BP: third quarter 2010 results

The group income statement for the third quarter and nine months reflects a pre-tax charge of $7.7 billion and $39.9 billion respectively related to the Gulf of Mexico oil spill. All charges relating to the incident have been treated as non-operating items. Costs incurred relating to the incident were $8.7 billion in the third quarter and $11.6 billion in total since the incident. For further information on the Gulf of Mexico oil spill and its consequences see pages 3 - 5, Note 2 on pages 24 - 29, Principal risks and uncertainties on page 34 and in our second-quarter results announcement, and Legal proceedings on pages 34 - 38. Further information on BP's third-quarter results is provided below.
Non-operating items and fair value accounting effects for the third quarter, on a post-tax basis, had a net unfavourable impact of $3,684 million compared with a net favourable impact of $307 million in the third quarter of 2009. For the nine months, the respective amounts were $25,686 million unfavourable and $315 million favourable. See pages 6, 20 and 21 for further details.
Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $335 million for the third quarter, compared with $311 million for the same period last year. For the nine months, the respective amounts were $777 million and $1,000 million.
The effective tax rate on replacement cost profit or loss for the third quarter and nine months was -16% and 33% respectively, compared with 29% and 33% a year ago. The effective tax rates for 2010 were impacted by the Gulf of Mexico oil spill, resulting in a particularly unusual rate for the third quarter. Excluding these impacts, the effective tax rate for the third quarter was 25% and for the nine months was 31%. The full-year effective tax rate, excluding the impact of the Gulf of Mexico oil spill, is expected to be around 31%.
Including the impact of the Gulf of Mexico oil spill, net cash used in operating activities for the third quarter was $0.7 billion and net cash provided by operating activities for the nine months was $13.8 billion, compared with net cash provided in the same periods of last year of $8.1 billion and $20.4 billion respectively. The amounts for 2010 included a net cash outflow of $9.1 billion and $10.6 billion for the third quarter and nine months respectively relating to the Gulf of Mexico oil spill.
Total capital expenditure for the third quarter and nine months was $6.7 billion and $17.6 billion respectively. Organic capital expenditure(b) in the third quarter and nine months was $4.7 billion and $13.0 billion respectively. Organic capital expenditure for 2010 is expected to be around $18 billion. Given the strength of our underlying cash flows and the investment opportunities available to us, our 2011 capital expenditure is currently under review and is expected to exceed the $18 billion previously indicated. Disposal proceeds for the quarter consisted of $3.7 billion for transactions completed in the period and $5.0 billion for deposits received relating to transactions expected to complete in subsequent periods. In July, the group announced plans to deliver up to $30 billion of disposal proceeds during the following 18-month period. Disposal proceeds received since that time and further amounts to be received under agreements already concluded total $14 billion. This includes some disposal proceeds relating to transactions agreed prior to 1 July 2010.
Net debt at the end of the quarter was $26.4 billion, compared with $26.3 billion a year ago. Net debt at the end of the quarter included $5.0 billion received as deposits for disposals completing after 30 September 2010, which is treated as short-term debt. The ratio of net debt to net debt plus equity was 23% compared with 21% a year ago. The net debt ratio at the end of the third quarter 2010 was impacted by the reduction in equity arising from the liabilities we have recognized in relation to the Gulf of Mexico oil spill. The group intends to reduce net debt to $10-15 billion by the end of 2011.
Cash costs(c) for the third quarter were broadly flat compared with the same period a year ago. For the nine months, they were slightly lower. Cash costs do not include amounts relating to the Gulf of Mexico oil spill. On 1 October 2010, Robert Dudley became group chief executive, succeeding Tony Hayward who stepped down from the post by mutual agreement with the BP board.