP) on 24 April, 2007.
Management
Chief Financial Officer: Byron Grote
Head of Investor Relations; Fergus MacLeod
Key Investors Issues
- Replacement cost profit was $4.4 billion, 17% lower than in 2006.
- The firm bought back $2.5 billion worth of shares, reducing shares outstanding by more than 1%.
- Acquisitions amounted to $1.1 billion, plus $4.4 billion of shareholder distributions.
First Quarter Highlights
Oil prices continued to decline resulting in a 3.2% drop in total revenue from $64.8 billion in 2006 to $62.7 billion including $680 million from gains on sale of businesses.
- Average liquids realization were $53 per barrel, down 4% from the previous year.
- Realization of $4.90 per 1000 cubic feet was 12% lower than experienced a year ago.
- Total hydrocarbon realization was 7% lower reflecting the weaker trading environment.
- The refining indicator margin of $9.45 per barrel was 50% higher than in 2006 as margins did not increase to the same extent because of product mix and narrower light heavy differentials.
Replacement cost profit was $4.4 billion, 17% lower than the $5.3 billion realized in the prior year due to a decline in sales across most segments.
- Profit including inventory gains and losses was $4.7 billion, also down 17% compared to last year.
- Operating cash flow of $8 billion was also lower compared to a year ago but by less than the reduction in earnings.
- Lower per share impact for all financial metrics reflects the 6% reduction in shares outstanding over the past year.
-Sterling dividend is down slightly year-on-year, reflecting the sharply weaker dollar.
Capital expenditure, excluding acquisitions, was $3.7 billion, and including included $1.1 billion in respect of the acquisition of Chevron’s Netherlands manufacturing company was $4.8 billion.
- Capital expenditure excluding acquisitions is expected to be around $18 billion for the year.
- Disposal proceeds were $900 million for the quarter.
- Net debt ratio remained flat at 20%, while cash dividends increased to $2 billion.
- The firm bought back $2.5 billion worth of shares, reducing shares outstanding by more than 1%.
Segment Highlights:
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E&P reported replacement cost profit before interest and tax of $6.04 billion, a decrease of 11% over 2006 due to the impact of lower oil and gas realizations and lower reported volumes, reflecting the impact of the divestment activity in 2006.
- In addition, it included higher costs, reflecting the impacts of sector-specific inflation, increased integrity spend and higher depreciation charges.
- The firm’s share of income from TNK-BP was negatively affected by lower prices and the adverse effect of lagged tax reference prices.
The result included a net non-operating gain of $748 million, with the most significant items being the gain on the sale of assets in the Netherlands, and fair value gains on embedded derivatives relating to North Sea gas contracts.
- After adjusting for the impact of divestments, production was flat compared with 2006.
- Actual production was down 123 mboe/d and full year production is expected to be in the range of 3.8 to 3.9 mmboe/d, in line with the guidance given previously.
- During the period, the firm had its first lifting from the Dalia field in Angola, with the field ramping up as planned, and the BTC pipeline celebrated the loading of its 100 millionth barrel at the Ceyhan terminal.
- In Angola, the Greater Plutonio FPSO has been successfully moored, while the strong exploration track record in Angola with Miranda, our 13th successful well in Block 31 continued.
- The firm has divested its interest in the Entrada field in the deepwater Gulf of Mexico, and acquired an increased interest in the Badin field in Pakistan in exchange for ownership interest in the West Texas Pipeline System.
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Refining and marketing reported replacement cost profit before interest and tax of $838 million, down 48% from $1.6 billion in 2006, including a net non-operating charge of $229 million, primarily in respect of asset impairments.
- Results benefited from a stronger operating environment for both refining and marketing, however, the benefit of higher refining throughput at Texas City was more than offset by the impact of operational issues at a number of other refineries, particularly in the US.
- In addition, results reflects a significant IFRS fair value accounting charge, lower supply optimization benefits and greater integrity spend.
Refining throughputs were 2,232 mb/d compared with 2,022 mb/d in 2006, the improvement being attributed to the partial resumption of operations at the Texas City refinery.
- Marketing sales were 3,769 mb/d compared with 3,826 mb/d for the corresponding period in 2006, reflecting lower heating oil demand in Europe caused by relatively mild winter weather.
- In March, the firm completed its acquisition of Chevron’s Netherlands manufacturing company, Texaco Raffinaderij Pernis B.V., for $1.1 billion.
- It also agreed to sell, subject to required regulatory approvals, its Coryton Refinery in Essex, UK, to Petroplus Holdings AG for consideration of $1.4 billion, plus working capital.
Further, the firm announced its intention to sell its ethyl acetate and vinyl acetate monomer manufacturing units at Saltend, near Hull, UK.
