BP p.l.c. — 2018 Form 20-F summary
Reporting period: Fiscal year ended 31 December 2018. This is an annual report, not a standalone fourth-quarter filing; separate Q4 financial results are not clearly provided in the filing text. BP reports under IFRS as issued by the IASB.
Key financial and operating metrics
| Metric | 2018 | 2017 |
|---|---|---|
| Sales and other operating revenues | $298.8 billion | $240.2 billion |
| Profit attributable to BP shareholders | $9.4 billion | $3.4 billion |
| Underlying replacement-cost profit (non-GAAP) | $12.7 billion | $6.2 billion |
| Operating cash flow | $22.9 billion | $18.9 billion |
| Gross debt | $65.8 billion | $63.2 billion |
| Net debt | $44.1 billion | $37.8 billion |
| Net debt ratio | 30.3% | 27.4% |
| Cash and cash equivalents | $22.5 billion | $25.6 billion |
| Organic capital expenditure | $15.1 billion | $16.5 billion |
| Dividends distributed to shareholders | $8.1 billion | $7.9 billion |
BP reported total hydrocarbon production of 3.7 million barrels of oil equivalent per day on a combined basis including Rosneft. Average Brent crude was $71.31 per barrel, up from $54.19 in 2017. Downstream underlying replacement-cost profit was $7.6 billion, compared with $7.0 billion.
Liquidity included $7.6 billion of undrawn committed bank facilities. Current assets were $71.3 billion and current liabilities $68.2 billion. BP’s long-term credit ratings were A- with stable outlook from S&P and A1 with stable outlook from Moody’s.
Material changes versus 2017
- Revenue increased about 24%, profit attributable to shareholders rose to $9.4 billion from $3.4 billion, and underlying replacement-cost profit more than doubled, reflecting higher prices, production and major-project start-ups.
- Operating cash flow increased about 21%; BP cited stronger business results and lower Gulf of Mexico spill cash payments, partly offset by working-capital outflows and higher taxes paid.
- Net debt increased $6.3 billion and the net debt ratio rose 2.9 percentage points, partly reflecting the acquisition of BHP’s US onshore assets.
- BP acquired Petrohawk Energy Corporation from BHP for $10.3 billion of cash consideration; $6.8 billion had been paid by year-end and $3.5 billion remained payable in instalments through April 2019.
- BP started six major projects, increased its interest in the Clair field to 45.1%, and completed asset sales including its Greater Kuparuk Area interest.
- Reported profit included $2.8 billion of after-tax non-operating charges, primarily related to the Gulf of Mexico oil spill, environmental and other provisions, and restructuring.
Outlook, risks and unusual items
- For 2019–2021, BP expects annual organic capital expenditure of $15–17 billion and more than $10 billion of divestments over the next two years. It targets a 20–30% gearing range and ROACE above 10% by 2021 at $55 per barrel Brent in real 2017 prices.
- BP expected five major project start-ups in 2019. Management anticipated lower industry refining margins and narrower North American heavy-crude discounts than in 2018. The expected 2019 effective tax rate on underlying profit was around 40%.
- Gulf of Mexico oil-spill cash payments were $3.2 billion in 2018. BP expected about $2 billion in 2019, then around $1 billion annually for the following 14 years. The remaining claims and appeals involve uncertainty in both timing and amounts.
- BP identified commodity prices and markets, climate-related policy and transition risks, geopolitical developments, safety and environmental incidents, cyber security, liquidity, and legal or regulatory compliance among its principal risks. BP states it generally buys insurance only where legally or contractually required.
- IFRS 16 lease accounting, adopted from 1 January 2019, was expected to add approximately $9.2 billion to lease liabilities, with total lease liabilities of about $9.9 billion including existing finance leases. This will affect balance-sheet and cash-flow presentation.
- The 2018 financial statements received an unqualified audit opinion. The auditor also gave an unqualified opinion on internal control over financial reporting, but the acquired Petrohawk business was excluded from management’s internal-control assessment and the auditor’s related scope.
Investor facts to verify
- Check the standalone fourth-quarter results separately; this filing reports the full year and does not clearly present a separate Q4 financial statement.
- Review the composition and sustainability of underlying profit and cash flow, including working-capital movements, taxes and non-operating items.
- Track net debt, gearing, BHP acquisition payments and the effect of IFRS 16 lease liabilities.
- Assess Gulf of Mexico claims, appeals, provisions and the expected schedule of future payments.
- Review reserves replacement and development progress, including the contribution of acquisitions and equity-accounted entities such as Rosneft.
- Evaluate delivery of the 2019–2021 capital, divestment, production and ROACE outlook against commodity prices and operating performance.