Fourth quarter and full year 2020 results

Financial results and progress

•  Underlying replacement cost profit for the quarter was $0.1 billion, similar to the previous quarter. Performance was significantly impacted by lower marketing performance in the Downstream, with volumes remaining under pressure due to COVID-19 and continuing pressure on refining margins and utilization. In addition, the result was impacted by a significantly weaker result in gas marketing and trading and higher exploration write-offs, partially offset by a higher Rosneft contribution and a lower underlying tax charge. The full-year result was a loss of $5.7 billion compared to $10 billion profit in 2019, driven by lower oil and gas prices, significant exploration write-offs and refining margins and depressed demand.
• Reported profit for the quarter was $1.4 billion, compared with $0.5 billion loss in the previous quarter. The result included $2.3 billion gain on disposal from the sale of BP’s petrochemicals business. For the full year, the reported loss was $20.3 billion, including significant impairments and exploration write-offs taken in the second quarter, compared with a profit of $4.0 billion in 2019.
• Operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments of $0.1 billion, was $2.4 billion. Compared to the third quarter, this reflected the significant impact of lower marketing volumes in the Downstream and a significantly weaker contribution from gas marketing and trading. There was also the absence of the working capital release and other working capital effects, absence of the Rosneft dividend, and severance payments for reinvent bp, partly offset by lower tax payments.
• Proceeds from divestments and other disposals in the quarter were $4.2 billion, including $3.5 billion on completion of the petrochemicals divestment. In February 2021, BP agreed to sell a 20% interest in Oman's Block 61 for $2.6 billion subject to final adjustments. BP has now completed or agreed transactions for over half of its target of $25 billion in proceeds by 2025. BP expects proceeds from divestments and other disposals of $4-6 billion in 2021, weighted toward the second half.
• At year end net debt was $39 billion, down $1.4 billion over the quarter and $6.5 billion over the full year. Net debt is expected to increase in the first half of 2021, driven by severance payments, the annual Gulf of Mexico oil spill payment and payment following completion of the offshore wind joint venture with Equinor. It is expected to then fall in the second half with growing operating cash flow and the receipt of divestment proceeds. BP continues to expect to reach our $35 billion net debt target around fourth quarter 2021 and first quarter 2022. This assumes oil prices in the range of $45-50 a barrel and BP planning assumptions for RMM and gas prices.
• A dividend of 5.25 cents per share was announced for the quarter.

Performing while transforming

• Operations were strong in 2020, with full-year BP-operated refining availability of 96% and Upstream plant reliability of 94%. Safety performance was also strong with both tier1/tier2 process safety events and reported recordable injury frequency significantly lower than in 2019. Upstream unit production costs for the year were 6.5% lower than 2019. Full-year Upstream production was 9.9% lower than 2019 primarily due to divestments.
• BP continues to make strong progress in reinventing its organization. The new organization was in place at the start of 2021 and over half of the approximately 10,000 people expected to leave BP as a result of the reinvent programme had left by year-end. Around $1.4 billion in people- related costs are expected associated with the reinvent programme, with the majority of the cash outflow incurred in the first half of 2021.
• Four new Upstream major projects began production in the year, including three in the fourth quarter – Ghazeer in Oman, Vorlich in the UK and KG D6 R-cluster in India. In the quarter, the Trans Adriatic Pipeline began gas deliveries, completing the Southern Gas Corridor pipeline system.
• Demonstrating the resilience of BP's convenience offer, while retail fuel volumes were 14% lower for the full year, BP's convenience gross margin grew by 6%. Through the year, around 300 strategic convenience sites were added to the network.
• BP had developed 3.3GW net renewable generating capacity to FID by end-2020, 0.7GW more than a year earlier. In January 2021 BP completed formation of its strategic US offshore wind partnership with Equinor, including the purchase of 50% in the Empire Wind and Beacon Wind projects. The projects were also selected to supply 2.5GW of power to the State of New York, adding to an existing commitment to supply 0.8GW.
• Working in partnership with other companies, BP has announced: plans to develop a ‘green’ hydrogen project at its Lingen refinery in Germany with Ørsted; a BP-operated multi-company partnership to develop offshore infrastructure to support planned UK carbon capture, use and storage projects; and agreements to provide additional supplies of renewable energy to Amazon..

Further information

Contacts

bp press office, London: +44 (0)20 7496 4076, bppress@bp.com

Cautionary statement

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’) and the general doctrine of cautionary statements, BP is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events and circumstances - with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. In particular, the following, among other statements, are all forward looking in nature: expectations regarding the COVID-19 pandemic, including its risks, impacts, consequences and challenges and BP’s response, the impact on BP’s financial performance (including cash flows and net debt), operations and credit losses, and the impact on the trading environment, oil and gas prices, and global GDP; expectations regarding the shape of the COVID-19 recovery and the pace of transition to a lower-carbon economy and energy system; plans, expectations and assumptions regarding oil and gas demand, supply or prices, the timing of production of reserves; plans and expectations regarding the divestment programme, including the amount and timing of proceeds in 2021 and reaching $25 billion of proceeds by 2025; expectations with respect to completion of transactions and the timing and amount of proceeds of agreed disposals, including further payments from INEOS in respect of the completed sale of BP’s petrochemicals business and the completion of the sale of BP’s interest in the Wamsutter asset; plans and expectations with respect to the total amount of organic capital expenditure and the DD&A charge in 2021; plans and expectations with respect to the total capital expenditure for 2021; plans and expectations regarding net debt, including delivery of the target of $35 billion; plans and expectations regarding new joint ventures and other agreements, including partnerships with Equinor, Ørsted, Amazon and BP’s multi-company partnership to develop offshore infrastructure to support planned UK carbon capture, use and storage projects, as well as plans and expectations related to BP’s stake in Finite Carbon; plans and expectations regarding BP’s strategic priorities; expectations regarding quarterly dividends and share buybacks; expectations regarding demand for BP’s products in the Upstream and Downstream; expectations regarding Downstream refining margins, utilization, marketing volumes and product demand; expectations regarding BP’s future financial performance and cash flows; plans and expectations with respect to the implementation and impact of BP’s strategic reinvention and redesign of its organization, including the ongoing reduction of approximately 10,000 jobs, and the amount and timing of associated costs; expectations regarding the underlying effective tax rate for 2021; plans and expectations regarding BP’s renewable energy and alternative energy businesses, including BP’s ambition to reach 20GW of net renewable generating capacity to FID by the end of 2025; plans and expectations regarding Upstream and Downstream projects, including the conversion of the Kwinana refinery; expectations regarding Upstream first-quarter and full-year 2021 reported and underlying production and related major project ramp-up, capital investments, divestment and maintenance activity; expectations regarding the timing of implementation of new accounting policies; expectations regarding price assumptions used in accounting estimates; expectations regarding the Other businesses and corporate charges for 2021; expectations regarding the timing and amount of future payments relating to the Gulf of Mexico oil spill, including expectations regarding the completion of the claims processing operations of the Deepwater Horizon Court Supervised Settlement Programme; and expectations regarding operational and financial results or acquisitions or divestments by Rosneft, including expectations regarding the ongoing assessment of the fair values of the assets and liabilities acquired and the consideration paid in respect of the acquisitions announced by Rosneft on 28 December 2020 and the impact, if any, on BP’s accounting for its equity-accounted investment in Rosneft of such acquisitions. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may 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 extent and duration of the impact of current market conditions including the volatility of oil prices, the impact of COVID-19, overall global economic and business conditions impacting our business and demand for our products as well as the specific factors identified in the discussions accompanying such forward-looking statements; changes in consumer preferences and societal expectations; the pace of development and adoption of alternative energy solutions; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain acquisitions and divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA and TSC effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; amounts ultimately payable and timing of payments relating to the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report, as well those factors discussed under “Principal risks and uncertainties” in our results announcement for the period ended 30 June 2020 and under “Risk factors” in BP Annual Report and Form 20-F 2019 as filed with the US Securities and Exchange Commission.