Second Quarter and Half Year 2020

Source Press Release
Company BP Plc. 
Tags LNG & Gas Storage/Processing, Strategy - Other, Strategy - Chemicals, Strategy - Downstream, Pipelines/ tankers/ distribution, Upstream Activities, Strategy - Upstream, Capital Spending, Environment, Issues & Setbacks, Guidance, Financial & Operating Data, Strategy - Corporate
Date August 04, 2020
Resetting for the future in face of difficult conditions 

- Reported loss for the quarter was $16.8 billion, compared with a profit of $1.8 billion for the same period a year earlier, including a net post-tax charge of $10.9 billion for non-operating items. This included $9.2 billion in post-tax non-cash impairments across the group largely arising from the revisions to its long-term price assumptions and $1.7 billion of post-tax non-cash exploration write-offs treated as non-operating items.

- Operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments, was $4.8 billion, including a $1.5 billion working capital release (after adjusting for net inventory holding gains). Gulf of Mexico oil spill payments in the quarter of $1.1 billion on a post-tax basis included the scheduled annual payment.

- Proceeds from divestments and other disposals received in the quarter were $1.1 billion. This included the first payment from the agreed sale of BP's petrochemicals business to INEOS, which delivered BP's plans for $15 billion of announced transactions a year earlier than expected. The sale of the upstream portion of BP's Alaska business also completed at the end of the quarter.

- Organic capital expenditure in the first half of 2020 was $6.6 billion, on track to meet BP's revised full year expectation of around $12 billion, announced in April.

- BP's redesign of its organization to become leaner, faster moving and lower cost, including the announced reduction of around 10,000 jobs, is expected to make a significant contribution to the planned $2.5 billion reduction in annual cash costs by the end of 2021, relative to 2019. Restructuring costs of around $1.5 billion are expected to be recognized in 2020.

- During the quarter BP issued $11.9 billion in hybrid bonds - a significant step in diversifying its capital structure, supporting its investment grade credit rating, and strengthening its finances.

- Net debt at the end of the quarter was $40.9 billion, $10.5 billion lower than in the first quarter. Gearing at the end of the quarter was 33.1% compared with 36.2% at the end of the previous quarter. This reflected the increase in equity associated with the issuance of hybrid bonds and the lower net debt, partly offset by the reduction in equity associated with the second-quarter loss.

- A dividend of 5.25 cents per share was announced for the quarter, compared to 10.5 cents per share for the previous quarter. This dividend decision is aligned with BP's new distribution policy announced separately today.

Helge Lund - chairman: 
Together with our results, we are today announcing BP's new strategy to deliver our net zero ambition, and a new investor proposition underpinned by a coherent financial frame. Our investor proposition includes a new distribution policy, which is designed to reward our investors with committed distributions, and which has informed the board's decision on the dividend declared today for the second quarter of 2020. 
Financial summary    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Profit (loss) for the period attributable to BP shareholders    (16,848  (4,365  1,822      (21,213  4,756   
Inventory holding (gains) losses, net of tax    (809  3,737    (47    2,928    (886 
RC profit (loss)    (17,657  (628  1,775      (18,285  3,870   
Net (favourable) adverse impact of non-operating items and fair value accounting effects, net of tax    10,975    1,419    1,036      12,394    1,299   
Underlying RC profit (loss)    (6,682  791    2,811      (5,891  5,169   
RC profit (loss) per ordinary share (cents)    (87.32  (3.11  8.72      (90.52  19.10   
RC profit (loss) per ADS (dollars)    (5.24  (0.19  0.52      (5.43  1.15   
Underlying RC profit (loss) per ordinary share (cents)    (33.05  3.92    13.82      (29.17  25.51   
Underlying RC profit (loss) per ADS (dollars)    (1.98  0.24    0.83      (1.75  1.53   
Bernard Looney - chief executive officer: 
" These headline results have been driven by another very challenging quarter, but also by the deliberate steps we have taken as we continue to reimagine energy and reinvent bp. In particular, our reset of long-term price assumptions and the related impairment and exploration write-off charges had a major impact. Beneath these, however, our performance remained resilient, with good cash flow and - most importantly - safe and reliable operations." 

COVID-19 Update

Outlook:

- The ongoing severe impacts of the COVID-19 pandemic continue to create a volatile and challenging trading environment.

- Looking ahead, the outlook for commodity prices and product demand remains challenging and uncertain.

- Global GDP is expected to contract this year by 4-5%.

- Global oil demand is expected to be around 8-9 million barrels of oil per day lower than 2019, with OECD oil stocks above their five-year range, and gas markets are likely to remain materially oversupplied. There is also a risk of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period.

- In July, refining margins remained under pressure, with RMM at $6.3/barrel due to lower product demand and high inventories, while BP refining utilization improved to above 80%. Retail fuel demand recovered in July to 10-15% lower than a year earlier, however, aviation fuel demand continued to be over 70% lower.

- The pandemic is not expected to result in Upstream oil and gas outages but has impacted development of the Mad Dog 2, Tangguh Expansion, Trinidad Cassia Compression and Greater Tortue Ahmeyin Phase 1 major projects.

- BP's future financial performance, including cash flows, net debt and gearing, will be impacted by the extent and duration of the current market conditions and the effectiveness of the actions that it and others take, including its financial interventions. It is difficult to predict when current supply and demand imbalances will be resolved and what the ultimate impact of COVID-19 will be.

Strengthening finances:

- BP continues to take deliberate steps to strengthen its finances and drive down its cash balance point.

- These steps include issuing around $7 billion of bonds in April, issuing $12 billion in hybrid bonds in June, agreeing the $5 billion divestment of its petrochemicals business, and completing the sale of the upstream Alaska business. BP also reset its long-term price assumptions.

- BP will continue to review these actions, and any further actions that may be appropriate, in response to changes in prevailing market conditions.

- Organic capital expenditure was limited to $6.6 billion in the first half.

- Net debt fell to $40.9 billion at quarter-end. BP had around $47 billion of liquidity, including cash and undrawn revolving credit facilities, at quarter end.

- Costs that are directly attributable to COVID-19 were around $200 million for the quarter.

Protecting our people and operations:

- BP continues to monitor the impact of COVID-19 on global operations and to date there has been no direct significant operational impact, although this could change through the rest of the third quarter.

- In the second quarter, Upstream production was curtailed as a result of market demand and OPEC+ restrictions, and refinery utilization was more than 10% below normal levels due to COVID-19 demand impacts.

- Despite the significant challenges of the environment, BP's operations continued safely and reliably in the quarter. BP-operated Upstream plant reliability was 95.5% and BP-operated refining availability was strong at 95.6%.

- BP continues to take steps to protect and support its staff through the pandemic, including: reduced manning levels, changing working patterns, and deploying appropriate personal protective equipment (PPE), enhanced cleaning and social distancing measures at plants and retail sites. The great majority of BP staff who are able to work from home have done so since mid-March. Decisions on repopulating offices are taken with caution and in compliance with local and national guidelines and regulations.

- BP is providing enhanced support and guidance to staff on safety, health and hygiene, homeworking and mental health.

Supporting communities:

- BP continues to offer support in response to the pandemic in communities in which it operates.

- Recent actions include: providing discounts to emergency service and health workers in the UK and US; donating PPE to health services; campaigning to promote the wearing of masks in Africa; and supporting staff in volunteering efforts, including matching employee donations to charities.

Group headlines

Results

For the half year, underlying replacement cost (RC) loss* was $5,891 million, compared with a profit of $5,169 million in 2019. Underlying RC loss is after adjusting RC loss* for a net charge for non-operating items* of $12,248 million and net adverse fair value accounting effects* of $146 million (both on a post-tax basis).

RC loss was $18,285 million for the half year, compared with a profit of $3,870 million in 2019.

For the second quarter, underlying RC loss was $6,682 million, compared with a profit of $2,811 million in 2019. Underlying RC loss is after adjusting RC loss for a net charge for non-operating items of $10,857 million and net adverse fair value accounting effects of $118 million (both on a post-tax basis).

RC loss was $17,657 million for the second quarter, compared with a profit of $1,775 million in 2019.

Loss for the second quarter and half year attributable to BP shareholders was $16,848 million and $21,213 million respectively, compared with a profit of $1,822 million and $4,756 million for the same periods in 2019.

Depreciation, depletion and amortization

The charge for depreciation, depletion and amortization was $3.9 billion in the quarter and $8.0 billion in the half year, compared with $4.6 billion and $9.0 billion for the same periods in 2019. BP now expects the 2020 full-year charge to be around 10% lower than 2019.

Effective tax rate

The effective tax rate (ETR) on RC profit or loss* for the second quarter and half year was 19% and 15% respectively, compared with 39% and 41% for the same periods in 2019. Adjusting for non-operating items and fair value accounting effects, the underlying ETR* for the second quarter and half year was 9% and -3% respectively, compared with 34% and 37% for the same periods a year ago. The lower underlying ETR for the second quarter and half year reflects the exploration write-offs with a limited deferred tax benefit and the reassessment of deferred tax asset recognition. The underlying ETR in the second half of the year remains sensitive to the volatility in the current environment. ETR on RC profit or loss and underlying ETR are non-GAAP measures.

Dividend

BP today announced a quarterly dividend of 5.25 cents per ordinary share ($0.315 per ADS), which is expected to be paid on 25 September 2020. The corresponding amount in sterling will be announced on 14 September 2020. See page 26 for more information.

Share buybacks

BP repurchased 120 million ordinary shares at a cost of $776 million (including fees and stamp duty) in the first half year of 2020, all of which was completed in the first quarter. In January 2020, the share dilution buyback programme had fully offset the impact of scrip dilution since the third quarter 2017.

Operating cash flow*

Operating cash flow excluding Gulf of Mexico oil spill payments* was $4.8 billion for the second quarter and $6.1 billion for the half year. These amounts include a working capital* release of $1.5 billion in the second quarter and a working capital build of $2.2 billion in the half year, after adjusting for net inventory holding gains or losses* and working capital effects of the Gulf of Mexico oil spill. The comparable amount for the same periods in 2019 was $8.2 billion and $14.2 billion.

Operating cash flow as reported in the group cash flow statement was $3.7 billion for the second quarter and $4.7 billion for the half year, including a working capital build of $0.6 billion and a working capital release of $0.1 billion respectively, compared with $6.8 billion and $12.1 billion for the same periods in 2019.

See page 32 and Glossary for further information on Gulf of Mexico oil spill cash flows and on working capital.

Capital expenditure*

Organic capital expenditure* for the second quarter and half year was $3.0 billion and $6.6 billion respectively, compared with $3.7 billion and $7.3 billion for the same periods in 2019.

Inorganic capital expenditure* for the second quarter and half year was $33 million and $0.4 billion respectively, compared with $2.0 billion and $4.0 billion for the same periods in 2019.

Organic capital expenditure and inorganic capital expenditure are non-GAAP measures. 

Divestment and other proceeds

Divestment and other proceeds were $1.1 billion for the second quarter, including the first tranche of petrochemicals disposal proceeds and TANAP pipeline refinancing, and $1.8 billion for the half year, compared with $0.1 billion and $0.7 billion for the same periods in 2019.

Net debt* and gearing*

Net debt at 30 June 2020 was $40.9 billion, compared with $46.5 billion a year ago. Gearing at 30 June 2020 was 33.1%, compared with 31.0% a year ago. Gearing including leases* at 30 June 2020 was 37.7%, compared with 35.3% a year ago. Net debt, gearing and gearing including leases are non-GAAP measures. 

Analysis of underlying RC profit (loss)* before interest and tax

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Underlying RC profit (loss) before interest and tax               
Upstream    (8,487  1,871    3,413      (6,616  6,341   
Downstream    1,405    921    1,365      2,326    3,098   
Rosneft    (61  (17  638      (78  1,205   
Other businesses and corporate    (260  (561  (290    (821  (708 
Consolidation adjustment - UPII*    (46  178    34      132    21   
Underlying RC profit (loss) before interest and tax    (7,449  2,392    5,160      (5,057  9,957   
Finance costs and net finance expense relating to pensions and other post-retirement benefits      (677  (668  (752    (1,345  (1,506 
Taxation on an underlying RC basis    770    (953  (1,515    (183  (3,135 
Non-controlling interests    674    20    (82    694    (147 
Underlying RC profit (loss) attributable to BP shareholders    (6,682  791    2,811      (5,891  5,169   

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    2020  2020  2019    2020  2019 
RC profit (loss) before interest and tax               
Upstream    (22,008  1,023    2,469      (20,985  5,353   
Downstream    594    664    1,288      1,258    3,053   
Rosneft    (124  (17  525      (141  1,011   
Other businesses and corporate    (317  (698  (381    (1,015  (927 
Consolidation adjustment - UPII    (46  178    34      132    21   
RC profit (loss) before interest and tax    (21,901  1,150    3,935      (20,751  8,511   
Finance costs and net finance expense relating to pensions and other post-retirement benefits    (791  (790  (868    (1,581  (1,750 
Taxation on a RC basis    4,361    (1,008  (1,210    3,353    (2,744 
Non-controlling interests    674    20    (82    694    (147 
RC profit (loss) attributable to BP shareholders    (17,657  (628  1,775      (18,285  3,870   
Inventory holding gains (losses)*    1,088    (4,884  81      (3,796  1,169   
Taxation (charge) credit on inventory holding gains and losses    (279  1,147    (34    868    (283 
Profit (loss) for the period attributable to BP shareholders    (16,848  (4,365  1,822      (21,213  4,756   

Operational updates

Upstream

Upstream production, which excludes Rosneft, for the first half of the year averaged 2,552mboe/d, 3.3% lower than a year earlier. Underlying production*, was 1.0% higher than 2019 mainly due to ramp up of major projects*.

The sale of the upstream portion of BP's Alaska business completed on 30 June. Hilcorp Energy and BP continue to work with regulators and subject to approvals, expect to complete the sale of the midstream portion, including BP's interest in the Trans Alaska Pipeline, during 2020. BP and Premier Oil signed sale and purchase agreements, reflecting final agreed terms, for the divestment of the Andrew Area and Shearwater assets in the UK North Sea. Subject to approvals, the transaction is expected to complete by the end of the third quarter of 2020.

Upstream has delayed exploration and appraisal activities and curtailed development activities in lower margin areas, as well as rephasing or minimizing spend on projects in the early phases of development. These interventions are expected to reduce 2020 reported production by around 70mboe/d.

Downstream

The second quarter saw the weakest industry refining environment in over 15 years, and an unprecedented fall in product demand driven by COVID-19. While refining operations in the quarter were strong, with BP-operated refining availability of 95.6%, demand destruction resulted in lower utilization.

In June BP announced the sale of its petrochemicals business to INEOS for a total consideration of $5 billion. Subject to approvals, the transaction is expected to complete before the end of the year.

In July BP and Reliance Industries completed the formation of the new fuel and mobility joint venture that will operate across India under the Jio-bp brand.

Low carbon

BP entered into an agreement with China's ENN to work together to supply 300,000 tonnes a year of regasified LNG to ENN's customers in Guangdong province. BP also agreed with Enágas in Spain to jointly promote LNG and CNG for transport and the use of renewable gas.

In July BP announced plans to work with JinkoPower, a leading Chinese solar power company, to offer integrated decarbonized energy solutions and services to customers in China. It also announced plans to invest $70 million in India's Green Growth Equity Fund to support the growing renewable energy sector in India.

Petrofac and BP extended their partnership with a new metering contract for four years. BP has invested in Satelytics whose technology is expected to aid in the deployment of a suite of methane detecting techniques across new and existing major facilities.

Financial framework

Operating cash flow excluding Gulf of Mexico oil spill payments* was $6.1 billion for the half year of 2020, compared with $14.2 billion for the same period in 2019.

Organic capital expenditure* for the half year of 2020 was $6.6 billion. BP expects 2020 organic capital expenditure to be around $12 billion.

Divestment and other proceeds were $1.8 billion for the half year of 2020.

Gulf of Mexico oil spill payments on a post-tax basis were $1.4 billion in the half year of 2020. BP now expects the post-tax payments to be around $1.5 billion in 2020.

Gearing* at 30 June 2020 was 33.1%, in part reflecting the recent hybrid bond issue. See page 27 for more information.

Operating metrics    First half 2020    Financial metrics    First half 2020 
  (vs. First half 2019)      (vs. First half 2019) 
Tier 1 and tier 2 process safety events    47    Underlying RC profit (loss)*    $(5.9)bn 
  (-2)      (-$11.1bn) 
Reported recordable injury frequency*    0.131    Operating cash flow excluding Gulf of Mexico oil spill payments (post-tax)    $6.1bn 
  (-29.8%)      (-$8.1bn) 
Group production    3,655mboe/d    Organic capital expenditure    $6.6bn 
  (-3.5%)      (-$0.8bn) 
Upstream production (excludes Rosneft segment)    2,552mboe/d    Gulf of Mexico oil spill payments (post-tax)    $1.4bn 
  (-3.3%)      (-$0.7bn) 
Upstream unit production costs*(a)    $6.13/boe    Divestment proceeds*    $1.4bn 
  (-12.6%)      (+$0.7bn) 
BP-operated Upstream plant reliability*    94.2%    Gearing    33.1% 
  (-0.7)      (+2.1) 
BP-operated refining availability*    95.9%    Dividend per ordinary share(b)    5.25 cents 
  (+2.0)      (-48.8%) 

Upstream

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Profit (loss) before interest and tax    (21,951  955    2,459      (20,996  5,345   
Inventory holding (gains) losses*    (57  68    10      11     
RC profit (loss) before interest and tax    (22,008  1,023    2,469      (20,985  5,353   
Net (favourable) adverse impact of non-operating items* and fair value accounting effects*    13,521    848    944      14,369    988   
Underlying RC profit (loss) before interest and tax*(a)    (8,487  1,871    3,413      (6,616  6,341   

Financial results

The replacement cost loss before interest and tax for the second quarter and half year was $22,008 million and $20,985 million respectively, compared with a profit of $2,469 million and $5,353 million for the same periods in 2019. The second quarter and half year included a net non-operating charge of $13,454 million and $14,525 million respectively, which principally relate to impairments associated with revisions to long-term price assumptions, compared with a net charge of $766 million and $770 million for the same periods in 2019. Fair value accounting effects in the second quarter and half year had an adverse impact of $67 million and a favourable impact of $156 million respectively, compared with an adverse impact of $178 million and $218 million in the same periods of 2019.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost loss before interest and tax for the second quarter and half year was $8,487 million and $6,616 million respectively, compared with a profit of $3,413 million and $6,341 million for the same periods in 2019. The results for the second quarter and half year mainly reflect the impact of writing down certain exploration intangible carrying values, and lower liquids and gas realizations.

Production

Production for the quarter was 2,525mboe/d, 3.8% lower than the second quarter of 2019. Underlying production* for the quarter increased by 0.6% mainly due to ramp up of major projects*.

For the half year, production was 2,552mboe/d, 3.3% lower than the first half of 2019. Underlying production for the half year was 1.0% higher than 2019 mainly due to ramp up of major projects.

Key events

On 30 June, BP completed the sale of its upstream Alaska business to Hilcorp. BP and Hilcorp continue to work with regulators to complete the sale of midstream assets, including BP's interest in the Trans Alaska Pipeline System (TAPS).

On 1 July, BP confirmed the Bashrush gas discovery, located offshore Egypt. Evaluation is ongoing (Eni operator 37.5%, BP 37.5%, Total 25%).

On 20 July, BP signed sale and purchase agreements, reflecting final agreed terms, for the divestment of its interests in the Andrew Area and Shearwater assets, both located in the UK North Sea, to Premier Oil. Subject to approvals, the transaction is expected to complete by the end of the third quarter of 2020.

These events follow the announcements in our first-quarter results, which comprised the following: BP executed a gas sale and purchase agreement with partners in the Greater Tortue Ahmeyim (GTA) project. GTA operations are severely affected by COVID-19 and the 2020 weather window for installation works can no longer be met resulting in a delay of around one year (BP operator 56%, Kosmos 27%, Petrosen 10%, SMHPM 7%); BP confirmed notification from the Brazilian National Petroleum Agency (ANP) of its approvals to postpone the deadline for declaring commerciality of the Wahoo (BP operator 35.7%, IBV Brasil Petróleo 35.7% Total 20%, Anadarko 8.6%) and Itaipu (BP operator 60%, Total 26.7%, Anadarko 13.3%) pre-salt discoveries offshore Brazil in the Campos basin, until June 2022; BP confirmed completion of the restructuring of contractual arrangements for the Petrojari Foinaven floating production, storage and offloading vessel on the Foinaven field to the west of the Shetlands (BP operator 72%, RockRose Energy 28%); BP relocated personnel from the remote Tangguh expansion project in Indonesia, as part of a COVID-19 response plan and anticipates a delay to start-up (BP operator 40.22%, MI Berau B.V. 16.30%, CNOOC Muturi Ltd. 13.90%,  Nippon Oil Exploration (Berau) Ltd. 12.23%, KG Berau Petroleum Ltd 8.60%, Indonesia Natural Gas Resources Muturi Inc 7.35%, KG Wiriagar Overseas Ltd 1.40%).

Outlook

Looking to the third quarter of 2020, we expect higher product demand, albeit still significantly below last year's levels. We also expect significant continued pressure on industry refining margins into the third quarter.

Downstream (continued)

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Underlying RC profit before interest and tax - by region               
US    719    557    566      1,276    1,097   
Non-US    686    364    799      1,050    2,001   
    1,405    921    1,365      2,326    3,098   
Non-operating items               
US    (69        (63   
Non-US    (711  (4  (33    (715  (38 
    (780    (31    (778  (35 
Fair value accounting effects(a)               
US    (71  145        74    69   
Non-US    40    (404  (54    (364  (79 
    (31  (259  (46    (290  (10 
RC profit before interest and tax               
US    579    708    576      1,287    1,169   
Non-US    15    (44  712      (29  1,884   
    594    664    1,288      1,258    3,053   
Underlying RC profit before interest and tax - by business(b)(c)               
Fuels    1,295    689    961      1,984    2,253   
Lubricants    63    167    321      230    593   
Petrochemicals    47    65    83      112    252   
    1,405    921    1,365      2,326    3,098   
Non-operating items and fair value accounting effects(a)               
Fuels    (748  (257  (99    (1,005  (62 
Lubricants    (51    22      (51  18   
Petrochemicals    (12        (12  (1 
    (811  (257  (77    (1,068  (45 
RC profit before interest and tax(b)(c)               
Fuels    547    432    862      979    2,191   
Lubricants    12    167    343      179    611   
Petrochemicals    35    65    83      100    251   
    594    664    1,288      1,258    3,053   
               
BP average refining marker margin (RMM)* ($/bbl)    5.9    8.8    15.2      7.4    12.7   
               
Refinery throughputs (mb/d)               
US    614    748    673      681    703   
Europe    716    835    715      776    741   
Rest of World    157    223    209      190    223   
    1,487    1,806    1,597      1,647    1,667   
BP-operated refining availability* (%)    95.6    96.1    93.4      95.9    93.9   
               
Marketing sales of refined products (mb/d)               
US    872    1,038    1,174      955    1,126   
Europe    685    954    1,091      820    1,042   
Rest of World    364    519    520      441    520   
    1,921    2,511    2,785      2,216    2,688   
Trading/supply sales of refined products    3,172    3,377    3,099      3,274    3,197   
Total sales volumes of refined products    5,093    5,888    5,884      5,490    5,885   
               
Petrochemicals production (kte)               
US    410    611    584      1,021    1,185   
Europe    1,246    1,371    1,226      2,617    2,386   
Rest of World    1,271    1,153    1,156      2,424    2,455   
    2,927    3,135    2,966      6,062    6,026   

Rosneft

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020(a)  2020  2019    2020(a)  2019 
Profit (loss) before interest and tax(b)(c)    (71  (218  523      (289  1,049   
Inventory holding (gains) losses*    (53  201        148    (38 
RC profit (loss) before interest and tax    (124  (17  525      (141  1,011   
Net charge (credit) for non-operating items*    63      113      63    194   
Underlying RC profit (loss) before interest and tax*    (61  (17  638      (78  1,205   

Financial results

Replacement cost (RC) loss before interest and tax for the second quarter and half year was $124 million and $141 million respectively, compared with a profit of $525 million and $1,011 million for the same periods in 2019.

After adjusting for non-operating items, the underlying RC loss before interest and tax for the second quarter and half year was $61 million and $78 million respectively, compared with a profit of $638 million and $1,205 million for the same periods in 2019.

Compared with the same periods in 2019, the result for the second quarter primarily reflects lower oil prices partially offset by favourable foreign exchange, whilst the result for the half year was primarily affected by lower oil prices.

Key events

BP's two nominees, Bob Dudley and Bernard Looney, were elected to Rosneft's board at Rosneft's annual general meeting (AGM) on 2 June 2020. At the AGM, shareholders also approved a resolution to pay a dividend of 18.07 roubles per ordinary share, which brings the total dividend for 2019 to 33.41 roubles per ordinary share, constituting 50% of the company's IFRS net profit. BP received a payment of $480 million, after the deduction of withholding tax, on 14 July.

On 30 April 2020, Rosneft completed a transaction to transfer all of its interest and cease participation in its Venezuelan businesses to a company owned by the government of the Russian Federation. In consideration,  Rosneft received shares equal to a 9.6% share of its own equity. The shares are held by a 100% subsidiary of  Rosneft and accounted for as treasury shares.  Rosneft also has an approved programme of share buybacks under which shares are being repurchased. Those shares are also accounted for as treasury shares.

BP retains 19.75% of the voting rights at meetings of Rosneft shareholders and continues to be entitled to dividends based on that shareholding. BP's economic interest as of 30 June, however, has increased to 21.93% as a result of its indirect interest in the shares held by the subsidiaries of  Rosneft. BP's share of profit or loss of Rosneft reflects its economic interest.

Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
    2020(a)  2020  2019    2020(a)  2019 
Production (net of royalties) (BP share)               
Liquids* (mb/d)    856    916    912      886    924   
Natural gas (mmcf/d)    1,248    1,275    1,250      1,261    1,288   
Total hydrocarbons* (mboe/d)    1,071    1,136    1,127      1,103    1,146   

Other businesses and corporate

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Profit (loss) before interest and tax    (317  (698  (381    (1,015  (927 
Inventory holding (gains) losses*               
RC profit (loss) before interest and tax    (317  (698  (381    (1,015  (927 
Net (favourable) adverse impact of non-operating items* and fair value accounting effects*      57    137    91      194    219   
Underlying RC profit (loss) before interest and tax*    (260  (561  (290    (821  (708 
Underlying RC profit (loss) before interest and tax               
US    (129  (124  (224    (253  (379 
Non-US    (131  (437  (66    (568  (329 
    (260  (561  (290    (821  (708 
Non-operating items               
US    (62  (48  (78    (110  (206 
Non-US    46    (89  (13    (43  (13 
    (16  (137  (91    (153  (219 
Fair value accounting effects               
US               
Non-US    (41        (41   
    (41        (41   
RC profit (loss) before interest and tax               
US    (191  (172  (302    (363  (585 
Non-US    (126  (526  (79    (652  (342 
    (317  (698  (381    (1,015  (927  )   

Financial results

The replacement cost loss before interest and tax for the second quarter and half year was $317 million and $1,015 million respectively, compared with $381 million and $927 million for the same periods in 2019.

The results included a net non-operating charge of $16 million for the second quarter and $153 million for the half year, compared with a charge of $91 million and $219 million for the same periods in 2019. Fair value accounting effects in the second quarter and half year had an adverse impact of $41 million. See page 30 for further information.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost loss before interest and tax for the second quarter and half year was $260 million and $821 million respectively, compared with $290 million and $708 million for the same periods in 2019.

Alternative Energy

BP's net ethanol-equivalent production* for the first half of the year averaged 14.4kb/d, compared with 9.3kb/d for the 100% BP-owned business for the same period in 2019.

Net wind generation capacity* was 923MW at 30 June 2020, compared with 926MW at 30 June 2019. BP's net share of wind generation for the second quarter and half year was 673GWh and 1,450GWh respectively, compared with 688GWh and 1,461GWh for the same periods in 2019. In July, BP agreed to acquire the remaining 50% interest in the BP-operated Fowler Ridge 1 wind asset from its current partner, Dominion Energy. Located in central Indiana, the asset includes 162 wind turbines with a generating capacity of 300MW and will increase BP's net wind generation capacity to 1,073MW.

Lightsource BP has developed assets of 2.2GW to date and has an ambition to reach 10GW of developed assets by the end of 2023.

In April, Lightsource BP and Conway Corp signed a 20-year purchase power agreement for the development of a 132MW solar energy project in White County, Arkansas, US. In the same month  Lightsource BP and the Southeastern Pennsylvania Transportation Authority (SEPTA) in the US signed a long-term power contract. The agreement will provide SEPTA with 67,029MWh of electricity from two solar power plants in Franklin county - about 20% of the transportation agency's annual electricity usage.  Lightsource BP also acquired the Wellington North solar project in New South Wales, Australia in July. It will be sited adjacent to  Lightsource BP's existing 200MW Wellington solar asset, which is currently in construction, creating a combined total capacity of 550MW.

This builds on the progress announced in our first-quarter results, which comprised the following: Lightsource BP signed a multi-year module supply agreement with Canadian Solar Inc. to deliver 1.2GW of high-efficiency polycrystalline solar modules for projects in the US and Australia; and  Lightsource BP closed on a $250 million financing package for its Impact Solar project located in Lamar County, Texas, USA.

In early July BP signed a memorandum of understanding (MOU) with Chinese solar firm, JinkoPower Technologies, to provide integrated decarbonized energy solutions and services to customers in China.

Outlook

Other businesses and corporate average quarterly charges, excluding non-operating items, fair value accounting effects and foreign exchange volatility impact, are expected to be around $350 million although this will fluctuate quarter to quarter.

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, the condensed set of financial statements on pages 14-27 has been prepared in accordance with IAS 34 'Interim Financial Reporting', and that the interim management report on pages 1-11 and 28-39 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 74-77 of BP Annual Report and Form 20-F 2019, with the following exceptions: Brian Gilvary retired on 30 June 2020 and Murray Auchincloss joined the board on 1 July 2020.

Independent review report to BP p.l.c.

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 2020 which comprises the group income statement, condensed group statement of comprehensive income, condensed group statement of changes in equity, group balance sheet, condensed group cash flow statement and related notes 1 to 13. 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 International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review 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 IFRSs as adopted by the European Union. 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 adopted by the European Union.

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 International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, 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 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Financial statements

Group income statement

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
               
Sales and other operating revenues (Note 6)    31,676    59,650    72,676      91,326    138,997   
Earnings from joint ventures - after interest and tax    (567  (22  138      (589  323   
Earnings from associates - after interest and tax    (100  (244  608      (344  1,257   
Interest and other income    107    140    270      247    433   
Gains on sale of businesses and fixed assets    74    16    55      90    144   
Total revenues and other income    31,190    59,540    73,747      90,730    141,154   
Purchases    18,778    48,878    55,683      67,656    103,955   
Production and manufacturing expenses    5,211    6,099    5,391      11,310    10,747   
Production and similar taxes (Note 8)    124    203    371      327    795   
Depreciation, depletion and amortization (Note 7)    3,937    4,059    4,588      7,996    9,049   
Impairment and losses on sale of businesses and fixed assets (Note 3)    11,770    1,149    906      12,919    1,002   
Exploration expense (Note 4)    9,674    202    146      9,876    513   
Distribution and administration expenses    2,509    2,684    2,646      5,193    5,413   
Profit (loss) before interest and taxation    (20,813  (3,734  4,016      (24,547  9,680   
Finance costs    783    783    853      1,566    1,720   
Net finance expense relating to pensions and other post-retirement benefits        15      15    30   
Profit (loss) before taxation    (21,604  (4,524  3,148      (26,128  7,930   
Taxation    (4,082  (139  1,244      (4,221  3,027   
Profit (loss) for the period    (17,522  (4,385  1,904      (21,907  4,903   
Attributable to               
BP shareholders    (16,848  (4,365  1,822      (21,213  4,756   
Non-controlling interests    (674  (20  82      (694  147   
    (17,522  (4,385  1,904      (21,907  4,903   
               
Earnings per share (Note 9)               
Profit (loss) for the period attributable to BP shareholders               
Per ordinary share (cents)               
Basic    (83.32  (21.63  8.95      (105.02  23.47   
Diluted    (83.32  (21.63  8.92      (105.02  23.35   
Per ADS (dollars)               
Basic    (5.00  (1.30  0.54      (6.30  1.41   
Diluted    (5.00  (1.30  0.54      (6.30  1.40   

Condensed group statement of comprehensive income

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
               
Profit (loss) for the period    (17,522  (4,385  1,904      (21,907  4,903   
Other comprehensive income               
Items that may be reclassified subsequently to profit or loss               
Currency translation differences(a)    1,371    (4,642  131      (3,271  1,120   
Exchange (gains) losses on translation of foreign operations reclassified to gain or loss on sale of businesses and fixed assets               
Cash flow hedges and costs of hedging    68    85    133      153    152   
Share of items relating to equity-accounted entities, net of tax    (333  442    (30    109    (80 
Income tax relating to items that may be reclassified    (37  117    (9    80    (43 
    1,072    (3,997  225      (2,925  1,149   
Items that will not be reclassified to profit or loss               
Remeasurements of the net pension and other post-retirement benefit liability or asset(b)    (1,960  1,719    (39    (241  (892 
Cash flow hedges that will subsequently be transferred to the balance sheet    (2  (8  (7    (10   
Income tax relating to items that will not be reclassified    623    (623        275   
    (1,339  1,088    (44    (251  (616 
Other comprehensive income    (267  (2,909  181      (3,176  533   
Total comprehensive income    (17,789  (7,294  2,085      (25,083  5,436   
Attributable to               
BP shareholders    (17,142  (7,217  2,001      (24,359  5,282   
Non-controlling interests    (647  (77  84      (724  154   
    (17,789  (7,294  2,085      (25,083  5,436   

Condensed group statement of changes in equity

    BP shareholders'  Non-controlling interests  Total 
$ million    equity  Hybrid bonds  Other interest  equity 
At 1 January 2020    98,412      2,296    100,708   
           
Total comprehensive income    (24,359    (724  (25,083 
Dividends    (4,242    (105  (4,347 
Cash flow hedges transferred to the balance sheet, net of tax           
Repurchase of ordinary share capital    (776      (776 
Share-based payments, net of tax    342        342   
Share of equity-accounted entities' changes in equity, net of tax           
Issue of perpetual hybrid bonds    (48  11,909      11,861   
Transactions involving non-controlling interests, net of tax    (471    571    100   
At 30 June 2020    68,864    11,909    2,038    82,811   
           
    BP shareholders'  Non-controlling interests  Total 
$ million    equity  Hybrid bonds  Other interest  equity 
At 31 December 2018    99,444      2,104    101,548   
Adjustment on adoption of IFRS 16, net of tax(a)    (329    (1  (330 
At 1 January 2019    99,115      2,103    101,218   
           
Total comprehensive income    5,282      154    5,436   
Dividends    (3,200    (119  (3,319 
Cash flow hedges transferred to the balance sheet, net of tax    12        12   
Repurchase of ordinary share capital    (125      (125 
Share-based payments, net of tax    398        398   
Share of equity-accounted entities' changes in equity, net of tax           
At 30 June 2019    101,485      2,138    103,623   

Group balance sheet

    30 June  31 December 
$ million    2020  2019 
Non-current assets       
Property, plant and equipment    117,208    132,642   
Goodwill    12,352    11,868   
Intangible assets    5,987    15,539   
Investments in joint ventures    8,015    9,991   
Investments in associates    16,982    20,334   
Other investments    2,559    1,276   
Fixed assets    163,103    191,650   
Loans    724    630   
Trade and other receivables    4,270    2,147   
Derivative financial instruments    7,381    6,314   
Prepayments    495    781   
Deferred tax assets    6,891    4,560   
Defined benefit pension plan surpluses    6,346    7,053   
    189,210    213,135   
Current assets       
Loans    370    339   
Inventories    12,504    20,880   
Trade and other receivables    16,522    24,442   
Derivative financial instruments    4,751    4,153   
Prepayments    679    857   
Current tax receivable    637    1,282   
Other investments    122    169   
Cash and cash equivalents    34,217    22,472   
    69,802    74,594   
Assets classified as held for sale (Note 2)    4,169    7,465   
    73,971    82,059   
Total assets    263,181    295,194   
Current liabilities       
Trade and other payables    32,134    46,829   
Derivative financial instruments    3,678    3,261   
Accruals    3,670    5,066   
Lease liabilities    1,958    2,067   
Finance debt    11,452    10,487   
Current tax payable    1,159    2,039   
Provisions    2,074    2,453   
    56,125    72,202   
Liabilities directly associated with assets classified as held for sale (Note 2)    948    1,393   
    57,073    73,595   
Non-current liabilities       
Other payables    11,777    12,626   
Derivative financial instruments    5,652    5,537   
Accruals    936    996   
Lease liabilities    7,373    7,655   
Finance debt    64,527    57,237   
Deferred tax liabilities    6,585    9,750   
Provisions    17,986    18,498   
Defined benefit pension plan and other post-retirement benefit plan deficits    8,461    8,592   
    123,297    120,891   
Total liabilities    180,370    194,486   
Net assets    82,811    100,708   
Equity       
BP shareholders' equity    68,864    98,412   
Non-controlling interests    13,947    2,296   
Total equity    82,811    100,708   

Condensed group cash flow statement

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Operating activities               
Profit (loss) before taxation    (21,604  (4,524  3,148      (26,128  7,930   
Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities               
Depreciation, depletion and amortization and exploration expenditure written off    13,555    4,157    4,665      17,712    9,410   
Impairment and (gain) loss on sale of businesses and fixed assets    11,696    1,133    851      12,829    858   
Earnings from equity-accounted entities, less dividends received    860    505    (395    1,365    (984 
Net charge for interest and other finance expense, less net interest paid    17    137    62      154    150   
Share-based payments    351    (6  117      345    414   
Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans    (34  (20  (68    (54  (145 
Net charge for provisions, less payments    (365  (59  (198    (424  (314 
Movements in inventories and other current and non-current assets and liabilities    (609  683    (58    74    (2,753 
Income taxes paid    (130  (1,054  (1,309    (1,184  (2,455 
Net cash provided by operating activities    3,737    952    6,815      4,689    12,111   
Investing activities               
Expenditure on property, plant and equipment, intangible and other assets    (3,018  (3,789  (3,833    (6,807  (7,528 
Acquisitions, net of cash acquired      (17  (1,747    (17  (3,542 
Investment in joint ventures    (8  (18  (20    (26  (20 
Investment in associates    (41  (37  (54    (78  (199 
Total cash capital expenditure    (3,067  (3,861  (5,654    (6,928  (11,289 
Proceeds from disposal of fixed assets    10    10    70      20    305   
Proceeds from disposal of businesses, net of cash disposed    670    671        1,341    373   
Proceeds from loan repayments    543    63    64      606    119   
Net cash used in investing activities    (1,844  (3,117  (5,512    (4,961  (10,492 
Financing activities               
Net issue (repurchase) of shares (Note 9)      (776  (80    (776  (125 
Lease liability payments    (664  (569  (595    (1,233  (1,212 
Proceeds from long-term financing    6,846    2,684    4,381      9,530    6,505   
Repayments of long-term financing    (964  (3,717  (3,602    (4,681  (6,242 
Net increase (decrease) in short-term debt    (215  2,517    (119    2,302    970   
Issue of perpetual hybrid bonds    11,861          11,861     
Payments relating to transactions involving non-controlling interests (other)    (8        (8   
Receipts relating to transactions involving non-controlling interests (other)               
Dividends paid - BP shareholders    (2,119  (2,102  (1,779    (4,221  (3,214 
 - non-controlling interests    (74  (31  (83    (105  (119 
Net cash provided by (used in) financing activities    14,663    (1,985  (1,877    12,678    (3,437 
Currency translation differences relating to cash and cash equivalents    (42  (183  (8    (225  24   
Increase (decrease) in cash and cash equivalents    16,514    (4,333  (582    12,181    (1,794 
Cash and cash equivalents at beginning of period    18,139    22,472    21,256      22,472    22,468   
Cash and cash equivalents at end of period(a)    34,653    18,139    20,674      34,653    20,674   

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 2019 included in BP Annual Report and Form 20-F 2019.

The directors consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information. The impact of COVID-19 and the current economic environment has been considered as part of the going concern assessment. Forecast liquidity has been assessed under a number of stressed scenarios and a reverse stress test performed to support this assertion.

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 as applicable to companies reporting under IFRS. 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 2020 which are the same as those used in preparing BP Annual Report and Form 20-F 2019 with the exception of the changes described in the 'Updates to significant accounting policies' section below. There are no other new or amended standards or interpretations adopted from 1 January 2020 onwards that have a significant impact on the interim financial information.

Considerations in respect of COVID 19 (coronavirus) and the current economic environment

BP's significant accounting judgements and estimates were disclosed in BP Annual Report and Form 20-F 2019. These have been subsequently reviewed at the end of each quarter to determine if any changes were required to those judgements and estimates as a result of current market conditions. The valuation of certain assets and liabilities is subject to a greater level of uncertainty than when reported in BP Annual Report and Form 20-F 2019, including those set out below.

Impairment testing assumptions

With the COVID-19 pandemic having continued during the second quarter of 2020, BP now sees the prospect of an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period. BP's management also has a growing expectation that the aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy and energy system, as countries seek to 'build back better' so that their economies will be more resilient in the future.  As a result of all the above, BP has revised its price assumptions used in value-in-use impairment testing, lowering them and extending the period covered to 2050.  A summary of the group's revised price assumptions, in real 2020 terms, is provided below:

    Second half 2020  2021  2025  2030  2040  2050 
Brent oil ($/bbl)    40  50  50  60  60  50 
Henry Hub gas ($/mmBtu)    2.00  3.00  3.00  3.00  3.00  2.75 

As disclosed in BP Annual Report and Form 20-F 2019 - Note 1, the majority of BP's reserves and resources that support the carrying amount of the group's oil and gas properties are expected to be produced over the next ten years. The revised assumptions for Brent oil and Henry Hub gas for the next 10 years are lower by approximately 30% and 16% respectively than the average prices used to estimate cash flows over this period as disclosed in BP Annual Report and Form 20-F 2019 - Note 1.  The revised impairment testing price assumptions are lower, on average, by approximately 27% and 31% respectively for the period from 2020 to 2050, than the prices referenced in BP Annual Report and Form 20-F 2019 - Note 1.

The group identified oil and gas properties with carrying amounts totalling $43 billion where the headroom, after the impairment tests performed in the second quarter, was less than or equal to 20% of the carrying value. A change in price or other assumptions within the next financial year may result in a recoverable amount of one or more of these assets above or below the current carrying amount.

Impairment charges for the second quarter of 2020 relate to the changes to price assumptions, the group's ongoing disposal programme and other factors. For further information see Note 3.

The discount rates used in value-in-use impairment testing were also reviewed. As these are set using a number of parameters that are applicable to longer-term assets, a revision of the discount rate assumption was determined not to be appropriate and therefore the rates, as disclosed in BP Annual Report and Form 20-F 2019, remain unchanged.

Exploration and appraisal intangible assets

As a result of the revised price assumptions and a review of the long-term strategic plan, management reviewed BP's exploration prospects and the carrying value of the associated intangible assets. The outcome of the review has resulted in revised judgements over the expectations to extract value from certain prospects, thereby leading to write-offs of the associated exploration and appraisal intangible assets in the second quarter of 2020. For further information see Note 4.

Note 1. Basis of preparation (continued)

Provisions

The nominal risk-free discount rate applied to provisions is reviewed on a quarterly basis. Recent changes in long-dated US government bond yields have not affected the group's overall assessment of the discount rate applied to the group's provisions and therefore the rate, as disclosed in BP Annual Report and Form 20-F 2019, remains unchanged. The timing and amount of cash flows relating to the group's existing provisions are not currently expected to change significantly as a result of the current environment. The detailed annual review will take place later in 2020.

In addition, the group expects to recognize provisions for restructuring costs as plans are formalized from the second half of 2020.

Pensions and other post-retirement benefits

The group's defined benefit pension plans are reviewed quarterly to determine any changes to the fair value of the plan assets or present value of the defined benefit obligations. As a result of the review during the second quarter of 2020, the group's total net defined benefit pension plan deficit as at 30 June 2020 is $2.1 billion, an increase in the deficit by $2.0 billion and $0.6 billion from 31 March 2020 and 31 December 2019 respectively. This principally reflects actuarial losses reported in other comprehensive income arising from decreasing discount rates and higher inflation assumptions increasing the plan obligations partially offset by increases in the valuation of plan assets. The current environment is likely to continue to affect the values of the plan assets and obligations resulting in potential volatility in the amount of the net defined benefit pension plan surplus/deficit recognized.

Impairment of financial assets measured at amortized cost

The estimate of the loss allowance recognised on financial assets measured at amortized cost using an expected credit loss approach was determined not to be a significant accounting estimate in preparing BP Annual Report and Form 20-F 2019.  Expected credit loss allowances are, however, reviewed and updated quarterly. Allowances are recognized on assets where there is evidence that the asset is credit-impaired and on a forward-looking expected credit loss basis for assets that are not credit-impaired. The current economic environment and future credit risk outlook have been considered in updating the estimate of loss allowances although the full economic impact of COVID-19 on the forward-looking expected credit loss is subject to significant uncertainty due to the limited forward-looking information currently available.

Whilst credit risk has increased since 31 December 2019, there has also been a significant reduction in the group's trade and other receivables balance. Therefore, the total expected credit loss allowances recognized as at 30 June 2020 have not significantly increased from the amounts disclosed in BP Annual Report and Form 20-F 2019 - Financial statements - Note 21 Valuation and qualifying accounts.

The group continues to believe that the calculation of expected credit loss allowances is not a significant accounting estimate. The group continues to apply its credit policy as disclosed in BP Annual Report and Form 20-F 2019 - Financial statements - Note 29 Financial instruments and financial risk factors - credit risk.

Income taxes

None of the group's deferred tax assets in BP Annual Report and Form 20-F 2019 were determined to be a significant accounting estimate. The carrying amounts are, however, reviewed and updated quarterly to the extent that there are changes in the probability of sufficient taxable profits being available to utilize the reported deferred tax assets. The group has recognized deferred tax assets as at 30 June 2020 of $6.9 billion, an increase of $2.3 billion from 31 December 2019. The group continues to believe that the measurement of its deferred tax assets is not a significant accounting estimate.

Other accounting judgements and estimates

All other significant accounting judgements and estimates disclosed in BP Annual Report and Form 20-F 2019 remain applicable and no new significant accounting judgements or estimates have been identified.

Updates to significant accounting policies

Hybrid bond issuance

On 17 June 2020, a group subsidiary issued perpetual subordinated hybrid bonds in EUR, GBP and USD for a USD equivalent amount of $11.9 billion. As the group has the unconditional right to avoid transferring cash or another financial asset in relation to these hybrid bonds, they are classified as equity instruments and reported within non-controlling interests in the condensed consolidated financial statements. The contractual terms of these instruments allow the group to defer coupon payments and the repayment of principal indefinitely, however their terms and conditions stipulate that any deferred payments must be made in the event of an announcement of an ordinary share or parity equity dividend distribution or certain share repurchases or redemptions.

Change in accounting policy - Interest Rate Benchmark Reform: Amendments to IFRS 9 'Financial instruments'

Financial authorities in the US, UK, EU and other territories are currently undertaking reviews of key interest rate benchmarks such as the London Inter-bank Offered Rate (LIBOR) with a view to replacing them with alternative benchmarks. Uncertainty around the method and timing of transition from Inter-bank Offered Rates (IBORs) to alternative risk-free rates (RfRs) may impact the assessment of whether hedge accounting can be applied to certain hedging relationships.

BP is significantly exposed to benchmark interest rate components e.g. USD LIBOR, GBP LIBOR, EURIBOR and CHF LIBOR. All of the group's existing fair value hedge relationships are directly affected by interest rate benchmark reform as they all manage interest rate risk. Further information about the group's fair value hedges is included in BP Annual Report and Form 20-F 2019 - Financial statements - Note 30 Derivative financial instruments - Fair value hedges.

BP adopted the amendments to IFRS 9 and IFRS 7 'Financial Instruments: Disclosures' relating to interest rate benchmark reform with effect from 1 January 2020. This first phase of amendments provides temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by interest rate benchmark reforms.

Note 1. Basis of preparation (continued)

The reliefs provided by the amendments allow BP, in the event that significant uncertainty around the reforms arise, to assume that:

-      the interest rate benchmark component of fair value hedges only needs to be assessed as separately identifiable at initial designation; and

-      the interest rate benchmark is not altered for the purposes of assessing the economic relationship between the hedged item and the hedging instrument for fair value hedges.

In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the start of the current reporting period and will be applied to new hedging relationships designated after that date.

The reliefs have meant that the uncertainty over the interest rate benchmark reforms has not resulted in discontinuation of hedge accounting for any of BP's fair value hedges.

The second phase of IFRS amendments is expected to be issued by the IASB later in 2020 to address the financial reporting impacts of transitioning from IBORs to RfRs. BP has set up an internal working group to monitor and manage the transition to alternative benchmark rates and are currently assessing the population of contracts and arrangements that are linked to existing interest rate benchmarks, for example, leases and derivative contracts. BP is also participating on external committees and task forces dedicated to interest rate benchmark reform.

Change in accounting policy - physically settled derivative contracts

In March 2019, the IFRS Interpretations Committee ("IFRIC") issued an agenda decision on the application of IFRS 9 to the physical settlement of contracts to buy or sell a non-financial item, such as commodities, that are not accounted for as 'own-use' contracts. IFRIC concluded that such contracts are settled by the delivery or receipt of a non-financial item in exchange for both cash and the settlement of the derivative asset or liability.

BP regularly enters into forward sale and purchase contracts. As described in the group's accounting policy for revenue in BP Annual Report and Form 20-F 2019, revenue recognized at the time such contracts were physically settled was measured at the contractual transaction price and was presented together with revenue from contracts with customers in those financial statements.

BP has changed its accounting policy for these contracts, in accordance with the conclusions included in the agenda decision, with effect from 1 April 2020, as follows:

-      Revenues and purchases from such contracts are measured at the contractual transaction price plus the carrying amount of the related derivative at the date of settlement. Realized derivative gains and losses on physically settled derivative contracts are included in other revenues.

-      There is no significant effect on current period or comparative information, including the first quarter 2020, for 'Sales and other operating revenues' and 'Purchases' as presented in the group income statement, therefore no comparative information has been re-stated.

-      There is no significant effect on net assets or on comparative information for 'Profit before taxation' or 'Profit after taxation' as presented in the group income statement.

In addition, BP chose to change its presentation of revenues from physically settled derivative sales contracts from first quarter 2020. Revenues from physically settled derivative sales contracts are no longer presented together with revenue from contracts with customers. They are now presented as other revenues. Comparative information in Note 6 for revenue from contracts with customers and other revenues have been re-presented to align with the current period.

Note 2. Non-current assets held for sale

The carrying amount of assets classified as held for sale at 30 June 2020 is $4,169 million, with associated liabilities of $948 million. These principally relate to two transactions.

Downstream segment

On 29 June 2020 BP announced that it had agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary closing adjustments. Under the terms of the agreement,  INEOS paid BP a deposit of $400 million and will pay a further $3.6 billion on completion. An additional $1 billion will be deferred and paid in three separate instalments of $100 million in March, April and May 2021 with the remaining $700 million payable by the end of June 2021. The business has interests in manufacturing plants in Asia, Europe and the US, including interests held in equity-accounted entities. Subject to regulatory and other approvals, the transaction is expected to complete before the end of 2020.  Assets of $3,647 million and associated liabilities of $637 million have been classified as held for sale in the group balance sheet at 30 June 2020. Accumulated foreign exchange differences will be reclassified from the foreign currency translation reserve to the income statement when the sale transaction completes.  At 30 June 2020 these foreign exchange differences amounted to a gain of approximately $300 million.

Upstream segment

On 27 August 2019, BP announced that it had agreed to sell all of its Alaska operations and interests to Hilcorp Energy ('Hilcorp'), including its ownership interests in BP Exploration (Alaska) Inc, which owned all of BP's upstream oil and gas interests in Alaska, and the assets of BP Pipelines (Alaska) Inc., including a 49% interest in the Trans Alaska Pipeline System (TAPS), for up to $5.6 billion, subject to customary closing adjustments. Assets of $6,518 million and associated liabilities of $969 million relating to this transaction were classified as held for sale at 31 December 2019. Deposit payments totalling $500 million in cash were received in 2019.

On 30 June 2020, BP completed the sale of BP Exploration (Alaska) Inc. On completion, BP received $209 million in cash and recognized a loan note with a principal amount of $2,100 million receivable from Hilcorp.  The group also recognized other assets totalling $1,689 million, including amounts in relation to the 'earn-out' provisions of the agreement.

Note 2. Non-current assets held for sale (continued)

The sale of BP Pipelines (Alaska) Inc.'s 49% interest in the Trans Alaska Pipeline System (TAPS) and other midstream assets, which is subject to regulatory approvals, is expected to complete during 2020. On completion of the sale, BP will retain its decommissioning liability relating to TAPS, which will be partially offset by a 30% cost reimbursement from Harvest Alaska LLC, an affiliate of Hilcorp. Assets of $499 million and associated liabilities of $279 million relating to this transaction continue to be classified as held for sale at 30 June 2020.

Note 3. Impairment and losses on sale of businesses and fixed assets

Impairment and losses on sale of businesses and fixed assets for the second quarter and half year were $11,770 million and $12,919 million and include net impairment charges of $11,848 million ($8,540 million after tax) and $12,646 million ($9,111 million after tax) respectively. Impairment charges also arose in certain equity-accounted entities in the second quarter. The BP shares of these charges, amounting to $648 million for the second quarter ($635 million after tax), are reported in the line items 'Earnings from joint ventures' and 'Earnings from associates' in the group income statement.

Upstream segment

Impairment charges in the Upstream segment were $11,100 million and $11,885 million for the second quarter and half year respectively.

Impairment charges for the second quarter mainly relate to producing assets and principally arose as a result of changes to the group's oil and gas price assumptions. They include amounts in Azerbaijan, BPX Energy, Canada, Egypt, India, Mauritania & Senegal, the North Sea, and Trinidad. The recoverable amounts of the cash generating units within these businesses were based on value-in-use calculations.

Impairment charges for the second quarter and half year also include amounts relating to the disposal of the group's interests in its Alaska business. For the second quarter these principally relate to revisions to the fair value of the consideration recognized following changes to oil and gas price assumptions. For the first half they additionally relate to completion adjustments, changes to structure and phasing of consideration and discounting impacts. The recoverable amount of the Alaska business was based on its fair value less costs of disposal. See Note 2 for further information.

The BP share of impairment charges arising in equity-accounted entities reported in the Upstream segment in the second quarter was $585 million.

Downstream segment

Impairment charges in the Downstream segment were $729 million for the second quarter, principally relating to anticipated portfolio changes in the fuels business. There were no other significant impairment charges in the Downstream segment for the half year.

Note 4. Exploration expense

Exploration expense in the second quarter and half year was $9,674 million and $9,876 million and includes exploration expenditure write-offs of $9,618 million ($8,128 million after tax) and $9,716 million ($8,202 million after tax) respectively. All exploration expenditure is recorded within the Upstream segment.

The exploration write-offs principally arose following management's re-assessment of expectations to extract value from certain exploration prospects as a result of a review of the group's long-term strategic plan and changes in the group's long-term price assumptions. The exploration write-offs for the second quarter principally arose in Angola, Brazil, Canada, Egypt, India and the Gulf of Mexico.

Note 5. 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    2020  2020  2019    2020  2019 
Upstream    (22,008  1,023    2,469      (20,985  5,353   
Downstream    594    664    1,288      1,258    3,053   
Rosneft    (124  (17  525      (141  1,011   
Other businesses and corporate    (317  (698  (381    (1,015  (927 
    (21,855  972    3,901      (20,883  8,490   
Consolidation adjustment - UPII*    (46  178    34      132    21   
RC profit (loss) before interest and tax*    (21,901  1,150    3,935      (20,751  8,511   
Inventory holding gains (losses)*               
Upstream    57    (68  (10    (11  (8 
Downstream    978    (4,615  93      (3,637  1,139   
Rosneft (net of tax)    53    (201  (2    (148  38   
Profit (loss) before interest and tax    (20,813  (3,734  4,016      (24,547  9,680   
Finance costs    783    783    853      1,566    1,720   
Net finance expense relating to pensions and other post-retirement benefits        15      15    30   
Profit (loss) before taxation    (21,604  (4,524  3,148      (26,128  7,930   
               
RC profit (loss) before interest and tax*               
US    (4,695  595    498      (4,100  1,269   
Non-US    (17,206  555    3,437      (16,651  7,242   
    (21,901  1,150    3,935      (20,751  8,511   

Note 6. Sales and other operating revenues

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
By segment               
Upstream    7,194    11,464    13,556      18,658    28,150   
Downstream    27,241    53,964    66,396      81,205    124,812   
Other businesses and corporate    450    453    433      903    789   
    34,885    65,881    80,385      100,766    153,751   
               
Less: sales and other operating revenues between segments               
Upstream    2,613    6,907    7,481      9,520    13,805   
Downstream    330    (782  62      (452  648   
Other businesses and corporate    266    106    166      372    301   
    3,209    6,231    7,709      9,440    14,754   
               
Third party sales and other operating revenues               
Upstream    4,581    4,557    6,075      9,138    14,345   
Downstream    26,911    54,746    66,334      81,657    124,164   
Other businesses and corporate    184    347    267      531    488   
Total sales and other operating revenues    31,676    59,650    72,676      91,326    138,997   
               
By geographical area               
US    10,117    21,219    26,086      31,336    47,934   
Non-US    24,776    43,955    52,933      68,731    102,551   
    34,893    65,174    79,019      100,067    150,485   
Less: sales and other operating revenues between areas    3,217    5,524    6,343      8,741    11,488   
    31,676    59,650    72,676      91,326    138,997   
               
Revenues from contracts with customers(a)               
Sales and other operating revenues include the following in relation to revenues from contracts with customers:               
Crude oil    1,062    1,435    2,577      2,497    5,067   
Oil products    10,452    20,254    27,211      30,706    49,915   
Natural gas, LNG and NGLs    2,992    3,638    4,294      6,630    9,651   
Non-oil products and other revenues from contracts with customers(b)    2,118    2,490    3,258      4,608    6,321   
Revenue from contracts with customers    16,624    27,817    37,340      44,441    70,954   
Other operating revenues(b)(c)    15,052    31,833    35,336      46,885    68,043   
Total sales and other operating revenues    31,676    59,650    72,676      91,326    138,997   

Note 7. Depreciation, depletion and amortization

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Upstream               
US    1,044    1,068    1,288      2,112    2,401   
Non-US    1,973    2,082    2,396      4,055    4,894   
    3,017    3,150    3,684      6,167    7,295   
Downstream               
US    344    342    333      686    656   
Non-US    408    405    392      813    775   
    752    747    725      1,499    1,431   
Other businesses and corporate               
US    16    15    14      31    27   
Non-US    152    147    165      299    296   
    168    162    179      330    323   
Total group    3,937    4,059    4,588      7,996    9,049   

Note 8. Production and similar taxes

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
US    13    13    79      26    160   
Non-US    111    190    292      301    635   
    124    203    371      327    795   

Note 9. Earnings per share and shares in issue

Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit (loss) for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. No share buybacks were carried out during the quarter. This brings the total number of ordinary shares repurchased for cancellation in the year to 120 million for a total cost of $776 million, including transaction costs of $4 million, as part of the share buyback programme announced on 31 October 2017. The number of shares in issue is reduced when shares are repurchased.

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.

Note 9. Earnings per share and shares in issue (continued)

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Results for the period               
Profit (loss) for the period attributable to BP shareholders    (16,848  (4,365  1,822      (21,213  4,756   
Less: preference dividend               
Profit (loss) attributable to BP ordinary shareholders    (16,849  (4,365  1,821      (21,214  4,755   
               
Number of shares (thousand)(a)(b)               
Basic weighted average number of shares outstanding    20,222,575    20,178,803    20,336,347      20,200,694    20,256,254   
ADS equivalent    3,370,429    3,363,133    3,389,391      3,366,782    3,376,042   
               
Weighted average number of shares outstanding used to calculate diluted earnings per share    20,222,575    20,178,803    20,421,184      20,200,694    20,368,125   
ADS equivalent    3,370,429    3,363,133    3,403,530      3,366,782    3,394,687   
               
Shares in issue at period-end    20,249,046    20,197,527    20,373,332      20,249,046    20,373,332   
ADS equivalent    3,374,841    3,366,254    3,395,555      3,374,841    3,395,555   

Note 10. Dividends

Dividends payable

BP today announced an interim dividend of 5.25 cents per ordinary share which is expected to be paid on 25 September 2020 to ordinary shareholders and American Depositary Share (ADS) holders on the register on 14 August 2020. The corresponding amount in sterling is due to be announced on 14 September 2020, calculated based on the average of the market exchange rates for the four dealing days commencing on 8 September 2020. Holders of ADSs are expected to receive $0.315 per ADS (less applicable fees). The board has decided not to offer a scrip dividend alternative in respect of the second quarter 2020 dividend. Ordinary shareholders and ADS holders (subject to certain exceptions) will be able to participate in a dividend reinvestment programme. Details of the second quarter dividend and timetable are available at bp.com/dividends and further details of the dividend reinvestment programmes are available at bp.com/drip.

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
    2020  2020  2019    2020  2019 
Dividends paid per ordinary share               
cents    10.500    10.500    10.250      21.000    20.500   
pence    8.342    8.156    8.066      16.498    15.804   
Dividends paid per ADS (cents)    63.00    63.00    61.50      126.00    123.00   
Scrip dividends               
Number of shares issued (millions)        46.3        136.4   
Value of shares issued ($ million)        318        947   

Note 11. Net debt

Net debt*    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Finance debt(a)(b)    76,003    69,117    67,553      76,003    67,553   
Fair value (asset) liability of hedges related to finance debt(c)    (430  426    (378    (430  (378 
    75,573    69,543    67,175      75,573    67,175   
Less: cash and cash equivalents(b)    34,653    18,139    20,674      34,653    20,674   
Net debt    40,920    51,404    46,501      40,920    46,501   
Total equity(d)    82,811    90,480    103,623      82,811    103,623   
Gearing*    33.1%  36.2%  31.0%    33.1%  31.0%   

te 12. Inventory valuation

A provision of $289 million was held against hydrocarbon inventories at 30 June 2020 ($3,596 million at 31 March 2020 and $290 million at 31 December 2019) to write them down to their net realizable value.

Note 13. Statutory accounts

The financial information shown in this publication, which was approved by the Board of Directors on 3 August 2020, is unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP Annual Report and Form 20-F 2020. BP Annual Report and Form 20-F 2019 has been filed with the Registrar of Companies in England and Wales. The report of the auditor on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under section 498(2) or section 498(3) of the UK Companies Act 2006.

Capital expenditure*

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Capital expenditure on a cash basis               
Organic capital expenditure*    3,034    3,539    3,686      6,573    7,334   
Inorganic capital expenditure*(a)    33    322    1,968      355    3,955   
    3,067    3,861    5,654      6,928    11,289   
    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Organic capital expenditure by segment               
Upstream               
US    1,018    1,168    972      2,186    1,954   
Non-US    1,517    1,662    1,858      3,179    3,746   
    2,535    2,830    2,830      5,365    5,700   
Downstream               
US    135    121    271      256    458   
Non-US    295    531    470      826    1,004   
    430    652    741      1,082    1,462   
Other businesses and corporate               
US    21    32    15      53    24   
Non-US    48    25    100      73    148   
    69    57    115      126    172   
    3,034    3,539    3,686      6,573    7,334   
Organic capital expenditure by geographical area               
US    1,174    1,321    1,258      2,495    2,436   
Non-US    1,860    2,218    2,428      4,078    4,898   
    3,034    3,539    3,686      6,573    7,334   

Non-operating items*

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Upstream               
Gains on sale of businesses and fixed assets    87      47      94    105   
Impairment and losses on sale of businesses and fixed assets(a)    (10,953  (1,131  (843    (12,084  (912 
Environmental and other provisions      (13      (13   
Restructuring, integration and rationalization costs    (24  (4  (17    (28  (52 
Other(b)(c)    (2,564  70    47      (2,494  89   
    (13,454  (1,071  (766    (14,525  (770 
Downstream               
Gains on sale of businesses and fixed assets    (13    10      (6  42   
Impairment and losses on sale of businesses and fixed assets(a)    (798  (5  (61    (803  (89 
Environmental and other provisions               
Restructuring, integration and rationalization costs    31      20      31    18   
Other              (6 
    (780    (31    (778  (35 
Rosneft               
Other(c)    (63    (113    (63  (194 
    (63    (113    (63  (194 
Other businesses and corporate               
Gains on sale of businesses and fixed assets        (4      (4 
Impairment and losses on sale of businesses and fixed assets    (19  (2      (21   
Environmental and other provisions      (23  (22    (23  (28 
Restructuring, integration and rationalization costs    (33  (13  (3    (46   
Gulf of Mexico oil spill    (31  (21  (57    (52  (172 
Other(d)    67    (80  (5    (13  (22 
    (16  (137  (91    (153  (219 
Total before interest and taxation    (14,313  (1,206  (1,001    (15,519  (1,218 
Finance costs(e)    (114  (122  (116    (236  (244 
Total before taxation    (14,427  (1,328  (1,117    (15,755  (1,462 
Taxation credit (charge) on non-operating items    3,456    302    256      3,758    349   
Taxation - impact of foreign exchange(f)    114    (365      (251   
Total after taxation for period    (10,857  (1,391  (861    (12,248  (1,113  )   

Net debt including leases

Net debt including leases*    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Net debt    40,920    51,404    46,501      40,920    46,501   
Lease liabilities    9,331    9,373    10,379      9,331    10,379   
Net partner (receivable) payable for leases entered into on behalf of joint operations    (90  (159  (230    (90  (230 
Net debt including leases    50,161    60,618    56,650      50,161    56,650   
Total equity(a)    82,811    90,480    103,623      82,811    103,623   
Gearing including leases*    37.7%  40.1%  35.3%    37.7%  35.3%   

Gulf of Mexico oil spill

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Net cash provided by operating activities as per condensed group cash flow statement    3,737    952    6,815      4,689    12,111   
Exclude net cash from operating activities relating to the Gulf of Mexico oil spill on a post-tax basis    1,097    281    1,413      1,378    2,062   
Operating cash flow, excluding Gulf of Mexico oil spill payments*    4,834    1,233    8,228      6,067    14,173   

Net cash from operating activities relating to the Gulf of Mexico oil spill on a pre-tax basis amounted to an outflow of $1,209 million and $1,490 million in the second quarter and first half of 2020 respectively.  For the same periods in 2019, the amount was an outflow of $1,472 million and $2,126 million respectively.  Net cash outflows relating to the Gulf of Mexico oil spill in 2020 and 2019 include payments made under the 2016 consent decree and settlement agreement with the United States and the five Gulf coast states.  Included in the current quarter are payments of $1,199 million on a pre-tax basis relating to the 2016 consent decree and settlement agreement.

    30 June  31 December 
$ million    2020  2019 
Trade and other payables    (11,294  (12,480 
Provisions    (29  (189 
Gulf of Mexico oil spill payables and provisions    (11,323  (12,669 
Of which - current    (1,511  (1,800 
       
Deferred tax asset    5,456    5,526   

The provision reflects the latest estimate for the remaining costs associated with the Gulf of Mexico oil spill. The amounts ultimately payable may differ from the amount provided and the timing of payments is uncertain. Further information relating to the Gulf of Mexico oil spill, including information on the nature and expected timing of payments relating to provisions and other payables, is provided in BP Annual Report and Form 20-F 2019 - Financial statements - Notes 7, 9, 20, 22, 23, 29, 33 and pages 319 to 320 of Legal proceedings.

Working capital* reconciliation

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
$ million    2020  2020  2019    2020  2019 
Movements in inventories and other current and non-current assets and liabilities as per condensed group cash flow statement    (609  683    (58    74    (2,753 
Adjustments to exclude movements in inventories and other current and non-current assets and liabilities for the Gulf of Mexico oil spill    1,120    254    1,451      1,374    2,082   
Adjusted for Inventory holding gains (losses)* (Note 5)               
Upstream    57    (68  (10    (11  (8 
Downstream    978    (4,615  93      (3,637  1,139   
Working capital release (build)    1,546    (3,746  1,476      (2,200  460   

Realizations* and marker prices

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
    2020  2020  2019    2020  2019 
Average realizations(a)               
Liquids* ($/bbl)               
US    21.63    45.96    56.98      33.80    53.91   
Europe    28.91    50.71    68.73      40.30    65.04   
Rest of World    22.58    48.13    66.24      33.79    63.18   
BP Average    22.75    47.47    62.63      34.39    59.61   
Natural gas ($/mcf)               
US    0.97    1.28    1.80      1.15    2.18   
Europe    1.38    3.23    3.63      2.17    4.75   
Rest of World    3.12    3.51    4.12      3.32    4.40   
BP Average    2.53    2.83    3.35      2.69    3.68   
Total hydrocarbons* ($/boe)               
US    16.05    29.94    35.94      23.37    35.08   
Europe    23.00    43.97    63.40      33.46    61.02   
Rest of World    20.21    31.61    41.60      25.63    41.06   
BP Average    19.06    31.80    40.64      25.36    40.02   
Average oil marker prices ($/bbl)               
Brent    29.56    50.10    68.86      40.07    65.95   
West Texas Intermediate    27.96    45.56    59.90      36.69    57.42   
Western Canadian Select    22.19    28.71    47.37      25.48    46.14   
Alaska North Slope    30.28    51.07    68.29      40.59    66.37   
Mars    30.02    45.57    65.20      37.73    63.20   
Urals (NWE - cif)    31.36    47.84    67.62      39.80    65.23   
Average natural gas marker prices               
Henry Hub gas price(b) ($/mmBtu)    1.71    1.95    2.64      1.83    2.90   
UK Gas - National Balancing Point (p/therm)    12.88    24.81    31.53      18.98    40.01   

Exchange rates

    Second  First  Second    First  First 
    quarter  quarter  quarter    half  half 
    2020  2020  2019    2020  2019 
$/£ average rate for the period    1.24    1.28    1.29      1.26    1.29   
$/£ period-end rate    1.23    1.24    1.27      1.23    1.27   
               
$/€ average rate for the period    1.10    1.10    1.12      1.10    1.13   
$/€ period-end rate    1.12    1.10    1.14      1.12    1.14   
               
Rouble/$ average rate for the period    72.40    66.75    64.58      69.64    65.29   
Rouble/$ period-end rate    71.25    78.14    63.09      71.25    63.09   
Source: EvaluateEnergy® ©2021 EvaluateEnergy Ltd