BP Regulatory News (BP.)

Top of page 1

"For a printer friendly version of this announcement please click on the link below to open a PDF version of the announcement"

http://www.rns-pdf.londonstockexchange.com/rns/7730R_1-2023-10-30.pdf

(a) Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. See page 3 for more information on other proceeds.

(b) See Note 9 for more information.

RC profit (loss), underlying RC profit (loss), surplus cash flow, net debt, adjusted EBITDA, underlying RC profit per ordinary share and underlying RC profit per ADS are non-IFRS measures. Inventory holding (gains) losses and adjusting items are non-IFRS adjustments.

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 31.

Top of page 2

Top of page 3

Financial results

In addition to the highlights on page 2:

? Profit attributable to bp shareholders in the third quarter and nine months was $4.9 billion and $14.9 billion respectively, compared with a loss of $2.2 billion and $13.3 billion in the same periods of 2022.

- After adjusting profit attributable to bp shareholders for inventory holding gains* and net impact of adjusting items*, underlying replacement cost profit* for the third quarter and nine months was $3.3 billion and $10.8 billion respectively, compared with $8.2 billion and $22.8 billion for the same periods of 2022. This reduction in underlying replacement cost profit for the third quarter mainly reflects lower oil and gas realizations and a weak gas marketing and trading result. For the nine months, the reduction reflects lower oil and gas realizations; the impact of portfolio changes in oil production & operations; a lower refining and oil trading performance; and a weak gas marketing and trading result in the third quarter.

- Adjusting items in the third quarter and nine months had a net favourable pre-tax impact of $0.5 billion and $3.8 billion respectively, compared with an adverse pre-tax impact of $8.3 billion and $39.4 billion in the same periods of 2022.

- Adjusting items for the third quarter and nine months of 2023 include a favourable impact of pre-tax fair value accounting effects*, relative to management's internal measure of performance, of $1.5 billion and $6.8 billion respectively, compared with an adverse pre-tax impact of $10.1 billion and $16.7 billion in the same periods of 2022. This is primarily due to a decline in the forward price of LNG during the 2023 periods, but an increase in the 2022 comparative periods. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges but also recognizes changes in value of the LNG contracts being risk managed.

- Adjusting items for the nine months 2022 include a pre-tax charge of $24.0 billion relating to bp's decision to exit its 19.75% shareholding in Rosneft. A further $1.5 billion pre-tax charge relating to bp's decision to exit its other businesses with Rosneft in Russia is also included.

? The effective tax rate (ETR) on RC profit or loss* for the third quarter and nine months was 33% and 32% respectively, compared with 96% and -242% for the same periods in 2022. Excluding adjusting items, the underlying ETR* for the third quarter and nine months was 33% and 39% respectively, compared with 37% and 33% for the same periods a year ago. The lower underlying ETR for the third quarter reflects adjustments in respect of prior periods. The higher underlying ETR for the nine months reflects changes in the geographical mix of profits and the increased impact of the UK Energy Profits Levy. ETR on RC profit or loss and underlying ETR are non-IFRS measures.

? Operating cash flow* for the third quarter and nine months was $8.7 billion and $22.7 billion respectively, compared with $8.3 billion and $27.4 billion for the same periods in 2022 driven by the movements in underlying replacement cost profit and working capital in the periods.

? Capital expenditure* in the third quarter and nine months was $3.6 billion and $11.5 billion respectively, compared with $3.2 billion and $9.0 billion in the same periods of 2022. The nine months 2023 reflected the inorganic $1.1 billion spend on the acquisition of TravelCenters of America in the second quarter 2023.

? Total divestment and other proceeds for the third quarter and nine months were $0.7 billion and $1.5 billion respectively, compared with $0.6 billion and $2.5 billion for the same periods in 2022. Other proceeds for the third quarter and nine months of 2023 were $0.5 billion of proceeds from the sale of a 49% interest in a controlled affiliate holding certain midstream assets onshore US. Other proceeds for the nine months of 2022 were $0.6 billion of proceeds from the disposal of a loan note related to the Alaska divestment.

? At the end of the third quarter, net debt* was $22.3 billion, compared with $23.7 billion at the end of the second quarter 2023 and $22.0 billion at the end of the third quarter 2022.

Top of page 4

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

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

Reconciliations of underlying RC profit attributable to bp shareholders to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-14 for the segments.

Operating Metrics

(a) See Operational updates on pages 6, 9 and 11. Because of rounding, upstream production may not agree exactly with the sum of gas & low carbon energy and oil production & operations.

(b) Mainly reflecting impact of portfolio changes.

Top of page 5

Outlook & Guidance

Macro outlook

In the fourth quarter:

? bp expects oil prices to be supported by OPEC+ production restrictions and the continued demand rebound;

? European gas and Asian LNG prices will be driven by weather, demand recovery in Europe and China and ongoing geopolitical tension. In the US, weather is also a risk factor, but higher than normal storage levels and higher production should help to dampen volatility; and

? bp expects industry refining margins to be significantly lower than the third quarter.

4Q23 guidance

? Looking ahead, we expect fourth-quarter 2023 reported upstream* production to be broadly flat compared to third-quarter 2023.

? In its customers business, bp expects seasonally lower volumes with marketing margins to remain sensitive to movements in the cost of supply. In refining, we expect significantly lower realized refining margins and a higher level of turnaround activity in the fourth quarter.

2023 guidance

In addition to the guidance on page 2:

? bp expects both reported and underlying upstream production to be higher compared with 2022. Within this, bp expects underlying production from oil production & operations to be higher and production from gas & low carbon energy to be slightly lower. bp continues to expect four major project start-ups during 2023.

? bp expects the other businesses & corporate underlying annual charge to be at the lower end of the range $1.1-1.3 billion for 2023. The charge may vary from quarter to quarter.

? bp continues to expect the depreciation, depletion and amortization to be slightly above 2022.

? bp continues to expect the underlying ETR* for 2023 to be around 40% but it is sensitive to the impact that volatility in the current price environment may have on the geographical mix of the group's profits and losses.

? Having realized $17.5 billion of divestment and other proceeds since the second quarter of 2020, bp continues to expect divestment and other proceeds of $2-3 billion in 2023 and continues to expect to reach $25 billion of divestment and other proceeds between the second half of 2020 and 2025.

? bp continues to expect Gulf of Mexico oil spill payments for the year to be around $1.3 billion pre-tax including the $1.2 billion pre-tax payment made during the second quarter.

? bp now expects capital expenditure* of around $16 billion in 2023 including inorganic capital expenditure*.

? bp is committed to maintaining a strong investment grade credit rating, targeting further progress within an 'A' grade credit rating. For 2023 bp continues to intend to allocate 40% of surplus cash flow* to further strengthen the balance sheet.

? For 2023 and subject to maintaining a strong investment grade credit rating, bp remains committed to using 60% of surplus cash flow for share buybacks.

? In setting the dividend per ordinary share and buyback each quarter, the board will continue to take into account factors including the cumulative level of and outlook for surplus cash flow, the cash balance point* and the maintenance of a strong investment grade credit rating.

? Based on bp's current forecasts, at around $60 per barrel Brent and subject to the board's discretion each quarter, bp continues to expect to be able to deliver share buybacks of around $4.0 billion per annum, at the lower end of its $14-18 billion capital expenditure range, and have capacity for an annual increase in the dividend per ordinary share of around 4%.

Adjusted EBITDA* aims(a)

? bp has increased its 2030 Adjusted EBITDA aims for resilient hydrocarbons and group by $2 billion to a range of $41-44 billion and $53-58 billion respectively.

(a) Brent $70/bbl 2021 real, at bp planning assumptions, and at the upper end of the respective expected capital expenditure* ranges.

Top of page 6

gas & low carbon energy*

Financial results

? The replacement cost (RC) profit before interest and tax for the third quarter and nine months was $2,275 million and $11,911 million respectively, compared with a loss of $2,956 million and $1,743 million for the same periods in 2022. The third quarter and nine months are adjusted by a favourable impact of net adjusting items* of $1,019 million and $4,966 million respectively, compared with an adverse impact of net adjusting items of $9,196 million and $14,658 million for the same periods in 2022. Adjusting items include impacts of fair value accounting effects*, relative to management's internal measure of performance, which are a favourable impact of $1,816 million and $6,972 million for the third quarter and nine months in 2023 and an adverse impact of $9,224 million and $14,313 million for the same periods in 2022. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges but also recognizes changes in value of the LNG contracts being risk managed, which decreased as forward prices fell during the nine months. Adjusting items also include a net impairment charge of $224 million and $1,284 million respectively, compared with net charges of $6 million and $523 million for the same periods in 2022.

? After adjusting RC profit before interest and tax for adjusting items, the underlying RC profit before interest and tax* for the third quarter and nine months was $1,256 million and $6,945 million respectively, compared with $6,240 million and $12,915 million for the same periods in 2022.

? The underlying RC profit for the third quarter and nine months, compared with the same periods in 2022, both reflect lower realizations, a higher depreciation, depletion and amortization charge, and a weak gas marketing and trading result in the third quarter.

Operational update

? Reported production for the quarter was 946mboe/d, 3.6% lower than the same period in 2022. Underlying production* was 2.6% lower, mainly due to base decline and increased planned maintenance offset by major project* delivery.

? Reported production for the nine months was 940mboe/d, 1.8% lower than the same period in 2022. Underlying production was 2.2% lower, mainly due to base decline partly offset by major project delivery.

? Renewables pipeline* at the end of the quarter was 43.9GW (bp net), including 17.7GW bp net share of Lightsource bp's (LSbp's) pipeline. The renewables pipeline increased by 6.7GW during the nine months due to bp being awarded the rights to develop two North Sea offshore wind projects in Germany (4GW) and increases to LSbp's pipeline. In addition, there is over 13GW (bp net) of early stage opportunities in LSbp's hopper.

Strategic progress

gas

? On 19 October bp, on behalf of the Tangguh production-sharing contract* partners (bp 40.22% operator), announced that the first cargo of liquefied natural gas (LNG) produced by the new third liquefaction train at the Tangguh LNG facility, in Papua Barat, Indonesia, has safely been loaded and sailed. The start-up of Tangguh Train 3 will add 3.8 million tonnes per annum (mtpa) of gross LNG production capacity to the existing facility, bringing total plant capacity to 11.4mtpa gross.

? On 26 September bp announced that a bp and Shell joint venture (bp 50%, Shell 50%) had been awarded three deepwater exploration blocks off Trinidad's east coast. 

? bp continues to work towards its aim of building an LNG portfolio of 30 million tonnes per year (mpta) by 2030:

? On July 28, bp and OMV announced the signing of a long-term agreement to supply of up to 1mtpa of LNG for 10 years from 2026. This builds on bp in May 2023 agreeing 2bcm per year of regasification capacity for 20 years at the Gate terminal in Rotterdam.

? On 5 September, bp announced its third long-term LNG offtake contract from Woodfibre's British Columbia LNG facility with firm offtake totalling 1.95mtpa and any additional production on a flexible offtake basis.

low carbon energy

? Hydrogen and CCS

? On 13 October the Midwest Alliance for Clean Hydrogen (MachH2), of which bp is a member, announced it has been selected by the U.S. Department of Energy's Office of Clean Energy Demonstrations to develop a Regional Clean Hydrogen Hub. Under the proposals, it would include blue hydrogen* production at or near bp's Whiting refinery and a potential hydrogen mobility corridor across Indiana and neighbouring states.

? Hydrogen pipeline* at the end of the third quarter was 2.9mtpa, an increase of 1.1mtpa compared with the start of the year.

? Offshore wind 

? bp and its partner Equinor continue to work on options for their US offshore wind projects to mitigate the effect of inflationary pressures and permitting delays. A filing on 7 June with the New York Public Services Commission (PSC) requesting to renegotiate the power purchase agreements associated with three wind farms off the coast of New York (Empire Wind 1 and 2, Beacon Wind 1) was rejected on 12 October. Equinor and bp are assessing the impact of the decision on these projects and future development plans. We have recognized a pre-tax impairment charge of $540 million in the third quarter related to these assets. The pre-tax charge is recorded through equity-accounted earnings and is classified as an 'other' adjusting item.

Top of page 7

gas & low carbon energy (continued)

(a) Includes bp's share of production of equity-accounted entities in the gas & low carbon energy segment.

(b) Realizations are based on sales by consolidated subsidiaries only - this excludes equity-accounted entities.

Top of page 8

gas & low carbon energy (continued)

(c) Because of rounding, some totals may not agree exactly with the sum of their component parts.

(d) 30 September 2023 and 30 June 2023 include 10.3GW of onshore wind and solar pipeline in support of hydrogen.

Top of page 9

oil production & operations

Financial results

? The replacement cost (RC) profit before interest and tax for the third quarter and nine months was $3,427 million and $9,312 million respectively, compared with $6,965 million and $18,033 million for the same periods in 2022. The third quarter and nine months are adjusted by a favourable impact of net adjusting items* of $291 million and $80 million respectively, compared with a favourable impact of net adjusting items of $1,754 million and $2,237 million for the same periods in 2022.

? After adjusting items, the underlying RC profit before interest and tax* for the third quarter and nine months was $3,136 million and $9,232 million respectively, compared with $5,211 million and $15,796 million for the same periods in 2022.

? The underlying RC profit for the third quarter and nine months compared to the same periods in 2022, reflects lower realizations, and the impact of portfolio changes, partly offset by higher volumes.

Operational update

? Reported production for the quarter was 1,382mboe/d, 5.0% higher than the third quarter of 2022. Underlying production* for the quarter was 5.1% higher compared with the third quarter of 2022 reflecting reduced seasonal maintenance, major projects* and bpx energy performance.

? Reported production for the nine months was 1,371mboe/d, 6.1% higher than the same period of 2022. Underlying production for the nine months was 5.6% higher compared with the same period of 2022 reflecting bpx energy performance, reduced seasonal maintenance and major projects.

Strategic Progress

? In August bpx energy successfully brought online 'Bingo', its second central processing facility in the Permian Basin. It is a low-emission, electrified facility that will enable further production growth for bpx energy in the basin (bp 100% operator).

? During the third quarter the Azeri Central East (ACE) platform topsides were safely installed in the field. This is the 9th and most automated platform installed in the giant Azeri Chirag Gunashli (ACG) field with approximately 90,000 barrels a day installed capacity (bp 30.37% operator).

? Regulatory approval was received on 8 September 2023 for the Murlach oil and gas development in the North Sea, a two well redevelopment of the Marnock-Skua field back to the ETAP (Eastern Trough Area Project) hub (bp 80% operator).

? In September, bp and its coventurers in the Clair joint venture, made the final investment decision to proceed with the construction and operation of the Shetland Crossover Pipeline, reinforcing the gas export network and supporting UK security of supply (bp 45% operator).

? Moving forward with concept selection for a bp-operated Tiber development project in the Gulf of Mexico.

Top of page 10

oil production & operations (continued)

(a) Includes bp's share of production of equity-accounted entities in the oil production & operations segment.

(b) Realizations are based on sales by consolidated subsidiaries only - this excludes equity-accounted entities.

(c) Realizations calculation methodology has been changed to reflect gas price fluctuations within the North Sea region. Third quarter 2022 and nine months 2022 were restated. There is no impact on financial results.

Top of page 11

customers & products

Financial results

? The replacement cost (RC) profit before interest and tax for the third quarter and nine months was $1,549 million and $4,784 million respectively, compared with $2,586 million and $8,098 million for the same periods in 2022. The third quarter and nine months are adjusted by an adverse impact of net adjusting items* of $506 million and $826 million respectively, compared with an adverse impact of net adjusting items of $139 million and $789 million for the same periods in 2022. Adjusting items include impacts of fair value accounting effects*, relative to management's internal measure of performance, which are an adverse impact of $198 million for the quarter and $230 million for the nine months in 2023, compared with an adverse impact of $59 million and $498 million for the same periods in 2022.

? After adjusting items, the underlying RC profit before interest and tax* for the third quarter and nine months was $2,055 million and $5,610 million respectively, compared with $2,725 million and $8,887 million for the same periods in 2022.

? The customers & products result for the third quarter was lower than the same period in 2022, with lower results in both customers and refining. The result for the nine months was significantly lower than the same period in 2022, primarily reflecting a lower refining and oil trading performance.

? customers - the convenience and mobility results, excluding Castrol, for the third quarter and nine months were lower than the same periods in 2022. In the third quarter, the benefits of a strong convenience performance and higher volumes were more than offset by a weaker retail performance, compared with the same period last year, which had benefited from higher margins as a result of falling cost of supply. In addition, the result included higher costs, including increased expenditure in our transition growth* engines, inflationary impacts and increased depreciation.

Castrol result for the third quarter was higher than the same period in 2022, primarily due to higher margins. The result for the nine months was lower, with higher margins more than offset by higher costs and adverse foreign exchange impacts.

? products - the products results for the third quarter and nine months were lower compared with the same periods in 2022, primarily due to lower industry refining margins. In refining, the result for the third quarter reflected lower realized refining margins, including the impact of narrower North American heavy crude differentials, and lower commercial optimization opportunities compared to the strong performance in the same period last year. This was partially offset by lower maintenance activity. In addition, the result for the nine months was impacted by higher turnaround activity. The oil trading contribution for the third quarter was very strong compared to the average result in the same period last year. The result for the nine months however was lower, as the first half of 2022 benefited from an exceptionally strong oil trading performance.

Operational update 

? bp-operated refining availability* for the third quarter and nine months was 96.3% and 96.0% respectively, higher compared with 94.3% and 94.4% for the same periods in 2022.

Strategic progress

? In support of bp's convenience transition growth engine delivery, bp signed an agreement in August with Auchan to extend its successful strategic convenience partnership in Poland, with plans to add more than 100 EasyAuchan stores to its retail network by the end of 2025. In addition, in September, bp strengthened its BPme Rewards loyalty scheme with the launch of loyalty pricing, giving customers exclusive discounts on retail store products at around 300 bp company-owned retail sites across the UK.

? In August, bp announced it had approved $500 million of investment in the US to begin building its EV network over the next two to three years. As part of this investment, in October, bp announced it had entered into an agreement with Tesla for the future purchase of $100 million of ultra-fast chargers.

? In September, bp pulse, The EV Network and NEC Group, launched the UK's largest public EV charging hub at the NEC campus in Birmingham, UK. The new Gigahub? at the NEC boasts 30 ultra-fast 150KW and 150 fast 7kW charge points enabling 180 EVs to charge simultaneously.

? In September, Castrol opened the Castrol Americas Technology Center, in Wayne, New Jersey. This is a 12,000 square foot, state-of-the-art laboratory to develop and test fluids for electric vehicles, engine and driveline oils and industrial lubricants.

? In October, bp's Archaea Energy announced the official start-up of its original Archaea Modular Design (AMD) renewable natural gas plant in Medora, Indiana, located next to a landfill site owned by Rumpke Waste and Recycling.

Top of page 12

customers & products (continued)

(a) A reconciliation to RC profit before interest and tax by business is provided on page 29.

(b) A reconciliation to RC profit before interest and tax by business is provided on page 29.

(c) Reported to the nearest 50.

Top of page 13

customers & products (continued)

(d) The RMM in the quarter is calculated based on bp's current refinery portfolio. On a comparative basis, the third quarter and nine months 2022 RMM would be $35.4/bbl and $33.4/bbl respectively.

Top of page 14

other businesses & corporate

Other businesses & corporate comprises innovation & engineering, bp ventures, Launchpad, regions, corporates & solutions, our corporate activities & functions and any residual costs of the Gulf of Mexico oil spill. It also includes Rosneft results up to 27 February 2022.

Financial results

? The replacement cost (RC) loss before interest and tax for the third quarter and nine months was $500 million and $887 million respectively, compared with a loss of $1,093 million and $26,840 million for the same periods in 2022. The third quarter and nine months are adjusted by an adverse impact of net adjusting items* of $197 million and $118 million respectively, compared with an adverse impact of net adjusting items of $688 million and $25,975 million for the same periods in 2022. Adjusting items include impacts of fair value accounting effects* which are an adverse impact of $146 million for the quarter and a favourable impact of $51 million for the nine months in 2023, an adverse impact of $785 million and $1,896 million for the same periods in 2022. The adjusting items for the nine months in 2022 mainly relate to Rosneft.

? After adjusting RC loss for net adjusting items, the underlying RC loss before interest and tax* for the third quarter and nine months was $303 million and $769 million respectively, compared with a loss of $405 million and $865 million for the same periods in 2022.

Strategic progress

? In August bp ventures invested $5 million in Advanced Ionics, a company developing a new category of hydrogen electrolyzers, supporting the expansion of green hydrogen* production.

? In August bp ventures announced that it had invested $5 million in Dynamon, which provides advanced data analytics and AI tools helping the road transport industry maximize sustainability.

? In July bp ventures invested $30 million in Electric Hydrogen, a company which is developing high efficiency and lower cost electrolyzers with the aim of delivering its first 100MW product in 2024.

(a) Includes fair value accounting effects relating to the hybrid bonds that were issued on 17 June 2020. See page 32 for more information.

other businesses & corporate (excluding Rosneft)

other businesses & corporate (Rosneft)

Top of page 15

Financial statements

Group income statement