Third Quarter and Nine Months 2020

Source Press Release
Company BP Plc.Rosneft 
Tags Production/Development, Guidance, Renewable Energy, Power, Strategy - Other, Strategy - Chemicals, Strategy - Upstream, Capital Spending, Technology, Financial & Operating Data, Strategy - Corporate
Date October 27, 2020

Financial results and progress

- Underlying replacement cost profit for the quarter was $0.1 billion, compared with a loss of $6.7 billion for the second quarter of 2020 and $2.3 billion profit for the third quarter of 2019. Compared to the previous quarter, the result benefitted from the absence of significant exploration write-offs and recovering oil and gas prices and demand. This was partly offset by a significantly lower oil trading result.

- Reported loss for the quarter was $0.5 billion, compared with losses of $16.8 billion for the previous quarter of 2020, reflecting absence of significant exploration write-offs and impairment charges, and $0.7 billion for the third quarter of 2019.

- Operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments, was resilient at $5.3 billion, including $0.9 billion working capital release (after adjusting for net inventory holding gains). Gulf of Mexico oil spill payments in the quarter were $0.1 billion post-tax.

- Organic capital expenditure in the first three quarters of 2020 was $9.1 billion, in line with the full-year target of around $12 billion.

- BP continues to make progress towards its target of $2.5 billion in annual cash cost savings by end-2021 compared with 2019, with its new organization on schedule to be in place by start of 2021.

- Proceeds from divestments and other disposals in the quarter were $0.6 billion. BP has already completed or agreed transactions for approaching half its target of $25 billion in proceeds by 2025, including the agreed $5 billion sale of BP's petrochemicals business, expected to complete by year end.

- Net debt at quarter-end was $40.4 billion, down $0.5 billion. This includes the impact of the $1.1 billion payment for the completion of the joint venture with Reliance. Net debt is expected to fall in the fourth quarter as proceeds from divestments are received.

- A dividend of 5.25 cents per share was announced for the quarter. 

Performing while transforming

- BP has brought two new Upstream major projects into production since mid-year: Atlantis Phase 3 in the US Gulf of Mexico and, ahead of schedule, Khazzan Phase 2 (Ghazeer) in Oman.

- Operations continued to be good with refining availability of 96.2% and Upstream plant reliability of 93.0%. Upstream unit production costs for the nine months of 2020 were 10% lower than 2019, reflecting progress on cost efficiency and strategic divestments.

- While refining margins remained at historical lows, driven by the extremely weak environment, BP's marketing businesses recovered strongly in the quarter, with fuels marketing earnings growing 3% year on year and lubricants result broadly in line with a year earlier.

- BP agreed to enter the offshore wind sector through a strategic partnership with Equinor to pursue offshore wind opportunities in the US, including taking a 50% stake in two leases off the US east coast.

- BP announced plans for a network of ultra-fast chargers in Germany and BP Chargemaster won a contract to deliver over 1,000 charging points for Police Scotland.

- BP also announced a partnership with Microsoft under which the two companies will co-operate to progress their sustainability aims. As part of this, BP has agreed to supply  Microsoft with renewable energy and to extend its use of  Microsoft's cloud-based services.

Bernard Looney - chief executive officer: 
Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that - performing while transforming. Major projects are coming online, our consumer-facing businesses are really delivering and we remain firmly focused on cost and capital discipline. Importantly, net debt continues to fall. We are firmly committed to our updated financial frame, including the dividend - the first call on our funds. 
Financial summary    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Profit (loss) for the period attributable to BP shareholders    (450)    (16,848)    (749)      (21,663)    4,007    
Inventory holding (gains) losses, net of tax    (194)    (809)    398       2,734     (488)   
RC profit (loss)    (644)    (17,657)    (351)      (18,929)    3,519    
Net (favourable) adverse impact of non-operating items and fair value accounting effects, net of tax    730     10,975     2,605       13,124     3,904    
Underlying RC profit (loss)    86     (6,682)    2,254       (5,805)    7,423    
RC profit (loss) per ordinary share (cents)    (3.18)    (87.32)    (1.72)      (93.63)    17.33    
RC profit (loss) per ADS (dollars)    (0.19)    (5.24)    (0.10)      (5.62)    1.04    
Underlying RC profit (loss) per ordinary share (cents)    0.42     (33.05)    11.06       (28.72)    36.57    
Underlying RC profit (loss) per ADS (dollars)    0.03     (1.98)    0.66       (1.72)    2.19  

COVID-19 Update

Strengthening finances:

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

- Organic capital expenditure is on track for the revised full-year target of around $12 billion, announced in April. Total for the first nine months was $9.1 billion.

- BP has continued to progress its divestment programme towards delivery of $25 billion of proceeds by 2025. The $5 billion sale of its petrochemicals business is expected to complete by year end. In the quarter, BP also sold an interest in a portfolio of UK retail properties for $0.5 billion.

- BP's headcount has reduced by a total of around 2,800 so far during 2020, including around 300 who have already left the organization as part of the reinvent bp programme. A further 2,100 have elected to leave under the programme, which is expected to result in a total reduction of around 10,000 positions, the majority by the end of this year. BP expects to incur people-related costs associated with the reinvent programme, including redundancy payments, of around $1.4 billion over the next 1-2 years, primarily in 2020.

- Net debt was $40.4 billion at quarter-end and is expected to fall further in the fourth quarter as divestment proceeds are received. BP also continues to actively manage the profile of its debt portfolio, buying back/retiring $4.0 billion of shorter-term debt in the quarter. At quarter end BP had around $44 billion of liquidity, including cash and undrawn revolving credit facilities.

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

- 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.

- Costs that are directly attributable to COVID-19 were around $0.1 billion for the quarter (second quarter 2020 $0.2 billion).

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 fourth quarter.

- Refinery utilization in the quarter was around 10% below 2019 levels, driven by COVID-19 impacts. Year-on-year, demand for retail fuels was lower by 7% and for aviation by around 60%. However fuels marketing earnings grew, benefitting from continued growth in convenience sales.

- Despite the significant challenges of the environment, BP's operations performed safely and reliably in the quarter. BP-operated Upstream plant reliability was 93.0% and BP-operated refining availability 96.2%.

- BP continues to take steps to protect and support its staff through the pandemic. The great majority of BP staff who are able to work from home are still doing so. Precautions in operations and offices include: reduced manning levels, changing working patterns, deploying appropriate personal protective equipment (PPE), enhanced cleaning and social distancing measures at plants and retail sites. Decisions on repopulating offices are being 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.

Outlook:

- The ongoing impacts of the COVID-19 pandemic continue to create a volatile and challenging trading environment. There have been some early signs of global economic recovery as countries move to more regional or localised restrictions on movement and governments continue to offer monetary and fiscal policy stimulus. However, the shape and pace of the recovery is uncertain, as it depends on the further spread of the pandemic.

- The gradual recovery in oil demand seen since the spring looks set to continue, led by strengthening demand in Asia. The IEA estimates an increase of around six million barrels a day in 2021, as economies continue to open up. OPEC+ production cuts have played a major role in stabilising the market and there is already a reduction in crude and product inventories. Inventories are likely to reduce through 2021, although the pace at which they normalise will depend on the strength of economic recovery and the degree of continued OPEC+ compliance.

- US gas supply is expected to continue on a declining trend in 2021, largely due to a drop in associated gas production. Tightening gas balances have caused the prompt price to rise, and the futures curve for Henry Hub now averages above $3 for 2021. This would be expected to provide some support to pricing in Europe and Asia until more gas comes to market.

- The refining margin outlook remains challenging, given record high inventory levels and a levelling off in demand recovery for gasoline and jet fuel due to COVID-19.

Group headlines Results For the nine months, underlying replacement cost (RC) loss* was $5,805 million, compared with a profit of $7,423 million in 2019. Underlying RC loss is after adjusting RC loss* for a net charge for non-operating items* of $13,357 million and net favourable fair value accounting effects* of $233 million (both on a post-tax basis). RC loss was $18,929 million for the nine months, compared with a profit of $3,519 million in 2019. For the third quarter, underlying RC profit was $86 million, compared with $2,254 million in 2019. Underlying RC profit is after adjusting RC loss for a net charge for non-operating items of $1,109 million and net favourable fair value accounting effects of $379 million (both on a post-tax basis). RC loss was $644 million for the third quarter, compared with $351 million in 2019. Loss for the third quarter and nine months attributable to BP shareholders was $450 million and $21,663 million respectively, compared with a loss of $749 million and a profit of $4,007 million for the same periods in 2019. See further information on pages 4, 27 and 28. Depreciation, depletion and amortization The charge for depreciation, depletion and amortization was $3.5 billion in the quarter and $11.5 billion in the nine months, compared with $4.3 billion and $13.3 billion for the same periods in 2019. BP now expects the 2020 full-year charge to be around 15% lower than 2019. Effective tax rate The effective tax rate (ETR) on RC profit or loss* for the third quarter and nine months was -504% and 13% respectively, compared with 168% and 49% for the same periods in 2019. Adjusting for non-operating items and fair value accounting effects, the underlying ETR* for the third quarter and nine months was 64% and -10% respectively, compared with 40% and 38% for the same periods a year ago. The higher underlying ETR for the third quarter reflects changes in the mix of profits and losses. The lower underlying ETR for the nine months mainly reflects the exploration write-offs with a limited deferred tax benefit and the reassessment of deferred tax asset recognition in the second quarter. 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 18 December 2020. The corresponding amount in sterling will be announced on 7 December 2020. See page 24 for more information.  Share buybacks BP repurchased 120 million ordinary shares at a cost of $776 million (including fees and stamp duty) in the nine months 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 $5.3 billion for the third quarter and $11.4 billion for the nine months. These amounts include a working capital* release of $0.9 billion in the third quarter and a working capital build of $1.3 billion in the nine months, 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 $6.5 billion and $20.6 billion. Operating cash flow as reported in the group cash flow statement was $5.2 billion for the third quarter and $9.9 billion for the nine months, including a working capital release of $0.6 billion and $0.6 billion respectively, compared with $6.1 billion and $18.2 billion for the same periods in 2019. See page 30 and Glossary for further information on Gulf of Mexico oil spill cash flows and on working capital. Capital expenditure* Organic capital expenditure* for the third quarter and nine months was $2.5 billion and $9.1 billion respectively, compared with $3.9 billion and $11.3 billion for the same periods in 2019. Inorganic capital expenditure* for the third quarter and nine months was $1.1 billion and $1.5 billion respectively, compared with $0.1 billion and $4.0 billion for the same periods in 2019. BP expects total capital expenditure for 2021 to be at the lower end of a $13-15 billion range. Organic capital expenditure and inorganic capital expenditure are non-GAAP measures. See page 26 for further information. Divestment and other proceeds Divestment proceeds* were $0.1 billion for the third quarter and $1.5 billion for the nine months, compared with $0.7 billion and $1.4 billion for the same periods in 2019. In addition, $0.5 billion was received in the third quarter of 2020 in relation to the sale of an interest in BP's UK retail property portfolio. Net debt* and gearing* Net debt at 30 September 2020 was $40.4 billion, compared with $46.5 billion a year ago. Gearing at 30 September 2020 was 33.0%, compared with 31.7% a year ago, reflecting the reduction in equity in the period. Gearing including leases* at 30 September 2020 was 37.7%, compared with 35.9% a year ago. Net debt, gearing and gearing including leases are non-GAAP measures. See pages 25 and 29 for more information. 

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

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Underlying RC profit (loss) before interest and tax               
Upstream    878     (8,487)    2,139       (5,738)    8,480    
Downstream    636     1,405     1,883       2,962     4,981    
Rosneft    (177)    (61)    802       (255)    2,007    
Other businesses and corporate    (130)    (260)    (322)      (951)    (1,030)   
Consolidation adjustment - UPII*    34     (46)    30       166     51    
Underlying RC profit (loss) before interest and tax    1,241     (7,449)    4,532       (3,816)    14,489    
Finance costs and net finance expense relating to pensions and other post-retirement benefits    (610)    (677)    (754)      (1,955)    (2,260)   
Taxation on an underlying RC basis    (402)    770     (1,506)      (585)    (4,641)   
Non-controlling interests    (143)    674     (18)      551     (165)   
Underlying RC profit (loss) attributable to BP shareholders    86     (6,682)    2,254       (5,805)    7,423    

Reconciliations of underlying RC profit or loss attributable to BP shareholders to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-11 for the segments.

Analysis of RC profit (loss)* before interest and tax and reconciliation to profit (loss) for the period

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
RC profit (loss) before interest and tax               
Upstream    30     (22,008)    (1,050)      (20,955)    4,303    
Downstream    915     594     2,016       2,173     5,069    
Rosneft    (278)    (124)    802       (419)    1,813    
Other businesses and corporate    24     (317)    (412)      (991)    (1,339)   
Consolidation adjustment - UPII    34     (46)    30       166     51    
RC profit (loss) before interest and tax    725     (21,901)    1,386       (20,026)    9,897    
Finance costs and net finance expense relating to pensions and other post-retirement benefits    (808)    (791)    (899)      (2,389)    (2,649)   
Taxation on a RC basis    (418)    4,361     (820)      2,935     (3,564)   
Non-controlling interests    (143)    674     (18)      551     (165)   
RC profit (loss) attributable to BP shareholders    (644)    (17,657)    (351)      (18,929)    3,519    
Inventory holding gains (losses)*    233     1,088     (512)      (3,563)    657    
Taxation (charge) credit on inventory holding gains and losses    (39)    (279)    114       829     (169)   
Profit (loss) for the period attributable to BP shareholders    (450)    (16,848)    (749)      (21,663)    4,007    
Operational updates Upstream Upstream production, which excludes Rosneft, for the nine months of the year averaged 2,448mboe/d, 6.4% lower than a year earlier. Underlying production*, for the nine months was slightly lower than 2019 reflecting adverse weather, primarily in the US Gulf of Mexico. For the first nine months of 2020, BP-operated Upstream plant reliability* was 93.8% and Upstream unit production costs of $6.30/boe were more than 10% lower than in 2019 reflecting ongoing progress on cost efficiency in operations, and strategic divestments. Since mid-year, BP has started production on the Atlantis Phase 3 project in the Gulf of Mexico, followed by the Ghazeer gas project, the second phase of development on Block 61 in Oman, that began production three months ahead of schedule. These are the first of five Upstream major projects* expected to begin production in 2020. BP also brought the Galeota expansion project in Trinidad into operation during the quarter. In September, BP confirmed a gas discovery with the Nidoco NW-1 exploratory well in the Abu Madi West development lease, offshore Egypt. The Trans Adriatic Gas pipeline (TAP) has completed construction and is expected to soon commence gas exports from Azerbaijan to customers in Europe. Downstream Fuels marketing earnings for the third quarter were 3% higher than in 2019, benefiting from continued growth in store gross margin, despite COVID-driven fuel demand impacts. BP-operated refining availability continued to be strong, at 96.2% in the quarter. However, refining margins were extremely weak and refinery utilization was around 10% below 2019 levels.  Lubricants saw strong demand recovery in the third quarter, including year-on-year growth in key markets such as India and China. The sale of BP's petrochemicals business to INEOS, agreed in June, remains on track to complete by the end of 2020.  Strategic progress In September, BP agreed to enter into a strategic partnership with Equinor to develop offshore wind projects in the US. This includes the purchase of a 50% interest in two existing wind leases and associated projects off the east coast of the US. Subject to customary regulatory and other approvals, the transaction is expected to close in early 2021. BP continued to progress electrification in the quarter with plans announced in July to build a network of ultra-fast charging points across Germany, including more than 100 charging points at Aral retail sites over the next 12 months. BP Chargemaster was recently awarded a contract by Police Scotland, to deliver more than 1,000 charging points over the next four years. BP announced a strategic partnership with Microsoft under which the two companies will co-operate to progress their sustainability aims. As part of this, BP has agreed to supply  Microsoft with renewable energy and to extend its use of  Microsoft's cloud-based services. BP announced an agreement to partner with Aberdeen City Council to help it achieve the goals of its Net Zero Vision to reduce emissions and become a climate positive city. This follows the partnership with the City of Houston that BP announced in July. Financial framework Operating cash flow excluding Gulf of Mexico oil spill payments* was $11.4 billion for the nine months of 2020, compared with $20.6 billion for the same period in 2019. Organic capital expenditure* for the nine months of 2020 was $9.1 billion. BP expects 2020 organic capital expenditure to be around $12 billion. Divestment and other proceeds were $2.4 billion for the nine months of 2020. Gulf of Mexico oil spill payments on a post-tax basis were $1.5 billion in the nine months of 2020. Payments for the full year are expected to be around $1.5 billion on a post-tax basis. Gearing* at 30 September 2020 was 33.0%, in part reflecting the recent hybrid bond issue. See page 25 for more information. 
Operating metrics    Nine months 2020    Financial metrics    Nine months 2020 
  (vs. Nine months 2019)      (vs. Nine months 2019) 
Tier 1 and tier 2 process safety events    66    Underlying RC profit (loss)*    $(5.8)bn 
  (-7)      (-$13.2bn) 
Reported recordable injury frequency*    0.127    Operating cash flow excluding Gulf of Mexico oil spill payments (post-tax)    $11.4bn 
  (-29.2%)      (-$9.2bn) 
Group production    3,542mboe/d    Organic capital expenditure    $9.1bn 
  (-5.7%)      (-$2.2bn) 
Upstream production (excludes Rosneft segment)    2,448mboe/d    Gulf of Mexico oil spill payments (post-tax)    $1.5bn 
  (-6.4%)      (-$1.0bn) 
Upstream unit production costs(a)    $6.30/boe    Divestment proceeds*    $1.5bn 
  (-10.3%)      (+$0.1bn) 
BP-operated Upstream plant reliability    93.8%    Gearing    33.0% 
  (-0.6)      (+1.3) 
BP-operated refining availability*    96.0%    Dividend per ordinary share(b)    5.25 cents 
  (+1.4)      (-48.8%) 

Upstream

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Profit (loss) before interest and tax    38     (21,951)    (1,050)      (20,958)    4,295    
Inventory holding (gains) losses*    (8)    (57)    -       3     8    
RC profit (loss) before interest and tax    30     (22,008)    (1,050)      (20,955)    4,303    
Net (favourable) adverse impact of non-operating items* and fair value accounting effects*    848     13,521     3,189       15,217     4,177    
Underlying RC profit (loss) before interest and tax*(a)    878     (8,487)    2,139       (5,738)    8,480    

(a)   See page 7 for a reconciliation to segment RC profit before interest and tax by region.

Financial results

The replacement cost result before interest and tax for the third quarter and nine months was a profit of $30 million and a loss of $20,955 million respectively, compared with a loss of $1,050 million and a profit of $4,303 million for the same periods in 2019. The third quarter and nine months included a net non-operating charge of $631 million and $15,156 million respectively, compared with a net charge of $3,454 million and $4,224 million for the same periods in 2019. The net non-operating charge for the nine months is principally related to impairments associated with revisions to long-term price assumptions. Fair value accounting effects in the third quarter and nine months had an adverse impact of $217 million and $61 million respectively, compared with a favourable impact of $265 million and $47 million in the same periods of 2019.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost result before interest and tax for the third quarter and nine months was a profit of $878 million and a loss of $5,738 million respectively, compared with a profit of $2,139 million and $8,480 million for the same periods in 2019. The result for the third quarter mainly reflects lower liquids and gas realizations, partly offset by lower depreciation, depletion and amortization. The result for the nine months mainly reflects lower liquids and gas realizations and the impact of writing down certain exploration intangible carrying values.

Production

Production for the quarter was 2,243mboe/d, 12.7% lower than the third quarter of 2019 mainly due to divestments in BPX Energy, Alaska and Gulf of Suez oil concessions in Egypt. Underlying production* for the quarter decreased by 3.0% mainly due to decline associated with reduced capital investment levels and significant weather impacts from hurricanes in the US Gulf of Mexico.

For the nine months, production was 2,448mboe/d, 6.4% lower than the nine months of 2019. Underlying production for the nine months was slightly lower than 2019 reflecting adverse weather, primarily in the US Gulf of Mexico.

Key events

During the third quarter, BP was awarded eight operated and three non-operated blocks in the North Sea as part of the UK Oil & Gas Authority 32nd offshore licensing round.

On 25 August, BP confirmed it started production on Atlantis Phase 3 in the US Gulf of Mexico (BP operator 56%, BHP Billiton 44%).

On 16 September, BP confirmed a gas discovery with the Nidoco NW-1 exploratory well in the Abu Madi West development lease, offshore Egypt (Eni operator 75%, BP 25%).

On 28 September, BP Trinidad and Tobago LLC started up the Galeota expansion project in Trinidad.

On 1 October, BP confirmed force majeure was lifted on the Greater Tortue Ahmeyim (GTA) project offshore Mauritania and Senegal (BP operator 56%, Kosmos 27%, Petrosen 10%, SMHPM 7%).

On 6 October, BP confirmed the planned divestment to Premier Oil of its interests in the Andrew area and Shearwater assets, both located in the UK North Sea, will not proceed following the announcement of a proposed merger between Chrysaor and Premier Oil.

On 12 October, BP announced the start-up of production from Block 61 Phase 2 Ghazeer gas field in Oman (BP operator 60%, Makarim Gas Development Limited 30%, PC Oman Ventures Limited 10%).

Outlook

Looking ahead, we expect fourth-quarter 2020 reported production to be slightly lower than the third quarter due to maintenance activity.

Upstream (continued)

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Underlying RC profit (loss) before interest and tax               
US    125     (2,960)    552       (2,296)    2,025    
Non-US    753     (5,527)    1,587       (3,442)    6,455    
    878     (8,487)    2,139       (5,738)    8,480    
Non-operating items(a)(b)               
US    (114)    (2,122)    (3,338)      (2,868)    (3,814)   
Non-US    (517)    (11,332)    (116)      (12,288)    (410)   
    (631)    (13,454)    (3,454)      (15,156)    (4,224)   
Fair value accounting effects               
US    57     39     19       94     (299)   
Non-US    (274)    (106)    246       (155)    346    
    (217)    (67)    265       (61)    47    
RC profit (loss) before interest and tax               
US    68     (5,043)    (2,767)      (5,070)    (2,088)   
Non-US    (38)    (16,965)    1,717       (15,885)    6,391    
    30     (22,008)    (1,050)      (20,955)    4,303    
Exploration expense               
US    40     2,560     53       2,620     147    
Non-US    150     7,114     132       7,446     551    
    190     9,674     185       10,066     698    
Of which: Exploration expenditure written off(b)    50     9,618     115       9,766     476    
Production (net of royalties)(c)(d)               
Liquids* (mb/d)               
US    363     472     449       446     470    
Europe    143     166     118       152     138    
Rest of World    623     728     657       668     667    
    1,129     1,366     1,224       1,266     1,274    
Natural gas (mmcf/d)               
US    1,419     1,549     2,396       1,671     2,372    
Europe    265     298     188       269     155    
Rest of World    4,774     4,878     5,211       4,915     5,254    
    6,457     6,725     7,795       6,855     7,782    
Total hydrocarbons* (mboe/d)               
US    608     739     862       735     879    
Europe    188     217     151       198     165    
Rest of World    1,446     1,569     1,555       1,516     1,573    
    2,243     2,525     2,568       2,448     2,616    
Average realizations*(e)               
Total liquids(f) ($/bbl)    38.17     22.75     55.68       35.51     58.38    
Natural gas ($/mcf)    2.56     2.53     3.11       2.65     3.49    
Total hydrocarbons ($/boe)    26.42     19.06     35.48       25.68     38.55    

Downstream

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Profit (loss) before interest and tax    1,106     1,572     1,583       (1,273)    5,775    
Inventory holding (gains) losses*    (191)    (978)    433       3,446     (706)   
RC profit before interest and tax    915     594     2,016       2,173     5,069    
Net (favourable) adverse impact of non-operating items* and fair value accounting effects*    (279)    811     (133)      789     (88)   
Underlying RC profit before interest and tax*(a)    636     1,405     1,883       2,962     4,981    

(a)   See page 9 for a reconciliation to segment RC profit before interest and tax by region and by business.

Financial results

The replacement cost profit before interest and tax for the third quarter and nine months was $915 million and $2,173 million respectively, compared with $2,016 million and $5,069 million for the same periods in 2019.

The third quarter and nine months include a net non-operating charge of $146 million and $924 million respectively, compared with a charge of $14 million and $49 million for the same periods in 2019. The charge for the quarter mainly relates to restructuring, while the charge for the nine months primarily reflects impairments. Fair value accounting effects in the third quarter and nine months had a favourable impact of $425 million and $135 million respectively, compared with a favourable impact of $147 million and $137 million in the same periods in 2019.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the third quarter and nine months was $636 million and $2,962 million respectively, compared with $1,883 million and $4,981 million for the same periods in 2019.

Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 9.

Fuels

The fuels business reported an underlying replacement cost profit before interest and tax of $222 million for the third quarter and $2,206 million for the nine months, compared with $1,438 million and $3,691 million for the same periods in 2019.

Across fuels marketing we saw earnings growth of 3% year on year primarily driven by increased store gross margin. This growth is despite continued COVID-19 demand impacts with retail volumes in the quarter 7% lower than last year. The result for the nine months, however, remained impacted by COVID-19, with year to date retail volumes 15% lower than 2019, and aviation volumes down by 50%.

The refining result for the quarter and nine months continued to be impacted by an extremely weak environment with refining margins remaining at historical lows. Utilization of 83% for the quarter improved compared with the second quarter, albeit still around 10% lower than 2019, driven by continued COVID-19 demand impacts. These factors were partially offset by a lower level of turnaround activity and strong refining availability. 

The quarterly result also reflects a weaker contribution from supply and trading, although the contribution for the nine months remains higher year on year.

We continued to progress our advanced mobility agenda in the quarter with plans announced in July to build a network of ultra-fast charging across Germany, beginning with the roll out of more than 100 charging points at Aral retail sites over the next 12 months.  In addition, BP Chargemaster was recently awarded the UK's largest ever EV infrastructure contract by Police Scotland, to deliver more than 1,000 charging points over the next four years.

Lubricants

The lubricants business saw significant recovery in the third quarter as volumes improved to levels similar to 2019, supported by growth of more than 5% in China and India. The result for the nine months, however, continued to reflect significant COVID-19 demand destruction seen in the first half of 2020.

Underlying replacement cost profit before interest and tax was $326 million for the third quarter and $556 million for the nine months, compared with $332 million and $925 million for the same periods in 2019.

Petrochemicals

The petrochemicals business reported an underlying replacement cost profit before interest and tax of $88 million for the third quarter and $200 million for the nine months, compared with $113 million and $365 million for the same periods in 2019. The result for the quarter and nine months reflects a significantly weaker margin environment and the demand impact of COVID-19. 

As previously reported, in the second quarter we announced the sale of BP's petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The transaction remains on track and, subject to approvals, is expected to complete by the end of the year.

Outlook

Looking to the fourth quarter of 2020, we expect continued pressure on industry refining margins and for marketing volumes to remain impacted by COVID-19 restrictions.

Downstream (continued)

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Underlying RC profit before interest and tax - by region               
US    96     719     537       1,372     1,634    
Non-US    540     686     1,346       1,590     3,347    
    636     1,405     1,883       2,962     4,981    
Non-operating items               
US    (27)    (69)    (5)      (90)    (2)   
Non-US    (119)    (711)    (9)      (834)    (47)   
    (146)    (780)    (14)      (924)    (49)   
Fair value accounting effects(a)               
US    78     (71)    116       152     185    
Non-US    347     40     31       (17)    (48)   
    425     (31)    147       135     137    
RC profit before interest and tax               
US    147     579     648       1,434     1,817    
Non-US    768     15     1,368       739     3,252    
    915     594     2,016       2,173     5,069    
Underlying RC profit before interest and tax - by business(b)(c)               
Fuels    222     1,295     1,438       2,206     3,691    
Lubricants    326     63     332       556     925    
Petrochemicals    88     47     113       200     365    
    636     1,405     1,883       2,962     4,981    
Non-operating items and fair value accounting effects(a)               
Fuels    288     (748)    135       (717)    73    
Lubricants    (7)    (51)    -       (58)    18    
Petrochemicals    (2)    (12)    (2)      (14)    (3)   
    279     (811)    133       (789)    88    
RC profit before interest and tax(b)(c)               
Fuels    510     547     1,573       1,489     3,764    
Lubricants    319     12     332       498     943    
Petrochemicals    86     35     111       186     362    
    915     594     2,016       2,173     5,069    
               
BP average refining marker margin (RMM)* ($/bbl)    6.2     5.9     14.7       7.0     13.4    
               
Refinery throughputs (mb/d)               
US    701     614     781       687     730    
Europe    699     716     815       750     766    
Rest of World    187     157     217       189     221    
    1,587     1,487     1,813       1,626     1,717    
BP-operated refining availability* (%)    96.2     95.6     96.1       96.0     94.6    
               
Marketing sales of refined products (mb/d)               
US    1,083     872     1,172       997     1,141    
Europe    849     685     1,157       830     1,081    
Rest of World    422     364     459       435     500    
    2,354     1,921     2,788       2,262     2,722    
Trading/supply sales of refined products    2,618     3,172     3,157       3,054     3,183    
Total sales volumes of refined products    4,972     5,093     5,945       5,316     5,905    
               
Petrochemicals production (kte)               
US    541     410     564       1,562     1,749    
Europe    1,325     1,246     1,187       3,942     3,573    
Rest of World    1,211     1,271     1,325       3,635     3,780    
    3,077     2,927     3,076       9,139     9,102    

Rosneft

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020(a)  2020  2019    2020(a)  2019 
Profit (loss) before interest and tax(b)(c)    (244)    (71)    723       (533)    1,772    
Inventory holding (gains) losses*    (34)    (53)    79       114     41    
RC profit (loss) before interest and tax    (278)    (124)    802       (419)    1,813    
Net charge (credit) for non-operating items*    101     63     -       164     194    
Underlying RC profit (loss) before interest and tax*    (177)    (61)    802       (255)    2,007    

Financial results

Replacement cost (RC) loss before interest and tax for the third quarter and nine months was $278 million and $419 million respectively, compared with a profit of $802 million and $1,813 million for the same periods in 2019.

After adjusting for non-operating items, the underlying RC loss before interest and tax for the third quarter and nine months was $177 million and $255 million respectively, compared with a profit of $802 million and $2,007 million for the same periods in 2019.

Compared with the same periods in 2019, the results for the third quarter and nine months primarily reflects lower oil prices and adverse foreign exchange effects and lower production as a result of OPEC+ agreement.

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
    2020(a)  2020  2019    2020(a)  2019 
Production (net of royalties) (BP share)               
Liquids* (mb/d)    858     856     920       877     923    
Natural gas (mmcf/d)    1,260     1,248     1,236       1,261     1,271    
Total hydrocarbons* (mboe/d)    1,075     1,071     1,133       1,094     1,142    

Other businesses and corporate

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Profit (loss) before interest and tax    24     (317)    (412)      (991)    (1,339)   
Inventory holding (gains) losses*    -     -     -       -     -    
RC profit (loss) before interest and tax    24     (317)    (412)      (991)    (1,339)   
Net (favourable) adverse impact of non-operating items* and fair value accounting effects*    (154)    57     90       40     309    
Underlying RC profit (loss) before interest and tax*    (130)    (260)    (322)      (951)    (1,030)   
Underlying RC profit (loss) before interest and tax               
US    (65)    (129)    (249)      (318)    (628)   
Non-US    (65)    (131)    (73)      (633)    (402)   
    (130)    (260)    (322)      (951)    (1,030)   
Non-operating items               
US    (62)    (62)    (85)      (172)    (291)   
Non-US    (50)    46     (5)      (93)    (18)   
    (112)    (16)    (90)      (265)    (309)   
Fair value accounting effects               
US    -     -     -       -     -    
Non-US    266     (41)    -       225     -    
    266     (41)    -       225     -    
RC profit (loss) before interest and tax               
US    (127)    (191)    (334)      (490)    (919)   
Non-US    151     (126)    (78)      (501)    (420)   
    24     (317)    (412)      (991)    (1,339)   

Other businesses and corporate comprises our alternative energy business, shipping, treasury, BP ventures and corporate activities including centralized functions, and any residual costs of the Gulf of Mexico oil spill.

Financial results

The replacement cost result before interest and tax for the third quarter and nine months was a profit of $24 million and a loss of $991 million respectively, compared with a loss of $412 million and $1,339 million for the same periods in 2019.

The results included a net non-operating charge of $112 million for the third quarter and $265 million for the nine months, compared with a charge of $90 million and $309 million for the same periods in 2019. Fair value accounting effects in the third quarter and nine months had a favourable impact of $266 million and $225 million. See page 28 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 third quarter and nine months was $130 million and $951 million respectively, compared with $322 million and $1,030 million for the same periods in 2019.

Alternative Energy

BP's net ethanol-equivalent production* for the third quarter and nine months of the year averaged 36.5kb/d and 22.1kb/d respectively, compared with 24.4kb/d and 14.4kb/d for the 100% BP-owned business for the same periods in 2019.

Net wind generation capacity* was 1,072MW at 30 September 2020, compared with 926MW at 30 September 2019. BP's net share of wind generation for the third quarter and nine months was 454GWh and 1,904GWh respectively, compared with 506GWh and 1,967GWh for the same periods in 2019. In September BP acquired the remaining 50% interest in the BP-operated Fowler Ridge 1 wind asset. The asset increased net wind capacity by 150MW to 1,072MW.

In September BP and Equinor announced the formation of a new strategic partnership to develop four assets in two existing offshore wind leases located offshore New York and Massachusetts. Subject to customary regulatory and other approvals, the transaction is expected to close in early 2021 and will mark BP's first entry into the offshore wind sector, one of the fastest growing energy sectors.

Lightsource BP has developed 637MW for the nine months of the year to 30 September 2020. In September  Lightsource BP reached financial close and mobilized construction for the 300MW Bighorn Solar project in the US, which will deliver energy to the EVRAZ North America steel mill in Pueblo, Colorado. In October they completed construction on three solar sites in Franklin County, Pennsylvania in the US. The sites will deliver electricity to Penn State University under the 70MW Power Purchase Agreement (PPA) to provide over 100 million kilowatt-hours of electricity in year one.

BP has developed a total of 3GW net renewable energy generating capacity by 30 September 2020 across our businesses. We intend to continue building our renewable energy businesses and to have developed 20GW by 2025.

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.

Financial statements

Group income statement

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
               
Sales and other operating revenues (Note 6)    44,251     31,676     68,291       135,577     207,288    
Earnings from joint ventures - after interest and tax    73     (567)    90       (516)    413    
Earnings from associates - after interest and tax    (332)    (100)    784       (676)    2,041    
Interest and other income    183     107     126       430     559    
Gains on sale of businesses and fixed assets    27     74     1       117     145    
Total revenues and other income    44,202     31,190     69,292       134,932     210,446    
Purchases    31,645     18,778     52,273       99,301     156,228    
Production and manufacturing expenses    5,073     5,211     5,259       16,383     16,006    
Production and similar taxes (Note 8)    140     124     340       467     1,135    
Depreciation, depletion and amortization (Note 7)    3,467     3,937     4,297       11,463     13,346    
Impairment and losses on sale of businesses and fixed assets (Note 3)    294     11,770     3,416       13,213     4,418    
Exploration expense (Note 4)    190     9,674     185       10,066     698    
Distribution and administration expenses    2,435     2,509     2,648       7,628     8,061    
Profit (loss) before interest and taxation    958     (20,813)    874       (23,589)    10,554    
Finance costs    800     783     883       2,366     2,603    
Net finance expense relating to pensions and other post-retirement benefits    8     8     16       23     46    
Profit (loss) before taxation    150     (21,604)    (25)      (25,978)    7,905    
Taxation    457     (4,082)    706       (3,764)    3,733    
Profit (loss) for the period    (307)    (17,522)    (731)      (22,214)    4,172    
Attributable to               
BP shareholders    (450)    (16,848)    (749)      (21,663)    4,007    
Non-controlling interests    143     (674)    18       (551)    165    
    (307)    (17,522)    (731)      (22,214)    4,172    
               
Earnings per share (Note 9)               
Profit (loss) for the period attributable to BP shareholders               
Per ordinary share (cents)               
Basic    (2.22)    (83.32)    (3.68)      (107.15)    19.74    
Diluted    (2.22)    (83.32)    (3.68)      (107.15)    19.63    
Per ADS (dollars)               
Basic    (0.13)    (5.00)    (0.22)      (6.43)    1.18    
Diluted    (0.13)    (5.00)    (0.22)      (6.43)    1.18    

Condensed group statement of comprehensive income

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
               
Profit (loss) for the period    (307)    (17,522)    (731)      (22,214)    4,172    
Other comprehensive income               
Items that may be reclassified subsequently to profit or loss               
Currency translation differences(a)    (166)    1,371     (986)      (3,437)    134    
Exchange (gains) losses on translation of foreign operations reclassified to gain or loss on sale of businesses and fixed assets    -     3     -       4     -    
Cash flow hedges and costs of hedging    (90)    68     (17)      63     135    
Share of items relating to equity-accounted entities, net of tax    308     (333)    119       417     39    
Income tax relating to items that may be reclassified    (16)    (37)    12       64     (31)   
    36     1,072     (872)      (2,889)    277    
Items that will not be reclassified to profit or loss               
Remeasurements of the net pension and other post-retirement benefit liability or asset(b)    78     (1,960)    (260)      (163)    (1,152)   
Cash flow hedges that will subsequently be transferred to the balance sheet    8     (2)    (10)      (2)    (9)   
Income tax relating to items that will not be reclassified    (16)    623     27       (16)    302    
    70     (1,339)    (243)      (181)    (859)   
Other comprehensive income    106     (267)    (1,115)      (3,070)    (582)   
Total comprehensive income    (201)    (17,789)    (1,846)      (25,284)    3,590    
Attributable to               
BP shareholders    (364)    (17,142)    (1,848)      (24,723)    3,434    
Non-controlling interests    163     (647)    2       (561)    156    
    (201)    (17,789)    (1,846)      (25,284)    3,590    

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    (24,723)    133     (694)    (25,284)   
Dividends    (5,305)    -     (163)    (5,468)   
Cash flow hedges transferred to the balance sheet, net of tax    7     -     -     7    
Repurchase of ordinary share capital    (776)    -     -     (776)   
Share-based payments, net of tax    547     -     -     547    
Share of equity-accounted entities' changes in equity, net of tax    -     -     -     -    
Issue of perpetual hybrid bonds    (48)    11,909     -     11,861    
Payments on perpetual hybrid bonds    -     (27)    -     (27)   
Tax on issue of perpetual hybrid bonds    1     -     -     1    
Transactions involving non-controlling interests, net of tax    (160)    -     746     586    
At 30 September 2020    67,955     12,015     2,185     82,155    
           
    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    3,434     -     156     3,590    
Dividends    (4,857)    -     (166)    (5,023)   
Cash flow hedges transferred to the balance sheet, net of tax    18     -     -     18    
Repurchase of ordinary share capital    (340)    -     -     (340)   
Share-based payments, net of tax    544     -     -     544    
Share of equity-accounted entities' changes in equity, net of tax    8     -     -     8    
At 30 September 2019    97,922     -     2,093     100,015    

Group balance sheet

    30 September  31 December 
$ million    2020  2019 
Non-current assets       
Property, plant and equipment    116,580     132,642    
Goodwill    12,457     11,868    
Intangible assets    6,293     15,539    
Investments in joint ventures    7,953     9,991    
Investments in associates    16,929     20,334    
Other investments    2,439     1,276    
Fixed assets    162,651     191,650    
Loans    711     630    
Trade and other receivables    4,239     2,147    
Derivative financial instruments    7,705     6,314    
Prepayments    497     781    
Deferred tax assets    6,816     4,560    
Defined benefit pension plan surpluses    6,806     7,053    
    189,425     213,135    
Current assets       
Loans    555     339    
Inventories    13,840     20,880    
Trade and other receivables    15,954     24,442    
Derivative financial instruments    3,562     4,153    
Prepayments    645     857    
Current tax receivable    681     1,282    
Other investments    298     169    
Cash and cash equivalents    30,749     22,472    
    66,284     74,594    
Assets classified as held for sale (Note 2)    4,541     7,465    
    70,825     82,059    
Total assets    260,250     295,194    
Current liabilities       
Trade and other payables    33,823     46,829    
Derivative financial instruments    3,088     3,261    
Accruals    3,822     5,066    
Lease liabilities    1,907     2,067    
Finance debt    11,013     10,487    
Current tax payable    804     2,039    
Provisions    2,563     2,453    
    57,020     72,202    
Liabilities directly associated with assets classified as held for sale (Note 2)    1,057     1,393    
    58,077     73,595    
Non-current liabilities       
Other payables    11,908     12,626    
Derivative financial instruments    4,761     5,537    
Accruals    908     996    
Lease liabilities    7,375     7,655    
Finance debt    61,796     57,237    
Deferred tax liabilities    6,634     9,750    
Provisions    17,892     18,498    
Defined benefit pension plan and other post-retirement benefit plan deficits     8,744     8,592    
    120,018     120,891    
Total liabilities    178,095     194,486    
Net assets    82,155     100,708    
Equity       
BP shareholders' equity    67,955     98,412    
Non-controlling interests    14,200     2,296    
Total equity    82,155     100,708    

Condensed group cash flow statement

    Third  Second  Third    Nine  Nine 
    quarter  quarter  quarter    months  months 
$ million    2020  2020  2019    2020  2019 
Operating activities               
Profit (loss) before taxation    150     (21,604)    (25)      (25,978)    7,905    
Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities               
Depreciation, depletion and amortization and exploration expenditure written off    3,517     13,555     4,412       21,229     13,822    
Impairment and (gain) loss on sale of businesses and fixed assets    267     11,696     3,415       13,096     4,273    
Earnings from equity-accounted entities, less dividends received    1,018     860     (236)      2,383     (1,220)   
Net charge for interest and other finance expense, less net interest paid    60     17     257       214     407    
Share-based payments    199     351     149       544     563    
Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans    (46)    (34)    (50)      (100)    (195)   
Net charge for provisions, less payments    293     (365)    (132)      (131)    (446)   
Movements in inventories and other current and non-current assets and liabilities    556     (609)    141       630     (2,612)   
Income taxes paid    (810)    (130)    (1,875)      (1,994)    (4,330)   
Net cash provided by operating activities    5,204     3,737     6,056       9,893     18,167    
Investing activities               
Expenditure on property, plant and equipment, intangible and other assets    (2,577)    (3,018)    (3,954)      (9,384)    (11,482)   
Acquisitions, net of cash acquired    (10)    -     13       (27)    (3,529)   
Investment in joint ventures    (12)    (8)    (60)      (38)    (80)   
Investment in associates    (1,037)    (41)    (22)      (1,115)    (221)   
Total cash capital expenditure    (3,636)    (3,067)    (4,023)      (10,564)    (15,312)   
Proceeds from disposal of fixed assets    32     10     171       52     476    
Proceeds from disposal of businesses, net of cash disposed    84     670     536       1,425     909    
Proceeds from loan repayments    50     543     63       656     182    
Net cash used in investing activities    (3,470)    (1,844)    (3,253)      (8,431)    (13,745)   
Financing activities               
Net issue (repurchase) of shares (Note 9)    -     -     (215)      (776)    (340)   
Lease liability payments    (578)    (664)    (594)      (1,811)    (1,806)   
Proceeds from long-term financing    2,587     6,846     213       12,117     6,718    
Repayments of long-term financing    (4,307)    (964)    (516)      (8,988)    (6,758)   
Net increase (decrease) in short-term debt    (2,630)    (215)    (852)      (328)    118    
Issue of perpetual hybrid bonds    -     11,861     -       11,861     -    
Payments on perpetual hybrid bonds    (27)    -     -       (27)    -    
Payments relating to transactions involving non-controlling interests (other)    -     (8)    -       (8)    -    
Receipts relating to transactions involving non-controlling interests (other)    483     -     -       492     -    
Dividends paid - BP shareholders    (1,060)    (2,119)    (1,656)      (5,281)    (4,870)   
 - non-controlling interests    (58)    (74)    (47)      (163)    (166)   
Net cash provided by (used in) financing activities    (5,590)    14,663     (3,667)      7,088     (7,104)   
Currency translation differences relating to cash and cash equivalents    268     (42)    (118)      43     (94)   
Increase (decrease) in cash and cash equivalents    (3,588)    16,514     (982)      8,593     (2,776)   
Cash and cash equivalents at beginning of period    34,653     18,139     20,674       22,472     22,468    
Cash and cash equivalents at end of period(a)    31,065     34,653     19,692       31,065     19,692    
Source: EvaluateEnergy® ©2021 EvaluateEnergy Ltd