BP Plc Q1 2010 Earnings Call Transcript

BP plc Q1 2010 Earnings Call Transcript
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BP plc (BP)

Q1 2010 Earnings Call

April 27, 2010 09:00 am ET

Executives

Fergus MacLeod - Head of IR

Tony Hayward - Group Chief Executive

Byron Grote - CFO

Andy Inglis - Head of Exploration & Production

Iain Conn - Head of Refining & Marketing

Analysts

Theepan - Morgan Stanley

Jon Rigby - UBS

Lucy Haskins - Bar Cap

Robert Kessler - Simmons & Co

Irene Himona - Exane

Neil McMohan - Sanford Bernstein

Joseph Tovey - Tovey & Company

Alejandro - Banc of America-Merrill Lynch

Jason Kenney - ING

Mark Gilman - Benchmark

Neill Morton - MF

Pavel Molchanov - Raymond James

Sergio Molisani - Unicredit

Presentation

Fergus MacLeod

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Previous Statements by BP
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Hello and welcome to BP's first quarter 2010 conference call. I'm Fergus MacLeod, BP's Head of Investor Relations and today’s presentation will be by Byron Grote, our Chief Financial Officer.

Just before we start, I'd like to draw your attention to our cautionary statement. During our presentation today we will make reference to estimate, plans and expectations that are forward-looking statements. Actual results including production could differ materially due to factors we note on this slide and in our UK and SEC filings. Please refer to our Annual Report and accounts and first quarter stock exchange announcements for more details. Both of these documents are available on our website.

Thank you and now over to Byron.

Byron Grote

Thank you, Fergus, and good day to those joining us on this call. You will all be aware of the tragic incident last week on the Transocean's Deepwater Horizon drilling rig. Our thoughts go out at this very difficult time to the families, friends and colleagues of those affected.

BP continues to do everything it can to respond to the incident and has put into place a comprehensive plan for both oil well intervention and spill response. Working with the U.S. authorities in Transocean, we will ensure that the Group’s full resources are behind the efforts to control the well and to ensure that there are no serious environmental consequences. We will continue to provide regular updates on our progress.

I would now begin my review of the quarter with the trading environment. The table shows the percentage year-on-year changes in BP’s average upstream realizations and refining indicator margin. Our liquids realization at $72 per barrel was up 6% on 4Q and was over 70% higher than a year ago.

Our gas realization increased to $4.26 per 1000 cubic feet up over 15% on both the previous quarter and a year ago. Taking both oil and gas together our total average hydrocarbon realization was up 7% compared with 4Q ‘09 and was 57% higher than a year ago. The refining indicator margin of $3.08 per barrel remained weak being 50% lower than a year ago.

Turning to the financials. Adjusting for a charge of $50 million for non-operating items and fair value accounting effects, our first quarter underlying replacement costs profit was $5.6 billion an increase of 120% on the 1Q’09 result. This strong performance reflects higher hydrocarbon realizations continued operational momentum and lower underlying costs partially offset by a weaker supply and trading contribution, lower refining margins and higher DD&A.

First quarter operating cash flow was on $7.7 billion up 38% compared with last year. The $0.14 per share dividend announced today, which will be paid in June is the same as a year ago. Shareholders approve the proposal to offer the choice receiving a scrip dividend at our recent Annual General Meeting. This scrip dividend program will be available for this and future dividend payments.

Turning now to the performance of the businesses, in expiration production after adjusting for a gain of $100 million for non-operating items and fair value accounting effects, we reported a pretax underlying replacement costs profit of $8.2 billion for 1Q up $4.3 billion compared with last year.

This reflects an improved price environment and continued underlying operational momentum. The contribution from gas marketing and trading was lower than the strong result of last year, but still within the typical quarterly range.

Production again exceeded 4 million barrels of oil equivalent per day broadly flat with the year ago and 1% higher after adjusting for entitlement impacts in our production sharing agreements. We have maintained momentum in reducing costs, after adjusting for restructuring charges unit production costs were 3% lower than a year ago. DD&A is higher than a year ago inline with previous guidance.

The first quarter result also reflected a low expiration write off similar to last year. BP share of the TNK-BP net income was $540 million for the quarter and we received a dividend of $260 million.

In refinery marketing after adjusting for net charge of $60 million related to non-operating items and fair value accounting effects we reported a pretax underlying replacement costs profit of $790 million for the first quarter.

Pretax underlying replacement costs profit was down by $760 million compared to the first quarter of 2009 primarily due to a weak supply and trading contribution in contrast to the very strong first quarter in 2009. The result was also impacted by a weaker refining environment with the indicator margin at around half the level of the same period last year and marketing margins for some products compressed by rising crude prices.

These factors were partially offset by further cost efficiencies and by continued strong operational performance in the field value change, with both availability and throughput significantly higher than the same period last year. In addition, BP’s actual refining margins fell by less than the indicated margin we suggest, as a result of BP’s highly upgraded refining portfolio.

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