SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 for the period ended March 31, 2003 BP p.l.c. (Translation of registrant's name into English) 1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F |X| Form 40-F ----------------- ----------------- Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No |X| ----------------- ----------------- THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-9790) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-65996) OF BP p.l.c., THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-83180) OF BP AUSTRALIA CAPITAL MARKETS LIMITED, BP CANADA FINANCE COMPANY, BP CAPITAL MARKETS p.l.c., BP CAPITAL MARKETS AMERICA INC. AND BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 33-21868) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-9020) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-9798) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-79399) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-34968) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-74414) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-103924) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-102583) OF BP p.l.c. AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-103923) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. Page 1 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GROUP RESULTS JANUARY - MARCH 2003 Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Turnover 63,788 36,290 ====== ====== Profit for the period 4,267 1,296 Exceptional items, net of tax (340) 70 ------ ------ Profit before exceptional items 3,927 1,366 ====== ====== Per Ordinary Share - cents Profit for the period 19.11 5.78 ====== ====== Dividends per Ordinary Share - cents 6.25 5.75 ====== ====== The following discussion should be read in conjunction with the consolidated financial statements and the related notes provided elsewhere in this Form 6-K and with the information, including the consolidated financial statements and related notes, for the year ended December 31, 2002 in BP p.l.c.'s Annual Report on Form 20-F for the year ended December 31, 2002. The first quarter trading environment was significantly more favourable than a year ago for both Exploration and Production and Refining and Marketing. The Brent oil price increased more than $10.00 per barrel; the Henry Hub gas price and the refining Global Indicator Margin were more than double the level of a year ago. Turnover for the three months ended March 31, 2003 was $63,788 million compared with $36,290 million for 2002. The increase in turnover for the first quarter reflects higher oil, natural gas and product prices, higher production, higher sales volumes and a stronger Euro. Profit for the three months ended March 31, 2003 was $4,267 million, compared with $1,296 million in the same period of 2002. Exceptional items are gains and losses on the sale of fixed assets and businesses or terminations of operations. Net exceptional gains in the first quarter of 2003 were $394 million ($340 million after tax) and principally relate to net gains from the sale of certain upstream interests. Net exceptional losses in the first quarter of 2002 were $109 million ($70 million after tax) and included the loss on closure of certain polypropylene facilities in Texas. Profit before exceptional items was $3,927 million for the three months ended March 31, 2003, compared with $1,366 million for the equivalent period of 2002. BP average liquids and natural gas realizations were up by more than half compared with a year ago, with significant improvement in refining margins and US retail margins. Improved volumes and cost efficiencies were also reflected in the first quarter results. For the three months ended March 31, 2003 and 2002, inventory holding gains were $799 million and $473 million, respectively. Inventory holding gains or losses represent the difference between the replacement cost of sales and the historical cost of sales calculated using the first-in first-out method. Profit before exceptional items for the three months ended March 31, 2003 is after charging impairment of $103 million related to the Yacheng field in China, costs of $90 million in respect of our restructuring activities in North America and the UK and a $49 million write-down of the Viscount asset in the North Sea in Exploration and Production; $18 million Veba integration costs in Refining and Marketing and includes a $130 million credit related to tax restructuring benefits. Profit before exceptional items for the three months ended March 31, 2002 is after charging severance costs of $72 million resulting from restructuring in North America and the North Sea and litigation costs of $55 million in Exploration and Production; Veba integration costs of $26 million in Refining and Marketing, and costs of $32 million related to major site restructuring and Solvay and Erdolchemie integration in Chemicals. Page 2 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued Interest expense for the three months ended March 31, 2003 was $220 million compared with $333 million in the same period of 2002, reflecting lower average debt and lower interest rates. Net taxation, other than production taxes, charged for the three months ended March 31, 2003 was $1,805 million compared with $753 million in the equivalent period last year. The tax on exceptional items was $54 million compared with a credit of $39 million for the first quarter of 2002. The effective tax rate was 30% for the three months ended March 31, 2003, compared with 36% for the equivalent period of 2002. The reduction in the rate reflects increased tax restructuring benefits, higher inventory holding gains (which are not taxable in certain jurisdictions), a rateably lower impact of goodwill amortization and the depreciation charge on uplifted asset values (for which no tax deduction is available), and nil tax charge on certain upstream disposals in the first quarter of 2003. Capital expenditure in the first quarter of 2003 was $2.9 billion; there were no acquisitions during the quarter. Capital expenditure and acquisitions for the first quarter of 2002 was $5.7 billion, including $2.6 billion for the acquisition of 51% of Veba Oil; excluding acquisitions capital expenditure was $3.1 billion. Disposal proceeds in the first quarter of 2003 were $2.5 billion compared with $0.3 billion for the equivalent period in 2002. Net cash inflow for the three months ended March 31, 2003 was $3.2 billion, compared with an outflow of $2.4 billion for the equivalent period of 2002, reflecting higher operating cash flow, higher disposal proceeds and lower acquisition spending. Net cash inflow from operating activities was $6.0 billion for the three months ended March 31, 2003, compared with $3.6 billion in the equivalent period in 2002, reflecting higher profit and depreciation partly offset by a higher requirement for working capital. Net debt at March 31, 2003 was $17.7 billion compared with $20.3 billion at December 31, 2002. The ratio of net debt to net debt plus equity was 20% at March 31, 2003 compared with 22% at December 31, 2002. This ratio shows the proportion of debt and equity used to finance our operations, and can also be used to measure borrowing capacity. In addition to reported debt, BP uses conventional off balance sheet sources of finance such as operating leases and joint venture and associated undertaking borrowings. The Group has access to other sources of liquidity in the form of committed facilities and other funding through the capital markets. BP believes that, taking into account the substantial amounts of undrawn borrowing facilities available, the Group has sufficient working capital for foreseeable requirements. In the normal course of business the Group has entered into certain long term purchase commitments principally relating to take or pay contracts for the purchase of natural gas, crude oil and chemicals feedstocks and throughput arrangements for pipelines. The Group expects to fulfil its obligations under these arrangements with no adverse consequences to the Group's results of operations or financial condition. The return on average capital employed was 19% for the first quarter of 2003 compared with 7% for the same period in 2002. Return on average capital employed is the ratio of profit including minority shareholders' interest and excluding post-tax interest on finance debt to average capital employed for the period. Capital employed is the total of BP shareholders' interest, minority shareholders' interest and finance debt. This performance measure is useful for shareholders and management as an indication of capital productivity over the long term. For further information on the return on average capital employed calculation see page 51 of this report. BP announced a first quarterly dividend for 2003 of 6.25 cents per ordinary share. Holders of ordinary shares will receive 3.947 pence per share and holders of American Depositary Receipts (ADRs) $0.375 per ADS. The dividend is payable on June 9, 2003 to shareholders on the register on May 16, 2003. Participants in the Dividend Reinvestment Plan or the dividend reinvestment facility in the US Direct Access Plan will receive the dividend in the form of shares, also on June 9, 2003. The company repurchased for cancellation 155 million of its own shares during the quarter, at a cost of $999 million. Page 3 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued DETAILED REVIEW OF BUSINESSES (EXCLUDING EXCEPTIONAL ITEMS) EXPLORATION AND PRODUCTION Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Turnover - $m 9,068 5,638 Total operating profit - $m 4,332 1,931 Results include: Exploration expense - $m 112 124 Of which: Exploration expenditure written off - $m 50 59 Key Statistics: Liquids(a) Average prices realized by BP - $/bbl 29.82 18.77 Production - mb/d 2,063 1,989 Natural gas Average prices realized by BP - $/mcf 3.87 2.27 Production - mmcf/d 9,017 8,746 Brent oil price - $/bbl 31.47 21.13 West Texas Intermediate oil price - $/bbl 34.00 21.54 Alaska North Slope US West Coast - $/bbl 33.16 19.76 Henry Hub gas price (b) - $/mmBtu 6.53 2.35 UK Gas - National Balancing Point - p/therm 21.28 19.22 --------------- (a) Crude oil and natural gas liquids (b) Henry Hub First of the Month Index (c) Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels. Turnover for the three months ended March 31, 2003 was $9,068 million compared with $5,638 million in the corresponding period in 2002, reflecting higher liquids and natural gas realizations as well as increased production. Operating profit for the three months ended March 31, 2003 was $4,332 million compared with $1,931 million for the equivalent period in 2002. The result for the first quarter 2003 is after charging impairment of $103 million related to the Yacheng field in China, costs of $90 million in respect of restructuring activities in North America and the UK and a $49 million write-down of the Viscount asset in the North Sea. The result for the first quarter of 2002 is after charging severance costs of $72 million resulting from restructuring in North America and the North Sea and litigation costs of $55 million. The result for the quarter benefited from strong realizations, with liquids up $11.05/bbl and natural gas up $1.60/mcf on a year ago. North American natural gas realizations lagged the increase in the Henry Hub marker price, as the effects of cold weather and low inventories were partly offset by an increase in regional differentials caused by pipeline constraints. The improved realizations were partly offset by a charge of $125 million for Unrealized Profit in Stock (UPIS) to remove the additional upstream margin from downstream inventories following an increase in the Alaska North Slope oil price. This compares to a charge of $56 million in the equivalent quarter last year. First quarter production was a record, increasing by over 3% to 3,618 mboe/d compared with a year ago as a result of the ramp up of production in the Deepwater Gulf of Mexico and Trinidad as new projects continue to be added, and the impact of our increased interest in Sidanco, partly offset by declines in mature areas. The impact of acquisition and divestment activity over the past year has had a broadly neutral effect on the quarter on quarter comparison. On April 1, 2003 two new discoveries were announced in Angola's deep offshore Block 17: Acacia-1 and Hortensia-1. During the quarter we approved the development of the Shah Deniz project in Azerbaijan, Greater Plutonio and Dalia in Angola and Rhum in the North Sea. Page 4 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued EXPLORATION AND PRODUCTION (concluded) We completed in the quarter the divestment of shallow water Gulf of Mexico assets to Apache and the exchange of our interest in Block A-18 in the Malaysia Thailand Joint Development Area for Amerada Hess's interests in Colombia. In addition, we completed the sale of other US assets. On April 2, 2003 we completed the sale of the Forties oil field in the North Sea to Apache. In February, we announced agreements with Perenco to sell a package of North Sea gas production assets and interests in Boqueron and Desarrollo Zuli Occidental (DZO) in Venezuela. In February, we called for redemption our $420 million Exchangeable Bonds, which were exchangeable for Lukoil ADSs. Bondholders converted to ADSs before the redemption date. This transaction completed the monetization of our stake in the Russian oil company Lukoil. The stake in Lukoil was obtained through the acquisition of ARCO. Repsol exercised their option in January to acquire a further 20% of our upstream interests in Trinidad. Our interest in BP Trinidad and Tobago LLC is now 70% and the transaction provides further leverage to access the gas markets and growth opportunities in Spain. We also sold 12.5% of the Tangguh liquefied natural gas project to China National Offshore Oil Corporation as part of our strategy to serve gas markets in Southern China. Page 5 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued GAS, POWER AND RENEWABLES Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Turnover - $m 17,998 7,768 Total operating profit - $m 221 115 Turnover for the three months ended March 31, 2003 was $17,998 million, compared with $7,768 million for the same period in 2002. The increase for the quarter reflects higher natural gas prices and sales volumes. Operating profit for the three months ended March 31, 2003 was $221 million compared with $115 million for the same period in 2002. The result reflects improved marketing and trading and natural gas liquids performance, partly offset by the absence of a contribution from Ruhrgas. Marketing margins were up significantly in North America as a result of prolonged cold weather in the northeast and midwest markets and an unusually large draw-down of gas in storage. In addition, North American gas volumes were 35% above the same period last year. The global LNG business continued to grow profitably as supply and shipping flexibility allowed the capture of additional business in Asia and the USA. In Spain, the Bilbao electricity generation plant (BP 25%) was commissioned as part of our gas to power strategy. The LNG ship British Innovator was delivered on March 29, 2003. The first quarter natural gas liquids result was up due to higher liquids prices and improved margins on winter propane sales, partly offset by the negative processing margins that resulted from gas prices increasing more than liquids prices. In Renewables, our solar business launched a new branded offer in California in the USA. Page 6 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued REFINING AND MARKETING Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Turnover - $m 41,435 24,889 Total operating profit - $m 1,251 563 Total refined product sales - mb/d 6,804 6,500 Refinery throughputs - mb/d 3,024 2,994 Global Indicator Refining Margin (a) - $/bbl 4.52 1.64 --------------- (a) The Global Indicator Refining Margin (GIM) is the average of seven regional indicator margins weighted for BP's crude refining capacity in each region. Each regional indicator margin is based on a single representative crude with product yields characteristic of the typical level of upgrading complexity. Turnover for the three months ended March 31, 2003 was $41,435 million compared with $24,889 million for the same period in the prior year. The increase in turnover for the first quarter is principally due to a stronger Euro, higher product prices and an additional month of contribution from Veba. Operating profit for the three months ended March 31, 2003 was $1,251 million compared with $563 million for the corresponding period of 2002. The result for the first quarter of 2003 includes inventory holding gains of $620 million and is after charging Veba integration costs of $18 million. The result for the first quarter of 2002 includes inventory holding gains of $495 million and was after charging Veba integration costs of $26 million. The increase in the result reflects improved worldwide refining margins, with some offset from higher utility costs. Refining throughputs increased by 1%. During the quarter, BP commissioned three new clean fuels units. The marketing environment reflected margins at normal levels, with US retail margins significantly up from the depressed levels of a year ago. Marketing volumes were flat compared with a year ago. During the quarter, an additional 600 sites were reimaged, bringing the total number of sites with the BP Helios to some 11,000 worldwide. Page 7 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued CHEMICALS Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Turnover - $m 3,938 2,642 Total operating profit - $m 285 47 Production (a) - kte 6,980 6,611 Chemicals Indicator Margin (b) - $/te 90(c) 80 -------------- (a) Includes BP share of joint ventures, associated undertakings and other interests in production. (b) The Chemicals Indicator Margin (CIM) is a weighted average of externally based product margins. It is based on market data collected by Nexant (formerly Chem Systems) in their quarterly market analyses, then weighted based on BP's product portfolio. While it does not cover our entire portfolio, it includes a broad range of products. Among the products and businesses covered in the CIM are the olefins and derivatives, the aromatics and derivatives, linear alpha-olefins (LAOs), acetic acid, vinyl acetate monomers and nitriles. Not included are fabrics and fibres, plastic fabrications, poly alpha-olefins (PAOs), anhydrides, speciality intermediates, and the remaining parts of the solvents and acetyls businesses. (c) Provisional. The data for the fourth quarter is based on two months' actual and one month of provisional data. Turnover for the three months ended March 31, 2003 was $3,938 million compared with $2,642 million for the equivalent period in 2002. The increase in turnover for the first quarter primarily reflects increased prices and higher production as a result of improved plant utilization and organic growth. Operating profit for the three months ended March 31, 2003, was $285 million, compared with $47 million for the equivalent period in 2002. The result for the first quarter of 2003 includes inventory holding gains of $146 million; the result for the first quarter of 2002 is after charging inventory holding losses of $29 million and costs of $32 million related to major site restructuring and Solvay and Erdolchemie integration. In the first quarter of 2003 there were better margins, increased production and improved unit costs compared with the corresponding period in 2002. Chemicals production of 6,980 thousand tonnes in the first quarter was a record and 369 thousand tonnes above a year ago. Higher production was due to improved plant utilization and organic growth, including one of our new Asian PTA plants coming on stream. During the quarter, we continued to reduce cash fixed costs per tonne of capacity through planned cost reductions. As part of the ongoing restructuring of our portfolio, we completed the divestment of the two remaining Burmah Castrol chemicals businesses, Fosroc Mining and Sericol. We also announced our intention to divest our speciality intermediates business (trimellitic anhydride, purified isophthalic acid (PIA) and maleic anhydride) based in Joliet, Illinois in the USA, plus the economic interest in our European PIA business. PT Petrokimia Nusantara Interindo (BP 75%), which operates a stand-alone polyethylene manufacturing plant in Indonesia, was sold to Indika Group on April 25, 2003. Page 8 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued OTHER BUSINESSES AND CORPORATE Three months ended March 31 (Unaudited) 2003 2002 ----- ----- ($ million) Turnover - $m 111 135 Operating (loss) - $m (165) (125) Other businesses and corporate comprises Finance, the Group's coal asset and aluminium asset, its investments in PetroChina and Sinopec, interest income and costs relating to corporate activities. EXCEPTIONAL ITEMS Three months ended March 31 (Unaudited) 2003 2002 ----- ----- ($ million) Profit (loss) on sale of fixed assets and businesses or termination of operations - $m 394 (109) Taxation credit (charge) - $m (54) 39 ----- ----- Exceptional items after taxation - $m 340 (70) ----- ----- Exceptional items for the first quarter principally relate to net gains from the sale of certain upstream interests. OUTLOOK World economic activity has remained weak during the first quarter with few signs of an imminent recovery. Confidence has declined in the USA, Europe and more recently in parts of Asia. OECD industrial production has remained essentially flat. Oil markets have been driven by the impact of war in Iraq, together with the loss of Venezuelan and Nigerian exports and a cold winter in the northern hemisphere. Dated Brent averaged $31.47/bbl in the first quarter. OECD commercial oil inventories declined to record lows in February in terms of forward days' cover, but appear to have stabilized recently. Rising OPEC production from the middle of the first quarter compensated for the loss of Iraqi exports. Crude prices have since fallen back to around $25/bbl. Oil supplies have proven adequate even without the release of strategic stocks. The prospect for prices depends upon a particularly wide range of uncertainties which include the timing and level of the return of Iraqi oil exports and the extent to which OPEC's earlier production increases are reversed. US natural gas prices have fallen back from the high levels of the first quarter (Henry Hub first of month index average of $6.53/mmbtu) after the end of the winter heating season. Prices remain above fuel oil parity in face of the challenge to refill gas in storage while production continues to fall. The opening of new pipeline infrastructure later in the second quarter has the potential to narrow differentials in the Rockies. Refining margins have begun the second quarter somewhat below the average for the first quarter (BP GIM $4.52/bbl) but remain firm in most regions. OECD commercial product inventories are at five year lows and may continue to underpin refining fundamentals in the short term. Retail margins strengthened towards the end of the first quarter, although prices to the consumer are now falling in line with product prices. Chemicals margins have been sharply lower than in the fourth quarter of last year, due to feedstock costs rising more rapidly than prices for the majority of petrochemical products. Recent declines in oil prices have begun to restore margins although weak demand conditions persist. Consistent with our financial framework and plan for the year, we expect capital investment to be in the range of $14 to 14.5 billion, excluding acquisitions. This excludes the initial cash payment due on completion of the TNK-BP transaction, expected to complete in the summer. We expect gearing to return to the lower half of our 21 to 30% target range following this transaction. Page 9 BP p.l.c. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - concluded FORWARD-LOOKING STATEMENTS In order to utilize the 'Safe Harbor' provisions of the United States Private Securities Litigation Reform Act of 1995, BP is providing the following cautionary statement. The foregoing discussion, in particular, although not limited to, the statements under `Group Results' and the statements under `Outlook', with regard to hydrocarbon production growth, the economic outlook, trends in the trading environment, the timing of acquisitions and divestments, the timing of new projects, oil and gas prices and margins, refining margins, retail margins, realizations on gas sales, inventory and product stock levels, capacity utilization, capital expenditure trends, gearing, working capital, profitability, results of operation, dividend payments, long term purchase commitments and liquidity or financial position are all forward-looking in nature. Forward-looking statements are also identified by such phrases as `will', `expects', `is expected to', `should', `may', `is likely to', `intends' and `believes'. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including the specific factors identified in the discussions accompanying such forward-looking statements, future levels of industry product supply, the timing of bringing new fields onstream, demand and pricing, operational problems, political stability and economic growth in relevant areas of the world, development and use of new technology, successful partnering, the actions of competitors, the actions of third party suppliers of facilities and services, natural disasters and other changes to business conditions, prolonged adverse weather conditions, wars and acts of terrorism or sabotage, and other factors discussed elsewhere in this report. These and other factors may cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Additional information, including information on factors which may affect BP's business, is contained in BP's Annual Report and Annual Accounts for 2002 and the Annual Report on Form 20-F for 2002 filed with the US Securities and Exchange Commission. 2003 DIVIDENDS On April 29, 2003, BP p.l.c. announced a first quarterly dividend for 2003 of 6.25 cents per ordinary share of 25 cents (ordinary shares), representing $0.375 per American Depositary Share (ADS) amounting to $1,386 million in total. The record date for qualifying US resident holders of American Depositary Shares as well as holders of ordinary shares is May 16, 2003, with payment to be made on June 9, 2003. Under the former US-UK Income Tax Treaty, dividends paid to qualifying ADS holders entitled them to a refund of a deemed UK tax credit equal to 1/9th of the announced dividend. This credit was exactly offset by an amount deemed by the former US-UK Income Tax Treaty to be a UK withholding tax. The net effect for ADS holders was a cash payment equal to the amount of the announced dividend, a potential foreign tax credit equal to 1/9th of the announced dividend, and a gross dividend equal to the sum of those two amounts. Under the new US-UK Tax Treaty, this deemed tax credit is no longer available on dividends paid to qualifying ADS shareholders, beginning with the first quarterly dividend for 2003. A dividend reinvestment facility is available for holders of ADSs through JPMorgan Chase Bank (formerly known as Morgan Guaranty Trust Company). Participants in the dividend reinvestment facility included in the US Direct Access Plan will receive the dividend in the form of shares on June 9, 2003. Page 10 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME Three months ended March 31 (Unaudited) 2003 2002 ------- ------- ($ million) Turnover - Note 2 64,186 36,569 Less: joint ventures 398 279 ------- ------- Group turnover 63,788 36,290 Cost of sales 54,439 31,078 Production taxes - Note 3 504 247 ------- ------- Gross profit 8,845 4,965 Distribution and administration expenses 3,244 2,691 Exploration expense - Note 4 112 124 ------- ------- 5,489 2,150 Other income 131 125 ------- ------- Group operating profit 5,620 2,275 Share of profits of joint ventures 118 70 Share of profits of associated undertakings 186 186 ------- ------- Total operating profit 5,924 2,531 Profit (loss) on sale of fixed assets and businesses or termination of operations - Note 5 394 (109) ------- ------- Profit before interest and tax 6,318 2,422 Interest expense - Note 6 220 333 ------- ------- Profit before taxation 6,098 2,089 Taxation - Note 7 1,805 753 ------- ------- Profit after taxation 4,293 1,336 Minority shareholders' interest 26 40 ------- ------- Profit for the period (a) 4,267 1,296 ======= ======= Earnings per ordinary share - cents (a) Basic 19.11 5.78 Diluted 19.05 5.75 ------- ------- Earnings per American depositary share - cents (a) Basic 114.66 34.68 Diluted 114.30 34.50 ---------- ---------- Average number of outstanding ordinary shares (thousands) 22,326,486 22,402,868 ========== ========== --------------- (a) A summary of the material adjustments to profit for the period which would be required if generally accepted accounting principles in the United States had been applied instead of those generally accepted in the United Kingdom is given in Note 13. Page 11 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET March 31, 2003 December 31, 2002 (Unaudited) ----------------------- ----------------------- ($ million) Fixed assets Intangible assets 14,190 15,566 Tangible assets 88,223 87,682 Investments 10,248 10,811 -------- -------- 112,661 114,059 Current assets Inventories 9,874 10,181 Receivables 39,058 33,150 Investments 228 215 Cash at bank and in hand 1,151 1,520 -------- --------- 50,311 45,066 -------- --------- Current liabilities - falling due within one year Finance debt 6,400 10,086 Accounts payable and accrued liabilities 40,614 36,215 -------- --------- 47,014 46,301 -------- --------- Net current liabilities 3,297 (1,235) -------- -------- Total assets less current liabilities 115,958 112,824 Noncurrent liabilities Finance debt 12,642 11,922 Accounts payable and accrued liabilities 3,411 3,455 Provisions for liabilities and charges Deferred tax 13,686 13,514 Other 14,096 13,886 -------- --------- 43,835 42,777 -------- -------- Net assets 72,123 70,047 Minority shareholders' interest - equity 1,047 638 -------- -------- BP shareholders' interest (a) - Note 10 71,076 69,409 ======== ======== Represented by: Capital shares Preference 21 21 Ordinary 5,560 5,595 Paid-in surplus 4,345 4,243 Merger reserve 27,050 27,033 Retained earnings 33,944 32,344 Other reserves 156 173 -------- -------- 71,076 69,409 ======== ======== --------------- (a) A summary of the material adjustments to BP shareholders' interest which would be required if generally accepted accounting principles in the United States had been applied instead of those generally accepted in the United Kingdom is given in Note 13. Page 12 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Net cash inflow from operating activities 5,961 3,636 ------ ------ Dividends from joint ventures 13 83 ------ ------ Dividends from associated undertakings 55 53 ------ ------ Servicing of finance and returns on investments Interest received 31 48 Interest paid (207) (309) Dividends received 6 2 Dividends paid to minority shareholders (2) (13) ------ ------ Net cash outflow from servicing of finance and returns on investments (172) (272) ------ ------ Taxation UK corporation tax (312) (187) Overseas tax (320) (258) ------ ------ Tax paid (632) (445) ------ ------ Capital expenditure and financial investment Payments for fixed assets (2,877) (2,799) Proceeds from the sale of fixed assets 2,317 317 ------ ------ Net cash outflow for capital expenditure and financial investment (560) (2,482) ------ ------ Acquisitions and disposals Investments in associated undertakings (186) (143) Acquisitions, net of cash acquired - (1,550) Net investment in joint ventures (14) (46) Proceeds from the sale of businesses 160 31 ------ ------ Net cash outflow for acquisitions and disposals (40) (1,708) ------ ------ Equity dividends paid (1,397) (1,288) ------ ------ Net cash inflow (outflow) 3,228 (2,423) ====== ====== Financing 3,593 (2,283) Management of liquid resources 13 (165) (Decrease) increase in cash (378) 25 ------ ------ 3,228 (2,423) ====== ====== --------------- (a) This cash flow statement has been prepared in accordance with UK GAAP. A cash flow statement presented on a SFAS 95 format is included in Note 13. Page 13 BP p.l.c. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - concluded Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Reconciliation of profit before interest and tax to net cash inflow from operating activities Profit before interest and tax 6,318 2,422 Depreciation and amounts provided 2,709 2,153 Exploration expenditure written off 50 59 Share of profits of joint ventures and associated undertakings (304) (256) Interest and other income (48) (63) (Profit) loss on sale of fixed assets and businesses (394) 109 Charge for provisions 202 169 Utilization of provisions (228) (238) Decrease (increase) in inventories 376 (496) Increase in debtors (6,935) (410) Increase in creditors 4,215 187 ------ ------ Net cash inflow from operating activities 5,961 3,636 ====== ====== Financing Long-term borrowing (1,015) (1,746) Repayments of long-term borrowing 403 234 Short-term borrowing (626) (3,499) Repayments of short-term borrowing 3,899 2,819 ------ ------ 2,661 (2,192) Issue of ordinary share capital for employee share schemes (67) (91) Repurchase of ordinary share capital 999 - ------ ------ Net cash inflow (outflow) from financing 3,593 (2,283) ====== ====== --------------- (a) This cash flow statement has been prepared in accordance with UK GAAP. A cash flow statement presented on a SFAS 95 format is included in Note 13. Page 14 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. 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 the periods presented. The interim financial statements and notes included in this Report should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2002 included in BP's Annual Report on Form 20-F filed with the Securities and Exchange Commission. Three months ended March 31 (Unaudited) 2003 2002 ------- ------- ($ million) 2. Turnover By business Exploration and Production 9,068 5,638 Gas, Power and Renewables 17,998 7,768 Refining and Marketing 41,435 24,889 Chemicals 3,938 2,642 Other businesses and corporate 111 135 ------- ------- 72,550 41,072 Less: sales between businesses 8,762 4,782 ------- ------- Group excluding joint ventures 63,788 36,290 Share of sales by joint ventures 398 279 ------- ------- 64,186 36,569 ======= ======= By geographical area Group excluding joint ventures UK 15,427 10,995 Rest of Europe 13,022 9,119 USA 31,098 15,265 Rest of World 13,736 6,984 ------- ------- 73,283 42,363 Less: sales between areas 9,495 6,073 ------- ------- 63,788 36,290 ======= ======= 3. Production taxes UK petroleum revenue tax 133 63 Overseas production taxes 371 184 ------- ------- 504 247 ======= ======= 4. Exploration expense Exploration and Production UK 3 6 Rest of Europe 4 23 USA 37 42 Rest of World 68 53 ------- ------- 112 124 ======= ======= Page 15 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Three months ended March 31 (Unaudited) 2003 2002 ------- ------- ($ million) 5. Analysis of exceptional items Profit (loss) on sale of fixed assets and businesses or termination of operations Exploration and Production 433 5 Gas, Power and Renewables - - Refining and Marketing (52) (45) Chemicals 7 (60) Other businesses and corporate 6 (9) ------- ------- Exceptional items before taxation 394 (109) Taxation (charge) credit (54) 39 ------- ------- Exceptional items after taxation 340 (70) ======= ======= 6. Interest expense Group interest payable 187 267 Capitalized (34) (15) ------- ------- 153 252 Joint ventures 13 14 Associated undertakings 10 24 Unwinding of discount on provisions 44 43 ------- ------- 220 333 ======= ======= 7. Charge for taxation Current 1,581 533 Deferred 224 220 ------- ------- 1,805 753 ======= ======= United Kingdom 485 189 Overseas 1,320 564 ------- ------- 1,805 753 ======= ======= Page 16 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 8. Business and geographical analysis Gas, Other Exploration Power Refining businesses By business and and and and Production Renewables Marketing Chemicals corporate Eliminations Total ----------- ---------- --------- --------- ---------- ------------ ------ ($ million) Three months ended March 31, 2003 Group turnover - third parties 2,031 17,449 40,380 3,817 111 - 63,788 - sales between businesses 7,037 549 1,055 121 - (8,762) - ------------------------------------------------------------------------------------ 9,068 17,998 41,435 3,938 111 (8,762) 63,788 ------------------------------------------------------------------------------------ Share of sales by joint ventures 181 - 100 117 - - 398 ------------------------------------------------------------------------------------ Equity accounted income 234 (1) 37 25 9 - 304 ------------------------------------------------------------------------------------ Total operating profit (loss) 4,332 221 1,251 285 (165) - 5,924 Exceptional items 433 - (52) 7 6 - 394 ------------------------------------------------------------------------------------ Profit (loss) before interest and tax 4,765 221 1,199 292 (159) - 6,318 ------------------------------------------------------------------------------------ Capital expenditure and acquisitions 2,137 68 537 96 36 - 2,874 Three months ended March 31, 2002 Group turnover - third parties 2,091 7,313 24,221 2,530 135 - 36,290 - sales between businesses 3,547 455 668 112 - (4,782) - ------------------------------------------------------------------------------------ 5,638 7,768 24,889 2,642 135 (4,782) 36,290 ------------------------------------------------------------------------------------ Share of sales by joint ventures 95 - 77 107 - - 279 ------------------------------------------------------------------------------------ Equity accounted income 125 54 51 9 17 - 256 ------------------------------------------------------------------------------------ Total operating profit (loss) 1,931 115 563 47 (125) - 2,531 Exceptional items 5 - (45) (60) (9) - (109) ------------------------------------------------------------------------------------ Profit (loss) before interest and tax 1,936 115 518 (13) (134) - 2,422 ------------------------------------------------------------------------------------ Capital expenditure and acquisitions 2,313 46 3,137 188 52 - 5,736 Page 17 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 8. Business and geographical analysis - continued Rest of Rest of By geographical area UK Europe USA World Eliminations Total ------- -------- ------- ------- ------------ ------- ($ million) Three months ended March 31, 2003 Group turnover - third parties 11,214 10,762 30,612 11,200 - 63,788 - sales between areas 4,213 2,260 486 2,536 (9,495) - ------------------------------------------------------------------ 15,427 13,022 31,098 13,736 (9,495) 63,788 ------------------------------------------------------------------ Share of sales by joint ventures 28 89 42 239 - 398 ------------------------------------------------------------------ Equity accounted income (1) (3) 35 273 - 304 ------------------------------------------------------------------ Total operating profit 1,118 690 2,489 1,627 - 5,924 Exceptional items (12) (41) (146) 593 - 394 ------------------------------------------------------------------ Profit before interest and tax 1,106 649 2,343 2,220 - 6,318 ------------------------------------------------------------------ Capital expenditure and acquisitions 301 202 1,396 975 - 2,874 Three months ended March 31, 2002 Group turnover - third parties 8,412 7,318 14,998 5,562 - 36,290 - sales between areas 2,583 1,801 267 1,422 (6,073) - ------------------------------------------------------------------ 10,995 9,119 15,265 6,984 (6,073) 36,290 ------------------------------------------------------------------ Share of sales by joint ventures 32 56 43 148 - 279 ------------------------------------------------------------------ Equity accounted income (2) 61 55 142 - 256 ------------------------------------------------------------------ Total operating profit 576 498 442 1,015 - 2,531 Exceptional items (9) 10 (109) (1) - (109) ------------------------------------------------------------------ Profit before interest and tax 567 508 333 1,014 - 2,422 ------------------------------------------------------------------ Capital expenditure and acquisitions 409 2,852 1,531 944 - 5,736 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) 9. Analysis of changes in net debt Opening balance Finance debt 22,008 21,417 Less: Cash 1,520 1,358 Current asset investments 215 450 ------ ------ Opening net debt 20,273 19,609 ------ ------ Closing balance Finance debt 19,042 24,531 Less: Cash 1,151 1,379 Current asset investments 228 286 ------ ------ Closing net debt 17,663 22,866 ------ ------ Decrease (increase) in net debt 2,610 (3,257) ====== ====== Movement in cash/bank overdrafts (378) 25 Increase (decrease) in current asset investments 13 (165) Net cash outflow (inflow) from financing (excluding share capital) 2,661 (2,192) Exchange of Exchangeable Bonds for Lukoil Amercian Depositary Shares 420 - Other movements 64 25 Debt acquired - (999) ------ ------ Movements in net debt before exchange effects 2,780 (3,306) Exchange adjustments (170) 49 ------ ------ Decrease (increase) in net debt 2,610 (3,257) ====== ====== 10.Movement in BP shareholders' interest $ million Balance at December 31, 2002 69,409 Profit for the period 4,267 Distribution to shareholders (1,386) Currency translation differences (net of tax) (282) Issue of ordinary share capital for employee share schemes 67 Repurchase of ordinary share capital (999) ------- Balance at March 31, 2003 71,076 ======= Page 19 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 11. Earnings per share Basic earnings per share excludes the dilutive effects of options, warrants and convertible securities. Diluted earnings per share reflects the potential dilution that could occur if options, warrants or convertible securities were exercised or converted into ordinary shares that shared in the earnings of the Group. The dilutive effect of outstanding share options is as follows: Three months ended March 31 (Unaudited) 2003 2002 ---------------------- (shares thousands) Weighted average number of ordinary shares 22,326,486 22,402,868 Ordinary shares issuable under employee share schemes 68,313 117,560 ---------- ---------- 22,394,799 22,520,428 ========== ========== 12. Share-based compensation BP accounts for share options granted to employees using the intrinsic-value method. If the fair value of options granted in any particular year is estimated and this value amortized over the vesting period of the options, an indication of the cost of granting options to employees can be made. The fair value of each share option granted has been estimated using a Black-Scholes option pricing model. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, `Accounting for Stock-Based Compensation', to share based employee compensation. Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Profit for the period applicable to ordinary shares, as reported 4,267 1,296 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (24) (26) ------- ------- Pro forma net income 4,243 1,270 ======= ======= (cents) Earnings per share Basic - as reported 19.11 5.78 Basic - pro forma 19.00 5.67 Diluted - as reported 19.05 5.75 Diluted - pro forma 18.95 5.64 Page 20 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles The consolidated financial statements of the BP Group are prepared in accordance with UK GAAP which differs in certain respects from US GAAP. The principal differences between US GAAP and UK GAAP for BP Group reporting relate to the following: (i) Group consolidation Where the Group conducts activities through a joint arrangement that is not carrying on a trade or business in its own right, the Group accounts for its own assets, liabilities and cash flows of the activity measured according to the terms of the arrangement. For the Group this method of accounting applies to certain oil and natural gas activities and undivided interests in pipelines. US GAAP permits these activities to be accounted for by proportional consolidation, which is equivalent to UK GAAP. Joint ventures and associated undertakings are accounted for by the equity method. UK GAAP requires the consolidated financial statements to show separately the Group proportion of operating profit or loss, exceptional items, inventory holding gains or losses, interest expense and taxation of joint ventures and associated undertakings. In addition the Group's share of turnover of joint ventures should be disclosed. For US GAAP the after tax profits or losses (i.e. operating results after exceptional items, inventory holding gains or losses, interest expense and taxation) are included in the income statement as a single line item. UK GAAP requires the Group's share of the gross assets and gross liabilities of joint ventures to be shown on the face of the balance sheet whereas under US GAAP the net investment is included as a single line item. The following summarizes the reclassifications for joint ventures and associated undertakings necessary to accord with US GAAP. Three months ended March 31, 2003 (Unaudited) ------------------------------------------------ As US GAAP Increase (decrease) in caption heading Reported Reclassification Presentation ------------------------------------------------ ($ million) Consolidated statement of income Other income 131 216 347 Share of profits of JVs and 304 (304) - associated undertakings Exceptional items before taxation 394 - 394 Interest expense 220 (23) 197 Taxation 1,805 (65) 1,740 Profit for the period 4,267 - 4,267 Three months ended March 31, 2002 (Unaudited) ------------------------------------------------ As US GAAP Increase (decrease) in caption heading Reported Reclassification Presentation ------------------------------------------------ ($ million) Consolidated statement of income Other income 125 153 278 Share of profits of JVs and 256 (256) - associated undertakings Exceptional items before taxation (109) - (109) Interest expense 333 (38) 295 Taxation 753 (65) 688 Profit for the period 1,296 - 1,296 Page 21 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (ii) Exceptional items Under UK GAAP certain exceptional items are shown separately on the face of the income statement after operating profit. These items are profits or losses on the sale of fixed assets and businesses or termination of operations and fundamental restructuring charges. Under US GAAP these items are classified as operating income or expenses. (iii)Deferred taxation/business combinations US GAAP requires the recognition of a deferred tax asset or liability for the tax effects of differences between the assigned values and the tax bases of assets acquired and liabilities assumed in a purchase business combination, whereas under UK GAAP no such deferred tax asset or liability is recognized. Under US GAAP the deferred tax asset or liability is amortized over the same period as the assets and liabilities to which it relates. The adjustments to profit for the period and to BP shareholders' interest to accord with US GAAP are summarized below. Three months ended March 31 Increase (decrease) in caption heading (Unaudited) 2003 2002 ------- ------- ($ million) Cost of sales 692 151 Taxation (728) (94) Profit for the period 36 (57) ======= ======= At At March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Tangible assets 6,749 7,408 Deferred taxation 6,794 7,486 BP shareholders' interest (45) (78) ======= ======= Page 22 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (iv) Provisions UK GAAP requires provisions for decommissioning, environmental liabilities and onerous contracts to be determined on a discounted basis if the effect of the time value of money is material. The provisions for decommissioning and environmental liabilities are estimated using costs based on current prices and discounted using real discount rates. Unwinding of the discount and the effect of a change in the discount rate is included in interest expense in the period. When a decommissioning provision is set up, a tangible fixed asset of the same amount is also recognized and is subsequently depreciated as part of the capital costs of the facilities. On January 1, 2003 the Group adopted Statement of Financial Accounting Standards No. 143 'Accounting for Asset Retirement Obligations' (SFAS 143). SFAS 143 requires companies to record liabilities equal to the fair value of their asset retirement obligations when they are incurred (typically when the asset is installed at the production location). When the liability is initially recorded, companies capitalize an equivalent amount as part of the cost of the asset. Over time the liability is accreted for the change in its present value each period, and the initial capitalized cost is depreciated over the useful life of the related asset. The provisions for decommissioning under SFAS 143 are set up on a similar basis to UK GAAP except that estimated future cash outflows are discounted using a credit-adjusted risk-free rate rather than a real discount rate. The cumulative effect of adopting SFAS 143 at January 1, 2003 resulted in an after tax credit to income, as adjusted to accord with US GAAP, of $1,002 million. The effect of adoption also included an increase in total assets, as adjusted to accord with US GAAP, of $687 million and a reduction in total liabilities, as adjusted to accord with US GAAP, of $315 million. The effect of adoption on the three months ended March 31, 2003 was to decrease profit for the period before cumulative effect of accounting changes as adjusted to accord with US GAAP by $23 million. Under US GAAP environmental liabilities are discounted only where the timing and amounts of payments are fixed and reliably determinable. The adjustments to profit for the period and to BP shareholders' interest to accord with US GAAP are summarized below. Three months ended March 31 Increase (decrease) in caption heading (Unaudited) 2003 2002 ------- ------- ($ million) Cost of sales (34) 77 Interest expense 6 (43) Taxation 2 (8) Profit for the period before cumulative effect of accounting changes 26 (26) Cumulative effect of accounting changes 1,002 - Profit for the period 1,028 (26) ======= ======= At At March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Tangible assets (601) (1,297) Provisions (533) 412 Deferred taxation (5) (621) BP shareholders' interest (63) (1,088) ======= ======= Page 23 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (iv) Provisions (concluded) The following pro forma data summarize the results of operations for the three months ended March 31, 2003 and 2002 assuming SFAS 143 was applied retroactively with effect from January 1, 2002. Three months ended March 31 (Unaudited) 2003 2002 ------- ------- ($ million) Profit for the period applicable to ordinary shares as adjusted to accord with US GAAP, as reported As reported 4,734 2,051 Pro forma 4,734 2,072 Per ordinary share - cents Basic - as reported 21.20 9.16 Basic - pro forma 21.20 9.25 Diluted - as reported 21.14 9.11 Diluted - pro forma 21.14 9.20 Per American Depositary Share - cents Basic - as reported 127.20 54.96 Basic - pro forma 127.20 55.50 Diluted - as reported 126.84 54.66 Diluted - pro forma 126.84 55.20 The pro forma asset retirement obligation at January 1, 2002 and December 31, 2002, assuming SFAS 143 was applied retroactively with effect from January 1, 2002, amounts to $3,268 million and $3,469 million, respectively. (v) Sale and leaseback The sale and leaseback of an office building in Chicago, Illinois in 1998 was treated as a sale for UK GAAP whereas for US GAAP it was treated as a financing transaction under US GAAP. The remaining interest in this building was sold in January 2003. Provisions were recognized under UK GAAP in 1999 and 2002 to cover the likely shortfall on rental income from subletting the Chicago office building. As the original sale and leaseback was not treated as a sale for US GAAP the provision was reversed for US GAAP. Following the disposal of the building a provision has now been recognized for US GAAP. Under UK GAAP the profit arising on the sale and operating leaseback of certain railcars in 1999 was taken to income in the period in which the transaction occurred. Under US GAAP this profit was not recognized immediately but amortized over the term of the operating lease. Page 24 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (v) Sale and leaseback (concluded) The adjustments to profit for the period and BP shareholders' interest to accord with US GAAP are summarized below. Three months ended March 31 Increase (decrease) in caption heading (Unaudited) 2003 2002 ------- ------- ($ million) Cost of sales (108) 5 Taxation 37 (1) Profit for the period 71 (4) ======= ======= At At March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Tangible assets - 161 Other accounts payable and accrued liabilities 26 27 Provisions 29 (117) Finance debt - 413 Deferred taxation (19) (56) BP shareholders' interest (36) (106) ======= ======= (vi) Goodwill and intangible assets Various differences in the basis for determining goodwill between UK and US GAAP result in goodwill for US GAAP reporting differing from the amount recognized under UK GAAP. On January 1, 2002 the Group adopted Statement of Financial Accounting Standards No. 142 `Goodwill and Other Intangible Assets' (SFAS 142) for US GAAP reporting. This standard eliminates the requirement to amortize goodwill and indefinite lived intangible assets. Rather, such assets are subject to periodic impairment testing. Intangible assets that are not deemed to have an indefinite life continue to be amortized over their estimated useful lives. Amortization of goodwill charged to income under UK GAAP has been reversed for US GAAP. The adjustments to profit for the period and to BP shareholders' interest to accord with US GAAP are summarized below. Three months ended March 31 Increase (decrease) in caption heading (Unaudited) 2003 2002 ------- ------- ($ million) Cost of sales (342) (321) Profit for the period 342 321 ======= ======= At At March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Intangible assets 245 (84) BP shareholders' interest 245 (84) ======= ======= Page 25 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (vi) Goodwill and intangible assets (concluded) Changes to exploration expenditure, goodwill and other intangible assets, as adjusted to accord with US GAAP, during the three months ended March 31, 2003 are shown below. Exploration Other expenditure Goodwill intangibles Total --------------------------------------------- ($ million) Net book amount At January 1, 2003 4,944 10,354 488 15,786 Amortization expense (50) - (13) (63) Acquisitions - - - - Other movements (639) (263) 9 (893) --------------------------------------------- At March 31, 2003 4,255 10,091 484 14,830 ============================================= Amortization expense relating to other intangibles is expected to be in the range $100-$200 million in each of the succeeding five years. During the second quarter of 2002 the Group completed a goodwill impairment review using the two-step process prescribed in SFAS 142. The first step includes a comparison of the fair value of a reporting unit to its carrying value, including goodwill. Where the carrying value exceeds the fair value, the goodwill of the reporting unit is potentially impaired and the second step is then completed in order to measure the impairment loss, if any. No impairment charge resulted from this review. (vii) Derivative financial instruments and hedging activities SFAS 133 `Accounting for Derivative Instruments and Hedging Activities' requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. To the extent that certain criteria are met, SFAS 133 permits, but does not require, hedge accounting. In the normal course of business the Group is a party to derivative financial instruments with off-balance sheet risk, primarily to manage its exposure to fluctuations in foreign currency exchange rates and interest rates, including management of the balance between floating rate and fixed rate debt. The Group also manages certain of its exposures to movements in oil and natural gas prices. In addition, the Group trades derivatives in conjunction with these risk management activities. All oil price derivatives and all derivatives held for trading are carried on the Group's balance sheet at fair value with changes in that value recognized in earnings of the period for both UK and US GAAP. Certain financial derivatives used to manage foreign currency and interest rate risk that qualify for hedge accounting under UK GAAP are marked to market under SFAS 133. Under US GAAP the fair values of derivative financial instruments are shown as current assets and liabilities as appropriate. The Group has a number of long-term natural gas contracts which have been in place for many years. The pricing structure for those contracts is not directly related to the market price of natural gas but to the price of other commodities or indices, such as fuel oil or consumer price indices. On the basis of SFAS 133 Implementation Issue C11, these contracts have been marked to market with effect from July 1, 2001. Page 26 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (vii) Derivative financial instruments and hedging activities (concluded) In October 2002, the FASB Emerging Issues Task Force (EITF) reached a consensus which rescinded EITF Issue No. 98-10, 'Accounting for Contracts Involved in Energy Trading and Risk Management Activities' (EITF 98-10). As a result of this consensus, all energy-related, non-derivative contracts (such as transportation, storage, tolling, and requirements contracts that do not meet the definition of a derivative) and trading inventories that are accounted for at fair value pursuant to EITF 98-10 will no longer be accounted for at fair value upon application of the consensus. Rather, such contracts will be accounted for as executory contracts on an accruals basis. The consensus is applicable for all contracts executed after October 25, 2002. Application of the consensus to contracts existing prior to October 26, 2002 is required to be accounted for as a cumulative effect of a change in accounting principle effective for periods beginning after December 15, 2002. For BP's reporting under UK GAAP, energy-related non-derivative contracts associated with trading activities are marked to market with gains and losses recognized in the income statement. The cumulative effect of adopting the consensus at January 1, 2003 resulted in an after tax credit to income, as adjusted to accord with US GAAP, of $50 million. Also in October 2002, the FASB Emerging Issues Task Force (EITF) reached a consensus with regards to EITF Issue No. 02-3, `Issues Involved in Accounting for Contracts Under EITF Issue No. 98-10 "Accounting for Contracts Involved in Energy Trading and Risk Management Activities"' (EITF 02-3). Under this consensus trading inventories should be recorded on the balance sheet at historical cost. The Group marks trading inventories to market at the balance sheet date. Thus a UK/US GAAP difference arises which impacts both profit for the year and BP shareholders' interest due to the difference in inventory valuations. The adjustments to profit for the period and to BP shareholders' interest to accord with US GAAP are summarized below. Three months ended March 31 Increase (decrease) in caption heading (Unaudited) 2003 2002 ------- ------- ($ million) Cost of sales 12 (804) Taxation (4) 281 Profit for the period before cumulative effect of accounting changes (8) 523 Cumulative effect of accounting changes 50 - Profit for the period 42 523 ======= ======= At At March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Inventories (148) (209) Accounts payable and accrued liabilities (17) (13) Deferred taxation (39) (61) BP shareholders' interest (92) (135) ======= ======= Page 27 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (viii)Gain arising on asset exchange For UK GAAP the transaction with Solvay in the fourth quarter of 2001, which led to the exchange of businesses for an interest in a joint venture and an associated undertaking, has been treated as an asset swap which does not give rise to a gain or loss. Under US GAAP the transaction has been treated as a disposal and acquisition at fair value which gives rise to a pre-tax gain on disposal of $242 million ($157 million after tax). The adjustments to profit for the period and to BP shareholders' interest to accord with US GAAP are summarized below. Three months ended March 31 Increase (decrease) in caption heading (Unaudited) 2003 2002 ------- ------- ($ million) Cost of sales 5 9 Taxation (2) (4) Profit for the period (3) (5) ======= ======= At At March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Intangible assets 163 167 Accounts payable and accrued liabilities (50) (52) Deferred taxation 75 77 BP shareholders' interest 138 142 ======= ======= (ix) Ordinary shares held for future awards to employees Under UK GAAP, Company shares held by an Employee Share Ownership Plan to meet future requirements of employee share schemes are recorded in the balance sheet as Fixed assets -- investments. Under US GAAP, such shares are recorded in the balance sheet as a reduction of shareholders' interest. The adjustment to BP shareholders' interest to accord with US GAAP is shown below. At At Increase (decrease) in caption heading March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Fixed assets - Investments (117) (159) BP shareholders' interest (117) (159) ======= ======= Page 28 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (x) Dividends Under UK GAAP, dividends are recorded in the period in respect of which they are announced or declared by the board of directors to the shareholders. Under US GAAP, dividends are recorded in the period in which dividends are declared. The adjustment to BP shareholders' interest to accord with US GAAP is shown below. At At Increase (decrease) in caption heading March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Other accounts payable and accrued liabilities (1,386) (1,398) BP shareholders' interest (1,386) (1,398) ======= ======= (xi)Investments Under UK GAAP certain of the Group's equity investments are reported as either fixed asset or current asset investments and carried on the balance sheet at cost subject to review for impairment. For US GAAP these investments are classified as available-for-sale securities. Consequently they are reported at fair value, with unrealized holding gains and losses, net of tax, reported in accumulated other comprehensive income. If a decline in fair value below cost is 'other than temporary' the unrealized loss is accounted for as a realized loss and charged against income. The adjustment to BP shareholders' interest to accord with US GAAP is shown below. At At Increase (decrease) in caption heading March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Fixed assets - Investments 11 52 Deferred taxation 4 18 BP shareholders' interest 7 34 ======= ======= (xii) Additional minimum pension liability Where a pension plan has an unfunded accumulated benefit obligation, US GAAP requires such amount to be recognized as a liability in the balance sheet. The adjustment resulting from the recognition of any such minimum liability, including the elimination of amounts previously recognized as a prepaid benefit cost, is reported as an intangible asset to the extent of unrecognized prior service cost with the remaining amount reported in comprehensive income. The adjustments to BP shareholders' interest to accord with US GAAP are summarized below. At At Increase (decrease) in caption heading March 31, 2003 December 31, (Unaudited) 2002 -------------- ------------ ($ million) Intangible assets 137 137 Other receivables falling due after more than one year (1,211) (1,211) Noncurrent liabilities - accounts payable accrued liabilities 2,459 2,459 Deferred taxation (1,247) (1,247) BP shareholders' interest (2,286) (2,286) ======= ======= The following is a summary of the adjustments to profit for the period and to BP shareholders' interest which would be required if generally accepted accounting principles in the USA (US GAAP) had been applied instead of those generally accepted in the United Kingdom (UK GAAP). Page 29 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued (xii) Additional minimum pension liability (concluded) These results are stated using the first-in first-out method of inventory valuation. Profit for the period Three months ended March 31 (Unaudited) 2003 2002 (a) ------------------- ($ million) Profit as reported in the consolidated statement of income 4,267 1,296 Adjustments: Deferred taxation/business combinations (iii) 36 (57) Provisions (iv) 26 (26) Sale and leaseback (v) 71 (4) Goodwill (vi) 342 321 Derivative financial instruments (vii) (8) 523 Gain arising on asset exchange (viii) (3) (5) Other 3 3 ------- ------- 467 755 ------- ------- Profit (loss) for the period as adjusted to accord with US GAAP before cumulative effect of accounting changes 4,734 2,051 Cumulative effect of accounting changes: Provisions 1,002 - Derivative financial instruments 50 - ------- ------- Profit for the period as adjusted to accord with US GAAP 5,786 2,051 ======= ======= Profit for the period as adjusted: Per ordinary share - cents Basic - before cumulative effect of accounting changes 21.20 9.16 Cumulative effect of accounting changes Provisions 4.49 - Derivative financial instruments 0.23 - ------- ------- 25.92 9.16 ======= ======= Diluted - before cumulative effect of accounting changes 21.14 9.11 Cumulative effect of accounting changes Provisions 4.49 - Derivative financial instruments 0.22 - ------- ------- 25.84 9.11 ======= ======= Per American Depositary Share - cents (b) Basic - before cumulative effect of accounting changes 127.20 54.96 Cumulative effect of accounting changes Provisions 26.94 - Derivative financial instruments 1.38 - ------- ------- 155.52 54.96 ======= ======= Diluted - before cumulative effect of accounting changes 126.84 54.66 Cumulative effect of accounting changes Provisions 26.88 - Derivative financial instruments 1.32 - ------- ------- 155.04 54.66 ======= ======= Page 30 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued BP shareholders' interest March 31, 2003 (Unaudited) December 31, 2002 ----------------------------------- ($ million) BP shareholders' interest as reported in the consolidated balance sheet 71,076 69,409 Adjustments: -------- -------- Deferred taxation/business combinations (45) (78) Provisions (iv) (63) (1,088) Sale and leaseback (v) (36) (106) Goodwill (vi) 245 (84) Derivative financial instruments (vii) (92) (135) Gain arising on asset exchange (viii) 138 142 Ordinary shares held for future awards to employees (ix) (117) (159) Dividends (x) 1,386 1,398 Investments (xi) 7 34 Additional minimum pension liability (xii) (2,286) (2,286) Other (47) (48) -------- -------- (910) (2,410) -------- -------- BP shareholders' interest as adjusted to accord with US GAAP 70,166 66,999 ======== ======== --------------- (a)One American Depositary Share is equivalent to six ordinary shares. Comprehensive income The components of comprehensive income, net of related tax are as follows: Three months ended March 31 (Unaudited) 2003 2002 -------- -------- ($ million) Profit for the period as adjusted to accord with US GAAP 5,786 2,051 Currency translation differences (282) (356) Derivative financial instruments 43 - Net unrealized gain (loss) on investments (27) 161 Additional minimum pension liability - - -------- -------- Comprehensive income 5,520 1,856 ======== ======== Accumulated other comprehensive income at March 31, 2003 and December 31, 2002 comprised losses of $3,975 million and $3,709 million, respectively. Page 31 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued Consolidated statement of cash flows The Group's financial statements include a consolidated statement of cash flows in accordance with the revised UK Financial Reporting Standard No. 1 (FRS 1). The statement prepared under FRS 1 presents substantially the same information as that required under FASB Statement of Financial Accounting Standards No. 95 'Statement of Cash Flows' (SFAS 95). Under FRS 1 cash flows are presented for (i) operating activities; (ii) dividends from joint ventures; (iii) dividends from associated undertakings; (iv) servicing of finance and returns on investments; (v) taxation; (vi) capital expenditure and financial investment; (vii) acquisitions and disposals; (viii) dividends; (ix) financing; and (x) management of liquid resources. SFAS 95 only requires presentation of cash flows from operating, investing and financing activities. Cash flows under FRS 1 in respect of dividends from joint ventures and associated undertakings, taxation and servicing of finance and returns on investments are included within operating activities under SFAS 95. Interest paid includes payments in respect of capitalized interest, which under SFAS 95 are included in capital expenditure under investing activities. Cash flows under FRS 1 in respect of capital expenditure and acquisitions and disposals are included in investing activities under SFAS 95. Dividends paid are included within financing activities. All short-term investments are regarded as liquid resources for FRS 1. Under SFAS 95 short-term investments with original maturities of three months or less are classified as cash equivalents and aggregated with cash in the cash flow statement. Cash flows in respect of short-term investments with original maturities exceeding three months are included in operating activities. Page 32 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued The consolidated statement of cash flows presented in accordance with SFAS 95 is as follows: Three months ended March 31 (Unaudited) 2003 2002 -------- -------- ($ million) Operating activities Profit after taxation 4,293 1,336 Adjustments to reconcile profits after tax to net cash provided by operating activities Depreciation and amounts provided 2,709 2,153 Exploration expenditure written off 50 59 Share of profits of joint ventures and associated undertakings less dividends received (148) (17) (Profit) loss on sale of businesses and fixed assets (394) 109 Working capital movement (a) (1,475) (669) Deferred taxation 224 220 Other 2 (108) -------- -------- Net cash provided by operating activities 5,261 3,083 ======== ======== Investing activities Capital expenditures (2,911) (2,814) Acquisitions, net of cash acquired - (1,550) Investment in associated undertakings (186) (143) Net investment in joint ventures (14) (46) Proceeds from disposal of assets 2,477 348 -------- -------- Net cash used in investing activities (634) (4,205) -------- -------- Financing activities Proceeds from shares issued (repurchased) (932) 91 Proceeds from long-term financing 1,015 1,746 Repayments of long-term financing (403) (234) Net decrease (increase) in short-term debt (3,273) 680 Dividends paid - BP Shareholders (1,397) (1,288) - Minority shareholders (2) (13) -------- -------- Net cash used in financing activities (4,992) 982 -------- -------- Currency translation differences relating to cash and cash equivalents 9 (3) -------- -------- Increase (decrease) in cash and cash equivalents (356) (143) Cash and cash equivalents at beginning of period 1,735 1,808 -------- -------- Cash and cash equivalents at end of period 1,379 1,665 ======== ======== (a) Working capital: Inventories (increase) decrease 376 (496) Receivables (increase) decrease (6,946) (443) Current liabilities - excluding finance debt increase (decrease) 5,095 270 -------- -------- (1,475) (669) ======== ======== Page 33 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - continued Impact of new US accounting standards Costs associated with exit or disposal activities: In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 'Accounting for Costs Associated with Exit or Disposal Activities' (SFAS 146). SFAS 146 requires that a liability for costs associated with an exit or disposal activity be recognized only when the liability is incurred, rather than at the date of an entity's commitment to an exit plan. SFAS 146 requires that the liability be initially measured at fair value. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. Stock-based compensation: In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS 148). SFAS 148 amends SFAS 123 to permit alternative methods of transition for adopting a fair value based method of accounting for stock-based employee compensation. As required by UK GAAP, the Group uses the intrinsic value method to account for stock-based employee compensation. Guarantees: In November 2002, the FASB issued FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (Interpretation 45). Interpretation 45 elaborates on existing disclosure requirements for guarantees and clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of Interpretation 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002. Consolidation: In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of Variable Interest Entities" (Interpretation 46). Interpretation 46 clarifies the application of existing consolidation requirements to entities where a controlling financial interest is achieved through arrangements that do not involve voting interests. Under Interpretation 46, a variable interest entity is consolidated if a company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns. Interpretation 46 applies to variable interest entities created or acquired after January 31, 2003. For variable interest entities existing at January 31, 2003, Interpretation 46 is effective for accounting periods beginning after June 15, 2003. The Company is currently carrying out the analysis necessary to adopt Interpretation 46 in the third quarter of 2003 for existing entities. The Company does not expect that the adoption of Interpretation 46 will have a significant effect on profit, as adjusted to accord with US GAAP, or BP shareholders' interest, as adjusted to accord with US GAAP. Page 34 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 13. US generally accepted accounting principles - concluded Impact of new UK accounting standards Retirement benefits: In December 2000, the UK Accounting Standards Board issued Financial Reporting Standard No. 17 `Retirement Benefits' (FRS 17). This standard was to be fully effective for accounting periods ending on or after June 22, 2003 with certain of the disclosure requirements effective for periods prior to 2003. FRS 17 requires that financial statements reflect at fair value the assets and liabilities arising from an employer's retirement benefit obligations and any related funding. The operating costs of providing retirement benefits are recognized in the period in which they are earned together with any related finance costs and changes in the value of related assets and liabilities. In November 2002, the UK Accounting Standards Board issued an amendment to FRS 17, which defers full adoption until January 1, 2005. Impact of International accounting standards In June 2002, the European Union Council of Ministers adopted a Regulation which would require the Group to prepare its primary consolidated financial statements in accordance with International Accounting Standards (IAS) beginning January 1, 2005, with restatement of prior periods presented. IAS differ in several respects from UK and US GAAP. In addition, significant revisions to IAS are currently being contemplated and other revisions may be adopted prior to January 1, 2005. The Group has not determined the effects of adopting IAS. 14. Condensed consolidating information The following information is presented in accordance with the financial reporting rules of the Securities and Exchange Commission regarding issuers and guarantors of guaranteed securities. BP p.l.c. fully and unconditionally guarantees the payment obligations of its 100% owned subsidiary BP Exploration (Alaska) Inc. under the Prudhoe Bay Royalty Trust. BP p.l.c. also fully and unconditionally guarantees securities issued by BP Australia Capital Markets Limited, BP Canada Finance Company, BP Capital Markets p.l.c. and BP Capital Markets America Inc. These companies are 100%-owned finance subsidiaries of BP p.l.c. Page 35 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Income statement Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Three months ended March 31, 2003 Turnover 880 - 64,186 (880) 64,186 Less: Joint ventures - - 398 - 398 ----------------------------------------------------------------------------- Group turnover 880 - 63,788 (880) 63,788 Cost of sales 400 - 54,995 (956) 54,439 Production taxes 68 - 436 - 504 ----------------------------------------------------------------------------- Gross profit 412 - 8,357 76 8,845 Distribution and administration expenses - 64 3,180 - 3,244 Exploration expense 1 - 111 - 112 ----------------------------------------------------------------------------- 411 (64) 5,066 76 5,489 Other income 6 147 129 (151) 131 ----------------------------------------------------------------------------- Group operating profit 417 83 5,195 (75) 5,620 Share of profits of joint ventures - - 118 - 118 Share of profits of associated undertakings - - 186 - 186 Equity accounted income of subsidiaries 125 5,890 - (6,015) - ----------------------------------------------------------------------------- Total operating profit 542 5,973 5,499 (6,090) 5,924 Profit (loss) on sale of fixed assets and businesses or termination of operations (1) 394 395 (394) 394 ----------------------------------------------------------------------------- Profit before interest and tax 541 6,367 5,894 (6,484) 6,318 Interest expense 68 295 238 (381) 220 ----------------------------------------------------------------------------- Profit before taxation 473 6,072 5,656 (6,103) 6,098 Taxation 211 1,805 1,640 (1,851) 1,805 ----------------------------------------------------------------------------- Profit after taxation 262 4,267 4,016 (4,252) 4,293 Minority shareholders' interest - - 26 - 26 ----------------------------------------------------------------------------- Profit for the period 262 4,267 3,990 (4,252) 4,267 ============================================================================= Page 36 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Income statement (continued) The following is a summary of the adjustments to the profit for the period which would be required if generally accepted accounting principles in the United States (US GAAP) had been applied instead of those generally accepted in the United Kingdom. Issuer Guarantor -------------------------- BP Eliminations Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Three months ended March 31, 2003 Profit as reported 262 4,267 3,990 (4,252) 4,267 Adjustments: Deferred taxation/business combinations (3) 36 39 (36) 36 Provisions (4) 26 25 (21) 26 Sale and leaseback - 71 71 (71) 71 Goodwill - 342 342 (342) 342 Derivative financial instruments - (8) (8) 8 (8) Gain arising on asset exchange - (3) (3) 3 (3) Other 16 3 3 (19) 3 ----------------------------------------------------------------------------- Profit for the period before cumulative effect of accounting change as adjusted to accord with US GAAP 271 4,734 4,459 (4,730) 4,734 Cumulative effect of accounting change: Provisions 214 1,002 788 (1,002) 1,002 Derivative financial instruments - 50 50 (50) 50 ----------------------------------------------------------------------------- Profit for the period as adjusted to accord with US GAAP 485 5,786 5,297 (5,782) 5,786 ============================================================================= Page 37 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Income statement (continued) Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Three months ended March 31, 2002 Turnover 506 - 36,569 (506) 36,569 Less: Joint ventures - - 279 - 279 ----------------------------------------------------------------------------- Group turnover 506 - 36,290 (506) 36,290 Cost of sales 319 - 31,273 (514) 31,078 Production taxes 44 - 203 - 247 ----------------------------------------------------------------------------- Gross profit 143 - 4,814 8 4,965 Distribution and administration expenses - 54 2,637 - 2,691 Exploration expense 6 - 118 - 124 ----------------------------------------------------------------------------- 137 (54) 2,059 8 2,150 Other income 15 153 56 (99) 125 ----------------------------------------------------------------------------- Group operating profit 152 99 2,115 (91) 2,275 Share of profits of joint ventures - - 70 - 70 Share of profits of associated undertakings - - 186 - 186 Equity accounted income of subsidiaries 49 2,483 - (2,532) - ----------------------------------------------------------------------------- Total operating profit 201 2,582 2,371 (2,623) 2,531 Profit (loss) on sale of fixed assets and businesses or termination of operations - (109) (109) 109 (109) ----------------------------------------------------------------------------- Profit before interest and tax 201 2,473 2,262 (2,514) 2,422 Interest expense 13 424 393 (497) 333 ----------------------------------------------------------------------------- Profit before taxation 188 2,049 1,869 (2,017) 2,089 Taxation 82 753 686 (768) 753 ----------------------------------------------------------------------------- Profit after taxation 106 1,296 1,183 (1,249) 1,336 Minority shareholders' interest - - 40 - 40 ----------------------------------------------------------------------------- Profit for the period 106 1,296 1,143 (1,249) 1,296 ============================================================================= Page 38 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Income statement (concluded) The following is a summary of the adjustments to the profit for the period which would be required if generally accepted accounting principles in the United States (US GAAP) had been applied instead of those generally accepted in the United Kingdom. Issuer Guarantor -------------------------- BP Eliminations Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Three months ended March 31, 2002 Profit as reported 106 1,296 1,143 (1,249) 1,296 Adjustments: Deferred taxation/business combinations (33) (57) (36) 69 (57) Provisions - (26) (25) 25 (26) Sale and leaseback - (4) (4) 4 (4) Goodwill - 321 321 (321) 321 Derivative financial instruments - 523 523 (523) 523 Gain arising on asset exchange - (5) (5) 5 (5) Other - 3 3 (3) 3 ----------------------------------------------------------------------------- Profit for the period as adjusted to accord with US GAAP 73 2,051 1,920 (1,993) 2,051 ============================================================================= Page 39 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Balance sheet Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) At March 31, 2003 Fixed assets Intangible assets 430 - 13,760 - 14,190 Tangible assets 6,386 - 81,837 - 88,223 Investments Subsidiaries - equity accounted basis 2,629 95,864 - (98,493) - Other - 120 10,128 - 10,248 ----------------------------------------------------------------------------- 2,629 95,984 10,128 (98,493) 10,248 ----------------------------------------------------------------------------- Total fixed assets 9,445 95,984 105,725 (98,493) 112,661 ----------------------------------------------------------------------------- Current assets Inventories 78 - 9,796 - 9,874 Receivables 18,411 12,770 59,419 (51,542) 39,058 Investments - - 228 - 228 Cash at bank and in hand (10) (11) 1,172 - 1,151 ----------------------------------------------------------------------------- 18,479 12,759 70,615 (51,542) 50,311 ----------------------------------------------------------------------------- Current liabilities - falling due within one year Finance debt 7,386 - 6,345 (7,331) 6,400 Accounts payable and accrued liabilities 621 11,366 40,030 (11,403) 40,614 ----------------------------------------------------------------------------- Net current assets (liabilities) 10,472 1,393 24,240 (32,808) 3,297 ----------------------------------------------------------------------------- Total assets less current liabilities 19,917 97,377 129,965 (131,301) 115,958 Noncurrent liabilities Finance debt - - 12,642 - 12,642 Accounts payable and accrued liabilities 5,480 49 30,690 (32,808) 3,411 Provisions for liabilities and charges Deferred taxation 1,698 - 11,988 - 13,686 Other provisions 495 125 13,476 - 14,096 ----------------------------------------------------------------------------- Net assets 12,244 97,203 61,169 (98,493) 72,123 Minority shareholders' interest - equity - - 1,047 - 1,047 ----------------------------------------------------------------------------- BP shareholders' interest 12,244 97,203 60,122 (98,493) 71,076 ============================================================================= Page 40 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Balance sheet (continued) Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) At March 31, 2003 Capital and reserves Capital shares 1,903 5,581 - (1,903) 5,581 Paid-in surplus 3,145 4,345 - (3,145) 4,345 Merger reserve - 26,353 697 - 27,050 Other reserves - 156 - - 156 Retained earnings 7,196 60,768 59,425 (93,445) 33,944 ----------------------------------------------------------------------------- 12,244 97,203 60,122 (98,493) 71,076 ============================================================================= The following is a summary of the adjustments to BP shareholders' interest which would be required if generally accepted accounting principles in the United States (US GAAP) had been applied instead of those generally accepted in the United Kingdom. Issuer Guarantor -------------------------- BP Eliminations Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Shareholders' interest as reported 12,244 97,203 60,122 (98,493) 71,076 Adjustments: Deferred taxation/business combinations 71 (45) (116) 45 (45) Provisions 24 (63) (87) 63 (63) Sale and leaseback - (36) (36) 36 (36) Goodwill - 245 245 (245) 245 Derivative financial instruments - (92) (92) 92 (92) Gain arising on asset exchange - 138 138 (138) 138 Ordinary shares held for future awards to employees - (117) - - (117) Quarterly dividend - 1,386 - - 1,386 Investments - 7 7 (7) 7 Additional minimum pension liability - (2,286) (2,286) 2,286 (2,286) Other (34) (47) (47) 81 (47) ----------------------------------------------------------------------------- Shareholders' interest as adjusted to accord with US GAAP 12,305 96,293 57,848 (96,280) 70,166 ============================================================================= Page 41 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Balance sheet (continued) Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) At December 31, 2002 Fixed assets Intangible assets 427 - 15,139 - 15,566 Tangible assets 6,405 - 81,277 - 87,682 Investments Subsidiaries - equity accounted basis 2,561 91,939 - (94,500) - Other - 162 10,649 - 10,811 ----------------------------------------------------------------------------- 2,561 92,101 10,649 (94,500) 10,811 ----------------------------------------------------------------------------- Total fixed assets 9,393 92,101 107,065 (94,500) 114,059 ----------------------------------------------------------------------------- Current assets Inventories 102 - 10,079 - 10,181 Receivables 18,169 13,581 51,022 (49,622) 33,150 Investments - - 215 - 215 Cash at bank and in hand (11) 1 1,530 - 1,520 ----------------------------------------------------------------------------- 18,260 13,582 62,846 (49,622) 45,066 ----------------------------------------------------------------------------- Current liabilities - falling due within one year Finance debt 1,768 - 10,031 (1,713) 10,086 Accounts payable and accrued liabilities 1,129 9,906 35,369 (10,189) 36,215 ----------------------------------------------------------------------------- Net current assets (liabilities) 15,363 3,676 17,446 (37,720) (1,235) ----------------------------------------------------------------------------- Total assets less current liabilities 24,756 95,777 124,511 (132,220) 112,824 Noncurrent liabilities Finance debt - - 11,922 - 11,922 Accounts payable and accrued liabilities 10,586 98 30,491 (37,720) 3,455 Provisions for liabilities and charges Deferred taxation 1,686 - 11,828 - 13,514 Other provisions 489 142 13,255 - 13,886 ----------------------------------------------------------------------------- Net assets 11,995 95,537 57,015 (94,500) 70,047 Minority shareholders' interest - equity - - 638 - 638 ----------------------------------------------------------------------------- BP shareholders' interest 11,995 95,537 56,377 (94,500) 69,409 ============================================================================= Page 42 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Balance sheet (concluded) Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) At December 31, 2002 Capital and reserves Capital shares 1,903 5,616 - (1,903) 5,616 Paid-in surplus 3,145 4,243 - (3,145) 4,243 Merger reserve - 26,336 697 - 27,033 Other reserves - 173 - - 173 Retained earnings 6,947 59,169 55,680 (89,452) 32,344 ----------------------------------------------------------------------------- 11,995 95,537 56,377 (94,500) 69,409 ============================================================================= The following is a summary of the adjustments to BP shareholders' interest which would be required if generally accepted accounting principles in the United States (US GAAP) had been applied instead of those generally accepted in the United Kingdom. Issuer Guarantor -------------------------- BP Eliminations Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Shareholders' interest as reported 11,995 95,537 56,377 (94,500) 69,409 Adjustments: Deferred taxation/business combinations 74 (78) (152) 78 (78) Provisions (190) (1,088) (902) 1,092 (1,088) Sale and leaseback - (106) (106) 106 (106) Goodwill - (84) (84) 84 (84) Derivative financial instruments 50 (135) (135) 85 (135) Gain arising on asset exchange - 142 142 (142) 142 Ordinary shares held for future awards to employees - (159) - - (159) Quarterly dividend - 1,398 - - 1,398 Investments - 34 34 (34) 34 Additional minimum pension liability - (2,286) (2,286) 2,286 (2,286) Other - (48) (48) 48 (48) ----------------------------------------------------------------------------- Shareholders' interest as adjusted to accord with US GAAP 11,929 93,127 52,840 (90,897) 66,999 ============================================================================= Page 43 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 14. Condensed consolidating information - continued Issuer Guarantor -------------------------- BP Eliminations Cash flow statement Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Three months ended March 31, 2003 Net cash inflow (outflow) from operating activities 518 2,253 3,163 27 5,961 Dividends from joint ventures - - 13 - 13 Dividends from associated undertakings - - 55 - 55 Dividends from subsidiaries 10 - - (10) - Net cash inflow (outflow) from servicing of finance and returns on investments (22) 27 (150) (27) (172) Tax paid - - (632) - (632) Net cash inflow (outflow) for capital expenditure and financial investment (97) 36 (499) - (560) Net cash inflow (outflow) for acquisitions and disposals 6 - (46) - (40) Equity dividends paid - (1,397) (10) 10 (1,397) ----------------------------------------------------------------------------- Net cash inflow (outflow) 415 919 1,894 - 3,228 ============================================================================= Financing 414 931 2,248 - 3,593 Management of liquid resources - - 13 - 13 Increase (decrease) in cash 1 (12) (367) - (378) ----------------------------------------------------------------------------- 415 919 1,894 - 3,228 ============================================================================= The consolidated statement of cash flows presented in accordance with SFAS 95 is as follows: Issuer Guarantor -------------------------- BP Eliminations Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Net cash provided by (used in) operating activities 534 2,280 2,449 (2) 5,261 Net cash provided by (used in) investing activities (97) 36 (545) (28) (634) Net cash provided by (used in) financing activities (436) (2,328) (2,258) 30 (4,992) Currency translation differences relating to cash and cash equivalents - - 9 - 9 ----------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 1 (12) (345) - (356) Cash and cash equivalents at beginning of period (11) 1 1,745 - 1,735 ----------------------------------------------------------------------------- Cash and cash equivalents at end of period (10) (11) 1,400 - 1,379 ============================================================================= Page 44 BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded 14. Condensed consolidating information - concluded Issuer Guarantor -------------------------- BP Eliminations Cash flow statement (concluded) Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Three months ended March 31, 2002 Net cash inflow (outflow) from operating activities 367 1,051 2,119 99 3,636 Dividends from joint ventures - - 83 - 83 Dividends from associated undertakings - - 53 - 53 Dividends from subsidiaries 15 - - (15) - Net cash inflow (outflow) from servicing of finance and returns on investments - 65 (337) - (272) Tax paid - - (445) - (445) Net cash inflow (outflow) for capital expenditure and financial investments (150) (17) (2,315) - (2,482) Net cash inflow (outflow) for acquisitions and disposals - 99 (1,708) (99) (1,708) Equity dividends paid - (1,288) (15) 15 (1,288) ----------------------------------------------------------------------------- Net cash inflow (outflow) 232 (90) (2,565) - (2,423) ============================================================================= Financing 214 (90) (2,407) - (2,283) Management of liquid resources - - (165) - (165) Increase (decrease) in cash 18 - 7 - 25 ----------------------------------------------------------------------------- 232 (90) (2,565) - (2,423) ============================================================================= The consolidated statement of cash flows presented in accordance with SFAS 95 is as follows: Issuer Guarantor -------------------------- BP Eliminations Exploration Other and BP (Alaska) Inc. BP p.l.c. subsidiaries reclassifications Group ----------------------------------------------------------------------------- ($ million) Net cash provided by (used in) operating activities 382 1,116 1,488 97 3,083 Net cash provided by (used in) investing activities (150) 83 (4,038) (100) (4,205) Net cash provided by (used in) financing activities (214) (1,199) 2,392 3 982 Currency translation differences relating to cash and cash equivalents - - (3) - (3) ----------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 18 - (161) - (143) Cash and cash equivalents at beginning of period (29) 3 1,834 - 1,808 ----------------------------------------------------------------------------- Cash and cash equivalents at end of period (11) 3 1,673 - 1,665 ============================================================================= Page 45 BP p.l.c. AND SUBSIDIARIES ENVIRONMENTAL INDICATORS Three months ended March 31 (Unaudited) 2003 2002 ------ ------ Average oil realizations (a) - $/bbl UK 30.67 20.67 USA 29.36 17.26 Rest of World 29.48 18.63 BP average 29.82 18.77 Brent oil price 31.47 21.13 West Texas Intermediate oil price 34.00 21.54 Alaska North Slope US West Coast 33.16 19.76 Average natural gas realizations - $/mcf UK 3.32 3.12 USA 5.27 2.13 Rest of World 2.70 1.93 BP average 3.87 2.27 Henry Hub gas price (b) ($/mmBtu) 6.53 2.35 UK Gas - National Balancing point (p/therm) 21.28 19.22 Global Indicator Refining Margins (c) - $/bbl Northwest Europe 3.70 0.09 US Gulf Coast 6.14 2.04 Midwest 4.14 2.06 US West Coast 6.77 5.43 Singapore 2.98 0.21 BP average 4.52 1.64 Chemicals Indicator Margin (d) - $/te 90(e) 80 --------------- (a) Crude oil and natural gas liquids. (b) Henry Hub First of Month Index. (c) The Global Indicator Refining Margin (GIM) is the average of seven regional indicator margins weighted for BP's crude refining capacity in each region. Each regional indicator margin is based on a single representative crude with product yields characteristic of the typical level of upgrading complexity. (d) The Chemicals Indicator Margin (CIM) is a weighted average of externally based product margins. It is based on market data collected by Nexant (formerly Chem Systems) in their quarterly market analyses, then weighted based on BP's product portfolio. While it does not cover our entire portfolio, it includes a broad range of products. Among the products and businesses covered in the CIM are the olefins and derivatives, the aromatics and derivatives, linear alpha-olefins (LAOs), acetic acid, vinyl acetate monomers and nitriles. Not included are fabrics and fibres, plastic fabrications, poly alpha-olefins (PAOs), anhydrides, speciality intermediates, and the remaining parts of the solvents and acetyls businesses. (e) Provisional. The data for the fourth quarter is based on two months' actual and one month of provisional data. Three months ended March 31 (Unaudited) US dollar/sterling exchange rates 2003 2002 ------ ------ Average rate for the period 1.60 1.43 Period-end rate 1.57 1.42 Page 46 BP p.l.c. AND SUBSIDIARIES OPERATING INFORMATION Three months ended March 31 (Unaudited) 2003 2002 ------ ------ Crude oil and natural gas liquids production (thousand barrels per day) (net of royalties) UK 471 482 Rest of Europe 95 104 USA 773 760 Rest of World 724 643 ------ ------ Total crude oil and liquids production 2,063 1,989 ====== ====== Natural gas production (million cubic feet per day) (net of royalties) UK 1,798 1,628 Rest of Europe 131 162 USA 3,437 3,561 Rest of World 3,651 3,395 ------ ------ Total natural gas production 9,017 8,746 ====== ====== Total production (a) (thousand barrels of oil equivalent per day) (net of royalties) UK 781 763 Rest of Europe 118 132 USA 1,366 1,374 Rest of World 1,353 1,228 ------ ------ Total production 3,618 3,497 ====== ====== Natural gas sales volumes (million cubic feet per day) UK 3,215 2,619 Rest of Europe 473 413 USA 11,734 8,733 Rest of World 11,553 9,289 ------ ------ Total natural gas sales volumes (b) 26,975 21,054 ====== ====== NGL sales volumes (thousand barrels per day) UK - - Rest of Europe - - USA 126 153 Rest of World 232 231 ------ ------ Total NGL sales volumes 358 384 ====== ====== --------------- (a) Expressed in thousand barrels of oil equivalent per day (mboe/d). Natural gas is converted to oil equivalent at 5.8 billion cubic feet: 1 million barrels. (b) Encompasses sales by Exploration and Production and Gas, Power and Renewables, including marketing, trading and supply sales. Page 47 BP p.l.c. AND SUBSIDIARIES OPERATING INFORMATION - concluded Three months ended March 31 (Unaudited) 2003 2002 ------ ------ Oil sales volumes (thousand barrels per day) Refined products UK 279 256 Rest of Europe 1,318 1,275 USA 1,751 1,834 Rest of World 645 600 ------ ------ Total marketing sales 3,993 3,965 Trading/supply sales 2,811 2,535 ------ ------ Total refined product sales 6,804 6,500 Crude oil 4,529 4,809 ------ ------ Total oil sales 11,333 11,309 ====== ====== Refinery throughputs (thousand barrels per day) UK 377 392 Rest of Europe 954 833 USA 1,302 1,394 Rest of World 391 375 ------ ------ Total throughput 3,024 2,994 ====== ====== Chemicals production (thousand tonnes) UK 869 829 Rest of Europe 2,763 2,583 USA 2,536 2,489 Rest of World 812 710 ------ ------ Total production 6,980 6,611 ====== ====== Page 48 BP p.l.c. AND SUBSIDIARIES TOTAL OPERATING PROFIT Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) By business Exploration and Production UK 1,134 727 Rest of Europe 193 152 USA 1,811 325 Rest of World 1,194 727 ------ ------ 4,332 1,931 ------ ------ Gas, Power and Renewables UK 3 2 Rest of Europe (8) 47 USA 41 (24) Rest of World 185 90 ------ ------ 221 115 ------ ------ Refining and Marketing UK 68 (73) Rest of Europe 407 270 USA 596 205 Rest of World 180 161 ------ ------ 1,251 563 ------ ------ Chemicals UK (11) (50) Rest of Europe 105 41 USA 139 19 Rest of World 52 37 ------ ------ 285 47 ------ ------ Other businesses and corporate (165) (125) ------ ------ 5,924 2,531 ====== ====== By geographical area UK 1,118 576 Rest of Europe 690 498 USA 2,489 442 Rest of World 1,627 1,015 ------ ------ 5,924 2,531 ====== ====== Page 49 BP p.l.c. AND SUBSIDIARIES CAPITAL EXPENDITURE AND ACQUISITIONS Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) By business Exploration and Production UK 196 261 Rest of Europe 51 71 USA 966 1,167 Rest of World 924 814 ------ ------ 2,137 2,313 ------ ------ Gas, Power and Renewables UK 8 16 Rest of Europe 15 4 USA 38 16 Rest of World 7 10 ------ ------ 68 46 ------ ------ Refining and Marketing UK 73 76 Rest of Europe (a) 104 2,732 USA 336 303 Rest of World 24 26 ------ ------ 537 3,137 ------ ------ Chemicals UK - 8 Rest of Europe 31 45 USA 46 42 Rest of World 19 93 ------ ------ 96 188 ------ ------ Other businesses and corporate 36 52 ------ ------ 2,874 5,736 ====== ====== By geographical area UK 301 409 Rest of Europe 202 2,852 USA 1,396 1,531 Rest of World 975 944 ------ ------ 2,874 5,736 ====== ====== ------------ (a) Three months ended March 31, 2003 included the acquisition of 51% of Veba. Page 50 BP p.l.c. AND SUBSIDIARIES RETURN ON AVERAGE CAPITAL EMPLOYED Three months ended March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Profit for the period 4,267 1,296 Interest (a) 99 164 Minority shareholders' interest 26 40 ------ ------ Adjusted profit 4,392 1,500 ====== ====== Capital employed at beginning of period: BP shareholders' interest 69,409 65,161 Minority shareholders' interest 638 598 Finance debt 22,008 21,417 ------ ------ Capital employed 92,055 87,176 ====== ====== Capital employed at end of period: BP shareholders' interest 71,076 64,902 Minority shareholders' interest 1,047 2,579 Finance debt 19,042 24,531 ------ ------ Capital employed 91,165 92,012 ====== ====== Average capital employed 91,610 92,012 ====== ====== ROACE 19.2% 6.7% ------------ (a) Excludes interest on joint venture and associated undertakings debt as well as unwinding of discount on provisions and effect of change in discount rate on provisions, and is on a post-tax basis, using a deemed tax rate equal to the US statutory tax rate. Page 51 BP p.l.c. AND SUBSIDIARIES NET DEBT RATIO At March 31 (Unaudited) 2003 2002 ------ ------ ($ million) Net debt ratio - net debt: net debt + equity Gross finance debt 19,042 24,531 Cash and current asset investments 1,379 1,665 ------ ------ Net debt 17,663 22,866 ------ ------ Equity 72,123 67,481 Net debt ratio 20% 25% ------ ------ Acquisition adjustment (a) 15,208 18,297 ------ ------ Net debt ratio - pro forma basis (b) 24% 32% ====== ====== --------------- (a) Acquisition adjustment refers to the fixed asset revaluation adjustments and goodwill consequent upon the ARCO and Burmah Castrol acquisitions. (b) Based on equity excluding the fixed asset revaluation adjustment and goodwill resulting from the ARCO and Burmah Castrol acquisitions. Page 52 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BP p.l.c. (Registrant) Dated: May 1, 2003 /s/ D. J. Pearl ......................................... D. J. PEARL Deputy Company Secretary Page 53