6-K 1 a6615m.htm 2Q17 PART 1 OF 1 Blueprint
 
SECURITIES AND EXCHANGE COMMISSION 
 
Washington, D.C. 20549  
 
Form 6-K 
 
Report of Foreign Issuer 
 
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934 
 
for the period ended August 2017
 
 
BP p.l.c.
(Translation of registrant's name into English)
 
 
 
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
 
 
 
Indicate  by check mark  whether the  registrant  files or will file annual
reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F        |X|          Form 40-F
     ---------------               ----------------
 
 
 
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby  furnishing  the  information to the
Commission  pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
     1934.
 
 
 
Yes                            No        |X|
      ---------------           ----------------
 
 
FOR IMMEDIATE RELEASE
London 1 August 2017
 

BP p.l.c. Group results
Second quarter and half year 2017(a)
 
For a printer friendly copy of this announcement, please click on the link below to open a PDF version:http://www.rns-pdf.londonstockexchange.com/rns/6610M_-2017-7-31.pdf
 
 
 
 

 
Highlights
Solid first half; strong operations, strong cash flow.
 
● Underlying replacement cost (RC) profit* for the second quarter was $0.7 billion.
● Second-quarter operating cash flow, excluding Gulf of Mexico oil spill payments*, was $6.9 billion. Including these payments, operating cash flow* for the quarter was $4.9 billion.
● Dividend unchanged at 10 cents per share.
● Second-quarter Upstream production was 10% higher than in the same period in 2016; first-half production was 6% higher.
● Upstream major projects on track; two new projects sanctioned in quarter;significant gas discoveries in Senegal and Trinidad announced;$753 million exploration write-off, predominantly in Angola.
●     In Downstream, first-half fuels marketing earnings around 20% higher than in the first half of 2016.
 
 
Financial summary
Second quarter 2017
See chart on PDF
 
 
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Profit (loss) for the period(b)
 
144
1,449
(1,419)
 
1,593
(2,002)
Inventory holding (gains) losses*, net of tax
 
409
(37)
(828)
 
372
(730)
RC profit (loss)*
 
553
1,412
(2,247)
 
1,965
(2,732)
Net (favourable) unfavourable impact of
 
 
 
 
 
 
 
  non-operating items* and fair value
 
 
 
 
 
 
 
  accounting effects*, net of tax
 
131
98
2,967
 
229
3,984
Underlying RC profit
 
684
1,510
720
 
2,194
1,252
RC profit (loss) per ordinary share (cents)*
 
2.80
7.23
(12.03)
 
10.02
(14.71)
RC profit (loss) per ADS (dollars)
 
0.17
0.43
(0.72)
 
0.60
(0.88)
Underlying RC profit per ordinary share (cents)*
 
3.47
7.74
3.85
 
11.19
6.73
Underlying RC profit per ADS (dollars)
 
0.21
0.46
0.23
 
0.67
0.40
 
(a)
 
This results announcement also represents BP’s half-yearly financial report (see page 12).
 
(b)
 
Profit attributable to BP shareholders.
 
 
 
Bob Dudley – Group chief executive:
“We continue to position BP for the new oil price environment, with a continued tight focus on costs, efficiency and discipline in capital spending. We delivered strong operational performance in the first half of 2017 and have considerable strategic momentum coming into the rest of the year and 2018, with rising production from our new Upstream projects and marketing growth in the Downstream.”
 
Brian Gilvary – Chief financial officer: 
“Cash flow was strong in the first half – organic cash flow* exceeded organic capital expenditure* and dividends paid. While net debt* rose primarily due to Gulf of Mexico payments, we expect this will improve over the second half as these payments decline and divestment proceeds come in towards the end of the year.”
 
 
* See definitions in the Glossary on page 32. RC profit (loss), underlying RC profit, cash flow excluding Gulf of Mexico oil spill payments, organic capital expenditure and net debt are non-GAAP measures.
 
The commentary above and following should be read in conjunction with the cautionary statement on page 35.
 
 
Top of page 2
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Group headlines
Earnings
BP’s profit for the second quarter and half year was $144 million and $1,593 million respectively, compared with a loss of $1,419 million and a loss of $2,002 million for the same periods in 2016.
 
The second-quarter replacement cost (RC) profit was $553 million, compared with a loss of $2,247 million for the same period in 2016. After adjusting for a net charge for non-operating items of $215 million and net favourable fair value accounting effects of $84 million (both on a post-tax basis), underlying RC profit for the second quarter was $684 million, compared with $720 million for the same period in 2016.
 
For the half year, RC profit was $1,965 million, compared with a loss of $2,732 million a year ago. After adjusting for a net charge for non-operating items of $520 million and net favourable fair value accounting effects of $291 million (both on a post-tax basis), underlying RC profit for the half year was $2,194 million, compared with $1,252 million for the same period in 2016.
 
See further information on page 3.
 
Non-operating items
Non-operating items amounted to a charge of $359 million pre-tax and $215 million post-tax for the quarter and a charge of $912 million pre-tax and $520 million post-tax for the half year.
 
The Gulf of Mexico oil spill charge before interest and tax for the second quarter was $347 million to reflect the latest estimate for claims, including business economic loss claims, and associated administration costs. In addition, the half year also reflects an impairment charge in the first quarter due to the divestment of certain Upstream assets.
 
Effective tax rate
The effective tax rate (ETR) on RC profit or loss* for the second quarter and half year was 63% and 43% respectively, compared with 51% and 49% for the same periods in 2016. Adjusting for non-operating items and fair value accounting effects, the adjusted ETR* for the second quarter and half year was 60% and 45% respectively, compared with 21% and 20% for the same periods in 2016.
 
The adjusted ETR for the second quarter and half year is higher than a year ago mainly due to the exploration write-offs and changes in the mix of profits, notably the impact of the renewal of our interest in the Abu Dhabi onshore oil concession. We now expect the full year adjusted ETR to be above 40%.
 
 
Dividend
BP today announced a quarterly dividend of 10.00 cents per ordinary share ($0.600 per ADS), which is expected to be paid on 22 September 2017. The corresponding amount in sterling will be announced on 12 September 2017. See page 24 for further information.
 
Operating cash flow*
Excluding post-tax amounts related to the Gulf of Mexico oil spill, operating cash flow* for the second quarter and half year was $6.9 billion and $11.3 billion respectively, compared with $5.3 billion and $8.3 billion for the same periods in 2016. Including amounts relating to the Gulf of Mexico oil spill, operating cash flow for the second quarter and half year was $4.9 billion and $7.0 billion respectively, compared with $3.9 billion and $5.8 billion for the same periods in 2016.
 
Capital expenditure*
Organic capital expenditure* for the second quarter and half year was $4.3 billion and $7.9 billion respectively, compared with $4.2 billion and $8.7 billion for the same periods in 2016.
 
Inorganic capital expenditure* for the second quarter and half year was $0.1 billion and $0.7 billion respectively, compared with $0.3 billion for both periods in 2016.
 
Organic and inorganic capital expenditure are non-GAAP measures. See page 26 for further information.
 
Divestment proceeds*
Divestment proceeds were $0.5 billion for the second quarter and $0.7 billion for the half year, compared with $0.4 billion and $1.6 billion for the same periods in 2016.
 
Net debt*
Net debt at 30 June 2017 was $39.8 billion, compared with $30.9 billion a year ago. The net debt ratio* at 30 June 2017 was 28.8%, compared with 24.7% a year ago. Net debt and the net debt ratio are non-GAAP measures. See page 25 for more information.
 
 
 
 
 
Top of page 3
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Analysis of underlying RC profit before interest and tax
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Underlying RC profit before interest and tax*
 
 
 
 
 
 
 
    Upstream
 
710
1,370
29
 
2,080
(718)
    Downstream
 
1,413
1,742
1,513
 
3,155
3,326
    Rosneft
 
279
99
246
 
378
312
    Other businesses and corporate
 
(366)
(440)
(376)
 
(806)
(554)
    Consolidation adjustment – UPII*
 
135
(68)
(121)
 
67
(81)
Underlying RC profit before interest and tax
 
2,171
2,703
1,291
 
4,874
2,285
Finance costs and net finance expense relating to
 
 
 
 
 
 
 
  pensions and other post-retirement benefits
 
(420)
(387)
(337)
 
(807)
(654)
Taxation on an underlying RC basis
 
(1,055)
(763)
(205)
 
(1,818)
(325)
Non-controlling interests
 
(12)
(43)
(29)
 
(55)
(54)
Underlying RC profit attributable to BP
 
 
 
 
 
 
 
  shareholders
 
684
1,510
720
 
2,194
1,252
 
Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-11 for the segments.
 
Analysis of RC profit (loss) before interest and tax and reconciliation to
profit (loss) for the period
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
RC profit (loss) before interest and tax*
 
 
 
 
 
 
 
  Upstream
 
795
1,256
(109)
 
2,051
(1,314)
  Downstream
 
1,567
1,706
1,405
 
3,273
3,285
  Rosneft
 
279
99
246
 
378
312
  Other businesses and corporate(a)
 
(721)
(431)
(5,525)
 
(1,152)
(6,599)
  Consolidation adjustment – UPII
 
135
(68)
(121)
 
67
(81)
RC profit (loss) before interest and tax
 
2,055
2,562
(4,104)
 
4,617
(4,397)
Finance costs and net finance expense relating to
 
 
 
 
 
 
 
  pensions and other post-retirement benefits
 
(541)
(513)
(460)
 
(1,054)
(900)
Taxation on a RC basis
 
(949)
(594)
2,346
 
(1,543)
2,619
Non-controlling interests
 
(12)
(43)
(29)
 
(55)
(54)
RC profit (loss) attributable to BP shareholders
 
553
1,412
(2,247)
 
1,965
(2,732)
Inventory holding gains (losses)
 
(586)
66
1,188
 
(520)
1,056
Taxation (charge) credit on inventory holding
 
 
 
 
 
 
 
  gains and losses
 
177
(29)
(360)
 
148
(326)
Profit (loss) for the period attributable to
 
 
 
 
 
 
 
  BP shareholders
 
144
1,449
(1,419)
 
1,593
(2,002)
 
(a)
 
Includes costs related to the Gulf of Mexico oil spill. See page 11 and also Note 2 from page 19 for further information on the accounting for the Gulf of Mexico oil spill.
 
 
 
 
Top of page 4
 
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Strategic progress
 
Upstream 
Upstream operating performance was strong in the first half, underpinned by 6% production growth and an 18% reduction in unit production costs. 
 
BP’s major projects programme is on track to deliver 800,000boe/d of new production by 2020. Three projects have already come online in 2017, Persephone in Australia and Juniper in Trinidad are in final commissioning, and Khazzan Phase 1 in Oman and Zohr in Egypt are expected online before year end. In the second quarter, BP sanctioned development of two new major gas projects: ‘R-Series’ in India and Angelin in Trinidad.
 
BP announced four gas discoveries in the first half. One in Egypt and two in Trinidad may support future developments and the major Yakaar discovery offshore Senegal marked a further step in building BP’s new business in Mauritania and Senegal. BP decided to exit some exploration assets in Angola, leading to higher exploration write-offs in the second quarter.
 
Downstream 
BP’s fuels marketing business continues to make good strategic progress; first-half earnings were around 20% higher than in the first half of 2016.
 
Premium fuel volumes continue to grow and around 90 new convenience partnership sites have been added so far this year. In lubricants, BP signed an agreement to be the exclusive premium brand sold by Kroger, the largest supermarket chain in the US.
 
In refining, BP increased the level of advantaged feedstock processed in the US and, in petrochemicals, BP’s industry-leading PTA technology is now operational at all its key PTA sites.
 
 
Financial framework
 
Operating cash flow, excluding Gulf of Mexico payments*, in the first half of 2017 was $11.3 billion, with $6.9 billion in the second quarter. This compares with $8.3 billion for the first half of 2016.
 
Organic capital expenditure* of $4.3 billion in the second quarter brought the total for the first half of 2017 to $7.9 billion. BP continues to intend to keep annual organic capital expenditure in the range $15-17 billion.
 
In the first half of 2017, operating cash flow, excluding Gulf of Mexico payments, exceeded organic capital expenditure and cash dividend payments by $0.6 billion.
 
BP expects divestments of $4.5-5.5 billion in 2017, with proceeds weighted to the second half of the year. Divestment proceeds for the first half of 2017 were $0.7 billion.
 
Gulf of Mexico oil spill payments were $2.0 billion in the second quarter and $4.3 billion in the first half of 2017. Payments are expected to be considerably lower in the second half, and the 2017 full-year estimate is unchanged at $4.5-5.5 billion. The additional charge in the second quarter is not expected to have any significant effect on forecast cash flows in the second half of 2017.
 
BP continues to target a gearing* range of 20-30%. At the end of the second quarter, gearing was 28.8%.
 
Operating
metrics
 
First half 2017 (vs. First half 2016)
 
Financial
metrics
 
First half 2017 (vs. First half 2016)
SafetyTier 1 process safety events*
 
 
11
(+2)
 
Underlying RC profit
 
$2.2bn
(+$0.9bn)
SafetyReported recordable injury frequency*
 
 
0.22
(-3%)
 
Operating cash flow excluding Gulf of Mexico oil spill payments
 
$11.3bn 
(+$3bn)
Group production
 
 
3,544mboe/d
(+8%)
 
Organic capital expenditure
 
$7.9bn
(-$0.8bn)
Upstream production excluding Rosneft segment
 
2,410mboe/d
(+6%)
 
Gulf of Mexico oil spill payments
 
$4.3bn 
(+$1.8bn)
Upstream unit production costs*
 
$7.20/boe
(-18%)
 
Divestment proceeds
 
$0.7bn
(-$0.9bn)
BP-operated Upstream operating efficiency*(a)
 
81.4%
 
 
 
Net debt ratio (gearing)
 
28.8%
(+4.1)
Refining availability*
 
94.8%
(-0.5)
 
Dividend per ordinary share
 
10.00 cents
(–)
 
(a)
 
Reported on a one-quarter lagged basis and represents 1Q 2017 actuals only.
 
 
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 35.
 
 
 
Top of page 5
BP p.l.c. Group results
Second quarter and half year 2017
 
 
 
 
 
 
INTENTIONALLY BLANK
 
 
 
 
 
 
Top of page 6
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Upstream
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Profit (loss) before interest and tax
 
796
1,250
(24)
 
2,046
(1,260)
Inventory holding (gains) losses*
 
(1)
6
(85)
 
5
(54)
RC profit (loss) before interest and tax
 
795
1,256
(109)
 
2,051
(1,314)
Net (favourable) unfavourable impact of
 
 
 
 
 
 
 
  non-operating items* and fair value
 
 
 
 
 
 
 
  accounting effects*
 
(85)
114
138
 
29
596
Underlying RC profit (loss) before interest
 
 
 
 
 
 
 
  and tax*(a)
 
710
1,370
29
 
2,080
(718)
 
(a)
 
See page 7 for a reconciliation to segment RC profit before interest and tax by region.
 
 
Financial results
The replacement cost profit before interest and tax for the second quarter and half year was $795 million and $2,051 million respectively, compared with a loss of $109 million and $1,314 million for the same periods in 2016. The second quarter and half year included a net non-operating charge of $21 million and $381 million respectively, compared with a net non-operating gain of $7 million and a charge of $348 million for the same periods in 2016. Fair value accounting effects in the second quarter and half year had a favourable impact of $106 million and $352 million respectively, compared with an unfavourable impact of $145 million and $248 million in the same periods of 2016.
 
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the second quarter and half year was $710 million and $2,080 million respectively, compared with a profit of $29 million and a loss of $718 million for the same periods in 2016. The result for the second quarter and half year mainly reflected higher liquids and gas realizations, and higher production including the impact of the Abu Dhabi concession renewal and major project start-ups, partly offset by higher exploration write-offs largely in Angola and higher depreciation, depletion and amortization.
 
Production
Production for the quarter was 2,431mboe/d, 9.9% higher than the second quarter of 2016. Underlying production* for the quarter increased by 7.0%, due to the ramp-up of major projects. For the first half, production was 2,410mboe/d, 6.4% higher than in the same period of 2016. First-half underlying production was 5% higher than the same period of 2016 due to major project start-ups.
 
Key events
On 8 May, BP along with joint venture partner Kosmos Energy announced the Yakaar gas discovery located at Cayar Offshore Profond block offshore Senegal (BP 60% (following completion on 3 July of the acquisition by BP of Timis Corp’s working interest), Kosmos 30%, and Petrosen 10%).
 
 
On 10 May, BP announced the start of gas production from the first two fields, Taurus and Libra, of the West Nile Delta development in Egypt (BP operator 82.75 % and DEA Deutsche Erdoel AG 17.25%).
 
 
On 22 May, BP announced first oil from the redeveloped Schiehallion Area, following completion of the Quad 204 project in the west of Shetland region, offshore UK (BP operator 36%, Shell 54%, and Siccar Point Energy 10%).
 
 
On 2 June, BP Trinidad and Tobago LLC (bpTT) announced the sanction for the development of its Angelin offshore gas project. On the same day, bpTT also announced that it has made two significant gas discoveries with the Savannah and Macadamia exploration wells.
 
 
On 15 June, BP and Reliance Industries Limited (RIL) announced the development of the R-Series project in Block KG D6 off the east coast of India (RIL operator 60%, BP 30%, and NIKO 10%).
 
 
This builds on the progress announced in our first-quarter results, which comprised the following: BP’s previously announced transaction with Kosmos Energy in Senegal was approved by the Senegal Minister of Energy and of Development of Renewable Energies;BP completed the purchase of a 10% interest from Eni (operator, 90%) in the Shorouk concession offshore Egypt; BP announced its third gas discovery in the North Damietta Offshore Concession (BP 100%) in the East Nile Delta, Egypt; BP announced that it had agreed to sell its Forties Pipeline System (FPS) business and other associated interests and facilities to INEOS; and bpTT announced the start-up of the Trinidad onshore compression project.
 
Outlook
Looking ahead, we expect third-quarter reported production to be broadly flat with the second quarter with the continued ramp-up of major projects offset by seasonal turnaround and maintenance activities.
 
 
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 35.
 
 
 
Top of page 7
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Upstream (continued)
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Underlying RC profit (loss) before interest and tax
 
 
 
 
 
 
 
US
 
179
166
(305)
 
345
(972)
Non-US
 
531
1,204
334
 
1,735
254
 
 
710
1,370
29
 
2,080
(718)
Non-operating items
 
 
 
 
 
 
 
US
 
(34)
(12)
(57)
 
(46)
(220)
Non-US(a)
 
13
(348)
64
 
(335)
(128)
 
 
(21)
(360)
7
 
(381)
(348)
Fair value accounting effects
 
 
 
 
 
 
 
US
 
92
192
(57)
 
284
(90)
Non-US
 
14
54
(88)
 
68
(158)
 
 
106
246
(145)
 
352
(248)
RC profit (loss) before interest and tax
 
 
 
 
 
 
 
US
 
237
346
(419)
 
583
(1,282)
Non-US
 
558
910
310
 
1,468
(32)
 
 
795
1,256
(109)
 
2,051
(1,314)
Exploration expense
 
 
 
 
 
 
 
US
 
25
40
48
 
65
160
Non-US(b)
 
825
372
302
 
1,197
444
 
 
850
412
350
 
1,262
604
Of which: Exploration expenditure written off(b)
 
753
261
260
 
1,014
421
Production (net of royalties)(c)
 
 
 
 
 
 
 
Liquids*(d) (mb/d)
 
 
 
 
 
 
 
US
 
418
448
401
 
433
402
Europe
 
122
115
117
 
118
122
Rest of World(d)
 
812
827
706
 
819
737
 
 
1,352
1,389
1,224
 
1,371
1,261
Natural gas (mmcf/d)
 
 
 
 
 
 
 
US
 
1,576
1,594
1,666
 
1,585
1,634
Europe
 
274
263
238
 
269
263
Rest of World
 
4,410
3,934
3,829
 
4,173
3,924
 
 
6,260
5,791
5,733
 
6,026
5,822
Total hydrocarbons*(d) (mboe/d)
 
 
 
 
 
 
 
US
 
689
723
688
 
706
684
Europe
 
169
160
158
 
165
168
Rest of World(d)
 
1,572
1,505
1,366
 
1,539
1,413
 
 
2,431
2,388
2,212
 
2,410
2,265
Average realizations*(e)
 
 
 
 
 
 
 
Total liquids(d)(f) ($/bbl)
 
46.27
49.87
39.68
 
48.09
34.44
Natural gas ($/mcf)
 
3.19
3.50
2.66
 
3.34
2.75
Total hydrocarbons(d) ($/boe)
 
33.59
37.19
28.66
 
35.37
26.16
 
(a)
 
First quarter 2017 relates primarily to an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS.
 
(b)
 
Second quarter 2017 predominantly relates to the write-off of exploration well and lease costs in Angola. First quarter 2017 is mainly due to the write-off of exploration wells in Egypt.
 
(c)
 
Includes BP’s share of production of equity-accounted entities in the Upstream segment.
 
(d)
 
A minor adjustment has been made to comparative periods in 2016. See page 30 for more information.
 
(e)
 
Realizations are based on sales by consolidated subsidiaries only – this excludes equity-accounted entities.
 
(f)
 
Includes condensate, natural gas liquids and bitumen.
 
 
Because of rounding, some totals may not agree exactly with the sum of their component parts.
 
 
Top of page 8
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Downstream
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Profit (loss) before interest and tax
 
988
1,804
2,463
 
2,792
4,246
Inventory holding (gains) losses*
 
579
(98)
(1,058)
 
481
(961)
RC profit before interest and tax
 
1,567
1,706
1,405
 
3,273
3,285
Net (favourable) unfavourable impact of
 
 
 
 
 
 
 
  non-operating items* and fair value
 
 
 
 
 
 
 
  accounting effects*
 
(154)
36
108
 
(118)
41
Underlying RC profit before interest and tax*(a)
 
1,413
1,742
1,513
 
3,155
3,326
 
(a)
 
See page 9 for a reconciliation to segment RC profit before interest and tax by region and by business.
 
 
Financial results
The replacement cost profit before interest and tax for the second quarter and first half was $1,567 million and $3,273 million respectively, compared with $1,405 million and $3,285 million for the same periods in 2016.
 
The second quarter and half year include a net non-operating gain of $138 million and $62 million respectively, compared with a net non-operating charge of $37 million and a net non-operating gain of $249 million for the same periods in 2016. Fair value accounting effects had a favourable impact of $16 million in the second quarter and $56 million for the half year, compared with an unfavourable impact of $71 million and $290 million for the same periods in 2016.
 
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the second quarter and half year was $1,413 million and $3,155 million respectively, compared with $1,513 million and $3,326 million for the same periods in 2016.
 
Replacement cost profit before interest and tax for fuels, lubricants and petrochemicals is set out on page 9.
 
Fuels business
The fuels business reported an underlying replacement cost profit before interest and tax of $908 million for the second quarter and $2,108 million for the half year, compared with $1,011 million and $2,327 million for the same periods in 2016, driven by higher fuels marketing and refining results which were more than offset by a significantly lower supply and trading contribution for both the quarter and half year.
 
The fuels marketing result for the quarter and half year reflects continued growth supported by the rollout of our convenience partnership sites and higher premium volumes. For the half year, the fuels marketing result was around 20% higher than the same period last year.
 
The refining result for the quarter and half year benefited from stronger refining commercial optimization, partially offset by a higher level of turnaround activity. The half year also benefited from improved industry refining margins which were partially offset by narrower North American heavy crude oil differentials.
 
In the second quarter, we signed a memorandum of understanding with Reliance Industries Limited to jointly explore options to develop differentiated retail and aviation fuels, mobility and advanced low carbon energy businesses in India.
 
On 18 July we announced that we are evaluating the formation and initial public offering of a master limited partnership to enhance shareholder value and to support BP’s strategy to grow its US midstream business.
 
Lubricants business
The lubricants business reported an underlying replacement cost profit before interest and tax of $355 million for the second quarter and $748 million for the half year, compared with $412 million and $796 million for the same periods in 2016.
 
During the quarter, we announced an agreement to be the exclusive premium lubricants brand sold by Kroger, the largest supermarket chain in the US.
 
Petrochemicals business
The petrochemicals business reported an underlying replacement cost profit before interest and tax of $150 million for the second quarter and $299 million for the half year, compared with $90 million and $203 million for the same periods in 2016. The result for the second quarter and half year reflects an improved margin environment as well as lower costs reflecting the continued benefit from our simplification and efficiency programmes.
 
On 27 April, we announced our intention to divest our 50% shareholding in our Shanghai SECCO Petrochemical Company Limited joint venture in China for a consideration of $1.7 billion. This transaction is subject to regulatory approvals.
 
Outlook
In the third quarter, we expect a similar level of industry refining margins and that North American heavy crude oil differentials will remain under pressure.
 
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 35.
 
 
 
Top of page 9
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Downstream (continued)
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Underlying RC profit before interest and tax -
 
 
 
 
 
 
 
  by region
 
 
 
 
 
 
 
US
 
283
554
386
 
837
926
Non-US
 
1,130
1,188
1,127
 
2,318
2,400
 
 
1,413
1,742
1,513
 
3,155
3,326
Non-operating items
 
 
 
 
 
 
 
US
 
28
(12)
17
 
16
130
Non-US
 
110
(64)
(54)
 
46
119
 
 
138
(76)
(37)
 
62
249
Fair value accounting effects
 
 
 
 
 
 
 
US
 
10
(62)
(78)
 
(52)
(165)
Non-US
 
6
102
7
 
108
(125)
 
 
16
40
(71)
 
56
(290)
RC profit before interest and tax
 
 
 
 
 
 
 
US
 
321
480
325
 
801
891
Non-US
 
1,246
1,226
1,080
 
2,472
2,394
 
 
1,567
1,706
1,405
 
3,273
3,285
Underlying RC profit before interest and tax - 
 
 
 
 
 
 
 
  by business(a)(b)
 
 
 
 
 
 
 
Fuels
 
908
1,200
1,011
 
2,108
2,327
Lubricants
 
355
393
412
 
748
796
Petrochemicals
 
150
149
90
 
299
203
 
 
1,413
1,742
1,513
 
3,155
3,326
Non-operating items and fair value
 
 
 
 
 
 
 
  accounting effects(c)
 
 
 
 
 
 
 
Fuels
 
159
4
(93)
 
163
(38)
Lubricants
 
(2)
(3)
(3)
 
(5)
(4)
Petrochemicals
 
(3)
(37)
(12)
 
(40)
1
 
 
154
(36)
(108)
 
118
(41)
RC profit before interest and tax(a)(b)
 
 
 
 
 
 
 
Fuels
 
1,067
1,204
918
 
2,271
2,289
Lubricants
 
353
390
409
 
743
792
Petrochemicals
 
147
112
78
 
259
204
 
 
1,567
1,706
1,405
 
3,273
3,285
 
 
 
 
 
 
 
 
BP average refining marker margin (RMM)* ($/bbl)
 
13.8
11.7
13.8
 
12.8
12.2
Refinery throughputs (mb/d)
 
 
 
 
 
 
 
US
 
708
694
668
 
702
683
Europe
 
782
801
805
 
791
806
Rest of World
 
198
181
231
 
189
235
 
 
1,688
1,676
1,704
 
1,682
1,724
Refining availability* (%)
 
94.5
95.2
95.7
 
94.8
95.3
Marketing sales of refined products (mb/d)
 
 
 
 
 
 
 
US
 
1,177
1,116
1,115
 
1,146
1,093
Europe
 
1,153
1,069
1,170
 
1,111
1,157
Rest of World
 
497
512
515
 
505
502
 
 
2,827
2,697
2,800
 
2,762
2,752
Trading/supply sales of refined products
 
2,996
2,959
2,875
 
2,978
2,843
Total sales volumes of refined products
 
5,823
5,656
5,675
 
5,740
5,595
Petrochemicals production (kte)
 
 
 
 
 
 
 
US
 
672
498
558
 
1,170
1,454
Europe
 
1,365
1,253
909
 
2,618
1,901
Rest of World
 
2,001
2,073
1,967
 
4,074
3,876
 
 
4,038
3,824
3,434
 
7,862
7,231
 
(a)
 
Segment-level overhead expenses are included in the fuels business result.
 
(b)
BP’s share of income from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany is reported in the fuels business.
(c)
For Downstream, fair value accounting effects arise solely in the fuels business.
 
 
Top of page 10
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Rosneft
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017(a)
2017
2016
 
2017(a)
2016
Profit before interest and tax(b)
 
271
73
291
 
344
353
Inventory holding (gains) losses*
 
8
26
(45)
 
34
(41)
RC profit before interest and tax
 
279
99
246
 
378
312
Net charge (credit) for non-operating items*
 
–
–
–
 
–
–
Underlying RC profit before interest and tax*
 
279
99
246
 
378
312
 
Financial results
 
Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the second quarter and half year was $279 million and $378 million respectively, compared with $246 million and $312 million for the same periods in 2016. There were no non-operating items in the second quarter and half year of either year.
 
Compared with the same periods in 2016, the result for the second quarter was primarily affected by higher oil prices and adverse duty lag effects. For the half year, the result was primarily affected by higher oil prices, adverse foreign exchange and adverse duty lag effects.
 
BP’s two nominees, Bob Dudley and Guillermo Quintero, were re-elected to Rosneft’s board by the annual general meeting (AGM) on 22 June. The AGM also adopted a resolution to pay dividends of 5.98 roubles per ordinary share. In July BP received a dividend in relation to the 2016 annual results of $190 million, after the deduction of withholding tax.
 
Key events
 
In April Rosneft completed the acquisition of a 100% interest in the Kondaneft project that is developing four licence areas in the Khanty-Mansiysk Autonomous District in West Siberia. The acquisition price was approximately $700 million.
 
On 29 June Rosneft completed the transaction for the sale of a 20% interest in its Verkhnechonskneftegaz subsidiary to the Beijing Gas Group, for around $1.1 billion.
 
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
 
 
2017(a)
2017
2016
 
2017(a)
2016
Production (net of royalties) (BP share)
 
 
 
 
 
 
 
Liquids* (mb/d)
 
902
912
812
 
907
810
Natural gas (mmcf/d)
 
1,302
1,334
1,266
 
1,318
1,274
Total hydrocarbons* (mboe/d)
 
1,126
1,142
1,030
 
1,134
1,029
 
(a)
 
The operational and financial information of the Rosneft segment for the second quarter and first half of the year is based on preliminary operational and financial results of Rosneft for the six months ended 30 June 2017. Actual results may differ from these amounts.
 
(b)
The Rosneft segment result includes equity-accounted earnings arising from BP’s 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BP’s purchase of its interest in Rosneft and the amortization of the deferred gain relating to the divestment of BP’s interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the second quarter and first half 2017, as shown in the table above, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own financial statements under IFRS. BP’s share of Rosneft’s profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date. BP's share of Rosneft’s earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation.
 
 
Top of page 11
 
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Other businesses and corporate
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Profit (loss) before interest and tax
 
 
 
 
 
 
 
Gulf of Mexico oil spill
 
(347)
(35)
(5,106)
 
(382)
(5,900)
Other
 
(374)
(396)
(419)
 
(770)
(699)
Profit (loss) before interest and tax
 
(721)
(431)
(5,525)
 
(1,152)
(6,599)
Inventory holding (gains) losses*
 
–
–
–
 
–
–
RC profit (loss) before interest and tax
 
(721)
(431)
(5,525)
 
(1,152)
(6,599)
Net charge (credit) for non-operating items*
 
 
 
 
 
 
 
Gulf of Mexico oil spill
 
347
35
5,106
 
382
5,900
Other
 
8
(44)
43
 
(36)
145
Net charge (credit) for non-operating items
 
355
(9)
5,149
 
346
6,045
Underlying RC profit (loss) before interest and
 
 
 
 
 
 
 
  tax*
 
(366)
(440)
(376)
 
(806)
(554)
Underlying RC profit (loss) before interest and
 
 
 
 
 
 
 
  tax
 
 
 
 
 
 
 
US
 
(104)
(197)
(109)
 
(301)
(219)
Non-US
 
(262)
(243)
(267)
 
(505)
(335)
 
 
(366)
(440)
(376)
 
(806)
(554)
Non-operating items
 
 
 
 
 
 
 
US
 
(350)
(38)
(5,136)
 
(388)
(5,984)
Non-US
 
(5)
47
(13)
 
42
(61)
 
 
(355)
9
(5,149)
 
(346)
(6,045)
RC profit (loss) before interest and tax
 
 
 
 
 
 
 
US
 
(454)
(235)
(5,245)
 
(689)
(6,203)
Non-US
 
(267)
(196)
(280)
 
(463)
(396)
 
 
(721)
(431)
(5,525)
 
(1,152)
(6,599)
 
Other businesses and corporate comprises our alternative energy business, shipping, treasury, corporate activities including centralized functions, and the costs of the Gulf of Mexico oil spill.
 
Financial results
The replacement cost loss before interest and tax for the second quarter and half year was $721 million and $1,152 million respectively, compared with $5,525 million and $6,599 million for the same periods in 2016.
 
The results included a net non-operating charge of $355 million for the second quarter and $346 million for the half year, compared with a net non-operating charge of $5,149 million and $6,045 million for the same periods in 2016.
 
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the second quarter and half year was $366 million and $806 million respectively, compared with $376 million and $554 million for the same periods in 2016. The underlying charge for the half year was impacted by adverse foreign exchange effects, which had a favourable effect in the same period in 2016.
 
Alternative energy – biofuels, wind
The net ethanol-equivalent production (which includes ethanol and sugar) for the second quarter was 227 million litres, compared with 283 million litres for the same period in 2016.
 
Net wind generation capacity*(a) was 1,432MW at 30 June 2017 compared with 1,477MW at 30 June 2016. BP’s net share of wind generation for the second quarter and half year was 1,053GWh and 2,212GWh respectively, compared with 1,060GWh and 2,407GWh for the same periods in 2016.
 
(a)
Capacity figures for 2016 include 23MW in the Netherlands managed by our Downstream segment.
 
 
 
Top of page 12
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Half-yearly financial report
This results announcement also represents BP’s half-yearly financial report for the purposes of the Disclosure Guidance and Transparency Rules made by the UK Financial Conduct Authority. In this context: (i) the condensed set of financial statements can be found on pages 14-25; (ii) pages 1-11, and 26-35 comprise the interim management report; and (iii) the directors’ responsibility statement and auditors’ independent review report can be found on pages 12-13.
 
 
Statement of directors’ responsibilities
The directors confirm that, to the best of their knowledge, the condensed set of financial statements on pages 14-25 has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, and that the interim management report on pages 1-11 and 26-35 includes a fair review of the information required by the Disclosure Guidance and Transparency Rules.
 
The directors of BP p.l.c. are listed on pages 52-57 of BP Annual Report and Form 20-F 2016, with the exception of Cynthia Carroll and Andrew Shilston who retired at the 2017 Annual General Meeting on 17 May 2017, and Melody Meyer who was elected at the 2017 Annual General Meeting.
 
By order of the board
 
Bob Dudley
Brian Gilvary
Group Chief Executive
Chief Financial Officer
31 July 2017
31 July 2017
 
 
Top of page 13
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Independent review report to BP p.l.c.
 
Introduction
 
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the group income statement, group statement of comprehensive income, group statement of changes in equity, group balance sheet, condensed group cash flow statement and Notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
 
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom (ISRE 2410). To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
 
Directors’ responsibilities
 
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
 
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union (EU). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as issued by the IASB and as adopted by the EU.
 
Our responsibility
 
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
 
Scope of review
 
We conducted our review in accordance with ISRE 2410. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
 
Conclusion
 
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and as adopted by the EU and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
 
 
Ernst & Young LLP
London
31 July 2017
 
The maintenance and integrity of the BP p.l.c. website are the responsibility of the directors; the review work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the website.
 
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
 
 
Top of page 14
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Financial statements
Group income statement
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
 
 
 
 
 
 
 
 
Sales and other operating revenues (Note 4)
 
56,511
55,863
46,442
 
112,374
84,954
Earnings from joint ventures – after interest
 
 
 
 
 
 
 
  and tax
 
160
205
274
 
365
303
Earnings from associates – after interest and tax
 
371
151
380
 
522
522
Interest and other income
 
127
122
101
 
249
246
Gains on sale of businesses and fixed assets
 
197
45
79
 
242
417
Total revenues and other income
 
57,366
56,386
47,276
 
113,752
86,442
Purchases
 
42,713
41,137
32,752
 
83,850
59,355
Production and manufacturing expenses(a)
 
5,761
5,255
10,446
 
11,016
16,965
Production and similar taxes (Note 5)
 
189
306
258
 
495
272
Depreciation, depletion and amortization (Note 4)
 
3,793
3,842
3,637
 
7,635
7,367
Impairment and losses on sale of businesses
 
 
 
 
 
 
 
  and fixed assets
 
51
453
52
 
504
65
Exploration expense
 
850
412
350
 
1,262
604
Distribution and administration expenses
 
2,540
2,353
2,697
 
4,893
5,155
Profit (loss) before interest and taxation
 
1,469
2,628
(2,916)
 
4,097
(3,341)
Finance costs(a)
 
487
460
414
 
947
808
Net finance expense relating to pensions and
 
 
 
 
 
 
 
  other post-retirement benefits
 
54
53
46
 
107
92
Profit (loss) before taxation
 
928
2,115
(3,376)
 
3,043
(4,241)
Taxation(a)
 
772
623
(1,986)
 
1,395
(2,293)
Profit (loss) for the period
 
156
1,492
(1,390)
 
1,648
(1,948)
Attributable to
 
 
 
 
 
 
 
  BP shareholders
 
144
1,449
(1,419)
 
1,593
(2,002)
  Non-controlling interests
 
12
43
29
 
55
54
 
 
156
1,492
(1,390)
 
1,648
(1,948)
 
 
 
 
 
 
 
 
Earnings per share (Note 6)
 
 
 
 
 
 
 
Profit (loss) for the period attributable to
 
 
 
 
 
 
 
  BP shareholders
 
 
 
 
 
 
 
  Per ordinary share (cents)
 
 
 
 
 
 
 
    Basic
 
0.73
7.42
(7.60)
 
8.12
(10.78)
    Diluted
 
0.72
7.38
(7.60)
 
8.08
(10.78)
  Per ADS (dollars)
 
 
 
 
 
 
 
    Basic
 
0.04
0.45
(0.46)
 
0.49
(0.65)
    Diluted
 
0.04
0.44
(0.46)
 
0.48
(0.65)
 
(a)
 
See Note 2 for information on the impact of the Gulf of Mexico oil spill on these income statement line items.
 
 
Top of page 15
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Group statement of comprehensive income
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
 
 
 
 
 
 
 
 
Profit (loss) for the period
 
156
1,492
(1,390)
 
1,648
(1,948)
Other comprehensive income
 
 
 
 
 
 
 
Items that may be reclassified subsequently to
 
 
 
 
 
 
 
  profit or loss
 
 
 
 
 
 
 
  Currency translation differences
 
(103)
1,214
(35)
 
1,111
839
  Exchange gains (losses) on translation of
 
 
 
 
 
 
 
    foreign operations reclassified to gain or loss
 
 
 
 
 
 
 
    on sale of businesses and fixed assets
 
4
1
–
 
5
6
  Available-for-sale investments
 
1
2
–
 
3
–
  Cash flow hedges marked to market
 
81
48
(289)
 
129
(351)
  Cash flow hedges reclassified to the income
 
 
 
 
 
 
 
    statement
 
31
42
16
 
73
39
  Cash flow hedges reclassified to the
 
 
 
 
 
 
 
    balance sheet
 
36
39
6
 
75
19
  Share of items relating to equity-accounted
 
 
 
 
 
 
 
    entities, net of tax
 
72
231
197
 
303
487
  Income tax relating to items that may
 
 
 
 
 
 
 
    be reclassified
 
4
(125)
80
 
(121)
(6)
 
 
126
1,452
(25)
 
1,578
1,033
Items that will not be reclassified to profit or loss
 
 
 
 
 
 
 
  Remeasurements of the net pension and other
 
 
 
 
 
 
 
    post-retirement benefit liability or asset
 
318
727
(1,763)
 
1,045
(2,985)
  Income tax relating to items that will not be
 
 
 
 
 
 
 
    reclassified
 
(102)
(246)
592
 
(348)
994
 
 
216
481
(1,171)
 
697
(1,991)
Other comprehensive income
 
342
1,933
(1,196)
 
2,275
(958)
Total comprehensive income
 
498
3,425
(2,586)
 
3,923
(2,906)
Attributable to
 
 
 
 
 
 
 
  BP shareholders
 
472
3,363
(2,604)
 
3,835
(2,955)
  Non-controlling interests
 
26
62
18
 
88
49
 
 
498
3,425
(2,586)
 
3,923
(2,906)
 
 
Top of page 16
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Group statement of changes in equity
 
 
BP
 
 
 
 
shareholders’
Non-controlling
Total
$ million
 
equity
interests
equity
 
 
 
 
 
At 1 January 2017
 
95,286
1,557
96,843
 
 
 
 
 
Total comprehensive income
 
3,835
88
3,923
Dividends
 
(2,850)
(77)
(2,927)
Share-based payments, net of tax
 
334
–
334
Share of equity-accounted entities’ change in equity, net of tax
 
198
–
198
Transactions involving non-controlling interests
 
–
90
90
At 30 June 2017
 
96,803
1,658
98,461
 
 
 
 
 
 
 
BP
 
 
 
 
shareholders’
Non-controlling
Total
$ million
 
equity
interests
equity
 
 
 
 
 
At 1 January 2016
 
97,216
1,171
98,387
 
 
 
 
 
Total comprehensive income
 
(2,955)
49
(2,906)
Dividends
 
(2,268)
(52)
(2,320)
Share-based payments, net of tax
 
447
–
447
Share of equity-accounted entities’ change in equity, net of tax
 
65
–
65
Transactions involving non-controlling interests
 
221
214
435
At 30 June 2016
 
92,726
1,382
94,108
 
 
Top of page 17
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Group balance sheet
 
 
30 June
31 December
$ million
 
2017
2016
Non-current assets
 
 
 
Property, plant and equipment
 
130,715
129,757
Goodwill
 
11,395
11,194
Intangible assets
 
17,399
18,183
Investments in joint ventures
 
8,550
8,609
Investments in associates
 
15,408
14,092
Other investments
 
1,048
1,033
Fixed assets
 
184,515
182,868
Loans
 
540
532
Trade and other receivables
 
1,425
1,474
Derivative financial instruments
 
4,446
4,359
Prepayments
 
1,076
945
Deferred tax assets
 
5,114
4,741
Defined benefit pension plan surpluses
 
1,281
584
 
 
198,397
195,503
Current assets
 
 
 
Loans
 
268
259
Inventories
 
16,449
17,655
Trade and other receivables
 
20,350
20,675
Derivative financial instruments
 
2,218
3,016
Prepayments
 
1,222
1,486
Current tax receivable
 
864
1,194
Other investments
 
77
44
Cash and cash equivalents
 
23,270
23,484
 
 
64,718
67,813
Total assets
 
263,115
263,316
Current liabilities
 
 
 
Trade and other payables
 
36,642
37,915
Derivative financial instruments
 
2,295
2,991
Accruals
 
4,221
5,136
Finance debt
 
7,385
6,634
Current tax payable
 
1,716
1,666
Provisions
 
2,583
4,012
 
 
54,842
58,354
Non-current liabilities
 
 
 
Other payables
 
12,556
13,946
Derivative financial instruments
 
4,210
5,513
Accruals
 
489
469
Finance debt
 
55,619
51,666
Deferred tax liabilities
 
7,435
7,238
Provisions
 
20,501
20,412
Defined benefit pension plan and other post-retirement benefit plan deficits
 
9,002
8,875
 
 
109,812
108,119
Total liabilities
 
164,654
166,473
Net assets
 
98,461
96,843
Equity
 
 
 
BP shareholders’ equity
 
96,803
95,286
Non-controlling interests
 
1,658
1,557
Total equity
 
98,461
96,843
 
 
Top of page 18
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Condensed group cash flow statement
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Operating activities
 
 
 
 
 
 
 
Profit (loss) before taxation
 
928
2,115
(3,376)
 
3,043
(4,241)
Adjustments to reconcile profit (loss) before
 
 
 
 
 
 
 
  taxation to net cash provided by operating
 
 
 
 
 
 
 
  activities
 
 
 
 
 
 
 
  Depreciation, depletion and amortization and
 
 
 
 
 
 
 
    exploration expenditure written off
 
4,546
4,103
3,897
 
8,649
7,788
  Impairment and (gain) loss on sale of businesses
 
 
 
 
 
 
 
    and fixed assets
 
(146)
408
(27)
 
262
(352)
  Earnings from equity-accounted entities,
 
 
 
 
 
 
 
    less dividends received
 
(103)
(220)
(485)
 
(323)
(509)
  Net charge for interest and other finance
 
 
 
 
 
 
 
    expense, less net interest paid
 
84
252
113
 
336
281
  Share-based payments
 
156
162
204
 
318
463
  Net operating charge for pensions and other post-
 
 
 
 
 
 
 
    retirement benefits, less contributions and
 
 
 
 
 
 
 
    benefit payments for unfunded plans
 
54
(73)
(56)
 
(19)
(24)
  Net charge for provisions, less payments
 
183
(177)
4,565
 
6
5,300
  Movements in inventories and other current and
 
 
 
 
 
 
 
    non-current assets and liabilities
 
3
(3,600)
(863)
 
(3,597)
(2,590)
  Income taxes paid
 
(815)
(856)
(89)
 
(1,671)
(361)
Net cash provided by operating activities
 
4,890
2,114
3,883
 
7,004
5,755
Investing activities
 
 
 
 
 
 
 
Expenditure on property, plant and equipment,
 
 
 
 
 
 
 
  intangible and other assets
 
(4,181)
(3,823)
(4,283)
 
(8,004)
(8,664)
Acquisitions, net of cash acquired
 
(123)
(42)
–
 
(165)
–
Investment in joint ventures
 
(10)
(20)
(8)
 
(30)
(12)
Investment in associates
 
(174)
(183)
(196)
 
(357)
(289)
Total cash capital expenditure
 
(4,488)
(4,068)
(4,487)
 
(8,556)
(8,965)
Proceeds from disposal of fixed assets
 
312
188
153
 
500
391
Proceeds from disposal of businesses, net of
 
 
 
 
 
 
 
  cash disposed
 
140
73
291
 
213
1,202
Proceeds from loan repayments
 
19
14
6
 
33
52
Net cash used in investing activities
 
(4,017)
(3,793)
(4,037)
 
(7,810)
(7,320)
Financing activities
 
 
 
 
 
 
 
Proceeds from long-term financing
 
1,720
3,713
2,710
 
5,433
5,448
Repayments of long-term financing
 
(1,463)
(917)
(1,318)
 
(2,380)
(4,877)
Net increase (decrease) in short-term debt
 
(299)
315
300
 
16
188
Net increase (decrease) in non-controlling interests
 
51
30
368
 
81
438
Dividends paid
- BP shareholders
 
(1,546)
(1,304)
(1,169)
 
(2,850)
(2,268)
 
- non-controlling interests
 
(62)
(15)
(43)
 
(77)
(52)
Net cash provided by (used in) financing activities
 
(1,599)
1,822
848
 
223
(1,123)
Currency translation differences relating to cash
 
 
 
 
 
 
 
  and cash equivalents
 
202
167
(226)
 
369
(184)
Increase (decrease) in cash and cash equivalents
 
(524)
310
468
 
(214)
(2,872)
Cash and cash equivalents at beginning of period
 
23,794
23,484
23,049
 
23,484
26,389
Cash and cash equivalents at end of period
 
23,270
23,794
23,517
 
23,270
23,517
 
 
Top of page 19
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Notes
Note 1. Basis of preparation
 
The interim financial information included in this report has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’.
 
The results for the interim periods are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2016 included in BP Annual Report and Form 20-F 2016.
 
The directors have made an assessment of the group’s ability to continue as a going concern and consider it appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.
 
BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the group’s consolidated financial statements for the periods presented.
 
The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing BP Annual Report and Form 20-F 2017, which do not differ significantly from those used in BP Annual Report and Form 20-F 2016.
 
 
Note 2. Gulf of Mexico oil spill
 
(a) Overview
 
The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2016 – Financial statements – Note 2 and Legal proceedings on page 261.
 
The group income statement includes a pre-tax charge for the second quarter of $347 million to reflect the latest estimate for claims, including business economic loss claims, and associated administration costs, and $121 million for finance costs relating to the unwinding of discounting effects. The equivalent amounts for the half year were $382 million and $247 million respectively. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $63,214 million.
 
The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.
 
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Income statement
 
 
 
 
 
 
 
Production and manufacturing expenses
 
347
35
5,106
 
382
5,900
Profit (loss) before interest and taxation
 
(347)
(35)
(5,106)
 
(382)
(5,900)
Finance costs
 
121
126
123
 
247
246
Profit (loss) before taxation
 
(468)
(161)
(5,229)
 
(629)
(6,146)
Taxation
 
154
48
2,533
 
202
2,784
Profit (loss) for the period
 
(314)
(113)
(2,696)
 
(427)
(3,362)
 
 
Top of page 20
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Note 2. Gulf of Mexico oil spill (continued)
 
 
30 June
31 December
$ million
 
2017
2016
Balance sheet
 
 
 
Current assets
 
 
 
  Trade and other receivables
 
172
194
Current liabilities
 
 
 
  Trade and other payables
 
(2,202)
(3,056)
  Provisions
 
(955)
(2,330)
Net current assets (liabilities)
 
(2,985)
(5,192)
Non-current assets
 
 
 
  Deferred tax assets
 
3,001
2,973
Non-current liabilities
 
 
 
  Other payables
 
(12,151)
(13,522)
  Provisions
 
–
(112)
  Deferred tax liabilities
 
5,294
5,119
Net non-current assets (liabilities)
 
(3,856)
(5,542)
Net assets (liabilities)
 
(6,841)
(10,734)
 
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Cash flow statement - Operating activities
 
 
 
 
 
 
 
Profit (loss) before taxation
 
(468)
(161)
(5,229)
 
(629)
(6,146)
Adjustments to reconcile profit (loss) before
 
 
 
 
 
 
 
  taxation to net cash provided by
 
 
 
 
 
 
 
  operating activities
 
 
 
 
 
 
 
Net charge for interest and other finance
 
 
 
 
 
 
 
  expense, less net interest paid
 
121
126
123
 
247
246
Net charge for provisions, less payments
 
298
(5)
4,466
 
293
5,223
Movements in inventories and other current
 
 
 
 
 
 
 
  and non-current assets and liabilities
 
(1,976)
(2,254)
(971)
 
(4,230)
(2,059)
Pre-tax cash flows
 
(2,025)
(2,294)
(1,611)
 
(4,319)
(2,736)
 
Cash outflows in 2016 and 2017 include payments made under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident and the 2016 consent decree and settlement agreement with the United States and the five Gulf coast states. Included in the current quarter cash outflow are payments of $379 million and $490 million relating to Clean Water Act penalties and natural resource damages settlements respectively. Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $2,025 million and $4,319 million in the second quarter and first half of 2017 respectively. For the same periods in 2016, the amount was an outflow of $1,398 million and $2,523 million respectively.
 
 
Top of page 21
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Note 2. Gulf of Mexico oil spill (continued)
 
(b) Provisions and other payables
 
Provisions
 
Movements in the remaining provision, which relates to litigation and claims, are shown in the table below.
 
$ million 
 
 
At 1 April 2017
 
1,350
Net increase in provision
 
337
Reclassified to other payables
 
(94)
Utilization
 
(638)
At 30 June 2017
 
955
 
Movements in the remaining provision during the first half are shown in the table below.
 
$ million 
 
 
At 1 January 2017
 
2,442
Net increase in provision
 
362
Reclassified to other payables
 
(690)
Utilization
 
(1,159)
At 30 June 2017
 
955
 
The provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources.
 
PSC settlement
The provision for the cost associated with the 2012 Plaintiffs’ Steering Committee (PSC) settlement has been increased in the second quarter to reflect the latest estimate for claims, including business economic loss claims and associated administration costs. However, the amounts ultimately payable may differ from the amount provided and the timing of payments is uncertain.
 
A significant number of claims determined by the settlement programme have been and may be appealed by BP and/or the claimants. Depending upon the resolution of these claims, the amount payable may differ from what is currently provided for. There is additional uncertainty in relation to the impact of the recent Fifth Circuit decision (on the policy addressing the matching of revenue with expenses in relation to business economic loss claims), including on those business economic loss claims that have not yet been determined and those that are under appeal within the settlement programme (see Legal proceedings on page 35 for further details on the Fifth Circuit decision).
 
Amounts to resolve remaining claims under the PSC settlement are now expected to be substantially paid by the end of 2018. The timing of payments is uncertain, and in particular, will be impacted by how long it takes to resolve claims that have been appealed and may be appealed in the future.
 
Other payables
 
Other payables include amounts payable under the 2012 agreement with the US government to resolve all federal criminal claims arising from the incident, amounts payable under the consent decree and settlement agreement with the United States and the five Gulf coast states for natural resource damages, state claims and Clean Water Act penalties, BP’s remaining commitment to fund the Gulf of Mexico Research Initiative, and amounts payable for certain economic loss and property damage claims.
 
Further information on provisions, other payables, and contingent liabilities is provided in BP Annual Report and Form
20-F 2016 – Financial statements – Note 2.
 
 
Top of page 22
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Note 3. Analysis of replacement cost profit (loss) before interest and tax and
reconciliation to profit (loss) before taxation
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Upstream
 
795
1,256
(109)
 
2,051
(1,314)
Downstream
 
1,567
1,706
1,405
 
3,273
3,285
Rosneft
 
279
99
246
 
378
312
Other businesses and corporate(a)
 
(721)
(431)
(5,525)
 
(1,152)
(6,599)
 
 
1,920
2,630
(3,983)
 
4,550
(4,316)
Consolidation adjustment – UPII*
 
135
(68)
(121)
 
67
(81)
RC profit (loss) before interest and tax*
 
2,055
2,562
(4,104)
 
4,617
(4,397)
Inventory holding gains (losses)*
 
 
 
 
 
 
 
  Upstream
 
1
(6)
85
 
(5)
54
  Downstream
 
(579)
98
1,058
 
(481)
961
  Rosneft (net of tax)
 
(8)
(26)
45
 
(34)
41
Profit (loss) before interest and tax
 
1,469
2,628
(2,916)
 
4,097
(3,341)
Finance costs
 
487
460
414
 
947
808
Net finance expense relating to pensions and
 
 
 
 
 
 
 
  other post-retirement benefits
 
54
53
46
 
107
92
Profit (loss) before taxation
 
928
2,115
(3,376)
 
3,043
(4,241)
 
 
 
 
 
 
 
 
RC profit (loss) before interest and tax
 
 
 
 
 
 
 
US
 
302
513
(5,394)
 
815
(6,650)
Non-US
 
1,753
2,049
1,290
 
3,802
2,253
 
 
2,055
2,562
(4,104)
 
4,617
(4,397)
 
(a)
Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.
 
 
 
Top of page 23
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Note 4. Segmental analysis
Sales and other operating revenues
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
By segment
 
 
 
 
 
 
 
Upstream
 
10,493
11,327
8,176
 
21,820
15,607
Downstream
 
52,195
50,080
42,809
 
102,275
77,361
Other businesses and corporate
 
326
285
422
 
611
818
 
 
63,014
61,692
51,407
 
124,706
93,786
 
 
 
 
 
 
 
 
Less: sales and other operating revenues
 
 
 
 
 
 
 
  between segments
 
 
 
 
 
 
 
Upstream
 
6,161
5,777
4,301
 
11,938
7,934
Downstream
 
208
(86)
475
 
122
593
Other businesses and corporate
 
134
138
189
 
272
305
 
 
6,503
5,829
4,965
 
12,332
8,832
 
 
 
 
 
 
 
 
Third party sales and other operating revenues
 
 
 
 
 
 
 
Upstream
 
4,332
5,550
3,875
 
9,882
7,673
Downstream
 
51,987
50,166
42,334
 
102,153
76,768
Other businesses and corporate
 
192
147
233
 
339
513
Total sales and other operating revenues
 
56,511
55,863
46,442
 
112,374
84,954
 
 
 
 
 
 
 
 
By geographical area
 
 
 
 
 
 
 
US
 
21,577
21,152
17,701
 
42,729
31,277
Non-US
 
41,103
40,020
32,482
 
81,123
59,628
 
 
62,680
61,172
50,183
 
123,852
90,905
Less: sales and other operating revenues
 
 
 
 
 
 
 
  between areas
 
6,169
5,309
3,741
 
11,478
5,951
 
 
56,511
55,863
46,442
 
112,374
84,954
 
 
Depreciation, depletion and amortization
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Upstream
 
 
 
 
 
 
 
US
 
1,133
1,237
1,064
 
2,370
2,153
Non-US
 
2,090
2,054
1,993
 
4,144
4,097
 
 
3,223
3,291
3,057
 
6,514
6,250
Downstream 
 
 
 
 
 
 
 
US
 
219
216
210
 
435
420
Non-US
 
274
279
279
 
553
546
 
 
493
495
489
 
988
966
Other businesses and corporate
 
 
 
 
 
 
 
US
 
16
16
20
 
32
35
Non-US
 
61
40
71
 
101
116
 
 
77
56
91
 
133
151
Total group
 
3,793
3,842
3,637
 
7,635
7,367
 
 
Note 5. Production and similar taxes
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
US
 
41
36
67
 
77
85
Non-US
 
148
270
191
 
418
187
 
 
189
306
258
 
495
272
 
 
Top of page 24
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Note 6. Earnings per share and shares in issue
 
Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
 
The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.
 
For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method.
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Results for the period
 
 
 
 
 
 
 
Profit (loss) for the period attributable to
 
 
 
 
 
 
 
  BP shareholders
 
144
1,449
(1,419)
 
1,593
(2,002)
Less: preference dividend
 
1
–
1
 
1
1
Profit (loss) attributable to BP ordinary
 
 
 
 
 
 
 
  shareholders
 
143
1,449
(1,420)
 
1,592
(2,003)
 
 
 
 
 
 
 
 
Number of shares (thousand)(a)(b)
 
 
 
 
 
 
 
Basic weighted average number of
 
 
 
 
 
 
 
  shares outstanding
 
19,686,613
19,518,500
18,685,199
 
19,602,785
18,577,135
ADS equivalent
 
3,281,102
3,253,083
3,114,200
 
3,267,130
3,096,189
 
 
 
 
 
 
 
 
Weighted average number of shares
 
 
 
 
 
 
 
  outstanding used to calculate
 
 
 
 
 
 
 
  diluted earnings per share
 
19,783,548
19,621,566
18,685,199
 
19,713,151
18,577,135
ADS equivalent
 
3,297,258
3,270,261
3,114,200
 
3,285,525
3,096,189
 
 
 
 
 
 
 
 
Shares in issue at period-end
 
19,738,566
19,664,528
18,777,156
 
19,738,566
18,777,156
ADS equivalent
 
3,289,761
3,277,421
3,129,526
 
3,289,761
3,129,526
 
(a)
 
Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans.
 
(b)
 
If the inclusion of potentially issuable shares would decrease loss per share, the potentially issuable shares are excluded from the weighted average number of shares outstanding used to calculate diluted earnings per share.
 
 
 
Note 7. Dividends
 
Dividends payable
BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 22 September 2017 to shareholders and American Depositary Share (ADS) holders on the register on 11 August 2017. The corresponding amount in sterling is due to be announced on 12 September 2017, calculated based on the average of the market exchange rates for the four dealing days commencing on 6 September 2017. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the second quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
 
 
2017
2017
2016
 
2017
2016
Dividends paid per ordinary share
 
 
 
 
 
 
 
  cents
 
10.000
10.000
10.000
 
20.000
20.000
  pence
 
7.756
8.159
6.917
 
15.915
13.929
Dividends paid per ADS (cents)
 
60.00
60.00
60.00
 
120.00
120.00
Scrip dividends
 
 
 
 
 
 
 
Number of shares issued (millions)
 
70.1
115.1
134.4
 
185.2
288.8
Value of shares issued ($ million)
 
420
642
695
 
1,062
1,434
 
 
Top of page 25
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Note 8. Net Debt*
Net debt ratio *
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Gross debt
 
63,004
61,832
55,727
 
63,004
55,727
Fair value (asset) liability of hedges related
 
 
 
 
 
 
 
  to finance debt(a)
 
60
597
(1,279)
 
60
(1,279)
 
 
63,064
62,429
54,448
 
63,064
54,448
Less: cash and cash equivalents
 
23,270
23,794
23,517
 
23,270
23,517
Net debt
 
39,794
38,635
30,931
 
39,794
30,931
Equity
 
98,461
99,282
94,108
 
98,461
94,108
Net debt ratio
 
28.8%
28.0%
24.7%
 
28.8%
24.7%
 
 
Analysis of changes in net debt
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Opening balance
 
 
 
 
 
 
 
Finance debt
 
61,832
58,300
54,012
 
58,300
53,168
Fair value (asset) liability of hedges related to
 
 
 
 
 
 
 
  finance debt(a)
 
597
697
(967)
 
697
379
Less: cash and cash equivalents
 
23,794
23,484
23,049
 
23,484
26,389
Opening net debt
 
38,635
35,513
29,996
 
35,513
27,158
Closing balance
 
 
 
 
 
 
 
Finance debt
 
63,004
61,832
55,727
 
63,004
55,727
Fair value (asset) liability of hedges related to
 
 
 
 
 
 
 
  finance debt(a)
 
60
597
(1,279)
 
60
(1,279)
Less: cash and cash equivalents
 
23,270
23,794
23,517
 
23,270
23,517
Closing net debt
 
39,794
38,635
30,931
 
39,794
30,931
Decrease (increase) in net debt
 
(1,159)
(3,122)
(935)
 
(4,281)
(3,773)
Movement in cash and cash equivalents
 
 
 
 
 
 
 
  (excluding exchange adjustments)
 
(726)
143
694
 
(583)
(2,688)
Net cash outflow (inflow) from financing
 
 
 
 
 
 
 
  (excluding share capital and dividends)
 
42
(3,111)
(1,692)
 
(3,069)
(759)
Other movements
 
(13)
(66)
36
 
(79)
395
Movement in net debt before exchange effects
 
(697)
(3,034)
(962)
 
(3,731)
(3,052)
Exchange adjustments
 
(462)
(88)
27
 
(550)
(721)
Decrease (increase) in net debt
 
(1,159)
(3,122)
(935)
 
(4,281)
(3,773)
 
(a)
 
Derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $1,167 million (first quarter 2017 liability of $1,746 million and second quarter 2016 liability of $1,440 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.
 
 
 
Note 9. Inventory valuation
 
A provision of $635 million was held at 30 June 2017 ($499 million at 31 March 2017 and $689 million at 30 June 2016) to write inventories down to their net realizable value. The net movement charged to the income statement during the second quarter 2017 was $132 million (first quarter 2017 was a credit of $4 million and second quarter 2016 was a charge of $12 million).
 
 
Note 10. Statutory accounts
 
The financial information shown in this publication, which was approved by the Board of Directors on 31 July 2017, is unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP Annual Report and Form 20-F 2017. BP Annual Report and Form 20-F 2016 has been filed with the Registrar of Companies in England and Wales. The report of the auditor on those accounts was unqualified and did not contain a statement under section 498(2) or section 498(3) of the UK Companies Act 2006.
 
 
Top of page 26
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Additional information
Capital expenditure*
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Capital expenditure on a cash basis
 
 
 
 
 
 
 
Organic capital expenditure*
 
4,348
3,538
4,205
 
7,886
8,683
Inorganic capital expenditure*(a)
 
140
530
282
 
670
282
 
 
4,488
4,068
4,487
 
8,556
8,965
 
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Organic capital expenditure by segment
 
 
 
 
 
 
 
Upstream
 
 
 
 
 
 
 
US
 
805
641
948
 
1,446
2,195
Non-US
 
3,005
2,339
2,769
 
5,344
5,578
 
 
3,810
2,980
3,717
 
6,790
7,773
Downstream
 
 
 
 
 
 
 
US
 
149
152
193
 
301
312
Non-US
 
316
320
257
 
636
526
 
 
465
472
450
 
937
838
Other businesses and corporate
 
 
 
 
 
 
 
US
 
3
21
4
 
24
4
Non-US
 
70
65
34
 
135
68
 
 
73
86
38
 
159
72
 
 
4,348
3,538
4,205
 
7,886
8,683
Organic capital expenditure by geographical area
 
 
 
 
 
 
 
US
 
957
814
1,145
 
1,771
2,511
Non-US
 
3,391
2,724
3,060
 
6,115
6,172
 
 
4,348
3,538
4,205
 
7,886
8,683
 
(a)
 
First quarter and first half 2017 include amounts paid to purchase an interest in the Zohr gas field in Egypt and in exploration blocks in Senegal.
 
 
 
Top of page 27
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Non-operating items*
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Upstream
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
 
 
 
 
  and fixed assets(a)
 
(18)
(382)
–
 
(400)
4
Environmental and other provisions
 
–
–
–
 
–
–
Restructuring, integration and rationalization costs
 
(19)
2
(3)
 
(17)
(266)
Fair value gain (loss) on embedded derivatives
 
5
25
28
 
30
41
Other
 
11
(5)
(18)
 
6
(127)
 
 
(21)
(360)
7
 
(381)
(348)
Downstream
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
 
 
 
 
  and fixed assets
 
156
(11)
23
 
145
344
Environmental and other provisions
 
–
–
(3)
 
–
(3)
Restructuring, integration and rationalization costs
 
(18)
(65)
(54)
 
(83)
(89)
Fair value gain (loss) on embedded derivatives
 
–
–
–
 
–
–
Other
 
–
–
(3)
 
–
(3)
 
 
138
(76)
(37)
 
62
249
Rosneft
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
 
 
 
 
  and fixed assets
 
–
–
–
 
–
–
Environmental and other provisions
 
–
–
–
 
–
–
Restructuring, integration and rationalization costs
 
–
–
–
 
–
–
Fair value gain (loss) on embedded derivatives
 
–
–
–
 
–
–
Other
 
–
–
–
 
–
–
 
 
–
–
–
 
–
–
Other businesses and corporate
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
 
 
 
 
  and fixed assets
 
8
(15)
4
 
(7)
4
Environmental and other provisions
 
(3)
–
(35)
 
(3)
(35)
Restructuring, integration and rationalization costs
 
(23)
(8)
(11)
 
(31)
(59)
Fair value gain (loss) on embedded derivatives
 
–
–
–
 
–
–
Gulf of Mexico oil spill(b)
 
(347)
(35)
(5,106)
 
(382)
(5,900)
Other
 
10
67
(1)
 
77
(55)
 
 
(355)
9
(5,149)
 
(346)
(6,045)
Total before interest and taxation
 
(238)
(427)
(5,179)
 
(665)
(6,144)
Finance costs(b)
 
(121)
(126)
(123)
 
(247)
(246)
Total before taxation
 
(359)
(553)
(5,302)
 
(912)
(6,390)
Taxation credit (charge)
 
144
248
2,483
 
392
2,793
Total after taxation for period
 
(215)
(305)
(2,819)
 
(520)
(3,597)
 
(a)
 
First quarter and first half 2017 relate primarily to an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS.
 
(b)
 
See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.
 
 
 
Top of page 28
 
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Non-GAAP information on fair value accounting effects
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Favourable (unfavourable) impact relative to
 
 
 
 
 
 
 
  management’s measure of performance
 
 
 
 
 
 
 
Upstream
 
106
246
(145)
 
352
(248)
Downstream
 
16
40
(71)
 
56
(290)
 
 
122
286
(216)
 
408
(538)
Taxation credit (charge)
 
(38)
(79)
68
 
(117)
151
 
 
84
207
 
(148)
 
291
(387)
 
 
BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in the income statement. This is because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness-testing requirements. Therefore, measurement differences in relation to recognition of gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices consistent with the contract maturity.
 
BP enters into physical commodity contracts to meet certain business requirements, such as the purchase of crude for a refinery or the sale of BP’s gas production. Under IFRS these physical contracts are treated as derivatives and are required to be fair valued when they are managed as part of a larger portfolio of similar transactions. In addition, derivative instruments are used to manage the price risk associated with certain future natural gas sales. Gains and losses arising are recognized in the income statement from the time the derivative commodity contract is entered into.
 
IFRS require that inventory held for trading is recorded at its fair value using period-end spot prices, whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices, resulting in measurement differences.
 
BP enters into contracts for pipelines and storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments that are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.
 
The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management’s internal measure of performance. Under management’s internal measure of performance the inventory and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period. The fair values of certain derivative instruments used to risk manage certain LNG and oil and gas contracts and gas sales contracts, are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management’s estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to management’s internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.
 
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
$ million
 
2017
2017
2016
 
2017
2016
Upstream
 
 
 
 
 
 
 
Replacement cost profit (loss) before interest and
 
 
 
 
 
 
 
  tax adjusted for fair value accounting effects
 
689
1,010
36
 
1,699
(1,066)
Impact of fair value accounting effects
 
106
246
(145)
 
352
(248)
Replacement cost profit before interest and tax
 
795
1,256
(109)
 
2,051
(1,314)
Downstream
 
 
 
 
 
 
 
Replacement cost profit before interest and tax
 
 
 
 
 
 
 
  adjusted for fair value accounting effects
 
1,551
1,666
1,476
 
3,217
3,575
Impact of fair value accounting effects
 
16
40
(71)
 
56
(290)
Replacement cost profit before interest and tax
 
1,567
1,706
1,405
 
3,273
3,285
Total group
 
 
 
 
 
 
 
Profit (loss) before interest and tax adjusted for
 
 
 
 
 
 
 
  fair value accounting effects
 
1,347
2,342
(2,700)
 
3,689
(2,803)
Impact of fair value accounting effects
 
122
286
(216)
 
408
(538)
Profit (loss) before interest and tax
 
1,469
2,628
(2,916)
 
4,097
(3,341)
 
 
Top of page 29
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Readily marketable inventory* (RMI)
 
 
30 June
31 December
$ million
 
2017
2016
RMI at fair value
 
4,387
5,952
Paid-up RMI*
 
2,470
2,705
 
Readily marketable inventory (RMI) is oil and oil products inventory held and price risk-managed by BP’s integrated supply and trading function (IST) which could be sold to generate funds if required. Paid-up RMI is RMI that BP has paid for.
 
We believe that disclosing the amounts of RMI and paid-up RMI is useful to investors as it enables them to better understand and evaluate the group’s inventories and liquidity position by enabling them to see the level of discretionary inventory held by IST and to see builds or releases of liquid trading inventory.
 
See the Glossary on page 32 for a more detailed definition of RMI. RMI, RMI at fair value and paid-up RMI are non-GAAP measures. A reconciliation of total inventory as reported on the group balance sheet to paid-up RMI is provided below.
 
 
 
30 June
31 December
$ million
 
2017
2016
Reconciliation of total inventory to paid-up RMI
 
 
 
Inventories as reported on the group balance sheet
 
16,449
17,655
Less: (a) inventories which are not oil and oil products and (b) oil and oil
 
 
 
  product inventories which are not risk-managed by IST
 
(12,310)
(12,131)
RMI on an IFRS basis
 
4,139
5,524
Plus: difference between RMI at fair value and RMI on an IFRS basis
 
248
428
RMI at fair value
 
4,387
5,952
Less: unpaid RMI* at fair value
 
(1,917)
(3,247)
Paid-up RMI
 
2,470
2,705
 
 
Top of page 30
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Realizations* and marker prices
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
 
 
2017
2017
2016
 
2017
2016
Average realizations(a)
 
 
 
 
 
 
 
Liquids* ($/bbl)
 
 
 
 
 
 
 
US
 
44.65
46.34
34.89
 
45.51
31.82
Europe
 
47.79
53.28
43.62
 
50.50
37.46
Rest of World(b)
 
47.11
51.79
42.36
 
49.46
35.60
BP Average(b)
 
46.27
49.87
39.68
 
48.09
34.44
Natural gas ($/mcf)
 
 
 
 
 
 
 
US
 
2.32
2.50
1.53
 
2.41
1.55
Europe
 
4.48
5.40
4.64
 
4.93
4.46
Rest of World
 
3.47
3.85
3.10
 
3.64
3.21
BP Average
 
3.19
3.50
2.66
 
3.34
2.75
Total hydrocarbons* ($/boe)
 
 
 
 
 
 
 
US
 
32.46
34.29
24.00
 
33.39
22.38
Europe
 
41.10
46.69
39.25
 
43.84
34.28
Rest of World(b)
 
33.48
37.93
30.03
 
35.64
27.20
BP Average(b)
 
33.59
37.19
28.66
 
35.37
26.16
Average oil marker prices ($/bbl)
 
 
 
 
 
 
 
Brent
 
49.64
53.69
45.59
 
51.71
39.81
West Texas Intermediate
 
48.11
51.70
45.53
 
49.89
39.64
Western Canadian Select
 
38.55
38.77
33.78
 
38.66
28.09
Alaska North Slope
 
50.61
53.82
45.74
 
52.20
40.00
Mars
 
46.92
49.59
42.08
 
48.24
36.25
Urals (NWE – cif)
 
48.48
51.88
43.37
 
50.22
37.56
Average natural gas marker prices
 
 
 
 
 
 
 
Henry Hub gas price(c) ($/mmBtu)
 
3.19
3.32
1.95
 
3.25
2.02
UK Gas – National Balancing Point (p/therm)
 
37.83
48.19
31.37
 
43.14
30.90
 
 
(a)
 
Based on sales of consolidated subsidiaries only – this excludes equity-accounted entities.
 
(b)
 
Production volume recognition methodology for our Technical Service Contract arrangement in Iraq has been simplified to exclude the impact of oil price movements on lifting imbalances. A minor adjustment has been made to second quarter and first half 2016. There is no impact on the financial results.
 
(c)
 
Henry Hub First of Month Index.
 
 
 
Exchange rates
 
 
Second
First
Second
 
First
First
 
 
quarter
quarter
quarter
 
half
half
 
 
2017
2017
2016
 
2017
2016
$/£ average rate for the period
 
1.28
1.24
1.43
 
1.26
1.43
$/£ period-end rate
 
1.30
1.25
1.34
 
1.30
1.34
 
 
 
 
 
 
 
 
$/€ average rate for the period
 
1.10
1.07
1.13
 
1.08
1.12
$/€ period-end rate
 
1.14
1.07
1.11
 
1.14
1.11
 
 
 
 
 
 
 
 
Rouble/$ average rate for the period
 
57.24
58.72
65.86
 
57.98
70.35
Rouble/$ period-end rate
 
59.05
56.01
63.64
 
59.05
63.64
 
 
Top of page 31
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Principal risks and uncertainties
The principal risks and uncertainties affecting BP are described in the Risk factors section of BP Annual Report and Form 20-F 2016 (pages 49-50) and are summarized below. There are no material changes in those risk factors for the remaining six months of the financial year.
 
The risks summarized below, separately or in combination, could have a material adverse effect on the implementation of our strategy, our business, financial performance, results of operations, cash flows, liquidity, prospects, shareholder value and returns and reputation.
 
Strategic and commercial risks
●
Prices and markets – our financial performance is subject to fluctuating prices of oil, gas, refined products, technological change, exchange rate fluctuations, and the general macroeconomic outlook.
●
Access, renewal and reserves progression – our inability to access, renew and progress upstream resources in a timely manner could adversely affect our long-term replacement of reserves.
●
Major project* delivery – failure to invest in the best opportunities or deliver major projects successfully could adversely affect our financial performance.
●
Geopolitical – we are exposed to a range of political developments and consequent changes to the operating and regulatory environment.
●
Liquidity, financial capacity and financial, including credit, exposure – failure to work within our financial framework could impact our ability to operate and result in financial loss.
●
Joint arrangements and contractors – we may have limited control over the standards, operations and compliance of our partners, contractors and sub-contractors.
●
Digital infrastructure and cybersecurity – breach of our digital security or failure of our digital infrastructure could damage our operations and our reputation.
●
Climate change and carbon pricing – public policies could increase costs and reduce future revenue and strategic growth opportunities.
●
Competition – inability to remain efficient, innovate and retain an appropriately skilled workforce could negatively impact delivery of our strategy in a highly competitive market.
●
Crisis management and business continuity – potential disruption to our business and operations could occur if we do not address an incident effectively.
●
Insurance – our insurance strategy could expose the group to material uninsured losses.
 
Safety and operational risks
●
Process safety, personal safety, and environmental risks – we are exposed to a wide range of health, safety, security and environmental risks that could result in regulatory action, legal liability, increased costs, damage to our reputation and potentially denial of our licence to operate.
●
Drilling and production – challenging operational environments and other uncertainties can impact drilling and production activities.
●
Security – hostile acts against our staff and activities could cause harm to people and disrupt our operations.
●
Product quality – supplying customers with off-specification products could damage our reputation, lead to regulatory action and legal liability, and potentially impact our financial performance.
 
Compliance and control risks
●
US government settlements – failure to comply with the terms of our settlements with legal and regulatory bodies in the US announced in November 2012 in respect of certain charges related to the Gulf of Mexico oil spill may expose us to further penalties or liabilities or could result in suspension or debarment of certain BP entities.
●
Regulation – changes in the regulatory and legislative environment could increase the cost of compliance, affect our provisions and limit our access to new exploration opportunities.
●
Ethical misconduct and non-compliance – ethical misconduct or breaches of applicable laws by our businesses or our employees could be damaging to our reputation, and could result in litigation, regulatory action and penalties.
●
Treasury and trading activities – ineffective oversight of treasury and trading activities could lead to business disruption, financial loss, regulatory intervention or damage to our reputation.
●
Reporting – failure to accurately report our data could lead to regulatory action, legal liability and reputational damage.
 
 
Top of page 32
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Glossary
Non-GAAP measures are provided for investors because they are closely tracked by management to evaluate BP’s operating performance and to make financial, strategic and operating decisions.
 
Adjusted effective tax rate (ETR) is a non-GAAP measure. The adjusted ETR is calculated by dividing taxation on an underlying RC basis excluding the impact of the reduction in the rate of the UK North Sea supplementary charge in the third quarter 2016 by underlying RC profit or loss before tax. Taxation on an underlying RC basis is taxation on a RC basis for the period adjusted for taxation on non-operating items and fair value accounting effects. Information on underlying RC profit or loss is provided below. BP believes it is helpful to disclose the adjusted ETR because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.
 
Capital expenditure is total cash capital expenditure as stated in the condensed group cash flow statement.
 
Consolidation adjustment – UPII is unrealized profit in inventory arising on inter-segment transactions.
 
Divestment proceeds are disposal proceeds as per the condensed group cash flow statement.
 
Effective tax rate (ETR) on replacement cost (RC) profit or loss is a non-GAAP measure. The ETR on RC profit or loss is calculated by dividing taxation on a RC basis by RC profit or loss before tax. Information on RC profit or loss is provided below. BP believes it is helpful to disclose the ETR on RC profit or loss because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.
 
Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligningthe valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information is provided on page 28.
 
Gearing – See Net debt and net debt ratio definition.
 
Hydrocarbons – Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
 
Inorganic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Inorganic capital expenditure comprises consideration in business combinations and certain other significant investments made by the group. It is reported on a cash basis. BP believes that this measure provides useful information as it allows investors to understand how BP’s management invests funds in projects which expand the group’s activities through acquisition. Further information and a reconciliation to GAAP information is provided on page 26.
 
Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge
that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation’s production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.
 
Liquids – Liquids for Upstream and Rosneft comprises crude oil, condensate and natural gas liquids. For Upstream, liquids also includes bitumen.
 
 
Major projects have a BP net investment of at least $250 million, or are considered to be of strategic importance to BP or of a high degree of complexity.
 
 
Top of page 33
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Glossary (continued)
Net debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents. The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders’ equity. All components of equity are included in the denominator of the calculation. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The derivatives are reported on the balance sheet within the headings ‘Derivative financial instruments’.
 
Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP’s share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
 
Non-operating items are charges and credits included in the financial statements that BP discloses separately because it considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the group’s reported financial performance. Non-operating items within equity-accounted earnings are reported net of incremental income tax reported by the equity-accounted entity. An analysis of non-operating items by region is shown on pages 7, 9 and 11, and by segment and type is shown on page 27.
 
Operating cash flow is net cash provided by (used in) operating activities as stated in the condensed group cash flow statement. When used in the context of a segment rather than the group, the terms refer to the segment’s share thereof.
 
Operating cash flow excluding amounts related to the Gulf of Mexico oil spill / Gulf of Mexico oil spill payments or Organic cash flow is a non-GAAP measure calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill as reported in Note 2 from Net cash provided by operating activities as reported in the condensed group cash flow statement. BP believes it is helpful to disclose net cash provided by operating activities excluding amounts related to the Gulf of Mexico oil spill because this measure allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is Net cash provided by operating activities.
 
Organic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Organic capital expenditure comprises capital expenditure less inorganic capital expenditure. BP believes that this measure provides useful information as it allows investors to understand how BP’s management invests funds in developing and maintaining the group’s assets. An analysis of organic capital expenditure by segment and region, and a reconciliation to GAAP information is provided on page 26.
 
Production-sharing agreement (PSA) is an arrangement through which an oil company bears the risks and costs of exploration, development and production. In return, if exploration is successful, the oil company receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of the production remaining after such cost recovery.
 
Readily marketable inventory (RMI) is inventory held and price risk-managed by our integrated supply and trading function (IST) which could be sold to generate funds if required. It comprises oil and oil products for which liquid markets are available and excludes inventory which is required to meet operational requirements and other inventory which is not price risk-managed. RMI is reported at fair value. Inventory held by the Downstream fuels business for the purpose of sales and marketing, and all inventories relating to the lubricants and petrochemicals businesses, are not included in RMI.
 
Paid-up RMI excludes RMI which has not yet been paid for. For inventory that is held in storage, a first-in first-out (FIFO) approach is used to determine whether inventory has been paid for or not. Unpaid RMI is RMI which has not yet been paid for by BP. RMI, Paid-up RMI and Unpaid RMI are non-GAAP measures. Further information is provided on page 29.
 
Realizations are the result of dividing revenue generated from hydrocarbon sales, excluding revenue generated from purchases made for resale and royalty volumes, by revenue generating hydrocarbon production volumes. Revenue generating hydrocarbon production reflects the BP share of production as adjusted for any production which does not generate revenue. Adjustments may include losses due to shrinkage, amounts consumed during processing, and contractual or regulatory host committed volumes such as royalties.
 
Refining availability represents Solomon Associates’ operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory downtime.
 
 
Top of page 34
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Glossary (continued)
The Refining marker margin (RMM) is the average of regional indicator margins weighted for BP’s crude refining capacity in each region. Each regional marker margin is based on product yields and a marker crude oil deemed appropriate for the region. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP’s particular refinery configurations and crude and product slate.
 
Replacement cost (RC) profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss. RC profit or loss is the measure of profit or loss that is required to be disclosed for each operating segment under IFRS. RC profit or loss for the group is not a recognized GAAP measure. BP believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP’s management believes it is helpful to disclose this measure. The nearest equivalent measure on an IFRS basis is profit or loss attributable to BP shareholders.
 
RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 6. RC profit or loss per share is calculated using the same denominator. The numerator used is RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the RC profit or loss per share because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders.
 
Reported recordable injury frequency measures the number of reported work-related employee and contractor incidents that result in a fatality or injury per 200,000 hours worked. This represents reported incidents occurring within BP’s operational HSSE reporting boundary. That boundary includes BP’s own operated facilities and certain other locations or situations.
 
Tier 1 process safety events are losses of primary containment from a process of greatest consequence – causing harm to a member of the workforce, costly damage to equipment or exceeding defined quantities. This represents reported incidents occurring within BP’s operational HSSE reporting boundary. That boundary includes BP’s own operated facilities and certain other locations or situations.
 
Underlying production is production after adjusting for divestments and entitlement impacts in our production-sharing agreements. 2017 underlying production does not include the Abu Dhabi onshore concession renewal.
 
Underlying RC profit or loss is RC profit or loss after adjusting for non-operating items and fair value accounting effects. Underlying RC profit or loss and adjustments for fair value accounting effects are not recognized GAAP measures. See pages 27 and 28 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact. BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by management to evaluate BP’s operating performance and to make financial, strategic and operating decisions and because it may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss attributable to BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and taxation.
 
Underlying RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 6. Underlying RC profit or loss per share is calculated using the same denominator. The numerator used is underlying RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the underlying RC profit or loss per share because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders.
 
Upstream operating efficiency is calculated as production for BP operated sites, excluding US Lower 48 and adjusted for certain items including entitlement impacts in our production-sharing agreements divided by installed production capacity for BP operated sites, excluding US Lower 48. Installed production capacity is the agreed rate achievable (measured at the export end of the system) when the installed production system (reservoir, wells, plant and export) is fully optimized and operated at full rate with no planned or unplanned deferrals.
 
Upstream unit production cost is calculated as production cost divided by units of production. Production cost does not include ad valorem and severance taxes. Units of production are barrels for liquids and thousands of cubic feet for gas. Amounts disclosed are for BP subsidiaries only and do not include BP’s share of equity-accounted entities.
 
 
Top of page 35
BP p.l.c. Group results
Second quarter and half year 2017
 
 
Legal proceedings
The following discussion sets out the material developments in the group’s material legal proceedings during the first half of 2017. For a full discussion of the group’s material legal proceedings, see pages 261-265 of BP Annual Report and Form 20-F 2016.
 
Deepwater Horizon accident and oil spill (the Incident)
Plaintiffs’ Steering Committee (PSC) settlements – Economic and Property Damages Settlement Agreement The Economic and Property Damages Settlement established a court-supervised settlement claims programme to resolve certain economic and property damage claims arising from the Incident.
 
Following numerous court decisions, on 31 March 2015, the United States district court in New Orleans denied the PSC motion seeking to alter or amend a revised policy relating to business economic loss claims. Such policy required the matching of revenue with the expenses incurred by claimants to generate that revenue, even where the revenue and expenses were recorded at different times. The PSC appealed the district court decision and, on 22 May 2017, the Fifth Circuit issued an opinion upholding the policy in part and reversing the policy in part. The Fifth Circuit ordered that the portion of the policy upheld, which covers the substantial majority of the remaining business economic loss claims, be applied as the governing methodology for all applicable business economic loss claims. BP filed a petition for a rehearing which was denied on 21 June 2017. On 5 July 2017, the district court issued an order instructing the court supervised settlement programme on how to implement the Fifth Circuit’s opinion. BP continues to evaluate the impact of the Fifth Circuit’s decision on undetermined business economic loss claims, and claims under appeal within the programme, and is considering its next steps in relation to this order. See Note 2 on page 19 for further information.
 
Cautionary statement
In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), BP is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements – that is, statements related to future, not past events – with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. In particular, among other statements, expectations regarding the expected quarterly dividend payment and timing of such payment; expectations regarding 2017 net debt, organic capital expenditure and divestment proceeds; expectations regarding the adjusted effective tax rate in 2017; expectations regarding Upstream third-quarter 2017 reported production; expectations regarding Downstream third-quarter 2017 refining margins and North American heavy crude oil differentials; plans and expectations with respect to the start-up of new Upstream projects; expectations with respect to new Upstream production through 2020; expectations regarding Rosneft operational and financial information for the first half of 2017; expectations with respect to the timing and amount of future payments relating to the Gulf of Mexico oil spill; and expectations that claims arising under the 2012 PSC settlement will be substantially paid by the end of 2018; are all forward looking in nature. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the specific factors identified in the discussions accompanying such forward-looking statements;the receipt of relevant third party and/or regulatory approvals;the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain divestments;future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems;potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations;regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims;exchange rate fluctuations; development and use of new technology;recruitment and retention of a skilled workforce;the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others;our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors;natural disasters and adverse weather conditions;changes in public expectations and other changes to business conditions;wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report and under “Risk factors” in BP Annual Report and Form 20-F 2016 as filed with the US Securities and Exchange Commission.
 
 
 
 
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SIGNATURES
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  
BP p.l.c.
(Registrant)
 
 
Dated: 01 August 2017
 
/s/ J. BERTELSEN
 
J. BERTELSEN
Deputy Company Secretary