<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-6262
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BP AMOCO P.L.C.
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(Exact name of Registrant as specified in its charter)
ENGLAND AND WALES
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(Jurisdiction of incorporation or organization)
BRITANNIC HOUSE
1 FINSBURY CIRCUS
LONDON EC2M 7BA
ENGLAND
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
<TABLE>
<CAPTION>
<S> <C>
Title of each class Name of each exchange
on which registered
ORDINARY SHARES OF 25C EACH CHICAGO STOCK EXCHANGE*
NEW YORK STOCK EXCHANGE*
PACIFIC EXCHANGE, INC.*
---------------------------- -------------------------
*Not for trading, but only in connection
with the registration of American Depositary
Shares, pursuant to the requirements of the
Securities and Exchange Commission
</TABLE>
Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
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Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
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Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report.
<TABLE>
<CAPTION>
<S> <C>
ORDINARY SHARES OF 25C EACH 19,484,024,424
CUMULATIVE FIRST PREFERENCE SHARES OF L1 EACH 7,232,838
CUMULATIVE SECOND PREFERENCE SHARES OF L1 EACH 5,473,414
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No. _____
Indicate by check mark which financial statement item the Registrant has
elected to follow.
Item 17 _____ Item 18 X
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Page
Certain Definitions........................................... 3
Exchange Rates................................................ 4
PART I Item 1 Description of Business....................................... 5
General.................................................. 5
Exploration and Production............................... 9
Refining and Marketing................................... 23
Chemicals................................................ 29
Other Businesses and Corporate........................... 34
Regulation of the Group's Business....................... 36
Environmental Protection................................. 38
Additional Factors Which May Affect Business............. 42
Item 2 Description of Property....................................... 43
Item 3 Legal Proceedings............................................. 44
Item 4 Control of Registrant......................................... 44
Item 5 Nature of Trading Market...................................... 45
Item 6 Exchange Controls and Other Limitations Affecting
Security Holders............................................ 46
Item 7 Taxation...................................................... 46
Item 8 Selected Financial Data....................................... 50
Summarized Financial Information......................... 50
Dividends................................................ 52
Item 9 Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 54
Item 9A Quantitative and Qualitative Disclosures about Market Risk.... 67
Item 10 Directors and Officers of Registrant.......................... 73
Item 11 Compensation of Directors and Officers........................ 75
Item 12 Options to Purchase Securities from Registrant or
Subsidiaries................................................ 87
Item 13 Interest of Management in Certain Transactions................ 87
PART III Item 15 Defaults upon Senior Securities............................... 88
Item 16 Changes in Securities, Changes in Security for
Registered Securities and Use of Proceeds................... 88
PART IV Item 18 Financial Statements.......................................... 89
Item 19 Financial Statements and Exhibits............................. 89
</TABLE>
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Note: Omitted items are inapplicable.
2
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CERTAIN DEFINITIONS
Unless the context indicates otherwise, the following terms have the
meanings shown below:
OIL AND NATURAL GAS RESERVES
'Proved reserves' -- Estimated quantities of crude oil or natural gas
which geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing economic and
operating conditions, i.e. prices and costs as of the date the estimate is made.
'Proved developed reserves' -- Reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
Additional oil and gas expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing natural forces
and mechanisms of primary recovery are included as 'proved developed reserves'
only after testing by a pilot project or after the operation of an installed
programme has confirmed through production response that increased recovery will
be achieved.
'Proved undeveloped reserves' -- Reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion. Reserves on undrilled
acreage are limited to those drilling units offsetting productive units that are
reasonably certain of production when drilled. Proved reserves for other
undrilled units are claimed only where it can be demonstrated with certainty
that there is continuity of production from the existing productive formation.
Under no circumstances are estimates of proved undeveloped reserves attributable
to acreage for which an application of fluid injection or other improved
recovery technique is contemplated, unless such techniques have been proved
effective by actual tests in the area and in the same reservoir.
MISCELLANEOUS TERMS
'ADR'-- American Depositary Receipt.
'ADS'-- American Depositary Share.
'Amoco' -- The former Amoco Corporation and its subsidiaries.
'Associated undertaking' -- An undertaking in which the BP Amoco Group has a
participating interest and over whose operating and financial policy the BP
Amoco Group exercises a significant influence (presumed to be the case where 20%
or more of the voting rights are held) and which is not a subsidiary
undertaking.
'Barrel' -- 42 US gallons.
'Billion'-- 1,000,000,000.
'BP' or 'BP Group'-- The British Petroleum Company p.l.c. and its subsidiaries.
'BP p.l.c.'-- The British Petroleum Company p.l.c.
'BP Amoco', 'BP Amoco Group' or the 'Group' -- The Company and its subsidiaries.
'Cent' or 'c' - One hundredth of the US dollar.
The 'Company' -- BP Amoco p.l.c.
'Crude oil' -- Includes condensate and natural gas liquids.
'Dollar' or '$' -- The US dollar.
'Gas'-- Natural Gas.
'LNG'-- Liquefied Natural Gas.
'London Stock Exchange' or 'LSE'-- London Stock Exchange Limited.
'LPG'-- Liquefied Petroleum Gas.
'NGL'-- Natural Gas Liquid.
3
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'Noon Buying Rate' -- The noon buying rate in New York City for cable transfers
in pounds as certified for customs purposes by the Federal Reserve Bank of New
York.
'OECD' -- Organization for Economic Cooperation and Development.
'Oil' -- Crude oil, condensate and natural gas liquids.
'OPEC'-- The Organization of Petroleum Exporting Countries.
'Ordinary Shares'-- Ordinary fully paid shares in BP Amoco p.l.c. of 25c each.
'Pence' or 'p' -- One hundredth of a pound.
'Pound', 'sterling' or 'L' -- The pound sterling.
'Preference Shares'-- Cumulative First Preference Shares and Cumulative Second
Preference Shares in BP Amoco p.l.c. of L1 each.
'Subsidiary undertaking' -- An undertaking in which the BP Amoco Group holds a
majority of the voting rights.
'Tonne' or 'metric ton' -- 2,204.6 pounds.
'Trillion'-- 1,000,000,000,000.
'UK'-- United Kingdom of Great Britain and Northern Ireland.
'UK GAAP' -- Generally Accepted Accounting Practice in the UK.
'Undertaking' -- A body corporate, partnership or an unincorporated association,
carrying on a trade or business.
'US' or 'USA' -- United States of America.
'US GAAP' -- Generally Accepted Accounting Principles in the USA.
EXCHANGE RATES
The following table sets forth, for the periods and dates indicated,
certain information concerning the Noon Buying Rate for the pound in New York
City for cable transfers in pounds as certified for customs purposes by the
Federal Reserve Bank of New York. This is expressed in dollars per L1.
<TABLE>
<CAPTION>
Calendar year at Year End Average(a) High Low
- ----------- ----------- ------- ---- ----
<S> <C> <C> <C> <C>
1995............................................ 1.55 1.58 1.64 1.53
1996............................................ 1.71 1.57 1.71 1.49
1997............................................ 1.64 1.64 1.70 1.58
1998............................................ 1.66 1.66 1.72 1.61
1999 ........................................... 1.62 1.62 1.66 1.60
2000 (through March 24) (b)..................... -- -- 1.65 1.57
</TABLE>
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(a) The average of the Noon Buying Rates on the last day of each
month during the calendar year.
(b) The Noon Buying Rate on March 24, 2000 was $1.59 = L1.
4
<PAGE>
PART I
ITEM 1 -- DESCRIPTION OF BUSINESS
GENERAL
UNLESS OTHERWISE INDICATED, INFORMATION IN THIS ITEM REFLECTS 100% OF THE
ASSETS AND OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES WHICH WERE
CONSOLIDATED AT THE DATE OR FOR THE PERIODS INDICATED, WITHOUT THE EXCLUSION OF
MINORITY INTERESTS. ALSO, UNLESS OTHERWISE INDICATED, FIGURES FOR BUSINESS
TURNOVER INCLUDE SALES BETWEEN BP AMOCO BUSINESSES
BP Amoco was created on December 31, 1998 by the merger of Amoco
Corporation of the USA and The British Petroleum Company p.l.c. of the UK.
Following this merger, Amoco Corporation became a wholly owned subsidiary of BP
p.l.c. and was renamed BP Amoco Corporation, and The British Petroleum Company
p.l.c. was renamed BP Amoco p.l.c. Amoco Corporation was incorporated in
Indiana, USA, in 1889 and The British Petroleum Company p.l.c. was incorporated
in 1909 in England.
BP Amoco is one of the world's leading oil companies on the basis of market
capitalization and proved reserves. Our worldwide headquarters is located in
London, UK.
Our main businesses are Exploration and Production, Refining and Marketing,
and Chemicals. Exploration and Production's activities include oil and natural
gas exploration and field development and production (upstream activities),
together with pipeline transportation, natural gas processing and gas and power
marketing (midstream activities). The activities of Refining and Marketing
include oil supply and trading as well as refining and marketing (downstream
activities). Chemicals activities include petrochemicals manufacturing and
marketing. In addition, we have a solar energy business which is one of the
world's largest manufacturers of photovoltaic modules and systems. The Group
provides high quality technological support for all its businesses through its
research and engineering activities.
We have well established operations in Europe, the USA, Canada, South
America, Australasia and parts of Africa. More than 70% of the Group's capital
is invested in OECD countries with approximately one half of our fixed assets
located in the USA, and about one third located in the UK and the Rest of
Europe.
We believe that BP Amoco has a strong portfolio of assets in its three
main businesses:
-- In Exploration and Production in the USA we have established production
bases in oil in Alaska and in oil and natural gas in the Gulf of Mexico,
and extensive natural gas production in the Lower 48 States. We are the
largest producer of both oil and natural gas from UK fields, and we have
exploration or production operations in several other areas including
Latin America, the Caspian Sea region and Africa.
-- In Refining and Marketing we have a strong presence in the Midwest, East
and Southeast of the USA through our Amoco brand and this is reinforced in
the Midwest and Southeast by our BP brand. In Europe we have a strong
retail position in fuels through a joint venture with ExxonMobil
Corporation (ExxonMobil). We have agreed to purchase ExxonMobil's share of
this joint venture. In addition we have established or growing retail
businesses elsewhere in the world under the BP brand.
-- In Chemicals we have a strong manufacturing and marketing base in the USA
and Europe, and are aiming to grow in the Asia Pacific region where we
already have interests in a number of plants. We have a strong position in
the technology and production of olefins and derivative products
(polyethylene, acetic acid and acrylonitrile), as well as a leading
position in aromatics and derivative products (purified terephthalic acid,
paraxylene and metaxylene).
The integration of BP and Amoco following the merger was completed in
1999 and the anticipated cost savings at a rate of $2 billion per annum before
tax were achieved by the end of that year.
Following completion of the merger on December 31, 1998 and in the
context of low oil prices at the time, BP Amoco undertook a strategic and
portfolio review in early 1999. This was completed in the Spring of 1999 and
resulted, among other things, in the development of an asset divestment
programme.
The guiding principle of the strategic and portfolio review was to
concentrate the combined Group's operations on areas of competitive strength
and, in the upstream portfolio, to dispose of assets which would not be robustly
economic on the basis of conservative assumptions about future oil prices.
5
<PAGE>
Our new strategy has evolved from those of BP and Amoco. In Exploration and
Production our goal is to have significant shares of the larger oil and natural
gas fields where our supply costs can be fully competitive with all other
producers. We are developing a new business division - Gas and Power -
specifically designed to extend our interests as the mix of world energy
consumption shifts in favour of natural gas. In Refining and Marketing we intend
to invest in the marketing areas which are growing, such as China and Poland,
while focusing our refining on advantaged areas. In Chemicals we are continuing
to establish a set of advantaged sites distinguished by excellence in
manufacturing and close links to both the supply of resources and evolving
demand growth.
In July 1999, we announced a new set of targets taking us through to the
end of 2001. Our aim is to improve returns by around five to six percentage
points, compared with the base-line of 1998, on the basis of cautious
assumptions about the trading environment. We cannot, and do not, rely on oil
prices maintaining their current levels.
Even allowing for price fluctuation, we believe we can continue to improve
performance through selective upgrading of the portfolio, including sustained
reductions in costs, a steady programme of investment in the existing business
amounting to some $24-26 billion over three years and a programme to divest some
$10 billion of assets by the end of 2001.
Our financial framework is to maintain a ratio of net debt to net debt
plus equity within a range of around 25-30% and a dividend policy which aims to
return to shareholders around 50% of estimated average replacement cost profit
before exceptional items through the business cycle. If circumstances give us a
larger surplus it is anticipated that cash will either be used to fund further
growth investment or be returned to shareholders.
The following table summarizes the Group's turnover, results and capital
expenditure for the last five years and total assets at the end of each of those
years.
<TABLE>
<CAPTION>
Years ended December 31, (a)
-----------------------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
($ million)
<S> <C> <C> <C> <C> <C>
Turnover............................ 101,180 83,732 108,564 102,064 84,216
Less: joint ventures................ 17,614 15,428 16,804 -- --
------- ------- ------- ------- -------
Group Turnover (sales to third parties) 83,566 68,304 91,760 102,064 84,216
Total replacement cost operating profit 8,894 6,521 10,683 10,634 8,264
Profit for the year*................ 5,008 3,220 5,673 7,417 3,700
Capital expenditure and acquisitions 7,345 10,362 11,420 10,288 8,380
Total assets........................ 89,561 84,915 86,279 88,651 81,499
</TABLE>
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* After minority shareholders' interest
(a) As restated for the effect of the adoption of Financial Reporting Standard
No.12 `Provisions, Contingent Liabilities and Contingent Assets'. For
further information see Note 43 of Notes to Financial Statements.
Information for 1999, 1998 and 1997 concerning the profits and assets
attributable to the businesses and to the geographical areas in which the Group
operates is set forth in Item 18 -- Note 45 of Notes to Financial Statements.
6
<PAGE>
The following table shows our production for the last five years and the
estimated proved oil and gas reserves at the end of each of those years.
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Total crude oil production
(thousand barrels per day)(a).......... 2,061 2,049 1,930 1,903 1,873
Total natural gas production
(million cubic feet per day)(a)........ 6,067 5,808 5,858 5,917 5,485
Total estimated net proved crude
oil reserves (million barrels)(b)...... 6,535 7,304 7,612 7,325 6,987
Total estimated net proved natural gas...
reserves (billion cubic feet) (b)....... 33,802 31,001 30,374 30,349 29,534
</TABLE>
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(a) Includes BP Amoco's share of equity-accounted entities.
(b) Net proved reserves of crude oil and natural gas exclude production
royalties due to others and reserves of equity-accounted entities.
During 1999, 1,172 million barrels of oil and natural gas, on an oil
equivalent* basis (mmboe), were added to BP Amoco's proved reserves, more than
replacing the volume produced. In addition, 157 mmboe were transferred from
reserves of equity-accounted entities into net proved reserves of the BP Amoco
Group after the dissolution of Crescendo Resources when BP Amoco purchased a
majority of Repsol YPF's interest. After allowing for production which amounted
to 1,050 mmboe and sales net of purchases totalling 565 mmboe, BP Amoco's proved
reserves decreased to 12,363 mmboe. These proved reserves are mainly located in
the USA (48%), the UK (17%) and Trinidad and Tobago (17%).
RECENT DEVELOPMENTS
THE PROPOSED COMBINATION OF BP AMOCO AND ARCO
On April 1, 1999 the Board of BP Amoco announced that it had reached
agreement on a proposed combination (the combination) with the Atlantic
Richfield Company (ARCO) of Los Angeles.
The agreement relating to the proposed combination (the Combination
Agreement), approved by the boards of both BP Amoco and ARCO, provides that all
common shareholders of ARCO, with the exception of BP Amoco, ARCO or any of
their subsidiaries, will receive 9.84 BP Amoco ordinary shares of US$0.25 each
in the form of BP Amoco ADSs or, at the election of the shareholder, BP Amoco
ordinary shares, in return for the cancellation of each of their shares (other
than the shares held by CH-Twenty Holdings, LLC, a subsidiary of ARCO) (the
Cancelled ARCO Shares). It also provides for the issue to BP Amoco of new common
shares equal in number to the Cancelled ARCO Shares by a newly enlarged ARCO
formed by a statutory merger of Prairie Holdings, Inc. (a direct wholly owned
subsidiary of BP Amoco) into and with ARCO. Any right to a fraction of a BP
Amoco ADS or an odd lot of less than six BP Amoco ordinary shares will be
satisfied by a cash payment. Both ARCO and BP Amoco shareholders voted
overwhelmingly in favour of the combination at shareholders' meetings on August
30, 1999 and September 1, 1999, respectively.
BP Amoco and ARCO announced in early November 1999 that they had reached
provisional agreement with the Alaskan State Governor on a package of asset
disposals and other measures designed to secure Alaskan government acceptance
for the proposed combination of the two companies. Subject to the completion of
the combination, BP Amoco would sell 175,000 barrels of production per day
together with associated infrastructure, 620,000 acres of state and federal
exploration leases, and matching stakes in the Trans Alaska Pipeline System
(TAPS). The provisional agreement was finalized into an agreement with the State
of Alaska (the Alaskan Charter Agreement) made in early December 1999.
On February 4, 2000 the US Federal Trade Commission (FTC) filed a complaint
in the US District Court (the Court) seeking a preliminary injunction to prevent
closing of the combination. The Attorney Generals for the States of California,
Oregon and Washington (the Western States) also filed complaints with the same
Court. The Attorney General for the State of Alaska joined in the Court
proceedings in support of the combination.
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* Natural gas is converted to oil equivalent at 5.8 billion cubic feet =
1 million barrels.
7
<PAGE>
On March 15, 2000 BP Amoco announced that it and ARCO had agreed to sell
ARCO's Alaskan business to Phillips Petroleum Co. (Phillips) for around $7
billion. The sale, which is subject to completion of the combination, is
intended to address anti-trust concerns of the FTC. The sale to Phillips of all
ARCO's Alaskan business includes a 21.9% interest in the Prudhoe Bay oil rim and
42.6% of the natural gas cap, a 55% interest in the greater Kuparuk area and a
78% interest in the Alpine field. Also included are 1.1 million net exploration
acres, a 22.3% interest in the TAPS, and ARCO's crude oil shipping fleet which
includes six tankers in service and three under construction. The reserves being
sold total 1.9 billion barrels of oil equivalent. The Alaskan government has
accepted that the sale to Phillips of all ARCO's Alaskan business satisfies the
sale obligations of BP Amoco under the Alaskan Charter Agreement.
Also on March 15, 2000 it was announced that the FTC, the Western States,
the State of Alaska, ARCO and BP Amoco had agreed to suspend the Court
proceedings, pending discussions for a consent order.
On March 16, 2000 BP Amoco announced that it was at an advanced stage in
discussions with the FTC on the combination and was hopeful of obtaining a
consent order within a few weeks allowing the Company to close the combination.
In addition, BP Amoco announced that, subject to completion of the combination,
it had advised the board of Vastar Resources Inc. of the intention to make a
tender offer for the minority stockholding of the company at $71 per share. ARCO
already owns some 82 percent of Vastar.
On March 23, 2000 BP Amoco and ARCO jointly agreed to extend the
termination date of the Combination Agreement from March 31, 2000 to June 30,
2000.
On March 24, 2000 ExxonMobil Corporation (ExxonMobil) filed a Complaint in
State Court, Los Angeles, seeking a preliminary injunction and other relief
against BP Amoco, ARCO and Phillips to prevent the sale of ARCO's Alaskan
business to Phillips referred to in this section above.
Completion of the combination remains subject to regulatory approvals and
the satisfaction of other conditions.
ANNOUNCEMENT OF INTENDED CASH OFFER TO BUY BURMAH CASTROL PLC
On March 14, 2000 BP Amoco announced that it had agreed on the terms of a
recommended cash offer to buy Burmah Castrol plc (Burmah Castrol) of the UK for
approximately $4.7 billion (L3 billion). The recommended cash offer of L16.75
for each Burmah Castrol share had been agreed by the boards of both companies.
The offer is pre-conditional and it is intended that the formal offer document
will be sent to Burmah Castrol's shareholders once the pre-conditions
(regulatory clearances) have been satisfied or waived. The offer will be subject
to terms to be set out in the formal Offer Document and such further terms as
required to comply with the rules of the London Stock Exchange and the City
Code.
BP AMOCO AND PETROCHINA JOINT VENTURE
On March 23, 2000 BP Amoco announced that it planned to form a natural gas
marketing joint venture with PetroChina aimed at supplying the energy markets of
eastern China. The project is part of a strategic alliance agreed in principle
between BP Amoco and PetroChina which also includes a preliminary agreement to
build a fuels marketing business in China's coastal provinces with the prospect
of further expansion into other regions.
These agreements are subject to the execution of definitive agreements
between the parties, and to all relevant government authorizations and
approvals.
BP Amoco also announced that it intended to acquire approximately 20% of
the shares currently being offered, up to a maximum purchase price of $1
billion, by PetroChina as part of its Initial Public Offering.
PetroChina is based in Beijing, China and is engaged in a broad range of
petroleum-related activities; it is one of the largest companies in China in
terms of sales.
8
<PAGE>
EXPLORATION AND PRODUCTION
The activities of our Exploration and Production business include oil and
natural gas exploration and field development and production -- the upstream
activities -- as well as the management of crude oil and natural gas pipeline
assets and the processing and marketing of natural gas and power -- midstream
activities. We have Exploration and Production interests in 27 countries, with
the main concentration in the USA and in the UK sector of the North Sea.
Production during 1999 came from 18 countries. Our most significant midstream
activities are the Trans Alaska Pipeline System (BP Amoco 50%), the Forties
Pipeline System (BP Amoco 100%) and the Central Area Transmission System
pipeline (BP Amoco 29.5%) in the UK sector of the North Sea, and the Atlantic
LNG plant (BP Amoco 34%) in Trinidad.
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
----- ----- -----
($ million)
<S> <C> <C> <C>
Turnover (a)............................................. 21,649 17,276 23,171
Total replacement cost operating profit.................. 7,194 3,231 7,385
Total assets............................................. 46,649 47,808 46,024
Capital expenditure and acquisitions..................... 4,212 6,318 7,879
($ per barrel)
Average BP Amoco oil realizations........................ 16.7 12.1 18.3
($ per thousand cubic feet)
Average BP Amoco US natural gas realizations............. 2.1 1.8 2.2
</TABLE>
- ----------
(a) Excludes BP Amoco's share of joint venture turnover of $497 million in
1999, $348 million in 1998, and $112 million in 1997.
Our Exploration and Production strategy has two key elements. The first is
to maximize the value realized from our existing assets and resource base. This
includes the following actions:
-- We actively manage existing producing assets to maintain and improve the
net income and operating cash flow realized from our oil and natural gas
production. In addition, we strive to reduce the cost and improve the
efficiency of new investment projects. Significant savings have been
achieved by developing closer relationships with partners, contractors and
suppliers, and by agreeing with these parties common incentives to improve
productivity. We also link internal compensation to operating and
investment efficiency, as well as safety and environmental performance.
-- We seek opportunities for profitable growth in both the upstream and
midstream activities, within the context of the market environment and
Group financial policies. This includes the use of decline management and
enhanced recovery technologies to increase recoveries and temper the volume
decline in mature fields. It also includes investing in midstream
activities which are relatively unaffected by oil and natural gas price
movements, and using our pipeline infrastructure and natural gas marketing
expertise to secure additional revenue by transporting and processing
volumes owned by other companies.
-- We continually upgrade the quality of our asset portfolio by focusing
investments in core areas and disposing of non-strategic assets. This can
be achieved through asset swaps, purchases and sales. Examples of portfolio
upgrading in 1999 include our $1 billion sale of non-core Canadian oil
properties in October, the sale of our Venezuelan assets announced in
November and our $400 million purchase of a majority of Repsol YPF's
interest in our US-based Crescendo joint venture. In March 2000, we
announced the divestment of Altura Energy Ltd (Altura), our US-based joint
venture with Shell, for a total price of approximately $3.6 billion (BP
Amoco 64%). The transaction is expected to close during the second quarter
of 2000 and it is estimated that profit after tax of approximately $260
million will be recognized by BP Amoco in 2000.
9
<PAGE>
The second element of our Exploration and Production strategy is to renew
the business and to provide growth for the future. We do this through
exploration and selected business development activity, as described below:
-- Our exploration programme focuses on areas which have been relatively
unexplored for political or technical reasons, and where we believe
substantial volumes of low cost, high value reserves remain to be found.
Principal areas of activity include Angola, Australia, Azerbaijan, Brazil,
Egypt, Trinidad and Tobago and the USA. Our Crazy Horse discovery in the
Gulf of Mexico, USA, is one example of this exploration growth strategy.
Finding this field involved drilling through 6,000 feet of water and more
than 2,000 feet of salt to a record depth of 25,770 feet.
-- Our business development activities focus on obtaining an interest in areas
new to BP Amoco, and extending our interests into existing core areas. Our
In Salah development is a new venture (BP Amoco 65%) in which BP Amoco and
the Algerian state company, Sonatrach, intend to go ahead with a
$2.5-billion development of natural gas fields in the Sahara Desert. This
development is expected to supply the fast growing markets of southern
Europe with some 320 billion cubic feet (bcf) annually. First deliveries
are expected to start in 2003.
-- In a longstanding core area, the negotiation of new concession terms with
the government of Egypt will enable continued investment of $450 million in
our Gulf of Suez concessions. The new terms will result in the development
of 160 million barrels of oil equivalent. Redevelopment activity conducted
in our portfolio of giant fields should be a significant source of future
growth.
Following the merger we have been able to capitalize on cost reduction
opportunities where we had parallel operations, and have drawn on the best
practices and experience of two successful companies to optimize further our
operations and investment programme. The merger has also provided a better
geographic, oil/natural gas and upstream/midstream balance in our portfolio.
With cost reductions achieved in 1999, we are well on our way toward meeting our
cost reduction target of $2.2 billion by 2001.
BP Amoco retains its 10% equity interest (20% voting interest) in the
Russian integrated oil company A O Sidanco (Sidanco). Sidanco went into
bankruptcy for most of 1999 and temporarily lost ownership of a major subsidiary
as a result of a forced bankruptcy sale. As part of a broad-ranging agreement
between the parties involved, this subsidiary will be returned to Sidanco's
ownership in 2000 and arrangements were put in place which made it possible to
take Sidanco out of bankruptcy in January 2000.
UPSTREAM ACTIVITIES
EXPLORATION
The Group explores for and produces oil and natural gas under a wide range
of licensing, joint venture and other contractual agreements. We may do this
alone or, more frequently, with partners. BP Amoco acts as operator for many of
these ventures.
The Group's worldwide capital expenditure on exploration and appraisal in
1999 was $604 million, a decrease of $371 million or 38% compared with 1998, as
we focused on high-graded opportunities following the merger of the BP and Amoco
exploration portfolios. In 1999, we participated in 84 gross (24.9 net)
exploration and appraisal wells in 17 countries. The principal areas of activity
were Angola, Australia, Azerbaijan, Brazil, Egypt, and the USA.
In 1999, BP Amoco obtained upstream rights in several new tracts, which are
expected to provide a foundation for continued exploration success. These
include the following:
-- In Angola, we acquired operatorship and a 26.67% interest in a production
sharing agreement covering deepwater Block 31. This new block is adjacent
and geologically similar to other acreage where BP Amoco and partners have
discovered several large fields.
-- In Australia we won our three preferred blocks (BP Amoco 16.7% to 20% and
operator) in the Canning deepwater Gazettal round. Additionally we farmed
into the WA-267-P licence (BP Amoco 12.5%).
-- In Brazil we were awarded two offshore blocks in the deepwater Foz do
Amazonas basin offshore Northern Brazil. BP Amoco is operator of both
blocks with a 30% interest in the 15,000 square kilometre block BMFZA-1,
and 35% in the 25,000 square kilometre block BFZ-2.
10
<PAGE>
-- In Egypt we obtained operating rights and 50% ownership interest in the
15,400 square kilometre West Mediterranean deepwater block.
-- In the USA, in Alaska, BP Amoco and partners won 25 blocks in the National
Petroleum Reserve-Alaska (NPR-A) at Lease Sale 991. A subsequent equity
cross assignment with partners Chevron and Phillips resulted in BP Amoco
holding 50% interest and operating rights in a total of 33 NPR-A blocks.
In addition, during 1999 we relinquished exploration interests in several
countries as we continued a process of focusing and shaping our portfolio. The
most significant of these was the exit from offshore Nigeria, but we also
relinquished the Zambezi block, offshore Mozambique, our properties offshore
southern Turkey, acreage in the Latvian Baltic Sea and our interests onshore
north Somalia.
In 1999, we announced significant discoveries in Angola, Australia,
Azerbaijan and the USA. In most cases, reserve bookings from these fields will
depend on the results of ongoing technical and commercial evaluations, including
appraisal drilling. These discoveries included the following:
-- In Angola, we were involved in eight discoveries. Plutonio and Platina in
Block 18 (BP Amoco 50% and operator), Orquidea, Cravoa, Camelia and Tulipa
in Block 17 (BP Amoco 16.7%), and Chocalho and Xikomba in Block 15 (BP
Amoco 26.7%).
-- In Australia, we participated in the significant Geryon and Orthrus natural
gas discoveries (licence WA-267-P, BP Amoco 12.5%) which lie approximately
200 kilometres west of our LNG facilities. A further four wells remain to
be drilled over the next two years.
-- In Azerbaijan we announced a significant gas condensate discovery, Shah
Deniz (BP Amoco 25.5% and operator). Gas from this discovery should
provide the basis to initiate gas exports from Azerbaijan to Turkey.
-- In the deepwater US Gulf of Mexico, we announced four discoveries, Crazy
Horse (BP Amoco 75% and operator), Mad Dog (BP Amoco 63% and operator),
Holstein (BP Amoco 50% and operator) and Atlantis (BP Amoco 56% and
operator). The Crazy Horse discovery is estimated to be the largest
discovery made to date in the deepwater Gulf of Mexico.
In 1999, total additions to the Group's proved reserves (excluding
purchases and sales) amounted to 1,172 million barrels of oil equivalent
(mmboe): 829 mmboe through extensions to existing fields and discoveries of new
fields, and the remaining 343 mmboe through revisions to previous estimates and
the application of improved recovery techniques. The principal reserve additions
were in Egypt, Trinidad and US Gulf of Mexico as follows:
-- In Egypt we added 90 million barrels (mmb) of oil reserves following the
successful amendment to the concession terms for our Gulf of Suez producing
properties. In addition we added 250 bcf of natural gas reserves from our
Nile Delta gas discoveries following completion of gas sales agreements.
-- In Trinidad and Tobago, we added through discoveries and extensions, 2.9
trillion cubic feet of natural gas, principally from the Sparrow field (BP
Amoco 100% and operator).
-- In the deepwater Gulf of Mexico we added 150 mmboe as we approved
development of a number of fields including Crosby, King and Mica.
RESERVES AND PRODUCTION
We annually review our total reserves of crude oil, condensate, natural
gas liquids and natural gas to take account of production, field reassessments,
the application of improved recovery techniques, the addition of new reserves
from discoveries and economic factors. We also conduct selective periodic
reserve reviews for individual fields.
Details of our net proved reserves of crude oil, condensate, natural gas
liquids and natural gas at December 31, 1999, 1998, and 1997 and production for
each of the three years then ended are set out in the Supplementary Oil and Gas
Information in Item 19 -- Financial Statements and Exhibits.
On an oil equivalent basis, natural gas represents some 47% of the
Group's hydrocarbon reserves (excluding equity-accounted entities).
11
<PAGE>
Our total hydrocarbon production (including equity-accounted entities)
during 1999 averaged 3,107,000 barrels of oil equivalent per day (boe/d), an
increase of 57,000 boe/d, or 1.9% compared with 1998 as production declines in
mature fields were more than offset by production start-ups and build-ups to
full production. About 38% of our production was in the USA and 26% in the UK.
The following tables show BP Amoco's production by major field (asterisks
denote fields operated by BP Amoco) for the three years 1997 to 1999, and BP
Amoco's aggregate estimated net proved reserves as at December 31, 1999:
CRUDE OIL (a)
PRODUCTION
<TABLE>
<CAPTION>
Net production
--------------------
Field or Area Interest 1999 1998 1997
------------- -------- ----- ----- -----
(%) (thousand barrels per day)
<S> <C> <C> <C> <C> <C>
Alaska (b) Prudhoe Bay* 51.2/13.8(c) 202 232 266
Kuparuk 39.2 90 92 90
Milne Point* 91.2 42 43 40
Point McIntyre 32.2 25 36 44
Endicott* 67.9 25 30 36
Other Various 21 21 22
------ ------ ------
Total Alaska 405 454 498
Lower 48 onshore Altura Various 127 122 146
Other Various 133 140 139
------ ------ ------
Total Lower 48 onshore 260 262 285
Gulf of Mexico (b) Mars 28.5 36 29 22
Troika 33.3 30 15 1
Pompano* 75.0 29 34 29
Other Various 44 39 33
------ ------ ------
Total Gulf of Mexico 139 117 85
------ ------ ------
TOTAL USA 804 833 868
------ ------ ------
UK offshore (b) ETAP Various 80 30 --
Forties* 95.4 66 76 75
Harding* 70.0 58 60 50
Foinaven* 72.0 56 51 3
Magnus* 85.0 48 61 59
Andrew* 62.8 43 43 37
Schiehallion/Loyal* Various 36 8 --
Miller* 40.0 30 31 43
Other Various 123 110 124
------ ------ ------
Total UK offshore 540 470 391
Onshore Wytch Farm* 50.5 40 48 45
Other Various -- -- 1
------ ------ ------
TOTAL UK 580 518 437
------ ------ ------
Rest of Europe
Norway (b) Various Various 98 103 113
Netherlands Various Various 2 2 2
------ ------ ------
TOTAL REST OF EUROPE Various 100 105 115
------ ------ ------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Net production
--------------------
Field or Area Interest 1999 1998 1997
------------- -------- ----- ----- -----
(%) (thousand barrels per day)
<S> <C> <C> <C> <C> <C>
Rest of World
Egypt October 30.4 35 30 38
Other Various 95 75 66
Colombia Cusiana/Cupiagua* 19.0 66 54 33
Canada (b) Various Various 56 68 61
Trinidad Various 100 49 47 48
Azerbaijan Azeri-Chirag-Gunashli* 34.1 32 16 --
Venezuela Various Various 30 31 21
Australia Various 16.7 23 30 28
Other (b) Various Various 21 34 43
------ ------ ------
TOTAL REST OF WORLD 407 385 338
------ ------ ------
TOTAL GROUP 1,891 1,841 1,758
====== ====== ======
Equity-accounted entities
Abu Dhabi (d) Various Various 113 124 118
Argentina Various Various 41 45 48
Other Various Various 16 39 6
------ ------ ------
TOTAL EQUITY-ACCOUNTED ENTITIES 170 208 172
------ ------ ------
TOTAL GROUP AND BP AMOCO SHARE OF EQUITY-ACCOUNTED ENTITIES 2,061 2,049 1,930
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED NET PROVED RESERVES (a) December 31, 1999
------------------------------------------------------
Rest of Rest of
SUBSIDIARY UNDERTAKINGS UK Europe USA World Total
------ ------ ------ ------ ------
(millions of barrels)
<S> <C> <C> <C> <C> <C>
Developed..................... 1,158 190 2,930 550 4,828
Undeveloped................... 183 95 932 497 1,707
------ ------ ------ ------ ------
1,341 285 3,862 1,047 6,535
====== ====== ====== ====== ------
EQUITY-ACCOUNTED ENTITIES 1,037
------
TOTAL GROUP AND BP AMOCO SHARE OF EQUITY-ACCOUNTED ENTITIES 7,572
======
</TABLE>
13
<PAGE>
NATURAL GAS (a)(e)
PRODUCTION
<TABLE>
<CAPTION>
Net production
--------------------
Field or Area Interest 1999 1998 1997
------------- -------- ----- ----- -----
(%) (million cubic feet per day)
<S> <C> <C> <C> <C> <C>
Lower 48 onshore (b) San Juan Coal* Various 427 408 383
Tuscaloosa Various 175 156 126
Hugoton* Various 162 170 242
Altura Various 118 143 108
Arkoma Various 111 129 142
Wamsutter* 70.5 92 87 84
Moxa Arch* 41.0 77 110 69
Anschutz Ranch East* Various 67 26 80
Jonah* 79.1 57 27 5
Whitney Canyon Various 52 53 53
Other Various 356 434 657
------ ------ ------
Total Lower 48 onshore 1,694 1,743 1,949
Alaska Various Various 10 10 12
Gulf of Mexico (b) Ram Powell (VK 912) 31.0 72 50 3
Matagorda Island 623* 44.0 99 97 70
Other Various 400 421 415
------ ------ ------
TOTAL USA 2,275 2,321 2,449
------ ------ ------
UK offshore (b) Bruce* 37.0 175 182 202
West Sole* 100.0 97 102 99
Ravenspurn South* 100.0 87 103 132
Armada 18.2 77 74 14
Braes Various 76 69 76
East Leman* 48.4 42 71 49
Amethyst* 45.4 42 57 64
Other Various 699 594 781
Onshore Various Various 6 6 6
------ ------ ------
TOTAL UK 1,301 1,258 1,423
------ ------ ------
Netherlands P/18-2* 48.7 63 73 42
Other Various 48 68 84
Norway Various Various 53 59 69
------ ------ ------
TOTAL REST OF EUROPE 164 200 195
------ ------ ------
Canada (b) Kirby* 71.9 132 139 85
Leismer* 54.2 64 49 45
Marten Hills* 96.0 56 56 53
Ricinus* 70.0 54 59 66
Brazeau River Gas* 70.0 41 52 44
Other Various 342 412 471
Trinidad Mahogany* 100 367 14 --
Immortelle* 100 207 125 105
Flamboyant* 100 92 187 121
Other 100 115 113 104
Australia Various 16.7 215 211 202
Sharjah Sajaa* 40.0 168 157 134
Other Various 38 62 97
Indonesia Pagerungan 40.0 103 108 129
Other (b) Various Various 69 64 22
------ ------ ------
TOTAL REST OF WORLD 2,063 1,808 1,678
------ ------ ------
TOTAL GROUP 5,803 5,587 5,745
====== ====== ======
</TABLE>
14
<PAGE>
NATURAL GAS (a)(e)
<TABLE>
<CAPTION>
Net production
--------------------
Field or Area Interest 1999 1998 1997
------------- -------- ----- ----- -----
(%) (million cubic feet per day)
<S> <C> <C> <C> <C> <C>
Equity-accounted entities
Argentina Various Various 145 128 19
Other Various Various 119 93 94
----- ----- -----
TOTAL EQUITY-ACCOUNTED ENTITIES 264 221 113
----- ----- -----
TOTAL GROUP AND BP AMOCO SHARE OF EQUITY-ACCOUNTED ENTITIES 6,067 5,808 5,858
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED NET PROVED RESERVES (A) December 31, 1999
------------------------------------------------------
Rest of Rest of
SUBSIDIARY UNDERTAKINGS UK Europe USA World Total
------ ------ ------ ------ ------
(billions of cubic feet)
<S> <C> <C> <C> <C> <C>
Developed..................... 3,354 282 10,439 6,423 20,498
Undeveloped................... 919 63 1,552 10,770 13,304
------ ------ ------ ------ ------
4,273 345 11,991 17,193 33,802
====== ====== ====== ====== ------
EQUITY-ACCOUNTED ENTITIES 1,724
------
TOTAL GROUP AND BP AMOCO SHARE OF EQUITY-ACCOUNTED ENTITIES 35,526
======
</TABLE>
- ----------
(a) Net proved reserves of crude oil and natural gas, stated as of December 31,
1999, exclude production royalties due to others, and include minority
interests in consolidated operations.
(b) In 1999, BP Amoco sold certain interests in Canada and Venezuela. At the
end of the year we purchased a significant part of Repsol YPF's share of
the assets of the dissolved Crescendo Resources partnership, a major
natural gas producer and processor in Texas and Oklahoma.
In 1998, BP Amoco sold its interests in Papua New Guinea, and certain
interests in the USA and the UK sector of the North Sea were sold,
purchased or swapped.
In 1997 BP Amoco sold, purchased or swapped a number of interests in the
North Sea. These transactions increased our interest in a number of fields,
including Ula, Gyda and Draugen in Norway and Amethyst and Ravenspurn North
in the UK sector of the Southern North Sea. We also sold certain assets in
the USA. Late in 1997, BP Amoco purchased a 10% interest in A O Sidanco, a
Russian oil company, for which reserves are included within associated
undertakings in 1999 and 1998.
(c) BP Amoco has a 51.2% interest in the oil rim and a 13.8% interest in the
gas cap.
(d) The BP Amoco Group holds proportionate interests, through associated
undertakings, in onshore and offshore concessions in Abu Dhabi expiring in
2014 and 2018, respectively.
(e) Natural gas production volumes exclude gas consumed in operations.
15
<PAGE>
UNITED STATES
We are the largest producer of both oil and natural gas in the USA. Our
1999 US oil production averaged 804,000 barrels per day (b/d). This was a
decline of 3% from 1998. Approximately 50% of our 1999 oil production came from
Alaska, 32% from onshore Lower 48 states, and the remainder from the Gulf of
Mexico. Our 1999 US natural gas production averaged 2,275 million cubic feet per
day (mmcf/d), with an additional 94 mmcf/d from the equity-accounted entity,
Crescendo Resources LP. This was down 1% from 1998. Our current principal
producing fields in Alaska are in production decline. Several developments are
either planned or under construction to temper this decline and enable Alaska to
remain a major producing area for the foreseeable future. Elsewhere in the USA,
we expect increases in production in the Gulf of Mexico to more than offset the
decline onshore.
Development expenditure in the USA (excluding pipelines) during 1999 was
$1,212 million, compared with $1,670 million in 1998.
In Alaska, our production of crude oil declined from 454,000 b/d in 1998 to
405,000 b/d in 1999. Natural gas production remained at 10 mmcf/d, the same
level as in 1998.
The current status of activity in Alaska is as follows:
-- Development is ongoing to temper the production decline at Prudhoe Bay, the
largest producing field in Alaska. The decline is projected to moderate in
2000 due to a number of near-term projects. These include the Miscible
Injectant Expansion project which is projected to add 18,000 b/d (gross) of
incremental production. Further, we are continuing the infill drilling
programme, a mixture of new wells, rig side-tracks and coiled tubing
drilled side-tracks, which is expected to add 22,000 b/d (gross) of
incremental production. Additionally, we are increasing our spending on
satellite field developments around Prudhoe Bay.
-- In line with BP Amoco's commitment to grow the natural gas business, recent
actions taken in Alaska include the formation of a new business unit to
investigate all options to commercialize Alaskan gas. These options include
export by pipeline, LNG and Gas-to-Liquids (GTL) technology. BP Amoco has
committed to build a GTL test facility in Alaska.
-- The Badami oil field (BP Amoco 70% and operator) came on stream in the
third quarter of 1998. In February 1999, we temporarily suspended
production in order to perform well work and analyze additional reservoir
data. The field was restarted in early May and has continued in production
at around 3,000 b/d gross compared with an expected rate of around 35,000
b/d. The Badami partners are reviewing options for further development in
the Badami Unit and the surrounding area. To reflect these factors, we have
provided $100 million against the carrying value of the property.
-- The first phase of development of the Northstar field (BP Amoco 98% and
operator) began in 1998 with module construction in Alaska. All major
construction permits were received in 1999. We are currently building the
gravel island where field facilities will be located, installing pipelines,
and continuing module construction for the Summer 2000 and 2001 sealifts.
We expect production to commence in late 2001 with a plateau rate of 52,000
b/d net.
Onshore in the Lower 48 states, BP Amoco's production of crude oil,
condensate, NGL and natural gas averaged 569,000 boe/d, including 17,000 boe/d
from equity-accounted entities, down from 577,000 boe/d in 1998. Production
comes from a large number of fields situated principally in the states of
Colorado, Kansas, Louisiana, New Mexico, Oklahoma, Texas and Wyoming.
In March 2000, BP Amoco and Shell Exploration and Production Company
(Shell) announced the sale of their interests in Altura Energy Ltd (Altura), a
US onshore oil-producing joint venture. Altura is a joint venture between BP
Amoco (approximately 64%) and Shell (approximately 36%). Altura's 1999
production of approximately 150,000 boe b/d gross came from over 6,000 (owned or
operated) producing wells in large secondary/tertiary recovery projects.
16
<PAGE>
Our production in the Lower 48 states is predominantly natural gas. Major
areas of activity include the following:
-- Overthrust Belt, Moxa Arch and Wamsutter -- southern Wyoming
-- San Juan Basin coal and conventional gas fields-- Colorado and New Mexico
-- Hugoton and Panoma fields -- western Kansas
-- Anadarko Basin - Oklahoma and Texas panhandles
-- Arkoma Basin -- eastern Oklahoma
-- Cotton Valley trend -- east Texas
-- Tuscaloosa trend -- Louisiana.
Through divestments and property exchanges, we have focused our onshore
producing activities in areas where we are a leading producer.
-- Effective December 31, 1999 BP Amoco and Repsol YPF dissolved Crescendo
Resources LP, a jointly owned production, gathering and processing
partnership, with BP Amoco acquiring a majority of Repsol YPF's interest in
the assets. The purchase is consistent with BP Amoco's strategy to grow its
leadership position in core North American natural gas assets and has
strengthened our position in the Anadarko basin by increasing our natural
gas production by around 90 mmcf/d.
-- We divested ownership interests in three non-core enhanced recovery oil
production assets during the second half of 1999: Beaver Creek (Wyoming) in
August and Bairoil (Wyoming) and Rangely (Colorado)in November. The
combined 1999 net production for the three properties was 11,500 boe/d.
In the Gulf of Mexico, combined offshore oil and natural gas production
increased from some 215,000 boe/d net in 1998 to 237,000 boe/d in 1999.
Significant 1999 development activity in the Gulf of Mexico included the
following:
-- In the Mars field (BP Amoco 28.5%) we brought three new wells online.
Production increased to 167,000 boe/d gross with facility debottlenecking
and a peak production of 182,000 boe/d gross was reached in November, 1999.
Facility expansion work continued to allow the subsea tieback of the Europa
field in early 2000.
-- In the Troika field (BP Amoco 33.3% and operator) production from the fifth
well commenced in March 1999. Total production for all of the wells in 1999
averaged 132,000 boe/d gross as compared with 77,000 boe/d gross during
1998. The peak daily production rate for the year was 155,000 boe/d gross.
-- Initial development of the Ram Powell field (BP Amoco 31%) was completed in
1999. Production averaged nearly 97,000 boe/d gross in 1999.
-- The Ursa oil and natural gas field (BP Amoco 22.7%) commenced production in
March 1999 from the largest tension-leg platform installed in the Gulf of
Mexico. Two wells were completed, with the Ursa A-7 well producing at a
rate in excess of 50,000 boe/d. Drilling and completion continues toward a
peak production rate of some 200,000 boe/d gross in 2001.
-- Development of the Hoover/Diana oil and natural gas fields (BP Amoco 33.3%)
continued in 1999. This simultaneous development of two fields, with
combined resources of 300 mmboe gross, represents BP Amoco's deepest water
project to date. All facilities are on location and in the commissioning
phase. Three wells have been completed with five additional wells scheduled
for 2000. First production is targeted for mid-2000.
-- Production from our Marlin development (BP Amoco 86% and operator) has been
delayed owing to a well design problem which is being investigated.
17
<PAGE>
UNITED KINGDOM
We are the largest producer of both oil and natural gas in the UK. Our 1999
UK oil production of 580,000 b/d was 62,000 b/d higher than in 1998, as the
increase in production from more recently developed fields more than offset
declines in mature fields. Our UK natural gas production increased 3% from 1,258
mmcf/d in 1998 to 1,301 mmcf/d in 1999. Increased production from the Eastern
Trough Area Project (ETAP) more than offset the decline at older UK offshore
fields.
Our 1999 development expenditure in the UK (excluding pipelines) was $676
million, compared with $1,432 million in 1998. Significant 1999 activity
included the following:
-- Production from the first phase of the Foinaven field (BP Amoco 72% and
operator), built up to its plateau level of 85,000 b/d gross. Located in
waters 500 metres deep, Foinaven was the first producing oil field in the
deep water Atlantic Margin, west of the Shetland Islands. Oil flows from
the well through flexible flow lines to a floating production storage and
offshore loading vessel (FPSO) and is then carried by dedicated shuttle
tanker to the Flotta oil terminal, Orkney.
-- Schiehallion (BP Amoco 33.4% and operator) and Loyal (BP Amoco 50% and
operator), which together comprise our second west of Shetland development,
commenced production in the third quarter of 1998. Several new production
records for the fields were set in 1999 and maximum daily production was in
excess of 170,000 b/d gross. Average daily production for 1999 was 95,000
b/d gross. Production in 2000 is expected to increase to around 130,000
b/d.
-- ETAP production continued to build-up throughout 1999, with plateau
production levels of 265,000 boe/d gross (135,000 boe/d net) achieved in
the fourth quarter. The development comprises seven initial fields --
Marnock, Machar, Mungo and Monan (BP Amoco operated) and Heron, Egret and
Skua (Shell operated). We have no equity interest in the Shell-operated
fields. This integrated development project includes central processing
facilities over the Marnock field, a normally unmanned facility over the
Mungo field and subsea facilities for the other fields linked back to the
central facilities.
-- We established first production in late 1998 from the Phase 2 expansion of
the Bruce field (BP Amoco 37% and operator). This expansion involves subsea
development of the western area of the field, linked by a bundled pipeline
to a new steel platform. During 1999 development of the Bruce field
included completion of five platform/subsea wells and progress towards
commissioning Booster Compression on the Bruce platform in 2000. Net
production for 1999 was 51,000 boe/d compared with 42,000 boe/d in 1998.
-- In November 1999, we completed the sale of our interests in the
non-operated Scott (BP Amoco 13.496%), and Telford Fields (BP Amoco
20.16%), and block 15/22 (BP Amoco 26%) which lie in the outer Moray Firth
of the North Sea. Average production for the fields during 1999 was
approximately 18,000 boe/d.
-- In 1999, the Harding field (BP Amoco 70%) continued to produce at plateau
production rates. The first well into the south east reservoir was brought
on stream during the second quarter of 1999 and produced steadily at 7,500
b/d gross. During the third quarter the production facilities were
successfully de-bottlenecked and in November a record production rate of
100,000 b/d gross was achieved.
REST OF EUROPE
Our oil production in Norway decreased from 103,000 b/d in 1998 to 98,000
b/d in 1999 as a result of natural field decline. Net production was 38,000 b/d
from Draugen (BP Amoco 18.4%), 24,000 b/d from Valhall (BP Amoco 28.1% and
operator), 19,000 b/d from Ula (BP Amoco 80% and operator) and 17,000 b/d from
Gyda (BP Amoco 56% and operator).
In the Netherlands, our net production decreased to 111 mmcf/d from 141
mmcf/d in 1998. BP Amoco is supplementing its long-standing production
operations with the expansion of its Peak Gas Installation, a natural gas
storage facility. This expansion, which became operational in 1999, increases
the capacity of 850 mmcf/d by 50% to 1,270 mmcf/d with the potential for further
capacity increase.
18
<PAGE>
REST OF WORLD
The Group's net share of oil production from the Rest of World increased
from 385,000 b/d in 1998 to 407,000 b/d in 1999. This excluded 170,000 b/d from
associated undertakings in 1999, of which 113,000 b/d came from Abu Dhabi, where
we have equity interests of 9.5% and 14.7% in onshore and offshore concessions
expiring in 2014 and 2018, respectively. Other areas of oil production in 1999
were Australia, Argentina, Azerbaijan, Bolivia, Canada, China, Colombia, Egypt,
Indonesia, Russia, Sharjah, Trinidad and Venezuela.
Our share of natural gas production from the Rest of World increased 14%
from 1998, averaging 2,063 mmcf/d in 1999. In addition, in 1999 production from
associated undertakings amounted to 170 mmcf/d. The largest part of the 1999
production came from Trinidad and Tobago, with the remainder from Argentina,
Australia, Bolivia, Canada, Colombia, Egypt, Indonesia and Sharjah.
Development expenditure in the Rest of World (excluding pipelines) amounted
to $956 million in 1999, compared with $1,569 million in 1998. In 1999, this
expenditure was primarily in Canada, Colombia, Trinidad and Venezuela:
- -- In Canada, we divested our heavy and conventional oil properties for
approximately $1.1 billion in October 1999. The sale represents
approximately 60,000 boe/d net of oil equivalent production. The divested
assets included substantial heavy oil operations in the Primrose, Wolf Lake
and Wabasca areas near Edmonton, Alberta. Also in Canada we sold our
significant 2-D and 3-D seismic data base to a seismic broker, retaining
the right to access this data on favourable terms. The divestment of our
marginal heavy oil business will enable us to give greater focus on our
core natural gas business.
- -- In Colombia, production of the Cusiana/Cupiagua development (BP Amoco 19%
and operator) has reached a plateau of approximately 69,000 b/d net. The
Cusiana field is now in decline and the Cupiagua field is expected to reach
its peak production in 2000. Colombia has now identified some well-defined
projects with the aim of sustaining production; some of these projects are
extensions in the Cusiana/Cupiagua area and some others are in the Recetor
and Piedemonte licences.
- -- We have been engaged in exploration and production activities in Trinidad
and Tobago since 1961. We hold a 100% interest in 121 tax and royalty
licences and a partial interest in a production sharing contract on a
recently acquired licence. Our Trinidad operations are in a transition from
primarily oil to a balance of oil and natural gas activities, and we hold
domestic sales contracts for up to 700 mmcf/d in Trinidad and Tobago. We
are the sole supplier of the initial natural gas requirement of the
liquefied natural gas plant belonging to the Atlantic LNG Company of
Trinidad and Tobago, in which we hold a 34% interest (see Midstream
discussion below).
Drilling activity continued in the Mahogany field to develop oil and
natural gas. Our total hydrocarbon production during 1999 averaged 183,000
boe/d net, an increase of 66,000 boe/d from 1998. In 1999, crude and
condensate production increased by 4% to 48,900 b/d net, and natural gas
sales increased by 85% to 779 mmcf/d net, a result of increased local gas
demand and start up of the Atlantic LNG plant operation.
The installation of the Amherstia platform commenced in late 1999 and is
planned to come on stream in 2000 to feed additional domestic gas sales
within Trinidad and Tobago.
- -- In Venezuela, we announed the disposal of our 100% interest in the
Pedernales reactivation licence in November 1999, subject to PDVSA
approval. BP Amoco retains an interest in other production reactivation and
exploration blocks. The most prolific of the reactivation blocks is Jusepin
(BP Amoco 45%), currently producing 30,000 b/d gross. Secondary recovery
projects are underway in the Jusepin field with the aim of maintaining and
expanding production levels. Retained exploration blocks also include Punta
Pescador (BP Amoco 50%) and Guarapiche (BP Amoco 75%).
The Azeri-Chirag-Gunashli (ACG) early oil project in the Caspian Sea,
offshore Azerbaijan (BP Amoco 34.1%) achieved plateau production in 1999 of in
excess of 100,000 b/d gross. In April 1999, the Western Export Route Pipeline
through Georgia was commissioned and oil is currently being exported from ACG
through two pipelines (the second pipeline being through Russia). In June 1999,
BP Amoco was appointed operator of the Azerbaijan International Operating
Company (AIOC) responsible for operation and development of the ACG complex.
Several additional phases of development are planned.
19
<PAGE>
In Egypt, our operations are carried out by the Gulf of Suez Petroleum
Company (Gupco), a joint operating company with the Egyptian General Petroleum
Company. Gupco operates seven production sharing contracts in the Gulf of Suez
and Western Desert, encompassing more than 40 fields. During 1999, Gupco
produced almost 290,000 b/d (130,000 b/d net), about 37 percent of Egypt's oil
production, as well as 78 mmcf/d (35 mmcf/d net) of natural gas. In early 1999,
BP Amoco finalized an agreement with the Egyptian Government which will help
maintain investment in the country's mature Gulf of Suez oil fields. Under this
agreement, BP Amoco will invest $450 million by 2005 to develop new reserves,
maintain production, and prolong the life of the fields. Over $50 million of
this spending had been completed by year end 1999, and another $120 million will
be spent in 2000.
BP Amoco entered the Nile Delta in the early 1990's, in a variety of
partnerships with AGIP, Egyptian General Petroleum Corporation and others. The
Ha'py field was brought on stream in early 2000 and the Baltim and Temsah
natural gas fields are expected to start-up in late 2000 or early 2001.
Collectively, we have agreements in place to supply 250 mmcf/d to the domestic
Egyptian market from these and other Nile Delta fields. We continue to actively
pursue natural gas export opportunities in the Eastern Mediterranean and we have
the public support of the Government of Egypt.
Through our equity-accounted investments in Empresa Petrolera Chaco S.A.
(Chaco) (BP Amoco 30%) and Pan American Energy (PAE) (BP Amoco 60%), we are the
second largest energy producer in the Southern Cone of South America. In 1999,
these entities produced 45,000 b/d of oil and 170 mmcf/d of natural gas (net to
BP Amoco) in Argentina and Bolivia. Chaco and PAE also have significant
interests in natural gas liquids plants, oil and gas pipelines, electricity
generation plants, and other midstream infrastructure.
Pan American Energy's regional midstream and downstream natural gas
position was enhanced during the year through the ratification of the Cruz del
Sur gas pipeline concession (BP Amoco 18%). This pipeline will transport natural
from Buenos Aires to Montevideo and is the first part of a integrated pipeline
system which is ultimately intended to serve the major gas markets in southeast
Brazil.
MIDSTREAM ACTIVITIES
OIL AND NATURAL GAS TRANSPORTATION
The Group has direct or indirect interests in certain crude oil
transportation systems, the principal of which are the Trans Alaska Pipeline
System in the USA and the Forties Pipelines System in the UK sector of the North
Sea. We also operate and have an interest in the Central Area Transmission
System for natural gas in the UK sector of the North Sea. Our onshore US crude
and product pipelines and related transportation assets are included under
Refining and Marketing.
The Trans Alaska Pipeline System (TAPS) consists of a 48-inch diameter
crude oil pipeline running approximately 1,300 kilometres from Prudhoe Bay to a
tank farm and marine terminal at the ice-free port of Valdez on Alaska's
southern coast. Alyeska Pipeline Service Company operates the pipeline and
terminal at Valdez. BP Amoco owns a 50% interest in TAPS, with the balance owned
by six other companies. Each of the TAPS participants uses its undivided
interest in TAPS as a common carrier, separately publishing tariffs and
receiving tenders for shipments through its share in the capacity of TAPS, and
paying its respective share of operating costs. At peak throughput, the TAPS
system carried around 2 mmb/d. In 1999, TAPS transported production from Prudhoe
Bay and the other North Slope fields averaging 1.08 mmb/d.
For a description of the procedures relating to the tariffs to be charged
to users of TAPS and a general description of pipeline regulation, see
Regulation of the Group's Business -- United States.
There are a number of unresolved protests with regard to the yearly tariffs
which are filed and which set out the charges for shipping oil through TAPS.
These items are in the process of resolution at the Federal Energy Regulatory
Commission (FERC) and the Regulatory Commission of Alaska.
The use of US-built and US-flagged ships is required when transporting
Alaskan oil to markets in the USA and abroad. In accordance with this, BP
America Inc. has a chartered fleet of US-flagged tankers to transport Alaskan
crude oil to markets. In 1999, the Alaska Tanker Company (ATC) was formed to be
the single operator for this fleet. Over the next few years, we plan to begin
replacing our US-flagged fleet as existing ships are retired in accordance with
the Oil Pollution Act of 1990. For discussion of the Oil Pollution Act of 1990,
see Regulation of the Group's Business -- Environmental Protection. For a
discussion of the proceedings arising from the Exxon Valdez oil spill, see Item
3 -- Legal Proceedings.
20
<PAGE>
The Forties Pipeline System in the UK (BP Amoco 100%) is an integrated oil
and natural gas liquids transportation and processing system which handles
production from over 20 fields in the central North Sea. The system was upgraded
in 1993 and has a capacity of more than 1 mmb/d. During 1999, average throughput
was approximately 943,000 b/d, compared with 880,000 b/d in 1998, and
transported its five billionth barrel. A Marine Vapour Recovery project was
completed in 1999 and this will lead to a substantial reduction in Volatile
Organic Compound emissions.
BP Amoco operates and has a 29.5% interest in the Central Area Transmission
System (CATS), a 400-kilometre natural gas pipeline system in the central UK
sector of the North Sea. The pipeline has a transportation capacity of 1.7
billion cubic feet per day (bcf/d). It carries both proprietary and other
companies' gas volumes to a natural gas terminal at Teesside, North East
England. CATS offers its customers the choice of gas transportation services or
transportation and processing via two 600 mmcf/d processing trains with the
capability to deliver NGLs for export or for local industry with gas entering
the UK National Transportation System. In 1999 CATS handled throughput of 1.2
bcf/d with volumes at the end of the year reaching 1.7 bcf/d.
BP Amoco, as AIOC operator, manages and has 34.1% interest in the Western
Export Route Pipeline between Sangachal, which is near Baku in Azerbaijan, and
Supsa on the Black Sea coast of Georgia. AIOC also operates the Azeri leg of the
Northern Export Route Pipeline between Sangachal and Novorossiysk in Russia. The
combined capacity of the pipelines is in excess of 200,000 b/d. Negotiations
with transit countries for the development of an additional export pipeline with
a capacity of 1 mmb/d from Sangachal to Ceyhan on the Turkish Mediterranean
coast were progressed. An Inter-governmental Agreement between Turkey, Georgia
and Azerbaijan to support this pipeline was signed on November 18,1999.
LIQUEFIED NATURAL GAS
In Trinidad and Tobago, we have a 34% interest in the Atlantic LNG plant
and are the sole supplier of natural gas to the first train of the plant. An
export contract of some 440 mmcf/d was established in 1999 for deliveries to the
New England region of the USA and Spain from the first train of the plant. Gas
sales commenced in February 1999 and averaged 246 mmcf/d per day for the year.
Subject to government and partner approval, the facilities are expected to be
expanded by the addition of a second and a third train at the plant. It is
anticipated that BP Amoco will supply the additional natural gas volumes to the
expanded facilities.
We have a 10% equity shareholding in the Abu Dhabi Gas Liquefaction Company
(ADGAS), which in 1999 supplied 5.2 million tonnes of LNG.
In Australia, our share of LNG from the North West Shelf natural gas
development (BP Amoco 16.7%) remained in line with that of the previous year at
1.3 million tonnes (approximately equivalent to 180 mmcf/d of natural gas).
GAS AND POWER MARKETING AND TRADING
We are one of the largest producer-marketers of natural gas in North
America. Our 1999 gas sales volumes averaged 5.4 bcf/d from the USA and Canada.
This consisted of 3.4 bcf/d from BP Amoco producing operations (including
royalty volumes we marketed under terms of our lease agreements), plus supplies
we purchased from third parties. As a result of the deregulation of the US
natural gas markets since the late 1980s, approximately 75% of our North
American natural gas production is now sold pursuant to short term gas contracts
which are renegotiated on a monthly, yearly or other short term basis, thereby
allowing us flexibility in production and distribution. As the North American
energy markets continue to evolve, we are enhancing our current positions in the
upstream, midstream and downstream natural gas businesses.
We acquired all of the shares we did not own in Canada's second largest
natural gas supply aggregator, ProGas. ProGas is based in Calgary, Alberta, and
purchases gas from around 170 producers in the Western Canada Sedimentary Basin.
It markets 1.45 bcf/d of gas a day across North America.
We also reached agreement with Nova Scotia Resources (Ventures) Limited to
market, on behalf of the Provincial Crown Corporation, 45 mmcf/d of natural gas
production flowing from the Sable Offshore Energy Project located offshore Nova
Scotia. Under the agreement, we will focus on marketing the gas primarily in New
England and the north-eastern states of the USA.
BP Amoco's policy toward natural gas price risk in the North American
markets is described in Item 9A -- Quantitative and Qualitative Disclosures
about Market Risk.
21
<PAGE>
BP Gas, a UK natural gas marketing company, started trading in 1996. Its
principal business is natural gas sales to industrial, commercial and power
generation customers in the UK, as well as gas sales to continental Europe. In
addition, we provide facilities and combined heat and power development and
contract energy management services to industrial customers in the UK. The
significance of long-term gas supply contracts with large customers such as
Centrica, the prices of which are typically indexed against oil or electricity,
has been declining as BP Gas takes advantage of increasingly liquid UK gas
markets to make more short-term sales to commercial and industrial companies.
The breakdown of gas sale arrangements in 1999 was as follows: 33% of production
sold to Centrica, 24% pursuant to other long-term arrangements, and 43% in the
commercial and industrial and spot markets. The main source of gas is BP Amoco's
equity share of gas from UK North Sea fields. The Company disposed of its 50%
interest in Beacon Gas Limited, a retail distributor of natural gas to domestic
customers, during 1999, consistent with its focus on business-to-business
marketing rather than retail distribution of natural gas in the UK.
Construction of a 400 megawatt capacity gas-fired power plant (BP Amoco
60%) at Great Yarmouth in the UK continued during 1999 and is due to be
commissioned in 2001. The Company also received Government consent to construct
a 500 megawatt combined cycle gas turbine power plant at the Baglan Energy Park
in South Wales. Online services to natural gas customers were developed
including an online gas trading service for non-fixed price customers.
In the Rest of Europe, we have a 25.5% interest in Ruhrgas, Germany's
largest gas distribution company. In 1997 BP Amoco signed a 15-year agreement to
supply 15 billion cubic metres of natural gas valued in excess of $1 billion to
Ruhrgas, commencing October 1, 1998. We supply this gas from our UK North Sea
fields, delivered via the Interconnector, which is described below.
The Interconnector is a 240-kilometre, 40-inch subsea natural gas pipeline
linking the UK national grid system at Bacton in Norfolk to the continental grid
system at Zeebrugge in Belgium. Construction work began in late 1996, and first
operation of the pipeline was in October 1998. We are one of ten international
energy companies with shareholdings in the Interconnector, which has a shipping
capacity of 1.9 bcf/d (BP Amoco 10%).
In Spain, where the market is being liberalized in common with other EU
states, we were the first foreign company to secure a licence permitting us to
market natural gas to industrial consumers.
During the last quarter of 1999 we made encouraging progress in the
marketing of future reserves from Australia, Trinidad and the Caspian Sea.
Plans were announced in September 1999 to create a Gas and Power business
to market our substantial upstream natural gas reserves and develop a leading
gas and power marketing and trading business. The Gas and Power business stream
will be reported as a business segment from January 1, 2000. The new stream will
be responsible for our existing world-wide gas marketing and development
activities, including gas-fired power generation.
22
<PAGE>
REFINING AND MARKETING
Our Refining and Marketing business is responsible for the supply and
trading, refining, marketing and transportation of crude oil and petroleum
products to wholesale and retail customers, and the wholesale marketing of NGL
in the USA and Canada. BP Amoco markets its products in about 100 countries. It
has operations in Europe, the USA and Australasia and in parts of South East
Asia and Africa.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
----- ----- -----
($ million)
<S> <C> <C> <C>
Turnover (a)............................................. 62,893 48,437 67,704
Total replacement cost operating profit.................. 1,840 2,564 2,292
Total assets............................................. 27,248 21,029 24,055
Capital expenditure and acquisitions..................... 1,634 1,937 1,824
($ per barrel)
Indicative industry global refining margin (b)........... 0.91 1.74 1.81
</TABLE>
- ----------
(a) Excludes BP Amoco's share of joint venture turnover of $17,117 million in
1999, $15,080 million in 1998, and $16,692 million in 1997.
(b) The indicative industry global refining margin is a weighted average of
global margins for the whole refining industry and is calculated by BP
Amoco. It reflects the margins generated by a standard cracking refinery,
running similar quality crudes, to similar yields, located in each refining
market. The weighting used reflects the presence of BP Amoco's refineries
in these markets - principally those of the USA, Europe, Australasia,
Southern Africa and Singapore.
Refining and Marketing aims to manage a portfolio of assets which are
believed to be competitively advantaged across the chain of downstream
activities. Such advantage may derive from several factors, including location,
operating cost and physical asset quality.
The merger of BP and Amoco created a top-tier player in refining and
marketing. We are one of the leading refiners and marketers of gasoline and
hydrocarbon products in the USA, and a market-leader in premium gasoline.
Overall we have a strong geographic position with the largest market share for
retail sales east of the Rocky Mountains, including first or second position in
some 20 states. We also have extensive retail and commercial businesses in the
UK, the Rest of Europe, Australasia, Africa and South East Asia. Worldwide, BP
Amoco continues to be a leading marketer of fuels, served by a global refining
network with key refineries among the top performers in their regions.
The prevailing economic conditions have driven a considerable re-basing of
business activities outside the USA not directly impacted by the merger. This
activity has necessitated a reduction in employee numbers; within the Refining
and Marketing business some 5,100 people, or 15% of the workforce, left during
1999. At the end of 1999 some 45,250 people were employed worldwide by the
business.
As part of the Federal Trade Commission's approval process for the merger,
BP Amoco undertook to complete the sale of nine terminals formerly owned by
Amoco in the Southeast of the USA where there was an overlap with existing BP
terminals. In addition, in order to resolve anti-trust concerns relating to the
sale of gasoline, BP and Amoco agreed to the divestiture of 134 service stations
in six states where there were ownership overlaps. The divestitures were
completed during 1999.
In the UK and the rest of Europe, during 1999, BP Amoco's refining and
marketing operations in fuels and lubricants were operated as part of a joint
venture (BP/Mobil joint venture) with ExxonMobil Corporation (ExxonMobil). Our
international aviation, marine, oil trading and shipping activities are excluded
from the joint venture. Under the terms of the joint venture, BP Amoco operates
and has a 70% interest in the fuels refining and marketing operation, and
ExxonMobil operates and has a 51% interest in the lubricants business.
23
<PAGE>
In December 1999, we agreed with ExxonMobil the principles under which the
BP/Mobil European fuels and lubricants joint venture would be dissolved in
response to the European Commission's authorization of the Exxon and Mobil
merger. Under the agreement - which is subject to a number of approvals from
national governments and appropriate employee consultation - BP Amoco will
purchase Mobil's 30% interest in the fuels business for about $1.5 billion,
subject to adjustments. In addition, the two companies will divide the assets of
the lubricants business broadly in line with their equity stakes (51% Mobil, 49%
BP Amoco). In February 2000, the European Union's Merger Task Force gave its
approval to the dissolution as proposed.
REFINING
In refining, our key objective is to operate an advantaged refining system
more profitably than those of our competitors. Advantaged characteristics relate
to supply - the refinery's position in relation to the market; clean fuels - how
the refinery supports our clean fuels strategy; integration value - how the
refinery adds value by virtue of integration with other parts of the Group's
business. A consequence of this objective will be to reduce the ratio between
our own refining supply and the volumes we market to between 60 and 70% from the
level of around 90% existing in 1999. As a first step, the Alliance refinery in
Louisiana, USA, has been offered for sale. There will continue to be focus on
reducing operating costs and optimizing yields.
In addition to the Alliance refinery, BP Amoco owns and operates six
refineries in the USA: Texas City, Texas; Whiting, Indiana; Toledo, Ohio;
Mandan, North Dakota; Yorktown, Virginia; and Salt Lake City, Utah. BP Amoco's
refinery at Lima, Ohio, was sold in mid-1998.
In Europe, as operator of the fuels business of the BP/Mobil joint venture,
we operate seven fuels refineries on behalf of the joint venture. These are
Bayernoil (Germany), Castellon (Spain), Coryton (UK), Grangemouth (UK), Lavera
(France), Mersin (Turkey) and Nerefco (the Netherlands). Additionally, BP Amoco
has an interest in the Reichstett refinery in France. All the refineries are
wholly-owned by BP Amoco or Mobil, except for Bayernoil, Mersin, Nerefco and
Reichstett where BP Amoco's and Mobil's combined interest is 55%, 69%, 69% and
17%, respectively.
Mobil's refinery at Gravenchon (France), which is primarily a lubricants
refinery, and BP Amoco's two lubricants base oil refineries in France and
Germany are operated by Mobil on behalf of the joint venture. BP Amoco's UK base
oil refinery at Llandarcy was closed in 1998 as part of a major restructuring of
the lubricants business.
In the rest of the world we operate three other principal refineries: at
Brisbane and Kwinana in Australia and in Singapore. We also have interests in
three other refineries: Mombassa in Kenya, Durban in South Africa and Whangerei
in New Zealand.
The following tables set out by area the crude oil and other feedstocks
processed in the years 1997 through 1999 by the BP Amoco Group for its own
account and for third parties, and for the Group by other refiners under
processing agreements, and the Group's refinery capacity utilization.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
REFINERY THROUGHPUTS 1999 1998 1997
----- ----- -----
(thousand barrels per day)
<S> <C> <C> <C>
United Kingdom (a)....................................... 271 296 299
Rest of Europe (a)....................................... 540 551 583
United States............................................ 1,340 1,489 1,600
Rest of World............................................ 371 362 373
----- ----- -----
2,522 2,698 2,855
For BP Amoco by others................................... 19 13 12
----- ----- -----
Total.................................................... 2,541 2,711 2,867
===== ===== =====
REFINERY CAPACITY UTILIZATION
Crude distillation capacity at December 31, (a) (b)...... 2,801 2,815 2,937
Crude distillation capacity utilization (c).............. 95% 94% 96%
</TABLE>
- ----------
(a) Includes the BP Amoco share of the BP/Mobil joint venture.
24
<PAGE>
(b) The crude distillation capacity figures are based on gross rated capacity
which assumes no loss of capacity due to shutdowns. The figures for 1998
reflect the disposal of the Lima refinery in mid-1998. The figures for 1997
reflect the impact of the BP/Mobil joint venture for those countries for
which implementation was completed by the end of 1997. The implementation
of the joint venture did not have a material impact on BP Amoco's overall
crude distillation capacity in Europe.
(c) Crude distillation capacity utilization is defined as the percentage
utilization of capacity per calendar day over the year after making
allowances for average annual shutdowns at BP Amoco refineries (net rated
capacity).
In 1999, we operated our refineries in the USA at an average of 95% of net
rated capacity (1998 and 1997, 95%), our European refineries at 94% (1998, 95%
and 1997, 98%) and our refineries in the rest of the world at 96% (1998, 89% and
1997, 99%).
In 1999, we continued our programme of upgrading refinery capability. The
Toledo Repositioning Project was completed in April with start up of the new
units at the refinery. This project, which includes a new coker and sulphur
plant, makes the Toledo Refinery a leading competitor in the United States
Midwest with the ability to utilize heavy sour crude for up to two-thirds of its
crude input.
Also during 1999 we commenced a project to allow low sulphur fuels
production at our Brisbane refinery. Completion is scheduled for the end of
2000. Additionally, over $60 million was spent on projects during 1999 to
deliver cleaner fuels throughout our refining system.
Emissions of greenhouse gases (primarily carbon dioxide) were reduced by
more than 3% compared with 1998, primarily through operational actions.
Additional reductions are planned through continued energy efficiency
improvements and participation in the internal BP Amoco trading programme.
MARKETING
We market a comprehensive range of refined oil products world-wide. These
products include gasoline, gasoil, marine and aviation fuels, heating fuels,
LPG, lubricants and bitumen.
The following table sets out refined product sales by area.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
SALES OF REFINED PRODUCTS (a) 1999 1998 1997
----- ----- -----
(thousand barrels per day)
<S> <C> <C> <C>
Marketing sales:
United Kingdom (b)(c).................................. 235 261 260
Rest of Europe (b)..................................... 794 769 752
United States.......................................... 1,542 1,504 1,465
Rest of World.......................................... 615 603 606
----- ----- -----
Total marketing sales (d)................................ 3,186 3,137 3,083
Trading/supply sales (d)................................. 1,816 1,665 1,592
----- ----- -----
Total refined products................................... 5,002 4,802 4,675
===== ===== =====
($ million)
Proceeds from sale of refined products (b)............... 44,248 44,446 57,026
</TABLE>
- ----------
(a) Excludes sales to other BP Amoco businesses.
(b) Includes the BP Amoco share of the BP/Mobil joint venture.
(c) UK area includes the UK-based international activities of Refining and
Marketing.
(d) Marketing sales are sales to service stations, end-consumers, bulk buyers,
jobbers and small resellers. Trading/supply sales are to large unbranded
resellers and other oil companies.
The following table sets out marketing sales by major product group.
25
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
MARKETING SALES BY PRODUCT 1999 1998 1997
----- ----- -----
(thousand barrels per day)
<S> <C> <C> <C>
Aviation fuel............................................ 366 292 271
Gasolines................................................ 1,298 1,256 1,204
Middle distillates....................................... 765 796 780
Fuel oil................................................. 319 322 410
Other products........................................... 438 471 418
----- ----- -----
Total marketing sales ................................... 3,186 3,137 3,083
===== ===== =====
</TABLE>
In marketing our aim is to grow our customer base, not only in existing
markets but also in new markets - more customers in a bigger geographic spread.
We are focusing on how we can increase the amount our customers spend with us,
whether they be retail customers spending more on items in convenience stores or
business customers spending more on value-added services and solutions.
Our objective is therefore to create a more capital-efficient,
higher-return business. In addition we recognize that our customers are
demanding a wider choice of fuels - fuels which are cleaner and more efficient.
In Retail, we envisage that there will be two distinct segments: fuels,
which we intend to grow through franchises, dealers and jobbers; and a directly
managed convenience store segment. We plan to expand our Retail business in a
disciplined way through rigorous site selection for convenience or for fuels
sales, and by concentrating direct convenience offers in our core metropolitan
markets.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
SHOP SALES (a) 1999 1998 1997
----- ----- -----
($ million)
<S> <C> <C> <C>
UK....................................................... 265 231 189
Rest of Europe........................................... 569 513 468
USA...................................................... 542 543 438
Rest of world............................................ 365 356 381
----- ----- -----
Total.................................................... 1,741 1,643 1,476
===== ===== =====
</TABLE>
(a) Shop sales reported are sales through direct managed stations, franchisees
and the BP Amoco share of shop alliances and joint ventures. Sales figures
exclude VAT and lottery sales but include quick service restaurant sales.
The sales include the BP Amoco share of the relevant sales within the
BP/Mobil joint venture.
Our retail network is concentrated in Europe and the USA, with established
operations in Australasia and Southern Africa. Networks are being grown in
China, Poland, Russia and Venezuela.
BP Amoco is continuing to improve the efficiency of its retail network by
reducing operating costs and improving customer service, through a process of
regularly reviewing the network. Actions taken include divesting the
non-strategic sites or networks, upgrading existing sites and investing in new
sites. An essential element of this strategy is the development of convenience
stores and the provision of related services. Such facilities are often provided
through alliances or other arrangements with partners. This strategy is applied
to all our retail networks, including those operated as part of the BP/Mobil
joint venture. At December 31, 1999, there were approximately 28,300 BP and
Amoco branded service stations world-wide, including those associated with the
BP/Mobil joint venture.
During 1999 we commenced implementation of two major environmental
initiatives. In January 1999 we announced our 'Clean Cities' initiative to
market cleaner fuels in 40 of the world's most polluted cities. During the year
15 launches of the initiative were undertaken in major cities around the globe
including Paris, Atlanta, Chicago, and Istanbul. In April, we announced that
around 200 of our service stations are to incorporate solar power - the largest
single project of its kind ever undertaken. The first phase of the two-year
programme is planned to consist of the installation of up to 400 solar panels on
each canopy at service stations across eleven countries in a $50-million,
3.5-megawatt project, saving around 3,500 tonnes of carbon dioxide emissions
every year. As a result of this project, BP Amoco will become one of the world's
largest users of solar power.
26
<PAGE>
At December 31, 1999 BP Amoco's retail network in the USA comprised some
16,300 service stations concentrated in the Midwest, East and Southeast.
Developments in the USA during 1999 included:
-- Divestment of the ProCare servicing and maintenance business was completed
in September 1999.
-- We agreed the extension of our alliance with Bovis Lend Lease, the
construction and project management arm of Lend Lease Corporation, to
develop and build new or remodelled service stations.
In the UK and the Rest of Europe, BP Amoco's network covered about 8,200
service stations at December 31, 1999. Significant developments in Europe during
1999 included the following:
-- We continued to develop our joint venture agreement with Safeway plc in the
UK to redevelop some 100 sites incorporating a Safeway convenience store.
By December 31, 1999, 39 such sites had been redeveloped. A further 36 are
expected to be redeveloped in 2000 with the remainder of the programme to
be completed in 2001.
-- In France, Portugal and Spain we continued to develop co-operative
retailing arrangements with our partners 8 a Huit, Modelo, and Speedy,
respectively.
-- In Poland and Russia, we continue to grow our retail network towards our
target of 300 sites, with the construction of a further 37 retail sites
during 1999 giving a total of 139 in these countries.
-- As part of the continued drive to improve the asset base the retail network
in Hungary was divested in early 1999.
At December 31, 1999 BP Amoco's retail network in the rest of the world
(primarily Australia, New Zealand, Southern Africa and South East Asia)
comprised some 3,700 service stations. BP Amoco now has some 130 branded
sites in the new markets of Venezuela, China and Japan. In addition,
through the Amoxxo joint venture with Femsa, the Group has a network of 28
convenience stores in Mexico.
In our Commercial and Industrial business we aim to attract more customers
through innovation in multi-product offers and cleaner fuels, packaged with a
range of value-adding services and solutions; thus aiming to increase customer
spend and growth in volumes at twice the market rate. Our Commercial and
Industrial business operates in Australasia, Europe, South Africa and the USA.
This business includes the supply of fuel, LPG, bitumen and, outside Europe,
lubricants to industrial and domestic users. In Europe, the Group has a 49%
interest in the lubricants activity operated by Mobil as part of the BP/Mobil
joint venture. In 1999, we continued to reshape our Commercial and Industrial
portfolio where we believe it to be appropriate:
-- As part of a strategic review of our Bitumen business, we announced, in
December 1999, the sale of our Bitumix road contracting business and
bitumen supply terminals in New Zealand.
-- We continued to develop our LPG business in Portugal, and as a result we
have entered into a joint venture with Petrogal and Borealis to develop an
LPG storage cavern facility at Sines.
Our aviation business sells jet and other aviation fuels to airlines and
general aviation customers as well as providing technical services to airlines
and airports. During the last few years, the aviation business has strengthened
its position in established markets and pursued opportunities in new or emerging
markets. In 1999, BP Amoco's aviation business entered two new markets: Ivory
Coast and Chile. The business now markets in some 87 countries. It is the third
largest jet fuel supplier globally.
BP Amoco's marine business sells ship's fuel and lubricants to a variety of
customers including ship owners and operators, covering a wide range of vessels,
from large oil tankers to small fishing boats. We operate a network of offices
and supply points in more than 900 ports across 90 countries, reflecting the
international nature of this marketing operation. In June 1999, we completed the
divestment of our bunkering operations on the US West Coast. BP Amoco is
continuing to develop the marine business, and is pursuing new market
opportunities in Latin America, Asia and the Middle East.
27
<PAGE>
In early 2000, BP Amoco's marine business announced that, in conjunction
with other participants in this sector, it had signed an agreement to develop an
industry-backed internet portal that will include an auction site with
facilities to undertake purchase and sales transactions for marine fuels. The
site is planned to become operational in mid-2000.
SUPPLY AND MARKETING OF NGL
In the USA and Canada, BP Amoco is engaged in the processing, fractionation
and marketing of NGL, which consists of ethane, propane, butanes and pentanes
extracted from natural gas. The majority of BP Amoco's NGL is marketed on a
wholesale basis under annual supply contracts which provide for price
redetermination based on prevailing market prices. Sales volumes of NGL for 1999
averaged 307,000 b/d (1998 318,000 b/d and 1997 298,000 b/d). NGL is also
supplied to BP Amoco's chemical and refining activities.
BP Amoco operates and/or owns natural gas processing facilities across all
of North America having a total gross capacity of over 12 bcf/d. We own or have
an interest in five fractionator plants in Canada and the United States. Two of
these are located in Canada in Fort Saskatchewan, Alberta and Sarnia, Ontario,
and three are located in the United States in Hobbs, New Mexico, Baton Rouge,
Louisiana and Mont Belvieu, Texas. During 1999, additional gas processing and
fractionation capacity came on stream in Pascagoula, Mississippi to support the
growth in BP Amoco's natural gas production in deepwater Gulf of Mexico.
SUPPLY AND TRADING
We are one of the world's major traders of crude oil and refined products,
dealing extensively in physical and futures markets. Our portfolio of purchases
and sales is spread among spot, term, exchange and other arrangements, and
covers a range of sources and customers to match the location and quality
requirements of the Group's refineries and the various markets, while seeking to
ensure flexibility and cost-competitiveness. In addition, the Group's
oil-trading division undertakes trading in physical and paper markets in order
to contribute to the Group's income.
TRANSPORTATION
Our Refining and Marketing business owns, operates or has an interest in
extensive transportation facilities for crude oil, refined products, NGL, carbon
dioxide and petrochemical feedstocks in the US. It also has interests in a
number of crude oil and product pipelines in the UK and the Rest of Europe.
We transport crude oil to our refineries principally by ship and through
pipelines linking our refineries with import terminals. We have interests in
eight major crude oil pipelines in the UK and the Rest of Europe and a further
thirteen in the USA.
Bulk products are transported between refineries and storage terminals by
ship, barge, pipeline and rail. Onward delivery to customers is primarily by
road. We have interests in nine major product pipelines in the UK and the Rest
of Europe and four in the USA. We also have interests in a major natural gas
pipeline, four NGL pipelines, two carbon dioxide pipelines and many smaller
pipelines. In total, we have interests in some 33,000 kilometres of pipeline, of
which about three-quarters are located in North America.
The lateral pipelines to the main Destin natural gas trunk line from
offshore in the Gulf of Mexico to Pascagoula, Mississippi and inland were
completed in 1999. This allowed connections with a number of other gas pipelines
and access to natural gas markets throughout the Southeast and the East coast of
the USA. The Tri-States NGL line, which runs west from our facility in
Pascagoula, Mississippi to Kenner, Louisiana, started up in March 1999. In
February, 2000 BP Amoco announced that it exercised its right of first refusal
to purchase Southern Natural Gas Company's one third interest in the Destin
Pipeline. The purchase increases BP Amoco's interest in the pipeline to two
thirds, with Tejas Destin L.L.C. continuing to hold the remaining interest.
SHIPPING
BP Amoco Shipping owns or operates an international fleet of crude and
product tankers carrying cargoes for the Group and for third parties. It also
offers a wide range of services to Group and third party marine customers.
At December 31, 1999 the Group owned an international fleet of twelve
tankers, totalling approximately 1.49 million deadweight tons (dwt). This
included three Very Large Crude Carriers (VLCCs), four Medium Crude Carriers and
five Product Carriers. All four of the Medium Crude Carriers were in lay-up at
the end of the year.
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Excluding BP Amoco companies in the USA, the Group had ten tankers (five
VLCCs, four Medium Crude Carriers and one Product Carrier) and four barges,
totalling approximately 2.17 million dwt, on long-term charter at December 31,
1999.
BP Amoco companies in the USA had 20 tankers (two VLCCs and 17 Medium Crude
Carriers and one Product Carrier), totalling approximately 2.39 million dwt on
long-term charter along with two other barges on short-term charter. Four of the
Medium Crude Carriers, totalling 0.65 million dwt, were in lay-up at the end of
1999.
In addition, a large number of small coastal vessels are used by Group
companies around the world.
BP Amoco Shipping has contracted to bareboat charter three more VLCCs for
delivery during 2000.
CHEMICALS
Our Chemicals business is a major producer of petrochemicals through
subsidiaries and associated undertakings. BP Amoco has operations principally in
the USA and Europe, and increasingly in the Asia-Pacific region. Chemicals is
also responsible for the supply, marketing and distribution of chemical products
to bulk, wholesale and retail customers.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
----- ----- -----
($ million)
<S> <C> <C> <C>
Turnover................................................. 9,392 9,691 11,445
Total replacement cost operating profit ................. 686 1,100 1,530
Total assets............................................. 13,021 12,562 12,141
Capital expenditure and acquisitions..................... 1,215 1,606 1,145
(thousand tonnes)
Production (a) .......................................... 21,853 20,570 19,491
</TABLE>
(a) Includes BP Amoco's share of associated undertakings and other interests in
production.
Chemicals margins are driven by the economics of supply and demand and, as
a result, are cyclical in nature. An illustration of this is the industry
integrated ethylene/low density polyethylene cash margin. This rose from 523
Deutschmarks (DM) per tonne in 1996 to 890 DM/tonne in 1997, then fell to 819
DM/tonne in 1998 and 666 DM/tonne in 1999. In 2000, the chemical industry's
external environment is expected to be similar to that faced in 1999. While a
pick-up in the growth of economies in Europe and Asia should lead to higher
demand, new capacity coming on stream will increase supplies and competitive
pressure on margins.
Our strategy is to create competitive advantage in petrochemicals through
adding value to Group hydrocarbons, industry cost leadership, world-leading
technology, premier market positions, and a bias to higher growth products.
As the petrochemicals arm of an oil major, a key element of our
competitive advantage comes through adding value to Group hydrocarbons, notably
by combining feedstock, refining and chemical processing on large integrated
sites. An example of this is our current investment programme in olefins and
derivative products at Grangemouth and Hull in the UK.
Increasing competitive pressures in the industry require an enduring focus
on cost reduction and we have made cost management an ongoing part of our
business. For example, in 1999 we launched our advanced manufacturing technology
project, which is intended to extensively automate most of our sites. Initial
projects are at our Texas City, Texas and Decatur, Alabama sites in the US, and
at Hull in the UK. We manage costs structurally too, by focusing our investment
on a limited number of world-class manufacturing sites. By limiting the number
of sites, we benefit from increased scale and integration of chemical operations
along value chains.
Technology will continue to distinguish the most successful companies from
their competitors. Leading technology makes us a preferred supplier and a
preferred joint venture partner, and this in turn should bring us increased
market share and access to new markets. We intend to maintain and extend our
leadership in the fundamental technologies that underpin our core businesses. By
way of example, our strengths in catalysis, oxidation and fluid bed technology
continue to enhance our leadership positions across the portfolio from polymers
to basic petrochemicals. BP Amoco has a number of leading technologies in
operation already and is currently investing in production capacity utilizing
recent breakthroughs in butanediol, vinyl acetate monomer and ethyl acetate
manufacture.
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<PAGE>
Our leading market positions make us supplier of choice and give us access
to a wider range of high quality growth options. We strive to be number one or
two in the markets in which we compete, and we have global leadership in
paraxylene, PTA, acetic acid, acrylonitrile, and other products. Our growth will
be driven by biasing our portfolio towards products which are growing at a
higher rate than the industry average. We are present in markets whose volumes
are on average increasing at 6% a year overall. This is about twice the rate of
global economic growth and compares with an estimated average of 4% for the
petrochemicals industry. We have also instituted a programme of marketing
initiatives to improve our commercial capability. The programme embraces
developments in the sphere of e-commerce, including the introduction of
web-based marketing channels.
We will continue to focus our portfolio in areas where we have clear
competitive advantage driven by the strategy elements described above. Over the
course of 1999, we sold two speciality businesses, Verdugt in February and
Plaskon in September; our share in the Wilton olefins cracker in June; and our
Fibers and Yarns business in November. We also announced the closure of our
joint-venture Singapore aromatics complex. In 2000, BP Amoco refinanced the
entity's bank loans and sold its interest in the entity.
MANUFACTURING FACILITIES
BP Amoco has large-scale manufacturing facilities in Europe and the USA.
The Group's major sites, with our share of their capacities in thousands of
tonnes per annum (ktepa), are: Grangemouth (2,126 ktepa) and Hull (1,400 ktepa)
in the UK; Lavera (1,817 ktepa) in France; Marl (623 ktepa) and Dormagen (2,200
ktepa) in Germany; Geel (1,504 ktepa) in Belgium; and Texas City, Texas (2,986
ktepa), Chocolate Bayou, Texas (3,220 ktepa), Decatur, Alabama (2,220 ktepa),
and Cooper River, South Carolina (1,310 ktepa) in the USA.
BP Amoco's European and US manufacturing base is a key to its continued
success. We also aim to grow in the Asia-Pacific region, which offers prospects
for demand growth. The intention is to build upon the existing bridgeheads that
the Group now holds in Indonesia, China, Malaysia and Korea. Our share of
capacity in Asia (largely through joint ventures) amounts to some 2.7 million
tonnes as follows: Indonesia (440 ktepa), Korea (630 ktepa), Malaysia (840
ktepa), Taiwan (740 ktepa) and China (75 ktepa).
The following table shows BP Amoco's production capacity by major product
and by business at December 31, 1999.
<TABLE>
<CAPTION>
Chemical Performance
Feedstocks Intermediates Polymers Products Total(a)
---------- ------------- -------- ----------- -----
(thousand tonnes per annum)
<S> <C> <C> <C> <C> <C>
Purified teraphthalic acid (PTA) 5,357 5,357
Ethylene..................... 3,139 3,139
Paraxylene................... 2,447 2,447
Polypropylene................ 1,919 1,919
Styrenics.................... 1,458 1,458
Polyethylene................. 1,477 1,477
Acetic acid/anhydride........ 1,363 1,363
Linear/poly alpha olefins.... 830 830
Acrylonitrile................ 801 801
Other........................ 2,474 632 677 3,664 7,447
------ ------ ------ ------ ------
Total 8,060 6,790 5,531 5,857 26,238
====== ====== ====== ====== ======
</TABLE>
- ------------
(a) This includes the Group's proportionate interest through associated
undertakings in production capacity and production from third-party
facilities made available to BP Amoco under long-term agreements.
BP Amoco's petrochemical products are sold to companies in a number of
industries that manufacture components used in a wide range of applications.
These include the agriculture, automotive, construction, furniture, household
products, insulation, packaging, paint, pharmaceuticals and textile industries.
Our products are marketed through a network of sales personnel and agents who
also provide technical services.
30
<PAGE>
BP Amoco's Chemicals business is organized into four broad groupings:
-- FEEDSTOCKS, including olefins and aromatics;
-- CHEMICAL INTERMEDIATES, including PTA and nitriles;
-- POLYMERS, including polypropylene, polyethylene, and styrenics; and
-- PERFORMANCE PRODUCTS, including acetyls, linear alpha olefins,
plastic fabrications, solvents, and fabrics.
FEEDSTOCKS
PRODUCTS
Our feedstocks group produces and markets the basic petrochemical building
blocks that are used primarily as raw material for other chemical products.
These basic petrochemicals include ethylene, propylene, butadiene, paraxylene
and metaxylene.
BP Amoco manufactures and markets feedstock chemicals from the steam
cracking of liquid and gaseous hydrocarbons. The olefins - ethylene, propylene
and butadiene - are produced by crackers at Grangemouth, UK; Lavera, France (BP
Amoco 50%); Dormagen, Germany by Erdoelchemie (BP Amoco 50%); Chocolate Bayou,
Texas; and Kertih, Malaysia (BP Amoco 15%). These crackers produce the raw
materials for the production of derivative products including polyethylene,
polypropylene, acrylonitrile, styrene, ethanol and ethylene oxide, which are
also produced at various BP Amoco plants.
BP Amoco is the world's largest producer of paraxylene (PX), and one of the
world's largest producers of metaxylene (MX), the feedstocks for PTA and
purified isophthalic acid (PIA), respectively. We recover PX and MX from
reformed gasoline streams at BP Amoco and other refineries, and deliver them
into our aromatic acids plants. PX is produced at Texas City, Texas and Decatur,
Alabama in the USA. MX is produced at Texas City.
MAJOR ACTIVITIES
-- Advanced Manufacturing technology projects were started at Texas City,
Decatur and Hull towards the end of 1999. These initial projects are the
beginning of a broader plan to implement the 'next generation' of
manufacturing across the chemicals business. This will involve the
introduction of leading edge process technology and control systems, and
will create extensively automated facilities which are integrated with
supply from the nearby refineries and demand from the downstream products.
-- In the UK, work is continuing on a major $825-million development
programme. Included in this programme are investments at Grangemouth. The
first stage, a 50-ktepa expansion of ethylene capacity, was commissioned in
March, 1999. A second 270-ktepa expansion is underway with completion
scheduled for the first quarter of 2001. When the second expansion is
complete, Grangemouth will have 1 million tonnes of ethylene capacity. This
additional production is intended to feed a new polyethylene plant
currently being built at the site.
-- In Belgium, work proceeded on the construction of a 420 ktepa PX unit at
our Geel site. This unit will employ our technology for PX crystallization
and will incorporate new process and catalyst technologies commercialized
at Decatur in 1997. The project is scheduled for start-up in early 2000.
-- BP Amoco continued feasibility studies on a $2.5-billion project for an
integrated ethylene cracker complex in China with the Shanghai
Petrochemical Company. In October 1999, the Chinese government approved our
proposal for a 50:50 joint venture, and the plant start-up is scheduled for
early 2005.
-- In June 1999, BP Amoco sold its 20% share of the Wilton olefins cracker.
-- In December 1999, we announced the closure of our joint-venture Singapore
aromatics complex. In 2000, BP Amoco refinanced the entity's bank loans and
sold its interest in the entity.
31
<PAGE>
CHEMICAL INTERMEDIATES
PRODUCTS
The Chemical Intermediates group produces and markets PTA, which is the
preferred raw material for the manufacture of polyester; acrylonitrile, a raw
material for acrylic fibre, varieties of synthetic rubber, a range of plastics
and other chemical products; PIA used for isopolyester resins and gel coats;
napthalene dicarboxylate (NDC), used for photographic film and specialized
packaging; trimellitic anhydride (TMA), used by the automotive, construction,
consumer goods, and packaging industries; and maleic anhydride (MAN), used in a
wide range of plastics and resins.
BP Amoco is the world's largest producer of PTA, with an interest in
approximately 25% of the world's PTA capacity. PTA is manufactured at Cooper
River, South Carolina and Decatur, Alabama, in the USA, Geel in Belgium, and
Kuantan in Malaysia. We also produce PTA through joint ventures in Korea (BP
Amoco 35%), Taiwan (BP Amoco 50%), Brazil (BP Amoco 49%), Mexico (BP Amoco
8.55%) and Indonesia (BP Amoco 50%). The Taiwan joint venture operation, Cooper
River, and Decatur represent the three largest PTA production sites in the
world.
BP Amoco is also the world's largest producer and global marketer of
acrylonitrile. We operate two acrylonitrile plants at Green Lake, Texas and
Lima, Ohio. Green Lake, with a capacity of 460 ktepa, is the largest
acrylonitrile production site in the world. Acrylonitrile is also produced by
Erdoelchemie at Dormagen, Germany and through a capacity rights agreement with
Sterling Chemicals at Texas City, Texas. Additionally, BP Amoco is the world's
largest producer and marketer of acetonitrile, primarily sold into
pharmaceutical applications.
The Anhydride business unit produces TMA and MAN at Joliet, Illinois, and
is the world's largest producer of TMA. We are entering the global market for
1,4-butanediol (BDO) using our proprietary technology in a world-scale plant at
Lima, Ohio. BDO and its derivatives are used in pharmaceuticals, a variety of
personal care products, plastics, auto parts and sports clothing.
PIA is produced in Joliet, Illinois; Geel, Belgium; and by the AGIC joint
venture (BP Amoco 50%) in Japan. NDC is produced at our plant in Decatur,
Alabama.
MAJOR ACTIVITIES
-- A 500 ktepa PTA unit at Geel, Belgium site was recommissioned as scheduled
during the second quarter of 1999 after a fire forced us to shut it down in
1998.
-- Construction progressed on a $10 million demonstration unit for our
proprietary propane-to-acrylonitrile technology process at the Green Lake
manufacturing facility. The project, involving an innovative recovery and
purification unit of unique design which will be integrated with one of the
three fluid-bed reactors at the Green Lake plant, is scheduled for
completion in the summer of 2000.
-- In September 1999, we commissioned an acetonitrile purification unit (APU)
at the BASF acrylonitrile plant at Seal Sands, UK, providing BP Amoco with
acetonitrile for sale into Europe. Owned by BP Amoco, the APU is operated
by BASF.
-- In June 1999, we commenced operation of a new leased import/export terminal
at Point Comfort, Texas and a pipeline between Point Comfort and Green Lake
for distribution and storage of acrylonitrile and raw material ammonia.
-- In December 1999 we completed a 20% expansion of the TMA plant at Joliet.
POLYMERS
PRODUCTS
The polymers product line includes polypropylene, used for moulded
products, fibres and films; polyethylene, used for packaging, pipes and
containers; engineering polymers used for medical, automotive and electronic
applications; carbon fibres used in aerospace applications and sporting goods;
and styrene monomers and polymers used in packaging and containers.
32
<PAGE>
We are the third-largest producer of polypropylene in the world.
Polypropylene is manufactured at Chocolate Bayou and Cedar Bayou, Texas and
Geel, Belgium. In addition, Appryl (BP Amoco 49%) operates polypropylene plants
at Lavera and at Gonfreville, France. BP Amoco has its own proprietary
polypropylene technology.
We are one of Europe's leading producers and suppliers of polyethylene, the
world's most widely used plastic. BP Amoco operates linear low density
polyethylene (LLDPE) and high density polyethylene (HDPE) plants at Grangemouth,
Lavera, Merak in Indonesia (BP Amoco 51%) and at Kertih in Malaysia (BP Amoco
60%). A low density polyethylene (LDPE) plant is operated at Wilton, UK.
Erdoelchemie (BP Amoco 50%) also produces LLDPE and LDPE at Dormagen in Germany.
Innovene, our proprietary gas-phase production process for polyethylene
based on a clean and cost-effective technology, has been licensed to 25
different companies in 16 countries. We have launched an enhanced version of our
High Productivity technology and have a range of next generation catalyst
programmes. During 1999, we successfully produced LLDPE film using metallocene
catalysts, in collaboration with Dow Chemical Company.
We operate styrene monomer plants at Texas City, Texas in the USA and Marl
in Germany. Polystyrene plants are operated at Marl, Wingles in France and
Trelleborg in Sweden. Expanded polystyrene (EPS) plants are operated at Wingles
and Marl.
BP Amoco's Engineering Polymers and Carbon Fibers business has
manufacturing facilities at Marietta, Ohio; Greenville and Rock Hill, South
Carolina; and Atlanta and Augusta, Georgia in the USA.
MAJOR ACTIVITIES
-- As part of the Grangemouth expansion programme, a new 300 ktepa
polyethylene plant employing enhanced High Productivity process technology
is planned to be commissioned in the summer of 2000.
-- Also at Grangemouth in 1999, Appryl (BP Amoco 49%) continued the
construction of a 250-ktepa polypropylene plant, with commissioning
expected in 2000.
-- The construction of the 250-ktepa polyethylene plant for the Bataan
Polyethylene Corporation (BP Amoco 38%) in the Philippines is nearing
completion and is due on stream in the third quarter of 2000.
-- In February 1999, new polypropylene capacity of 250 ktepa was brought on
stream at the Chocolate Bayou plant in Texas.
-- In the third quarter of 1999, a new polystyrene line using BP Amoco
technology was successfully commissioned at Wingles. Concurrently, our
styrenics business undertook a major restructuring programme, closing three
older EPS units and mothballing a polystyrene train.
-- In September 1999, the Plaskon business, which manufactures computer chip
packaging encapsulant resins, with manufacturing facilities located in
Singapore, was sold.
-- The Baglan Bay, UK, styrene monomer plant was closed in November 1999.
PERFORMANCE PRODUCTS
PRODUCTS
This group of businesses covers the following: acetic acid/anhydride,
solvents, linear alpha olefins, industrial products, polybutenes, plastic
fabrications group, and fabrics and fibres. These businesses add value to raw
materials produced by our other chemicals businesses.
We are a major supplier of acetic acid, a versatile chemical used in a
variety of products such as foodstuffs, textiles, paints, dyes and
pharmaceuticals. BP Amoco has acetyls operations in Europe, the USA and Korea
(BP Amoco 51%), and commissioned a 150-ktepa acetic acid plant in Sichuan, China
with local partners (BP Amoco 51%) in late 1998. This plant performed above
capacity during 1999, and a re-rating of the capacity to 200 ktepa was announced
in October 1999.
In Korea, the Asian Acetyls Company (BP Amoco 34%) operates a 150 ktepa
vinyl acetate monomer (VAM) plant. BP Amoco currently operates a 110-ktepa VAM
plant at Baglan Bay, UK and has a toll manufacturing agreement with Enichem for
50 ktepa of VAM from Porto Marghera in Italy.
33
<PAGE>
BP Amoco is the world's leading merchant supplier of polybutene. Polybutene
is manufactured at Texas City, Texas, and Whiting, Indiana in the US, and at
Lavera, France. Our Grangemouth polybutene facility was closed in 1999 as part
of an asset optimization drive. Polybutene is consumed as fuel additives,
lubricants, adhesives, sealants, cable filling compounds, personal care
products, in polymer modification, tackified polyethylene, explosives and in
many other products.
Linear alpha olefins (LAO) are used as co-monomers in the production of
polyethylene, as intermediates for the manufacture of linear plasticizers for
polyvinyl chloride (PVC), as raw material to manufacture poly alpha olefins
(PAO) for synthetic lubricants, as a building block for the production of
biodegradable surfactants, in synthetic-based drilling muds for the oil field
and for a host of other intermediate and final products. LAOs are produced at
our facilities in Pasadena, Texas and Feluy, Belgium. To meet the requirements
of the industry, production of LAOs at our plant in Feluy was increased during
the second quarter of 1999 by 50%. This increase in production pushed capacity
to 300 ktepa.
BP Amoco is the world's leading merchant supplier of poly alpha olefins
(PAO), high viscosity index materials primarily used in the production of high
performance, environmentally friendly, synthetic lubricants and motor oils.
These materials are manufactured at facilities in Deer Park, Texas and Feluy.
Our other Performance Product businesses are: (i) Solvents and Industrial
Chemicals, which manufactures and markets acetate esters, iso-propanol, acetone,
glycol esters, aerosols and ethanol at plants in the UK, France, Belgium, Italy
and Korea. These products have many applications including pharmaceuticals, inks
and paints. This business also manufactures ethylene oxide, ethanolamines, brake
fluids, antifreeze, oilfield chemicals, and plasticizers; (ii) Plastic
Fabrications, with a number of European and US sites converting polymer resins
into plastic films, rigid containers, non-woven fibres and engineering
components; and (iii) Fabrics and Fibers, which makes products for carpet
backing and industrial uses such as civil engineering fabrics and bulk bags.
MAJOR ACTIVITIES
-- Construction began on a 220-ktepa ethyl acetate plant at Hull and 110 ktepa
ethanol plant at Grangemouth, both scheduled for completion in 2001. The
ethyl acetate investment is based on BP Amoco's innovative proprietary
'direct addition' method for making ethyl acetate from ethylene and acetic
acid which does not require ethanol as a raw material.
-- Construction continues on a 200-ktepa VAM plant at Hull, which uses the
proprietary BP Amoco LEAP technology based on fluid bed catalyst. The work
is scheduled for completion in 2001, and the plant will ultimately replace
production from Baglan Bay and Porto Marghera.
-- We are investing with Petroliam Nasional Berhad (Petronas) in an acetic
acid plant at Kertih, Malaysia, with a capacity of 400 ktepa (BP Amoco
70%). Construction of the plant, which will use our Cativa technology,
started in 1998, and production is scheduled to commence during 2000.
-- In 1999 we commenced construction of a $300-million, 250-ktepa LAO facility
in Alberta, Canada. It is scheduled to come online in 2001. The facility is
based on technology used in our Feluy plant.
-- In February 1999, we sold a small speciality business, Verdugt, in the
Netherlands and in October we disposed of Plaspack Kunststoffe, a plastic
net and webbing business in Austria. In November, we sold our Fibers and
Yarns business, located in the US.
OTHER BUSINESSES AND CORPORATE
Other Businesses and Corporate comprises Finance, BP Solarex, the Group's
remaining coal asset, interest income and costs relating to corporate activities
worldwide.
FINANCE co-ordinates the management of the Group's major financial assets
and liabilities. From locations in the UK, Europe, the USA and the Asia-Pacific
region, it provides the link between BP Amoco and the international financial
markets, and makes available a range of financial services to the Group
including supporting the financing of BP Amoco's projects around the world.
Moody's and Standard and Poor's have assigned long-term debt ratings of Aa1
and AA+, respectively, to BP Amoco.
34
<PAGE>
Finance has in place a Debt Issuance Programme, under which the Group may
raise an aggregate of $4 billion of debt for maturities of one month or longer.
At March 24, 2000 the amount drawn down against this programme was $2,705
million.
In 1999, BP Amoco purchased the 50% of Solarex it did not already own from
Enron Corporation for $45 million. Our expanded SOLAR business was renamed BP
Solarex. The new company has a 20% share of the global market and is one of the
largest manufacturers of photovoltaic cells and modules with plants in the USA,
Spain, Australia and India. In 1999 BP Solarex revenues totalled $179 million
and solar module production grew 23%. Many of BP Solarex's successes in 1999
were based on advanced technology. One major project, 'Plug in the Sun',
involved installing solar modules on 200 new BP Amoco service stations in nine
countries. Another involved using solar energy to power 665 houses in the
Athlete's Village adjacent to the Olympic site in Sydney, Australia.
COAL activity consists of our 50% interest in PT Kaltim Prima Coal, an
Indonesian company. This company operates an opencast coal mine at Sangatta in
Kalimantan, Indonesia.
RESEARCH, TECHNOLOGY AND ENGINEERING activities are carried out by each of
the major business streams on the basis of a distributed programme coordinated
by the BP Amoco Technology Council. This body provides leadership for
scientific, technical and engineering activities throughout the Group and in
particular promotes cross-business initiatives and the transfer of best practice
between businesses. In addition, a group of eminent industrialists and academics
form the Technology Advisory Council, which advises senior management on the
state of technology within the Group and helps identify current trends and
future developments in technology.
Research and development is carried out using a balance of internal and
external resources. Involving third parties in the various steps of technology
development and application enables a wider range of technology solutions to be
considered and implemented, improving the productivity of research and
development activities.
The innovative application of technology and the rapid transfer of this
knowledge through the Group make a key contribution to improving BP Amoco's
business performance, particularly in the areas of the introduction of new
products, safety, the environment, cost reduction and efficiency of business
operations. We believe that, in addition to improving existing business
performance, the use of innovative technology can create new possibilities for
the organic growth of our energy- and petrochemical-related businesses.
INSURANCE. The Group generally restricts its purchase of insurance to
situations where this is required for legal or contractual reasons. This is
because external insurance is not considered economic for the Group. Losses will
therefore be borne as they arise, rather than being spread over time through
insurance premia. The position is reviewed periodically.
35
<PAGE>
REGULATION OF THE GROUP'S BUSINESS
UNITED KINGDOM
LICENSING. Pursuant to, among other things, the Petroleum (Production) Act 1934,
all petroleum existing in its natural condition in strata in the UK or beneath
its territorial waters (including its continental shelf) is the property of the
Crown, and licences to explore for and produce it may be granted, subject to
conditions, by the Secretary of State for Trade and Industry (Secretary of
State). These conditions include provisions relating to the term of the licence,
the imposition of specific drilling obligations, environmental protection
controls, controls over the development and decommissioning of oil and natural
gas fields (including restrictions on production) and the payment of royalties.
DEVELOPMENT OF OIL AND NATURAL GAS RESERVES. The development and production of
UK oil and natural gas reserves (including rates of production) require the
approval or consent of the Secretary of State. There have been a number of
policy statements by various UK Governments over the years with respect to
production controls. Although successive Governments have made it clear that the
imposition of production cut-backs in order to facilitate a coherent depletion
policy has been kept under review, the steps taken by the Government since the
early 1980s have tended to concentrate on encouraging exploration, development
and production and no significant cut-backs of previously agreed rates of
production are known to have been imposed.
OTHER CONTROLS. In addition to the regulatory powers of the Government referred
to above, the Secretary of State has wide powers over the oil field operations,
including gas flaring, the installation, use and tariffs of sub-marine
pipelines, the construction or expansion of refining capacity and powers to
impose programmes for the eventual decommissioning of offshore installations.
Furthermore, the Secretary of State for Transport has powers to control the
positioning of offshore installations if the chosen location is in or close to a
shipping lane. The UK Health and Safety Executive has wide powers and duties in
relation to offshore health and safety. BP Amoco is also subject to European
Union legislation, in particular the Procurement Directive which regulates the
procedure for awarding major contracts.
PETROLEUM REVENUE TAX. Petroleum revenue tax (PRT) was abolished in the Finance
Act 1993 in respect of oil and natural gas fields given development consent on
or after March 16, 1993 (Non-Taxable Fields). Profits from Non-Taxable Fields
are charged to corporation tax under general principles. PRT is still charged on
profits from fields given development consent before that date (Taxable Fields).
PRT is charged in relation to Taxable Fields on profits from oil (which includes
gas except where specifically excluded by statute) won under licences granted
under either the Petroleum (Production) Act 1934 or the Petroleum (Production)
Act (Northern Ireland) 1964. It is charged on a field-by-field basis, at the
rate of 50% for chargeable periods ending after June 30, 1993 (75% for periods
ending on or before that date), on the assessable profit arising in each
chargeable period (normally the six months ending on June 30 and December 31 in
each year), as reduced by any allowable losses and by an oil allowance (unless
the maximum amount of oil allowance has already been used), and subject in
certain years to an overall limit (safeguard). PRT is also chargeable on any
consideration received in connection with the use by other fields and the
disposal of certain 'qualifying assets', the expenditure on which is allowable
for PRT, subject to an allowance in the case of the use of assets by fields
which are themselves liable to PRT.
The assessable profit reflects, very broadly, the market value of oil won
less the costs of discovery and production, including any Government royalties
payable. Interest and other financing costs are not deductible in determining
the assessable profit; instead, certain costs are designated as qualifying for a
supplement of 35% (uplift). Uplift ceases for costs incurred after the end of
the chargeable period in which the field's cumulative income exceeds its
cumulative expenditure (payback).
Oil allowance exempts certain amounts from PRT. For each onshore field and
offshore field given development consent before April 1982, an allowance of up
to 250,000 tonnes of oil per chargeable period is available, subject to a
cumulative total of 5 million tonnes. For each onshore field and each offshore
field situated in the Southern Basin of the North Sea given development consent
after March 1982, the oil allowance for chargeable periods ending after June 30,
1988 is 125,000 tonnes per chargeable period and the cumulative total is 2.5
million tonnes. For each offshore field not situated in the Southern Basin given
development consent after March 1982, the allowance is 500,000 tonnes per
chargeable period subject to a cumulative total of 10 million tonnes. The oil
allowance is shared by the participants in each field in proportion to their
shares of oil. Safeguard provides that the total PRT payable in respect of a
field is limited to 80% of the amount (if any) by which the PRT profits for a
chargeable period (specially adjusted for this purpose) exceed 15% of
accumulated expenditure (as adjusted). Safeguard remains available after payback
has been reached for half as many periods again as it took to reach payback from
the first chargeable period.
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Allowable losses in any chargeable period can be set off against the
assessable profits of subsequent or, after making an appropriate claim, previous
periods from the same field but, in relation to losses arising in respect of
chargeable periods ending after June 30, 1993, the PRT repayment plus any
interest thereon arising from the set-off of losses against profits of previous
periods cannot exceed 60% of the losses set off (85% in respect of chargeable
periods ending after June 30, 1991 and on or before June 30, 1993). In addition,
relief is available against the assessable profit from a field for certain
expenditure incurred outside the field. There are restrictions to prevent the
obtaining of relief for expenditure incurred in connection with Non-Taxable
Fields against profits from Taxable Fields. Exploration or appraisal expenditure
incurred on or after March 16, 1983 and before March 16, 1993, in respect of an
area for which no development decision has been made, may be set against the
assessable profits of any Taxable Field together with any such expenditure
incurred prior to that date which is designated as abortive. There is no relief
for exploration and appraisal incurred after March 16, 1993 unless the Company
was already committed to it at that date and it is incurred on or before March
16, 1995. There is an additional transitional relief for exploration and
appraisal expenditure, subject to certain conditions, limited to a maximum of
L10 million for expenditure incurred on or after March 16, 1993 and before
January 1, 1995. Finally, a loss from a Taxable Field in which the winning of
oil has permanently ceased which cannot be relieved against the assessable
profits of that field can be claimed against the assessable profit from any
other Taxable Field. The offset of reliefs is limited to prevent a company
buying into mature oil fields and setting pre-acquisition expenditures against
the assessable profits of that field.
CORPORATION TAX. Companies are also subject to corporation tax on their profits
or gains from oil extraction activities, although PRT is deductible in computing
any corporation tax liability. There are restrictions on using reliefs from
other activities against profits or gains from oil extraction activities, or
from the disposal of interests in oil or of assets used in connection with a
field in the UK or a designated area. There is also an exemption from capital
gains taxation and capital allowance clawback for certain exchanges of licence
interests before the development stage. An election can be made in relation to
expenditure incurred after June 30, 1991 for 100% reliefs for certain net
offshore decommissioning expenditure. Losses created by these decommissioning
reliefs are available for set-off against profits of the previous three years.
In his Budget of July 1997 the UK Chancellor announced a review of the
North Sea fiscal regime to ensure that an appropriate share of North Sea profits
is being taxed while continuing to maintain a high level of oil industry
interest in the future development of the UK's oil and gas reserves. In BP
Amoco's submission to the review it argued that the existing fiscal regime
broadly succeeds in both areas. In September 1998 the Chancellor announced that
the existing regime would not be changed.
UNITED STATES
TAX. The State of Alaska imposes various taxes on the Group's operations in
Alaska. At present, these include a severance tax on oil and natural gas
produced, an ad valorem tax on all oil and gas exploration, production and
pipeline equipment and a corporate income tax on companies doing business in
Alaska. Following the Exxon Valdez oil spill, the State of Alaska passed an act
to finance the State's Oil and Hazardous Substance Release Response Fund by
imposing a conservation surcharge of $0.05 per barrel on all oil subject to the
State's oil and gas properties production tax. Subsequently, the State amended
the surcharge to suspend $0.02 per barrel of it when the balance in the Response
Fund exceeds $50 million, and as a result the net surcharge is $0.03 per taxable
barrel unless there is a spill that draws the Fund's balance below $50 million.
Further, losses occurring in connection with a catastrophic oil discharge are
not deductible as business expenses in determining the gross value of oil for
tax purposes in the State of Alaska.
PIPELINE REGULATIONS. The Interstate Commerce Act requires common carriers
engaged in the transport by pipeline of oil in interstate or foreign commerce to
file tariffs with the Federal Energy Regulatory Commission (the FERC) showing
all rates, classifications, rules and practices between all points on their
system. It also prohibits them from collecting any different compensation for
transportation from that specified in their approved tariffs. Third parties, or
the FERC on its own motion, may initiate an investigation of any proposed
tariff, which involves the scheduling of a hearing. If the FERC, at the
conclusion of a hearing, finds that a new or increased rate is unreasonable or
discriminatory, or otherwise in violation of the Interstate Commerce Act, it may
order the carrier to cease and desist from charging that rate, may prescribe a
rate for the future and order refunds to shippers of collected amounts found to
be unreasonable.
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ENVIRONMENTAL PROTECTION
HEALTH, SAFETY AND ENVIRONMENTAL REGULATION
The Group is subject to numerous national and local environmental laws and
regulations concerning its products, operations and other activities. These laws
and regulations may require the Group to take future action to remediate or
otherwise redress the effects on the environment of prior disposal or release of
chemicals or petroleum substances by the Group or other parties. Such
contingencies may exist for various sites including refineries, chemicals
plants, oil fields, service stations, terminals and waste disposal sites. In
addition, the Group may have obligations relating to prior asset sales or closed
facilities. Provisions for environmental restoration and remediation are made
when a clean-up is probable and the amount is reasonably determinable.
Generally, their timing coincides with the commitment to a formal plan of action
or, if earlier, on divestment or on closure of inactive sites. The provisions
made are considered by management to be sufficient for known requirements.
The extent and cost of future environmental restoration, remediation and
abatement programmes are inherently difficult to estimate. They depend on the
magnitude of any possible contamination, the timing and extent of the corrective
actions required and BP Amoco's share of liability relative to that of other
solvent responsible parties. Though the costs of future restoration and
remediation could be significant, and may be material to the results of
operations in the period in which they are recognized, it is not expected that
such costs will have a material impact on the Group's financial position or
liquidity.
Management cannot predict future developments, such as increasingly strict
requirements of environmental laws and enforcement policies thereunder, that
might affect the Group's operations or affect the exploration for new reserves
or the products sold by the Group. A risk of increased environmental costs and
liabilities is inherent in particular operations and products of the Group and
there can be no assurance that material costs and liabilities will not be
incurred in the future. In general, the Group does not expect that it will be
affected differently from other companies with comparable assets engaged in
similar businesses. Management believes that the Group's activities are in
compliance in all material respects with applicable environmental laws and
regulations.
For a discussion of the Group's environmental expenditures see Item 9 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Environmental Investment.
In December 1997, at the Third Conference of the Parties to the United
Nations Framework Convention on Climate Change in Kyoto, Japan, the participants
agreed on a system of differentiated internationally legally binding targets for
the first commitment period of 2008-2012. The range of targets in Annex I
countries (OECD, former Soviet Union and Eastern Bloc countries) against 1990
levels of emissions is from -8% to +10% for a basket of the six main greenhouse
gases. The USA agreed, subject to ratification by the Senate, on a reduction of
7%, and the European Union on a reduction of 8%. EU member states have
undertaken differentiated commitments on the basis of `burden sharing' to meet
the overall Community target. Projections of the increase in emissions without
any reduction measures are estimated at 32% for the USA and 19% for the European
Union. If these targets are to be met a major reduction in the use of fossil
fuels would be required, and this would be likely to have a significant effect
on BP Amoco's main businesses, but the Group does not expect that it will be
affected differently from other companies with comparable assets engaged in
similar businesses.
The following is a summary of significant health, safety and environmental
legislation affecting the Group in 1999.
UNITED STATES
The Clean Air Act and its regulations require, among other things, enhanced
monitoring of major sources of specified pollutants, stringent limits on
chemical plant, refinery, marine and distribution terminal emissions, risk
management plans for storage of hazardous substances, and new fuel
specifications.
Title V of the Clean Air Act requires major emission sources to obtain new
air permits. This permitting effort is underway at the Group's US operations.
Title V also requires more comprehensive measurement of specified air pollutants
from major emission sources. Two aims of this regulation are to provide
regulating bodies with accurate data on emissions from major sources, and to
enable regulatory authorities to better evaluate compliance with applicable
emission limitations. Federal authorities have recently promulgated monitoring
requirements.
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Risk Management Plan regulations require that any non-exempted facility
that processes or stores a threshold amount of a regulated substance prepares
and implements a risk management plan to detect, prevent and minimize accidental
releases. Undertaking an offsite hazard assessment, preparing a response plan
and dialogue with the local community are the primary components of the
programme.
Additionally, the Clean Air Act imposes specifications for motor vehicle
fuels that significantly impact petroleum refining and marketing operations. In
nine urban areas with the highest ozone levels, reformulated gasoline (RFG)
containing oxygenates and lower levels of benzene, and having lower levels of
volatility was introduced beginning January 1995. The emission reduction
requirements have been phased in over time and are now fully in effect. BP Amoco
manufactures and markets fuels in some of these nine areas, as well as in other
areas that chose to join the RFG programme.
Since 1992, gasoline sold during the winter in approximately 40
metropolitan areas with high carbon monoxide levels must have higher levels of
oxygenates such as methyl-tertiary-butyl-ether (MTBE) and ethanol. BP Amoco is
providing such oxygenated fuels in a number of US markets. Recently some
environmental groups and legislators have expressed opposition to the continued
use of MTBE as an oxygenate. Some metropolitan areas have been able to achieve
compliance with carbon monoxide standards and terminate their oxygenated fuels
programmes.
Beginning 1993, the Clean Air Act limited highway diesel fuel sulphur
content to 0.05%. BP Amoco has been producing this fuel in many of its US
markets. The Amendments also require service stations located in certain ozone
non-attainment areas to install equipment to capture gasoline vapours released
during refuelling.
The Clean Air Act also requires installation of 'maximum achievable control
technology' (MACT) over a ten-year period at certain types of industry
facilities that release certain specified toxic chemicals. Additional controls
could be required if the US Environmental Protection Agency (EPA) determines
that an unacceptable residual risk remains after installation of MACT. The EPA
has finalized MACT control requirements for certain categories of chemical
plants, refineries, gasoline marketing terminals and marine terminals.
Additional regulations on some sources in petroleum refineries were proposed in
1998. These are expected to be finalized in 2000 with compliance required in
2003. The EPA is also attempting to impose more stringent controls on the
emission of nitrous oxides (NOx) and particulate matter.
The Clean Water Act regulates the discharge of wastewater and other
pollutants into US waters. Facilities are required to obtain permits for most
discharges, install control equipment and implement operational controls and
preventative measures. Requirements under the Clean Water Act have become more
stringent in recent years, including coverage of storm and surface water
discharges at many facilities. The administrators of agencies for the Clean
Water Act and the Endangered Species Act formalized agreements linking those
statutes with the potential to limit access because of habitat concerns to
certain areas with development potential. During 1995 a final federal rule was
issued regarding protection of the Great Lakes watershed which will have local
and national impacts on water protection requirements. During 1998, individual
states in the Great Lakes watershed were working on regulations implementing the
federal rule.
The Oil Pollution Act of 1990 (the Oil Pollution Act) significantly
increased oil spill prevention requirements, spill response planning obligations
and spill liability for vessels, offshore facilities (such as platforms) and
onshore terminals. To provide compensation for oil spill response where the
spiller is unable to do so, the Oil Pollution Act created a $1 billion fund,
funded by a tax on imported and domestic oil.
The Oil Pollution Act also requires double hulls on all new tankers
operating in US waters and double hulls installed on existing tankers on a
phased schedule between the years 1995 and 2015. Major oil shippers and handling
facilities are expected to be most affected by the expanded technical and
operational requirements for tankers under the Oil Pollution Act. Regulations
require businesses covered by this Act to carry specified levels of insurance or
other documentation of financial responsibility and maintain facility response
plans that, among other things, identify and prepare for worst case spill
scenarios. Facilities must also conduct emergency response programmes in
coordination with area and national response plans.
The Prince William Sound port-specific vessel escort plan required by
regulations that became effective late in 1994, was updated during 1995,
including operational requirements such as enhanced tanker steering
capabilities, rudder failure response procedures, and reduced speed in the
Valdez Narrows, plus directives on communications and training.
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BP Amoco has set performance objectives to enhance emergency preparedness
and crisis management at all facilities, and to promote compliance with all
related legislation such as the Oil Pollution Act. These objectives are designed
to be met through appropriate assessment, planning, training and routine
exercises, and by the provision or identification of sufficient human and
physical resources.
The Resource Conservation and Recovery Act (RCRA) regulates the storage,
handling, treatment, transportation and disposal of hazardous and non-hazardous
wastes. It also requires the investigation and remediation of certain locations
where such wastes have been previously handled or disposed of. RCRA requirements
have become increasingly stringent in recent years. BP Amoco facilities generate
a number of wastes regulated by RCRA and have units that have been used for the
storage, handling or disposal of RCRA wastes.
Under the Comprehensive Environmental Response, Compensation, and Liability
Act (also known as CERCLA or Superfund), waste generators, site owners, facility
operators and certain other parties may be liable for the entire cost of
addressing sites contaminated by spills or waste disposal regardless of fault or
the amount of waste contributed to a site. Additionally, most states have laws
similar to CERCLA.
BP Amoco has been identified as a Potentially Responsible Party (PRP) under
CERCLA and similar state statutes at approximately 420 sites. A PRP has a joint
and several liability for site remediation costs and so BP Amoco may be required
to assume, among other costs, the share attributed to insolvent, unidentified or
other parties. BP Amoco is the PRP identified as having the most significant
exposure for remediation costs at 27 of these sites. For the remaining sites the
number of PRPs ranges generally from 20 to 200, and BP Amoco expects its share
of remediation costs in respect of these sites to be small. BP Amoco has
estimated its potential exposure at all sites where it has been identified as a
PRP and has accrued provisions accordingly. BP Amoco does not anticipate that
its ultimate liability at these sites individually, or in aggregate, will be
significant. The Group is also subject to claims made for natural resource
damage under several federal and state laws.
Other significant legislation includes the Toxic Substances Control Act
which, among other things, regulates the development, testing, import, export
and introduction of new chemical products into commerce; the Occupational Safety
and Health Act which, among other things, imposes workplace safety and health,
training and process standards to reduce the risks of chemical exposure and
injury to employees; and the Emergency Planning and Community Right-to-Know Act
which requires emergency planning and spill notification as well as public
disclosure of chemical usage and emissions. The Occupational Safety and Health
Administration's Process Safety Management (PSM) rule formalizes the procedures
used in identifying and minimizing safety risks at a covered facility and also
in conducting formal documented hazard reviews of all covered processes.
UNITED KINGDOM AND EUROPEAN UNION
Part 1 of the UK Environmental Protection Act 1990 introduced the concept
of Integrated Pollution Control (IPC) of pollution to air, water and land by
requiring each prescribed process (including petroleum and gasification
processes) to be authorized. The controls apply to new processes in England and
Wales from April 1, 1991 and in Scotland from April 1, 1992. The standard to be
achieved by each process is the Best Available Techniques Not Entailing
Excessive Cost (BATNEEC). Existing petroleum and gasification processes had to
apply for an IPC authorization by June 30, 1992. These processes were to be
upgraded to the BATNEEC standard at the earliest opportunity and generally for
petroleum and gasification processes by April 1, 1998. BP Amoco has registered
all sites affected by the IPC legislation and is carrying out monitoring and
upgrading of processes as required. Onshore oil production facilities are
covered by separate guidance notes issued in November 1995. BP Amoco has IPC
authorizations for its onshore production facilities which effectively equate to
BATNEEC compliance. Where they do not, the authorization includes an agreed
improvement programme which BP Amoco is working towards with its Environment
Agency IPC Inspector. The UK Environmental Protection Act may also impose new
investigation and remediation obligations on the Group's UK facilities upon the
adoption of implementing regulations.
A European Commission directive for a similar system of Integrated
Pollution Prevention and Control (IPPC) is based upon Best Available Techniques
(BAT) with cost-benefit analysis as a holistic approach. In the event that the
use of BAT will fail to meet Environmental Quality Standards (EQS), plant
emissions must be reduced further to meeting the EQS. This encompasses, among
other things, most activities and processes undertaken by the oil industry
within the European Union. The European Commission has stated that it hopes that
all processes to which it applies will be licensed by July 2005. When
implemented, this directive will replace the IPC regulation in the UK. All
plants must be upgraded to BAT standards by 2007.
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The European Union Large Combustion Plant Directive sets emission limit
values for sulphur dioxide, nitrogen oxides and particulates from large
combustion plants; it also requires phased reductions in emissions from existing
large combustion plants. Implementation by Member States was required by June
1990. In the UK, it has been given effect through the authorization mechanism in
Part 1 of the Environmental Protection Act 1990. Large combustion plants
required an IPC application to be made by April 30, 1991. Upgrading to the
BATNEEC standard is required at the earliest opportunity, at the latest by April
1, 2001. The European Commission has considered proposals to impose emission
limit values on small combustion plants. A revised Large Combustion Plant
Directive was proposed by the Commission in 1998 to be considered by the Council
and Parliament during 1999-2000, as part of the EU Acidification Strategy. After
revisions of the EU treaty agreed to in Amsterdam, Parliament has acquired an
increased role in environmental legislation through co-decision procedures.
As part of its overall programme to combat air pollution, the European
Union has set stringent emission limits for new cars and commercial vehicles
which are being implemented in stages. Beginning October 1994, the sulphur
content of diesel fuel was limited to 0.2% and from October 1996 the limit was
further reduced to 0.05%. Heating oils were initially limited to 0.2% with
further reductions subject to review. In August, the Federal German Government
adopted a regulation to encourage early introduction of low sulphur transport
fuels by setting differential excise taxes for gasoline and diesel with maximum
50 ppm sulphur content from November 2001, and for a maximum of 10 ppm from
January 2001. It also proposed that 10 ppm sulphur fuels should be adopted at EU
level. Implementation of the German regulation depends on tax derogations being
agreed by the Commission and the other Member States. The Commission made it
clear that it will not consider 10 ppm sulphur fuels within the current Auto/Oil
Programme for implementation in 2005.
In 1998, the EU adopted directives to set emission limits for cars and
light vehicles to apply from 2000, together with specifications for gasoline and
diesel fuel to apply from that date. Some member States indicate that they need
such energy product taxes to enable them to meet their Kyoto commitments, within
the EU burden sharing agreement, and are already implementing national
legislation. The Commission is also undertaking a second Auto/Oil Programme to
propose changes to other gasoline and diesel fuel specifications from 2005, as
well as non-technical measures designed to help meet air quality targets.
In April 1999, the EU adopted a directive to further reduce the sulphur
content of liquid fuels, but excluding marine bunker fuel oil, and marine gas
oil used by ships crossing a frontier between a third country and an EU Member
State. Sulphur in gas oil will be limited to 0.2% from July 2000, and 0.1% from
January 2008. From January 2003, sulphur in heavy fuel oil will be limited to
1%, except where use of heavy fuel oil up to 3% sulphur can be used in
combustion plants without exceeding specific emission limits, and provided that
local air quality standards are met.
As part of its overall approach to improving air quality, in 1997 the
Commission proposed its Acidification Strategy, and followed this with its
proposal for a strategy to combat tropospheric ozone. The Ozone Strategy was
adopted in 1998. Four air quality targets have been adopted as Commission
Directives, two more have been proposed and a target of 120 micrograms per cubic
metre for ozone itself was proposed in 1999, together with a proposal for
national emission ceilings for the main polluting emissions. Upon adoption by
the Council, these targets and ceilings will be the reference point for further
environmental controls of industrial installations at Community and Member State
levels.
As part of its ozone strategy, the EU has taken action on volatile organic
compounds (VOCs). In late 1994, the European Union adopted the so-called Stage 1
VOC controls which require a 90% cut in emissions over ten years from petrol
transport and storage. In November 1996, the Commission proposed a directive on
control of emissions of organic solvents from the solvent-using industry which
has the goal of combating low-level ozone by setting emission limits and, as an
alternative, targets to be met by national plans. Existing installations would
be required to reach compliance by 2007 (VOC). This proposal was adopted as a
directive during 1998.
As part of a package to stabilize carbon dioxide emissions at 1990 levels
by the year 2000, the European Commission proposed a combined carbon
dioxide/energy tax. In March 1997, the Commission proposed instead an energy tax
that is intended to be fiscally neutral when applied by Member States. Though
formally the proposal replaces the carbon dioxide/energy tax proposal that had
been blocked in Council, it has as its main objective to provide a harmonized
framework by setting minimum levels for national excise taxes on energy
products, and to allow Member States greater flexibility to offer tax incentives
based on environmental criteria, whilst avoiding barriers to trade within the
Single Market. Maximum sulphur levels for gasoline and diesel fuels to apply
from 2005 were also agreed as 50 ppm, which is 0.005%, and 35% maximum aromatic
content for gasoline from the same date. In 1999, this was followed by emission
limits for heavy commercial vehicles, also based on the Auto/Oil Programme
conclusions.
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The European Union enacted the Major Hazards (Seveso) Directive (the Seveso
Directive) in 1982. The intention of this legislation is to identify industrial
sites which have the potential to suffer a major accident which would impact on
the neighbouring population. Such sites are defined by the hazards that exist on
them, in some cases by the process in operation, but mainly by exceeding the
defined threshold quantities of various categories of 'dangerous substances' in
storage or use on the premises. It is the responsibility of the site to evaluate
their hazards. Those which fall into the category of a major hazard site must
produce a safety case which contains the evaluation of the hazards, an
assessment of the consequences of the most serious credible incidents which can
occur, both on and off site, and a description of the emergency plan which they
have in place to deal with them. The safety case must be submitted to the
national regulator, who acts on behalf of the local authority. The site is also
expected to communicate the relevant aspects of its emergency plan to the local
community. All BP Amoco sites in Europe are in compliance with the Seveso
Directive as enacted in each specific country. The European Union has now
adopted a revised Seveso Directive known as the Control of Major Accident
Hazards Regulation, which came into force in February 1999. The main objective
of this revision is to ensure that effective safety management systems are in
place.
The European Commission is committed to issue in early 2000 a `white
(consultation) paper' on the scope for proposing a harmonized EU approach to
liability for environmental damage. This follows a `green (discussion) paper' in
1992 that focused on a strict liability approach.
The UK Offshore Safety Act 1992 came into force on March 6, 1992. Detailed
implementation is through regulations made under existing health and safety
legislation enforced by the UK Health and Safety Executive. The Offshore
Installations (Safety Case) Regulations 1992 came into force in May 1993. BP
Amoco submitted all safety cases by the required date of November 1993. This
included 22 operational safety cases, all of which have been accepted, and two
design safety cases on new installations. As part of the safety case, BP Amoco
was required to justify continued operation and outline remedial measures
identified as part of the risk assessment completed. Work on these remedial
works was completed by the November 1995 deadline.
MANAGEMENT OF HEALTH, SAFETY AND ENVIRONMENTAL ISSUES
The Group's world-wide HSE policy is developed within a framework set by BP
Amoco p.l.c.'s board of directors. The policy is implemented through targets in
the corporate and business performance contracts and programmes ranging from
pollution prevention through safety management and product stewardship. Each
part of the BP Amoco Group reviews its own performance and an assurance report
is presented annually to the Group Chief Executive. The Ethics and Environment
Assurance Committee of the board of directors, comprising six non-executive
directors, reviews policies and processes which bear upon the Group's health,
safety and environmental relationships.
ADDITIONAL FACTORS WHICH MAY AFFECT BUSINESS
In order to utilize the `Safe Harbor' provisions of the United States
Private Securities Litigation Reform Act of 1995, BP Amoco is providing the
following cautionary statement. This document contains certain forward-looking
statements with respect to the financial condition, results of operations and
business of BP Amoco and certain of the plans and objectives of BP Amoco with
respect to these items. These statements may generally, but not always, be
identified by the use of words such as `anticipates' `should', `expects',
`estimates', `believes' or similar expressions. In particular, among other
statements, (i) certain statements in Item 1 - Description of Business and Item
9 - Management's Discussion and Analysis of Financial Condition and Results of
Operations with regard to management aims and objectives, planned expansion,
investment or other projects, expected or targeted production volume, capacity
or rate, the date or period in which production is scheduled or expected to come
on stream or a project or action is scheduled or expected to be completed, and
statements regarding the benefits of the merger with ARCO; and (ii) the
statements in Item 9 - Management's Discussion and Analysis of Financial
Condition and Results of Operations including the statements under `Outlook'
with regard to trends in results of operations, margins overall market trends,
costs, dividends, returns, risk management and exchange rates, are
forward-looking in nature. 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 Amoco. 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, demand and pricing; political stability and economic
growth in relevant areas of the world; development and use of new technology and
successful partnering; the actions of competitors, natural disasters and other
changes to business conditions; and other factors discussed elsewhere in this
report. In addition to factors set forth elsewhere in this report, the following
are important factors, although not exhaustive, that may cause actual results
and developments to differ materially from those expressed or implied by these
forward-looking statements.
42
<PAGE>
There is strong competition, both within the oil industry and with other
industries, in supplying the fuel needs of commerce, industry and the home. The
oil industry is also particularly subject to regulation and intervention by
governments throughout the world in such matters as the award of exploration and
production interests, the imposition of specific drilling obligations,
environmental protection controls, control over the development and
decommissioning of a field (including restrictions on production) and, possibly,
nationalization, expropriation or cancellation of contract rights. The oil
industry is also subject to the payment of royalties and taxation, which tend to
be high compared with those payable in respect of other commercial activities.
Exploration and production require high levels of investment and have
particular economic risks and opportunities. They are subject to natural hazards
and other uncertainties including those relating to the physical characteristics
of an oil or natural gas field.
Oil prices are subject to international supply and demand. Political
developments (especially in the Middle East) and the outcome of meetings of OPEC
can particularly affect world oil supply and oil prices. The refining industry
is suffering from severe oversupply. Crude oil prices are generally set in
dollars while sales of refined products may be in a variety of currencies.
Fluctuation in exchange rates can therefore give rise to foreign exchange
exposures.
Sectors of the chemicals industry are also subject to fluctuations in
supply and demand within the chemicals market, with consequent effect on prices
and profitability, and to governmental regulation and intervention in such
matters as safety and environmental controls.
ITEM 2 -- DESCRIPTION OF PROPERTY
BP Amoco has freehold and leasehold interests in real estate in numerous
countries throughout the world, but no one individual property is significant to
the Group as a whole. See Item 1 -- Description of Business for a description of
the Group's reserves and sources of crude oil and natural gas.
43
<PAGE>
ITEM 3 -- LEGAL PROCEEDINGS
Save as disclosed in the following paragraph, no member of the Group is a
party to, and no property of a member of the Group is subject to, any pending
legal proceedings which are significant to the Group.
Approximately 200 lawsuits were filed in State and Federal Courts in Alaska
seeking compensatory and punitive damages arising out of the Exxon Valdez oil
spill in Prince William Sound in March 1989. Most of those suits named Exxon
(now ExxonMobil), Alyeska Pipeline Service Company (Alyeska), which operates the
oil terminal at Valdez, and the other oil companies which own Alyeska. Alyeska
initially responded to the spill until the response was taken over by Exxon. BP
Amoco owns a 50% interest in Alyeska through a subsidiary of BP America Inc.
Alyeska and its owners have settled all of the claims against them under these
lawsuits. Exxon has indicated that it may file a claim for contribution against
Alyeska for a portion of the costs and damages which it has incurred. If any
claims are asserted by Exxon which affect Alyeska and its owners, BP Amoco would
defend the claims vigorously.
The Internal Revenue Service (IRS) has challenged the application of
certain foreign income taxes as credits against BP Amoco Corporation's US taxes
that otherwise would have been payable for the years 1980 to 1992. On June 18,
1992, the IRS issued a statutory Notice of Deficiency for additional taxes in
the amount of $466 million, plus interest, relating to 1980 to 1982. BP Amoco
filed a petition in the US Tax Court contesting the IRS statutory Notice of
Deficiency. Trial on the matter was held in April 1995, and a decision was
rendered by the US Tax Court in March 1996, in BP Amoco's favour. The IRS
appealed the Tax Court's decision to the US Court of Appeals for the Seventh
Circuit and on March 11, 1998, the Seventh Circuit affirmed the Tax Court's
prior decision. A comparable adjustment of foreign tax credits for each year has
been proposed for the years 1983 to 1992 based upon subsequent IRS audits. In
November 1999, BP Amoco Corporation reached an agreement with the IRS that
effectively resolves this issue at a minimal tax cost to the Company. On
December 13,1999 the parties filed a status report with the US Tax Court for the
years 1983-1989 advising the Court that a basis for settlement had been reached
and that final calculations were in the process of being prepared. Once these
calculations are finalized, the parties expect to file an agreed decision
document for the Court's final approval, which will then conclude the
litigation.
In February 1998, a jury in a Texas state court awarded compensatory and
punitive damages in the aggregate amount of $115 million to former employees of
a steel company. The plaintiffs had alleged that they suffered injuries
following their use of products containing asbestos, sold during 1965 to 1983 by
Carborundum, a former subsidiary of BP America Inc. These proceedings have now
been settled between the parties on the basis of an annulment of the court
judgement. Other such claims will be defended vigorously.
In February 2000, the FTC filed a Complaint in the US District Court
against BP Amoco and ARCO, seeking a preliminary injunction to prevent closing
of the combination transaction between BP Amoco and ARCO. The Attorney Generals
for the Western States also filed complaints with the same Court. The Attorney
General for the State of Alaska also joined in the Court proceedings in support
of the transaction. The parties agreed on March 15, 2000, to suspend the Court
proceedings, pending discussions for a consent order.
In March 2000, ExxonMobil filed a Complaint in State Court, Los Angeles,
seeking declaratory and injunctive relief and specific performance against BP
Amoco, ARCO and Phillips to prevent the sale of ARCO's Alaskan business to
Phillips referred to in Part 1 -- Recent Developments -- The Proposed
Combination of BP Amoco and ARCO. ExxonMobil allege that the proposed sale to
Phillips breaches ExxonMobil's prior preferential rights to purchase the
interests subject to an agreement between predecessors of ARCO and predecessors
of ExxonMobil dated September 23, 1964. BP Amoco believes that this action is
without merit and will defend the claim vigorously.
ITEM 4 -- CONTROL OF REGISTRANT
The following table sets forth certain shareholding information as of
March 24, 2000, concerning the directors and the secretary of BP Amoco p.l.c.
<TABLE>
<CAPTION>
Title of class Identity of person or group Number owned Percent of class
- -------------- --------------------------- ------------ ----------------
<S> <C> <C> <C>
Ordinary Shares of Directors and the
25 cents each secretary of BP Amoco p.l.c. 5,478,669(a) less than 1/10th of 1%
</TABLE>
- ----------
(a) Includes the equivalent of 2,304,959 Ordinary Shares held by certain
directors and the secretary in the form of ADSs.
There are no interests of more than 10% of the Company's Ordinary Shares,
other than Morgan Guaranty Trust Company of New York as Depositary for Ordinary
Shares underlying ADSs. See Item 5 -- Nature of Trading Market.
44
<PAGE>
ITEM 5 -- NATURE OF TRADING MARKET
The primary market for the Company's Ordinary Shares is the London Stock
Exchange. The Company's Ordinary Shares are a constituent element of the
Financial Times Stock Exchange 100 Index. The Company's Ordinary Shares are also
traded on stock exchanges in France, Germany, Japan and Switzerland.
Trading of BP Amoco's shares on the LSE is primarily through the use of the
Stock Exchange Electronic Trading Service (SETS), introduced in 1997 for the
largest companies in terms of market capitalization whose primary listing is the
LSE. Under SETS, buy and sell orders at specific prices may be sent to the
exchange electronically by any firm which is a member of the LSE, on behalf of a
client or on behalf of itself acting as a principal. The orders are then
anonymously displayed in the order book. When there is a match on a 'buy' and a
'sell' order, the trade is executed and automatically reported to the LSE.
Trading is continuous from 9:00 a.m. to 4:30 p.m. UK time, but in the event of a
20% movement in the share price either way the LSE may impose a temporary halt
in the trading of that company's shares in the order book, to allow the market
to re-establish equilibrium. Dealings in the Company's Ordinary Shares may also
take place between an investor and a market-maker, via a member firm, outside
the electronic order book.
In the United States and Canada the Company's securities are traded in the
form of American Depositary Shares (ADSs), for which Morgan Guaranty Trust
Company of New York is the depositary (the Depositary) and transfer agent. Each
ADS represents six Ordinary Shares. ADSs are listed on the New York Stock
Exchange, and are also traded on the Chicago, Pacific and Toronto Stock
Exchanges.
The Ordinary Shares represented by ADSs issued pursuant to the merger
between BP and Amoco were issued in bearer form at the time of the merger. As at
March 24, 2000, 5,411,636,254 Ordinary Shares in bearer form are held by the
Depositary in London, with 32,507,346 Ordinary Shares being held by Boston
Equiserve Limited, as exchange agent on behalf of Amoco shareholders that have
yet to exchange their Amoco shares for BP Amoco ADSs.
With effect from 4 October 1999, BP Amoco subdivided (or split) its
ordinary share capital. As a result, the number of ordinary shares held at the
close of business on Friday October 1, 1999 doubled. This resulted in holders of
ADSs receiving a two-for-one stock split. Therefore, for every ADS held before
the stock split, a holder received an additional ADS.
The following table sets forth for the periods indicated the highest and
lowest middle market quotations for the Ordinary Shares of The British Petroleum
Company p.l.c. for 1997 and 1998, and of BP Amoco p.l.c. for 1999 and 2000.
These are derived from the Daily Official List of the LSE, and the highest and
lowest sales prices of ADSs as reported on the New York Stock Exchange composite
tape. The information in this table has been restated to reflect the subdivision
of Ordinary Shares on October 4, 1999.
<TABLE>
<CAPTION>
American
Depositary
Ordinary Shares Shares (a)
--------------- ---------------
High Low High Low
---- --- ---- ---
(Pence) (Dollars)
<S> <C> <C> <C> <C>
1998: First quarter....................... 466.75 373.00 48.00 36.88
Second quarter...................... 484.25 415.50 48.66 41.44
Third quarter....................... 455.00 368.50 45.88 36.50
Fourth quarter...................... 478.25 407.50 47.69 40.72
1999: First quarter....................... 539.50 411.00 52.66 40.19
Second quarter...................... 595.50 504.75 57.69 47.00
Third quarter....................... 642.50 532.50 61.16 52.50
Fourth quarter...................... 643.50 538.00 62.63 51.38
2000: First quarter (through March 24).... 602.00 444.50 60.63 43.13
</TABLE>
- ----------
(a) An ADS is equivalent to six Ordinary Shares.
Market prices for the Ordinary Shares on the LSE and in after-hours trading
off the LSE, in each case while the New York Stock Exchange is open, and the
market prices for ADSs on the New York Stock Exchange and other North American
stock exchanges, are closely related due to arbitrage among the various markets,
although differences may exist from time to time due to various factors
including UK stamp duty reserve tax. Trading in ADSs began on the LSE on August
3, 1987.
45
<PAGE>
On March 24, 2000, 921,098,875 ADSs (equivalent to 5,526,593,250 Ordinary
Shares or some 28.4% of the total) were outstanding and were held by
approximately 121,000 ADR holders. Of these, about 119,000 had registered
addresses in the USA at that date.
On March 24, 2000 there were approximately 372,000 holders of record of
Ordinary Shares. Of these holders, around 1,200 had registered addresses in the
United States and held a total of some 3,662,000 Ordinary Shares. In addition,
certain accounts of record with registered addresses other than in the United
States hold Ordinary Shares, in whole or in part, beneficially for United States
persons.
ITEM 6-- EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are currently no UK foreign exchange controls or restrictions on
remittances of dividends on the Ordinary Shares or on the conduct of the
Company's operations.
There are no limitations, either under the laws of the UK or under the
Articles of Association of BP Amoco p.l.c., restricting the right of
non-resident or foreign owners to hold or vote Ordinary or Preference Shares in
the Company.
ITEM 7 -- TAXATION
The following summary of the principal UK and certain US tax consequences
of ownership of ADSs or Ordinary Shares is based in part on representations of
Morgan Guaranty Trust Company of New York as Depositary for the ADRs evidencing
the ADSs and assumes that each obligation in the deposit agreement among the
Company, the Depositary and the holders from time to time of ADRs and any
related agreement will be performed in accordance with its terms.
Beneficial owners of ADSs who are resident in the USA are treated as the
owners of the underlying Ordinary Shares for the purposes of the income tax
convention between the USA and the UK (the Convention) and for the purposes of
the US Internal Revenue Code of 1986, as amended (the Code). Unless otherwise
stated, references to 'shareholders' or 'shareholder' below are to persons who
are the beneficial owners of the underlying Ordinary Shares. It should be noted
that the UK Inland Revenue is currently negotiating with the US Internal Revenue
Service about updating and revising the Convention.
UK TAXATION OF DIVIDENDS
POSITION FOR DIVIDENDS PAID BEFORE APRIL 6, 1999
BP Amoco p.l.c. was required, when paying a cash dividend, to account to
the UK Inland Revenue for a payment of advance corporation tax (ACT). The rate
of ACT was 1/4 of the net dividend (equivalent to 20% of the combined dividend
and ACT).
Under UK law, an individual shareholder resident in the UK for UK income
tax purposes is treated as having taxable income equal to the sum of any
dividend paid plus a tax credit equal (before April 6, 1999) to 1/4 of the
amount of the net dividend. The tax credit was available to be set against the
individual's tax liability on the dividend, and might in appropriate cases be
refunded. A UK resident corporate shareholder will not generally be liable to UK
corporation tax on any dividend received.
Under the Convention, a beneficial owner of the Company's shares who for
the purposes of the Convention is not a US corporation owning directly or
indirectly 10% or more of the Company's voting stock, and who is a resident of
the USA and is not a resident of the UK (a US Holder) and whose holding of the
Company's shares is not effectively connected with (i) a permanent establishment
in the UK through which the US Holder carries on a business in the UK, or (ii) a
fixed base from which the US Holder performs independent personal services in
the UK, will generally be entitled to receive from the UK Inland Revenue, in
addition to any dividend paid by the Company, an amount equal to the tax credit
available to individual shareholders resident in the UK in respect of such
dividend, less a withholding tax equal to 15% of the aggregate of such tax
credit and such dividend (the Refund).
For example, a dividend of $8.00 would entitle such a US Holder to receive
a Refund of $0.50 (a tax credit of $2.00, less a withholding of $1.50), giving a
total net receipt, after UK taxes but before US taxes, of $8.50.
46
<PAGE>
Special rules may apply under certain circumstances if the US Holder (a) is
exempt from tax in the USA on dividends paid by the Company, or (b) is an
investment or holding company, 25% of the capital of which is held directly or
indirectly by one or more persons who are not individual residents or nationals
of the USA and (i) which has imposed on it by the USA, in respect of the
dividend, a tax substantially less than the tax generally imposed by the USA on
corporate profits, or (ii) which receives more than 80% of its gross income from
sources outside the USA as determined in accordance with the Convention. Special
rules apply to a US Holder who owns 10% or more of the Ordinary Shares and to US
corporate shareholders which directly or indirectly control, alone or with one
or more associated corporations, at least 10% of the voting power of the Company
or are residents of the UK.
Arrangements existed with the UK Inland Revenue under which a holder of
ADRs resident in the USA that was (i) a US corporation whose business was not
managed and controlled in the UK, (ii) an individual resident in the USA and not
resident in the UK, or (iii) a trust or estate, all the beneficiaries of which
were resident in the USA, would receive payment of the Refund to which such
holder was entitled, together with payment of the associated cash dividend,
provided that the holder was not subject to the special rules described in the
preceding paragraph, completed the declaration on the reverse of the dividend
check and presented the check for payment within three months from its date of
issue. The holder had to declare, among other things, that he was neither
engaged in business nor performing independent personal services through a
permanent establishment or fixed base in the UK. These arrangements were
terminated by the UK Inland Revenue with effect from April 6, 1999.
A US Holder who did not receive the Refund to which such US Holder is
entitled must, in order to obtain payment, file in the manner and at the time
described in Revenue Procedure 80-18, 1980-1 C.B. 623 (as modified by Revenue
Procedure 81-58, 1981-2 C.B. 678 and Revenue Procedure 84-60, 1984-2 C.B. 504,
clarified and amplified by Revenue Procedure 90-61, 1990-2 C.B. 657 and as
recently modified by Revenue Procedure 2000-13, 2000-6 I.R.B. 515), a claim for
payment identifying the dividends with respect to which the ACT was paid. The
first claim by such a US Holder for a payment is made by sending the appropriate
UK tax form in duplicate to Philadelphia Service Center, Foreign Certification
Unit, P.O. Box 16347, DP535B, Philadelphia, PA19114. Forms may be obtained from
the IRS Assistant Commissioner (International), 950 L'Enfant Plaza South, S.W.,
Washington, D.C. 20024. If the US Holder qualifies as a US resident, the
Internal Revenue Service (IRS) will certify the form to that effect and forward
it to the UK tax authorities. Claims must be made within six years of the end of
the UK year of assessment (generally the 12-month period ending April 5 in each
year) in which the related dividend was paid. As a claim is not considered made
until the UK tax authorities receive the appropriate form from the IRS, forms
should be sent to the IRS well before the end of the applicable limitation
period. Any Refund claim by a US Holder after the first claim should be filed
directly with the Financial Intermediaries and Claims Office (International),
FitzRoy House, PO Box 46, Nottingham, NG2 1BD, England.
Whether shareholders who reside in countries other than the USA are
entitled to the tax credit in respect of dividends on such shares depends in
general upon the provisions of such conventions or agreements as may exist
between such countries and the UK. In addition to that with the USA, conventions
or agreements presently exist between the UK and, among other countries,
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden and Switzerland.
POSITION FOR DIVIDENDS PAID ON OR AFTER APRIL 6, 1999
The Finance (No 2) Act 1997 introduced new legislation which significantly
altered the tax treatment of dividends paid on or after April 6, 1999. As from
that date the tax credit for an individual shareholder resident in the UK is
reduced to 1/9 (or 10% of the net dividend plus the tax credit) of the amount of
the net dividend. This tax credit continues to be available to set against the
individual's tax liability on the dividend, but is no longer refundable to the
individual.
For a US Holder as defined above this amendment has the effect of reducing
the Refund available under the Convention to nil, since the amount of the
withholding tax (at 15%) exceeds the 10% tax credit available to individual
shareholders resident in the UK. Following the example given above, a dividend
of $8.00 will result in a net receipt after UK tax but before US tax of $8.00,
rather than $8.50 (the withholding tax does not reduce the dividend below the
net dividend of $8.00).
The Finance Act 1998 also abolished the requirement for UK companies to pay
ACT on cash dividends as from April 1, 1999. This does not affect the tax
treatment of dividends described above.
47
<PAGE>
Dividends (including amounts in respect of the tax credit and any amounts
withheld) must be included in gross income by a shareholder subject to US
taxation and will generally be treated as foreign source 'passive income' or, in
the case of certain US holders, 'financial services income' for Federal income
tax purposes. Such dividends will generally not be eligible for the dividends
received deduction allowed to US corporations. The IRS has recently confirmed,
in Revenue Procedure 2000-13, 2000-6 I.R.B. 515, that, in the case of qualifying
US holders, subject to certain limitations, the UK withholding tax as determined
by the convention (i.e. an amount equal to 1/9 of the cash dividend) will be
treated as a foreign income tax that is eligible for credit against the US
holders' federal income tax. To qualify for such credit, US holders must make an
election on Form 8833 (Treaty-Based Return Position Disclosure), which must be
filed with their tax return, in addition to any other filings that may be
required. At the end of the calendar year during which the dividends are paid,
US holders will receive a Form 1099 confirming the amount of dividends received.
SHARE DIVIDEND CHOICE FOR BP AMOCO ADR HOLDERS
ADR holders electing to receive ADSs instead of a cash dividend (see Item 8
- -- Selected Financial Data -- Dividends) will not be entitled to any Refund from
the UK Inland Revenue, nor will the 15% withholding tax apply, with respect to
such dividends.
For US tax purposes the receipt of additional ADSs will be treated as a
dividend distribution. An ADR holder who is subject to US taxation will
generally be treated as having received gross income equal to the fair market
value of the ADSs (or fraction thereof) on the date of the share distribution in
London (with no reduction for the stamp duty reserve tax referred to below). The
US resident ADR holder will receive a tax basis in the ADSs equal to such fair
market value. Corporations will not be entitled to a dividends received
deduction on receipt of a share dividend.
FOREIGN INCOME DIVIDENDS
The Finance Act 1994 introduced new legislation under which companies were
able on or after July 1, 1994 to elect to pay a 'foreign income dividend' with
special tax treatment. ACT would be payable by the Company on such a dividend,
but surplus ACT not creditable against mainstream corporation tax liabilities
may be repayable to the Company later, based on the extent to which the dividend
was shown to have been paid out of sufficiently taxed foreign source profits.
Shareholders would obtain no tax credit. However, they would be treated for UK
tax purposes as having received income which had suffered tax at 20%. No Refund
would be available to US Holders in respect of any such dividends. BP Amoco did
not elect to pay a foreign income dividend.
The Finance (No. 2) Act 1997 repealed the foreign income dividend
legislation with effect from April 6, 1999.
UK TAXATION OF CAPITAL GAINS
A US Holder will be liable to UK tax on capital gains realized on the sale
or other disposition of Ordinary Shares only if the US Holder is resident (or,
in the case of an individual, ordinarily resident) for UK tax purposes in the UK
or if he carries on a trade, profession or vocation in the UK through a
permanent establishment and the Ordinary Shares are (i) used for the purposes of
the trade, profession or vocation, or (ii) used, held or acquired for the
purposes of the permanent establishment.
The liability to UK capital gains tax for US holders of ADRs is the same as
that for a US holder of Ordinary Shares, except that a US holder of ADRs who is
resident but not domiciled in the UK will not be taxed on gains realized on the
sale or other disposition of ADSs if the proceeds are not remitted to the UK.
UK INHERITANCE TAX
UK capital transfer tax was restructured and renamed 'inheritance tax' in
1986. The US-UK double taxation convention relating to estate and gift taxes
(the Estate Tax Convention) applies to inheritance tax. ADRs held by an
individual who is domiciled for the purposes of the Estate Tax Convention in the
USA and is not for the purposes of the Estate Tax Convention a national of the
UK will not be subject to inheritance tax on death or on transfer during the
individual's lifetime unless, among other things, the ADSs are part of the
business property of a permanent establishment situated in the UK or pertain to
a fixed base situated in the UK used for the performance of independent personal
services. In the exceptional case where ADSs are subject both to inheritance tax
and to US Federal gift or estate tax, the Estate Tax Convention generally
provides for tax paid in the UK to be credited against tax payable in the USA or
for tax paid in the USA to be credited against tax payable in the UK based on
priority rules set forth in the Estate Tax Convention.
48
<PAGE>
UK STAMP DUTY AND STAMP DUTY RESERVE TAX
The statements below relate to what is understood to be the current
practice of the UK Inland Revenue under existing law.
Provided that the instrument of transfer is not executed in the UK and
remains at all times outside the UK, and the transfer does not relate to any
matter or thing done or to be done in the UK, no UK stamp duty is payable on the
acquisition or transfer of ADSs. Neither will an agreement to transfer ADSs in
the form of ADRs give rise to a liability to stamp duty reserve tax.
Purchases of Ordinary Shares, as opposed to ADSs, through the CREST system
of paperless share transfers will be subject to stamp duty reserve tax at a rate
of 0.5%. The charge will arise as soon as there is an agreement for the transfer
of the shares (or, in the case of a conditional agreement, when the condition is
fulfilled). The stamp duty reserve tax will apply to agreements to transfer
Ordinary Shares even if the agreement is made outside the UK between two
non-residents. Purchases of Ordinary Shares outside the CREST system are subject
either to stamp duty at a rate of 50 pence per L100 (or part), or stamp duty
reserve tax at 0.5%. Stamp duty and stamp duty reserve tax are generally the
liability of the purchaser. A subsequent transfer of Ordinary Shares to the
Depositary's nominee will give rise to further stamp duty at the rate of L1.50
per L100 (or part) or stamp duty reserve tax at the rate of 1.5% of the value of
the Ordinary Shares at the time of the transfer.
A transfer of the underlying Ordinary Shares to an ADR holder upon
cancellation of the ADSs without transfer of beneficial ownership will give rise
to UK stamp duty at the rate of 50 pence per transfer (which is increased to L5
in the 1999 UK budget).
An ADR holder electing to receive ADSs instead of a cash dividend will be
responsible for the stamp duty reserve tax due on issue of shares to the
Depositary's nominee and calculated at the rate of 1.5% on the issue price of
the shares. Current UK Inland Revenue practice is to calculate the issue price
by reference to the total cash receipt (i.e. cash dividend plus the Refund if
any) to which a US Holder would have been entitled had the election to receive
ADSs instead of a cash dividend not been made. ADR holders electing to receive
ADSs instead of the cash dividend authorize the Depositary to sell sufficient
shares to cover this liability.
49
<PAGE>
ITEM 8 -- SELECTED FINANCIAL DATA
SUMMARIZED FINANCIAL INFORMATION
The information shown below for 1999, 1998 and 1997 has been extracted or
derived from the audited financial statements of the BP Amoco Group presented
elsewhere herein. The information for 1996 and 1995 has been extracted from the
Annual Report on Form 20-F for the year 1998 which has been filed with the
Securities and Exchange Commission, as restated to conform with the accounting
presentation adopted in this annual report.
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
($ million except per share amounts)
--------------------------------
UK GAAP
INCOME STATEMENT DATA
<S> <C> <C> <C> <C> <C>
Turnover.............................. 101,180 83,732 108,564 102,064 84,216
Less:joint ventures................... (17,614) (15,428) (16,804) -- --
----- ----- ----- ----- -----
Group turnover........................ 83,566 68,304 91,760 102,064 84,216
Total replacement cost operating profit(a) 8,894 6,521 10,683 10,634 8,264
Replacement cost profit before
exceptional items (b)............. 5,330 3,959 6,622 6,659 4,943
Profit for the year................... 5,008 3,220 5,673 7,417 3,700
Per Ordinary Share (c): (cents)
Profit for the year:
Basic............................... 25.82 16.77 29.56 38.79 19.52
Diluted............................. 25.68 16.70 29.41 38.63 19.45
Dividends (d)....................... 20.0 19.8 18.0 15.5 13.5
BALANCE SHEET DATA
Total assets.......................... 89,561 84,915 86,279 88,651 81,499
BP Amoco Shareholders' interest....... 43,281 42,501 42,503 42,130 36,789
Finance debt due after more than one year 9,644 9,641 8,853 8,954 10,257
Debt to borrowed and invested capital (e) 18% 18% 17% 17% 22%
OTHER DATA
Per Ordinary Share: (cents)
Replacement cost profit before
exceptional items................. 27.48 20.62 34.51 34.82 26.09
Net cash inflow from operating
activities(f)....................... 10,290 9,586 15,558 13,679 12,682
Net cash outflow from capital expenditure
acquisitions and disposals............. 5,142 6,520 10,056 8,056 7,183
US GAAP
INCOME STATEMENT DATA
Revenues.............................. 83,566 68,304 91,760 102,064 84,216
Profit for the period................. 4,596 2,826 5,686 6,795 3,991
Comprehensive income.................. 3,674 2,848 4,106 7,218 4,346
Profit per Ordinary Share(c)(g):(cents)
Basic............................. 23.70 14.72 29.62 35.54 21.05
Diluted........................... 23.56 14.66 29.46 35.39 20.98
Profit per American Depositary Share(c)(g)(h):(cents)
Basic............................. 142.20 88.32 177.72 213.24 126.30
Diluted........................... 141.36 87.96 176.76 212.34 125.88
BALANCE SHEET DATA
Total assets.......................... 90,342 85,538 87,076 89,934 89,929
BP Amoco Shareholders' interest....... 37,838 37,334 37,504 37,259 32,475
OTHER DATA
Net cash used in investing activities. 4,922 6,861 10,151 8,311 7,160
Net cash used in financing activities. 3,332 2,161 3,449 3,239 3,723
</TABLE>
- ----------
(a) Operating profit is a UK GAAP measure of trading performance. It excludes
profits and losses on the sale of businesses and fixed assets and
fundamental restructuring costs, interest expense and taxation.
50
<PAGE>
BP Amoco determines operating profit on a replacement cost basis, which
eliminates the effect of inventory holding gains and losses. For the oil
and gas industry, the price of crude oil can vary significantly from
period to period; hence the value of crude oil (and products) also varies.
As a consequence, the amount that would be charged to cost of sales on a
first-in, first-out (FIFO) basis of inventory valuation would include the
effect of oil price fluctuations on oil and products inventories. BP Amoco
therefore charges cost of sales with the average cost of supplies incurred
during the period rather than the historical cost of supplies on a FIFO
basis. For this purpose, inventories at the beginning and end of the
period are valued at the average cost of supplies incurred during the
period rather than at their historical cost. These valuations are made
quarterly by each business unit, based on local oil and product price
indices applicable to their specific inventory holdings, following a
methodology that has been consistently applied by BP Amoco for many years.
Operating profit on the replacement cost basis is used by BP Amoco
management as the primary measure of business unit trading performance and
BP Amoco management believes that this measure assists investors to assess
BP Amoco's underlying trading performance from period to period.
Replacement cost is not a US GAAP measure. The major US oil companies
apply the last-in, first-out (LIFO) basis of inventory valuation. The LIFO
basis is not permitted under UK GAAP. The LIFO basis eliminates the effect
of price fluctuations on crude oil and product inventory except where an
inventory drawdown occurs in a period. BP Amoco management believes that
where inventory volumes remain constant or increase in a period, operating
profit on the LIFO basis will not differ materially from operating profit
on BP Amoco's replacement cost basis.
Where an inventory drawdown occurs in a period, cost of sales on a LIFO
basis will be charged with the historical cost of the inventory drawn
down, whereas BP Amoco's replacement cost basis charges cost of sales at
the average cost of supplies for the period. To the extent that the
historical cost on the LIFO basis of the inventory drawn down is lower
than the current cost of supplies in the period, operating profit on the
LIFO basis will be greater than operating profit on BP Amoco's replacement
cost basis. To the extent that the historical cost on the LIFO basis of
the inventory drawdown is greater than the current cost of supplies in the
period operating profit on the LIFO basis will be lower than operating
profit on BP Amoco's replacement cost basis.
(b) Replacement cost profit before exceptional items excludes profits and
losses on the sale of businesses and fixed assets and fundamental
restructuring costs, which are defined by UK GAAP. This is the measure of
profit used by the BP Amoco board in setting targets for and monitoring
performance within BP Amoco. BP Amoco's management believes this indicator
provides the most relevant and useful measure for investors because it most
accurately reflects underlying trading performance.
(c) With effect from October 4, 1999 BP Amoco split (or subdivided) its
ordinary share capital. As a result, the number of Ordinary Shares held at
the close of business on Friday October 1, 1999, doubled, and holders of
ADSs received a two-for-one stock split. Comparative figures for 1995 to
1998 inclusive have been restated accordingly.
(d) BP Amoco dividends per share represent historical dividends per share paid
by BP for 1995 to 1998 inclusive.
(e) Finance debt due after more than one year, compared with such debt plus BP
Amoco and minority shareholders' interests.
(f) The net cash inflows from operating activities are presented in accordance
with the requirements of Financial Reporting Standard No. 1 (Revised 1996)
issued by the UK Accounting Standards Board. For a cash flow statement
prepared on a US GAAP basis see Item 18 -- Note 44 of Notes to Financial
Statements.
(g) FASB Statement of Financial Accounting Standards No. 128-- 'Earnings per
Share' (SFAS 128) was adopted for the accounting period ending December 31,
1997. Amounts for prior periods have been restated as required by SFAS 128.
(h) With effect from June 6, 1997 the Company split existing ADSs on a
two-for-one basis so that an ADS is now equivalent to six Ordinary Shares.
Comparative figures for 1995 and 1996 have been restated accordingly.
(i) The Group has adopted Financial Reporting Standard No.12 `Provisions,
Contingent Liabilities and Contingent Assets' with effect from January 1,
1999. Comparative figures for 1995 to 1998 inclusive have been restated
accordingly.
51
<PAGE>
DIVIDENDS
BP p.l.c. paid dividends on its Ordinary Shares in each year since 1917. In
1999, there was a dividend payment in February to holders of BP p.l.c. Ordinary
Shares and ADSs as at November 13, 1998. There were further dividend payments in
April, June, September and December to harmonize payment dates for former BP and
Amoco shareholders. In 2000 and thereafter, dividends will be paid quarterly in
March, June, September and December. Until their shares have been exchanged into
the form of BP Amoco ADSs, Amoco Shareholders do not have the right to receive
dividends.
BP Amoco announces dividends on Ordinary Shares in US dollars and at the
same time states an equivalent sterling dividend. Prior to the fourth quarterly
dividend of 1998 BP p.l.c. announced dividends in sterling. Foreign exchange
rates may affect dividends paid. However, when setting the dividend the
directors are mindful of dividend fluctuation in sterling terms.
The following table shows dividends announced by the Company per ADS for
each of the past five years, together with the Refund but before deduction of
withholding taxes as described in Item 7 -- Taxation. Dividends have been
translated from pounds per ADS up to and including the third quarterly dividend
for 1998, and from dollars per ADS for the fourth quarterly dividend of 1998, at
an exchange rate in London on the business day last preceding the day when the
directors announced their intention to pay the quarterly dividends for those
years.
DIVIDENDS PER AMERICAN DEPOSITARY SHARE (a)(b)
<TABLE>
<CAPTION>
Quarterly
--------------------------------
First Second Third Fourth Total
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1995.......................... UK pence 11.3 15.0 15.0 15.9 57.2
US cents 18.0 24.1 23.7 24.4 90.2
Can. cents 24.4 32.6 32.0 33.5 122.5
1996.......................... UK pence 15.9 18.8 18.8 19.7 73.2
US cents 23.9 28.9 30.9 32.2 115.9
Can. cents 32.6 39.8 41.3 43.5 157.2
1997.......................... UK pence 19.7 20.6 20.7 21.5 82.5
US cents 31.9 33.6 34.6 35.3 135.4
Can. cents 44.1 46.4 48.6 50.5 189.6
1998.......................... UK pence 21.5 22.5 22.5 23.0 89.5
US cents 36.0 36.5 37.5 33.4 143.4
Can. cents 51.4 55.3 57.8 50.0 214.5
1999.......................... UK pence 20.5 20.8 20.2 20.8 82.3
US cents 33.3 33.3 33.3 33.4 133.3
Can. cents 48.7 50.1 48.6 48.5 195.9
</TABLE>
- ----------
(a) With effect from June 6, 1997 the Company split existing ADSs on a
two-for-one basis so that an ADS is now equivalent to six Ordinary Shares.
Comparative figures for 1995 and 1996 have been restated accordingly.
(b) With effect from October 4, 1999 BP Amoco split (or subdivided) its
ordinary share capital. As a result, the number of Ordinary Shares held at
the close of business on Friday October 1, 1999, doubled, and holders of
ADSs received a two-for-one stock split. Comparative figures for 1995 to
1998 inclusive have been restated accordingly
The share dividend plan whereby holders of Ordinary Shares could elect to
receive new shares (out of unissued share capital) instead of cash
dividends at a rate equivalent to the sum of the net cash dividend and
related tax credit, was withdrawn following the third quarterly 1998
dividend.
A dividend reinvestment plan was introduced with effect from the fourth
quarterly 1998 dividend, whereby holders of Ordinary Shares can elect to
reinvest the net cash dividend in shares purchased on the London Stock
Exchange. This plan is not available to any person resident in the USA or
Canada, or in any jurisdiction outside the UK where such an offer requires
compliance by the Company with any governmental or regulatory procedures or
any similar formalities.
52
<PAGE>
A dividend reinvestment plan is, however, available for holders of ADSs
through Morgan Guaranty Trust Company of New York.
Future dividends of BP Amoco p.l.c. will be dependent upon future
earnings, the financial condition of the Group, the Additional Factors
which may affect the business of the Group set out in Item 1 --
Description of Business, and other factors.
53
<PAGE>
ITEM 9 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GROUP RESULTS
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
HIGHLIGHTS 1999 1998 1997
----- ----- -----
<S> <C> <C> <C> <C>
Total replacement cost operating profit........... ($ million) 8,894 6,521 10,683
Replacement cost profit before exceptional items.. ($ million) 5,330 3,959 6,622
Replacement cost profit for the year.............. ($ million) 3,280 4,611 6,612
Historical cost profit for the year............... ($ million) 5,008 3,220 5,673
Profit per Ordinary Share (diluted)............... (cents) 25.68 16.70 29.41
Dividends per Ordinary Share...................... (cents) 20.0 19.8 18.0
</TABLE>
The Group has adopted Financial Reporting Standard No.12 `Provisions,
Contingent Liabilities and Contingent Assets' with effect from January 1,1999.
Comparative figures for 1998 and 1997 have been restated accordingly.
BP Amoco's 1999 operating performance reflected the substantial benefits of
restructuring and integration following the merger, together with ongoing cost
control. The trading environment was broadly neutral, with higher average oil
prices substantially offset by weaker downstream and chemicals margins. European
currencies were significantly weaker and sterling was marginally weaker against
the US dollar in 1999.
As well as reporting net income (profit after inventory holding gains and
losses, calculated on a first-in, first-out basis), and after exceptional items
(as defined by UK GAAP: profits and losses on sale and termination and
fundamental restructuring costs), BP Amoco also reports results on a replacement
cost basis (excluding inventory holding gains and losses) and before exceptional
items. In addition the Group discloses the amount and nature of special items
which are non-recurring charges and credits that are not classified as
exceptional items under UK GAAP, and discloses also replacement cost profit
before exceptional items, after adjusting for these special items. This is done
in order to provide a more comparable basis to the results and disclosures of US
companies and to indicate underlying trading performance undistorted by
significant restructuring, integration and other one-off charges and credits.
Both exceptional and special charges have been significant in 1999. The
discussion below addresses each of these various measures and disclosures.
In 1999, replacement cost profit before exceptional items (which excludes
inventory holding gains and losses) was $5,330 million compared with $3,959
million in 1998, representing an increase of 35%. In addition to exceptional
items (as identified under UK GAAP), these results included net special charges
of $1,210 million ($876 million after tax) in 1999 and $597 million ($469
million after tax) in 1998. The major components of the special charges in 1999
were integration costs, costs associated with the restructuring programme,
write-downs in respect of asset impairments and project costs in respect of
process improvement and outsourcing. The special charges in 1998 consisted
principally of write-downs in respect of asset impairments. After adjusting for
these special charges, the 1999 result was 40% higher than that of 1998. The
return on average capital employed, based on replacement cost profit before
exceptional items, was 12% (13% on an adjusted basis) representing an increase
of three percentage points over 1998. The historical cost profit for 1999 was
$5,008 million including inventory holding gains of $1,728 million. This
compared with a profit of $3,220 million in 1998 after inventory holding losses
of $1,391 million. There were net exceptional losses of $2,280 million ($2,050
million after tax) in 1999 compared with net exceptional profits in 1998 of $850
million ($652 million after tax).
54
<PAGE>
In 1999 the net exceptional losses of $2,280 million before tax comprised
restructuring costs of $1,943 million and a net loss on sales of businesses and
fixed assets or termination of operations of $337 million. The restructuring
costs arose from restructuring activity across the Group following the merger of
BP and Amoco at the end of 1998 and relate predominantly to the Group's US
operations. The main areas of activity were the elimination of duplication in
the former BP and Amoco operations and ongoing restructuring to adapt to the
changing business environment, and some further outsourcing. The major elements
of the restructuring charges comprised employee severance costs ($1,212 million)
and provisions to cover future rental payments on surplus leasehold office
accommodation and other property ($297 million). Also included in the
restructuring charges were office closure costs, contract termination payments
and asset write-offs. The cash outflow for these restructuring charges during
1999 was $976 million.
During 1999, some 16,000 employees left the Group through severance or
outsourcing arrangements. Of these, some 13,000 were based in the USA. The
reductions arose mainly in Houston, Texas; Chicago, Illinois; and Cleveland and
Warrensville, Ohio. Approximately 4,000 more employees had received notification
of the termination of their employment by the end of 1999 and are expected to
leave the Group in 2000.
Sales of businesses and fixed assets in 1999 included the sale of
distribution terminals and service stations in the USA mandated by the Federal
Trade Commission in connection with the BP Amoco merger. Following completion of
the merger on December 31, 1998 and in the context of low oil prices at the
time, BP Amoco undertook a strategic and portfolio review in early 1999. This
was completed in the Spring of 1999 and resulted, among other things, in the
development of an asset divestment programme.
The guiding principle of the strategic and portfolio review was to
concentrate the combined Group's operations on areas of competitive strength
and, in the upstream portfolio, to dispose of assets which would not be robustly
economic on the basis of conservative assumptions about future oil prices. Under
this programme the Group disposed of its Canadian oil properties, its interest
in the Pedernales oil field in Venezuela and certain chemicals operations.
In 1998, financial performance was affected by general price deflation
and erosion of margins, with a 34% fall in average oil realizations and
deterioration in both the downstream and chemicals environments. Productivity
improvements, cost savings and higher sales volumes partially offset this
significant downturn in the operating environment.
The US dollar was relatively stable against European currencies in 1998. In
1997 most currencies declined against the dollar, except for sterling which
strengthened to an average of $1.64/L1 from $1.56/L1 in 1996.
Replacement cost profit before exceptional items (which excludes inventory
holding gains and losses) for 1998 was $3,959 million compared with $6,622
million in 1997, a fall of 40%. In addition to exceptional items these results
included net special charges of $597 million ($469 million after tax) in 1998
and $133 million ($106 million after tax) in 1997. The special charges in both
years consisted principally of write-downs in respect of asset impairments.
After excluding these special charges, the 1998 result was 34% lower than that
of 1997. The 1998 results reflected the then new requirement to capitalize
certain information technology expenditure of a type which had been expensed in
previous years. The amount capitalized in 1998 was some $160 million. The return
on average capital employed, based on replacement cost profit before exceptional
items, was 9% compared to 14% in 1997. On an adjusted basis the return on
average capital employed was 10% in 1998 compared to 14% in 1997.
The historical cost profit for 1998 was $3,220 million after inventory
holding losses of $1,391 million. This compared with a profit of $5,673 million
after inventory holding losses of $939 million for 1997. The results for 1998
included net exceptional profits of $850 million ($652 million after tax); those
of 1997 included net exceptional profits of $128 million ($10 million loss after
tax).
In 1998 sales of businesses and fixed assets generated net profits before
tax of $1,048 million. The principal sales were exploration and production
properties in the USA and Papua New Guinea, the refinery in Lima, Ohio, the sale
and leaseback of the Amoco building in Chicago, Illinois, the retail network in
the Czech Republic, the Adibis fuel additives business and a speciality
chemicals distribution business. Also included was the disposal by the BP/Mobil
joint venture of its retail network in Belgium. Merger transaction costs of $198
million in respect of advisers' fees and expenses were incurred in 1998.
55
<PAGE>
The major elements of the net profit before tax on the sale of businesses
and fixed assets in 1997 of $440 million were the sales of US exploration and
production properties and an intrastate natural gas pipeline unit in Texas. The
loss on sale of businesses by joint ventures relates principally to the costs of
the BP/Mobil joint venture terminating base oil manufacturing operations at
Llandarcy in the UK. Also in 1997, there was a net charge for refinery network
rationalization of $47 million which represented the balance of the costs
associated with the rationalization of the BP Amoco Group's international
refining system announced in 1995. In addition, there were one-off costs
associated with the setting-up of the European refining and marketing joint
venture with Mobil amounting to $265 million. These costs represented the
Group's share of charges for severance, restructuring, rebranding and other
implementation charges.
Capital expenditure and acquisitions in 1999 amounted to $7,345 million,
29% down on 1998, reflecting greater focus in the capital programme following
the merger. Expenditure in 1999 included $400 million in respect of the Group's
purchase of a significant part of Repsol YPF's share of assets in the Crescendo
Resources partnership. Disposal proceeds, arising primarily from the post-merger
asset divestment programme, amounted to $2,441 million. Capital expenditure net
of divestments was $4,904 million (1998 $8,195 million). Within the context of
the Group's targets, capital expenditure in 2000 is projected to be around $10
billion, excluding significant acquisitions, reflecting the businesses' growth
agenda underpinned by continuing discipline in the capital programme.
The total dividends announced for 1999 were $3,884 million, against $4,121
million for 1998. 1998 dividends included a second fourth-quarterly dividend to
former Amoco shareholders to harmonize timing of quarterly dividend payments as
a result of the merger. Dividends per share for 1999 were 20.0 cents ($1.20 per
ADS) compared with 19.8 cents per share ($1.19 per ADS) for 1998. The Group also
intends to continue the operation of the Dividend Reinvestment Plan (DRIP) for
shareholders who wish to receive their dividend in the form of shares rather
than cash. The DRIP was introduced in 1999 to replace the previous share
dividend plan which was terminated owing to the abolition of UK advance
corporation tax. The BP Amoco Direct Access Plan for US and Canadian investors
also includes a dividend reinvestment feature.
The Group will seek authority from shareholders at the April 2000 annual
general meeting for the repurchase and cancellation of shares up to a maximum of
1,948,600,000 Ordinary Shares (approximately 10% of the ordinary issued share
capital at December 31, 1999). This will allow share buybacks as and when the
Group's funding position permits.
BUSINESS OPERATING RESULTS
Total replacement cost operating profit, which is arrived at before
inventory holding gains and losses, interest expense, taxation and minority
interests, and before exceptional items, was $8,894 million in 1999, $6,521
million in 1998 and $10,683 million in 1997. The business results which follow
are presented on this basis.
EXPLORATION AND PRODUCTION
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
---- ----- -----
<S> <C> <C> <C> <C>
Total replacement cost operating profit................... ($ million) 7,194 3,231 7,385
Results included:
Exploration expense.................................... ($ million) 548 921 962
Key statistics:
Average prices realized by BP Amoco : North Sea........ ($/bbl) 17.6 12.7 19.1
: Alaskan North Slope ($/bbl) 16.1 12.6 19.0
: US natural gas... ($/mcf) 2.1 1.8 2.2
Crude oil production (a).................................. (mb/d) 2,061 2,049 1,930
Natural gas production (a)................................ (mmcf/d) 6,067 5,808 5,858
Total production (a)(b)................................... (mboe/d) 3,107 3,050 2,940
</TABLE>
- ----------
(a) Includes BP Amoco's share of associated undertakings.
(b) Expressed in thousands of barrels of oil equivalent per day (mboe/d).
Natural gas is converted to oil equivalent at 5.8 billion cubic feet : 1
million barrels.
56
<PAGE>
The replacement cost operating profit for 1999 was $7,194, an improvement
of 123% over the equivalent result of 1998. After adjusting for special charges
of $299 million, the adjusted result of $7,493 million represented an increase
of 102% on the adjusted result of $3,716 million for 1998. Special charges in
1998 amounted to $485 million. Oil realizations were $4.68 a barrel higher and
North American natural gas prices were 13% above their 1998 level. These
environmental benefits were significantly complemented by cost savings.
Oil production increased slightly compared with 1998, with rising output in
the Eastern Trough Area Project (ETAP) in the North Sea and at Schiehallion and
Foinaven, west of Shetland, more than offsetting declines in Alaska and in the
more mature North Sea fields, and the effect of the sale of our Canadian oil
interests. Natural gas production increased 4.5% to just over 6 bcf/d following
the start-up of a $1-billion liquefied natural gas plant in Trinidad.
In 1999, finding and development costs averaged $3.3 a barrel of oil
equivalent, representing a substantial reduction on the $4.70 per barrel in
1998. Lifting costs averaged $2.7 a barrel of oil equivalent, compared with $3.2
in 1998.
In 1998 our upstream business performed well in a most difficult
environment. Replacement cost operating profit of $3,231 million, represented a
decline of 56% (50% after adjusting for net special charges) compared with 1997.
Brent North Sea oil averaged $6.4 a barrel below the 1997 level while North
American natural gas prices were some 40 cents per thousand cubic feet below the
1997 average. The special charges of $485 million principally comprised $200
million for the write-down of the Group's investment in A O Sidanco and $104
million for the impairment of the Opon field and $110 million for the adjacent
power plant in Colombia.
Increased production volumes, coupled with a sustained focus on costs,
boosted this performance. Production grew 3.7% to 3,050 mboe/d. Production of
oil, condensate and natural gas liquid increased by 6.2% to 2,049 thousand
barrels a day (mb/d) from 1,930 mb/d in 1997, while natural gas production fell
0.9% to 5,808 million standard cubic feet a day (mmcf/d) from 5,858 mmcf/d
because of the decline at older UK offshore fields.
The production growth in 1998 was supported by strong performance from our
1997 start-ups, and completion of a large number of new projects in 1998. These
included ETAP, Viking Phoenix, Brown and Bruce Phase 2 in the North Sea;
Schiehallion and Loyal, west of Shetland; Hugoton natural gas plant in the USA;
the second phase of development of the Cusiana/Cupiagua project in Colombia; and
Pedernales phase 2 in Venezuela. Start-up of these projects contributed towards
the transfer of 1.38 billion barrels of oil equivalent of reserves to developed
status.
In 1999, Exploration and Production's reserves replacement exceeded
production for the sixth consecutive year, with 1,172 million barrels of oil
equivalent added to proved reserves. The proportion of gas in these reserve
additions was similar to that of 1998 at about 66%.
Technological innovation underpinned our most significant exploration
achievement in 1999 - the discovery of the largest deepwater field so far found
in the Gulf of Mexico, the Crazy Horse field, in which the Group holds a 75%
interest. Finding this field involved drilling through 1,800 metres (6,000 feet)
of water and more than 600 metres (2,000 feet) of salt to a record depth of
7,830 metres (25,770 feet).
Crazy Horse was only one of a number of major finds in 1999. In the Gulf of
Mexico we announced the discovery of three other fields - Holstein, Atlantis and
Mad Dog. In Angola our exploration success continued with eight new discoveries.
Elsewhere there were large natural gas finds in Azerbaijan's offshore waters and
in Australia's North West Shelf. In December 1999, a consortium, in which BP
Amoco has a 35% interest, announced that it had been awarded a deep water
concession offshore Brazil, the BFZ-2 block. This will be BP Amoco's second
operatorship in the area.
Also in December 1999, BP Amoco and Repsol YPF dissolved their partnership,
Crescendo Resources, a major gas producer and processor in Texas and Oklahoma,
USA. Subsequently, BP Amoco purchased a significant part of Repsol YPF's share
of the assets from the partnership.
57
<PAGE>
During 1998, discoveries occurred in many parts of the world. Our success
in Angola continued with new finds in Kissanje, Marimba, Hungo and Dikanza in
Block 15. In South America, there was a successful discovery at the Tropical-1X
well on the Quiriquire block in Venezuela, in which we have a 45% stake. In
Norway, the Barden well confirmed significant natural gas reserves in the
Southern extension of the Ormen Lange Dome. Other substantial oil and natural
gas discoveries were made off the coast of Trinidad and in Egypt, Canada and the
USA.
Capital expenditure and acquisitions decreased to $4,212 million in 1999
from $6,318 million in 1998.
In 2000, projects coming on stream are expected to include Amherstia in
Trinidad and Ha'py and Baltim in Egypt. In addition, there should be a full
year's production from new developments in the deepwater Gulf of Mexico.
REFINING AND MARKETING
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1999(a) 1998(a) 1997(a)
---- ---- ----
<S> <C> <C> <C>
Total replacement cost operating profit....... ($ million) 1,840 2,564 2,292
Indicative industry global refining margin.... ($/bbl) 0.91 1.74 1.81
Refinery throughputs.......................... (mb/d) 2,522 2,698 2,855
Total marketing sales ........................ (mb/d) 3,186 3,137 3,083
</TABLE>
- ----------
(a) Includes BP Amoco's share of the BP/Mobil joint venture.
In 1999, Refining and Marketing achieved a highly competitive adjusted
return (i.e. before special charges) on fixed assets of 10% despite plummeting
margins in refining, which fell by 48% compared with the previous year.
Replacement cost operating profit of $1,840 million represented a decrease of
28% compared with 1998. After adjusting to exclude special charges of $242
million, Refining and Marketing's replacement cost operating profit was $2,082
million a decrease of 19% compared with 1998, reflecting the rise in the price
of crude oil and refined products and consequent tightening of margins. The
deterioration in the refining environment led to run cuts at a number of
refineries. The pressure on marketing margins reflected rising product prices
which could not be fully recovered in the market. Significant cost reductions
moderated the effect of the harsher trading environment.
Retail volumes rose while shop revenues grew faster than the market at
6%, reflecting the strength of our convenience retail business in the USA and
UK. More than 170 new retail sites were opened worldwide during the year, with
90 opened in Poland, China, Venezuela and Russia. Growth in our aviation
business was strong, and Air BP was recognized as the World's Best Jet Fuel
Marketer by an authoritative industry survey.
1998 was a year of strong performance for the downstream business.
Underlying performance delivered total replacement cost operating profit of
$2,564 million, an increase of 12% over 1997, with a competitive return on fixed
assets of 12%. This outcome was achieved in spite of difficult trading
conditions, characterized by reduced refining margins in the second half of the
year and the impact of economic slowdown in our growth markets. 1998 also
benefited from the capitalization of IT expenditure of $70 million which would
have been expensed in earlier periods.
Marketing volumes rose in 1998 in spite of divestments across both the
retail and commercial segments, with continued improvement flowing from our US
and European operations. The retail business grew during the year, with volumes
up 3%. The focus on growing our convenience retailing activity as one of our key
strategic objectives continued. The 'Split Second' US convenience store format
was rolled out in Atlanta, Georgia; Philadelphia, Pennsylvania; Chicago,
Illinois; Denver, Colorado and south Florida, with high customer satisfaction
ratings. Our commercial marketing activities continued to deliver strong growth
in income with the drive towards customer-focused marketing solutions.
In 1998, despite lower overall margins our refining business achieved
good results. A combination of cost savings and improved operating efficiency
produced a 12% improvement in total replacement cost operating profit compared
with 1997.
58
<PAGE>
Capital expenditure in 1999 was $1,634 million compared with $1,937 million
in 1998. The Group's capital expenditure on refinery assets, including
environmental expenditures and investments in line with regulatory requirements
to improve product quality, totalled $607 million in 1999 compared with $685
million in 1998. During the year we completed the repositioning of our Toledo
refinery (to allow it to run on cheaper, heavy crudes) with the commissioning of
a new coker unit and we began a project at Sines, Portugal, to develop a
liquefied petroleum gas storage cavern facility. During the year we also began
to upgrade our Bulwer Island refinery near Brisbane, Australia, to allow it to
produce low sulphur fuels. This was one of a number of initiatives undertaken as
part of our drive for cleaner fuels. Capital expenditure on marketing assets
amounted to $1,027 million in 1999 compared with $1,252 million in the previous
year.
In December 1999, we announced that BP Amoco had agreed with ExxonMobil
Corporation the principles under which their European fuels and lubricants joint
venture would be dissolved in response to the European Commission's requirement
in respect of the Exxon and Mobil merger. Under the agreement - which is
conditional on a number of approvals from national governments and appropriate
employee consultation - BP Amoco will purchase Mobil's 30% interest in the fuels
business for around $1.5 billion, subject to adjustments. In addition, the two
companies will divide the assets of the lubricants business broadly in line with
their equity stakes (51% Mobil, 49% BP Amoco). In February 2000, the European
Union's Merger Task Force gave its approval to the dissolution.
CHEMICALS
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C> <C>
Total replacement cost operating profit...($ million) 686 1,100 1,530
Chemicals production (a)... ............(thousand tonnes) 21,853 20,570 19,491
</TABLE>
- ----------
(a) Includes BP Amoco share of associated undertakings and other interests in
production.
Chemicals' replacement cost operating profit was $686 million compared with
$1,100 million in 1998, a decrease of 38%. After adjustment for special charges
of $247 million, Chemicals' profit of $933 million in 1999 represented a
decrease of 19% compared with the adjusted result of 1998 despite a 6% increase
in production. Special charges in 1998 amounted to $50 million.
Chemicals margins in several commodity product areas fell to levels below
the low points seen in previous cycles. At the same time the effects of the
financial crisis in Asia continued to be felt, especially in Europe, where
weakness of the euro also contributed to pressure on margins. This adverse
external environment was offset partially by a clear focus on cost reductions
and releasing the value of the merger of BP and Amoco. Total volume of product
manufactured rose by 6% to an all-time record of 21.9 million tonnes as new
capacity came on stream and production reliability increased. These increases in
production were partly offset by disposals.
In 1998, margins for most commodity chemicals deteriorated compared with
1997. This reflected increased industry capacity, weak demand in Europe and the
financial crisis in Asia. These factors were offset to some extent by our
continued focus on self-help initiatives, such as cost reduction, and by the
benefits of our investment in proprietary technology.
The total volume of product manufactured rose by 6% in 1998, principally
reflecting our styrenics acquisition in early 1998. As a result of all these
factors total replacement cost operating profit was $1,100 million compared with
$1,530 million in 1997.
In 1999 we disposed of the Verdugt acid salts business in Europe, the
Plaskon electronic materials business based in the USA and Singapore, our share
of the olefins cracker in Wilton, UK, the US Fibers and Yarns business and the
Plaspack Kunststoffe plastic net and webbing business and we completed the sale
and leaseback of railcars in the USA. In addition, we announced the closure of
our joint-venture Singapore aromatics complex. In 2000, BP Amoco refinanced the
entity's bank loans and sold its interest in the entity to ExxonMobil, resulting
in a loss of $218 million ($148 million after tax).
In 1998, divestments included the Adibis lubricants and fuel additives
business and speciality chemicals distribution businesses in Europe and
Australasia. During 1997 BP Amoco sold its advanced materials and phenolic
resins business in the UK.
59
<PAGE>
Capital expenditure and acquisitions in 1999 was $1,215 million compared
with $1,606 million in 1998.
In 1999, a number of new chemicals projects aimed at strengthening our
portfolio were sanctioned or announced, including a new 250,000 tonnes a year
linear alpha-olefins plant in Alberta, Canada, and the expansion of trimellitic
anhydride capacity at our plant in Joliet, Illinois.
In China our 150,000-tonnes-a-year acetic acid joint venture with Sinopec
at Yaraco was commissioned early in the year. Another joint venture with Sinopec
- - the detailed planning phase of a world-scale 900,000-tonnes-a-year ethylene
cracker and derivative product units near Shanghai - received official approval
in the Autumn. Start-up is expected in 2005.
During 1998 we acquired Styrenix Kunststoffe. Projects completed in 1998
included the purified terephthalic acid unit and paraxylene unit at Geel, a new
metaxylene plant at Texas City, and the first stage of the planned $825 million
investment programme in the UK.
OTHER BUSINESSES AND CORPORATE
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C> <C>
Replacement cost operating loss........ ($ million) 826 374 524
</TABLE>
Other Businesses and Corporate comprises Finance, BP Solarex, the Group's
coal asset, interest income and costs relating to corporate activities
worldwide.
The net cost of Other Businesses and Corporate in 1999 amounted to $826
million. This included special charges of $398 million. The net cost of Other
Businesses and Corporate of $374 million for 1998 included $50 million for
integration costs in respect of the BP Amoco merger. 1998 benefited from the
capitalization of IT expenditure amounting to $65 million which would have been
expensed in earlier periods.
INTEREST EXPENSE
Interest expense was $1,316 million compared with $1,177 million in 1998.
These amounts included special charges of $24 million and $12 million
respectively, arising from the early redemption of bonds. After adjusting for
these special charges, the increase in Group interest expense in 1999 reflected
lower capitalized interest and higher average debt, the effects of which were
partly offset by lower interest rates.
Interest expense in 1998 was $1,177 million compared with $1,035 million in
1997. The increase reflected higher average debt, partly offset by lower
interest rates.
TAXATION
The charge for corporate taxes in 1999 was $1,880 million compared with
$1,520 million in 1998, and $3,013 million in 1997. The effective tax rate on
historical cost profit was 27% in 1999, 32% in 1998 and 34% in 1997. The lower
rate in 1999 reflected the effect of inventory holding gains not taxed, whereas
in 1998 there were unrelieved inventory holding losses; this difference between
the two years was partly offset by the relatively low tax relief on net
exceptional losses in 1999 and the absence of tax credits in 1998.
The effective tax rate on replacement cost profit before exceptional items
was 28%, compared with 25% in 1998 and 30% in 1997. The increase in effective
rate in 1999 over 1998 reflected the effects of tax on inventory holding gains
which do not form part of the replacement cost profit before exceptional items.
The reduction from 1997 to 1998 reflected the effects of tax relief on inventory
holding losses and timing benefits.
60
<PAGE>
BP AMOCO GROUP'S FINANCIAL CONDITION
CASH FLOW
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
----- ----- -----
($ million)
<S> <C> <C> <C>
Net cash inflow from operating activities................... 10,290 9,586 15,558
Net cash (outflow) inflow................................... (82) (906) 878
</TABLE>
Net cash outflow for 1999 was $82 million compared with $906 million in
1998. The change reflected improved operating results and lower net capital
expenditure, partly offset by restructuring and integration costs and higher
dividend payments.
Net cash inflow from operating activities increased to $10,290 million in
1999 from $9,586 million in 1998. The main factors in this improvement were
increased operating earnings offset to a large extent by an increase in the
funding requirement for working capital caused by the increase in oil prices.
Dividends from joint ventures and associated undertakings increased from
$966 million in 1998 to $1,168 million in 1999. The principal factor in this
increase was improved results from the BP/Mobil joint venture partially offset
by a decrease in dividends from other associated undertakings. The net cash
outflow from servicing of finance and return from investments increased to
$1,003 million from $825 million in 1998, principally as a result of higher
interest payments being made on the higher average level of debt. Tax payments
fell from $1,705 million in 1998 to $1,260 million in 1999 reflecting a degree
of lag in the timing of tax payments.
Payments for capital expenditures on fixed assets net of proceeds from
sales of fixed assets, amounted to $5,385 million, a reduction of $1,913 million
on 1998. This reduction was a result of the Group's decision to increase the
focus of its capital programme.
Acquisitions and disposals of businesses produced a net cash inflow of $243
million compared with $778 million in 1998. The major element of this reduction
in cash inflow was the turnaround of the funding of joint ventures from a net
release of funds in 1998 of $708 million to a net requirement of $750 million in
1999. This increase in cash outflow was partially offset by an increase in
proceeds from the sale of businesses which amounted to $1,292 million in 1999
compared with $780 million in 1998. Also within this net reduction were cash
outflows for acquisitions and investments in associated undertakings which
amounted to $299 million, a decrease of $411 million over 1998.
Dividend payments increased by $1,727 million to $4,135 million in 1999.
This reflected the termination of the former BP share dividend plan and the
fifth dividend payment in 1999 due to the harmonization and acceleration of the
payment timetable.
Net cash outflow for 1998 was $906 million, compared with an inflow of $878
million in 1997. The change reflected lower operating cash flow resulting from
lower income and a smaller reduction in working capital requirements than in
1997, partially offset by a turnaround in the funding position of the BP/Mobil
joint venture, lower net capital expenditures and lower tax payments.
Net cash inflow from operating activities fell from $15,558 million in 1997
to $9,586 million in 1998. Most of this decrease was caused by the effect on
profits of the deterioration in the operating environment for all of our
businesses. The requirement for funding working capital decreased in 1998 by
$352 million, compared with a reduction of $1,779 million in 1997.
Dividends from joint ventures and associated undertakings increased to $966
million in 1998 from $741 million in 1997, mainly as a result of improved
profits from the BP/Mobil joint venture. The net cash outflow from servicing of
finance and from returns on investments increased to $825 million from $655
million in 1997, principally because of the payment of dividends to minority
shareholders. Tax payments fell from $2,273 million in 1997 to $1,705 million in
1998.
Payments for capital expenditures on fixed assets and purchase of shares
for employee share schemes, net of proceeds from sales of fixed assets, amounted
to $7,298 million in 1998. This represented a small decrease over the net
payments of $7,432 million in 1997.
61
<PAGE>
Acquisitions and disposals of businesses resulted in a net cash inflow of
$778 million in 1998 compared with an outflow of $2,624 million in 1997. This
was due in part to an increase in disposal proceeds but principally to the
funding situation with joint ventures. A turnaround in the funding position of
the BP/Mobil joint venture produced net cash inflows of $708 million in 1998,
whereas in 1997 the initial funding of this and certain other joint ventures
caused an outflow of $1,967 million.
Dividend payments decreased by $29 million to $2,408 million in 1998,
reflecting an increase in distributions offset by a higher proportion of
shareholders opting for the share dividend.
FINANCING THE GROUP'S ACTIVITIES
The Group's principal commodity, oil, is priced internationally in dollars.
Group policy has been to minimize economic exposure to currency movements by
financing operations with dollar debt wherever possible, achieving this by
currency swaps when funds have been raised in currencies other than dollars.
The Group's finance debt is almost entirely in US dollars. Net debt, that
is debt less cash and liquid resources, was $12,993 million at the end of 1999,
an increase of $113 million over the year. The ratio of net debt to net debt
plus equity was 23%, the same as a year ago.
At December 31, 1999 contracts had been placed for authorized future
capital expenditure estimated at $2,544 million, mainly in respect of
exploration and production activities. Such expenditure is expected to be
financed largely by cash flow from operating activities. At December 31, 1999,
the Group had available undrawn committed borrowing facilities of $3,000 million
($2,800 million at December 31, 1998).
BP Amoco has in place a Debt Issuance Programme (the Programme). Under the
Programme certain subsidiaries of the Group may from time to time issue debt
securities guaranteed by the Company. The debt may have a minimum maturity of
one month and no maximum maturity. Aggregate debt outstanding under the
Programme will not at any time exceed $4 billion or the equivalent in other
currencies. At March 24, 2000, the amount drawn down against this Programme was
$2,705 million.
OUTLOOK
Crude oil prices continue to respond to OPEC's supply side management and,
though inventories have been substantially reduced, the market remains orderly.
Continuing OPEC restraint, together with firm underlying demand, is expected to
lead to short-term robustness in the oil price, though volatility is to be
expected, dependent on weather and market sentiment.
Natural gas prices are expected to show normal seasonal variation.
Downstream, the development of marketing margins is expected to depend upon
future movements in crude oil and hence product prices. Refining margins are
expected to remain volatile.
In Chemicals, margins are expected to respond to developments in feedstock
costs assuming firmness in demand. Surplus industry capacity, particularly new
capacity coming on stream in the second half of 2000, together with continuing
euro weakness, are expected to limit upside potential.
The foregoing discussion focuses on certain trends and general market and
economic conditions and outlook on production levels or rates, prices and
margins and, as such, are forward-looking statements that involve risk and
uncertainty that could cause actual results and developments to differ
materially from those expressed or implied by these discussions. 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 Amoco. 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, demand and
pricing; political stability and economic growth in relevant areas of the world;
development and use of new technology and successful partnering; the actions of
competitors, natural disasters and other changes to business conditions; and
other factors discussed elsewhere in this report. For a discussion of additional
factors that may affect the above discussion, see Item 1 -- Description of
Business -- Additional Factors Which May Affect Business.
62
<PAGE>
FINANCIAL RISK MANAGEMENT
The Group's policy is to co-ordinate certain key activities on a global
basis in order to optimize its financial position and performance. These include
the management of the currency, maturity and interest rate profile of borrowing,
cash, other significant financial risks and relationships with banks and other
financial institutions. International oil trading and risk management relating
to the businesses' commercial operations are carried out by the Group's oil
trading divisions.
BP Amoco is exposed to financial risks, including market risk, credit risk
and liquidity risk, arising from the Group's normal business activities. These
risks and the Group's approach to dealing with them are discussed below.
MARKET RISK
Market risks include the possibility that changes in currency exchange
rates, interest rates or oil and gas prices will adversely affect the value of
the Group's financial assets, liabilities or expected future cash flows. Market
risks are managed using a range of financial and commodity instruments including
derivatives. We also trade derivatives in conjunction with these risk management
activities.
CURRENCY EXCHANGE RATES
Fluctuations in exchange rates can have significant effects on the Group's
operating results. The effects of most exchange rate fluctuations are subsumed
within business operating results through changing cost competitiveness, lags in
market adjustment to movements in rates, and conversion differences accounted
for on specific transactions. For this reason the total effect of exchange rate
fluctuations is not identifiable separately in the Group's reported results.
The main underlying economic currency of the Group's cash flows is the US
dollar and the Group's borrowings are predominantly in US dollars. Our foreign
exchange management policy is to minimize economic and material transactional
exposures from currency movements against the US dollar.
The Group co-ordinates the handling of foreign exchange risks centrally, by
netting off naturally occurring opposite exposures wherever possible, to reduce
the risk, and then dealing with any material residual foreign exchange risks.
Significant residual non-dollar exposures are managed using a range of
derivatives. See Item 9A -- Quantitative and Qualitative Disclosures about
Market Risk.
INTEREST RATES
The BP Amoco Group is exposed to interest rate risk on short- and long-term
floating rate instruments and as a result of the refinancing of fixed rate
finance debt. Consequently, as well as managing the currency and maturity of
debt, the Group manages interest costs through the balance between generally
lower-cost floating rate debt, which has inherently higher risk, and generally
more expensive, but lower-risk, fixed rate debt. The Group is exposed
predominantly to US dollar LIBOR (London Inter-Bank Offer Rate) interest rates
as borrowings are mainly denominated in, or are swapped into, US dollars.
The BP Amoco Group uses derivatives to achieve the required mix between
fixed and floating rate debt. During 1999, debt policy was to keep floating rate
debt below an upper limit of 65% of total net debt. Actual floating rate debt
for the year was in the range of 47-53%.
OIL AND NATURAL GAS PRICES
BP Amoco's oil trading division uses financial and commodity derivatives as
part of the overall optimization of the value of the Group's equity oil
production and as part of the associated trading of crude oil, products and
related instruments. The Group also uses financial and commodity derivatives to
manage certain of its exposures to price fluctuations on natural gas
transactions.
MARKET RISK MANAGEMENT AND TRADING
In market risk management and trading, only well-understood, conventional
derivative instruments are used. These include futures and options traded on
regulated exchanges and `over-the-counter' swaps, options and forward contracts.
63
<PAGE>
Where derivatives constitute a hedge, the Group's exposure to market risk
created by the derivative is offset by the opposite exposure arising from the
asset, liability, cash flow or transaction being hedged. By contrast, where
derivatives are held for trading purposes, changes in market risk factors give
rise to realized and unrealized gains and losses, which are recognized in the
current period.
All financial instrument and derivative activity, whether for risk
management or trading, is carried out by specialist teams which have the
appropriate skills, experience and supervision. These teams are subject to close
financial and management control, meeting generally accepted industry practice
and reflecting the principles of the Group of Thirty Global Derivatives Study
recommendations. An independent control function monitors compliance with BP
Amoco's policies.
The control framework includes prescribed trading limits that are reviewed
regularly by senior management, daily monitoring of risk exposure, marking
trading exposures to market and reviewing open positions to assess the Group's
exposure in potentially adverse situations.
Further details of BP Amoco's use of derivatives appear in Item 9A --
Quantitative and Qualitative disclosures about Market Risk, and in Item 18 --
Note 28 of Notes to Financial Statements.
CREDIT RISK
Credit risk is the potential exposure of the Group to loss in the event of
non-performance by a counterparty. The credit risk arising from the Group's
normal commercial operations is controlled by individual operating units within
guidelines. In addition, as a result of the use of financial instruments,
including derivatives, to manage market risk, the Group has credit exposures
through its dealings in the financial and specialized oil and gas markets. The
Group controls the related credit risk by entering into contracts only with
highly credit-rated counterparties and through credit approvals, limits and
monitoring procedures, and does not usually require collateral or other
security. Counterparty credit validation, independent of the dealers, is
undertaken before contractual commitment. The Group has not experienced material
non-performance by any counterparty.
LIQUIDITY RISK
Liquidity risk is the risk that suitable sources of funding for the Group's
business activities may not be available. The Group has long-term debt ratings
of Aa1 and AA+ assigned respectively by Moody's and Standard and Poor's. The
Group has access to a wide range of funding at competitive rates through the
capital markets and banks. It co-ordinates relationships with banks, borrowing
requirements, foreign exchange requirements and cash management centrally. The
Group believes it has access to sufficient funding and has also undrawn
committed borrowing facilities to meet currently foreseeable borrowing
requirements. At December 31,1999, the Group had available undrawn committed
facilities of $3 billion. These committed facilities, which are mainly with a
number of international banks, expire in 2000. The Group expects to renew the
facilities on an annual basis.
INSURANCE
The Group generally restricts its purchase of insurance to situations where
this is required for legal or contractual reasons. This is because external
insurance is not considered economic for the Group. Losses will therefore be
borne as they arise rather than being spread over time through insurance premia.
The position is reviewed periodically.
MILLENNIUM IT RISK
The Year 2000 issue, which stems from computer programs written using two
digits rather than four to define the applicable year, could have resulted in
processing faults on the change of century, producing a wide range of
consequences.
To avoid any such consequences, BP Amoco undertook a Group-wide risk-based
review of its computer systems and process control equipment and developed and
implemented plans to remediate potential Year 2000-related faults by replacement
or repair. The project was designed to minimize risks arising from the Year 2000
problem which might endanger health, safety, the environment, the Group's
reputation or its cash flow.
64
<PAGE>
The Year 2000 programme covered IT application systems and infrastructure,
process control systems and embedded microprocessors in plants, oil and gas
fields and building facilities, and an assessment of the readiness of our
critical suppliers, customers, joint venturers and partners. Contingency plans
were developed to manage any risk associated with our operations or third party
dependencies.
In the event, the Group achieved a smooth and successful transition into
2000. In addition to dealing with the specific Year 2000 risk, important
additional benefits were seen from the Year 2000 programme in a number of
different areas across the Group.
A critical point has been passed successfully, but the Group is maintaining
an appropriate level of vigilance to deal with any consequential Year 2000
effects, especially from third parties, which may yet emerge.
The total cost of the Group's Year 2000 programme was $335 million, which
includes some minor expenditure in the first few months of 2000. These costs are
charged against income in the period in which they are incurred.
THE EURO
As a result of the Treaty establishing the European Community, as amended
by the Treaty on European Union, (the Treaty), European economic and monetary
union (EMU) has occurred for eleven out of the fifteen member countries of the
European Union (participating countries). The final stage of the Treaty began on
January 1, 1999.
For the participating countries, the fixed conversion rates between their
sovereign currencies (legacy currencies) prior to January 1, 1999 and the euro
have been established. The euro has been adopted as their common legal currency.
The legacy currencies are scheduled to remain legal tender as denominations of
the euro between January 1, 1999 and January 1, 2002 (the transition period).
The United Kingdom has not participated initially in EMU, but may do so at
a later time. The current policy of the UK government is that any decision to
join EMU will only be taken after a national referendum of the people and, in
any event, not before 2002.
BP Amoco's commercial and financial processes were successfully adapted to
allow its European operations to undertake transactions in the euro and capture
competitive advantage offered by the new currency, from January 1, 1999. In
common with experience generally across Europe, the actual level of transactions
in euros for our businesses has until now been low. The currency of accounting
records and the related systems will be converted during the transition period,
which ends on January 1, 2002. The capability to conduct business in national
currencies will be retained as long as necessary. The costs associated with the
euro programme are estimated at $100 million, of which some $26 million had been
incurred and expensed by the end of 1999.
It is difficult to predict whether the euro will affect the level or
volatility of foreign exchange rates. However, we do not expect that the
introduction of the euro will have a significant effect on the Group's results
of operations, its financial position or liquidity.
ENVIRONMENTAL INVESTMENT
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
----- ----- -----
($ million)
<S> <C> <C> <C>
Operating expenditure (a)................................... 414 446 477
Capital expenditure (b)..................................... 246 426 376
Clean-ups................................................... 92 129 129
</TABLE>
- ----------
(a) Expenditure for 1999 includes $15 million (1998 $44 million and 1997 $10
million) incurred by the BP/Mobil joint venture
(b) Expenditure for 1999 includes $84 million (1998 $89 million and 1997 $69
million) incurred by the BP/Mobil joint venture.
65
<PAGE>
Operating and capital expenditure on the prevention, control, abatement or
elimination of air, water and solid waste pollution is often not incurred as a
separately identifiable transaction. Instead, it forms part of a larger
transaction which includes, for example, normal maintenance expenditure. The
figures for environmental operating and capital expenditure in the table are
therefore estimates, based on the definitions and guidelines of the American
Petroleum Institute.
In 1999, environmental operating expenditure and amounts spent on clean-ups
were slightly lower than 1998. The reduction in capital expenditure reflects the
completion of a number of capital projects at the end of 1998. Similar levels of
operating and capital expenditure are expected in the foreseeable future. In
addition to operating and capital expenditure, we create provisions for future
environmental remediation. Expenditure against such provisions is normally
incurred in subsequent periods and is not included in environmental operating
expenditure reported for such periods.
Provisions for environmental remediation are made when a clean-up is
probable and the amount reasonably determinable. Generally, their timing
coincides with commitment to a formal plan of action or, if earlier, on
divestment or on closure of inactive sites. These provisions are usually set up
on a discounted basis, as required by Financial Reporting Standard No.12,
`Provisions, Contingent Liabilities and Contingent Assets'.
The extent and cost of future remediation programmes are inherently
difficult to estimate. They depend on the scale of any possible contamination,
the timing and extent of corrective actions, and also the Group's share of the
liability. Although the cost of any future remediation could be significant, and
may be material to the result of operations in the period in which it is
recognized, we do not expect that such costs will have a material effect on the
Group's financial position or liquidity. We believe our provisions are
sufficient for known requirements, and we do not believe that our costs will
differ significantly from those of other companies engaged in similar industries
or that our competitive position will be adversely affected as a result.
With effect from January 1, 1999 BP Amoco adopted Financial Reporting
Standard No. 12 which requires that the Group now provide fully for the cost of
decommissioning oil and gas production facilities and related pipelines on a
discounted basis at the commencement of production.
Further details of decommissioning and environmental provisions appear in
Item 18 -- Note 27 of Notes to Financial Statements. See also Item 1 --
Description of Business -- Environmental Protection.
66
<PAGE>
ITEM 9A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
BP Amoco is exposed to a number of different market risks arising from the
Group's normal business activities. Market risk is the possibility that changes
in currency exchange rates, interest rates or oil and natural gas prices will
adversely affect the value of the Group's financial assets, liabilities or
expected future cash flows. The Group has developed policies aimed at managing
the volatility inherent in certain of these natural business exposures and in
accordance with these policies the Group enters into various transactions using
derivative financial and commodity instruments (derivatives). Derivatives are
contracts whose value is derived from one or more underlying financial
instruments, indices or prices which are defined in the contract. We also trade
derivatives in conjunction with these risk management activities.
In market risk management and in trading, only well-understood,
conventional derivative instruments are used. These include futures and options
traded on regulated exchanges, and 'over-the-counter' swaps, options and forward
contracts.
Where derivatives constitute a hedge, the Group's exposure to market risk
created by the derivative is offset by the opposite exposure arising from the
asset, liability or transaction being hedged. By contrast, where derivatives are
held for trading purposes, changes in market risk factors give rise to realized
and unrealized gains and losses, which are recognized in the current period.
All material derivatives activity, whether for risk management or trading,
is carried out by specialist teams which have appropriate skills, experience and
supervision. These teams are subject to close financial and management control,
meeting generally accepted industry practice and reflecting the principles of
the Group of Thirty Global Derivatives Study recommendations. An independent
control function monitors compliance with BP Amoco's derivative management
policies. The control framework includes prescribed trading limits that are
reviewed regularly by senior management, daily monitoring of risk exposure,
marking trading exposures to market and reviewing open positions to assess BP
Amoco's exposure in potentially adverse situations. Counterparty credit
validation, independent of the dealers, is undertaken before contractual
commitment.
Further information about BP Amoco's use of derivatives, their
characteristics, and the accounting treatment thereof is given in Item 18 --
Note 1 and Note 28 of Notes to Financial Statements.
RISK MANAGEMENT
FOREIGN CURRENCY EXCHANGE RATE RISK
Fluctuations in exchange rates can have significant effects on BP Amoco's
operating results. The effects of most exchange rate fluctuations are subsumed
within business operating results through changing cost-competitiveness, lags in
market adjustment to movements in rates, and conversion differences accounted on
specific transactions. For this reason, the total effect of exchange rate
fluctuations is not identifiable separately in the Group's reported results.
The underlying economic currency of the Group's cash flows is mainly the US
dollar. This is because BP Amoco's major product, oil, is priced internationally
in US dollars. BP Amoco's foreign exchange management policy is to minimize
economic and material transactional exposures from currency movements against
the US dollar. The Group co-ordinates the handling of foreign exchange risks
centrally, by netting off naturally occurring opposite exposures wherever
possible, to reduce the risk, and then dealing with any material residual
foreign exchange risks. Significant residual non-dollar exposures are managed
using a range of derivatives. The most significant of such exposures are the
sterling-based capital leases, that part of the quarterly dividend which is paid
in sterling, the sterling cash flow requirements for UK Corporation Tax, and the
capital expenditure and operational requirements of Exploration, mainly in the
UK. In addition, most of the Group's borrowings are in US dollars, are hedged
with respect to the US dollar, or are swapped into dollars where this achieves a
lower cost of financing. At December 31, 1999 the total of foreign currency
borrowings not swapped into dollars amounted to $275 million. The principal
element of this is $90 million of borrowings in Malaysian ringgits.
The following tables provide information about the Group's foreign currency
derivative financial instruments. These include foreign currency forward
exchange agreements (forwards) and cylinder option contracts (cylinders) that
are sensitive to changes in the sterling/dollar exchange rate. Where foreign
currency denominated borrowings are swapped into dollars using forwards or
currency interest rate swaps such that currency risk is completely eliminated,
neither the borrowing nor the derivative are included in the table.
67
<PAGE>
For forwards, the tables present the notional amounts and weighted average
contractual exchange rates by contractual maturity dates and exclude forwards
that have offsetting positions. Only significant forward positions are included
in the tables. The notional amounts of forwards are translated into US dollars
at the exchange rate included in the contract at inception. The majority of the
sterling contracts consist of forwards relating to sterling-based capital leases
which effectively convert the lease obligation from sterling into dollars. The
remaining contracts relate to sterling requirements for net operational
expenditures. The fair value represents an estimate of the gain or loss which
would be realized if the contracts were settled at the balance sheet date.
For cylinders, the tables present the notional amounts of the constituent
purchased call and written put option contracts at December 31, 1999 and the
weighted average strike rates by contractual maturity dates. At December 31,
1999, the sterling cylinders related to the Group's expected sterling tax
payments over the next year. We no longer hedge the expected sterling dividend
over the next year using cylinders but hedge each quarter's sterling payment
using forwards which mature within the quarter.
The fair values for the foreign exchange contracts in the table below are
based on market prices of comparable instruments (forwards) and pricing models
which take into account relevant market data (options). These derivative
contracts constitute a hedge; any change in the fair value or expected cash
flows is offset by an opposite change in the market value or expected cash flows
of the asset, liability or transaction being hedged.
<TABLE>
<CAPTION>
Notional amount by expected maturity date
-----------------------------------------
Fair
2000 2001 2002 Thereafter Total value
----- ----- ----- --------- ----- -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Forwards
Receive sterling/pay US dollars
Contract amount................. 1,674 -- -- -- 1,674 (26)
Weighted average contractual
exchange rate................. 1.64
Cylinders
Receive sterling/pay US dollars
Purchased call
Contract amount................. 286 -- -- -- 286 2
Weighted average strike rate.... 1.71
Written put
Contract amount................. 286 -- -- -- 286 (4)
Weighted average strike rate.... 1.57
</TABLE>
68
<PAGE>
INTEREST RATE RISK
BP Amoco is exposed to interest rate risk on short- and long-term
floating-rate instruments and as a result of the refinancing of fixed-rate
finance debt. Consequently, as well as managing the currency and the maturity of
debt, the Group manages interest costs through the balance between lower-cost
floating rate debt, which has inherently higher risk, and generally more
expensive but lower-risk, fixed-rate debt. The Group is exposed predominantly to
US dollar LIBOR interest rates as borrowings are mainly denominated in, or
swapped into, US dollars. The BP Amoco Group uses derivatives to achieve the
required mix between fixed and floating rate debt. During 1999, debt policy was
to keep floating rate debt below an upper limit of 65% of total net debt. Actual
floating rate debt for the year was in the range of 47-53%.
The following table shows, by major currency, the Group's borrowings at
December 31, 1999 and the weighted average interest rates achieved at those
dates through a combination of borrowings and other interest rate sensitive
instruments entered into to manage interest rate exposure.
<TABLE>
<CAPTION>
Fixed rate debt Floating rate debt
------------------------ ----------------------------------
Weighted Weighted Weighted
average average time average
interest for which interest
rate rate is fixed Amount rate Amount Total
-------- ------------- ------ -------- ------ -----
(%) (Years) ($m) (%) ($m) ($m)
<S> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
US dollars.................... 7 9 6,529 6 5,915 12,444
Sterling...................... -- -- -- 6 49 49
Other currencies.............. 8 31 46 6 180 226
------ ------ ------
Total loans 6,575 6,144 12,719
====== ====== ======
</TABLE>
The Group's earnings are sensitive to changes in interest rates over the
forthcoming year as a result of the floating rate instruments included in the
Group's finance debt at December 31, 1999. These include the effect of interest
rate and currency swaps and forwards utilized to manage interest rate risk. If
the interest rates applicable to floating rate instruments were to have
increased by 1% on January 1, 2000, the Group's 2000 earnings before taxes would
decrease by approximately $80 million. This assumes that the amount and mix of
fixed and floating rate debt, including capital leases, remains unchanged from
that in place at December 31, 1999 and that the change in interest rates is
effective from the beginning of the year. Where the interest rate applicable to
an instrument is reset during a quarter it is assumed that this occurs at the
beginning of the quarter and remains unchanged for the rest of the year. In
reality, the fixed/floating rate mix will fluctuate over the year and interest
rates will change continually. Furthermore the effect on earnings shown by this
analysis does not consider the effect of an overall reduction in economic
activity which could accompany such an increase in interest rates.
69
<PAGE>
OIL PRICE RISK
The Group's risk management policy with respect to oil price risk is to
manage only those exposures associated with the immediate operational programme
for certain of its equity share of production and certain of its refinery and
marketing activities. To this end, BP Amoco's oil trading division uses the full
range of conventional oil price-related financial and commodity derivatives
available in the oil markets.
The derivative instruments used for hedging purposes do not expose the
Group to market risk because the change in their market value is offset by an
equal and opposite change in the market value of the asset, liability or
transaction being hedged. The values at risk in respect of derivatives held for
oil price risk management purposes are shown in isolation in the table below.
The items being hedged are not included in the values at risk.
The value at risk model used is that discussed under Trading below, except
that value at risk in respect of oil price risk management does not take into
account physical crude oil or refined product positions held by the Group. Thus
the value at risk calculation for oil price exposure includes derivative
financial instruments such as exchange-traded futures and options, swap
agreements and over-the-counter options and derivative commodity instruments
(commodity contracts that permit settlement either by delivery of the underlying
commodity or in cash) such as forward contracts. The values at risk represent
the potential gain or loss in fair values over a 24-hour period with a 99.7%
confidence level.
The following table shows values at risk for oil price risk management
activities.
<TABLE>
<CAPTION>
1999
---------------------------------------
High Low Average December 31
----- ------ ------- -----------
($ million)
<S> <C> <C> <C> <C>
Oil price contracts......... 5 3 3 5
</TABLE>
NATURAL GAS PRICE RISK
BP Amoco's general policy with respect to natural gas price risk is to
manage only a portion of its exposure to price fluctuations. Natural gas swaps,
options and futures are used to convert specific sales and purchases contracts
from fixed prices to market prices. Swaps are also used to hedge exposure to
price differentials between locations. We also use derivatives to fix prices
which are favourable with respect to our forecasts of future prices.
The table below provides information about the Group's material swaps
contracts that are sensitive to changes in natural gas prices. Contract amount
represents the notional amount of the contract. Fair value represents an
estimate of the gain or loss which would be realized if the contracts were
settled at the balance sheet date. Weighted average price represents the
year-end forward price for futures, the fixed price and the year-end forward
price related to the settlement month for swaps; and the weighted average strike
price for options.
At December 31, 1999, in addition to the swaps contracts shown in the table
there were options contracts with aggregate notional amounts of $7 million and
terms of up to one year.
70
<PAGE>
<TABLE>
<CAPTION>
Weighted
Fair value average price
Contract ----------------- -----------------
Quantity amount Asset Liability Receive Pay
-------- -------- ------- --------- ------- -------
(Btus trillion)(a) ($ million) ($ million) ($ per mmbtu)(b)
<S> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Maturing in 2000
Swaps
Receive variable/pay fixed..... 78 201 3 (10) 2.47 2.58
Receive fixed/pay variable..... 55 138 6 (2) 2.51 2.43
Receive and pay variable....... 1,474 3,350 36 (32) 2.28 2.27
Maturing in 2001
Swaps
Receive variable/pay fixed..... 14 38 1 (1) 2.63 2.68
Receive fixed/pay variable..... 6 14 -- -- 2.51 2.44
Receive and pay variable....... 252 604 9 (7) 2.41 2.40
</TABLE>
- ---------------
(a) British thermal units (btus)
(b) Million british thermal units (mmbtu)
TRADING
In conjunction with the risk management activities discussed above, BP
Amoco also trades interest rate and foreign currency exchange rate derivatives.
The Group controls the scale of the trading exposures by using a value at risk
model with a maximum value at risk limit authorized by the board.
In addition to the risk management activities related to equity crude
disposal, refinery supply and marketing, BP Amoco's oil trading division
undertakes trading in the full range of conventional derivative financial and
commodity instruments and physical cargoes available in the oil markets. This
activity is monitored and measured separately from the risk management activity
and is subject to maximum value at risk limits authorized by the board.
The Group measures its market risk exposure, i.e. potential gain or loss in
fair values, on its trading activity using a value at risk technique. This
technique is based on a variance/covariance model and makes a statistical
assessment of the market risk arising from possible future changes in market
values over a 24-hour period. The calculation of the range of potential changes
in fair value takes into account a snapshot of the end-of-day exposures, and the
history of one day price movements over the previous twelve months, together
with the correlation of these price movements. The potential movement in fair
values is expressed to three standard deviations which is equivalent to a 99.7%
confidence level. This means that, in broad terms, one would expect to see an
increase or a decrease in fair values greater than the value at risk on only one
occasion per year if the portfolio were left unchanged.
The Group calculates value at risk on all instruments that are held for
trading purposes and that therefore give an exposure to market risk. The value
at risk model takes account of derivative financial instruments such as interest
rate forward and futures contracts, swap agreements, options and swaptions;
foreign exchange forward and futures contracts, swap agreements and options; and
oil price futures, swap agreements and options. Financial assets and liabilities
and physical crude oil and refined products that are treated as trading
positions are also included in these calculations. The value at risk calculation
for oil price exposure also includes derivative commodity instruments (commodity
contracts that permit settlement either by delivery of the underlying commodity
or in cash), such as forward contracts.
71
<PAGE>
The following table shows values at risk for trading activities.
<TABLE>
<CAPTION>
1999
---------------------------------------
High Low Average December 31
------ ----- ------- -----------
($ million)
<S> <C> <C> <C> <C>
Interest rate contracts..... 1 -- 1 --
Foreign exchange contracts.. 13 -- 3 1
Oil price contracts......... 15 5 9 10
</TABLE>
72
<PAGE>
ITEM 10 -- DIRECTORS AND OFFICERS OF REGISTRANT
There are currently 22 directors on the board.
<TABLE>
<CAPTION>
Initially elected
Name or appointed
- ------ --------------
<S> <C> <C>
P D Sutherland................ Non-executive co-chairman (a) Chairman since May 1997
Director since July 1995
H L Fuller.................... Executive co-chairman (a) December 1998
Sir Ian Prosser............... Non-executive deputy chairman (a)(b)(c) Deputy chairman
since February 1999
Director since May 1997
Sir John Browne............... Executive director (Group chief September 1991
executive)
Dr J G S Buchanan............. Executive director October 1996
R F Chase..................... Executive director (Deputy group March 1992
chief executive)
W D Ford........................ Executive director January 2000
Dr C S Gibson-Smith........... Executive director September 1997
R L Olver..................... Executive director January 1998
B K Sanderson................. Executive director April 1992
R S Block..................... Non-executive director (a)(b)(d) December 1998
J H Bryan..................... Non-executive director (a)(c) December 1998
E B Davis, Jr................. Non-executive director (a)(b)(c) December 1998
R J Ferris.................... Non-executive director (a)(b) December 1998
C F Knight.................... Non-executive director (a)(b) October 1987
F A Maljers................... Non-executive director (a)(d) December 1998
Dr W E Massey................. Non-executive director (a)(d) December 1998
H M P Miles................... Non-executive director (a)(c)(d) June 1994
Sir Robin Nicholson........... Non-executive director (a) October 1987
M H Wilson.................... Non-executive director (a)(c) December 1998
Sir Robert Wilson............. Non-executive director (a)(c)(d) July 1998
The Lord Wright of Richmond... Non-executive director (a)(b)(d) October 1991
J C Hanratty.................. Secretary October 1994
</TABLE>
- ----------
(a) Member of the Chairman's Committee.
(b) Member of the Remuneration Committee.
(c) Member of the Audit Committee.
(d) Member of the Ethics and Environment Assurance Committee.
Mr H L Fuller and Mr W G Lowrie were appointed executive directors and Mrs
R S Block, Mr J H Bryan, Mr E B Davis, Jr, Mr R J Ferris, Mr F A Maljers, Dr W E
Massey and Mr M H Wilson were appointed non-executive directors of BP Amoco with
effect from December 31, 1998. Mr H L Fuller was appointed executive co-chairman
of the board on the same date. Mr W G Lowrie resigned as a director of BP Amoco
on February 12, 1999. Mr W D Ford was appointed executive director with effect
from January 1, 2000. Mr H L Fuller will resign from the Board with effect from
March 31, 2000.
BP Amoco's articles of association require directors who have held office
for three years or more since they were appointed or re-elected to retire from
office at the Company's annual general meeting, together with directors
appointed by the board since the last annual general meeting. Retiring directors
may offer themselves for re-election. The directors retiring and offering
themselves for re-election at this year's meeting are Dr J G S Buchanan, R F
Chase, C F Knight and The Lord Wright of Richmond. Mr W D Ford is standing for
election by the shareholders.
73
<PAGE>
The biographies of the directors and the secretary are set out below.
P D Sutherland, SC -- Peter Sutherland (53) rejoined BP's board in 1995
having previously been a non-executive director from 1990 to 1993. He was
appointed chairman of BP in May 1997. He is chairman of Goldman Sachs
International and is a non-executive director of Telefonaktiebolaget LM
Ericsson, Investor AB and ABB. He is on the advisory board of the Council on
Foreign Relations and is chairman of the Overseas Development Council.
H L Fuller -- Larry Fuller (61) was appointed a director of Amoco in 1981
and was elected chairman and chief executive officer in February 1991. He is a
non-executive director of Chase Manhattan Corporation, Chase Manhattan Bank,
Motorola, Security Capital Group and Abbott Laboratories. He also serves on the
boards of Catalyst, the American Petroleum Institute and the Rehabilitation
Institute of Chicago, and is a trustee of The Orchestral Association.
Sir Ian Prosser -- Sir Ian (56) joined BP's board in 1997 and was appointed
deputy chairman in February 1999. He is chairman and chief executive of Bass, a
non-executive director of SmithKline Beecham and vice president of the council
of the Brewers and Licensed Retailers Association.
Sir John Browne, F. Eng, -- Sir John (52) was appointed an executive
director of BP in 1991 and group chief executive in 1995. He is a non-executive
director of Goldman Sachs Group and Intel Corporation, a trustee of the British
Museum and a member of the supervisory board of DaimlerChrysler. He is also vice
president and a member of the board of the Prince of Wales Business Leaders
Forum.
Dr J G S Buchanan -- John Buchanan (56), chief financial officer, was
appointed an executive director of BP in 1996. He is a non-executive director of
Boots and a member of the UK Accounting Standards Board.
R F Chase -- Rodney Chase (56), deputy group chief executive, was appointed
an executive director of BP in 1992. He is a non-executive director of Diageo
and the BOC Group.
W D Ford -- Doug Ford (56), chief executive, refining and marketing, was
appointed an executive director of BP Amoco with effect from January 2000.
Before the merger of BP Amoco he had been an executive vice president of Amoco
since 1993. He is a non-executive director of USG Corporation.
Dr C S Gibson-Smith -- Chris Gibson-Smith (54), executive director,
policies and technology, was appointed an executive director of BP in 1997. He
is a non-executive director of Lloyds TSB.
R L Olver -- Dick Olver (53), chief executive, exploration and production,
was appointed an executive director of BP in January 1998. He is a non-executive
director of Reuters Group.
B K Sanderson, CBE -- Bryan Sanderson (59), chief executive, chemicals, was
appointed an executive director of BP in 1992. He is chairman of Sunderland PLC,
a non-executive director of Corus, president of CEFIC (the European Chemical
Industry Council) and vice president of the court of governors of the London
School of Economics.
R S Block -- Ruth Block (69) joined Amoco's board in 1986. She retired as
executive vice president and chief insurance officer of The Equitable in 1987.
She is a non-executive director of Ecolab and 35 Alliance Capital Mutual Funds.
J H Bryan -- John Bryan (63) joined Amoco's board in 1982. He is chairman
and chief executive officer of Sara Lee Corporation and a non-executive director
of Bank One Corporation, General Motors Corporation and Goldman Sachs.
E B Davis, Jr -- Erroll B Davis, Jr (55) joined Amoco's board in 1991. He
is president and chief executive officer of Alliant Energy. He is a
non-executive director of PPG Industries and a member of the American Society of
Corporate Executives, Association of Edison Illuminating Companies, the
Wisconsin Association of Manufacturers and Commerce, the Iowa Business Council,
the Edison Electric Institute and the Nuclear Energy Institute. He is also a
trustee of Carnegie Mellon University.
R J Ferris -- Richard Ferris (63) joined Amoco's board in 1981. He retired
as co-chairman of Doubletree Corporation in 1997. He is a non-executive director
of The Proctor & Gamble Company.
74
<PAGE>
C F Knight -- Charles Knight (64) joined BP's board in 1987. He is chairman
and chief executive officer of Emerson Electric and is a non-executive director
of Anheuser-Busch, Morgan Stanley Dean Witter, SBC Communications and IBM.
F A Maljers -- Floris Maljers (66) joined Amoco's board in 1994. He is a
member of the supervisory boards of SHV Holding, Vendex N.V. and KLM Royal Dutch
Airlines. He is chairman of the supervisory board of the Amsterdam Concertgebouw
and Rotterdam School of Management, Erasmus University.
Dr W E Massey -- Walter Massey (61) rejoined Amoco's board in 1993 having
previously been a director from 1983 to 1991. He is president of Morehouse
College and is a non-executive director of Motorola, Bank of America, McDonald's
Corporation, the Mellon Foundation and the Commonwealth Fund.
H M P Miles, OBE -- Michael Miles (63) joined BP's board in 1994. He is
chairman of Johnson Matthey and a non-executive director of ING Baring Holdings
and BICC.
Sir Robin Nicholson, F Eng, FRS -- Sir Robin (65) joined BP's board in
1987. He retired as chairman of Pilkington Optronics in November 1998. He is a
non-executive director of Rolls-Royce and a member of the UK Government's
Council for Science and Technology.
M H Wilson -- Michael Wilson (62) joined Amoco's board in 1993. He is vice
chairman and a director of RBC Dominion Securities. He is a non-executive
director of Manufacturers Life Insurance Company and Rio Algom.
Sir Robert Wilson,KCMG -- Sir Robert (56) joined BP's board in July 1998.
He is chairman of Rio Tinto and a non-executive director of Diageo.
The Lord Wright of Richmond, GCMG -- Lord Wright (68) joined BP's board in
1991, having been Permanent Under-Secretary and Head of the UK Diplomatic
Service. He is a non-executive director of De La Rue.
J C Hanratty -- Judith Hanratty (56) joined BP in London in 1986 and was
appointed company secretary in October 1994. She is a nominated member of the
Council of Lloyds (the London Insurance Market), a member of the Competition
Commission (formerly the Monopolies and Mergers Commission), the Listing
Authorities Committee of The London Stock Exchange and the Takeover Panel. She
is also a governor of the College of Law and a Fellow of Lucy Cavendish College,
Cambridge.
ITEM 11 -- COMPENSATION OF DIRECTORS AND OFFICERS
INTRODUCTION
During the 12 months following the merger between BP and Amoco, the
Remuneration Committee of the board (the Committee) has undertaken a
comprehensive review of the way in which it determines the remuneration of
executive directors and of the effectiveness of its policies for the needs of
the merged company. BP Amoco competes globally for business and for customers,
with each business stream of the Company now exceeding most FTSE companies in
size. It also competes globally for talent, with fewer than half of its top
management team being of British nationality.
In its review the Committee was assisted by a team of independent
consultants in a study of other global-scale companies, with a particular
emphasis on those based in Europe. Having taken account of that study, and of
the development of the Company, the Committee has concluded that an individual
director's home nationality should be regarded as of secondary importance in
setting remuneration. Therefore, in order to ensure greater equity at board
level, all executive directors will now have their potential remuneration set
against global competitive comparisons, irrespective of their own nationality.
The remuneration of BP Amoco's directors will continue to be compared with the
remuneration of directors in their own countries (in companies of appropriate
scale and global spread) to ensure that remuneration policies and practices
remain competitive in the home market. Further rigorous comparisons will then be
made against an international set of appropriate companies.
The Committee has also decided that the remuneration of executive directors
should in future be managed separately from that of other senior executives.
Shareholders' agreement will be sought for the creation of an Executive
Directors' Incentive Plan for their remuneration. Directors will then be
excluded from future participation in any other incentive plans. The following
information relates specifically to the reward of executive directors, unless
stated otherwise.
75
<PAGE>
CHANGES MADE DURING 1999
There have been two immediate outcomes of the changes to the Company's
reward philosophy for executive directors. The first has been a set of
adjustments to base salaries during 1999, which have also affected annual
incentive bonuses for the year. Secondly, long-term incentive grants in the 1997
and 1998 Long Term Performance Plans (LTPPs) have been adjusted to provide a
means of reducing the imbalance in rewards between former BP and former Amoco
directors following the merger. These potential long-term plan awards are in
line with plans approved by shareholders in late 1998.
PROPOSED CHANGES IN 2000
The major change proposed for 2000 is the introduction of the Executive
Directors' Incentive Plan which will provide for the granting of performance
shares, share options and cash incentives at the discretion of the Remuneration
Committee.
The Committee proposes to introduce two component plans under the umbrella
of the Executive Directors' Incentive Plan - a long-term performance plan and a
stock option plan. The first plan will mirror the existing plan for senior
executives in the Company while the option plan will be structured to extend the
timescale of the performance-reward linkage. The proposed target structure for
the two component plans is set out under `Performance measures and targets for
2000', which shows the updated competitor set for the long-term plan measure,
and gives outline details of the annual incentive plan targets for 2000 and of
the performance condition that is under consideration for the granting of share
options.
No changes are proposed in the way the Long Term Performance Plan will
operate for executive directors. The rules of the current Plan were approved by
shareholders in November 1998. Future grants to directors under the Executive
Directors' Incentive Plan will be managed in the same way and subject to the
same targets and conditions, including the plan design feature which requires
directors to build up a personal shareholding in the Company equal in value to
at least five times their annual salary.
In 1998, when shareholders approved the current BP Amoco Share Option Plan,
it was considered appropriate to maintain the competitive focus on the oil
sector, and it was therefore unnecessary to grant share options to UK directors
who participated in the Long Term Performance Plan. Share options were granted
in addition to LTPP only to North American directors, as is normal practice in
North America. A number of factors have now changed.
First, to meet the board's new emphasis on setting the potential rewards of
all executive directors at a more equitable level of global competitiveness,
there is a consequent need to increase the scale of long-term incentive grants
for some directors. In coming to the conclusion that this could be best achieved
through use of share options, in addition to the LTPP grants, the emphasis has
been on how best to drive performance forward in the coming years. The LTPP will
still predominate as the Company's long-term incentive vehicle, and it has
already helped BP Amoco to achieve the aims of maximizing performance through
all cycles in the oil sector.
In addition to maintaining that performance, it was felt appropriate to
incorporate a new level of `stretch' into long-term incentives through the use
of a new and very challenging performance measure, the FTSE Global 100 group of
companies. This wider competitor set gives BP Amoco's executive directors
greater exposure to competition with non-oil sector performance, as well as
creating better alignment with shareholders by giving increased exposure to the
absolute performance of the equity market itself. (The LTPP measures relative
performance.)
Taking all this into account, the board favours a policy of making a
balance of grants under both the three-year LTPP and the longer-term share
option plan, i.e. following the approach which is currently taken in respect of
our US executive directors.
The remuneration policy for the most senior executives below board level
will be aligned with the policy for executive directors, albeit with a stronger
focus on national market comparisons. In particular, share option grants under
the 1998 Plan may be made to senior executives in addition to their
participation in the Long Term Performance Plan and irrespective of their
nationality.
76
<PAGE>
The remainder of this item contains details of awards made in 1999 under
the incentive compensation plans of BP Amoco, and includes the remuneration data
required by the London Stock Exchange. The summary contains the following
sections:
-- Reward philosophy.
-- Reward process - the Remuneration Committee.
-- Description of the reward plans.
-- Performance measures and targets for 2000.
-- Report on 1999 - remuneration data for executive directors.
-- Long-term incentive awards.
-- Other remuneration features.
-- Remuneration of non-executive directors.
REWARD PHILOSOPHY
The remuneration of executive directors in BP Amoco will be based on the
following guiding principles:
-- total potential rewards will be set at levels sufficient to retain
high-calibre and high-potential staff who will have alternative employment
opportunities within a global market.
-- total potential rewards will be earned by the achievement of demanding
performance targets based on measures which represent the best interests of
the shareholders in the short, medium and long term.
-- incentive plans, performance targets and participating conditions will be
structured to ensure that directors will be fully aligned with the best
interests of the Company at all stages of the business cycle.
-- levels of reward for meeting business targets will be fully competitive
within the appropriate market while outstanding rewards will be given for
delivering world-class results.
-- remuneration policies and incentive plans will be designed to meet the
highest standards of international industry.
REWARD PROCESS -- THE REMUNERATION COMMITTEE
The Remuneration Committee's role is to determine the terms of engagement
and remuneration of the group chief executive and the executive directors. The
Remuneration Committee (the Committee) also establishes the principles for the
remuneration of other senior executives, which in turn provide the framework for
remunerating all employees. At the beginning of the year the Committee sets
challenging and demanding performance targets for the executive directors and at
the end of the year makes awards which reflect the year's performance.
The Committee members have no personal financial interest, other than as
shareholders, in the matters to be decided. They have no conflicts arising from
cross-directorships or day-to-day involvement in running BP Amoco. For
membership of the Committee see Item 10 -- Directors and Officers of Registrant.
The Committee actively solicits professional advice from independent
outside consultants.
The constitution and operation of the Committee are in compliance with the
`Principles of Good Governance and Code of Best Practice' set out by the London
Stock Exchange (the `Combined Code'). Ernst & Young have confirmed that the
scope of their report on the accounts covers the disclosures contained in this
report that are specified for audit by the London Stock Exchange
77
<PAGE>
DESCRIPTION OF THE REWARD PLANS
BASE SALARY
-- This is a fixed sum, payable monthly in pensionable cash, recognizing
ongoing market worth.
-- Salaries are reviewed annually in line with global companies, and targeted
at the median of the appropriate national survey groups for fully effective
job performance. Higher salaries are paid only where justified by sustained
higher level of individual contribution.
-- Surveys are conducted on a regular basis by a leading remuneration
consultancy and look at remuneration levels in an international mix of
companies with comparable size, complexity and global spread of operations.
ANNUAL PERFORMANCE BONUS
-- This is a variable sum, potentially awarded annually in non-pensionable
cash. (Bonuses to North American executives are pensionable/
benefits-bearing).
-- It recognizes performance against demanding annual targets set out in
annual performance contracts.
-- Target bonus level for executive directors is 70% of base salary in 2000.
If contract levels of performance are achieved so that the target bonus is
earned, executive annual remuneration levels reach a median position of the
relevant global employment market.
-- A `stretch' bonus level is also identified for when targets are
substantially exceeded. (For directors, this is 105% of salary in 1999.)
-- Outstanding performance may be recognized by bonus payments in excess of
the stretch level at the discretion of the Committee.
LONG-TERM INCENTIVE
-- The Long Term Performance Plan consists of rolling, three-year performance
periods, at the beginning of which participants receive a grant of
performance units.
-- Any potential LTPP award is a variable, taxable sum, in shares, given after
the performance period. (Depending on the technical constraints in each
country in which the Plan is operated, the Committee may award shares to
participants or fund the purchase of shares by participants.)
-- Share awards have a minimum of a further three years' retention in trust
and no shares will be released until the director has a personal holding in
BP Amoco shares, within the Plans, equivalent to five times base salary.
SHARE OPTIONS
-- Share options may be granted in proportion to the ranking of the Company by
total shareholder return over a three-year period relative to the FTSE
Global 100 set of companies. Options will vest three years after grant
without further performance conditions.
PERFORMANCE MEASURES AND TARGETS FOR 2000
ANNUAL PERFORMANCE BONUS
-- Bonus targets focus on internal operating plans and are a mix of financial
targets and leadership objectives. The financial targets concentrate on
savings in cash costs and bonus underlying performance improvement relative
to competitors and market expectations, while the leadership objectives
include safety, environment, people, organization and investment issues.
-- These targets are embedded within performance contracts which reflect the
operating plans of the Company, and are subject to board decision.
78
<PAGE>
-- Each year's performance provides the platform for the next year's targets,
providing a continuous drive to higher levels of achievement.
LONG-TERM PERFORMANCE PLAN (LTPP)
-- The LTPP focuses on performance within the oil sector and looks at
performance against demanding three-year shareholder return, profitability
and growth targets.
-- For all three measures BP Amoco's performance is assessed in relation to
the oil majors: Chevron, ENI, ExxonMobil, Repsol YPF, Royal Dutch Shell,
Texaco and TotalFina.
-- The maximum award can be made only when performance has been ahead of the
competitor group on all three performance measures. For second and lower
rankings progressively lower awards are made. Participants benefit only
when they deliver results above the median for this group.
SHARE OPTIONS
-- Option grants will be related to performance comparisons with a wide
selection of global companies. The Remuneration Committee will take into
account the ranking of the Company's total shareholder return (TSR) against
the TSR of the FTSE Global 100 group of companies over the three-year
period preceding the date of grant in setting the scale of grants.
-- Options granted to former Amoco employees during 1999-2000 will not be
subject to any additional performance conditions, in line with the practice
followed previously in Amoco. (Under the terms of the merger agreement,
options granted to former Amoco Group employees must, for at least two
years, be no less favourable than their previous arrangements.)
REPORT ON 1999 -- REMUNERATION DATA FOR EXECUTIVE DIRECTORS
BASE SALARY AWARDS IN 1999
Base salaries for executive directors were adjusted in two steps during the
year by a total average increase of 22% to reflect the increased scale and
complexity of directors' responsibilities.
79
<PAGE>
BONUS AWARDS FOR 1999 PERFORMANCE
The Committee established a bonus rating of 148% based on the achievement
of targets set for 1999. This rating took into account, among other things, the
operating performance of the Company which reflected the substantial benefits of
restructuring and integration following the merger, together with ongoing cost
control; the saving of cash costs and the substantial contribution of
performance improvements to the results for the year; the return on average
capital employed and earnings per share, which were both strong and very
competitive in the sector; and the progress made against non-financial targets.
Bonus awards for executive directors were therefore significantly higher than in
1998. Annual remuneration for 1999 is shown in the table below.
<TABLE>
<CAPTION>
Annual Benefits
performance and other 1999 1998
Base salary bonus emoluments Total Total
---------- ---------- ---------- ---------- ----------
($ thousand)
<S> <C> <C> <C> <C> <C>
Sir John Browne............... 1,120 1,137 94 2,351 1,514
Dr J G S Buchanan............. 657 673 70 1,400 899
R F Chase..................... 737 754 61 1,552 962
H L Fuller (a)................ 1,096 1,302 36 2,434 1,674
Dr C S Gibson-Smith........... 579 590 62 1,231 838
W G Lowrie (a)................ 188 126 4 318 1,049
R L Olver (b)................. 587 596 68 1,251 948
B K Sanderson................. 668 685 80 1,433 987
---------- ---------- ---------- ---------- ----------
Totals 5,632 5,863 475 11,970 8,871
========== ========== ========== ========== ==========
</TABLE>
----------
The table above represents annual remuneration earned by, and paid to,
executive directors in the 1999 financial year, with the exception of
bonuses (which were earned in 1999 but paid in 2000). A conversion rate of
L1 = $1.62 has been used for 1999, L1 = $1.66 for 1998. 70% target bonus
applied in 1999 to all executive directors except H L Fuller (80%
target/120% maximum).
(a) H L Fuller and W G Lowrie were appointed to the board on December 31, 1998,
the effective date of the merger. However, the figures shown represent
earnings for the whole 1998 calendar year.
(b) R L Olver was appointed to the board on January 1, 1998. His benefits and
other emoluments for 1998 include expatriation costs which were incurred
before his board appointment.
80
<PAGE>
LONG-TERM INCENTIVE AWARDS
BP AMOCO LONG TERM PERFORMANCE PLAN
Awards made in 1999 under the BP Long Term Performance Plan related to the
1996-98 Plan. Estimates of grant values were indicated in BP Amoco's 1998 Annual
Report on Form 20-F.
Awards to be made in 2000 under the BP Long Term Performance Plan relate to
the 1997-99 Plan.
BP Amoco came first in the 1997-99 Plan, and the Remuneration Committee
expects to make a maximum award. The primary performance measure, BP Amoco's
shareholder return against the market (SHRAM), was 15%. BP Amoco was the only
company in the peer group to exceed market returns during the three-year period,
and was more than 20% ahead of the nearest-ranked competitor.
At the time of the merger the Committee decided to set minimum award levels
for all participants in the 1998 Plans, including executive directors. This
decision was based on pre-merger announcement comparisons of total shareholder
returns, and provides an indication for participants that the final outcome will
be no less than the SHRAM performance measure position which BP held, in
relation to its peer group comparators, before the merger. As mentioned
previously, some executive directors have also had additional grants, under
these plans, to bring them closer to a common global standard.
The total number of shares that may be awarded to all directors under the
1997-99 Plan is 2,190,600, with a value of $16.8 million based on a share price
of L4.81/$7.65 at L1 = $1.59 (mid-market price on February 14, 2000).
Serving recipients in the LTPP are obliged to have the balance of their
1997-99 awards retained in trust for at least a further three years. This
restriction also applies to future Plans, together with additional share
ownership requirements.
Potential awards to executive directors, including an indicative range of
potential awards under the 1998 and 1999 Plans, for which awards would be
payable in 2001 and 2002, are set out in the table below.
LONG-TERM PERFORMANCE PLANS
<TABLE>
<CAPTION>
Performance period of Plan 1996-98 1997-99 1998-2000 1999-2001
-------- ------------------- ---------------- ----------------
Year of award 1999 2000 2000 2001 2002
-------- -------- ------- ---------------- ----------------
Range of potential awards(d)
-----------------------------------
Value of Potential Award
award(a) award(b) value(c) Minimum Maximum Target Maximum
-------- --------- ----- ------- ------- ------ -------
($ thousand) (shares) ($ thousand) (shares) (shares)
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE DIRECTORS
Sir John Browne......... 1,500 527,600 4,036 80,280 532,600 270,000 540,000
Dr J G S Buchanan....... 1,188 323,400 2,474 47,700 319,800 160,000 320,000
R F Chase............... 1,500 329,800 2,523 51,540 339,000 180,000 360,000
W D Ford................ -- -- -- -- -- 100,000 200,000
H L Fuller.............. -- -- -- -- -- 270,000 540,000
Dr C S Gibson-Smith..... 1,030 285,800 2,186 45,480 297,400 144,000 288,000
R L Olver............... 876 285,800 2,186 45,480 297,400 144,000 288,000
B K Sanderson........... 1,500 329,800 2,523 51,540 339,000 160,000 320,000
FORMER EXECUTIVE DIRECTORS OF BP
S J Ahearne............. 500 -- -- -- -- -- --
K R Seal................ 1,000 54,200 415 -- -- --
Dr R W H Stomberg....... 1,000 54,200 415 -- -- -- --
-------- -------- ------- -------- -------- -------- --------
</TABLE>
- ----------
(a) Based on average market price on date of award (L5.70/$9.23) at L1 = $1.62.
(b) Based on assessed performance and the other terms of the Plan.
(c) Based on mid-market price of BP Amoco shares on February 14, 2000
(L4.80/$7.65 at L1 = $1.59).
(d) Minimum awards were determined for these Plans prior to the completion of
the merger. Actual awards will be determined at the end of each performance
period.
81
<PAGE>
OTHER REMUNERATION FEATURES
SHARE OPTION AWARDS
DIRECTORS' EXECUTIVE SHARE OPTIONS(a)
<TABLE>
<CAPTION>
Number of options
-----------------------------------------------------
At At Dates
January 1, December 31, Average from which Expiry
1999(b) Granted(b) Exercised(b) 1999 option price(c) exercisable dates
---------- ------- --------- ----------- ------------ ----------- ------
(L)
<S> <C> <C> <C> <C> <C> <C> <C>
Dr J G S Buchanan.. 119,200 -- 119,200(d) -- n/a n/a n/a
W D Ford.......... -- -- -- 4,536,444(e) 3.23(f) 3/22/94-3/15/01 3/22/03-3/14/09
H L Fuller........ 14,768,400 1,087,844 794,000 15,062,244 3.05(f 4/23/93-3/15/01 4/23/01-3/14/09
DIRECTOR LEAVING THE BOARD IN 1999
W G Lowrie........ 7,066,600 -- -- 7,066,600(h)
---------- ------- --------- ----------- ------------ ----------- ------
</TABLE>
(a) All options in the above table are denoted in BP Amoco ordinary stock or
calculated equivalents.
(b) Directors' positions adjusted for October 1999 subdivision of ordinary
share capital.
(c) These are the weighted average prices applicable to all shares under option
at the end of the year. Full details of directors' shareholdings and
options are available for inspection in the Company's register of
directors' interests.
(d) 96,000 exercised at L1.375 and 23,200 exercised at L1.69 (market price at
date of exercise L4.6425).
(e) On appointment on January 1, 2000.
(f) Equivalent to $5.23 (W D Ford) and $4.94 (H L Fuller) at L1 = $1.62.
(g) 132,332 ADSs exercised at $19.81 (market price at date of exercise $53.88).
(h) At February 12, 1999
DIRECTORS' SAYESHARE OPTIONS
<TABLE>
<CAPTION>
Number of options
-----------------------------------------------------
At At Dates
January 1, December 31, Average from which Expiry
1999(a) Granted(a) Exercised(a) 1999 option price(b) exercisable dates
---------- ------- --------- ----------- ------------ ----------- ------
L
<S> <C> <C> <C> <C> <C> <C> <C>
Sir John Browne....... 5,968 -- -- 5,968 2.89 9/1/02 2/28/03
Dr J G S Buchanan..... 6,978 750 -- 7,728 3.03 9/1/99-9/1/04 2/29/00-2/28/05
R F Chase............. 9,324 -- -- 9,324 1.85 9/1/00 2/28/01
Dr C S Gibson-Smith... -- 2,154 -- 2,154 4.49 9/1/04 2/28/05
R L Olver............ 6,856 -- -- 6,856 2.60 9/1/01-9/1/02 2/28/02-2/28/03
B K Sanderson........ 8,534 -- 4,284(c) 4,250 2.11 9/1/99-9/1/02 2/29/00-2/28/03
</TABLE>
(a) Directors' positions adjusted for October 1999 subdivision of ordinary
share capital.
(b) These are the weighted average prices applicable to all shares under option
at the end of the year. Full details of directors' shareholdings and
options are available for inspection in the Company's register of
directors' interests.
(c) Exercised at L1.61 (market price at date of exercise L5.875).
SHARE SCHEMES AND OTHER BENEFITS
In 1999, six UK directors were allocated shares under the BP Participating
Share Scheme which is available to most UK employees. Under the Participating
Scheme, the Company matches employees' own contribution of shares, all of which
are held for a defined period (see Item 18 -- Note 33 of Notes to Financial
Statements). Six directors continued to participate in the Savings-Related Share
Option Scheme, under which employees enter a savings plan to purchase shares
after three or five years. This plan is also open to most UK employees. UK
directors may also receive modest benefits from typical all-employee
arrangements, such as a fuel discount card and free accidental death insurance.
82
<PAGE>
Mr Fuller and Mr Lowrie were eligible to participate in those benefit plans
generally provided to US employees, including an employee savings plan
containing a company matching contribution of up to 7% of annual earnings, and
certain health and welfare plans, including medical and dental coverage,
non-contributory group life insurance of one times annual earnings, additional
employee paid group life insurance, and short- and long-term sickness and
disability coverage. In 1999, the Company contributed $112,787 and $42,430
respectively to the Savings Plan to `match' their savings.
PENSIONS
UK DIRECTORS
Pension and other benefits have regard to competitor practice in the home
country of each senior executive.
In the UK, eligible staff can join the BP Pension Scheme, which offers
Inland Revenue-approved retirement benefits, based on final salary.
Scheme members' core benefits, which are non-contributory, comprise a
pension accrual rate of 1/60th of final basic salary for each year of service,
inclusive of a proportion of the basic state pension, up to a limit of
two-thirds of final basic salary; a lump-sum death-in-service benefit of three
times salary; and a dependant's benefit of two-thirds of actual or prospective
pension. The link between the Scheme pension and the basic state pension will
cease for all members on May 1, 2000.
Normal retirement age is 60, but members who have 30 or more years' service
at the age of 55 can opt to retire early without an actuarial reduction to their
pension.
Post-retirement pensions are reviewed annually, and increases are
guaranteed equivalent to the Retail Price Index (up to 5%).
Directors who are members of the BP Pension Scheme accrue pension at the
enhanced rate of 2/60ths of their final basic salary for each year of service as
managing directors (up to the same two-thirds limit). No contributions are
payable by executive directors.
None of the directors is affected by the `pensionable earnings cap'.
The BP Pension Scheme is the principal section of the BP Pension Fund, the
latter being established under a trust deed. Contributions to the Fund are made
on the advice of the actuary appointed by the Trustee directors. No
contributions were made to the Fund by the Company in 1999 in respect of
pensions accruing under the BP Pension Scheme.
US DIRECTORS
All current US directors participate in the Employee Retirement Plan for
Amoco Corporation. Under this retirement plan, the amount of the annuity which
they are eligible to receive on a single-life basis is determined under an
annuity benefit formula.
The annuity benefit formula (including a percentage of US Social Security
benefits) is calculated at 1.67% x the employee's years of participation x
average annual earnings. Such earnings for Plan purposes are determined by
taking separately the three highest consecutive calendar years' earnings from
salary and the three highest consecutive calendar years' bonus awards during the
10 years preceding retirement. The maximum annuity is 60% of such average annual
earnings. Years of participation in the Plan in excess of 36 do not result in
additional benefits.
Normal pensionable age in the US Plan is 65. There is no actuarial
reduction to the pension which becomes payable between age 60 and 65, but a
reduction of 5% a year is applied if paid between age 50 and 59.
In line with US tax regulations, benefits are provided as appropriate
through a combination of tax qualified and restoration/non-qualified plans.
83
<PAGE>
PENSION ENTITLEMENT - UK EXECUTIVE DIRECTORS
<TABLE>
<CAPTION>
Additional Additional
pension earned pension earned
Accrued during the during the
Years of service entitlement at year ended year ended
at December 31, December 31, December 31, December 31,
1999 1999(a) 1999(a) 1998(a)
------------- -------------- -------------- --------------
($ thousand) ($ thousand) ($ thousand)
<S> <C> <C> <C> <C>
Sir John Browne........... 33 880 252 45
Dr J G S Buchanan......... 30 447 118 32
R F Chase................. 35 551 128 32
Dr C S Gibson-Smith....... 29 393 95 27
R L Olver................. 26 416 115 27
B K Sanderson............. 35 486 63 32
</TABLE>
- ----------
(a) A conversion rate of L1 = $1.62 has been used for 1999, L1 = $1.66 for
1998.
PENSION ENTITLEMENT - US EXECUTIVE DIRECTORS
<TABLE>
<CAPTION>
Additional Additional
pension earned pension earned
Accrued during the during the
Years of service entitlement at year ended year ended
at December 31, December 31, December 31, December 31,
1999 1999 1999 1998
------------- -------------- -------------- --------------
($ thousand) ($ thousand) ($ thousand)
<S> <C> <C> <C> <C>
H L Fuller................... 38 1,172 (a) 26 128
W G Lowrie................... 33 491 (b) 16 111
- ----------
</TABLE>
(a) Includes a temporary annuity payable until age 62 of $7,092.
(b) Includes a temporary annuity payable until age 62 of $6,704. Accrued
entitlement as at Apri1 1,1999 (date of retirement).
SERVICE CONTRACTS
All UK executive directors appointed since 1996 hold a contract of service
which includes a one-year period of notice. Sir John Browne and Mr Chase were
appointed before 1996 and have contracts which include a two-year notice period.
The Board does not consider it in shareholders' interest to renegotiate these
contracts. Mr Sanderson's contract is due to expire in 2000 when he reaches the
age of 60. Under each contract, the Company reserves the right to make a payment
in lieu of notice.
Dr Stomberg was a director of BP prior to his retirement at the end of 1997
and served as a special adviser to the group chief executive on European matters
at a fixed annual salary of DM1.1 million until the end of 1999.
Mr Fuller's and Mr Lowrie's secondments to BP Amoco began on December 31,
1998. Their underlying US employment agreements with BP Amoco Corporation have a
three-year period. Mr Fuller is due to retire in March 2000. Mr Lowrie's UK
secondment was subject to termination by mutual agreement, after which he would
return to the USA and be subject to the terms of that US employment agreement.
His secondment terminated on Apri1 1,1999, and he received a payment of
$6,126,414 in line with the terms of his US agreement.
On his appointment as an executive director, Mr Ford's contractual
arrangements were adjusted to provide for termination on one year's notice and
retirement at 60. Mr Ford's salary in this post is $620,000. If his contract is
terminated by the Company without cause, Mr Ford will be entitled to
compensation of $1 million a year (pro rated for part years) for each year
remaining between the date of severance and the date he turns 60. As an
expatriate, Mr Ford receives a resettlement allowance of $450,000 a year which
terminates on December 31, 2002.
84
<PAGE>
REMUNERATION OF NON-EXECUTIVE DIRECTORS
The Articles of Association provide that the remuneration paid to
non-executive directors shall be determined by the board within the limits set
by the shareholders. Non-executive directors do not have service contracts with
the Company.
During 1999 the non-executive co-chairman of BP Amoco received a fee of
$259,000 (L160,000). The non-executive directors of BP Amoco received an annual
fee of $65,000 (L40,000) plus an allowance of $4,860 (L3,000) for occasions on
which a director travels across the Atlantic for a board meeting or committee
meeting. During 1999 the board met 11 times, eight times in the UK and three
times in the USA. Committee meetings are held in conjunction with board meetings
whenever feasible. Details of individual fees are set out below.
85
<PAGE>
REMUNERATION OF NON-EXECUTIVE DIRECTORS
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999(a) December 31, 1998
----------------- -----------------
($ thousand)
CURRENT DIRECTORS
<S> <C> <C>
R S Block............................................ 89 90
J H Bryan............................................ 84 90
E B Davis, Jr........................................ 89 90
R J Ferris........................................... 84 90
C F Knight........................................... 79 51 (b)
F A Maljers.......................................... 70 90
Dr W E Massey........................................ 89 90
H M P Miles.......................................... 79 61 (b)(c)
Sir Robin Nicholson.................................. 79 (d) 46 (b)(e)
Sir Ian Prosser...................................... 122 55 (b)
P D Sutherland....................................... 259 (f) 266 (b)
M H Wilson........................................... 94 90
Sir Robert Wilson.................................... 79 18 (b)
The Lord Wright of Richmond.......................... 75 (g) 61 (b)
DIRECTORS WHO RETIRED BEFORE 1999
D R Beall............................................ -- 393 (h)
Sir James Glover..................................... 81 (i) 61 (b)
Dr K N Horn.......................................... 36 (i) 51 (b)
A C Martinez......................................... -- 244 (j)
M R Seger............................................ -- 393 (h)
Sir Patrick Sheehy................................... 89 (i) 51 (b)
T M Solso............................................ -- 214 (k)
------ ------
Total................................................ 1,577 2,595
====== ======
</TABLE>
- ----------
(a) Sterling payments converted at the average 1999 exchange rate of L1 =
$1.62.
(b) Sterling payments converted at the average 1998 exchange rate of L1 =
$1.66.
(c) Paid in part to his employer.
(d) Also received $32,000 (L20,000 converted at the average 1999 exchange rate
of L1 = $1.62) for serving on the Technical Advisory Council.
(e) Also received $22,687 (L13,667 converted at the average 1998 exchange rate
of L1 = $1.66) for serving on the Technical Advisory Council.
(f) Also received other remuneration and benefits of $9,849 (L6,080 converted
at the average 1999 exchange rate of L1 = $1.62).
(g) Also received $1,458 (L900 converted at the average 1999 exchange rate of
L1 = $1.62) for serving as a director of BP Pensions Trustees Limited.
(h) Includes standard Amoco Corporation non-executive director remuneration of
$89,762 and a special payment of $304,000 in recognition of service to the
Amoco Corporation board.
(i) Ex gratia payment in lieu of superannuation in recognition of contribution
to the board of The British Petroleum Company p.l.c.
(j) Includes standard Amoco Corporation non-executive director remuneration of
$89,762 and a special payment of $154,000 in recognition of service to the
Amoco Corporation board.
(k) Includes standard Amoco Corporation non-executive director remuneration of
$89,762 and a special payment of $124,000 in recognition of service to the
Amoco Corporation board.
TOTAL EMOLUMENTS
Total emoluments include salary and benefits earned and paid during the
relevant financial year, plus bonuses, which are paid in the following year,
plus for 1999 the value of the awards made under the 1997-99 Plan in respect of
the three years covered by that Plan. The total remuneration paid during 1999 to
all directors and the secretary as a group was $21,502,000.
86
<PAGE>
ITEM 12-- OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES (a)
Pursuant to the various BP Amoco Group share option schemes, the following
options for Ordinary Shares of the Company were outstanding at March 24, 2000:
<TABLE>
<CAPTION>
Expiry Exercise
Options dates of price
outstanding options per share
------------ ------------ ------------
(shares)
<S> <C> <C>
312,425,993 2000 to 2010 $2.09 to $10.10
</TABLE>
Options under the BP Amoco Share Option Plan were granted to Mr Fuller in
1999. See Item 11 -- Compensation of Directors and Officers.
As at March 24, 2000, the following directors, together with the secretary
of BP Amoco p.l.c., held options under the BP Amoco Group share option schemes
for Ordinary Shares or their calculated equivalent as set out below:
<TABLE>
<CAPTION>
<S> <C>
Sir John Browne............... 5,968
J G S Buchanan................ 5,586
R F Chase..................... 9,324
W D Ford...................... 4,536,444
H L Fuller................... 15,062,244
C S Gibson-Smith.............. 2,154
R L Olver..................... 6,856
B K Sanderson................. 4,250
J C Hanratty.................. 9,324
----------
Total......................... 19,642,150
==========
</TABLE>
- ----------
(a) See also Item 18-- Note 33 of Notes to Financial Statements.
ITEM 13 -- INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In the ordinary course of its business the Group has transactions with
various organizations with which certain of its directors are associated but,
except as described in this report, no material transactions responsive to this
item have been entered into in the period commencing January 1, 1999 to March
24, 2000.
87
<PAGE>
PART III
ITEM 15 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16 -- CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED
SECURITIES AND USE OF PROCEEDS
BP Amoco p.l.c.'s Articles of Association were amended by special
resolution on September 1,1999.
The 'Description of BP Amoco Ordinary Shares' and 'Description of BP Amoco
American Depositary Shares' contained in BP Amoco's Report on Form 6-K filed on
March 27, 2000, are incorporated herein by reference.
88
<PAGE>
PART IV
ITEM 18 -- FINANCIAL STATEMENTS
See pages F-3 through F-97 and page S-1, incorporated herein by reference.
ITEM 19 -- FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The following financial statements, together with the reports of the
Independent Auditors thereon, are filed as part of this annual report:
<TABLE>
<CAPTION>
Page
<S> <C>
Reports of Independent Auditors and Consents of Independent Auditors.... F-1
Consolidated Statement of Income for the Years
Ended December 31, 1999, 1998 and 1997................................ F-3
Consolidated Balance Sheet at December 31, 1999 and 1998................ F-4
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997................................ F-5
Statement of Total Recognized Gains and Losses for the Years
Ended December 31, 1999, 1998 and 1997................................ F-5
Statement of Changes in BP Amoco Shareholders' Interest for
the Years Ended December 31, 1999, 1998 and 1997...................... F-6
Notes to Financial Statements........................................... F-8
Supplementary Oil and Gas Information (Unaudited)....................... F-85
Schedule for the Years Ended December 31, 1999, 1998 and 1997
Schedule II Valuation and Qualifying Accounts......................... S-1
</TABLE>
(B) EXHIBITS
The following documents are filed as part of this annual report:
<TABLE>
<CAPTION>
Page
<S> <C>
Computation of Ratio of Earnings to Fixed Charges (Unaudited)........... E-1
Memorandum and Articles of Association of BP Amoco p.l.c
(embodying amendments to September 1, 1999)........................... E-2
</TABLE>
The total amount of long-term debt securities of the Registrant and its
subsidiaries authorized under any one instrument does not exceed 10% of the
total assets of BP Amoco p.l.c. and its subsidiaries on a consolidated basis.
The Company agrees to furnish copies of any or all such instruments to the
Securities and Exchange Commission upon request.
89
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BP AMOCO p.l.c.
(REGISTRANT)
/s/ Judith C. Hanratty
(SECRETARY)
Dated: March 29, 2000
90
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
REPORT OF INDEPENDENT AUDITORS
To: The Board of Directors
BP Amoco p.l.c.
We have audited the accompanying consolidated balance sheets of BP Amoco
p.l.c. as of December 31, 1999 and 1998, and the related consolidated statements
of income, changes in BP Amoco shareholders' interest, total recognized gains
and losses, and cash flows for each of the three years in the period ended
December 31, 1999. Our audits also included the financial statement schedule
listed in the Index at Item 19(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
The consolidated financial statements for each of the two years in the
period ended December 31,1998 give retroactive effect to the merger of The
British Petroleum Company p.l.c. and Amoco Corporation, which has been accounted
for as a merger. We did not audit the financial statements of Amoco Corporation
for the year ended December 31,1997, which statements reflect net income
constituting approximately 33% of the related consolidated financial statement
total for the year ended December 31, 1997. Those statements, which were
prepared in accordance with accounting principles generally accepted in the
United States, were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to amounts included for Amoco
Corporation for 1997 (before the conversion to accounting principles generally
accepted in the United Kingdom), is based solely on the report of the other
auditors.
We conducted our audits in accordance with United Kingdom auditing
standards which do not differ in any significant respect from United States
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation (including the conversion of the financial
statements of Amoco Corporation to accounting principles generally accepted in
the United Kingdom). We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of BP Amoco p.l.c. at
December 31, 1999 and 1998, and the consolidated results of its operations and
its consolidated cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United Kingdom which differ in certain respects from those followed in
the United States (see Note 44 of Notes to Financial Statements). Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ ERNST&YOUNG
London, England Ernst & Young
February 15, 2000
----------------------------------------------------------------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated February
15, 2000, with respect to the consolidated financial statements of BP Amoco
p.l.c. included in this Annual Report (Form 20-F) for the year ended December
31, 1999 in the following Registration Statements:
Registration Statement on Form F-3 (File No. 333-9790) of BP Amoco p.l.c.
Registration Statements on Form F-3 (File Nos. 33-39075 and 33-20338) of BP
America Inc. and BP Amoco p.l.c.;
Registration Statement on Form F-3 (File No. 33-29102) of The Standard Oil
Company and BP Amoco p.l.c.; and
Registration Statements on Form S-8 (File Nos. 33-21868, 333-9020, 333-9798
and 333-79399) of BP Amoco p.l.c.
/s/ ERNST&YOUNG
London, England Ernst & Young
March 29, 2000
F - 1
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
To: THE BOARD OF DIRECTORS AND
Shareholders of Amoco Corporation
In our opinion, the consolidated statements of income and cash flows (not
presented separately herein) present fairly, in all material respects the
results of the operations and the cash flows of Amoco Corporation and its
subsidiaries for the year ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Amoco Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 24, 1998
---------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-21868, 333-9020, 333-9798 and 333-79399) of BP
Amoco p.l.c. and in the Prospectuses constituting part of the Registration
Statements on Form F-3 (No. 33-39075 and 33-20338) of BP America and BP Amoco
p.l.c. and (No. 33-29102) of The Standard Oil Company and BP Amoco p.l.c. and
(No. 333-9790) of BP Amoco p.l.c. of our report dated February 24, 1998,
appearing in Item 19 of this Annual Report on Form 20-F.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 29, 2000
F - 2
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
Note 1999 1998 1997
------ ------ ------ ------
($ million, except per share amounts)
<S> <C> <C> <C>
TURNOVER............................................. 101,180 83,732 108,564
Less: Joint ventures................................. 17,614 15,428 16,804
------ ------ ------
GROUP TURNOVER....................................... 2 83,566 68,304 91,760
Replacement cost of sales............................ 68,615 56,270 73,828
Production taxes..................................... 3 1,017 604 1,307
------ ------ ------
GROSS PROFIT......................................... 13,934 11,430 16,625
Distribution and administration expenses............. 4 6,064 6,044 6,742
Exploration expense.................................. 548 921 962
------ ------ ------
7,322 4,465 8,921
Other income......................................... 5 414 709 662
------ ------ ------
GROUP REPLACEMENT COST OPERATING PROFIT.............. 7,736 5,174 9,583
Share of profits of joint ventures................... 555 825 544
Share of profits of associated undertakings.......... 603 522 556
------ ------ ------
TOTAL REPLACEMENT COST OPERATING PROFIT.............. 8,894 6,521 10,683
Profit (loss) on sale of businesses.................. 6 (421) 395 127
Profit (loss) on sale of fixed assets................ 6 84 653 313
Restructuring costs.................................. 6 (1,943) -- --
Merger expenses...................................... 6 -- (198) --
Refinery network rationalization..................... 6 -- -- (47)
European refining and marketing joint venture
implementation..................................... 6 -- -- (265)
------ ------ ------
REPLACEMENT COST PROFIT BEFORE INTEREST AND TAX...... 6,614 7,371 10,811
Inventory holding gains (losses)..................... 1,728 (1,391) (939)
------ ------ ------
HISTORICAL COST PROFIT BEFORE INTEREST AND TAX....... 8,342 5,980 9,872
Interest expense..................................... 7 1,316 1,177 1,035
------ ------ ------
PROFIT BEFORE TAXATION............................... 7,026 4,803 8,837
Taxation............................................. 9 1,880 1,520 3,013
------ ------ ------
PROFIT AFTER TAXATION................................ 5,146 3,283 5,824
Minority shareholders' interest...................... 138 63 151
------ ------ ------
PROFIT FOR THE YEAR*................................. 5,008 3,220 5,673
Dividend requirements on preference shares*.......... 2 1 1
------ ------ ------
PROFIT FOR THE YEAR APPLICABLE TO ORDINARY SHARES*... 5,006 3,219 5,672
====== ====== ======
PROFIT PER ORDINARY SHARE - CENTS
Basic ............................................... 11 25.82 16.77 29.56
Diluted.............................................. 11 25.68 16.70 29.41
====== ====== ======
DIVIDENDS PER ORDINARY SHARE - CENTS................. 10 20.0 19.8 18.0
====== ====== ======
Average number outstanding of 25 cents ordinary shares
(in millions)...................................... 19,386 19,192 19,184
====== ====== ======
</TABLE>
- ----------
* A summary of the adjustments to profit for the year of the Group 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 44.
The Notes to Financial Statements are an integral part of this Statement.
F - 3
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
---------------------------------
Note 1999 1998
------ --------------- ----------------
($ million)
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets................. 19 3,344 3,037
Tangible assets................... 20 52,631 54,880
Investments
Joint ventures
Gross assets................... 9,948 9,053
Gross liabilities.............. 4,744 4,048
------ ------
Net investment................. 21 5,204 5,005
Associated undertakings.......... 21 4,334 4,162
Other............................ 21 571 605
------ ------
10,109 9,772
------ ------
TOTAL FIXED ASSETS.................. 66,084 67,689
CURRENT ASSETS
Inventories....................... 22 5,124 3,642
Trade receivables................. 23 9,417 5,778
Other receivables falling due
Within one year.................. 23 3,930 3,626
After more than one year......... 23 3,455 3,305
Investments....................... 24 220 470
Cash at bank and in hand.......... 1,331 405
------ ------
23,477 17,226
------ ------
CURRENT LIABILITIES -- FALLING DUE WITHIN ONE YEAR
Finance debt...................... 25 4,900 4,114
Trade payables.................... 26 8,203 5,091
Other accounts payable and accrued
liabilities....................... 26 10,172 10,238
------ ------
23,275 19,443
------ ------
NET CURRENT ASSETS (LIABILITIES).... 202 (2,217)
------ ------
TOTAL ASSETS LESS CURRENT LIABILITIES 66,286 65,472
Noncurrent liabilities
Finance debt...................... 25 9,644 9,641
Accounts payable and accrued
liabilities....................... 26 2,245 2,047
Provisions for liabilities and charges
Deferred taxation................. 9 1,783 1,632
Other............................. 27 8,272 8,579
------ ------
21,944 21,899
------ ------
NET ASSETS.......................... 44,342 43,573
Minority shareholders' interest..... 1,061 1,072
------ ------
BP AMOCO SHAREHOLDERS' INTEREST*.... 43,281 42,501
====== ======
REPRESENTED BY:
Capital shares
Preference........................ 21 21
Ordinary.......................... 4,871 4,842
Paid in surplus..................... 29 3,684 3,386
Merger reserve...................... 29 697 697
Retained earnings................... 30 34,008 33,555
------ ------
43,281 42,501
====== ======
</TABLE>
- ----------
* A summary of the adjustments to BP Amoco 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 44.
The Notes to Financial Statements are an integral part of this Balance
Sheet.
F - 4
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
Note 1999 1998 1997
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES............ 31 10,290 9,586 15,558
------ ------ ------
DIVIDENDS FROM JOINT VENTURES........................ 949 544 190
------ ------ ------
DIVIDENDS FROM ASSOCIATED UNDERTAKINGS............... 219 422 551
------ ------ ------
SERVICING OF FINANCE AND RETURNS ON INVESTMENTS
Interest received.................................... 179 223 243
Interest paid........................................ (1,065) (961) (911)
Dividends received................................... 34 43 13
Dividends paid to minority shareholders.............. (151) (130) --
------ ------ ------
NET CASH OUTFLOW FROM SERVICING OF FINANCE AND
RETURNS ON INVESTMENTS............................. (1,003) (825) (655)
------ ------ ------
TAXATION
UK corporation tax................................... (559) (391) (500)
Overseas tax......................................... (701) (1,314) (1,773)
------ ------ ------
TAX PAID............................................. (1,260) (1,705) (2,273)
------ ------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments for fixed assets............................ (6,457) (8,431) (8,600)
Purchase of shares for employee share schemes........ (77) (254) (300)
Proceeds from the sale of fixed assets............... 18 1,149 1,387 1,468
------ ------ ------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (5,385) (7,298) (7,432)
------ ------ ------
ACQUISITIONS AND DISPOSALS
Investments in associated undertakings............... (197) (396) (1,021)
Acquisitions......................................... 17 (102) (314) --
Net investment in joint ventures..................... (750) 708 (1,967)
Proceeds from the sale of businesses................. 18 1,292 780 364
------ ------ ------
NET CASH INFLOW (OUTFLOW) FOR
ACQUISITIONS AND DISPOSALS 243 778 (2,624)
------ ------ ------
EQUITY DIVIDENDS PAID................................ (4,135) (2,408) (2,437)
------ ------ ------
NET CASH (OUTFLOW) INFLOW ........................... (82) (906) 878
====== ====== ======
FINANCING............................................ 31 (954) (377) 1,012
MANAGEMENT OF LIQUID RESOURCES....................... 31 (93) (596) (167)
INCREASE IN CASH..................................... 31 965 67 33
------ ------ ------
(82) (906) 878
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
PROFIT FOR THE YEAR.................................. 5,008 3,220 5,673
Currency translation differences..................... (921) 55 (1,587)
------ ------ ------
TOTAL RECOGNIZED GAINS AND LOSSES RELATING TO THE YEAR 4,087 3,275 4,086
====== ======
Prior year adjustment -- change in accounting policy.. 715
------
Total recognized gains and losses.................... 4,802
======
</TABLE>
- ---------------
For a cash flow statement and a statement of comprehensive income prepared on
the basis of US GAAP see Note 44 -- US generally accepted accounting principles.
- --------------------------------------------------------------------------------
The Notes to Financial Statements are an integral part of these Statements.
F - 5
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
STATEMENT OF CHANGES IN BP AMOCO SHAREHOLDERS' INTEREST
On October 4, 1999 the parent company's authorised share capital of 12
billion ordinary shares of 50 cents each was subdivided into 24 billion ordinary
shares of 25 cents amounting to $6 billion. Also outstanding are preference
shares of L12,750,000 ($21 million). Also during the year 51,842,146 ordinary
shares were issued under the share dividend plan by capitalization of the share
premium account and 66,162,232 ordinary shares were issued under employee share
schemes. The authorized ordinary share capital of BP Amoco p.l.c. at December
31, 1998 was 12 billion ordinary shares of 50 cents each and at December 31,
1997 the authorised ordinary share capital was 7,949 million ordinary shares of
25 pence each.
The allotted share capital at December 31, was as follows:
<TABLE>
<CAPTION>
Shares
---------------------
Authorized Issued Amount
----------- --------- --------
($ million)
<S> <C> <C> <C>
NON-EQUITY-- PREFERENCE SHARES
8% cumulative first preference
shares of L1 each at
December 31, 1999, 1998 and 1997.... 7,250,000 7,232,838 12
=========== ========= ========
9% cumulative second preference
shares of L1 each at
December 31, 1999, 1998 and 1997.... 5,500,000 5,473,414 9
=========== ========= ========
EQUITY--ORDINARY SHARES OF 25 CENTS EACH
Authorized
December 31, 1999............................... 24,000,000,000
==============
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------
1999 1998 1997
---------------------- ---------------------- ----------------------
ISSUED Shares of Shares of Shares of
25 cents each Amount 50 cents each Amount 50 cents each Amount
------------- ------ ------------- ------ ------------- ------
(thousands) ($ million) (thousands) ($ million) (thousands) ($ million)
<S> <C> <C> <C> <C> <C> <C>
January 1................ 19,366,020 4,842 9,597,793 4,309 9,598,573 4,361
Employee share schemes... 66,162 16 29,833 13 40,407 18
Share dividend plan...... 51,842 13 110,285 46 87,179 36
Share repurchases........ -- -- (54,901) (27) (128,366) (64)
Redenomination of shares
into US dollars....... -- -- -- 484 -- --
Exchange adjustment...... -- -- -- 17 -- (42)
------------- ------ ------------- ------ ------------- ------
December 31.............. 19,484,024 4,871 9,683,010 4,842 9,597,793 4,309
============= ====== ============= ====== ============= ======
PAID IN SURPLUS
January 1................ 3,386 3,777 3,733
Premium on shares issued:
Employee share schemes. 311 117 144
Share dividend plan ... (13) (46) (36)
Exchange adjustment...... -- 22 (64)
Redenomination of shares
into US dollars......... -- (484) --
------ ------ ------
December 31.............. 3,684 3,386 3,777
====== ====== ======
</TABLE>
The Notes to Financial Statements are an integral part of this Statement.
F - 6
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
STATEMENT OF CHANGES IN BP AMOCO SHAREHOLDERS' INTEREST (CONCLUDED)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
MERGER RESERVE
January 1.......................................... 697 650 673
Employee share schemes............................. -- 97 92
Share repurchases.................................. -- (50) (115)
------ ------ ------
December 31........................................ 697 697 650
====== ====== ======
RETAINED EARNINGS
January 1.......................................... 33,555 33,746 32,231
Profit for the year................................ 5,008 3,220 5,673
Exchange adjustment................................ (921) 16 (1,481)
Share repurchases.................................. -- (507) (1,243)
Dividends (c)
Preference (non-equity)........................... (2) (1) (1)
Ordinary (equity)................................. (3,882) (4,120) (3,451)
Qualifying Employee Share Ownership Trust (d)...... (61) (42) --
Share dividend plan................................ 311 1,243 907
------ ------ ------
December 31........................................ 34,008 33,555 32,635
====== ======
Prior year adjustment - change in accounting
policy (Note 43)................................. 1,111
------
December 31, 1997-- as restated.................... 33,746
======
</TABLE>
- ----------
(a) During 1999, 51,842,146 Ordinary Shares (1998, 110,285,094 and 1997,
87,179,495) were issued under the share dividend plan at par value, by
capitalization of paid in surplus.
(b) Voting on substantive resolutions tabled at a general meeting is on a poll.
On a poll, shareholders present in person or by proxy have two votes for
every L5 in nominal amount of the first and second preference shares
held and one vote for every ordinary share held. On a show of hands vote on
other resolutions (procedural matters) at a general meeting, shareholders
present in person or by proxy have one vote each.
In the event of the winding up of the company preference shareholders would
be entitled to a sum equal to the capital paid up on the preference shares
plus an amount in respect of accrued and unpaid dividends and a premium
equal to the higher of (i) 10% of the capital paid up on the preference
shares and (ii) the excess of the average market price of such shares on
the London Stock Exchange during the previous six months over par value.
(c) See Note 10 -- Dividends.
(d) See Note 33 -- Employee share schemes.
(e) See Note 30 -- Retained earnings.
The Notes to Financial Statements are an integral part of this Statement.
F - 7
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES
ACCOUNTING STANDARDS
These accounts are prepared in accordance with applicable UK accounting
standards. The Group has adopted Financial Reporting Standard No.12 `Provisions,
Contingent Liabilities and Contingent Assets' (FRS12) and Financial Reporting
Standard No.13 `Derivatives and Other Financial Instruments: Disclosures'
(FRS13) with effect from January 1,1999.
The financial information for 1998 and 1997 has been restated to comply
with the requirements of FRS12. See Note 43 for further information.
BASIS OF PREPARATION
The Group's main activities are the exploration and production of crude oil
and natural gas; the refining, marketing, supply and transportation of petroleum
products; and the manufacturing and marketing of petrochemicals.
The preparation of financial statements in conformity with UK generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses; and the disclosure of contingent assets and liabilities. Actual
results could differ from the estimates and assumptions used.
GROUP CONSOLIDATION
The Group financial statements comprise a consolidation of the accounts of
the parent company and its subsidiary undertakings (subsidiaries). The results
of subsidiaries acquired or sold are consolidated for the periods from or to the
date on which control passes.
An associated undertaking (associate) is an entity in which the Group has a
long-term equity interest and over which it exercises significant influence. The
consolidated financial statements include the Group proportion of the operating
profit or loss, exceptional items, stock holding gains or losses, interest
expense, taxation and net assets of associates (the equity method).
A joint venture is an entity in which the Group has a long-term interest
and shares control with one or more co-venturers. The consolidated financial
statements include the Group proportion of turnover, operating profit or loss,
exceptional items, stock holding gains or losses, interest expense, taxation,
gross assets and gross liabilities of the joint venture (the gross equity
method).
Certain of the Group's activities are conducted through joint arrangements
and are included in the consolidated financial statements in proportion to the
Group's interest in the income, expenses, assets and liabilities of these joint
arrangements.
On the acquisition of a subsidiary, or of an interest in a joint venture or
associated undertaking, fair values reflecting conditions at the date of
acquisition are attributed to the identifiable net assets acquired. When the
cost of acquisition exceeds the fair values attributable to the Group's share of
such net assets the difference is treated as purchased goodwill. This is
capitalized and amortized over its estimated useful economic life, limited to a
maximum period of 20 years.
F - 8
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CONVENTION
The accounts are prepared under the historical cost convention. Historical
cost accounts show the profits available to shareholders and are the most
appropriate basis for presentation of the Group's balance sheet. Profit or loss
determined under the historical cost convention includes stock holding gains or
losses and, as a consequence, does not necessarily reflect underlying trading
results.
REPLACEMENT COST
The results of individual businesses and geographical areas are presented
on a replacement cost basis. Replacement cost operating results exclude stock
holding gains or losses and reflect the average cost of supplies incurred during
the year, and thus provide insight into underlying trading results. Stock
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.
INVENTORY VALUATION
Inventories are valued at cost to the Group using the first-in first-out
method or at net realizable value, whichever is the lower. Stores are stated at
or below cost calculated mainly using the average method.
FOREIGN CURRENCIES
On consolidation, assets and liabilities of subsidiary undertakings are
translated into US dollars at closing rates of exchange. Income and cash flow
statements are translated at average rates of exchange. Exchange differences
resulting from the retranslation of net investments in subsidiary and associated
undertakings at closing rates, together with differences between income
statements translated at average rates and at closing rates, are dealt with in
reserves. Exchange gains and losses arising on long-term foreign currency
borrowings used to finance the Group's foreign currency investments are also
dealt with in reserves. All other exchange gains or losses on settlement or
translation at closing rates of exchange of monetary assets and liabilities are
included in the determination of profit for the year.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments (derivatives) to manage
certain exposures to fluctuations in foreign currency exchange rates and
interest rates, and to manage some of its margin exposure from changes in oil
and natural gas prices. Derivatives are also traded in conjunction with these
risk management activities.
The purpose for which a derivative contract is used is identified at
inception. To qualify as a derivative for risk management, the contract must be
in accordance with established guidelines which ensure that it is effective in
achieving its objective. All contracts not identified at inception as being for
the purpose of risk management are designated as being held for trading
purposes, as are all oil price derivatives, and accounted for using the fair
value method.
The Group accounts for derivatives using the following methods:
FAIR VALUE METHOD: derivatives are carried on the balance sheet at fair
value (`marked to market') with changes in that value recognized in earnings of
the period. This method is used for all derivatives which are held for trading
purposes. Interest rate contracts traded by the Group include futures, swaps,
options and swaptions. Foreign exchange contracts traded include forwards and
options. Oil price contracts traded include swaps, options and futures.
F - 9
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
ACCRUAL METHOD: amounts payable or receivable in respect of derivatives are
recognized ratably in earnings over the period of the contracts. This method is
used for derivatives held to manage interest rate risk. These are principally
swap agreements used to manage the balance between fixed and floating interest
rates on long-term finance debt. Other derivatives held for this purpose may
include swaptions and futures contracts. Amounts payable or receivable in
respect of these derivatives are recognized as adjustments to interest expense
over the period of the contracts. Changes in the derivative's fair value are not
recognized.
DEFERRAL METHOD: gains and losses from derivatives are deferred and
recognized in earnings or as adjustments to carrying amounts, as appropriate,
when the underlying debt matures or the hedged transaction occurs. This method
is used for derivatives used to convert non-US dollar borrowings into US
dollars, to hedge significant non-US dollar firm commitments or anticipated
transactions, and to manage some of the Group's exposure to natural gas price
fluctuations. Derivatives used to convert non-US dollar borrowings into US
dollars include foreign currency swap agreements and forward contracts. Gains
and losses on these derivatives are deferred and recognized on maturity of the
underlying debt, together with the matching loss or gain on the debt.
Derivatives used to hedge significant non-US dollar transactions include foreign
currency forward contracts and options and to hedge natural gas price exposures
include swaps, futures and options. Gains and losses on these contracts and
option premia paid are also deferred and recognized in the income statement or
as adjustments to carrying amounts, as appropriate, when the hedged transaction
occurs.
Where derivatives used to manage interest rate risk or to convert non-US
dollar debt or to hedge other anticipated cash flows are terminated before the
underlying debt matures or the hedged transaction occurs, the resulting gain or
loss is recognized on a basis which matches the timing and accounting treatment
of the underlying debt or hedged transaction. When an anticipated transaction is
no longer likely to occur or finance debt is terminated before maturity, any
deferred gain or loss that has arisen on the related derivative is recognized in
the income statement together with any gain or loss on the terminated item.
DEPRECIATION
Oil and gas production assets are depreciated using a unit-of-production
method based upon estimated proved reserves. Other tangible and intangible
assets are depreciated on the straight line method over their estimated useful
lives. The average estimated useful lives of refineries are 20 years, chemicals
manufacturing plants 20 years and service stations 15 years. Other intangibles
are amortized over a maximum period of 20 years.
The Group undertakes a review for impairment of a fixed asset or goodwill
if events or changes in circumstances indicate that the carrying amount of the
fixed asset or goodwill may not be recoverable. To the extent that the carrying
amount exceeds the recoverable amount, that is the higher of net realizable
value and value in use, the fixed asset or goodwill is written down to its
recoverable amount. The value in use is determined from estimated discounted
future net cash flows.
MAINTENANCE EXPENDITURE
Expenditure on major maintenance, refits or repairs is capitalized where it
enhances the performance of an asset above its originally assessed standard of
performance; replaces an asset or part of an asset which was separately
depreciated and which is then written off; or restores the economic benefits of
an asset which has been fully depreciated. All other maintenance expenditure is
charged to income as incurred.
F - 10
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- ACCOUNTING POLICIES (CONTINUED)
EXPLORATION EXPENDITURE
Exploration expenditure is accounted for in accordance with the successful
efforts method. Exploration and appraisal drilling expenditure is initially
capitalized as an intangible fixed asset. When proved reserves of oil and
natural gas are determined and development is sanctioned, the relevant
expenditure is transferred to tangible production assets. All exploration
expenditure determined as unsuccessful is charged against income. Exploration
licence acquisition costs are amortized over the estimated period of
exploration. Geological and geophysical exploration costs are charged against
income as incurred.
DECOMMISSIONING
Provision for decommissioning is recognized in full at the commencement of
oil and natural gas production. The amount recognized is the present value of
the estimated future expenditure determined in accordance with local conditions
and requirements. A corresponding tangible fixed asset of an amount equivalent
to the provision is also created. This is subsequently depreciated as part of
the capital costs of the production and transportation facilities. Any change in
the present value of the estimated expenditure is reflected as an adjustment to
the provision and the fixed asset.
PETROLEUM REVENUE TAX
The charge for petroleum revenue tax is calculated using a
unit-of-production method.
CHANGES IN UNIT-OF-PRODUCTION FACTORS
Changes in factors which affect unit-of-production calculations are dealt
with prospectively, not by immediate adjustment of prior years' amounts.
ENVIRONMENTAL LIABILITIES
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations and that do not contribute to current or
future earnings are expensed.
Liabilities for environmental costs are recognized when environmental
assessments or clean-ups are probable and the associated costs can be reasonably
estimated. Generally, the timing of these provisions coincides with the
commitment to a formal plan of action or, if earlier, on divestment or on
closure of inactive sites. The amount recognized is the best estimate of the
expenditure required. Where the liability will not be settled for a number of
years the amount recognized is the present value of the estimated future
expenditure.
LEASES
Assets held under leases which result in Group companies receiving
substantially all risks and rewards of ownership (finance leases) are
capitalized as tangible fixed assets at the estimated present value of
underlying lease payments. The corresponding finance lease obligation is
included with borrowings. Rentals under operating leases are charged against
income as incurred.
RESEARCH
Expenditure on research is written off in the year in which it is incurred.
F - 11
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- ACCOUNTING POLICIES (CONCLUDED)
INTEREST
Interest is capitalized gross during the period of construction where it
relates either to the financing of major projects with long periods of
development or to dedicated financing of other projects. All other interest is
charged against income.
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The cost of providing pensions and other postretirement benefits is charged
to income on a systematic basis, with pension surpluses and deficits amortized
over the average expected remaining service lives of current employees. The
difference between the amounts charged to income and the contributions made to
pension plans is included within other provisions or debtors as appropriate. The
amounts accrued for other postretirement benefits and unfunded pension
liabilities are included within other provisions.
DEFERRED TAXATION
Deferred taxation is calculated, using the liability method, in respect of
timing differences arising primarily from the difference between the accounting
and tax treatments of both depreciation and petroleum revenue tax. Provision is
made or recovery anticipated where timing differences are expected to reverse in
the foreseeable future.
DISCOUNTING
The unwinding of the discount on provisions is included within interest
expense. Any change in the amount recognized for environmental and other
provisions arising through changes in discount rates is included within interest
expense.
COMPARATIVE FIGURES
Certain previous years' figures have been restated to conform with the 1999
presentation.
NOTE 2 -- TURNOVER
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and operating revenue.......................... 91,891 76,448 100,913
Customs duties and sales taxes....................... 8,325 8,144 9,153
------ ------ ------
83,566 68,304 91,760
====== ====== ======
</TABLE>
NOTE 3 -- PRODUCTION TAXES
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
UK petroleum revenue tax............................. 237 45 306
Overseas production taxes............................ 780 559 1,001
------ ------ ------
1,017 604 1,307
====== ====== ======
</TABLE>
F - 12
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- DISTRIBUTION AND ADMINISTRATION EXPENSES
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Distribution......................................... 5,031 4,714 5,178
Administration....................................... 1,033 1,330 1,564
------ ------ ------
6,064 6,044 6,742
====== ====== ======
</TABLE>
NOTE 5 -- OTHER INCOME
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Income from other fixed asset investments............ 66 74 101
Other interest and miscellaneous income.............. 348 635 561
------ ------ ------
414 709 662
====== ====== ======
Income from investments publicly traded included above 14 10 19
------ ------ ------
</TABLE>
NOTE 6 -- EXCEPTIONAL ITEMS
Exceptional items comprise profit (loss) on sale of businesses and fixed
assets, restructuring costs, merger expenses, refinery network rationalization
costs and European refining and marketing joint venture implementation costs as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Profit on sale of businesses
- --Group................................................. 427 310 250
- --Joint ventures........................................ 42 85 --
Loss on sale of businesses
- --Group................................................. (890) -- --
- --Joint ventures........................................ -- -- (123)
------ ------ ------
(421) 395 127
Profit (loss) on sale of fixed assets -- Group.......... 84 653 313
------ ------ ------
(337) 1,048 440
Restructuring costs -- Group............................ (1,900) -- --
Restructuring costs -- Joint ventures................... (43) -- --
Merger expenses -- Group................................ -- (198) --
Refinery network rationalization -- Group............... -- -- (47)
European refining and marketing joint venture
implementation -- Group............................... -- -- (265)
------ ------ ------
Exceptional items....................................... (2,280) 850 128
Taxation credit (charge):
Sale of businesses...................................... (21) (36) (7)
Sale of fixed assets.................................... (29) (185) (208)
Restructuring costs..................................... 280 -- --
Merger expenses......................................... -- 23 --
Refinery network rationalization........................ -- -- 24
European refinery and marketing joint venture implementation -- -- 53
------ ------ ------
Exceptional items, net of tax........................... (2,050) 652 (10)
====== ====== ======
</TABLE>
F - 13
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SALES OF BUSINESSES AND FIXED ASSETS
The profit on sale of businesses during 1999 relates mainly to the
divestment by the Group of its Canadian oil properties and certain chemicals
businesses. These included the Verdugt acid salts business; the Plaskon
electronics materials business located in the USA and Singapore; and the US
Fibers and Yarns business. The profit on sale of businesses by joint ventures is
mainly attributable to the disposal by the BP/Mobil joint venture of its retail
network in Hungary.
The major elements of the loss on sale of businesses or termination of
operations in 1999 are the disposal by the Group of its interest in the
Pedernales oil field in Venezuela and the closure of its paraxylene joint
venture in Singapore.
For 1999 the sale of fixed assets includes the Federal Trade
Commission-mandated sale of distribution terminals and service stations in the
USA; the divestment by the Group of its interest in an olefins cracker at Wilton
in the UK and the sale and leaseback of US railcars.
In 1998 the principal sales of businesses were exploration and production
properties in the USA and Papua New Guinea, the retail network in the Czech
Republic, the Adibis fuel additives business and a speciality chemicals
distribution business. The profit on sale of businesses by joint ventures
relates mainly to the disposal by the BP/Mobil joint venture of its retail
network in Belgium. In 1998 the profit on the sale of fixed assets arose
principally from the divestment of the refinery in Lima, Ohio, and the sale and
leaseback of the Amoco building in Chicago.
In 1997 the major disposals were the sale of US exploration and production
properties and an intrastate natural gas pipeline in Texas. Other divestments
included oil marketing assets in Thailand and advanced materials and plastic
resin businesses in the UK. The loss on sale of businesses by joint ventures
related principally to the costs of the BP/Mobil joint venture terminating base
oil manufacturing operations at Llandarcy in the UK.
Additional information on the sale of businesses and fixed assets is given
in Note 18 - Disposals.
RESTRUCTURING COSTS
These costs arising from restructuring activity across the Group following
the merger of BP and Amoco at the end of 1998 and relate predominantly to the
Group's US operations. The major elements of the restructuring charges comprise
employee severance costs ($1,212 million) and provisions to cover future rental
payments on surplus leasehold office accommodation and other property ($297
million). During 1999 some 16,000 employees left the Group through severance or
outsourcing arrangements. Also included in the restructuring charges are office
closure costs, contract termination payments and asset write-downs. The cash
outflow for these restructuring charges during the year was $976 million.
MERGER EXPENSES
BP Amoco incurred fees and expenses of $198 million in connection with the
merger. These costs relate principally to investment banking fees as well as
legal, accounting and regulatory filing fees.
REFINERY NETWORK RATIONALIZATION
The net charge for refinery network rationalization in 1997 of $47 million
(1996 $24 million) represents the balance of the costs associated with the
rationalization of the BP Amoco Group's international refining system announced
in 1995.
EUROPEAN REFINING AND MARKETING JOINT VENTURE IMPLEMENTATION
The one-off costs associated with the setting up of the European refining
and marketing joint venture with Mobil in 1997 were $265 million. These costs
represent the BP Amoco Group's share of charges for severance, restructuring,
rebranding and other implementation charges.
F - 14
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- INTEREST EXPENSE
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Bank loans and overdrafts............................ 119 158 188
Other loans.......................................... 854 762 651
Finance leases....................................... 75 90 102
------ ------ ------
1,048 1,010 941
Capitalized.......................................... 43 119 116
------ ------ ------
Group................................................ 1,005 891 825
Joint ventures....................................... 70 54 --
Associated undertakings.............................. 131 108 83
Unwinding of discount on provisions (Note 43)........ 130 124 127
Change in discount rate for provisions (Note 43)..... (20) -- --
------ ------ ------
Total charged against profit......................... 1,316 1,177 1,035
====== ====== ======
</TABLE>
Interest expense includes a charge of $24 million (1998 $12 million and
1997 nil) relating to early redemption of debt.
NOTE 8 -- DEPRECIATION AND AMOUNTS PROVIDED
Included in the income statement under the following headings:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Depreciation:
Replacement cost of sales.......................... 4,185 4,666 4,631
Distribution....................................... 408 335 390
Administration..................................... 115 100 88
Exceptional items.................................. 258 -- 8
------ ------ ------
4,966 5,101 5,117
====== ====== ======
Depreciation of capitalized leased assets included above 70 71 76
------ ------ ------
Amounts provided against fixed asset investments:
Exceptional items.................................. 84 -- --
Replacement cost of sales.......................... (1) 200 --
------ ------ ------
83 200 --
====== ====== ======
</TABLE>
The rationalization of office and other facilities in 1999 following the
merger resulted in the write-off of redundant IT and other office equipment and
furnishings. This charge of $258 million has been included within exceptional
items. In addition for 1999 the charge for depreciation includes $100 million
for the impairment of the Badami field in Alaska and $123 million for the
write-down of various Chemicals and Refining and Marketing assets.
The charge for depreciation in 1998 included $214 million for the
impairment of the Opon field in Colombia and $61 million for the write-down of
various other oil and natural gas properties. The impairment of the Opon field
reflected lower than anticipated natural gas production and related reserve
estimates. The charge also reflected impairment of the adjacent power plant
because of the unavailability of an economic fuel supply. As a result of
increased economic uncertainty in Russia, the Group wrote down the carrying
value of its investment in A O Sidanco by $200 million.
In assessing the value in use of potentially impaired assets, a discount
rate of 10% has been used.
F - 15
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- TAXATION
CHARGE FOR TAXATION
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
United Kingdom corporation tax:
Current at 30.25% (1998 at 31.0% and 1997 at 31.5%) 875 1,325 1,329
Overseas tax relief................................ (363) (566) (777)
------ ------ ------
512 759 552
Deferred at 30.0% (1998 at 31.0% and 1997 at 31.5%) 91 (188) 217
------ ------ ------
603 571 769
Advance corporation tax............................ -- (76) (116)
------ ------ ------
603 495 653
------ ------ ------
Overseas:
Current............................................ 1,143 896 2,247
Deferred........................................... 30 (4) 7
Joint ventures..................................... 5 (15) --
Associated undertakings............................ 99 148 106
------ ------ ------
1,277 1,025 2,360
------ ------ ------
Taxation charge for the year......................... 1,880 1,520 3,013
====== ====== ======
</TABLE>
Included in the charge for the year is a credit of $230 million (1998 $198
million charge and 1997 $138 million charge) relating to exceptional items.
PROVISIONS FOR DEFERRED TAXATION
<TABLE>
<CAPTION>
Gross potential
Provisions liability
--------------- ---------------
Years ended December 31,
---------------------------------
1999 1998 1999 1998
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
Analysis of movements during the year:
At January 1........................................ 1,632 1,183 6,618 5,817
Exchange adjustments................................ 30 37 (42) 20
Charge (credit) for the year........................ 121 (192) 563 177
Deletions/transfers................................. -- 604 -- 604
------ ------ ------ ------
At December 31...................................... 1,783 1,632 7,139 6,618
====== ====== ====== ======
of which -- United Kingdom......................... 1,015 927 1,482 1,577
-- Overseas............................... 768 705 5,657 5,041
====== ====== ====== ======
</TABLE>
F - 16
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- TAXATION (CONTINUED)
<TABLE>
<CAPTION>
Gross potential
Provisions liability
--------------- ---------------
Years ended December 31,
---------------------------------
1999 1998 1999 1998
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
Analysis of provision:
Depreciation........................................ 2,567 2,413 10,279 9,905
Petroleum revenue tax............................... (332) (420) (332) (420)
Other timing differences............................ (452) (328) (2,808) (2,834)
Advance corporation tax............................. -- (33) -- (33)
------ ------ ------ ------
1,783 1,632 7,139 6,618
====== ====== ====== ======
</TABLE>
If provision for deferred taxation had been made on the basis of the gross
potential liability, the taxation charge for the year would have been increased
(decreased) as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
United Kingdom................................................. (185) (40) 83
Overseas....................................................... 627 409 43
------ ------ ------
442 369 126
====== ====== ======
</TABLE>
Deferred taxation is not generally provided in respect of liabilities which
may arise on the distribution of accumulated reserves of overseas subsidiaries,
joint ventures and associates.
RECONCILIATION OF THE UK STATUTORY TAX RATE TO THE EFFECTIVE TAX RATE OF THE
GROUP ON REPLACEMENT COST PROFIT BEFORE EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(% of profit before tax)
<S> <C> <C> <C>
United Kingdom statutory tax rate................................. 30 31 31
Increase (decrease) resulting from:
Current year timing differences not provided (including
current year losses unrelieved/prior year losses utilized).... (10) (6) (4)
Tax on inventory holding gains (relief for inventory
holding losses)............................................... 2 (3) (1)
Overseas taxes at higher rates.................................. 5 4 4
Tax credits..................................................... -- (2) (2)
Advance corporation tax......................................... -- (1) (1)
Other........................................................... 1 2 3
------ ------ ------
Effective tax rate on replacement cost profit before
exceptional items............................................. 28 25 30
====== ====== ======
</TABLE>
Further information presented in compliance with the requirements of FASB
Statement of Financial Accounting Standards No. 109 -- 'Accounting For Income
Taxes' is set out below.
F - 17
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- TAXATION (CONCLUDED)
EFFECTIVE TAX RATE
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Analysis of profit before taxation:
United Kingdom....................................... 1,663 2,269 3,305
Overseas............................................. 5,363 2,534 5,532
------ ------ ------
7,026 4,803 8,837
====== ====== ======
Taxation............................................. 1,880 1,520 3,013
====== ====== ======
Effective tax rate................................... 27% 32% 34%
====== ====== ======
</TABLE>
The following relates the United Kingdom statutory tax rate to the
effective tax rate of the Group based on profit before taxation:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(% of profit before tax)
<S> <C> <C> <C>
United Kingdom statutory tax rate.................... 30 31 31
Increase (decrease) resulting from:
Current year timing differences not provided....... (9) (12) (3)
(Prior year losses utilized) current year
losses unrelieved................................ 2 5 (2)
(Inventory holding gains not taxed) no relief for
inventory holding losses......................... (5) 5 2
Overseas taxes at higher rates..................... 5 7 6
Tax credits........................................ -- (2) (2)
Advance corporation tax............................ -- (2) (1)
Amortization of purchase price allocation.......... 1 1 1
Other ............................................. 3 (1) 2
------ ------ ------
Effective tax rate................................... 27 32 34
====== ====== ======
</TABLE>
F - 18
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- DIVIDENDS PER ORDINARY SHARE
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
(pence per share) (cents per share) ($ million)
BP AMOCO
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends per ordinary share:
First quarterly........... 3.069 -- -- 5.00 -- -- 970 -- --
Second quarterly.......... 3.112 -- -- 5.00 -- -- 970 -- --
Third quarterly........... 3.033 -- -- 5.00 -- -- 971 -- --
Fourth quarterly.......... 3.125 3.059 -- 5.00 5.00 -- 971 968 --
------ ------ ------ ------ ------ ------ ------ ------ ------
12.339 3.059 -- 20.00 5.00 -- 3,882 968 --
------ ------ ------ ------ ------ ------ ------ ------ ------
BP
Dividends per ordinary share:
First quarterly........... 2.875 2.625 4.75 4.25 551 490
Second quarterly.......... 3.000 2.750 5.00 4.48 579 517
Third quarterly........... 3.000 2.750 5.00 4.61 584 519
Fourth quarterly.......... -- 2.875 -- 4.70 -- 543
------ ------ ------ ------ ------ ------
8.875 11.00 14.75 18.04 1,714 2,069
------ ------ ------ ------ ------ ------
AMOCO
Dividends per common stock:
First quarterly........... 18.75 17.50 362 345
Second quarterly.......... 18.75 17.50 360 349
Third quarterly........... 18.75 17.50 358 344
Fourth quarterly.......... 18.75 17.50 358 344
------ ------ ------ ------
75.0 70.00 1,438 1,382
------ ------ ------ ------
Total Group............... 3,882 4,120 3,451
===== ===== ======
</TABLE>
On an ordinary share equivalent basis, the Amoco quarterly dividends for
1998 were 4.7 cents and 1997 4.4 cents.
F - 19
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- PROFIT PER ORDINARY SHARE
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(cents per share)
<S> <C> <C> <C>
Basic earnings per share....................................... 25.82 16.77 29.56
Diluted earnings per share..................................... 25.68 16.70 29.41
</TABLE>
The calculation of basic earnings per ordinary share is based on the profit
attributable to ordinary shareholders, i.e. profit for the year less preference
dividends, related to the weighted average number of ordinary shares in issue
during the year. The weighted average number of shares has been adjusted for the
subdivision (2 for 1 share split) of ordinary shares effective October 4, 1999.
The profit attributable to ordinary shareholders is $5,006 million (1998 $3,219
million and 1997 $5,672 million). The average number of shares outstanding
excludes the shares held by the Employee Share Ownership Plans.
The calculation of diluted earnings per share is based on profit
attributable to ordinary shareholders as for basic earnings per share. However,
the number of shares outstanding is adjusted to show the potential dilution if
employee share options are converted into ordinary shares. The number of
ordinary shares outstanding for basic and diluted earnings per share may be
reconciled as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(shares million)
<S> <C> <C> <C>
Weighted average number of ordinary shares..................... 19,386 19,192 19,184
Ordinary shares issuable under employee share schemes.......... 111 84 98
------ ------ ------
19,497 19,276 19,282
====== ====== ======
</TABLE>
In addition to basic earnings per share based on the historical cost profit
for the year, a further measure, based on replacement cost profit before
exceptional items, is provided as it is considered that this measure gives an
indication of underlying performance.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(cents per share)
<S> <C> <C> <C>
Profit for the year......................................... 25.82 16.77 29.56
Inventory holding (gains) losses............................ (8.91) 7.25 4.89
------ ------ ------
Replacement cost profit for the year........................ 16.91 24.02 34.45
Exceptional items, net of tax............................... 10.57 (3.40) 0.06
------ ------ ------
Replacement cost profit before exceptional items............ 27.48 20.62 34.51
====== ====== ======
</TABLE>
F - 20
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12-- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Historical cost Profit per
Group profit before Profit ordinary
turnover interest and tax (loss) share
-------- ---------------- ------ ----------
($ million) (cents)
<S> <C> <C> <C> <C>
Year ended December 31, 1999
First quarter............................. 17,984 195 (176) (0.91)
Second quarter............................ 22,939 2,461 1,635 8.44
Third quarter............................. 26,665 2,990 1,848 9.53
Fourth quarter............................ 33,592 2,696 1,701 8.76
------- ------- ------- -------
Total..................................... 101,180 8,342 5,008 25.82
======= ======= ======= =======
Year ended December 31, 1998
First quarter............................. 21,516 1,376 639 3.32
Second quarter............................ 20,969 1,845 991 5.17
Third quarter............................. 21,651 2,279 1,578 8.22
Fourth quarter............................ 19,596 480 12 0.06
------- ------- ------- -------
Total..................................... 83,732 5,980 3,220 16.77
======= ======= ======= =======
</TABLE>
NOTE 13 -- RENTAL EXPENSE UNDER OPERATING LEASES
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Minimum rentals:
Tanker charters.................................... 357 396 447
Plant and machinery................................ 509 429 335
Land and buildings................................. 271 315 268
------ ------ ------
1,137 1,140 1,050
Less: Rentals from sub-leases........................ (178) (105) (99)
------ ------ ------
959 1,035 951
====== ====== ======
</TABLE>
NOTE 14 -- RESEARCH AND DEVELOPMENT
Expenditure on research and development amounted to $310 million (1998 $412
million and 1997 $382 million).
F - 21
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- AUDITORS' REMUNERATION
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
UK Total UK Total UK Total
------ ------ ------ ------ ------ ------
($million)
<S> <C> <C> <C> <C> <C> <C>
Audit fees -- Ernst & Young:
Group audit........................ 5.5 13.5 5.8 12.1 3.9 8.9
Local statutory audit and
quarterly review................. 1.0 6.1 0.8 5.1 0.7 4.2
------ ------ ------ ------ ------ ------
6.5 19.6 6.6 17.2 4.6 13.1
------ ------ ------ ------ ------ ------
Audit fees -- PricewaterhouseCoopers LLP:
Group audit........................ -- -- 0.1 2.7 0.1 2.8
Local statutory audit and
quarterly review................. -- -- 0.2 0.9 0.2 1.1
------ ------ ------ ------ ------ ------
-- -- 0.3 3.6 0.3 3.9
------ ------ ------ ------ ------ ------
Total Group.......................... 6.5 19.6 6.9 20.8 4.9 17.0
====== ====== ====== ====== ====== ======
Fees for other services -- Ernst & Young
Acquisitions and disposals......... 3.4 4.5 1.7 4.2 2.5 2.5
Taxation services.................. 1.4 5.9 0.8 2.6 -- 2.1
Consultancy and other.............. 10.2 25.9 6.2 18.4 2.4 13.2
------ ------ ------ ------ ------ ------
15.0 36.3 8.7 25.2 4.9 17.8
====== ====== ====== ====== ====== ======
</TABLE>
1999 Group audit fees include $1.1 million (1998 $0.7 million) for excess
of actual over estimated fees for 1998.
Fees to major firms of accountants other than Ernst & Young for non-audit
services amounted to $160 million (1998 $181 million and 1997 $175 million).
NOTE 16 -- CURRENCY EXCHANGE GAINS AND LOSSES
Accounted net foreign currency exchange losses included in the
determination of profit for the year amounted to $17 million gain (1998 $23
million loss and 1997 $126 million loss).
F - 22
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 17 -- ACQUISITIONS
In 1999 the Group acquired the outstanding 83% of ProGas, a major Canadian
natural gas supply aggregator, and 50% of Solarex, a manufacturer and developer
of photovoltaic products and systems, it did not already own. Also in 1999 the
Group purchased APEX, a solar electric company based in Montpellier, France.
During 1998 the Group acquired Styrenix Kunststoffe, a plastics business
based in Germany and a number of minor refining and marketing businesses.
In 1997 BP Amoco and Shell Oil completed the formation of Altura Energy, a
partnership combining their oil and gas interests in west Texas and southeast
New Mexico, USA. Altura Energy is consolidated within these accounts.
The cost of acquisitions in the Group cash flow statement comprises:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1999 1998 1997
---------------------------- ----- -----
Book Fair Fair Fair
value Adjustment value value value
----- ---------- ----- ----- -----
($ million)
<S> <C> <C> <C> <C> <C>
Goodwill......................................... -- 20 20 38 --
Other intangible assets.......................... 3 -- 3 1 --
Tangible assets.................................. 109 10 119 194 810
Fixed assets - investments....................... 9 -- 9 71 --
Working capital.................................. 15 -- 15 27 25
MSI.............................................. (1) -- (1) -- (835)
------ ------ ------ ------ ------
135 30 165 331 --
Finance debt..................................... (58) -- (58) (17) --
------ ------ ------ ------ ------
Cash consideration............................... 77 30 107 314 --
Cash acquired.................................... 5 -- 5 -- --
------ ------ ------ ------ ------
Net cash outflow................................. 72 30 102 314 --
====== ====== ====== ====== ======
</TABLE>
F - 23
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 18 -- DISPOSALS
Disposals during 1999 included the sale of the Group's Canadian oil
properties; the divestment of its interest in the Pedernales oil field in
Venezuela; the Federal Trade Commission-mandated sale of distribution terminals
and service stations in the USA and certain chemicals activities. These included
the Verdugt acid salts business; its interest in an olefins cracker at Wilton in
the UK; the Plaskon electronics materials business located in the USA and
Singapore; the US Fibers and Yarns business; and the sale and leaseback of US
railcars. In addition the Group incurred a loss on the closure of its paraxylene
joint venture in Singapore.
In 1998, the major disposals were exploration and production properties in
the USA and Papua New Guinea, the refinery in Lima, Ohio, the sale and leaseback
of the Amoco building in Chicago, the retail network in the Czech Republic, the
Adibis fuel additives business and a speciality chemicals distribution business.
In 1997, the major disposals were the sale of US exploration and production
properties and an intrastate natural gas pipeline in Texas. Other divestments
included oil marketing assets in Thailand and advanced materials and phenolic
resin businesses in the UK.
Total proceeds received for disposals represent the following amounts
shown in the cash flow statement:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Proceeds from the sale of businesses................. 1,292 780 364
Proceeds from the sale of fixed assets............... 1,149 1,387 1,468
------ ------ ------
2,441 2,167 1,832
====== ====== ======
</TABLE>
The disposals comprise the following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Intangible assets.................................... 199 151 21
Tangible assets...................................... 2,340 945 1,184
Fixed asset -- investments........................... 206 157 40
Working capital...................................... 175 88 203
Other ............................................... (94) (125) (110)
------ ------ ------
2,826 1,216 1,338
Profit (loss) on sale of businesses.................. (463) 310 250
Profit (loss) on sale of fixed assets................ 84 653 313
------ ------ ------
Total consideration.................................. 2,447 2,179 1,901
Deferred consideration............................... (12) (9) (69)
Cash transferred on sale............................. 6 (3) --
------ ------ ------
Net cash inflow...................................... 2,441 2,167 1,832
====== ====== ======
</TABLE>
F - 24
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 19 -- INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Exploration Other
expenditure Goodwill intangibles Total
----------- ----------- ----------- -----------
($ million)
<S> <C> <C> <C> <C>
Cost
At January 1, 1999..................... 3,601 139 338 4,078
Exchange adjustments................... (14) (9) (3) (26)
Acquisitions........................... -- 20 3 23
Additions.............................. 757 6 181 944
Transfers.............................. (118) -- -- (118)
Deletions.............................. (446) (5) (12) (463)
----------- ----------- ----------- -----------
At December 31, 1999................... 3,780 151 507 4,438
=========== =========== =========== ===========
Depreciation
At January 1, 1999..................... 715 79 247 1,041
Exchange adjustments................... (7) (4) (3) (14)
Charge for the year.................... 304 6 44 354
Transfers.............................. (23) -- -- (23)
Deletions.............................. (261) (1) (2) (264)
----------- ----------- ----------- -----------
At December 31, 1999................... 728 80 286 1,094
=========== =========== =========== ===========
Net book amount
At December 31, 1999................... 3,052 71 221 3,344
At December 31, 1998................... 2,886 60 91 3,037
=========== =========== =========== ===========
</TABLE>
F - 25
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 20 -- TANGIBLE ASSETS
Property, plant and equipment:
<TABLE>
<CAPTION>
Other of which
Exploration Refining businesses Assets
and and and under
Production Marketing Chemicals corporate Total construction
----------- --------- --------- ---------- ------- ------------
($ million)
Cost
<S> <C> <C> <C> <C> <C> <C>
At January 1, 1999......... 82,776 18,455 14,178 1,810 117,219 4,145
Prior year adjustment - change
in accounting policy..... 1,823 -- -- -- 1,823 --
----------- --------- --------- ---------- ------- ------------
Restated................... 84,599 18,455 14,178 1,810 119,042 4,145
Exchange adjustments....... (972) 75 (436) (16) (1,349) (21)
Acquisitions............... -- 10 1 108 119 53
Additions.................. 2,964 871 1,078 140 5,053 1,531
Transfers.................. 355 (5) -- -- 350 (2,605)
Deletions.................. (3,215) (735) (714) (406) (5,070) (74)
----------- --------- --------- ---------- ------- ------------
At December 31, 1999....... 83,731 18,671 14,107 1,636 118,145 3,029
=========== ========= ========= ========== ======= ============
Depreciation
At January 1, 1999......... 46,648 8,744 6,435 927 62,754
Prior year adjustment - change
in accounting policy..... 1,408 -- -- -- 1,408
----------- --------- --------- ---------- -------
Restated................... 48,056 8,744 6,435 927 64,162
Exchange adjustments....... (691) 30 (189) (7) (857)
Charge for the year........ 3,401 799 534 182 4,916
Transfers.................. 23 -- -- -- 23
Deletions.................. (1,532) (457) (453) (288) (2,730)
----------- --------- --------- ---------- -------
At December 31, 1999....... 49,257 9,116 6,327 814 65,514
=========== ========= ========= ========== =======
Net book amount
At December 31, 1999....... 34,474 9,555 7,780 822 52,631 3,029
At December 31, 1998....... 36,543 9,711 7,743 883 54,880 4,145
=========== ========= ========= ========== ======= ============
</TABLE>
Assets held under capital leases, capitalized interest and land at net book
amount included above:
<TABLE>
<CAPTION>
Leased assets Capitalized interest
---------------------------- ----------------------------
Cost Depreciation Net Cost Depreciation Net
----- ------------- ----- ----- ------------ -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1999....... 1,741 969 772 2,554 1,321 1,233
At December 31, 1998....... 1,887 918 969 2,843 1,661 1,182
====== ============= ==== ===== ============ =====
</TABLE>
<TABLE>
<CAPTION>
Leasehold land
---------------------
Over 50 years
Freehold land unexpired Other
------------- ------------- -----
($ million)
<S> <C> <C> <C>
At December 31, 1999.................................. 942 47 38
At December 31, 1998.................................. 963 42 29
============= ============= =====
</TABLE>
F - 26
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 21 -- FIXED ASSETS -- INVESTMENTS
<TABLE>
<CAPTION>
Associated undertakings
------------------------
Share of
retained Joint Own Other
Shares Loans profit ventures Loans shares(a) investments(b) Total
------ ----- -------- -------- ----- ------ ----------- ------
($ million)
Cost
<S> <C> <C> <C> <C> <C> <C> <C> <C>
At January 1, 1999.... 2,759 835 783 5,005 80 489 51 10,002
Exchange adjustments.. (6) (11) (49) (395) (1) (16) (1) (479)
Additions and net movements
in joint ventures... 147 63 110 843 85 77 1 1,326
Acquisitions.......... 6 -- -- -- -- -- 3 9
Transfers............. 14 3 -- (249) -- -- -- (232)
Deletions............. (54) (8) 19 -- (68) (94) (3) (208)
------ ----- -------- -------- ----- ------ ----------- ------
At December 31, 1999.. 2,866 882 863 5,204 96 456 51 10,418
====== ===== ======== ======== ===== ====== =========== ======
Amounts provided
At January 1, 1999.... 215 -- -- -- 14 -- 1 230
Exchange adjustments.. (2) -- -- -- -- -- -- (2)
Provided in the year.. 64 -- -- -- 19 -- -- 83
Transfers............. -- -- -- -- -- -- -- --
Deletions............. -- -- -- -- (2) -- -- (2)
------ ----- -------- -------- ----- ------ ----------- ------
At December 31, 1999. 277 -- -- -- 31 -- 1 309
====== ===== ======== ======== ===== ====== =========== ======
Net book amount
At December 31, 1999.. 2,589 882 863 5,204 65 456 50 10,109
At December 31, 1998.. 2,544 835 783 5,005 66 489 50 9,772
====== ===== ======== ======== ===== ====== =========== ======
</TABLE>
- ----------
(a) Own shares are held in Employee Share Ownership Plans (ESOPs) to meet the
future requirements of the Employee Share Schemes (see Note 33) and prior
to award under the Long Term Performance Plan (see Note 34). At December
31, 1999 the ESOPs held 53,989,000 (62,768,000 at December 31, 1998) shares
for the Employee Share Schemes and 9,502,000 (6,266,000 at December 31,
1998) shares for the Long Term Performance Plan. The market value of these
shares at December 31, 1999 was $640 million ($517 million at December 31,
1998).
(b) Other investments are unlisted.
NOTE 22 -- INVENTORIES
<TABLE>
<CAPTION>
December 31,
--------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Petroleum................................................... 3,517 1,896
Chemicals................................................... 828 917
Other....................................................... 202 174
------ ------
4,547 2,987
Stores...................................................... 577 655
------ ------
5,124 3,642
====== ======
Replacement cost............................................ 5,165 3,747
====== ======
</TABLE>
F - 27
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 23 -- RECEIVABLES
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
Within After Within After
1 year 1 year 1 year 1 year
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
Trade receivables.................................. 9,417 -- 5,778 --
====== ====== ====== ======
Other receivables:
Joint ventures................................... 725 -- 644 --
Associated undertakings.......................... 60 45 153 7
Prepayments and accrued income................... 1,229 459 786 509
Taxation recoverable............................. 263 83 248 165
Pension prepayment............................... -- 2,542 -- 2,213
Other............................................ 1,653 326 1,795 411
------ ------ ------ ------
3,930 3,455 3,626 3,305
====== ====== ====== ======
</TABLE>
Provisions for doubtful debts deducted from Trade receivables amounted to
$117 million ($126 million at December 31, 1998).
- ----------
See Note 44 -- US generally accepted accounting principles.
NOTE 24 -- CURRENT ASSETS -- INVESTMENTS
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Publicly traded -- United Kingdom...................................... 56 48
-- Foreign............................................. 42 33
------ ------
98 81
Not publicly traded................................................... 122 389
------ ------
220 470
====== ======
Stock exchange value of publicly traded investments................... 99 83
====== ======
</TABLE>
NOTE 25 -- FINANCE DEBT
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
Within After Within After
1 year 1 year 1 year 1 year
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
Bank loans and overdrafts.......................... 264(a) 726 302(a) 1,778
Other loans........................................ 4,548(a) 7,181 3,711(a) 6,080
------ ------ ------ ------
Total borrowings................................... 4,812 7,907 4,013 7,858
Obligations under capital leases................... 88 1,737 101 1,783
------ ------ ------ ------
4,900 9,644 4,114 9,641
====== ====== ====== ======
</TABLE>
- ---------------
(a) Amounts due within one year include current maturities of long-term debt.
F - 28
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 25 -- FINANCE DEBT (CONTINUED)
Where a borrowing is swapped into another currency, the borrowing is
accounted in the swap currency and not in the original currency of denomination.
Total borrowings include $91 million ($86 million at December 31, 1998) for the
carrying value of currency swaps and forward contracts.
Included within Other loans repayable within one year are US Industrial
Revenue/Municipal Bonds of $1,376 million (December 31, 1998 $1,277 million)
with maturity periods ranging up to 35 years. They are classified as repayable
within one year, as required under UK GAAP, as the bondholders typically have
the option to tender these bonds for repayment on interest reset dates. Any
bonds that are tendered are usually remarketed and BP Amoco has not experienced
any significant repurchases. BP Amoco considers these bonds to represent
long-term funding when assessing the maturity profile of its borrowings.
ANALYSIS OF BORROWINGS BY YEAR OF REPAYMENT
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------- ------------------------------
Bank loans Bank loans
and Other and Other
overdrafts loans Total overdrafts loans Total
--------- --------- --------- ---------- -------- ---------
($ million)
<S> <C> <C> <C> <C> <C> <C>
Due after 10 years........ 110 1,290 1,400 11 1,391 1,402
Due within 6-10 years...... 45 1,816 1,861 266 1,825 2,091
5 years......... 410 722 1,132 201 365 566
4 years......... 36 377 413 785 1,081 1,866
3 years......... 87 1,774 1,861 288 652 940
2 years......... 38 1,202 1,240 227 766 993
--------- --------- --------- ---------- -------- ---------
726 7,181 7,907 1,778 6,080 7,858
1 year.......... 264 4,548 4,812 302 3,711 4,013
--------- --------- --------- ---------- -------- ---------
990 11,729 12,719 2,080 9,791 11,871
========= ========= ========= ========== ======== =========
</TABLE>
Amounts included above repayable by instalments part of which falls due
after five years from December 31, are as follows:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
After five years............................................ 46 174
Within five years........................................... 91 406
------ ------
137 580
====== ======
</TABLE>
Interest rates on borrowings repayable wholly or partly more than five
years from December 31, 1999 range from 6% to 9% with a weighted average of 7%.
The weighted average interest rate on finance debt is 6%.
At December 31, 1999 the Group had substantial amounts of undrawn borrowing
facilities available, including $3,000 million ($2,800 million at December 31,
1998) expiring in 2000. These facilities are with a number of international
banks and borrowings under them would be at pre-agreed rates. Certain of these
facilities support the Group's commercial paper programme.
F - 29
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 25 -- FINANCE DEBT (CONTINUED)
ANALYSIS OF BORROWINGS BY CURRENCY
<TABLE>
<CAPTION>
December 31,
December 31, 1999 1998
----------------------------------------------------------------- -----------
Fixed rate debt Floating rate debt
--------------------------------- -------------------
Weighted Weighted Weighted
average average time average
interest for which interest
rate rate is fixed Amount rate Amount Total Total
-------- ------------- ------ -------- ------ ----- -----
(%) (Years) ($ million) (%) ($ million)($ million) ($ million)
<S> <C> <C> <C> <C> <C> <C> <C>
US dollars................. 7 9 6,529 6 5,915 12,444 10,852
Sterling................... -- -- -- 6 49 49 613
Other currencies........... 8 31 46 6 180 226 406
------ -------- ------- -------
Total loans................ 6,575 6,144 12,719 11,871
====== ======== ======= =======
</TABLE>
The Group aims for a balance between floating and fixed interest rates and,
in 1999, the Group's upper limit for the proportion of floating rate debt was
65% of total net debt outstanding. Aside from debt issued in the US municipal
bond markets, interest rates on floating rate debt denominated in US dollars are
linked principally to LIBOR, while rates on debt in other currencies are based
on local market equivalents. The Group monitors interest rate risk using a
process of sensitivity analysis. Assuming no changes to the borrowings and
hedges described above, it is estimated that a change of 1% in the general level
of interest rates on January 1, 2000 would change 2000 profit before tax by
approximately $80 million.
FAIR VALUES AND CARRYING AMOUNTS OF BORROWINGS
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1999 1998
---------------------- ----------------------
Carrying Carrying
Fair value amount Fair value amount
---------- -------- ---------- --------
($ million)
<S> <C> <C> <C> <C>
Short-term borrowings.................... 2,433 2,433 1,659 1,659
Long-term borrowings..................... 9,979 10,118 10,555 10,126
---------- -------- ---------- --------
Total borrowings......................... 12,412 12,551 12,214 11,785
========== ======== ========== ========
</TABLE>
The fair value and carrying amounts of borrowings shown above exclude the
effects of currency swaps, interest rate swaps and forward contracts (which are
included for presentation in the balance sheet). Long-term borrowings include
debt which matures in the year from December 31, 1999, whereas in the balance
sheet long-term debt of current maturity is reported under amounts falling due
within one year. Long-term borrowings also include US Industrial
Revenue/Municipal Bonds classified on the balance sheet as repayable within one
year. The carrying amount of the Group's short-term borrowings, which mainly
comprise commercial paper, bank loans and overdrafts, approximate their fair
value. The fair value of the Group's long-term borrowings is estimated using
quoted prices or, where these are not available, discounted cash flow analyses,
based on the Group's current incremental borrowing rates for similar types and
maturities of borrowing.
F - 30
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 25 -- FINANCE DEBT (CONTINUED)
OBLIGATIONS UNDER CAPITAL LEASES
The future minimum lease payments together with the present value of the
net minimum lease payments were as follows:
<TABLE>
<CAPTION>
December 31,
1999
-----------
($ million)
<S> <C>
2000 ............................................................... 103
2001 ............................................................... 192
2002 ............................................................... 183
2003 ............................................................... 172
2004 ............................................................... 178
Thereafter........................................................... 3,569
-----------
4,397
Less: amount representing lease interest............................. 2,572
-----------
Present value of net minimum capital lease payments.................. 1,825
===========
of which -- due within one year...................................... 88
-- due after one year....................................... 1,737
-----------
</TABLE>
The following information is presented in compliance with the requirements
of US GAAP.
Bank loans and overdrafts and other loans -- long term
<TABLE>
<CAPTION>
Weighted average December 31,
interest rate at ---------------
December 31, 1999 1999 1998
----------------- ------ ------
(%) ($ million)
<S> <C> <C> <C>
Sterling.................................. 6 40 486
US dollars................................ 8 7,786 7,180
Other currencies.......................... 10 81 192
------ ------
7,907 7,858
====== ======
</TABLE>
Bank loans and overdrafts and other loans -- short term
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Current maturities of long-term debt........................ 1,003 1,077
Commercial paper............................................ 2,201 1,333
Bank loans and overdrafts................................... 232 300
Other....................................................... 1,376 1,303
------ ------
4,812 4,013
====== ======
</TABLE>
F - 31
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 25 -- FINANCE DEBT (CONCLUDED)
<TABLE>
<CAPTION>
Weighted average
interest rate
at December 31,
----------------
1999 1998
------ ------
(%)
<S> <C> <C>
Commercial paper............................................ 6 5
Bank loans, overdrafts and other borrowings................. 6 7
US Industrial Revenue/Municipal bonds....................... 5 4
</TABLE>
NOTE 26 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
Within After Within After
1 year 1 year 1 year 1 year
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
Trade payables....................................... 8,203 -- 5,091 --
====== ====== ====== ======
Other accounts payable and accrued liabilities:
Joint ventures..................................... 278 -- 205 --
Associated undertakings............................ 199 4 154 4
Production taxes................................... 417 1,140 241 1,238
Taxation on profits................................ 2,558 39 2,395 39
Social security.................................... 14 -- 14 --
Accruals and deferred income....................... 3,610 618 2,642 454
Dividends.......................................... 971 -- 1,552 --
Other.............................................. 2,125 444 3,035 312
------ ------ ------ ------
10,172 2,245 10,238 2,047
====== ====== ====== ======
</TABLE>
NOTE 27 -- OTHER PROVISIONS
<TABLE>
<CAPTION>
Unfunded Other
pension postretirement
Decommissioning Environmental plans benefits Other Total
--------------- ------------- ------- -------------- ----- -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
At January 1, 1999...... 3,310 1,157 1,767 2,311 272 8,817
Prior year adjusted - change
in accounting policy (Note 43) (229) (172) -- -- 163 (238)
--------------- ------------- ------- -------------- ----- -----
Restated................ 3,081 985 1,767 2,311 435 8,579
Exchange adjustments.... (57) (4) (224) -- (5) (290)
New provisions.......... 80 145 160 42 500 927
Unwinding of discount... 94 25 -- -- 11 130
Change in discount rate. (280) (18) -- -- (2) (300)
Utilized/deleted........ (133) (216) (108) (109) (208) (774)
--------------- ------------- ------- -------------- ----- -----
At December 31, 1999.... 2,785 917 1,595 2,244 731 8,272
=============== ============= ======= ============== ===== =====
</TABLE>
F - 32
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 27 -- OTHER PROVISIONS (CONCLUDED)
At December 31, 1999 the provision for the costs of decommissioning the
Group's oil and natural gas production facilities and pipelines at the end of
their economic lives was $2,785 million. These costs are expected to be incurred
over the next 30 years. The provision has been estimated using existing
technology, at current prices and discounted using a real discount rate of 3.5%
(3%).
The provision for environmental liabilities at 31 December 1999 was $917
million. This represents primarily the estimated environmental restoration and
remediation costs for closed sites or facilities that have been sold. These
costs are expected to be incurred over the next 10 years. The provision has been
estimated using existing technology, at current prices, and discounted using a
real discount rate of 3.5% (3%).
The Group also holds provisions for potential future awards under the
long-term performance plan, expected rental shortfalls on surplus properties and
sundry other liabilities. To the extent that these liabilities are not expected
to be settled within the next three years, the provisions are discounted using a
real discount rate of 3.5% (3%).
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS
An outline of the Group's major financial risks and the policies and
objectives pursued in relation to these risks is set out in the financial risk
management section of Item 9 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations and in Item 9A -- Quantitative and
Qualitative Disclosures about Market Risk.
In the normal course of business the Group is a party to derivative
financial instruments (derivatives) 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. The underlying economic currency of the Group's cash
flows is mainly the US dollar. Accordingly, most of our borrowings are in US
dollars, are hedged with respect to the US dollar or swapped into dollars where
this achieves a lower cost of financing. Significant non-dollar cash flow
exposures are hedged. Gains and losses arising on these hedges are deferred and
recognized in the income statement or as adjustments to carrying amounts, as
appropriate, only when the hedged item occurs. In addition, we trade derivatives
in conjunction with these risk management activities. The results of trading are
recognized in income in the current period.
These derivatives involve, to varying degrees, credit and market risk. With
regard to credit risk, the Group may be exposed to loss in the event of
non-performance by a counterparty. The Group controls credit risk by entering
into derivative contracts only with highly credit-rated counterparties and
through credit approvals, limits and monitoring procedures and does not usually
require collateral or other security. The Group has not experienced material
non-performance by any counterparty.
Market risk is the possibility that a change in interest rates, currency
exchange rates or oil and natural gas prices will cause the value of a financial
instrument to decrease or its obligations to become more costly to settle. When
derivatives are used for the purpose of risk management they do not expose the
Group to market risk because the exposure to market risk created by the
derivative is offset by the opposite exposure arising from the asset, liability,
cash flow or transaction being hedged. When derivatives are held for trading
purposes, the exposure of the Group to market risk is represented by potential
changes in their fair (market) values. The measurement of market risk in trading
activities is discussed further below.
F - 33
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
With the exception of the table of currency exposures shown on page F-36,
short-term debtors and creditors which arise directly from the Group's
operations have been excluded from the disclosures contained in this note, as
permitted by FRS13.
INTEREST RATE RISK
The interest rate and currency profile of the financial liabilities of the
Group at December 31, 1999, after taking into account the effect of interest
rate swaps, currency swaps and forward contracts, are set out below.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------------------------------------------
Fixed rate Floating rate Interest free
------------------------------------ ----------------- ---------------------
Weighted Weighted
Weighted average time Weighted average time
ANALYSIS OF FINANCIAL average for which average until
LIABILITIES BY CURRENCY interest rate rate is fixed Amount interest Amount maturity Amount Total
------------- ------------- ------ -------- ------ ------------ ------ ------
(%) (Years) ($m) (%) ($m) (Years) ($m) ($m)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US dollars............. 7 9 6,704 5 7,587 7 912 15,203
Sterling............... -- -- -- 6 49 4 217 266
Other currencies....... 8 31 46 6 180 5 319 545
------ ------ ------ ------
6,750 7,816 1,448 16,014
====== ====== ====== ======
Analysis of the above liabilities by balance sheet caption:
Creditors-- amounts falling due within one year
- --Finance debt................................................................................. 4,900
Creditors-- amounts falling due after more than one year
- --Finance debt................................................................................. 9,644
- --Other creditors.............................................................................. 1,062
Provisions for liabilities and charges
- --Other provisions............................................................................. 408
------
16,014
======
</TABLE>
The financial liabilities upon which interest is paid comprise principally
borrowings and net obligations under finance leases.
In managing its finance debt, the Group aims for a balance between floating
and fixed interest rates and, in 1999, the Group's upper limit for the
proportion of floating rate debt was 65% of total net debt outstanding. Interest
rate swaps are used by the Group to modify the interest characteristics of its
long-term borrowings from a fixed to a floating rate basis or vice versa. The
following table indicates the types of swaps used and their weighted average
interest rates as at December 31, 1999.
<TABLE>
<CAPTION>
$ million
except percentages
------------------
<S> <C>
Receive fixed rate swaps-- notional amount.................................. 2,300
Average receive fixed rate ................................................. 6.3%
Average pay floating rate................................................... 5.9%
Pay fixed rate swaps-- notional amount...................................... 3,221
Average pay fixed rate...................................................... 7.1%
Average receive floating rate............................................... 6.0%
</TABLE>
The financial liabilities which are interest-free comprise various
accruals, sundry creditors and provisions relating to the Group's normal
commercial operations with payment dates spread over a number of years.
F - 34
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The following table shows the interest rate and currency profile of the
Group's material financial assets at December 31, 1999.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------------------------------------------
Fixed rate Floating rate Interest free
------------------------------------ ----------------- ---------------------
Weighted Weighted
Weighted average time Weighted average time
ANALYSIS OF FINANCIAL average for which average until
ASSETS BY CURRENCY interest rate rate is fixed Amount interest Amount maturity Amount Total
------------- ------------- ------ -------- ------ ------------ ------ ------
(%) (Years) ($m) (%) ($m) (Years) ($m) ($m)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US dollars............. 5 1 12 5 748 3 122 882
Sterling............... 9 2 55 -- -- 1 357 412
Other currencies....... 6 1 44 3 168 2 371 583
------ ------ ------ ------
111 916 850 1,877
====== ====== ====== ======
Analysis of the above assets by balance sheet caption:
Current assets
- --Debtors -- amounts falling due after more than one year.................................... 326
- --Investments................................................................................ 220
- --Cash at bank and in hand................................................................... 1,331
------
1,877
======
</TABLE>
The floating rate financial assets earn interest at various rates set
principally with respect to LIBOR or the local market equivalent.
MATURITY PROFILE OF FINANCIAL LIABILITIES
The profile of the maturity of the financial liabilities included in the
Group's balance sheet at December 31,1999 is shown in the table below.
<TABLE>
<CAPTION>
December 31, 1999
CARRYING AMOUNT OF FINANCIAL LIABILITIES -----------------
($ million)
<S> <C>
Due within: 1 year............................................................ 4,900
1 to 2 years...................................................... 1,505
2 to 5 years...................................................... 3,845
Thereafter........................................................ 5,764
-------
16,014
-------
</TABLE>
FOREIGN EXCHANGE RATE RISK
The table below shows the Group's principal currency exposures arising from
normal trading activities. These exposures give rise to net currency gains and
losses recognized in the profit and loss account. Such exposures comprise the
monetary assets and monetary liabilities of the Group that are not denominated
in the functional currency of the operating unit involved, other than certain
non-US dollar borrowings treated as hedges of net investments in overseas
operations. As at December 31, 1999, these exposures were as shown below.
F - 35
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
FUNCTIONAL CURRENCY OF GROUP OPERATION
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------
Net foreign currency monetary assets (liabilities)
-------------------------------------------------
US dollar Sterling Euro Other Total
--------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
US dollar.............................. -- 747 460 (385) 822
Sterling............................... 141 -- 264 (19) 386
Other.................................. 205 (114) 1 26 118
-------- -------- -------- -------- --------
Total 346 633 725 (378) 1,326
======== ======== ======== ======== ========
</TABLE>
In accordance with its policy for managing its foreign exchange rate risk,
the Group enters into various types of foreign exchange contracts, such as
currency swaps, forwards and options. The fair values and carrying amounts of
these derivatives are shown in the fair value disclosures below.
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
The estimated fair value of the Group's financial instruments is shown in
the table below. The table also shows the `net carrying amount' of the financial
asset or liability. This amount represents the net book value, i.e. market value
when acquired or later marked to market. The carrying amounts and fair values of
finance debt shown below exclude the effects of interest rate swaps, currency
swaps and forward contracts (which are included for presentation in the balance
sheet). Current maturities of long-term finance debt are included under
long-term finance debt.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------
Net carrying
Net fair value amount
asset (liability) asset(liability)
---------------- ---------------
($ million)
<S> <C> <C>
PRIMARY FINANCIAL INSTRUMENTS
Current assets
- --Debtors-- amounts falling due after more than one year.... 326 326
- --Investments............................................... 221 220
- --Cash at bank and in hand.................................. 1,331 1,331
Finance debt
- --Short-term borrowings..................................... (2,433) (2,433)
- --Long-term borrowings...................................... (9,979) (10,118)
- --Net obligations under finance leases...................... (1,824) (1,802)
Creditors-- amounts falling due after more than one year
- --Other creditors........................................... (1,062) (1,062)
Provisions for liabilities and charges-- Other provisions... (408) (408)
DERIVATIVE FINANCIAL OR COMMODITY INSTRUMENTS
Risk management-- interest rate contracts.................. 37 --
-- foreign exchange contracts............... (209) (191)
-- oil price contracts...................... -- --
-- natural gas price contracts.............. 2 --
Trading -- interest rate contracts.................. -- --
-- foreign exchange contracts............... -- --
-- oil price contracts...................... (61) (61)
</TABLE>
F - 36
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate contracts include futures contracts, swap agreements and
options. Foreign exchange contracts include forward and futures contracts, swap
agreements and options. Oil and natural gas price contracts are those which
require settlement in cash and include futures contracts, swap agreements and
options and cash-settled commodity instruments (derivative commodity contracts
that permit settlement either by delivery of the underlying commodity or in
cash) such as forward contracts.
The following methods and assumptions were used by the Group in estimating
its fair value disclosures for its financial instruments: Current assets -
Debtors - amounts falling due after more than one year: The fair value of other
debtors due after one year is estimated not to be materially different from its
carrying value.
Current assets - Investments and Cash at bank and in hand: The carrying
amount reported in the balance sheet for unlisted current asset investments and
cash at bank and in hand approximates their fair value. The fair value of listed
current asset investments has been determined by reference to market prices.
Finance debt: The carrying amount of the Group's short-term borrowings,
which mainly comprise commercial paper, bank loans and overdrafts, approximates
their fair value. The fair value of the Group's long-term borrowings and finance
lease obligations is estimated using quoted prices or, where these are not
available, discounted cash flow analyses, based on the Group's current
incremental borrowing rates for similar types and maturities of borrowing.
Creditors - amounts falling due after more than one year - Other creditors:
These liabilities are predominantly interest-free. In view of the short
maturities, the reported carrying amount is estimated to approximate the fair
value.
Provisions for liabilities and charges - Other provisions: Where the
liability will not be settled for a number of years the amount recognized is the
present value of the estimated future expenditure. The carrying amount of
provisions for onerous contracts thus approximates the fair value.
Derivative financial or commodity instruments: The fair values of the
Group's interest rate contracts (swaps) are based on pricing models which take
into account relevant market data. Fair values for the Group's foreign exchange
contracts (forward contracts, swap agreements and options) are based on market
prices of comparable instruments. The fair values of the Group's oil and natural
gas price contracts (futures contracts, swap agreements, options and forward
contracts) are based on market prices.
RISK MANAGEMENT
Gains and losses on derivatives used for risk management purposes are
deferred and recognized in earnings or as adjustments to carrying amounts, as
appropriate, when the underlying debt matures or the hedged transaction occurs.
When an anticipated transaction is no longer likely to occur or finance debt is
terminated before maturity, any deferred gain or loss that has arisen on the
related derivative is recognized in the income statement, together with any gain
or loss on the terminated item. Where such derivatives used for hedging purposes
are terminated before the underlying debt matures or the hedged transaction
occurs, the resulting gain or loss is recognized on a basis which matches the
timing and accounting treatment of the underlying hedged item. The unrecognized
and carried-forward gains and losses on derivatives used for hedging, and the
movements therein, are shown in the following table.
F - 37
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
Year ended December 31, 1999
---------------------------------------------------------------
Unrecognized Carried forward in the balance sheet
------------------------ ------------------------------------
Gains Losses Total Gains Losses Total
----- ------ ----- ----- ------ -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
Gains and losses at January 1, 1999........... 253 (402) (149) 143 (194) (51)
of which accounted for in income in 1999.... 115 (95) 20 58 (66) (8)
Gains and losses at December 31, 1999......... 236 (215) 21 65 (283) (218)
of which expected to be recognized in income:
In 2000..................................... 53 (58) (5) 32 (45) (13)
In 2001 or later............................ 183 (157) 26 33 (238) (205)
</TABLE>
TRADING ACTIVITIES
The Group maintains active trading positions in a variety of derivatives.
This activity is undertaken in conjunction with risk management activities.
Derivatives held for trading purposes are marked to market and any gain or loss
recognized in the income statement. For traded derivatives, many positions have
been neutralized, with trading initiatives being concluded by taking opposite
positions to fix a gain or loss, thereby achieving a zero net market risk.
The following table shows the fair value at the year end and the average
net fair value of derivatives and other financial instruments held for trading
purposes during the year.
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------
1999 1998
--------------------------------------------- ----------------
Year end Year end Average Average
fair value fair value net fair value net fair value
asset liability asset (liability) asset (liability)
---------- ---------- ---------------- ----------------
($ million)
<S> <C> <C> <C> <C>
Interest rate contracts....... -- -- -- (8)
Foreign exchange contracts.... 4 (4) -- 21
Oil price contracts........... 155 (216) 54 60
---------- ---------- ---------------- ----------------
159 (220) 54 73
========== ========== ================ ================
</TABLE>
The Group measures its market risk exposure, i.e. potential gain or loss in
fair values, on its trading activity using a value at risk technique. This
technique is based on a variance/covariance model and makes a statistical
assessment of the market risk arising from possible future changes in market
values over a 24-hour period. The calculation of the range of potential changes
in fair value takes into account a snapshot of the end-of-day exposures, and the
history of one-day price movements over the previous 12 months, together with
the correlation of these price movements. The potential movement in fair values
is expressed to three standard deviations which is equivalent to a 99.7%
confidence level. This means that, in broad terms, one would expect to see an
increase or a decrease in fair values greater than the value at risk on only one
occasion per year if the portfolio were left unchanged.
The Group calculates value at risk on all instruments that are held for
trading purposes and that therefore give an exposure to market risk. The value
at risk model takes account of derivative financial instruments such as interest
rate forward and futures contracts, swap agreements, options and swaptions,
foreign exchange forward and futures contracts, swap agreements and options and
oil price futures, swap agreements and options. Financial assets and liabilities
and physical crude oil and refined products that are treated as trading
positions are also included in these calculations. The value at risk calculation
for oil price exposure also includes derivative commodity instruments (commodity
contracts that permit settlement either by delivery of the underlying commodity
or in cash) such as forward contracts.
F - 38
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The following table shows values at risk for trading activities.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1999 1998
----------------------------------- -----------------
High Low Average Year end Average Year end
------- ------- ------- -------- ------- --------
($ million)
<S> <C> <C> <C> <C> <C> <C>
Interest rate contracts................ 1 -- 1 -- 2 --
Foreign exchange contracts............. 13 -- 3 1 4 --
Oil price contracts.................... 15 5 9 10 8 12
</TABLE>
The presentation of trading results shown below includes certain activities
of the Group's oil trading division which involve the use of derivative
financial instruments in conjunction with physical and paper trading of oil. It
is considered that a more comprehensive representation of the Group's oil
trading activities is given by the classification of the gains or losses on such
derivatives along with those arising from the physical and paper trades to which
they relate.
The following table shows the trading income arising from derivatives and
other financial instruments. For oil price contract trading, this also includes
income or losses arising on trading of derivative commodity instruments and
physical oil trades, representing the net result of the oil-trading portfolio.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------
1999 1998
-------- --------
Net gain Net gain
(loss) (loss)
-------- --------
($ million)
<S> <C> <C>
Oil price derivative financial and commodity instruments............. 133 540
Physical oil trades.................................................. 151 (325)
-------- --------
Total oil trading.................................................... 284 215
Interest rate contracts.............................................. -- (26)
Foreign exchange contracts........................................... 23 38
-------- --------
307 227
======== ========
</TABLE>
The following information is presented in compliance with the requirements
of US GAAP.
FURTHER INFORMATION ON ACCOUNTING POLICIES
The following information is presented in amplification of the accounting
policies presented in Note 1 -- Accounting policies.
REPORTING IN THE INCOME STATEMENT
Gains and losses on oil price contracts held for trading and for risk
management purposes are reported in cost of sales in the income statement in the
period in which the change in value occurs. Gains and losses on interest rate or
foreign currency derivatives used for trading are reported in other income and
cost of sales, respectively. Gains and losses in respect of derivatives used to
manage interest rate exposures are recognized as adjustments to interest
expense.
Where derivatives are used to convert non-US dollar borrowing into US
dollars, the gains and losses are deferred and recognized on maturity of the
underlying debt, together with the matching loss or gain on the debt. The two
amounts offset each other in the income statement.
F - 39
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Gains and losses on derivatives identified as hedges of significant non-US
dollar firm commitments or anticipated transactions are not recognized until the
hedged transaction occurs. The treatment of the gain or loss arising on the
designated derivative reflects the nature and accounting treatment of the hedged
item. The gain or loss is recorded in cost of sales in the income statement or
as an adjustment to carrying values in the balance sheet, as appropriate.
Gains and losses arising from natural gas price derivatives are recognized
in earnings when the hedged transaction occurs. The gains or losses are reported
as components of the related transactions.
REPORTING IN THE BALANCE SHEET
The carrying amounts of foreign exchange contracts that hedge finance debt
are included within finance debt in the balance sheet. The carrying amounts of
other derivatives, including option premiums paid or received, are included in
the balance sheet under receivables or payables within current assets and
current liabilities respectively, as appropriate.
CASH FLOW EFFECTS
Interest rate swaps give rise, at specified intervals, to cash settlement
of interest differentials. Under currency swaps the counterparties initially
exchange a principal amount in two currencies, agreeing to re-exchange the
currencies at a future date at the same exchange rate. The Group's currency
swaps have terms of up to six years.
Interest rate futures require an initial margin payment and daily
settlement of margin calls. Interest rate forwards require settlement of the
interest rate differential on a specified future date. Currency forwards require
purchase or sale of an agreed amount of foreign currency at a specified exchange
rate at a specified future date, generally over periods of up to one year for
the Group. Currency options involve the initial payment or receipt of a premium
and will give rise to delivery of an agreed amount of currency at a specified
future date if the option is exercised.
For oil and natural gas price futures and options traded on regulated
exchanges, BP Amoco meets initial margin requirements by bank guarantees and
daily margin calls in cash. For swaps and over-the-counter options, BP Amoco
settles with the counterparty on conclusion of the pricing period.
In the statement of cash flows the effect of interest rate derivatives is
reflected in interest paid. The effect of foreign currency derivatives used for
hedging non-US dollar debt is included under financing. The cash flow effects of
foreign currency derivatives used to hedge non-US dollar firm commitments and
anticipated transactions are included in net cash inflow from operating
activities for items relating to earnings or in capital expenditure or
acquisitions, as appropriate, for items of a capital nature. The cash flow
effects of all oil and natural gas price derivatives and all traded derivatives
are included in net cash inflow from operating activities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following information is presented in compliance with the requirements
of FASB Statement of Financial Accounting Standards No. 107 -- 'Disclosures
about Fair Value of Financial Instruments'.
F - 40
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of finance debt are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1999 1998
---------------------- ----------------------
Carrying Fair Carrying Fair
amount value amount value
--------- --------- --------- ---------
($ million)
<S> <C> <C> <C> <C>
Finance debt
Long-term............................... 10,118 9,979 10,126 10,555
Short-term.............................. 2,433 2,433 1,659 1,659
Cash at bank and in hand.................. 1,331 1,331 405 405
</TABLE>
The following information is presented in compliance with the requirements
of FASB Statement of Financial Accounting Standards No. 119 -- 'Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments'.
The carrying amounts of foreign exchange contracts that hedge finance debt
are included within finance debt in the balance sheet. The carrying amounts of
other derivatives are included in the balance sheet under receivables or
payables as appropriate.
In addition to the above financial instruments, the Group has issued third
party guarantees and indemnities amounting to $458 million ($436 million at
December 31, 1998). The credit risk and maximum cash requirement of these
guarantees and indemnities is the full contractual amount, however no material
loss is expected to arise.
The following information is presented in compliance with the requirements
of FASB Statement of Accounting Standards No.105 -- `Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk'.
The table shows the 'fair value' of the asset or liability created by
derivatives. This represents the market value at the balance sheet date. Credit
exposure at December 31 is represented by the column 'fair value asset'.
The table also shows the 'net carrying amount' of the asset or liability
created by derivatives. This amount represents the net book value, i.e. market
value when acquired or later marked to market.
F - 41
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
Gross Net carrying
contract Fair value Fair value amount asset
amount asset (liability) (liability)
--------- ---------- ---------- ------------
($ million)
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Risk management
Interest rate contracts........ 5,521 138 (101) --
Foreign exchange contracts..... 5,026 39 (248) (191)
Oil price contracts............ 504 13 (13) --
Natural gas contracts.......... 4,395 56 (54) --
Trading
Interest rate contracts........ 200 -- -- --
Foreign exchange contracts..... 1,674 4 (4) --
Oil price contracts............ 3,144 148 (207) (59)
AT DECEMBER 31, 1998
Risk management
Interest rate contracts........ 5,866 69 (328) (45)
Foreign exchange contracts..... 8,908 181 (160) (75)
Oil price contracts............ 491 12 (5) 7
Natural gas contracts.......... 1,511 51 (44) --
Trading
Interest rate contracts........ 189 -- -- --
Foreign exchange contracts..... 9,441 30 (39) (9)
Oil price contracts............ 4,038 134 (123) 11
</TABLE>
Interest rate contracts include forward and futures contracts, swap
agreements and options. Foreign exchange contracts include forward and futures
contracts, swap agreements and options. Oil and natural gas price contracts are
those which require settlement in cash and include futures contracts, swap
agreements and options.
INTEREST RATE RISK MANAGEMENT
The Group enters into interest rate contracts to manage its cost of
borrowing as indicated in the following table:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------------- -----------------------------
Gross Fair Fair Gross Fair Fair
contract value value contract value value
amount asset liability amount asset liability
-------- ------- ------- ------- ------- -------
($ million)
<S> <C> <C> <C> <C> <C> <C>
Swaps ....................... 5,521 138 (101) 5,866 69 (328)
======= ======= ======= ======= ======= =======
</TABLE>
Interest rate swaps allow BP Amoco to modify the interest characteristics
of its long-term borrowings from a fixed to a floating rate basis or vice versa.
Under interest rate swaps, the Group agrees with other parties to exchange, at
specified intervals, the interest differentials calculated by reference to an
agreed notional principal amount. There is no exchange of the underlying
principal amount.
F - 42
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The following table indicates the types of swaps used and their weighted
average interest rates. Average variable rates are based on the actual rates in
place at December 31; these may change significantly, affecting future cash
flows. Swap contracts mainly have maturities between one and ten years.
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
------------- -------------
($ million, except percentages)
<S> <C> <C>
Receive-- fixed swaps-- notional amount............ 2,300 2,125
Average receive fixed rate......................... 6.3% 6.6%
Average pay floating rate.......................... 5.9% 5.4%
Pay-- fixed swaps-- notional amount................ 3,221 3,741
Average pay fixed rate............................. 7.1% 7.3%
Average receive floating rate...................... 6.0% 5.3%
</TABLE>
Interest rate futures contracts may be used by the Group, on occasion, in
preference to interest rate swaps to achieve a more cost effective method of
managing the mix between fixed and floating rate debt. These contracts are
commitments to either purchase or sell designated financial instruments at a
future date for a specified price, and may be settled in cash or through
delivery. The Group holds highly liquid contracts, such as US Treasury bond
futures, with terms ranging up to a year. Initial margin requirements and daily
calls are met either by the deposit of securities or in cash. Futures contracts
have little credit risk as regulated exchanges are the counterparties.
Interest rate forward contracts, which include forward rate agreements and
options on forward rate agreements, may also be used by the Group to manage
interest rate risk on debt. These contracts are agreements which allow the
interest rate cost on a principal amount to be fixed for a specified period
commencing on a future date.
Swaptions may also be employed to manage interest rate risk on debt. A
swaption is an agreement that conveys the right, but not the obligation, to swap
a series of fixed rate interest payments for floating rate interest payments, or
vice versa, at a given future point in time. Typically the swaptions entered
into by the Group are cash settled at expiry.
FOREIGN EXCHANGE RISK MANAGEMENT
The Group enters into various types of foreign exchange contracts in
managing its foreign exchange risk as indicated in the following table:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------- ------------------------------
Gross Fair Fair Gross Fair Fair
contract value value contract value value
amount asset liability amount asset liability
--------- --------- --------- --------- --------- ---------
($ million)
<S> <C> <C> <C> <C> <C> <C>
Currency swaps............... 2,109 30 (200) 1,797 99 (107)
Forwards..................... 2,237 6 (44) 4,046 63 (38)
Options...................... 680 3 (4) 3,065 19 (15)
--------- --------- --------- --------- --------- ---------
5,026 39 (248) 8,908 181 (160)
========= ========= ========= ========= ========= =========
</TABLE>
F - 43
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Group's foreign exchange management policy is to minimize economic
exposures from currency movements against the US dollar. This is achieved by
raising finance in US dollars, hedging with respect to the US dollar or swapping
into US dollars where this achieves a lower cost of financing, and hedging
significant non-dollar cash flows. Examples of significant non-dollar cash flows
are sterling-based capital lease payments, sterling tax payments and capital
expenditure and operational requirements of Exploration in the UK.
Under currency swaps the counterparties initially exchange a principal
amount in two currencies, agreeing to re-exchange the currencies at a future
date and at the same exchange rate. In addition, interest payments in the
respective currencies are exchanged at specified intervals over the term of the
agreement. The Group's currency swaps have terms up to six years. The majority
of the Group's currency swaps relate to major currencies such as Sterling,
Deutschmarks, Swiss Francs and Japanese Yen.
Currency forward contracts are commitments to purchase or sell an agreed
amount of foreign currency at a specified exchange rate at a specified future
date. The Group's forward contracts are generally settled over periods of up to
one year.
Currency options, which are normally directly negotiated, allow but do not
require, the holder to buy from or sell to the writer an agreed amount of
currency at a specified exchange rate within a stated period, and involve the
initial payment or receipt of a premium. The Group's option contracts have an
average term of less than one year.
Included in currency options are currency cylinder option contracts. A
cylinder is the purchase of an option to buy foreign currency and the
simultaneous selling of an option to sell the same amount of foreign currency to
BP Amoco at a different exchange rate. The effect is to limit the risk of both
gain and loss. This is achieved at little or no cost as the symmetry of the
options means that the premium paid for one option is balanced by the premium
received from the sale of the other.
OIL AND NATURAL GAS PRICE RISK MANAGEMENT
The Group enters into various types of oil and natural gas price contracts
to manage its exposure to some movements in hydrocarbon prices as indicated in
the following table. Contracts which are capable of being settled by delivery of
oil, oil products or natural gas are excluded.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------- ------------------------------
Gross Fair Fair Gross Fair Fair
contract value value contract value value
amount asset liability amount asset liability
--------- --------- --------- --------- --------- ---------
($ million)
<S> <C> <C> <C> <C> <C> <C>
Oil
Swaps................. 361 8 (13) 421 12 (5)
Futures............... 143 5 -- 70 -- --
--------- --------- --------- --------- --------- ---------
504 13 (13) 491 12 (5)
========= ========= ========= ========= ========= =========
Natural gas
Swaps................. 4,346 55 (52) 1,478 48 (43)
Options............... 7 -- -- 33 3 (1)
Futures............... 42 1 (2) -- -- --
--------- --------- --------- --------- --------- ---------
4,395 56 (54) 1,511 51 (44)
========= ========= ========= ========= ========= =========
</TABLE>
F - 44
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Group uses swaps, options and futures to hedge future purchases and
sales of crude oil and refined oil products. The term of the oil price
derivatives is usually less than one year. Natural gas swaps, options and
futures are used to convert specific sales and purchase contracts from fixed
prices to market prices. Swaps are also used to hedge exposure for price
differentials between locations. The term of most natural gas price derivatives
is less than one year, with some having terms of two years.
Under swaps, BP Amoco agrees with other parties to pay or receive the
difference between a fixed and variable price at a range of specified dates
determined by reference to an agreed notional volume.
The option and futures contracts are traded on regulated exchanges.
Exchange-traded options allow, but do not require, the holder to either buy from
or sell to the writer an agreed amount of futures contracts at a specified price
at a specified future date. Futures are fixed price commitments to purchase or
sell a contract, whose value is derived from the price of oil at a specified
future date. Initial margin requirements and daily cash settlements for both
these types of contracts are met either by bank guarantees or in cash. There is
little credit risk under these contracts as regulated exchanges are the
counterparties.
TRADING ACTIVITIES
The Group maintains active trading positions in a variety of derivatives.
This activity is undertaken in conjunction with risk management. Derivatives
held for trading purposes are marked to market and any gain or loss recognized
in the income statement. For traded derivatives, many positions have been
neutralized, with trading initiatives being concluded by taking opposite
positions to fix a gain or loss, thereby achieving a zero net market risk.
The following table discloses the contract or notional amount and fair
value of the derivatives held for trading purposes at December 31, 1999 and 1998
and the average fair value for the year.
<TABLE>
<CAPTION>
Year ended December 31, 1999 Year ended December 31, 1998
------------------------------- ---------------------------------
Net Average Net Average
Gross fair value fair value Gross fair value fair value
contract asset asset contract asset asset
amount (liability) (liability) amount (liability) (liability)
--------- --------- --------- -------- ----------- -----------
($ million)
<S> <C> <C> <C> <C> <C> <C>
Interest rate contracts
Futures..................... 200 -- -- 185 -- (1)
Options..................... -- -- -- 4 -- --
Swaptions................... -- -- -- -- -- (7)
--------- --------- --------- --------- --------- ---------
200 -- -- 189 -- (8)
========= ========= ========= ========= ========= =========
Foreign exchange contracts
Forwards.................... 1,549 -- -- 3,012 (9) 23
Options..................... 125 -- -- 6,429 -- (2)
--------- --------- --------- --------- --------- ---------
1,674 -- -- 9,441 (9) 21
========= ========= ========= ========= ========= =========
Oil price contracts
Swaps....................... 2,372 (63) 62 3,460 11 54
Futures..................... 470 -- -- 413 -- --
Options..................... 302 4 6 165 -- --
--------- --------- --------- --------- --------- ---------
3,144 (59) 68 4,038 11 54
========= ========= ========= ========= ========= =========
</TABLE>
F - 45
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 28 -- DERIVATIVE FINANCIAL INSTRUMENTS (CONCLUDED)
CONCENTRATIONS OF CREDIT RISK
The primary activities of the Group are oil and gas exploration and
production, oil refining and marketing and the manufacture and marketing of
chemicals. The Group's principal customers, suppliers and financial institutions
with which it conducts business are located throughout the world. The credit
ratings of interest rate and currency swap counterparties are all of a quality
equal to or better than BP Amoco's when agreed. The credit quality is actively
managed over the life of the swap.
NOTE 29 -- CAPITAL AND RESERVES
<TABLE>
<CAPTION>
Paid
Share in Merger Retained
capital surplus reserve earnings Total
--------- --------- --------- --------- ---------
($ million)
<S> <C> <C> <C> <C> <C>
At January 1, 1999..................... 4,863 3,386 697 32,840 41,786
Prior year adjustment - change in
accounting policy (Note 43).......... -- -- -- 715 715
--------- --------- --------- --------- ---------
Restated............................... 4,863 3,386 697 33,555 42,501
Employee share schemes................. 16 311 -- (61) 266
Share dividend plan.................... 13 (13) -- 311 311
Profit for the year.................... -- -- -- 5,008 5,008
Dividends.............................. -- -- -- (3,884) (3,884)
Exchange adjustment.................... -- -- -- (921) (921)
--------- --------- --------- --------- ---------
At December 31, 1999................... 4,892 3,684 697 34,008 43,281
========= ========= ========= ========= =========
</TABLE>
The movements in the Group's share capital during the year are set out
above. All movements are quantified in terms of the number of BP Amoco shares
issued or repurchased.
EMPLOYEE SHARE SCHEMES. During the year 66,162,232 ordinary shares were
issued under employee share schemes. Certain of these shares were issued via a
QUEST. See Note 33 for further details.
SHARE DIVIDEND PLAN. 51,842,146 ordinary shares were issued under the share
dividend plan by capitalization of the paid in surplus.
F - 46
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 30 -- RETAINED EARNINGS
Retained earnings of $34,008 million ($33,555 million at December 31, 1998)
include the following amounts, the distribution of which is limited by statutory
or other restrictions:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Parent company....................................................... 16 16
Subsidiary undertakings.............................................. 5,638 5,195
Associated undertakings.............................................. 1,649 1,162
------ ------
7,303 6,373
====== ======
</TABLE>
Cumulative net exchange losses of $1,374 million are included in retained
earnings ($453 million losses at December 31, 1998).
There were no unrealized currency translation differences for the year on
long-term borrowings used to finance equity investments in foreign currencies
(1998 nil and 1997 unrealized losses of $2 million).
NOTE 31 -- ANALYSIS OF CONSOLIDATED STATEMENT OF CASH FLOWS
(I) RECONCILIATION OF HISTORICAL COST PROFIT BEFORE INTEREST AND TAX TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Historical cost profit before interest and tax........... 8,342 5,980 9,872
Depreciation and amounts provided........................ 4,965 5,301 5,117
Exploration expenditure written off...................... 304 373 365
Share of (profits) losses of joint ventures
and associated undertakings............................ (1,704) (1,102) (777)
Interest and other income................................ (217) (272) (255)
(Profit) loss on sale of businesses and fixed assets..... 379 (963) (563)
Charge for provisions.................................... 847 377 421
Utilization of provisions................................ (597) (460) (401)
Decrease (increase) in inventories....................... (1,562) 584 1,740
Decrease (increase) in debtors........................... (4,013) 1,768 2,033
(Decrease) increase in payables.......................... 3,546 (2,000) (1,994)
------ ------ ------
Net cash inflow from operating activities................ 10,290 9,586 15,558
====== ====== ======
</TABLE>
(II) EXCEPTIONAL ITEMS
The cash outflow in respect of the restructuring costs charged in 1999 was
$976 million. The cash outflow relating to the merger expenses charged in 1998
was $166 million (1998 $32 million). Both amounts were included in the net cash
inflow from operating activities.
F - 47
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- ANALYSIS OF CONSOLIDATED STATEMENT OF CASH FLOWS (CONCLUDED)
(III) FINANCING
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Long-term borrowing.................................. (2,140) (2,078) (1,179)
Repayments of long-term borrowing.................... 2,268 1,208 884
Short-term borrowing................................. (3,136) (631) (1,285)
Repayments of short-term borrowing................... 2,299 701 1,342
----- ------ ------
(709) (800) (238)
Issue of ordinary share capital...................... (245) (161) (172)
Repurchase of share capital.......................... -- 584 1,422
----- ------ ------
Net cash (inflow) outflow............................ (954) (377) 1,012
===== ====== ======
</TABLE>
(IV) MANAGEMENT OF LIQUID RESOURCES
Liquid resources comprise current asset investments which are principally
commercial paper issued by other companies. The net cash inflow from the
management of liquid resources was $93 million (1998 $596 million and 1997 $167
million).
(V) COMMERCIAL PAPER
Net movements in commercial paper are included within short-term borrowings
or repayment of short-term borrowings as appropriate.
(VI) MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------------------------------
1999 1998
-------------------------------------- --------------------------------------
Current Current
Finance asset Net Finance asset Net
debt Cash investments debt debt Cash investments debt
------- ------- ----------- ------- ------- ------- ----------- -------
($ million)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
At January 1.... (13,755) 405 470 (12,880) (12,877) 355 1,067 (11,455)
Net cash flow... (709) 965 (93) 163 (800) 67 (596) (1,329)
Other movements. (67) -- (150) (217) (53) -- -- (53)
Exchange adjustments (13) (39) (7) (59) (25) (17) (1) (43)
------- ------- ----------- ------- ------- ------- ----------- -------
At December 31.. (14,544) 1,331 220 (12,993) (13,755) 405 470 (12,880)
======= ======= =========== ======= ======= ======= =========== =======
</TABLE>
F - 48
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 32 -- OPERATING LEASE COMMITMENTS
Annual commitments under operating leases were as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1999 1998
-----------------------------------------------
Land and Land and
buildings Other buildings Other
--------- --------- --------- ---------
($ million)
<S> <C> <C> <C> <C> <C>
Expiring within: 1 year 19 107 50 149
2 to 5 years............ 57 372 92 432
Thereafter.............. 163 250 174 99
--------- --------- --------- ---------
239 729 316 680
========= ========= ========= =========
</TABLE>
The minimum future lease payments (after deducting related rental income
from operating sub-leases of $518 million) were as follows:
<TABLE>
<CAPTION>
December 31,
1999
-----------
($million)
<S> <C>
2000 ............................................................... 924
2001 ............................................................... 801
2002 ............................................................... 736
2003 ............................................................... 556
2004 ............................................................... 504
Thereafter........................................................... 1,898
-----------
5,419
===========
</TABLE>
F - 49
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 33 -- EMPLOYEE SHARE SCHEMES
BP Amoco offers most of its employees the opportunity to acquire a
shareholding in the Company through savings related and matching arrangements
(participating share schemes and savings plans). BP Amoco also uses a long-term
performance plan (see Note 34) and the granting of share options as elements of
employee remuneration.
Under the UK Savings Related Share Option Scheme employee save monthly over
a three-or-five year period toward the purchase of shares at a price fixed when
the option is granted. The option price is usually set at a 20% discount to the
market price at the time of grant. The option must be exercised within six
months of maturity of the savings contract otherwise it lapses. Similar schemes
are run in a number of overseas countries.
Under the UK Participating Scheme, BP Amoco matches employees' own
contribution of shares, up to a predetermined limit, all of which are then held
in trust for defined periods before being released to the employee. There are
similar schemes in a number of overseas countries.
The Company sponsors a number of savings plans covering most US employees.
Under these plans, employees may contribute up to 20% of their salary subject to
certain regulatory limits. BP Amoco matches employee contributions up to 7%,
depending upon length of service. The plans invest primarily in BP Amoco ADSs.
The Company's contributions vest over a period of five years. Company
contributions to savings plans during the year were $95 million (1998 $91
million).
During 1999, BP Amoco granted options under the BP Amoco Share Option Plan
to certain categories of employees. Prior to 1999, BP and Amoco granted options
under the BP Executive Share Option Scheme (BP ESOS) and the Amoco Stock Option
Plan respectively. Options were granted to former Amoco employees who, under the
terms of the merger agreement between BP and Amoco, must, for 1999 and 2000, be
granted options on a similar basis to the arrangements under the Amoco Stock
Option Plan. Options were also granted to certain former BP US employees. The
options were granted at the market price at the date of grant. There are no
performance conditions attaching to these grants. The options are exercisable
one or two years after the date of grant, and lapse after 10 years.
Also in 1999, options were granted to non-US middle managers in prior years
these were granted under the BP ESOS. The options were granted at market price
at the date of grant and are not exercisable until a performance condition is
satisfied. Before any options can be exercised, the Remuneration Committee will
require the total return to shareholders (share price increase with all
dividends reinvested) on an investment in BP Amoco shares to exceed the mean
total return to shareholders of a representative group of UK companies by a
margin set from time to time by the committee. The performance period for each
grant will normally be three years. Subject to achievement of the performance
conditions, the options are exercisable between the third and tenth
anniversaries of the date of grant.
An Employee Share Ownership Plan (ESOP) has been established to acquire BP
Amoco shares to satisfy future requirements of certain employee share schemes.
Funding is provided to the ESOP by the Company. The assets and liabilities of
the ESOP are recognized as assets and liabilities of the Company within these
accounts. The ESOP has waived its rights to dividends.
During 1999 the ESOP released 8,779,000 shares for the participating share
schemes. The cost of shares released for these schemes has been charged in these
accounts. At December 31, 1999 the ESOP held 53,989,000 shares (December 31,
1998, 62,768,000).
F - 50
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 33 -- EMPLOYEE SHARE SCHEMES (CONTINUED)
BP Amoco has established a Qualifying Employee Share Ownership Trust
(QUEST) for the purposes of share option schemes for UK employees and executive
directors of the company and its subsidiaries. During the year, contributions of
$61 million ($42 million) were made by the Company to the QUEST which, together
with option-holder contributions, were used by the QUEST to subscribe for new
ordinary shares at market price. The cost of this contribution has been
transferred by the Company directly to retained profits and the excess of the
subscription price over nominal value has increased the share premium account.
At December 31, 1999, all the 9,672,542 ordinary shares issued to the QUEST
had been transferred to option holders exercising options under the UK Group
Savings Related Share Option Scheme.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(Options thousands)
<S> <C> <C> <C>
Employee share options granted during the year:
BP Amoco savings related and similar schemes....... 8,828 9,734 14,778
BP Amoco share option plan......................... 41,054 -- --
BP ESOS............................................ -- 2,576 4,538
Amoco Stock Option Plan............................ -- 60,696 53,982
------ ------ ------
49,882 73,006 73,298
====== ====== ======
</TABLE>
The exercise prices for BP options granted during the year were
L4.495/$7.28 (8,828,566 options) for savings-related and similar schemes and
L5.02/$8.01 (weighted average price) for 41,053,562 options granted under the
share option plan.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
(Shares thousands)
<S> <C> <C> <C>
Shares issued in respect of options exercised during the year:
BP Amoco savings related and similar schemes........ 12,176 12,582 27,948
BP ESOS............................................. 7,861 10,260 8,804
Amoco Stock Option Plan............................. 43,611 30,634 28,394
------ ------ ------
63,648 53,476 65,146
====== ====== ======
</TABLE>
In addition 2,514,000 shares (1998, 3,298,000 shares and 1997, 13,644,000
shares) were issued, and 8,779,000 shares (1998, 8,518,000 shares and 1997 nil)
released from the ESOP for participating share schemes.
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Options outstanding at December 31:
BP Amoco options (shares thousands).................. 323,161 346,898 336,066
Exercise period..................................... 2000-2009 1999-2008 1998-2007
Price............................................... $2.09-$10.1 $1.85-$7.88 $1.85-$5.97
</TABLE>
F - 51
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 33 -- EMPLOYEE SHARE SCHEMES (CONTINUED)
Share option transactions under employee share schemes are summarized as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------
1999 1998 1997
-------------------- --------------------- -------------------
Weighted Weighted Weighted
average average average
Number of exercise Number of exercise Number of exercise
shares price shares price shares price
--------- -------- --------- -------- --------- --------
($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1... 346,897,822 4.34 336,066,100 3.85 336,891,588 3.25
Reinstated................. 37,480 5.24 33,486 2.82 1,920 3.72
Granted.................... 49,882,128 7.88 73,005,560 5.64 373,298,654 5.47
Exercised.................. (63,711,433) 3.85 (53,475,492) 3.00 (65,145,366) 2.59
Stock appreciation rights
exercised................ (542,772) 3.30 (698,720) 2.56 (635,200) 2.40
Cancelled.................. (9,401,838) 5.54 (8,033,112) 4.73 (8,345,496) 3.68
----------- ----------- ----------
Outstanding at December 31. 323,161,387 4.95 346,897,822 4.34 336,066,100 3.85
=========== =========== ===========
Exercisable at December 31. 206,116,577 202,132,716 188,210,596
=========== =========== ===========
Available for grant at
December 31.............. 1,087,626,398 1,177,618,184 493,888,856
============= ============= ===========
</TABLE>
Options outstanding at December 31, 1999 will be exercisable between 2000
and 2009.
Available for grant figures for 1997 are as previously reported for BP
p.l.c.
For the share options outstanding and exercisable at December 31, 1998 the
exercise price ranges and average remaining lives were:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------ --------------------
Weighted Weighted Weighted
average average average
Number of remaining exercise Number of exercise
Shares life price shares price
---------- --------- -------- --------- --------
(years) ($) ($)
<S> <C> <C> <C> <C> <C>
Range of exercise prices
$2.01 - $3.62................. 96,461,832 2.75 3.27 86,451,031 3.30
$3.72 - $4.61................. 62,721,177 5.48 4.26 57,173,680 4.31
$4.68 - $6.93................. 115,913,522 6.91 5.54 62,470,866 5.60
$7.28 - $10.10................ 48,064,916 8.36 7.88 21,000 7.89
----------- --------- -------- ----------- --------
323,161,387 5.61 4.96 206,116,577 4.28
=========== ========= ======== =========== ========
</TABLE>
F - 52
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 33 -- EMPLOYEE SHARE SCHEMES (CONCLUDED)
As allowed by SFAS 123 `Accounting for Stock-Based Compensation' the
Company has elected to continue to follow Accounting Principles Board Opinion
No. 25, 'Accounting for Stock Issued to Employees'. In accordance with this
accounting statement the Company does not recognize compensation expense on the
grant of the options. Had compensation expense been determined based upon the
fair value of the stock options at grant date consistent with the method of SFAS
123, the Company's profit for the year and profit per Ordinary Share for 1999
would have been reduced by $65 million (1998 $47 million and 1997 $43 million)
and 1 cent (1998 1 cent and 1997 1 cent), respectively.
The weighted average fair value of BP Amoco share options granted in 1999
was $2.27 (1998 $2.29 and 1997 $2.97). The fair value of each option grant was
estimated on the date of grant using a Black-Scholes option pricing model with
the following assumptions for 1999, 1998 and 1997, respectively; risk-free
interest rates of 6.5, 6.0 and 7.0%; dividend yield of 3%; expected lives of
three to five years and volatility of 32%, 18% and 18%.
In 1998 and earlier years Amoco had granted stock options. Following the
merger between BPand Amoco these were converted into BPAmoco share options. The
weighted average fair value of Amoco stock options granted in 1998 was $7.40 and
in 1997 was $8.41. On the basis of BP Amoco shares these equate to values of
$1.86 and $2.12 respectively. The fair value of each option grant was estimated
on the date of grant using a Black-Scholes option pricing model with the
following assumptions for 1998 and 1997 respectively; risk-free interest rates
of 5.7 and 6.7, dividend yield of 4%, expected lives of six years and volatility
of 17%.
The effects of applying SFAS 123 for the proforma disclosures are not
representative of the effects expected on reported net income and profit per
Ordinary Share in future years, since the disclosures do not reflect
compensation expense for options granted prior to 1995.
NOTE 34 -- LONG TERM PERFORMANCE PLAN
Senior executives and the executive directors participate in the Long Term
Performance Plan (the Plan). This is an incentive scheme under which the
Remuneration Committee may award shares to participants or fund the purchase of
shares for participants if long-term targets are met. The Plan replaced the
granting of executive share options to participants, apart from those based in
North America who will continue to receive share options in line with local
market practice.
The cost of potential future awards is accrued over the three-year
performance periods of each Plan. In any one year, three Plans are in operation.
The amount charged in 1999 was $128 million (1998 $45 million and 1997 $28
million).
The value of awards under the 1996-98 Plan made in 1999 was $52 million
(1995-97 Plan $36 million).
Employee Share Ownership Plans (ESOPs) have been established to acquire BP
Amoco shares to satisfy any awards made to particpants under the Plan and then
to hold them for the participants during the retention period of the Plan. In
order to hedge the cost of potential future awards the ESOPs may, from time to
time over the performance period of the Plans, purchase BP Amoco shares in the
open market. Funding is provided to the ESOPs by the Company. The assets and
liabilities of the ESOPs are recognized as assets and liabilities of the Company
within these accounts. The ESOPs have waived their rights to dividends.
At December 31, 1999 the ESOPs held 9,502,000 (1998, 6,266,000) shares for
potential future awards.
F - 53
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 35 -- DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ thousand)
<S> <C> <C> <C>
TOTAL FOR ALL DIRECTORS
Emoluments (a)................................................. 13,309 6,870 8,264
Compensation for loss of office................................ 6,126 -- --
Gains made on the exercise of share options.................... 5,158 888 146
Amounts awarded under long-term incentive schemes.............. 7,594 4,434 6,844
====== ====== ======
HIGHEST PAID DIRECTOR
Emoluments..................................................... 2,434 1,514 1,538
Gains made on the exercise of share options.................... 4,509 806 105
Amount awarded under long-term incentive schemes............... -- 1,331 1,346
Accrued pension at December 31................................. 1,172 626 554
====== ====== ======
</TABLE>
- ----------
(a) Fees in 1998 of $45,730 and in 1997 of $60,680 in respect of Mr H M P
Miles' services as a non-executive director were paid to his employer.
EMOLUMENTS
These amounts comprise fees paid to the non-executive co-chairman and
non-executive directors, and, for executive directors, salary and benefits
earned during the relevant financial year, plus bonuses awarded for the year.
PENSION CONTRIBUTIONS
Six executive directors participate in a non-contributory pension scheme
established for UK staff by a separate trust fund to which contributions are
made by BP Amoco based on actuarial advice. There were no contributions to this
pension scheme in 1999, 1998 or 1997. Two executive directors participated in
the Employee Retirement Plan for Amoco Corporation.
NOTE 36 -- LOANS TO OFFICERS
Miss J C Hanratty has a low interest loan of $43,000 made to her prior to
her appointment as Company Secretary on October 1, 1994.
F - 54
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 37 -- EMPLOYEE COSTS AND NUMBERS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
EMPLOYEE COSTS
Wages and salaries................................... 5,302 4,995 5,114
Social security costs................................ 359 412 388
Pension costs........................................ (97) 139 141
------ ------ ------
5,564 5,546 5,643
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
NUMBER OF EMPLOYEES
Exploration and Production........................... 13,300 18,800 19,150
Refining and Marketing (a)........................... 45,250 52,100 53,800
Chemicals............................................ 18,700 23,050 24,000
Other businesses and corporate....................... 3,150 2,700 3,850
------ ------ -------
80,400 96,650 100,800
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
AVERAGE NUMBER OF EMPLOYEES
<S> <C> <C> <C> <C> <C>
1999
Exploration and Production............. 3,950 900 5,300 5,600 15,750
Refining and Marketing (b)............. 9,600 10,050 20,700 8,150 48,500
Chemicals.............................. 4,100 4,900 9,850 2,000 20,850
Other businesses and corporate......... 1,150 350 1,000 500 3,000
-------- -------- -------- -------- --------
18,800 16,200 36,850 16,250 88,100
======== ======== ======== ======== ========
1998
Exploration and Production 4,050 900 7,900 6,200 19,050
Refining and Marketing (b)............. 10,300 9,700 23,600 9,150 52,750
Chemicals.............................. 4,650 5,150 11,600 2,450 23,850
Other businesses and corporate......... 950 300 1,550 450 3,250
-------- -------- -------- -------- --------
19,950 16,050 44,650 18,250 98,900
======== ======== ======== ======== ========
1997
Exploration and Production............. 3,750 900 8,450 5,700 18,800
Refining and Marketing................. 9,550 10,000 23,650 9,000 52,200
Chemicals.............................. 5,000 4,650 11,850 2,550 24,050
Other businesses and corporate......... 900 200 1,950 600 3,650
-------- -------- -------- -------- --------
19,200 15,750 45,900 17,850 98,700
======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Includes 18,050 (1998, 17,300 and 1997, 18,050) employees assigned to the
BP/Mobil joint venture.
(b) Includes 7,800 (1998, 8,550 and 1997, 7850) employees assigned to the
BP/Mobil joint venture in the UK and 9,650 (1998, 9,350 and 1997, 9,600)
employees in the Rest of Europe.
F - 55
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 38 -- PENSIONS
Most Group companies have pension plans, the forms and benefits of which
vary with conditions and practices in the countries concerned. The main plans
provide benefits that are computed based on an employee's years of service and
final pensionable salary. In most cases Group companies make contributions to
separately administered trusts, based on advice from independent actuaries using
actuarial methods, the objective of which is to provide adequate funds to meet
pension obligations as they fall due. In certain countries the plans are
unfunded and the accrued liabilities for pension benefits is included within
other provisions.
The net credit to income for pensions in 1999 was $97 million (1998 $139
million net charge and 1997 $141 million net charge). This was assessed in
accordance with independent actuarial advice using the projected unit credit
method for the Group's major pension plans. The net credit for 1999 includes
settlement and curtailment gains of $150 million arising from the high level of
severance during the year.
The principal assumptions used in calculating the credit/charge for the
principle plans were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
UK and other European plans:
Rate of return on assets............ 6.1% 7% 8.1%
Discount rate....................... 6.1% 7% 8.1%
Future salary increases............. 4.3% 5.1% 5.9%
Future pension increases............ 2.5% 3.2% 4.0%
US plans:
Rate of return on assets............ 10% 10% 10%
Discount rate....................... 6.5% 6.9% 7%
Future salary increases............. 4% 4.7% 4.7%
Future pension increases............ nil nil nil
</TABLE>
At January 1, 1999 the date of the latest actuarial valuations or reviews,
the market value of assets in the Group's major externally funded pension plans
in the UK and the USA was $23,209 million ($20,689 million at January 1, 1998).
The actuarial value of the assets of these plans represented 125% (1998 123%) of
the benefits that had accrued to members of those plans, after allowing for
expected future increases in salaries.
At December 31, 1999 the obligation for accrued benefits in respect of the
principal unfunded plans in Europe was $1,513 million ($1,714 million at
December 31, 1998). Of this amount, $1,234 million ($1,345 million at December
31, 1998) has been provided in these accounts.
F - 56
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 38 -- PENSIONS (CONTINUED)
Further information in respect of the Group's principal defined benefit
pension plans required under FASB Statement of Financial Accounting Standards
No. 132 -- 'Employers' Disclosures about Pensions and Other Postretirement
Benefits' is set out below.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Principal plans:
Service cost-- benefits earned during year......... 347 375 335
Interest cost on projected benefit obligation...... 999 1,089 1,136
Expected return on plan assets..................... (1,273) (1,339) (1,364)
Amortization of transition asset................... (83) (84) (82)
Recognized net actuarial gain...................... (108) (87) (65)
Recognized prior service cost...................... 17 14 30
Curtailment and settlement......................... (150) 12 9
Special termination benefits....................... 3 -- --
------ ------ ------
(248) (20) (1)
Other defined benefit plans.......................... 30 51 39
Defined contribution schemes......................... 121 108 103
------ ------ ------
Total pension (income) expense....................... (97) 139 141
====== ====== ======
</TABLE>
F - 57
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 38 -- PENSIONS (CONTINUED)
<TABLE>
<CAPTION>
UK and Other
European plans US plans
---------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
($ million)
<S> <C> <C> <C> <C>
Benefit obligation at January 1.................. 12,670 11,567 4,424 4,388
Service cost..................................... 229 221 118 154
Interest cost.................................... 723 787 276 302
Plan amendments.................................. 47 -- 71 --
Curtailments, settlements and special
termination benefits -- -- (15) 12
Actuarial (gain) loss............................ 130 518 (93) 60
Plan participants' contributions................. 21 20 -- --
Settlement payments.............................. -- -- (668) (26)
Benefit payments................................. (639) (619) (286) (466)
Exchange adjustment.............................. (591) 176 -- --
------ ------ ------ ------
Benefit obligation at December 31................ 12,590 12,670 3,827 4,424
------ ------ ------ ------
Fair value of plan assets at January 1........... 17,991 15,915 5,230 4,774
Actual return on plan assets..................... 3,280 2,456 981 833
Plan participants' contributions................. 21 20 -- --
Employer contributions........................... -- 8 74 115
Settlement payments.............................. -- -- (668) (26)
Benefit payments................................. (534) (515) (286) (466)
Exchange adjustment.............................. (569) 107 -- --
------ ------ ------ ------
Fair value of plan assets at December 31......... 20,189 17,991 5,331 5,230
------ ------ ------ ------
Funded status.................................... 7,599 5,321 1,504 806
Unrecognized transition asset.................... (252) (318) (14) (32)
Unrecognized net actuarial (gain) loss........... (7,012) (4,914) (740) (207)
Unrecognized prior service cost.................. 135 111 13 (53)
------ ------ ------ ------
Net amount recognized............................ 470 200 763 514
====== ====== ====== ======
Prepaid benefit cost............................. 1,704 1,545 837 656
Accrued benefit liability........................ (1,473) (1,644) (142) (190)
Intangible asset................................. 78 126 5 --
Accumulated other comprehensive income........... 161 173 63 48
------ ------ ------ ------
470 200 763 514
====== ====== ====== ======
</TABLE>
F - 58
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 38 -- PENSIONS (CONCLUDED)
Major assumptions used to determine projected benefit obligations for the
principal pension plans were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
UK and other European plans:
Compensation increase........................... 4.8% 4.3% 5.1%
Discount rate................................... 6.5% 6.1% 7%
US plans:
Compensation increase........................... 4.0% 4.7% 4.7%
Discount rate................................... 7.5% 6.5% 6.9%
</TABLE>
Plan assets are held in equity securities, fixed income securities and real
estate.
NOTE 39 -- OTHER POSTRETIREMENT BENEFITS
Certain Group companies, principally in the United States, provide
postretirement healthcare and life insurance benefits to their retired employees
and dependants. The entitlement to these benefits is usually based on the
employee remaining in service until retirement age and completion of a minimum
period of service. The plans are partly funded and the accrued net liability for
postretirement benefits is included within other provisions.
The charge to income for postretirement benefits in 1999 of $42 million
(1998 $101 million and 1997 $110 million) was assessed in accordance with
independent actuarial advice using the projected unit credit method. The charge
for 1999 is net of a curtailment gain of $62 million arising from the high level
of severance during the year.
At December 31, 1999 the independent actuaries have reassessed the
obligation for postretirement benefits at $1,638 million ($1,814 million at
December 31, 1998). The provision for postretirement benefits at December 31,
1999 was $2,244 million ($2,311 million at December 31, 1998).
The discount rate used to assess the obligation at December 31, 1999 was
7.5% (6.5% at December 31, 1998). The assumed future healthcare cost trend rate
for 2000 and subsequent years is 5%.
F - 59
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 39 -- OTHER POSTRETIREMENT BENEFITS (CONCLUDED)
Further information presented in compliance with the requirements of FASB
Statement of Financial Accounting Standards No. 132 -- 'Employers' Disclosures
about Pensions and Other Postretirement Benefits' is set out below.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Service cost -- benefits earned during year.......... 34 39 40
Interest cost on projected benefit obligation........ 113 114 116
Expected return on plan assets....................... (4) (1) --
Recognized net actuarial gain........................ (31) (28) (24)
Amortization of prior service cost recognized........ (8) (23) (22)
Curtailment.......................................... (62) -- --
------ ------ ------
Postretirement benefit expense....................... 42 101 110
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1999 1998
------- -------
($ million)
<S> <C> <C>
Benefit obligation at January 1........................... 1,814 1,709
Service cost.............................................. 34 39
Interest cost............................................. 113 114
Plan amendments........................................... 22 --
Curtailment gain.......................................... (21) --
Actuarial (gain) loss..................................... (214) 52
Benefit payments.......................................... (110) (100)
------ ------
Benefit obligation at December 31......................... 1,638 1,814
------ ------
Fair value of plan assets at January 1.................... 49 --
Actual return on plan assets.............................. 6 9
Employer contributions.................................... (2) 40
------ ------
Fair value of plan assets at December 31.................. 53 49
------ ------
Funded status............................................. (1,585) (1,765)
Unrecognized net actuarial gain........................... (570) (382)
Unrecognized prior service cost........................... (89) (164)
------ ------
Provision for postretirement benefits..................... (2,244) (2,311)
====== ======
</TABLE>
The assumed healthcare cost trend rate has a significant effect on the
amounts reported. A one-percentage-point change in the assumed healthcare cost
trend rate would have the following effects:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
point increase point decrease
------------- -------------
($ million)
<S> <C> <C>
Effect on total of service and interest cost in 1999........ 18 (14)
Effect on postretirement obligation at December 31, 1999.... 164 (137)
</TABLE>
F - 60
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 40 -- CONTINGENT LIABILITIES
There were contingent liabilities at December 31, 1999 in respect of
guarantees and indemnities entered into as part of, and claims arising from, the
ordinary course of the Group's business, upon which no material losses are
likely to arise.
Approximately 200 lawsuits were filed in State and Federal Courts in Alaska
seeking compensatory and punitive damages arising out of the Exxon Valdez oil
spill in Prince William Sound in March 1989. Most of those suits named Exxon
(now ExxonMobil), Alyeska Pipeline Service Company (Alyeska), which operates the
oil terminal at Valdez, and the other oil companies which own Alyeska. Alyeska
initially responded to the spill until the response was taken over by Exxon. BP
Amoco owns a 50% interest in Alyeska through a subsidiary of BP America Inc.
Alyeska and its owners have settled all of the claims against them under these
lawsuits. Exxon has indicated that it may file a claim for contribution against
Alyeska for a portion of the costs and damages which it has incurred. If any
claims are asserted by Exxon which affect Alyeska and its owners, BP Amoco would
defend the claims vigorously.
The Internal Revenue Service (IRS) has challenged the application of
certain foreign income taxes as credits against BP Amoco Corporation's US taxes
that otherwise would have been payable for the years 1980 to 1992. On June 18,
1992, the IRS issued a statutory Notice of Deficiency for additional taxes in
the amount of $466 million, plus interest, relating to 1980 to 1982. BP Amoco
filed a petition in the US Tax Court contesting the IRS statutory Notice of
Deficiency. Trial on the matter was held in April 1995, and a decision was
rendered by the US Tax Court in March 1996, in BP Amoco's favor. The IRS has
appealed the Tax Court's decision to the US Court of Appeals for the Seventh
Circuit and on March 11, 1998 the Seventh Circuit affirmed the Tax Court's prior
decision. A comparable adjustment of foreign tax credits for each year has been
proposed for the years 1983 to 1992 based upon subsequent IRS audits. In
November 1999, BP Amoco Corporation reached an agreement with the IRS that
effectively resolves this issue at a minimal tax cost to the company. On
13December1999 the parties filed a status report with the US Tax Court for the
years 1983-1989 advising the Court that a basis for settlement had been reached
and that final calculations were in the process of being prepared. Once these
calculations are finalized, the parties expect to file an agreed decision
document for the Court's final approval, which will then conclude the
litigation.
The Group is subject to numerous national and local environmental laws and
regulations concerning its products, operations and other activities. These laws
and regulations may require the Group to take future action to remediate the
effects on the environment of prior disposal or release of chemical or petroleum
substances by the Group or other parties. Such contingencies may exist for
various sites including refineries, chemical plants, oil fields, service
stations, terminals and waste disposal sites. In addition, the Group may have
obligations relating to prior asset sales or closed facilities. The ultimate
requirement for remediation and its cost is inherently difficult to estimate.
However, the estimated cost of known environmental obligations has been provided
in these accounts in accordance with the Group's accounting policies. While the
amounts of future costs could be significant and could be material to the
Group's results of operations in the period in which they are recognized, BP
Amoco does not expect these costs to have a material effect on the Group's
financial position or liquidity.
F - 61
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 41 -- JOINT VENTURES AND ASSOCIATED UNDERTAKINGS
Summarized financial information for the Group's share of its joint
ventures is shown below. The principal joint venture is the pan-European
refining and marketing joint venture with ExxonMobil, which is jointly
controlled. The other significant joint ventures of the BP Amoco Group at
December 31, 1998 are shown in Note 46.
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Turnover.................................................... 17,614 15,428
------ ------
Profit for the period before tax............................ 1,037 546
------ ------
Profit for the period after tax............................. 1,032 561
------ ------
Fixed assets................................................ 5,366 5,681
Current assets.............................................. 4,582 3,372
------ ------
9,948 9,053
Liabilities due within one year............................. 4,172 3,586
Liabilities due after one year.............................. 572 462
------ ------
5,204 5,005
====== ======
</TABLE>
Within the BP/Mobil joint venture BP Amoco operates and has a 70% interest
in the fuels refining and marketing operation and has a 49% interest in the
lubricants business. Funding is provided to the joint venture by both BP Amoco
and ExxonMobil in proportion to their respective interests as required. Surplus
cash in the joint venture is returned to BP Amoco and ExxonMobil on a regular,
usually daily, basis.
BP Amoco has made available to the joint venture on a long-term basis the
tangible fixed assets formerly used by its European refining and marketing
operations. Staff working for the fuels business are BP Amoco employees, while
those working for the lubricants business are ExxonMobil employees. Staff costs
for BP Amoco employees were $819 million (1998 $902 million).
During the year the BP Amoco Group sold crude oil and products totalling
$3,398 million (1998 $2,264 million) to the BP/Mobil joint venture and purchased
crude oil and products totalling $1,791 million (1998 $1,335 million). At
December 31, 1999 the outstanding balances receivable and payable were $725
million (1998 $351 million) and $278 million (1998 $144 million) respectively.
In addition there were net receipts of $527 million (1998 $675 million)
outstanding at December 31, 1999.
The more significant associated undertakings of the BP Amoco Group at
December 31, 1998 are shown in Note 46.
During the year the BP Amoco Group purchased crude oil from two associated
undertakings, Abu Dhabi Marine Areas and Abu Dhabi Petroleum to the value of
$935 million (1998 $715 million). At December 31, 1999 $119 million (1998 $45
million) was payable in respect of these purchases.
During the year the BP Amoco Group sold chemical feedstocks totalling $460
million (1998 $395 million) to Erdoelchemie, an associated undertaking, and
bought petrochemicals, mainly polyethylene, to the value of $77 million (1998
$76 million). At December 31, 1998 the outstanding balance receivable from
Erdolchemie was $1 million (1998 $1 million).
F - 62
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 42-- OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (a)
CAPITALIZED COSTS AT DECEMBER 31
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
1999
Gross capitalized costs:
Proved properties.................... 22,874 2,738 35,826 14,166 75,604
Unproved properties.................. 412 79 741 2,067 3,299
-------- -------- -------- -------- --------
23,286 2,817 36,567 16,233 78,903
Accumulated depreciation (b)........... 13,160 1,890 20,751 8,279 44,080
-------- -------- -------- -------- --------
Net capitalized costs.................. 10,126 927 15,816 7,954 34,823
======== ======== ======== ======== ========
1998
Gross capitalized costs:
Proved properties.................... 23,290 2,934 35,383 15,078 76,685
Unproved properties.................. 400 76 890 1,915 3,281
-------- -------- -------- -------- --------
23,690 3,010 36,273 16,993 79,966
Accumulated depreciation (b)........... 12,670 1,865 20,741 8,183 43,459
-------- -------- -------- -------- --------
Net capitalized costs.................. 11,020 1,145 15,532 8,810 36,507
======== ======== ======== ======== ========
1997
Gross capitalized costs:
Proved properties.................... 21,250 2,917 34,166 14,137 72,470
Unproved properties.................. 323 55 914 1,776 3,068
-------- -------- -------- -------- --------
21,573 2,972 35,080 15,913 75,538
Accumulated depreciation (b)........... 10,975 1,736 20,924 7,889 41,524
-------- -------- -------- -------- --------
Net capitalized costs.................. 10,598 1,236 14,156 8,024 34,014
======== ======== ======== ======== ========
</TABLE>
F - 63
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 42-- OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (a) (CONTINUED)
COSTS INCURRED FOR THE YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
1999
Acquisition of properties:
Proved............................... -- -- 396 -- 396
Unproved............................. -- -- 23 130 153
-------- -------- -------- -------- --------
-- -- 419 130 549
Exploration and appraisal costs (c).... 83 39 287 439 848
Development costs...................... 676 71 1,212 956 2,915
-------- -------- -------- -------- --------
Total costs............................ 759 110 1,918 1,525 4,312
======== ======== ======== ======== ========
1998
Acquisition of properties:
Proved............................... -- -- 3 54 57
Unproved............................. -- 1 58 62 121
-------- -------- -------- -------- --------
-- 1 61 116 178
Exploration and appraisal costs (c).... 177 106 476 764 1,523
Development costs...................... 1,432 100 1,670 1,569 4,771
-------- -------- -------- -------- --------
Total costs............................ 1,609 207 2,207 2,449 6,472
======== ======== ======== ======== ========
1997
Acquisition of properties:
Proved............................... -- 95 7 7 109
Unproved............................. 15 3 121 26 165
-------- -------- -------- -------- --------
15 98 128 33 274
Exploration and appraisal costs (c).... 192 133 524 942 1,791
Development costs...................... 1,463 161 1,744 1,714 5,082
-------- -------- -------- -------- --------
Total costs............................ 1,670 392 2,396 2,689 7,147
======== ======== ======== ======== ========
</TABLE>
F - 64
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 42-- OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (a) (CONTINUED)
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
1999
Turnover (d):
Third parties........................ 2,258 644 4,738 2,216 9,856
Sales between businesses............. 2,251 108 1,283 2,938 6,580
-------- -------- -------- -------- --------
4,509 752 6,021 5,154 16,436
-------- -------- -------- -------- --------
Exploration expense.................... 51 20 172 305 548
Production costs....................... 734 98 1,387 756 2,975
Production taxes....................... 167 2 283 495 947
Other costs (income) (e)............... 157 16 1,231 1,143 2,547
Depreciation and amounts provided...... 1,306 138 1,113 651 3,208
-------- -------- -------- -------- --------
2,415 274 4,186 3,350 10,225
-------- -------- -------- -------- --------
Profit before taxation (f)............. 2,094 478 1,835 1,804 6,211
Allocable taxes........................ 643 312 483 497 1,935
-------- -------- -------- -------- --------
Results of operations ................. 1,451 166 1,352 1,307 4,276
======== ======== ======== ======== ========
1998
Turnover (d):
Third parties........................ 2,481 520 2,027 905 5,933
Sales between businesses............. 1,063 73 2,782 2,133 6,051
-------- -------- -------- -------- --------
3,544 593 4,809 3,038 11,984
-------- -------- -------- -------- --------
Exploration expense.................... 134 89 240 458 921
Production costs....................... 878 146 1,548 888 3,460
Production taxes....................... 15 6 233 320 574
Other costs (income) (e)............... (50) (18) 780 384 1,096
Depreciation and amounts provided...... 1,183 169 1,168 1,072 3,592
-------- -------- -------- -------- --------
2,160 392 3,969 3,122 9,643
-------- -------- -------- -------- --------
Profit (loss) before taxation (f)...... 1,384 201 840 (84) 2,341
Allocable taxes........................ 378 79 111 115 683
-------- -------- -------- -------- --------
Results of operations ................. 1,006 122 729 (199) 1,658
======== ======== ======== ======== ========
</TABLE>
F - 65
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 42-- OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (a) (CONTINUED)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
1997
Turnover (d):
Third parties........................ 3,175 900 3,456 1,465 8,996
Sales between businesses............. 1,322 -- 3,315 2,972 7,609
-------- -------- -------- -------- --------
4,497 900 6,771 4,437 16,605
-------- -------- -------- -------- --------
Exploration expense.................... 156 79 273 454 962
Production costs....................... 743 176 1,378 944 3,241
Production taxes....................... 283 19 446 536 1,284
Other costs (income) (e)............... 50 (11) 720 690 1,449
Depreciation and amounts provided...... 1,236 185 1,163 707 3,291
-------- -------- -------- -------- --------
2,468 448 3,980 3,331 10,227
-------- -------- -------- -------- --------
Profit before taxation (f)............. 2,029 452 2,791 1,106 6,378
Allocable taxes........................ 655 206 896 501 2,258
-------- -------- -------- -------- --------
Results of operations ................. 1,374 246 1,895 605 4,120
======== ======== ======== ======== ========
</TABLE>
- ----------
The Group's share of associated undertakings results of operations in 1999
was a profit of $204 million (1998 $40 million and 1997 $13 million) after
adding a tax credit of $6 million (1998 $19 million and 1997 nil).
The Group's share of associated undertakings net capitalized costs at
December 31, 1999 was $1,442 million (December 31, 1998 $2,212 million and
December 31, 1997 $2,662 million).
The Group's share of associated undertakings costs incurred in 1999 was $49
million (1998 $282 million and 1997 $1,349 million).
(a) Information given in this note relates to the Group's oil and natural gas
activities. Midstream activities of natural gas gathering and distribution
and the operation of the main pipelines and tankers are excluded. The main
midstream activities are the Alaskan transportation facilities, the Forties
Pipeline system, the Central Area Transmission system and Ruhrgas gas
distribution operations. Profits (losses) on sale of businesses and fixed
assets and restructuring costs relating to the oil and natural gas
exploration and production activities which have been accounted as
exceptional items, are also excluded.
(b) Accumulated depreciation consists of depreciation, depletion and
amortization related to oil and natural gas producing activities.
(c) Exploration and appraisal drilling expenditure and licence acquisition
costs are initially capitalized within intangible fixed assets in
accordance with the Group's accounting policy.
(d) Turnover represents sales of production excluding royalty oil where royalty
is payable in kind.
(e) Includes cost of royalty oil not taken in kind and property taxes.
F - 66
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 42-- OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (a) (CONCLUDED)
(f) The exploration and production total replacement cost operating profit
comprises:
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
1999
Exploration and production activities
--Group (as above)..................... 2,094 478 1,835 1,804 6,211
--Associated undertakings.............. -- -- 45 153 198
Midstream activities................... 230 180 263 112 785
-------- -------- -------- -------- --------
Total replacement cost operating profit 2,324 658 2,143 2,069 7,194
======== ======== ======== ======== ========
1998
Exploration and production activities
--Group (as above)..................... 1,384 201 840 (84) 2,341
--Associated undertakings.............. (15) -- 31 5 21
Midstream activities................... 297 171 307 94 869
-------- -------- -------- -------- --------
Total replacement cost operating profit 1,666 372 1,178 15 3,231
======== ======== ======== ======== ========
1997
Exploration and production activities
--Group (as above)..................... 2,029 452 2,791 1,106 6,378
--Associated undertakings.............. (8) -- 19 2 13
Midstream activities................... 290 159 319 226 994
-------- -------- -------- -------- --------
Total replacement cost operating profit 2,311 611 3,129 1,334 7,385
======== ======== ======== ======== ========
</TABLE>
NOTE 43 -- NEW ACCOUNTING STANDARD
The BP Amoco Group adopted Financial Reporting Standard No.12 `Provisions,
Contingent Liabilities and Contingent Assets' (FRS12) with effect from January
1, 1999. This standard changes the criteria for recognizing provisions for such
costs as decommissioning, environmental liabilities, onerous contracts and
restructuring charges. It also requires provisions for liabilities which may not
be settled for a number of years to be discounted to their net present value.
The adoption of this standard has been treated as a change in accounting policy.
Comparative figures have been restated to reflect this change in accounting
policy.
The principal effects of the adoption of FRS12 are as follows:
(a) Provisions for environmental liabilities are determined on a discounted
basis as the effect of the time value of money is material. Previously
these liabilities were on an undiscounted basis.
(b) Provisions for decommissioning are recognized in full, on a discounted
basis, at the commencement of oil and natural gas production. The BP Amoco
Group's prior practice was to accrue the expected cost of decommissioning
oil and natural gas production facilities on a unit-of-production basis
over the life of the field. FRS12 also requires the BP Amoco Group to
capitalize an amount equivalent to the provision as a tangible fixed asset
and to amortize this amount over the life of the field on a
unit-of-production basis.
(c) The unwinding of the discount, which represents a period-by-period cost, is
included within interest expense.
F - 67
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 43 -- NEW ACCOUNTING STANDARD (CONCLUDED)
(d) Liabilities in respect of certain onerous contracts have been recognized.
The effect of the change in accounting policy has been for 1999 to increase
total replacement cost operating profit and profit for the year, and for 1998 to
increase total replacement cost operating profit and reduce the profit for the
year as set out below.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Total replacement cost operating profit....................... 121 84 100
Restructuring costs........................................... 66 -- --
Refinery network rationalization.............................. -- -- (118)
European refining and marketing joint venture implementation.. -- -- (265)
Interest expense.............................................. (110) (124) (127)
Taxation...................................................... -- -- 53
------ ------ ------
Profit (loss) for the period.................................. 77 (40) (357)
====== ====== ======
The adjustments to tangible assets and provisions for liabilities and
charges at December 31, 1998 are as follows:
Tangible assets......................................................... 415
Other creditors......................................................... 62
Other provisions........................................................ 238
------
BP Amoco shareholders' interest.......................................... 715
======
</TABLE>
NOTE 44 -- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the BP Amoco 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 Amoco Group reporting
relate to the following:
(A) GROUP CONSOLIDATION
Investments in entities over which the Group does not exercise control
(associates and joint ventures) 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
associated undertakings and joint ventures. In addition the 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.
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 requires these activities to be accounted for by
proportional consolidation, which is equivalent to UK GAAP.
F - 68
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(A) GROUP CONSOLIDATION (CONCLUDED)
The following summarizes the reclassifications for associates and joint
ventures necessary to accord with US GAAP.
<TABLE>
<CAPTION>
Year ended December 1999
--------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------- ---------------- ------------
($ million)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME
Other income................................. 414 1,399 1,813
Share of profits of JVs and associated
undertakings 1,158 (1,158) --
Exceptional items before taxation............ (2,280) 1 (2,279)
Inventory holding gains (losses)............. 1,728 (547) 1,181
Interest expense............................. 1,316 (201) 1,115
Taxation..................................... 1,880 (104) 1,776
Profit for the year.......................... 5,008 -- 5,008
</TABLE>
<TABLE>
<CAPTION>
Year ended December 1998
--------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------- ---------------- ------------
($ million)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME
Other income................................. 709 808 1,517
Share of profits of JVs and associated
undertakings 1,347 (1,347) --
Exceptional items before taxation............ 850 (85) 765
Inventory holding gains (losses)............. (1,391) 330 (1,061)
Interest expense............................. 1,177 (162) 1,015
Taxation..................................... 1,520 (132) 1,388
Profit for the year.......................... 3,220 -- 3,220
</TABLE>
<TABLE>
<CAPTION>
Year ended December 1997
--------------------------------------------
As US GAAP
Reported Reclassification Presentation
------------- ---------------- ------------
($ million)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME
Other income................................. 662 586 1,248
Share of profits of JVs and associated
undertakings 1,100 (1,100) --
Exceptional items before taxation............ 128 123 251
Inventory holding gains (losses)............. (939) 200 (739)
Interest expense............................. 1,035 (83) 952
Taxation..................................... 3,013 (108) 2,905
Profit for the year.......................... 5,673 -- 5,673
</TABLE>
(B) INCOME STATEMENT
The income statement prepared under UK GAAP shows sub-totals for
replacement cost profit before interest and tax, historical cost profit
before interest and tax and profit after taxation. These line items are not
recognized under US GAAP.
F - 69
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(C) 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 businesses and fixed assets and fundamental
restructuring charges. Under US GAAP these items are classified as
operating income or expenses.
(D) IMPAIRMENT
Both UK and US GAAP require that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. US GAAP requires, in performing
the review for recoverability, the entity to estimate the future cash flows
expected to result from the use of the asset and its eventual disposition.
If the sum of the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Otherwise, no impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use is based on the fair
value of the assets.
For UK GAAP to the extent that the carrying amount exceeds the recoverable
amount, that is the higher of net realizable value and value in use (fair
value) the fixed asset is written down to its recoverable amount.
No UK/US GAAP adjustment was required for impairment.
(E) 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. Under US GAAP (i) environmental
liabilities are discounted only where the timing and amounts of payments
are fixed and reliably determinable and (ii) provisions for decommissioning
are provided on a unit-of-production basis over field lives.
The adjustments for decommissioning expense, interest expense and
decommissioning and environmental provisions arise from the differences
between the UK and US GAAP bases for determining provisions
(F) DEFERRED TAXATION
Under the UK GAAP restricted liability method, deferred taxation is only
provided where timing differences are expected to reverse in the
foreseeable future. Under US GAAP deferred taxation is provided for
temporary differences between the financial reporting basis and the tax
basis of the Group's assets and liabilities at enacted tax rates.
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 US 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 for fixed assets, depreciation and deferred taxation arise
from the difference between the UK GAAP and US GAAP bases for deferred
taxation.
F - 70
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(F) DEFERRED TAXATION (CONCLUDED)
At December 31, 1999, the adjustment to the carrying amount of fixed assets
was $1,210 million ($1,325 million at December 31, 1998) and the related
deferred tax liability $1,145 million ($1,236 million at December 31,
1998). The charge for depreciation in 1999 in respect of these assets was
$115 million (1998 $123 million and 1997 $162 million) and the credit for
taxation $91 million (1998 $256 million and 1997 $166 million). The UK/US
GAAP adjustment for deferred taxation may be summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
($ million)
<S> <C> <C>
Increase in provision from restricted liability to gross
potential liability............................................. 5,356 4,677
Tax liability resulting from business combination................. 1,145 1,236
Net tax asset on sale and leaseback of Chicago office building,
severance costs, European joint venture implementation costs,
and other adjustments........................................... (419) (137)
------ ------
6,082 5,776
====== ======
</TABLE>
The major components of deferred tax liabilities and assets on a US GAAP
basis were as follows:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Depreciation.......................................... (11,394) (11,087)
Other taxable temporary differences................... (1,733) (1,249)
------ ------
Total deferred tax liabilities........................ (13,127) (12,336)
------ ------
Petroleum revenue tax................................. 332 420
Decommissioning and other provisions.................. 2,362 2,279
Advance corporation tax............................... -- 33
Tax credit and loss carry forward..................... 1,726 1,870
Other deductible temporary differences................ 1,141 1,080
------ ------
Gross deferred tax assets............................. 5,561 5,682
Valuation allowance................................... (299) (754)
------ ------
Net deferred tax assets............................... 5,262 4,928
------ ------
Net deferred tax liability*........................... 7,865 7,408
====== ======
</TABLE>
- ----------
* Primarily noncurrent.
F - 71
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
(G) 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.
(H) SALE AND LEASEBACK
The sale and leaseback of the Amoco building in Chicago, Illinois in 1998
is treated as a sale for UK GAAP whereas for US GAAP it is treated as a
financing transaction.
A provision was recognized under UK GAAP in 1999 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 has been reversed for US GAAP.
Under UK GAAP the profit arising on the sale and operating leaseback of
certain railcars in 1999 is taken to income in the period in which the
transaction occurs. Under US GAAP this profit is not recognized immediately
but amortised over the term of the operating lease.
(I) DIVIDENDS
Under UK GAAP, dividends are recorded in the year 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.
F - 72
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The following is a summary of the adjustments to profit for the year and
to BP Amoco shareholders' interest which would be required if US GAAP had been
applied instead of UK GAAP:
PROFIT FOR THE YEAR
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million except
per share amounts)
<S> <C> <C> <C>
Profit as reported in the consolidated statement of income.. 5,008 3,220 5,673
Adjustments:
Depreciation charge....................................... (81) (76) (101)
Decommissioning and environmental expense................. (165) (131) (161)
Onerous property leases................................... 133 -- --
Interest expense.......................................... 110 124 127
Sale and leaseback of fixed assets........................ (37) (211) --
Deferred taxation......................................... (378) (72) 41
Other..................................................... 6 (28) 107
------ ------ ------
Profit for the year as adjusted to accord with US GAAP...... 4,596 2,826 5,686
Dividend requirements on preference shares.................. 2 1 1
------ ------ ------
Profit for the year applicable to Ordinary Shares
as adjusted to accord with US GAAP........................ 4,594 2,825 5,685
====== ====== ======
Profit for the year as adjusted:
Per Ordinary Share - cents
Basic..................................................... 23.70 14.72 29.62
Diluted................................................... 23.56 14.66 29.46
====== ====== ======
Per American Depositary Share - cents
Basic..................................................... 142.20 88.32 177.72
Diluted................................................... 141.36 87.96 176.76
====== ====== ======
</TABLE>
BP AMOCO SHAREHOLDERS' INTEREST
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
BP Amoco shareholders' interest as reported in the
consolidated balance sheet..................................... 43,281 42,501
Adjustments:
Fixed assets.................................................... 1,237 1,112
Ordinary shares held for future awards to employees............. (456) (489)
Sale and leaseback of Chicago office building................... (413) (413)
Decommissioning and environmental provisions.................... (499) (238)
Onerous property leases......................................... 139 --
Deferred taxation............................................... (6,082) (5,776)
Fourth quarterly dividend....................................... 972 968
Pension liability adjustment.................................... (144) (143)
Other........................................................... (197) (188)
------ ------
BP Amoco shareholders' interest as adjusted to accord with US GAAP 37,838 37,334
====== ======
</TABLE>
F - 73
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C>
Profit for the period as adjusted to accord with US GAAP.... 4,596 2,826 5,686
Currency translation differences............................ (921) 55 (1,587)
Pension liability adjustment................................ (1) (33) 7
------ ------ ------
Comprehensive income........................................ 3,674 2,848 4,106
====== ====== ======
</TABLE>
Accumulated other comprehensive income at December 31, 1999 comprised
currency translation losses of $1,374 million (December 31, 1998 losses $453
million) and pension liability adjustments of $144 million (December 31, 1998
$143 million).
CONSOLIDATED BALANCE SHEET
Under US GAAP Trade and Other receivables due after one year of $3,455
million at December 31, 1999 ($3,305 million at December 31, 1998), included
within current assets, would have been classified as noncurrent assets.
Borrowing under US Industrial Revenue/Municipal Bonds of $1,376 million
(December 31,1998 $1,277 million) included within current liabilities -- falling
due within one year would under US GAAP have been classified as noncurrent
liabilities. The provision for deferred taxation is primarily in respect of
noncurrent items.
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
(FRS1). The statement prepared under FRS1 presents substantially the same
information as that required under FASB Statement of Financial Accounting
Standards No. 95 'Statement of Cash Flows' (SFAS 95).
Under FRS1 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) management of liquid resources; and (x) financing. SFAS 95 only
requires presentation of cash flows from operating, investing and financing
activities.
Cash flows under FRS1 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
FRS1 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 FRS1. 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.
F - 74
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The statement of consolidated cash flows presented in accordance with SFAS 95 is
as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Profit after taxation................................ 5,146 3,283 5,824
Adjustments to reconcile profit after tax to net
cash provided by operating activities:
Depreciation and amounts provided.................. 4,965 5,301 5,117
Exploration expenditure written off................ 304 373 365
Share of profit (losses) of joint ventures and associated
undertakings less dividends received............. (536) (136) (36)
Profit (loss) on sale of businesses and fixed assets 379 (963) (563)
Working capital decrease (increase) (a)............ (1,676) 380 2,370
Other.............................................. 318 255 382
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ 8,900 8,493 13,459
------ ------ ------
INVESTING ACTIVITIES
Capital expenditures................................. (6,314) (9,026) (8,995)
Acquisitions......................................... (102) (314) --
Investment in associated undertakings................ (197) (396) (1,021)
Net investment in joint ventures..................... (750) 708 (1,967)
Proceeds from disposal of assets..................... 2,441 2,167 1,832
------ ------ ------
NET CASH USED IN INVESTING ACTIVITIES................ (4,922) (6,861) (10,151)
------ ------ ------
FINANCING ACTIVITIES
Proceeds from shares issued (repurchased) ........... 245 (423) (1,250)
Proceeds from long-term financing.................... 2,140 2,078 1,124
Repayments of long-term financing.................... (2,268) (1,208) (863)
Net increase (decrease) in short-term debt........... 837 (70) (23)
Dividends paid -- Shareholders....................... (4,135) (2,408) (2,437)
-- Minority shareholders.............. (151) (130) --
------ ------ ------
NET CASH USED IN FINANCING ACTIVITIES................ (3,332) (2,161) (3,449)
------ ------ ------
Currency translation differences relating to cash
and cash equivalents............................... 15 (15) (28)
------ ------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 661 (544) (169)
Cash and cash equivalents at beginning of year....... 794 1,338 1,507
------ ------ ------
Cash and cash equivalents at end of year............. 1,455 794 1,338
====== ====== ======
</TABLE>
- ----------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(a)Working capital:
Inventories (increase) decrease ................... (1,562) 584 1,740
Receivables (increase) decrease ................... (3,854) 1,777 2,119
Current liabilities (excluding finance debt)
increase (decrease)............................... 3,740 (1,981) (1,489)
------ ------ ------
(1,676) 380 2,370
====== ====== ======
</TABLE>
F - 75
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 44-- US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONCLUDED)
IMPACT OF NEW ACCOUNTING STANDARDS
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 133 `Accounting for Derivative Instruments and Hedging Activities
(`SFAS 133'). The effective date of this standard was delayed for one year, to
accounting periods beginning after June 15, 2000, by Statement of Financial
Accounting Standards No.137, `Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No.133', issued in June 1999. SFAS 133 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. The Company has not yet completed its evaluation of the impact of
adopting SFAS 133 on the Group's results of operations and financial position as
adjusted to accord with US GAAP.
START-UP COSTS: Effective January 1, 1999 the Group adopted the American
Institute of Certified Public Accountants' issued Statement of Position No.
98-5, `Reporting on the Costs of Start-up Activities' (SOP 98-5). This Statement
requires costs associated with start-up activities and organization costs be
expensed as incurred. Under its previous practice, the Group generally expensed
such costs as incurred. The adoption of SOP 98-5 had no impact on the Group's
results of operations and financial positions as adjusted to accord with US
GAAP.
NOTE 45 -- BUSINESS AND GEOGRAPHICAL ANALYSIS
BP Amoco has three reportable operating segments -- Exploration and
Production, Refining and Marketing and Chemicals. Exploration and Production's
activities include oil and natural gas exploration and field development and
production (upstream activities), together with pipeline transportation, natural
gas processing and natural gas marketing (midstream activities). The activities
of Refining and Marketing include oil supply and trading as well as refining and
marketing (downstream activities). Chemicals activities include petrochemicals
manufacturing and marketing.
The Group is managed on a unified basis. Reportable segments are
differentiated by the activities that each undertakes and the products they
manufacture and market.
The accounting policies of operating segments are the same as those
described in Note 1, Accounting Policies. Performance is evaluated based on
replacement cost operating profit or loss, which excludes exceptional items,
inventory holding gains and losses, interest income and expense, taxation and
minority shareholders' interests.
Sales between segments are made at prices that approximate market prices
taking into account the volumes involved.
F - 76
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 45-- BUSINESS AND GEOGRAPHICAL ANALYSIS (CONTINUED)
BY BUSINESS
<TABLE>
<CAPTION>
Other
Exploration Refining businesses
and and and
Production Marketing Chemicals corporate(a) Eliminations Total
---------- --------- --------- ---------- ------------ -----
($ million)
1999
<S> <C> <C> <C> <C> <C> <C>
Group turnover--third parties... 13,949 60,369 9,050 198 -- 83,566
--sales between
businesses(b)... 7,700 2,524 342 -- (10,566) --
------- ------- ------- ------- ------- -------
21,649 62,893 9,392 198 (10,566 83,566
------- ------- ------- ------- ------- -------
Share of joint venture sales 17,614
-------
101,180
-------
Equity accounted income (c).... 476 503 125 54 1,158
------- ------- ------- ------- -------
Total replacement cost operating
profit (loss) (d)............ 7,194 1,840 686 (826) 8,894
Exceptional items (e).......... (1,097) (334) (257) (592) (2,280)
Inventory holding gains (losses) (1) 1,613 116 -- 1,728
------- ------- ------- ------- -------
Historical cost profit (loss)
before interest and tax...... 6,096 3,119 545 (1,418) 8,342
------- ------- ------- ------- -------
Total assets (f)............... 46,649 27,248 13,021 2,643 89,561
Operating capital employed (g). 37,322 14,358 10,048 1,192 62,920
Depreciation and amounts
provided (h)................. 3,705 810 632 206 5,353
Capital expenditure and
acquisitions (i) 4,212 1,634 1,215 284 7,345
1998
Group turnover--third parties.. 12,216 46,625 9,312 151 -- 68,304
--sales between
businesses (b). 5,060 1,812 379 48 (7,299) --
------- ------- ------- ------- ------- -------
17,276 48,437 9,691 199 (7,299) 68,304
------- ------- ------- ------- ------- -------
Share of joint venture sales 15,428
-------
83,732
-------
Equity accounted income (c).... 244 852 150 101 1,347
------- ------- ------- ------- -------
Total replacement cost operating
profit (loss) (d)............ 3,231 2,564 1,100 (374) 6,521
Exceptional items (e).......... 396 394 43 17 850
Inventory holding gains (losses) (17) (1,228) (146) -- (1,391)
------- ------- ------- ------- -------
Historical cost profit (loss)
before interest and tax...... 3,610 1,730 997 (357) 5,980
------- ------- ------- ------- -------
Total assets (f)............... 47,808 21,029 12,562 3,516 84,915
Operating capital employed (g). 38,819 12,563 10,178 (579) 60,981
Depreciation and amounts
provided (h)................. 4,272 790 497 115 5,674
Capital expenditure and
acquisitions (i)............. 6,318 1,937 1,606 501 10,362
</TABLE>
F - 77
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 45-- BUSINESS AND GEOGRAPHICAL ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
Other
Exploration Refining businesses
and and and
Production Marketing Chemicals corporate(a) Eliminations Total
---------- --------- --------- ---------- ------------ -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
1997
Group turnover--third parties.. 15,475 65,283 10,853 149 -- 91,760
--sales between
businesses (b). 7,696 2,421 592 -- (10,709) --
------- ------- ------- ------- ------- -------
23,171 67,704 11,445 149 (10,709) 91,760
------- ------- ------- ------- ------- -------
Share of joint venture sales 16,804
-------
108,564
-------
Equity accounted income (c)... 292 604 125 79 1,100
------- ------- ------- ------- -------
Total replacement cost operating
profit (loss) (d)........... 7,385 2,292 1,530 (524) 10,683
Exceptional items (e)......... 587 (422) (15) (22) 128
Inventory holding gains (losses) 12 (849) (102) -- (939)
------- ------- ------- ------- -------
Historical cost profit (loss)
before interest and tax..... 7,984 1,021 1,413 (546) 9,872
------- ------- ------- ------- -------
Total assets (f).............. 46,024 24,055 12,141 4,059 86,279
Operating capital employed (g) 36,428 14,073 9,672 232 60,405
Depreciation (h).............. 3,957 842 559 124 5,482
Capital expenditure and
acquisitions 7,879 1,824 1,145 572 11,420
</TABLE>
BY GEOGRAPHICAL AREA
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom (j) Europe USA World Eliminations Total
---------- --------- --------- ---------- ------------ -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
1999
Group turnover
- -- third parties(k)........... 25,817 5,332 37,405 15,012 83,566
- -- sales between areas........ 4,406 641 1,381 4,453 (10,881) --
------ ------ ------ ------ ------- ------
30,223(k) 5,973(k) 38,786 19,465 (10,881) 83,566
------ ------ ------ ------ -------
Share of joint venture sales.. 3,988 16,114 155 342 (2,985) 17,614
-------
101,180
-------
Equity accounted income (c).. 48 619 198 293 1,158
------ ------ ------ ------ -------
Total replacement cost
operating profit (d)....... 2,111 1,167 3,001 2,615 8,894
Exceptional items (e)........ (237) (258) (983) (802) (2,280)
Inventory holding gains (losses) 151 494 839 244 1,728
------ ------ ------ ------ -------
Historical cost profit before
interest and tax........... 2,025 1,403 2,857 2,057 8,342
------ ------ ------ ------ -------
Total assets (f)............. 22,867 8,865 38,223 19,606 89,561
Operating capital employed (g) 14,748 4,434 27,426 16,312 62,920
Capital expenditure and
acquisitions (i)........... 1,518 831 2,963 2,033 7,345
</TABLE>
F - 78
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 45-- BUSINESS AND GEOGRAPHICAL ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom (j) Europe USA World Eliminations Total
---------- --------- --------- ---------- ------------ -----
($ million)
<S> <C> <C> <C> <C> <C> <C>
1998
Group turnover
- -- third parties(k)........... 19,662 5,123 31,945 11,574 68,304
- -- sales between areas........ 2,848 700 1,215 2,458 (7,221) --
------ ------ ------ ------ ------- ------
22,510(k) 5,823(k) 33,160 14,032 (7,221) 68,304
------ ------ ------ ------ -------
Share of joint venture sales.. 3,467 14,186 43 305 (2,573) 15,428
-------
83,732
-------
Equity accounted income (c).. 135 904 125 183 1,347
------ ------ ------ ------ -------
Total replacement cost
operating profit (d)....... 1,931 1,249 2,631 710 6,521
Exceptional items (e)........ (39) 106 511 272 850
Inventory holding gains (losses) (136) (283) (720) (252) (1,391)
------ ------ ------ ------ -------
Historical cost profit before
interest and tax........... 1,756 1,072 2,422 730 5,980
------ ------ ------ ------ -------
Total assets (f)............. 22,747 8,538 35,823 17,807 84,915
Operating capital employed (g) 14,188 5,053 26,629 15,111 60,981
Capital expenditure and
acquisitions (i)........... 2,463 1,248 3,720 2,931 10,362
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1997
Group turnover
- -- third parties(k)........... 27,473 7,943 40,322 16,022 91,760
- -- sales between areas........ 3,787 553 1,438 3,377 (9,155) --
------ ------ ------ ------ ------- ------
31,260 8,496 41,760 19,399 (9,155) 91,760
------ ------ ------ ------ -------
Share of joint venture sales.. 4,584 15,414 41 71 (3,306) 16,804
-------
108,564
-------
Equity accounted income (c).. 26 758 84 232 1,100
------ ------ ------ ------ -------
Total replacement cost
operating profit (d)....... 2,767 1,332 4,360 2,224 10,683
Exceptional items (e)........ (133) (205) 456 10 128
Inventory holding gains (losses) (85) (103) (647) (104) (939)
------ ------ ------ ------ -------
Historical cost profit before
interest and tax........... 2,549 1,024 4,169 2,130 9,872
------ ------ ------ ------ -------
Total assets (f)............. 22,520 9,246 36,533 17,980 86,279
Operating capital employed (g) 12,853 4,821 26,456 16,275 60,405
Capital expenditure and
acquisitions (i)........... 2,413 1,243 3,315 4,449 11,420
</TABLE>
- ----------
(a) Other businesses and corporate comprises Finance, BP Solarex, the Group's
coal interest, interest income, and costs relating to corporate activities
worldwide.
(b) Sales and transfers between businesses are made at market prices taking
into account the volumes involved.
(c) Equity accounted income (loss) represents the Group's share of income
(loss) before interest expense and taxes of joint ventures and associated
undertakings.
(d) Total replacement cost operating profit (loss) is before inventory holding
gains and losses and interest expense, which is attributable to the
corporate function.
F - 79
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 45-- BUSINESS AND GEOGRAPHICAL ANALYSIS (CONCLUDED)
(e) Exceptional items comprise profit (loss) on sale of businesses and sale of
fixed assets of $(337) million in 1999 (1998 $1,048 million profit and 1997
$440 million profit), restructuring costs in 1999 of $1,943, merger
expenses in 1998 of $198 million refinery network rationalization costs in
1997 of $47 million and European refining and marketing joint venture
implementation costs in 1997 of $265 million.
(f) Total assets comprise fixed and current assets and include investments in
joint ventures and associated undertakings analyzed between activities as
follows:
<TABLE>
<CAPTION>
Other
Exploration Refining businesses
and and and
Production Marketing Chemicals corporate(a) Total
---------- ---------- ---------- ---------- ----------
($ million)
<S> <C> <C> <C> <C> <C>
1999.................... 3,312 4,771 1,350 105 9,538
---------- ---------- ---------- ---------- ----------
1998.................... 3,416 4,345 1,281 125 9,167
---------- ---------- ---------- ---------- ----------
1997.................... 3,782 4,796 1,270 130 9,978
---------- ---------- ---------- ---------- ----------
</TABLE>
(g) Operating capital employed comprises net assets before deducting finance
debt and liabilities for current and deferred taxation.
(h) Depreciation consists of charges for depreciation, depletion and
amortization of property, plant and equipment, exploration expense and
amounts provided against fixed asset investments.
(i) Capital expenditure and acquisitions includes $624 million in 1999 (1998
$620 million and 1997 $646 million) for the BP/Mobil joint venture.
(j) United Kingdom area includes the UK-based international activities of
Refining and Marketing.
(k) Turnover to third parties is stated by origin which is not materially
different from turnover by destination.
NOTE 46-- SUMMARIZED FINANCIAL INFORMATION ON ASSOCIATED UNDERTAKINGS AND JOINT
VENTURES
A summarized statement of income and assets and liabilities based on
latest information available, with respect to the Group's equity accounted
associated undertakings and joint ventures, is set out below:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997(a)
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and other operating revenue.................... 41,180 42,801 45,330
Gross profit......................................... 7,715 7,484 7,641
Profit for the year.................................. 2,641 675 1,754
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Fixed and other assets............................... 17,398 25,534
Current assets....................................... 12,232 11,626
------ ------
29,630 37,160
Current liabilities.................................. (10,929) (12,703)
Noncurrent liabilities............................... (5,876) (7,604)
------ ------
Net assets........................................... 12,825 16,853
====== ======
</TABLE>
- ----------
F - 80
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 46-- SUMMARIZED FINANCIAL INFORMATION ON ASSOCIATED UNDERTAKINGS AND JOINT
VENTURES (CONCLUDED)
(a) Excludes Sidanco and Rusia.
The more important associated undertakings and joint ventures of the Group
at December 31, 1999 and the percentage of equity capital owned or joint venture
interest are:
<TABLE>
<CAPTION>
% Country of Principal
operation activities
ASSOCIATED UNDERTAKINGS
<S> <C> <C> <C>
Abu Dhabi Marine Areas..... 33 Abu Dhabi Crude oil production
Abu Dhabi Petroleum........ 24 Abu Dhabi Crude oil production
Erdolchemie................ 50 Germany Chemicals
Ruhrgas.................... 25 Germany Gas distribution
Sidanco (b)................ 10 Russia Integrated oil operations
Rusia...................... 25 Russia Exploration and production
China American Petroleum Co. 50 Taiwan Chemicals
JOINT VENTURES
BP/Mobil................... 70/49(c) Europe Refining and marketing
Empresa Petrolera Chaco.... 30 Bolivia Exploration and production
Pan American Energy........ 60 Argentina Exploration and production
CaTo Finance Partnership... 50 UK Finance
</TABLE>
- ----------
(b) 20% voting interest.
(c) Fuels/lubricants
NOTE 47 -- SUMMARIZED FINANCIAL INFORMATION ON CERTAIN US SUBSIDIARIES
BP AMERICA INC. (a)(b)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and other operating revenue.................... 15,727 12,502 16,789
Gross profit (c)..................................... 2,539 1,819 3,204
Profit for the year ................................. 797 525 928
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Fixed and other assets............................... 13,790 13,789
Current assets....................................... 5,278 3,002
------ ------
Total assets......................................... 19,068 16,791
====== ======
Current liabilities.................................. 6,283 5,172
Noncurrent liabilities............................... 6,199 5,822
Shareholders' interest............................... 6,586 5,797
------ ------
Total liabilities and shareholders' interest......... 19,068 16,791
====== ======
</TABLE>
F - 81
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 47-- SUMMARIZED FINANCIAL INFORMATION ON CERTAIN USSUBSIDIARIES (CONTINUED)
THE STANDARD OIL COMPANY (a)(b)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and other operating revenue.................... 15,301 12,111 16,312
Gross profit (c)..................................... 2,337 1,617 2,897
Profit for the year.................................. 1,057 655 1,008
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Fixed and other assets............................... 12,584 12,387
Current assets....................................... 6,664 4,547
------ ------
Total assets......................................... 19,248 16,934
====== ======
Current liabilities.................................. 4,303 2,772
Noncurrent liabilities............................... 5,363 5,630
Shareholders' interest............................... 9,582 8,532
------ ------
Total liabilities and shareholders' interest......... 19,248 16,934
====== ======
</TABLE>
BP PIPELINES (ALASKA) INC. (a)(b)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and other operating revenue.................... 476 547 638
Gross profit (c)..................................... 193 239 242
Profit for the year.................................. 113 140 123
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Fixed and other assets............................... 1,290 1,362
Current assets....................................... 853 803
------ ------
Total assets......................................... 2,143 2,165
====== ======
Current liabilities.................................. 128 152
Noncurrent liabilities............................... 967 994
Shareholders' interest............................... 1,048 1,019
------ ------
Total liabilities and shareholders' interest......... 2,143 2,165
====== ======
</TABLE>
F - 82
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 47-- SUMMARIZED FINANCIAL INFORMATION ON CERTAIN USSUBSIDIARIES (CONTINUED)
BP EXPLORATION (ALASKA) INC. (a)(b)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and other operating revenue.................... 8,645 5,666 9,228
Gross profit (loss)(c)............................... 365 (65) 1,150
Profit (loss)for the year............................ 242 (60) 959
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------ ------
($ million)
<S> <C> <C>
Fixed and other assets............................... 10,124 9,704
Current assets....................................... 3,117 1,836
------ ------
Total assets......................................... 13,241 11,540
====== ======
Current liabilities.................................. 2,119 628
Noncurrent liabilities............................... 1,536 1,582
Shareholders' interest............................... 9,586 9,330
------ ------
Total liabilities and shareholders' interest......... 13,241 11,540
====== ======
</TABLE>
- ----------
(a) BP America Inc. is a wholly-owned subsidiary of BP Amoco p.l.c.; The
Standard Oil Company is a wholly-owned subsidiary of BP America Inc.; and
BP Pipelines (Alaska) Inc. and BP Exploration (Alaska) Inc. are
wholly-owned subsidiaries of The Standard Oil Company.
(b) As a result of adopting FRS 12 (see Note 43), profit for the year ended
December 31, 1999 for BP America Inc., The Standard Oil Company, BP
Pipelines (Alaska) Inc. and BP Exploration (Alaska) Inc. was increased by
$22 million, $22 million $8 million and $11 million respectively. In
addition, the adoption of FRS 12 resulted in the restatement of certain
prior year financial information as follows - (i) shareholders' interest at
December 31, 1998 for BP America Inc., The Standard Oil Company, BP
Pipelines (Alaska) Inc. and BP Exploration (Alaska) Inc. was increased by
$770 million, $754 million, $281 million and $362 million, respectively;
(ii) profit for the year ended December 31, 1998 for BP America Inc. The
Standard Oil Company and BP Pipelines (Alaska) Inc. was decreased by $37
million, $35 million, and $9 million respectively and loss for the year
ended December 31, 1998 for BP Exploration (Alaska) Inc. was increased by
$7 million; (iii) profit for the year ended December 31, 1997 for BP
America Inc., The Standard Oil Company, BP Pipelines (Alaska) Inc. was
decreased by $35 million, $35 million, $7 million and $4 million
respectively.
(c) Gross profit (loss) equals sales and other operating revenue less
associated costs, which exclude distribution and administration expenses
and exploration expense.
(d) During 1997, as part of a restructuring of ownership interests among
certain wholly owned subsidiaries of BP America Inc., the obligation for
certain employee benefits provided in the financial statements of BP
Exploration (Alaska) Inc. was transferred to The Standard Oil Company. As a
result of this transfer, profit for 1997 for BP Exploration (Alaska) Inc.
includes a credit of $223 million.
F - 83
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 47-- SUMMARIZED FINANCIAL INFORMATION ON CERTAIN USSUBSIDIARIES (CONCLUDED)
(e) In August 1998, The Standard Oil Company completed the sale of its Lima,
Ohio, refinery and related terminal facilities. The after-tax gain
resulting from this sale amounts to $255 million, which includes the
write-back of certain provisions no longer required.
(f) During 1998, certain tax liabilities provided in the financial statements
of BP America Inc. were transferred to The Standard Oil Company, BP
Pipelines (Alaska) Inc. and BP Exploration (Alaska) Inc. As a result of
this transfer profit (loss) for 1998 for The Standard Oil Company, BP
Pipelines (Alaska) Inc. and BP Exploration (Alaska) Inc. includes a tax
charge of $80 million, $22 million and $28 million, respectively.
(g) Profit for the year ended December 31, 1999 for BP America Inc., The
Standard Oil Company and BP Exploration (Alaska) Inc. includes a pretax
charge of $100 million relating to the write-down of the investment in the
Badami oilfield.
(h) Profit for the year ended December 31, 1999 for BP America Inc., The
Standard Oil Company and BP Exploration (Alaska) Inc. includes pre-tax
restructuring charges of $222 million, $153 million and $49 million
respectively
F - 84
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION
(UNAUDITED)
The following tables show estimates of the Group's net proved reserves of
crude oil and natural gas at December 31, 1999, 1998 and 1997.
ESTIMATED NET PROVED RESERVES OF CRUDE OIL (a)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(millions of barrels)
1999
<S> <C> <C> <C> <C> <C>
SUBSIDIARY UNDERTAKINGS
At January 1
Developed............................ 1,258 220 2,982 858 5,318
Undeveloped.......................... 270 51 979 686 1,986
-------- -------- -------- -------- --------
1,528 271 3,961 1,544 7,304
======== ======== ======== ======== ========
Changes in year attributable to:
Revisions of previous estimates...... (10) 12 11 1 14
Purchases of reserves-in-place....... 6 -- 4 -- 10
Extensions, discoveries and other additions 1 24 100 44 169
Improved recovery.................... 28 14 87 83 212
Production........................... (212) (36) (275) (149) (672)
Sales of reserves-in-place........... -- -- (33) (476) (509)
Transfers from associated undertakings -- -- 7(d) -- 7
-------- -------- -------- -------- --------
(187) 14 (99) (497) (769)
======== ======== ======== ======== ========
At December 31
Developed............................ 1,158 190 2,930 550 4,828
Undeveloped.......................... 183 95 932 497 1,707
-------- -------- -------- -------- --------
1,341 285 3,862(b)(c) 1,047 6,535
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
BP Amoco share
<S> <C>
At January 1..................................................................... 1,128
Net revisions and other additions.............................................. (21)
Purchases of reserves-in-place................................................. --
Production..................................................................... (63)
Transfers to subsidiary undertakings........................................... (7)(d)
------
At December 31................................................................... 1,037
======
TOTAL GROUP AND BP AMOCO SHARE OF ASSOCIATED UNDERTAKINGS...................... 7,572
======
</TABLE>
F - 85
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
ESTIMATED NET PROVED RESERVES OF CRUDE OIL (a) (CONTINUED)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(millions of barrels)
1998
<S> <C> <C> <C> <C> <C>
SUBSIDIARY UNDERTAKINGS
At January 1
Developed............................ 779 241 3,039 916 4,975
Undeveloped.......................... 744 46 1,210 637 2,637
-------- -------- -------- -------- --------
1,523 287 4,249 1,553 7,612
======== ======== ======== ======== ========
Changes in year attributable to:
Revisions of previous estimates...... 106 17 (90) (76) (43)
Purchases of reserves-in-place....... 3 -- 10 1 14
Extensions, discoveries and
other additions.................... 38 4 57 222 321
Improved recovery.................... 80 1 69 32 182
Production........................... (189) (38) (283) (141) (651)
Sales of reserves-in-place........... (33) -- (51) (47) (131)
-------- -------- -------- -------- --------
5 (16) (288) (9) (308)
======== ======== ======== ======== ========
At December 31
Developed............................ 1,258 220 2,982 858 5,318
Undeveloped.......................... 270 51 979 686 1,986
-------- -------- -------- -------- --------
1,528 271 3,961(b)(c) 1,544 7,304
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
BP Amoco share
<S> <C>
At January 1..................................................................... 1,110
Purchases of reserves-in-place................................................. 90
Production..................................................................... (72)
------
At December 31................................................................... 1,128
======
TOTAL GROUP AND BP AMOCO SHARE OF ASSOCIATED UNDERTAKINGS....................... 8,432
======
</TABLE>
F - 86
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
ESTIMATED NET PROVED RESERVES OF CRUDE OIL (a) (CONCLUDED)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(millions of barrels)
1997
<S> <C> <C> <C> <C> <C>
SUBSIDIARY UNDERTAKINGS
At January 1
Developed............................ 655 198 2,933 911 4,697
Undeveloped.......................... 924 49 924 731 2,628
-------- -------- -------- -------- --------
1,579 247 3,857 1,642 7,325
======== ======== ======== ======== ========
Changes in year attributable to:
Revisions of previous estimates...... 33 13 139 50 235
Purchases of reserves-in-place....... 9 67 364 48 488
Extensions, discoveries and
other additions.................... 88 28 338 144 598
Improved recovery.................... 35 1 66 34 136
Production........................... (160) (42) (302) (140) (644)
Sales of reserves-in-place........... (61) (27) (213) (225) (526)
-------- -------- -------- -------- --------
(56) 40 392 (89) 287
======== ======== ======== ======== ========
At December 31
Developed............................ 779 241 3,039 916 4,975
Undeveloped.......................... 744 46 1,210 637 2,637
-------- -------- -------- -------- --------
1,523 287 4,249(b)(c) 1,553 7,612
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
BP Amoco share
<S> <C>
At January 1..................................................................... 984
Net revisions and other changes................................................ (23)
Purchases of reserves-in-place................................................. 194
Production..................................................................... (45)
------
At December 31................................................................... 1,110(e)
======
TOTAL GROUP AND BP AMOCO SHARE OF ASSOCIATED UNDERTAKINGS....................... 8,722
======
</TABLE>
- ----------
(a) Crude oil includes natural gas liquids and condensate. Net proved reserves
of crude oil exclude production royalties due to others.
(b) Proved reserves in the Prudhoe Bay field in Alaska include an estimated 94
million barrels (nil barrels at December 31, 1998 and 65 million barrels at
December 31, 1997) upon which a net profits royalty will be payable over
the life of the field under the terms of the BP Prudhoe Bay Royalty Trust.
(c) Minority interest in Altura Energy included 309 million barrels of crude
oil (280 million barrels at December 31, 1998 and 334 million barrels at
December 31,1997).
ASSOCIATED UNDERTAKINGS
(d) Transfer from associated to subsidiary undertakings comprise reserves in
Crescendo Resources after the acquisition of the majority interest from
Repsol YPF.
(e) Excludes reserves in Sidanco and Rusia.
F - 87
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
ESTIMATED NET PROVED RESERVES OF NATURAL GAS (a)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(billions of cubic feet)
<S> <C> <C> <C> <C> <C>
1999
At January 1
Developed............................ 3,536 324 9,637 6,054 19,551
Undeveloped.......................... 1,107 38 1,658 8,647 11,450
-------- -------- -------- -------- --------
4,643 362 11,295 14,701 31,001
======== ======== ======== ======== ========
Changes in year attributable to:
Revisions of previous estimates...... 1 9 215 (107) 118
Purchases of reserves-in-place....... 3 -- -- 12 15
Extensions, discoveries and
other additions 79 34 417 3,296 3,826
Improved recovery.................... 22 -- 242 299 563
Production........................... (475) (60) (907)(b) (752) (2,194)
Sales of reserves-in-place........... -- -- (143) (256) (399)
Tranfers from associated undertakings -- -- 872 (d) -- 872
-------- -------- -------- -------- --------
(370) (17) 696 2,492 2,801
======== ======== ======== ======== ========
At December 31
Developed............................ 3,354 282 10,439 6,423 20,498
Undeveloped.......................... 919 63 1,552 10,770 13,304
-------- -------- -------- -------- --------
4,273 345 11,991 (c) 17,193 33,802
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
BP Amoco share
<S> <C>
At January 1.................................................................. 1,766
Net revisions and other changes............................................. 549
Purchases of reserves-in-place.............................................. 378
Production.................................................................. (97)
Transfers to subsidiary undertakings........................................ (872)(d)
------
At December 31................................................................ 1,724
======
TOTAL GROUP AND BP AMOCO SHARE OF ASSOCIATED UNDERTAKINGS.................... 35,526
======
</TABLE>
F - 88
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
ESTIMATED NET PROVED RESERVES OF NATURAL GAS (a) (CONTINUED)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(billions of cubic feet)
1998
<S> <C> <C> <C> <C> <C>
At January 1
Developed............................ 3,161 372 10,284 5,612 19,429
Undeveloped.......................... 1,868 50 1,819 7,208 10,945
-------- -------- -------- -------- --------
5,029 422 12,103 12,820 30,374
======== ======== ======== ======== ========
Changes in year attributable to:
Revisions of previous estimates...... (16) -- 161 (148) (3)
Purchases of reserves-in-place....... -- -- 104 37 141
Extensions, discoveries and
other additions.................... 129 11 176 4,439 4,755
Improved recovery.................... 25 -- 277 47 349
Production........................... (460) (71) (897)(b) (665) (2,093)
Sales of reserves-in-place........... (64) -- (629) (1,829) (2,522)
-------- -------- -------- -------- --------
(386) (60) (808) 1,881 627
======== ======== ======== ======== ========
At December 31
Developed............................ 3,536 324 9,637 6,054 19,551
Undeveloped.......................... 1,107 38 1,658 8,647 11,450
-------- -------- -------- -------- --------
4,643 362 11,295 (c) 14,701 31,001
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
BP Amoco share
<S> <C>
At January 1.................................................................. 1,748
Net revisions and other changes............................................. 47
Purchases of reserves-in-place.............................................. 52
Production.................................................................. (81)
------
At December 31................................................................ 1,766
======
TOTAL GROUP AND BP AMOCO SHARE OF ASSOCIATED UNDERTAKINGS.................... 32,767
======
</TABLE>
F - 89
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
ESTIMATED NET PROVED RESERVES OF NATURAL GAS (a) (CONCLUDED)
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(billions of cubic feet)
1997
<S> <C> <C> <C> <C> <C>
At January 1
Developed............................ 3,085 402 11,722 5,508 20,717
Undeveloped.......................... 2,204 76 1,617 5,735 9,632
-------- -------- -------- -------- --------
5,289 478 13,339 11,243 30,349
======== ======== ======== ======== ========
Changes in year attributable to:
Revisions of previous estimates...... 94 -- (227) 992 859
Purchases of reserves-in-place....... 196 13 283 1,007 1,499
Extensions, discoveries and
other additions.................... 122 289 1,035 1,221 2,667
Improved recovery.................... 10 1 99 200 310
Production........................... (519) (70) (950)(b) (629) (2,168)
Sales of reserves-in-place........... (163) (289) (1,476) (1,214) (3,142)
-------- -------- -------- -------- --------
(260) (56) (1,236) 1,577 25
======== ======== ======== ======== ========
At December 31
Developed............................ 3,161 372 10,284 5,612 19,429
Undeveloped.......................... 1,868 50 1,819 7,208 10,945
-------- -------- -------- -------- --------
5,029 422 12,103 (c) 12,820 30,374
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
BP Amoco share
<S> <C>
At January 1.................................................................. --
Net revisions and other changes............................................. 54
Purchases of reserves-in-place.............................................. 1,723
Production.................................................................. (29)
------
At December 31................................................................ 1,748
======
TOTAL GROUP AND BP AMOCO SHARE OF ASSOCIATED UNDERTAKINGS.................... 32,122
======
</TABLE>
- ----------
(a) Net proved reserves of natural gas exclude production royalties due to
others.
(b) Includes 77 billion cubic feet of natural gas consumed in Alaskan
operations (1998, 79 billion cubic feet and 1997, 81 billion cubic feet).
(c) Minority interest in Altura Energy included 155 billion cubic feet of
natural gas (117 billion cubic feet at December 31, 1998 and 161 billion
cubic feet at December 31, 1997).
ASSOCIATED UNDERTAKINGS
(d) Transfers from associated to subsidiary undertakings comprise reserves in
Crescendo Resources after the acquisition of the majority interest from
Repsol YPF.
(e) Excludes reserves in Sidanco and Rusia.
F - 90
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES THEREIN
RELATING TO PROVED OIL AND GAS RESERVES
The following tables set out the standardized measures of discounted future
net cash flows, and changes therein, relating to crude oil and natural gas
production from the Group's estimated proved reserves. This information is
prepared in compliance with the requirements of FASB Statement of Financial
Accounting Standards No. 69 -- 'Disclosures about Oil and Gas Producing
Activities'.
Future net cash flows have been prepared on the basis of certain
assumptions which may or may not be realized. These include the timing of future
production, the estimation of crude oil and natural gas reserves and the
application of year end crude oil and natural gas prices and exchange rates.
Furthermore, both reserve estimates and production forecasts are subject to
revision as further technical information becomes available and economic
conditions change. BP Amoco cautions against relying on the information
presented because of the highly arbitrary nature of assumptions on which it is
based and its lack of comparability with the historical cost information
presented in the financial statements.
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
($ million)
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Future cash inflows (a)................ 42,400 7,900 101,500 49,500 201,300
Future production and development costs (b) 18,800 2,000 32,500 13,700 67,000
Future taxation (c).................... 5,900 4,200 23,300 15,800 49,200
-------- -------- -------- -------- --------
Future net cash flows.................. 17,700 1,700 45,700 20,000 85,100
10% annual discount (d)................ 4,700 400 23,200 8,400 36,700
-------- -------- -------- -------- --------
Standardized measure of discounted future
net cash flows....................... 13,000 1,300 22,500 11,600 48,400
======== ======== ======== ======== ========
AT DECEMBER 31, 1998
Future cash inflows (a)................ 27,100 3,700 44,800 36,500 112,100
Future production and development costs (b) 18,700 2,200 27,500 14,300 62,700
Future taxation (c).................... 2,000 800 3,100 9,900 15,800
-------- -------- -------- -------- --------
Future net cash flows.................. 6,400 700 14,200 12,300 33,600
10% annual discount (d)................ 1,300 100 7,000 6,600 15,000
-------- -------- -------- -------- --------
Standardized measure of discounted future
net cash flows....................... 5,100 600 7,200 5,700 18,600
======== ======== ======== ======== ========
AT DECEMBER 31, 1997
Future cash inflows (a)................ 38,400 6,000 86,200 48,600 179,200
Future production and development costs (b) 20,300 2,300 35,600 18,400 76,600
Future taxation (c).................... 4,700 2,300 15,500 12,600 35,100
-------- -------- -------- -------- --------
Future net cash flows.................. 13,400 1,400 35,100 17,600 67,500
10% annual discount (d)................ 4,300 400 19,100 8,700 32,500
-------- -------- -------- -------- --------
Standardized measure of discounted future
net cash flows....................... 9,100 1,000 16,000 8,900 35,000
======== ======== ======== ======== ========
</TABLE>
F - 91
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES THEREIN
RELATING TO PROVED OIL AND GAS RESERVES (CONCLUDED)
The following are the principal sources of change in the standardized
measure of discounted future net cash flows during the years ended December 31,
1999, 1998 and 1997:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
------ ------ ------
($ million)
<S> <C> <C> <C>
Sales and transfers of oil and gas produced, net of
production costs...................................... (12,600) (6,500) (10,400)
Development costs incurred during the year.............. 2,900 4,700 5,100
Extensions, discoveries and improved recovery,
less related costs.................................... 6,200 3,200 4,000
Net changes in prices and production costs (e).......... 47,900 (30,900) (34,300)
Revisions of previous reserve estimates................. 2,600 -- 1,000
Net change in taxation.................................. (18,000) 10,800 14,000
Future development costs................................ (200) (1,000) (3,000)
Net change in purchase and sales of reserves-in-place... (900) (200) (1,000)
Addition of 10% annual discount......................... 1,900 3,500 5,400
Other .................................................. -- -- (500)
------ ------ ------
Total change in the standardized measure during the year 29,800 (16,400) (19,700)
====== ====== ======
</TABLE>
- ----------
(a) Future cash inflows are computed by applying year-end oil and natural gas
prices and exchange rates to future annual production levels estimated by
the Group's petroleum engineers.
(b) Production costs (which include petroleum revenue tax in the UK) and
development costs relating to future production of proved reserves are
based on year-end cost levels and assume continuation of existing economic
conditions. Future decommissioning costs are included.
(c) Taxation is computed using appropriate year-end income tax rates.
(d) Future net cash flows from oil and natural gas production are discounted at
10% regardless of the Group assessment of the risk associated with its
producing activities.
(e) Net changes in prices and production costs includes the effect of exchange
movements.
ASSOCIATED UNDERTAKINGS
In addition, at December 31, 1999 the Group's share of the standardized
measure of discounted future net cash flows of associated undertakings amounted
to $2,420 million ($715 million at December 31, 1998 and $830 million at
December 31, 1997).
F - 92
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
OPERATIONAL AND STATISTICAL INFORMATION
The following tables present operational and statistical information
related to production, drilling, productive wells and acreage.
PRODUCED FROM OWN RESERVES
The following table shows crude oil and natural gas production from the
Group's own reserves for the years indicated:
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total(d)
-------- -------- -------- -------- --------
(thousand barrels per day)
<S> <C> <C> <C> <C> <C>
PRODUCTION FOR THE YEAR (A)
Crude oil (b)
1999................................... 580 100 804 577 2,061
1998................................... 518 105 841 585 2,049
1997................................... 437 115 869 509 1,930
</TABLE>
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total(e)
-------- -------- -------- -------- --------
(million cubic feet per day)
<S> <C> <C> <C> <C> <C>
Natural gas (c)
1999................................... 1,301 164 2,369 2,233 6,067
1998................................... 1,258 200 2,401 1,949 5,808
1997................................... 1,423 195 2,513 1,727 5,858
</TABLE>
- ----------
(a) All volumes are net of royalty.
(b) Crude oil includes natural gas liquid and condensate.
(c) Natural gas production excludes gas consumed in operations.
(d) Includes amounts produced for the Group by associated undertakings of
170,000 b/d in 1999 (1998, 208,000b/d and 1997, 172,000 b/d).
(e) Includes amounts produced for the Group by associated undertakings of 264
mmcf/d in 1999 (1998, 221 mmcf/d and 1997, 113 mmcf/d).
F - 93
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONTINUED)
(UNAUDITED)
OPERATIONAL AND STATISTICAL INFORMATION (CONTINUED)
PRODUCTIVE OIL AND GAS WELLS AND ACREAGE
The following tables show the number of gross and net productive oil and
natural gas wells and total gross and net developed and undeveloped oil and
natural gas acreage in which the Group and its associated undertakings had
interests as of December 31, 1999. A 'gross' well or acre is one in which a
whole or fractional working interest is owned, while the number of 'net' wells
or acres is the sum of the whole or fractional working interests in gross wells
or acres. Productive wells are producing wells and wells capable of production.
Developed acreage is the acreage within the boundary of a field, on which
development wells have been drilled, which could produce the reserves; while
undeveloped acres are those on which wells have not been drilled or completed to
a point that would permit the production of commercial quantities, whether or
not such acres contain proved reserves.
NUMBER OF PRODUCTIVE OIL AND GAS WELLS
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Oil wells (a) -- gross............... 467 75 14,243 11,821 26,606
-- net................. 219.0 28.0 8,687.2 2,971.2 11,905.4
Gas wells (b) -- gross............... 418 33 14,437 2,131 17,019
-- net................. 189.0 11.4 8,980.7 1,214.5 10,395.6
</TABLE>
- ----------
(a) Includes approximately 875 gross (231.5 net) multiple completion wells
(more than one formation producing into the same well bore).
(b) Includes 1,164 gross (692.7 net) multiple completion wells.
(c) If one of the multiple completions in a well is an oil completion, the well
is classified as an oil well.
OIL AND NATURAL GAS ACREAGE
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
(thousands of acres)
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Developed
--gross.............................. 627 75 12,288 7,290 20,280
--net................................ 304 24 5,303 2,010 7,641
Undeveloped (a)
--gross.............................. 5,234 3,391 7,665 109,205 125,495
--net................................ 2,416 1,064 4,078 47,401 54,959
</TABLE>
- ----------
(a) Undeveloped acreage includes leases and concessions.
F - 94
<PAGE>
BP AMOCO p.l.c. AND SUBSIDIARIES
SUPPLEMENTARY OIL AND GAS INFORMATION (CONCLUDED)
(UNAUDITED)
NET OIL AND GAS WELLS COMPLETED OR ABANDONED
The following table shows the number of net productive and dry exploratory
and development oil and natural gas wells completed or abandoned in the years
indicated by the Group and its associated undertakings. Productive wells include
wells in which hydrocarbons were encountered and the drilling or completion of
which, in the case of exploratory wells, has been suspended pending further
drilling or evaluation. A dry well is one found to be incapable of producing
hydrocarbons in sufficient quantities to justify completion.
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1999
Exploratory
--productive......................... 0.5 0.5 3.7 10.1 14.8
--dry................................ 1.1 0.9 1.4 6.6 10.0
Development
--productive......................... 27.3 1.3 274.4 160.6 463.6
--dry................................ 1.7 0.3 10.5 15.4 27.9
1998
Exploratory
--productive......................... 2.3 3.6 18.9 32.1 56.9
--dry................................ 2.1 2.1 12.1 22.4 38.7
Development
--productive......................... 32.2 1.4 424.4 261.5 719.5
--dry................................ 1.1 -- 16.7 30.6 48.4
1997
Exploratory
--productive......................... 2.8 2.5 27.2 42.4 74.9
--dry................................ 5.4 11.5 15.0 13.4 45.3
Development
--productive......................... 32.5 4.7 258.8 282.1 578.1
--dry................................ 1.2 -- 14.7 23.2 39.1
</TABLE>
DRILLING AND PRODUCTION ACTIVITIES IN PROGRESS
The following table shows the number of exploratory and development oil
and natural gas wells in the process of being drilled by the Group and its
associated undertakings as of December 31, 1999. Suspended development wells and
long-term suspended exploratory wells are also included in the table.
<TABLE>
<CAPTION>
United Rest of Rest of
Kingdom Europe USA World Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Exploratory
--gross.............................. 1 -- 28 40 69
--net................................ 0.5 -- 17.3 13.7 31.5
Development
--gross.............................. 17 4 121 68 210
--net................................ 8.3 1.4 70.5 33.8 114.0
</TABLE>
F - 95
<PAGE>
SCHEDULE II
BP AMOCO p.l.c. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
----------------------
Charged to Charged to
Balance at costs and other Transfers/ Balance
January 1, expenses accounts(a)DeductionsDecember 31,
---------- ---------- ---------- ---------- ----------
($ million)
<S> <C> <C> <C> <C> <C>
1999
Fixed assets-- Investments (b) 230 83 (2) (2) 309
========== ========== ========== ========== ==========
Doubtful debts (b)............ 126 12 (13) (8) 117
========== ========== ========== ========== ==========
Decommissioning provisions.... 3,310 80 (472) (133) 2,785
========== ========== ========== ========== ==========
1998
Fixed assets-- Investments (b) 25 200 -- 5 230
========== ========== ========== ========== ==========
Doubtful debts (b)............ 130 35 (22) (17) 126
========== ========== ========== ========== ==========
Decommissioning provisions.... 3,201 130 10 (31) 3,310
========== ========== ========== ========== ==========
1997
Fixed assets-- Investments (b) 34 -- (1) (8) 25
========== ========== ========== ========== ==========
Doubtful debts (b)............ 159 45 (6) (68) 130
========== ========== ========== ========== ==========
Decommissioning provisions.... 3,153 162 (29) (85) 3,201
========== ========== ========== ========== ==========
</TABLE>
- ----------
(a) Principally currency translations, apart from 1999 for decommissioning
provisions which includes the impact of adopting FRS12.
(b) Deducted in the balance sheet from the assets to which they apply.
S - 1
<PAGE>
EXHIBIT 1
BP AMOCO p.l.c. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
Year ended
December 31,
1999
------------
($ million)
<S> <C>
Profit before taxation............................................... 7,026
BP Amoco's share of income in excess of dividends from joint
ventures and associated undertakings............................... (335)
Capitalized interest................................................. (43)
------------
Profit as adjusted................................................... 6,648
============
Fixed charges
Interest net of intest expense of joint ventures and associated
undertakings..................................................... 1,005
Rental expense representative of interest.......................... 379
Capitalized interest............................................... 43
------------
1,427
============
Total adjusted earnings available for payment of fixed charges....... 8,075
============
Ratio of earnings to fixed charges................................... 5.66
============
Total adjusted earnings available for payment of fixed charges,
after taking account of adjustments to profit before taxation to
accord with US GAAP................................................ 8,041
============
Ratio of earnings to fixed charges with adjustments to accord
with US GAAP....................................................... 5.63
============
</TABLE>
E - 1
<PAGE>
Transcript of certificate
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 102498
The Registrar of Companies for England and Wales hereby certifies that THE
BRITISH PETROLEUM COMPANY P.L.C.
having by special resolution changed its name, is now incorporated
under the name of
BP AMOCO P.L.C.
Given at Companies House, Cardiff, the 31st December 1998
There follows the image of THE OFFICIAL SEAL OF THE REGISTRAR OF COMPANIES
1
<PAGE>
Transcript of certificate
CERTIFICATE OF INCORPORATION
ON RE-REGISTRATION AS A PUBLIC COMPANY
No. 102498
I hereby certify that
THE BRITISH PETROLEUM COMPANY p.l.c.
has this day been re-registered under the Companies Acts 1948 to 1980 as a
public company, and that the company is limited.
Dated at Cardiff the 4TH JANUARY 1982
There follows a signature and the words Assistant Registrar of Companies
2
<PAGE>
Transcript of certificate
No.102498
Change of Name Certificate pursuant to Section 18(3) of the Companies Act, 1948.
I Hereby Certify that
ANGLO-IRANIAN OIL COMPANY, LIMITED
having, with the sanction of a Special Resolution of the said Company and
with the approval of the BOARD OF TRADE, changed its name, is now
called
THE BRITISH PETROLEUM COMPANY LIMITED
and I have entered such new name on the Register accordingly.
Given under my hand at London, this seventeenth day of December
One thousand nine hundred and fifty four.
There follows a signature and the words Registrar of Companies
3
<PAGE>
Transcript of certificate
No.102498
Certificate of Change of Name.
I hereby Certify That
ANGLO-PERSIAN OIL COMPANY, LIMITED
having, with the sanction of a Special Resolution of the said Company and
with the approval of the BOARD OF TRADE, changed its name, is now
called
ANGLO-IRANIAN OIL COMPANY, LIMITED
and I have entered such new name on the Register accordingly. Given under
my hand at London, this twenty-eighth day of June One Thousand Nine
Hundred and thirty-five.
There follows a signature and the words For Registrar of Companies.
4
<PAGE>
Transcript of certificate
N0.102498
Certificate of Incorporation
I Hereby Certify That the
Anglo-Persian Oil Company, Limited
is this day Incorporated under the Companies (Consolidation) Act, 1908,
and that the Company is Limited.
Given under my hand at London this Fourteenth day of April One Thousand
Nine Hundred and nine.
Fees and Deed Stamps L51.15.0
Stamp Duty on Capital L5000.0.0
There follows a signature and the words Registrar of Joint Stock Companies.
5
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares BP Amoco p.l.c.
October 1999
Memorandum
and Articles
of Association
[Logo]
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares BP Amoco p.l.c.
Special Resolutions
Passed 1st September, 1999
At the Extraordinary General Meeting of BP AMOCO p.l.c. held on 1st September,
1999, the following resolutions were passed as Special Resolutions:-
THAT conditional upon and with effect from the Merger Agreement becoming
unconditional and not having been terminated in accordance with its terms, for
the period ending on the date of the Annual General Meeting in 2000 or 14 July
2000, whichever is the earlier, the Directors be and are hereby authorised and
empowered pursuant to Article 11(B) of the Articles of Association, to allot
equity securities wholly for cash:
(i) in connection with a rights issue; and
(ii) otherwise than in connection with a rights issue up to an aggregate nominal
amount of $280,000,000 (the Section 89 amount),
this authority to be in substitution to that granted to the Directors at the
Annual General Meeting of the Company held on 15 April 1999;
THAT the Articles of Association of the Company be and are hereby amended as set
out in Schedules A and B to this Notice of Extraordinary General Meeting, such
amendments to take effect from the dates set out in such schedules.
G.E. Young
Assistant Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
6
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares BP Amoco p.l.c.
Special Resolution
Passed 15th April, 1999
At the Annual General Meeting of BP AMOCO p.l.c. held on 15th April, 1999 the
following resolution was passed as a Special Resolution:-
On the motion of the Chairman it was Resolved as a Special Resolution to renew,
for the period ending on the date of the Annual General Meeting in 2000 or 14
July 2000, whichever is the earlier, the authority and power conferred on the
directors by article 11(B)(ii) of the company's articles of association to allot
equity securities wholly for cash in connection with a rights issue or otherwise
than in connection with a rights issue up to an aggregate nominal amount of
US$242 million.
G.E. Young
Assistant Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
7
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolutions
Passed 25th November, 1998
At the EXTRAORDINARY GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c.
held on 25th November, 1998 the following resolutions were passed as SPECIAL
RESOLUTIONS:-
That:-
1.1 the merger (the "Merger") with Amoco Corporation ("Amoco") on the basis
described in the circular to shareholders from the Company dated 30 October 1998
(a copy of which, signed by the Chairman for the purposes of identification, was
produced to the Meeting) and on the terms and subject to the conditions of the
Agreement and Plan of Merger dated 11 August 1998 (as amended) between (1) the
Company, (2) Amoco and (3) Eagle Holdings Inc., a copy of which, signed by the
Chairman for the purposes of identification, was produced to the Meeting (the
"Merger Agreement") be and is hereby approved and that the Directors be and are
hereby authorised to take all necessary steps to implement the same, subject to
such non-material modifications amendments waivers, variations or extensions of
such terms and conditions as they think fit;
1.2 conditional upon and with effect from the Merger Agreement becoming
unconditional (save as regards the condition relating to the admission of the
shares in the Company to be issued as consideration pursuant to the Merger to
the Official List of the London Stock Exchange becoming effective) and not
having been terminated in accordance with its terms:
(a) if the Directors shall certify in writing to the Company that there is no
reasonable probability of Resolution 11 taking effect in accordance with
its terms:
(i) the authorised share capital of the Company be increased from
[sterling] 2,000,000,000 to [sterling] 3,000,000,000 by the creation
of an additional 4,000,000,000 new Ordinary Shares of 25p each;
(ii) for the period ending on the date of the Annual General Meeting in
1999 or 15 July 1999, whichever is the earlier, the Directors be and
are hereby authorised and empowered pursuant to Article 11(B) of the
Articles of Association:
(a) to allot relevant securities up to an aggregate nominal amount of
[sterling] 1,515,000,000 (the Section 80 amount), and
(b) to allot equity securities wholly for cash:
(i) in connection with a rights issue; and
(ii) otherwise than in connection with a rights issue up to an aggregate
nominal amount of [sterling] 122,000,000 (the Section 89 amount), this
authority to be in substitution for that granted to the Directors at
the Annual General Meeting of the Company held on 16 April 1998;
(b) the Articles of Association of the Company be and are hereby amended as set
out in Schedule A to this Notice of Extraordinary General Meeting; and
(c) the name of the Company be changed to "BP Amoco p.l.c.".
THAT, conditional upon the passing as an extraordinary resolution at a separate
meeting of the holders of the Ordinary Shares in the capital of the Company (or
any adjournment thereof) of the resolution set out in the notice dated 30
October 1998 convening such meeting and upon and with effect from the Merger
Agreement becoming unconditional in all respects (save as regards the condition
relating to the admission of the shares in the Company to be issued as
consideration pursuant to the Merger to the Official List of the London Stock
Exchange becoming effective) and not having been terminated in accordance with
its terms:
11.1 the ordinary share capital of the Company be reduced by cancelling and
extinguishing all the Ordinary Shares of 25p each in the capital of the Company
("Sterling Shares"), whether issued or authorised but unissued, and the reserve
arising as a result of such cancellation be credited to a special reserve
account of the Company (the "Ordinary Share Reserve");
11.2 subject to and forthwith upon such reduction of capital taking effect:
(a) the authorised share capital of the Company be increased to
[sterling]12,750,000 and $6,000,000,000 by the creation of 12,000,000,000
new Ordinary Shares of $0.50 each;
(b) the Ordinary Share Reserve be converted into US dollars at such spot rate
of exchange for the purchase of US dollars with pounds sterling at or
around 4.00 pm (London time) on the Record Date as may be selected by the
Directors of the Company ("the Selected Rate");
(c) The sum standing in the books of the Company as a result of such conversion
("the US Dollar Reserve") be applied in paying up Dollar Shares in full at
par in accordance with paragraph 11.2(e) of this Resolution 11, provided
that, if there would otherwise be any amount remaining in the US Dollar
Reserve once as many as possible Dollar Shares have been paid up in full at
par, one of such Dollar Shares be paid up at a premium equal to such
amount;
8
<PAGE>
(d) there be converted into US dollars at the Selected Rate and capitalised in
accordance with paragraph 11.2(e) of this Resolution 11 such part of the
share premium account of the Company ("the US Dollar Share Premium") as is
necessary to pay up in full at par such number of Dollar Shares so that
when it is added to the number of Dollar Shares to be paid up by
application of the US Dollar Reserve, the aggregate number of Dollar Shares
to be paid up pursuant to this Resolution 11 is equal to the Requisite
Number;
(e) each of the US Dollar Reserve and the US Dollar Share Premium be separately
applied so as to pay up in aggregate the Requisite Number of Dollar Shares,
such shares to be allotted and issued credited as fully paid to the holders
of Sterling Shares in the register of members of the Company at the close
of business on the Record Date on the basis of one Dollar Share for each
Sterling Share then held;
(f) as an exception to Article 17, unless the Directors decide otherwise, no
new share certificates be completed and delivered in respect of the Dollar
Shares to be issued pursuant to paragraph 11.2(e) of this Resolution 11;
and
(g) for the period ending on the date of the Annual General Meeting in 1999 or
15 July 1999, whichever is the earlier, the Directors be and are hereby
authorised and empowered pursuant to Article 11(B) of the Articles of
Association:
(i) to allot relevant securities up to an aggregate nominal amount of
$6,000,000,000 (the Section 80 amount), and
(ii) to allot equity securities wholly for cash:
(a) in connection with a rights issue; and
(b) otherwise than in connection with a rights issue up to an aggregate nominal
amount of $244,000,000 (the Section 89 amount),
this authority to be in substitution for that granted to the Directors at the
Annual General Meeting of the Company held on 16 April 1998;
11.3 for the purposes of this Resolution:
(a) "Dollar Shares" means ordinary shares of $0.50 each in the capital of the
Company;
(b) "Requisite Number" means the number of Sterling Shares in issue at the
close of business on the Record Date; and
(c) "Record Date" means the business day immediately prior to the date on which
the reduction of capital proposed to be effected by this Resolution 11
becomes effective; and
11.4 the Articles of Association of the Company be and are hereby amended as set
out in Schedule B to this Notice of Extraordinary General Meeting.
THAT conditional upon and with effect from the Merger Agreement becoming
unconditional in all respects and not having been terminated in accordance with
its terms:
12.1 in accordance with Article 75 of the Company's Articles of Association, the
remuneration of the Directors shall be such sum as the Directors shall decide
not exceeding in aggregate [sterling] 1,500,00 per annum; and
12.2 the Articles of Association of the Company be and are hereby amended as set
out in Schedule C to this Notice of Extraordinary General Meeting.
THAT the Articles of Association of the Company be and are hereby amended as set
out in Schedule D to this Notice of Extraordinary General Meeting.
G.E. Young
Assistant Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
9
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolutions
Passed 16th April 1998
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
16th April, 1998 the following resolutions were passed as SPECIAL RESOLUTIONS,
namely:-
To renew, for the period ending on the date of the annual general meeting in
1999 or 15th July 1999, whichever is the earlier, the authority and power
conferred on the directors by article 11(B)(ii) of the company's articles of
association to allot equity securities wholly for cash in connection with a
rights issue or otherwise than in connection with a rights issue up to an
aggregate nominal amount of [sterling] 72 million.
That the company be generally and unconditionally authorised to make market
purchases (within the meaning of section 163(3) of the Companies Act 1985) of
ordinary shares of 25 pence each in the company ("ordinary shares") provided
that:
(a) the maximum number of ordinary shares hereby authorised to be acquired is
288,129,180 representing 5% of the company's ordinary share capital in
issue at 31 December 1997;
(b) the minimum price which may be paid for the shares is 25 pence;
(c) the maximum price which may be paid for the shares is an amount equal to
105 per cent. of the average of the middle market quotation for an ordinary
share, as derived from the London Stock Exchange Daily Official List for
the five business days before the purchase is made; and
(d) the authority hereby conferred shall expire at the close of the next annual
general meeting of the company or on 15 October 1999, whichever is the
earlier.
G.E. Young
Deputy Assistant Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
10
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 10th April 1997
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
10th April, 1997 the following resolution was passed as a SPECIAL RESOLUTION,
namely:-
To renew, for the period ending on the date of the Annual General Meeting in
1998 or 9 July 1998, whichever is the earlier, the authority and power conferred
on the Directors by Article 11(B) of the Articles of Association:
(a) to allot relevant securities up to an aggregate nominal amount of
[sterling] 470 million (the Section 80 amount), and
(b) to allot equity securities wholly for cash:
(i) in connection with a rights issue, and
(ii) otherwise than in connection with a rights issue up to an aggregate
nominal amount of [sterling] 70 million (the Section 89 amount).
G.E. Young
Deputy Assistant Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
11
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Directors' Resolution
Passed 2nd May 1996
At a meeting of the Directors of THE BRITISH PETROLEUM COMPANY p.l.c. held on
2nd May 1996 the following resolution was passed pursuant to Regulation 16(2) of
the Uncertificated Securities Regulations 1996 ("the Regulations"):-
That:
(a) title to the Ordinary Shares of 25p each, Cumulative First Preference
Shares of [sterling]1 each and Cumulative Second Preference Shares of
[sterling] 1 each in the capital of the Company (the "Shares"), in issue or
to be issued, may be transferred by means of a relevant system (as defined
in the Regulations);
(b) such relevant system shall include the relevant system of which CRESTCo
Limited is to be the Operator (as defined in the Regulations);
(c) this Resolution shall become effective immediately prior to CRESTCo Limited
granting permission for the Shares to be transferred by meansof the CREST
system.
It was noted that, upon this Resolution becoming effective and for as long as it
is in force, the Articles of Association of the Company in relation to the
Shares shall not apply to any uncertificated Shares to the extent that they are
inconsistent with:
(a) the holding of the Shares in uncertificated form;
(b) the transfer of title to the Shares by means of a relevant system; and
(c) any provision of the Regulations
It was further noted that, in accordance with Regulation 16(4), a notice to
shareholders of the Board's intention to pass a resolution to permit title to
the Shares to be settled by means of the CREST system was included in the
Chairman's letter to the Notice of Annual General Meeting dated 13th March 1996.
The Secretary was instructed to file a copy of this resolution with the
Registrar of Companies as required by Section 380 of the Companies Act 1985 (as
amended by Regulation 40 (3)).
Gillian Young
Deputy Assistant Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
12
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 11th April 1996
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
11th April 1996 the following resolution was passed as a SPECIAL RESOLUTION,
namely:-
To renew, for the period ending on the date of the Annual General Meeting in
1997 or 10th July 1997, whichever is the earlier, the authority and power
conferred on the Directors by Article 11(B) of the Articles of Association and
for such period:-
(a) the Section 80 amount shall be [sterling] 464 million; and
(b) the Section 89 amount shall be [sterling] 69 million.
Judith C. Hanratty
Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
13
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 13th April 1995
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
13th April 1995 the following resolution was passed as a SPECIAL RESOLUTION,
namely:-
To renew, for the period ending on the date of the Annual General Meeting in
1996 or 12th July 1996, whichever is the earlier, the authority and power
conferred on the Directors by Article 11(B) of the Articles of Association and
for such period:-
(a) the Section 80 amount shall be [sterling] 458 million; and
(b) the Section 89 amount shall be [sterling] 68 million.
Judith C. Hanratty
Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
14
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolutions
Passed 7th April 1994
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
7th April 1994 the following resolutions were passed as SPECIAL RESOLUTIONS,
namely:-
To renew, for the period ending on the date of the Annual General Meeting in
1995 or 6th July 1995, whichever is the earlier, the authority and power
conferred on the Directors by Article 11(B) of the Articles of Association and
for such period:-
(a) the Section 80 amount shall be [sterling] 454 million; and
(b) the Section 89 amount shall be [sterling] 68 million.
The Article 11(C) of the Articles of Association of the Company be amended as
set out in the Schedule to the Notice of Annual General Meeting; and
That if any plan is implemented pursuant to Article 11(C) as so amended,
elections (pursuant to any plan previously implemented pursuant to Article 11(C)
in force at such time to receive on a regular basis Ordinary Shares instead of
cash dividends shall (unless revoked) operate and be treated by the Directors as
valid elections for the purposes of such plan.
To amend the Articles of Association of the Company by:-
(i) renumbering Article 47 as Article 47(A) and inserting immediately
after such Article 47(A), the following as Article 47(B):-
"The provisions of these Articles of Association relating to General Meetings
shall apply, with necessary modifications to any separate meeting of the holders
of shares of a particular class which is convened otherwise than in connection
with the variation or abrogation of the rights attached to shares of that
class.";
(ii) amending Article 124(A) by inserting ", or to" after the words
"payable to" and a comma after the words "the order of" in the second
sentence; and
(iii)amending Article 140 by deleting all the words after the words
"duties, powers or office".
R.C. Grayson
Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
Schedule
Article 11(C) to be amended:-
(a) by the addition at the end of sub-paragraph
(i) of the following:-
"Where, in the case of any plan such as those contemplated in paragraphs (b) and
(c) above, holders of Ordinary Shares are not entitled to payment of a cash
dividend (otherwise than in respect of fractional entitlements), the plan may
provide for them to receive allotments of Ordinary Shares credited as fully paid
having a value of more than the net cash amount which would otherwise be due to
them in respect of the relevant dividend but not exceeding a value equivalent to
the sum of the net cash amount of the dividend together with the associated tax
credit (as defined in sub-paragraph (viii) below).";
(b) by the insertion in sub-paragraph (ii) after "terminate" of the words "or
modify in any manner not inconsistent with these Articles of Association or
the sanctioning Resolution";
(c) by the insertion in sub-paragraph (iv) after the word "allotment" in the
second sentence of the words "(by reference to the aggregate net cash
amount thereof or value equivalent to the sum of the aggregate net cash
amount thereof together with the associated tax credit which it would have
attracted if paid as a dividend)";
(d) by the addition after sub-paragraph (vii) of the following new
sub-paragraph (viii):-
"(viii) "Associated tax credit" means for the purposes of this Article and
any plan the tax credit which would be available to the recipient of a dividend
under Section 231 of the Income and Taxes Act 1988 on the assumption that such
recipient is an individual resident in the UK for UK taxation purposes."
15
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolutions
Passed 15th April 1993
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
15th April 1993 the following resolutions were passed as SPECIAL RESOLUTIONS,
namely:-
To amend the Articles of Association by deleting the current Article 84 and
inserting in its place the proposed Article 84 set out in the Schedule to the
Notice of Annual General Meeting, to take effect immediately after the
conclusion of the Annual General Meeting;
To renew, for the period ending on the date of the Annual General Meeting in
1994 or 14th July 1994, whichever is the earlier, the authority and power
conferred on the Directors by Article 11(B) of the Articles of Association and
for such period:
(a) the Section 80 amount shall be [sterling] 452 million; and
(b) the Section 89 amount shall be [sterling] 68 million.
R.C. Grayson
Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
Schedule
Current Article 84
At each Annual General Meeting one third of the Directors for the time being
(or, if their number is not a multiple of three, the number of nearest to but
not greater than one-third) shall retire from office by rotation, provided that
no Director holding office as an executive Chairman or being a Managing or Joint
Managing Director shall be subject to retirement by rotation or be taken into
account in determining the number of Directors to retire.
Proposed Article 84
At each Annual General Meeting one-third of the Directors for the time being
(or, if their number is not a multiple of three, the number nearest to but not
greater than one-third) shall retire from office by rotation.
16
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 16th April 1992
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
16th April 1992 the following resolutions were passed as SPECIAL RESOLUTIONS,
namely:-
To amend the Memorandum of Association as set out in Part B of the Schedule to
the Notice of Annual General Meeting;
To amend the Articles of Association as set out in Part C of the Schedule to the
Notice of Annual General Meeting.
To renew, for the period ending on the date of the Annual General meeting in
1993 or 15th July 1993 whichever is the earlier, the authority and power
conferred on the Directors by Article 11(B) of the Articles of Association and
for such period:
(a) the Section 80 amount shall be [sterling]513 million; and
(b) the Section 89 amount shall be [sterling] 67 million.
R.C. Grayson
Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
Schedule
Part B
1. In Clause 4 of the Memorandum of Association:
1.1 the following shall be inserted as a new sub-clause (DD) after
sub-clause (CC):
"(DD) To establish and maintain, and to contribute to, any scheme for
encouraging or facilitating the holding of shares or debentures in the Company
by or for the benefit of its employees or former employees, or those of its
subsidiary or holding companies or subsidiaries of its holding company, or by or
for the benefit of such other persons as may for the time being be permitted by
law, or any scheme for sharing profits with its employees or those of its
subsidiary and/or associated companies."
1.2 the existing sub-clauses (DD), (EE) and (FF) shall be redesignated
accordingly.
Part C
Article 73 of the Articles of Association shall be deleted and replaced bythe
following:
"73(A) Subject as hereinafter provided, the number of Directors shall not
be less than three nor more than eighteen (or such lesser maximum as the
Directors may from time to time resolve).
(B) The Company may by Ordinary Resolution from time to time vary
the minimum number and/or maximum number of Directors."
17
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 18th April 1991
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
18th April 1991 the following Resolution was passed as a SPECIAL RESOLUTION,
namely:-
To amend the Articles of Association as set out in the Schedule to the Notice of
Annual General Meeting.
R.C. Grayson
Secretary
Britannic House, 1 Finsbury Circus, London EC2M 7BA
SCHEDULE
1 In Article 2 there shall be inserted immediately after the definition
of "debenture" the following new paragraphs:
"The expression "Designated Shares" shall mean fully paid shares in a body
corporate (which both immediately before and after the distribution hereafter
referred to is a subsidiary of the Company) which have been distributed by the
Company pursuant to Article 123 and which, at or before the record date for the
purpose of determining entitlement to receipt of such distribution, are
designated by the Directors to be "Designated Shares" for the purposes of
Article 37(A) and any further shares of the same class which may, with the prior
consent of the Company, be allotted by such body corporate after such
distribution, provided that the Directors may at any time after such
distribution declare such shares no longer to be "Designated Shares" for the
purposes of such Article by giving not less than 15 days prior notice thereof to
The Stock Exchange, and provided further that there shall not at any time be
more than one class of shares constituting Designated Shares."
"The expression "Designated Subsidiary" shall mean the body corporate referred
to in the definition of "Designated Shares"."
2 In Article 37(A) the first sentence shall be deleted and replaced by the
following:
"The Directors may, in their absolute discretion and without giving any reason,
refuse to register the transfer of a share which is not fully paid and shall
(for so long as there is in issue any Designated Share) decline to register the
transfer of any Ordinary Share unless there is produced to the Directors such
evidence as they may in their discretion require to ensure that on the same
occasion there is being transferred to the same person one Designated Share for
every Ordinary Share included in such transfer. For so long as there is in issue
any Designated Share, every transfer of one or more Ordinary Shares shall,
except so far as otherwise stated on the instrument of transfer, constitute a
transfer of the same number of Designated Shares."
3 In Article 115 the words "declare and" in the penultimate line shall be
deleted.
4 In Article 123:
(a) The following new sentences shall be added after the first sentence:
"In addition the Directors may direct payment of any dividend in whole or in
part by the distribution of Designated Shares. If at any time and from time to
time there have been, or will be, allotted any shares which are Designated
Shares, and the Directors resolve to allot to any person any Ordinary Shares
(whether or not pursuant to an existing obligation of the Company) the Directors
may, if and so far as in the opinion of the Directors the profits of the Company
justify such payments, either at the time of such allotment or at any time
thereafter, resolve that there be paid to the registered holder of such Ordinary
Shares as at the close of business (or at such other time as the Directors may
determine) on such date as the Directors may specify a dividend to be paid by
the distribution of Designated Shares in such amount and manner as will secure
that such holder will receive one Designated Share for each Ordinary Share held
by him. (If and so far as the foregoing provisions are inconsistent with those
contained in Articles 115, 116, 124 or 126, the foregoing provisions shall
prevail.)"
(b) There shall be added as a new sentence at the end of such Article the
following:
"The Directors may in relation to any such distribution of Designated Shares
authorise any person to enter on behalf of all the members interested into an
agreement with the relevant Designated Subsidiary whereby such members agree to
become members and to be bound, in respect of their holdings of Designated
Shares from time to time, by the Memorandum and Articles of Association (as
amended from time to time), of such Designated Subsidiary and each mandateor
other instruction relating to the payment of dividends or making of
distributions by the Company, and which is in force at the time of determining
entitlement to any distribution of Designated Shares, shall, unless and until
revoked, become a valid and binding mandate or other instruction to such
Designated Subsidiary in respect of any dividend or other distribution paid or
made by it, and any agreement made under the authority given to the Directors
pursuant to this Article shall be effective and binding on all concerned."
18
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 26th April 1990
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
26th April 1990 the following Resolution was passed as a SPECIAL RESOLUTION,
namely:-
That the Memorandum and Articles of Association of the Company be and are hereby
amended as set out in Schedule 1 to the Notice, provided that such amendment
shall not affect any power or authority conferred by the passing of Resolution
10 in the Notice.
R.C. Grayson
Secretary
Britannic House, 1 Moor Lane, London EC2Y 9BU
SCHEDULE
A Memorandum of Association
In Clause 4(CC) there shall be inserted after the words "and to subscribe or
guarantee money for charitable or benevolent objects, or for any exhibition, or
for any public, general or useful object" the following:-
"and to purchase and maintain for the benefit of any persons (including
Directors) any insurance."
B Articles of Association
1 In Article 2:-
(a) there shall be deleted the sentence "Words denoting persons shall
include corporations." and there shall be substituted the following:-
"Words denoting persons shall include bodies corporate and unincorporate."
(b) there shall be inserted immediately after the definition of "Stock
Exchange Nominee" as a new paragraph the following sentence:-
"The word "subsidiary" bears the meaning ascribed thereto by Section 736 of the
Act and shall bear such meaning notwithstanding any provision contained in these
presents which would otherwise require the reference to the said Section of the
Act to be construed as relating to any statutory modification or re-enactment
thereof."
2 Article 7 shall be redesignated as Article 7(A)and there shall be
inserted as a new Article 7(B) the following:-
"7(B) Whenever as a result of a consolidation and division or sub-division
of shares any difficulty arises, the Directors may settle the matter in any
manner they deem fit and, in particular, may sell shares representing fractions
to which any members would become entitled to any person (including, subject to
the provisions of the Statutes, the Company) and distribute the net proceeds of
sale in due proportion among those members, and the Directors may authorise some
person to execute an instrument of transfer of the shares to, or in accordance
with the directions of, the purchaser. The transferee shall not be bound to see
to the application of the purchase money nor shall his title to the shares be
affected by any irregularity in or invalidity of the proceedings relating to the
sale."
3 Article 11(B) shall be deleted and replaced by the following:-
"11(B) (i) Pursuant to and in accordance with Section 80 of the Act the
Directors shall be generally and unconditionally authorised to exercise for each
prescribed period all the powers of the Company to allot relevant securities up
to an aggregate nominal amount equal to the Section 80 Amount; and
(ii) pursuant to and within the terms of the said authority the Directors
shall be empowered during each prescribed period to allot equity securities
wholly for cash (a) in connection with a rights issue; and (b) otherwise than in
connection with a rights issue up to an aggregate nominal amount equal to the
Section 89 Amount; and
(iii) during each prescribed period the Company and its Directors by such
authority and power may make offers or agreements which would or might require
equity securities or other relevant securities to be allotted after the expiry
of such period; and
(iv) for the purposes of this Article 11(B):-
(a) "rights issue" means an offer of equity securities open for acceptance for
a period fixed by the Directors to holders of equity securities on the
register on a fixed record date in proportion to their respective holdings
of such securities or in accordance with the rights attached thereto (but
subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to fractional entitlements or legal or
practical problems under the laws of, or the requirements of any recognised
regulatory body or any stock exchange in, any territory or as regards
shares held by any Approved Depositary);
(b) "prescribed period" means any period (not exceeding 15 months on any
occasion) for which the authority conferred in the case of sub-paragraph
(i) is renewed by Ordinary or Special Resolution stating the Section 80
Amount, and the power conferred in the case of sub-paragraph (ii) is
renewed by Special Resolution stating the Section 89 Amount;
(c) "the Section 80 Amount" shall for any prescribed period be that stated in
the relevant Ordinary or Special Resolution;
19
<PAGE>
(d) "the Section 89 Amount" shall for any prescribed period be that stated in
the relevant Special Resolution;
(e) the nominal amount of any securities shall be taken to be, in the case of
rights to subscribe for or to convert any securities into shares of the
Company, the nominal amount of such shares which may be allotted pursuant
to such rights; and
(f) words and expressions defined in or for the purposes of Part IV of the Act
shall bear the same meanings therein."
4 In Article 11(C)(i) there shall be inserted after the word "plan" where
it appears for the first time the words "or plans".
5 Article 25 shall be redesignated as Article 25(A) and there shall be
inserted as a new Article 25(B) the following:-
"25(B) Whenever any law for the time being of any country, state or place
imposes or purports to impose any immediate or future or possible liability upon
the Company to make any payment or empowers any government or taxing authority
or government official to require the Company to make any payment in respect of
any shares registered in any of the Company's registers as held either jointly
or solely by any member or in respect of any dividends, bonuses or other moneys
due or payable or accruing due or which may become due or payable to such member
by the Company on or in respect of any shares registered as aforesaid or for or
on account or in respect of any member and whether in consequence of:-
(i) the death of such member;
(ii) the non-payment of any income tax or other tax by such member;
(iii)the non-payment of any estate, probate, succession, death, stamp, or
other duty by the executor or administrator of such member or by or
out of his estate; or
(iv) any other act or thing;
the Company in every such case:-
(a) shall be fully indemnified by such member or his executor or administrator
from all liability; and
(b) may recover as a debt due from such member or his executor or administrator
wherever constituted or residing any monies paid by the Company under or in
consequence of any such law together with interest thereon at the rate of
15 per cent. per annum thereon from date of payment to date of repayment.
Nothing herein contained shall prejudice or affect any right or remedy which any
law may confer or purport to confer on the Company and as between the Company
and every such member as aforesaid, his executor, administrator, and estate
wheresoever constituted or situate, any right or remedy which such law shall
confer or purport to confer on the Company shall be enforceable by the Company."
6 In Article 37(B) there shall be inserted after words "on which the
transfer was lodged with the Company" the following:-
"or ten days after the Directors have determined to refuse such transfer,
whichever is the earlier,"
7 In Article 54 there shall be inserted in the first sentence after the
words "a quorum is present may with" the words:-
"or without"
8 Article 64(A) shall be redesignated as Article 64 and shall be amended by
the deletion of all the words after "unpaid" in the fifth line. Articles 64(B)
and (C) shall be deleted.
9 Article 70 shall be redesignated as Article 70(A) and Article 71 shall be
redesignated as Article 70(B). The following shall be inserted as new Article
71:-
"DISCLOSURE OF INTERESTS
71(A) if any member, or any other person appearing to be interested in
shares held by such member, has been duly served with a notice under Section 212
of the Act and is in default for the Prescribed Period in supplying to the
Company the information thereby required, then the Directors may in their
absolute discretion at any time thereafter by notice (a "Direction Notice") to
such member direct that in respect of the shares in relation to which the
default occurred (the "Default Shares") (which expression shall include any
further shares which are issued in respect of such shares) the member shall not
be entitled to vote either personally or by proxy at a General Meeting of the
Company or a meeting of the holders of any class of shares of the Company or to
exercise any other right conferred by membership in relation to General Meetings
of the Company or meetings of the holders of any class of shares of the Company.
20
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(B) The Company shall send to each other person appearing to be interested
in the shares the subject of any Direction Notice a copy of the said Notice, but
the failure or omission by the Company to do so shall not invalidate such
Direction Notice.
(C) Where the Default Shares represent at least 0.25 per cent. of the
issued shares of that class then the Direction Notice may additionally direct:-
(i) that any cash dividend or other money which would otherwise be payable
in respect of each of the Default Shares shall (in whole or any part thereof) be
retained by the Company without any liability to pay interest thereon when such
money is finally paid to the member; and/or
(ii) that no transfer of any of the shares held by such member shall be
registered unless:-
(a) the member is not himself in default as regards supplying the information
required and the transfer is of part only of the member's holding and when
presented for registration is accompanied by a certificate by the member in
a form satisfactory to the Directors to the effect that after due and
careful enquiry the member is satisfied that no person in default as
regards supplying such information is interested in any of the shares the
subject of the transfer; or
(b) the transfer is an approved transfer.
(D) Where any person appearing to be interested in the Default Shares has
been duly served with a Direction Notice and the Default Shares which are the
subject of such Direction Notice are held by an Approved Depositary, the
provisions of this Article shall be treated as applying only to such Default
Shares held by the Approved Depositary and not (insofar as such person's
apparent interest is concerned) to any other shares held by the Approved
Depositary.
(E) Where the member on which a notice under Section 212 of the Act is
served is an Approved Depositary acting in its capacity as such, the obligations
of the Approved Depositary as a member of the Company shall be limited to
disclosing to the Company such information relating to any person appearing to
be interested in the shares held by it as has been recorded by it pursuant to
the arrangements entered into by the Company or approved by the Directors
pursuant to which it was appointed as an Approved Depositary.
(F) Any Direction Notice shall have effect in accordance with its terms
for so long as the default in respect of which the Direction Notice was
issued continues and (unless the Directors otherwise determine) for a period
of one week thereafter but shall cease to have effect in relation to any Default
Shares which are transferred by such member by means of an approved
transfer. The Directors may at any time give notice cancelling a Default
Notice.
(G) For the purpose of this Article:-
(i) a person shall be treated as appearing to be interested in any shares
if the member holding such shares has given to the Company a notification under
the said Section 212 of the Act which either (a) names such person as being so
interested or (b) fails to establish the identities of those interested in the
shares and (after taking into account the said notification and any other
relevant Section 212 notification) the Company knows or has reasonable cause to
believe or suspects on reasonable grounds that the person in question is or may
be interested in the shares;
(ii) the Prescribed Period is 28 days from the date of service of the
notice under the said Section 212 except that if the Default Shares represent at
least 0.25 per cent. of the issued shares of that class, the Prescribed Period
is 14 days from such date; and
(iii) a transfer of shares is an approved transfer if but only if:-
(a) it is a transfer of shares to an offeror by way or in pursuance of
acceptance of a take-over offer for a company (as defined in Section
14 of the Company Securities (Insider Dealing) Act 1985); or
(b) the Directors are satisfied that the transfer is made pursuant to a
sale of the whole of the beneficial ownership of the shares to a party
unconnected with the member and with other persons appearing to be
interested in such shares; or
(c) the transfer results from a sale made through a recognised investment
exchange as defined in the Financial Services Act 1986 or any other
stock exchange outside the United Kingdom on which the Company's
shares are normally traded.
(H) Nothing contained in this Article shall limit the power of the
Directors under Section 216 of the Act."
10 Article 91 shall be redesignated as Article 91(A), and there shall be
inserted as a new Article 91(B) the following:-
21
<PAGE>
"Subject always to Article 91(A), all or any of the Directors or any committee
thereof may participate in a meeting of the Directors or that committee by means
of a conference telephone or any communication equipment which allows all
persons participating in the meeting to hear each other. Any person so
participating shall be deemed to be present in person at the meeting and shall
be entitled to vote or be counted in a quorum accordingly. Such a meeting shall
be deemed to take place where the largest group of those participating is
assembled, or, if there is no such group, where the chairman of the meeting is
then present."
11 In Article 95(B) at the end of paragraph (v) there shall be deleted "."
and substituted therefor ";" and the following shall be inserted as a new
paragraph (vi):-
"(vi) any proposal concerning the purchase and/or maintenance of any
insurance policy under which he may benefit".
12 In Article 97(B) there shall be added after the words "by seniority in
length of appointment":-
"as Deputy Chairman"
13 In Article 113 after Article 113(C) insert the following new Article
113(D) :-
"(D) Where the Statutes so permit, any instrument signed by one Director
and the Secretary or by two Directors and expressed to be executed by the
Company shall have the same effect as if executed under the Seal, provided that
no instrument shall be so signed which makes it clear on its face that it is
intended by the person or persons making it to have effect as a deed without the
authority of the Directors or of a committee authorised by the Directors in that
behalf."
14 In Article 116(B) there shall be inserted after the words "the date on
which the Directors publicly announce their intention to pay that specific
dividend." the following:-
"Provided that where the Directors consider the circumstances to be appropriate
they shall determine such foreign currency equivalent of any sums payable as a
dividend by reference to such market rate or rates or the mean of such market
rates prevailing at such time or times or on such other date or dates, in each
case falling before the time of the relevant announcement, as the Directors may
in their discretion select."
15 In Article 124(A) there shall be added in the 13th line after the
words "drawn shall be a good discharge to the Company" the following:-
"If any such cheque or warrant has or shall be alleged to have been lost, stolen
or destroyed, the Directors may, on request of the person entitled thereto,
issue a replacement cheque or warrant subject to compliance with such conditions
as to evidence and indemnity and the payment of out of pocket expenses of the
Company in connection with the request as the Directors may think fit."
16 In Article 126, there shall be added after the words in the first sentence
"Notwithstanding any other provision of these presents" the words:-
"but subject always to the Statutes"
17 In Article 129 there shall be added in the 11th line after the words "copy
free of charge on application at the Office" the following:-
"and provided further that if the Statutes so permit the Company need not send
copies of these documents to members who do not wish to receive them but may
send them such summary financial statement or other documents as may be
authorised by the Statutes."
18 In Article 132 there shall be inserted in the third line after the word
"cover" the words "(in such form as any Director or the Secretary may
determine)".
22
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolutions
Passed 27th April 1989
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
27th April 1989 the following Resolutions were passed as SPECIAL RESOLUTIONS,
namely:-
THAT Article 11(C)(iv) of the Company's Articles of Association be deleted and
replaced with the following:-
"(iv) No fraction of any share shall be allotted. The Directors may make
such provisions as they think fit for any fractional entitlements including
provisions whereby, in whole or in part, the benefit thereof accrues to the
Company and/or under which fractional entitlements are accrued and/or retained
and in each case accumulated on behalf of any shareholder and such accruals or
retentions are applied to the allotment by way of bonus to or cash subscription
on behalf of such shareholder of fully paid Ordinary Shares."
THAT Article 116 of the Company's Articles of Association be deleted and
replaced with the following:
"(A) Unless and to the extent that the rights attached to any shares, the
terms of issue thereof or these presents otherwise provide, all dividends shall
(as regards any shares not fully paid throughout the period in respect of which
the dividend is paid) be apportioned and paid pro rata according to the amounts
paid on the shares during any portion or portions of the period in respect of
which the dividend is paid. For the purposes of this Article no amount paid on a
share in advance of calls shall be treated as paid on the share.
(B) The Directors may at their discretion make provisions to enable such
Approved Depositary and/or member as they shall from time to time determine to
receive dividends duly declared in a currency or currencies other than sterling.
For the purposes of the calculation of the amount receivable in respect of any
dividend, the rate of exchange to be used to determine the foreign currency
equivalent of any sum payable as a dividend shall be such market rate selected
by the Directors as they shall consider appropriate ruling at the close of
business in London on the date which is the business day last preceding (a) in
the case of a dividend to be declared by the Company in general meeting, the
date on which the Directors publicly announce their intention to recommend that
specific dividend and (b) in the case of any other dividend, the date on which
the Directors publicly announce their intention to pay that specific dividend."
THAT in Article 124:
(a) The existing Article be re-numbered "124(A)" and the words "Any
dividend or other moneys payable in cash on or in respect of a share
may be paid by cheque or warrant sent through the post to the
registered address" be deleted and replaced with the following:
"(A) Any dividend or other moneys payable in cash (whether in sterling or
foreign currency pursuant to provision made under these presents) on or in
respect of a share may be paid by cheque or warrant sent through the post to the
registered address"
(b) The following new clause (B) be added:
"(B) Where an Approved Depositary approved by the Directors for the
purposes of this Article has elected or agreed pursuant to provision made under
these presents to receive dividends in a foreign currency, the Directors may in
their discretion approve the entering into of arrangements with such Approved
Depositary to enable payment of the dividend to be made to such Approved
Depositary in such foreign currency for value on the date on which the relevant
dividend is paid, or such later date as the Directors may determine."
THAT in Article 11(C)(vii), after "Approved Depositary", the following be added:
"or in respect of Ordinary Shares the dividends on which are payable or liable
to be payable in foreign currency pursuant to provisions made under these
presents."
R.C. Grayson
Secretary
Britannic House, Moor Lane, London EC2Y 9BU
23
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 28th April 1988
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
28th April 1988 the following Resolution was passed as a SPECIAL RESOLUTION,
namely:-
That Article 75 of the Company's Articles of Association be deleted and
replaced with the following:-
"75 The ordinary remuneration of the Directors shall from time to time be
determined by an Ordinary Resolution of the Company and shall (unless such
resolution otherwise provides) be divisible among the Directors as they may
agree, or, failing agreement, equally, except that any Director who shall hold
office for part only of the period in respect of which such remuneration is
payable shall be entitled only to rank in such division for a proportion of
remuneration related to the period during which he has held office."
R.C. Grayson
Secretary
Britannic House, Moor Lane, London EC2Y 9BU
24
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 21st September 1987
At an EXTRAORDINARY GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held
on 21st September, 1987 the following Resolution was passed as a Special
Resolution, namely:-
THAT, subject to and with effect from Her Majesty's Government (as defined in
the Articles of Association of the Company) becoming unconditionally obliged to
subscribe for Ordinary Shares of 25p each in the Company ('Ordinary Shares') for
the purpose of offering such Ordinary Shares to members of the Company and
others, in accordance with the arrangements described in the letter from The
Chairman to the members of the Company dated 28th August, 1987 or with such
modifications as the Directors may consider appropriate:
(i) the Directors be and are hereby authorised and empowered pursuant to
Section 95 of the Companies Act 1985 to allot (as if Section 89(1) of the said
Act did not apply thereto) up to 600 million Ordinary Shares for cash to Her
Majesty's Government or such person or persons as Her Majesty's Government may
nominate:
(a) at such price (payable in full on subscription) as shall be agreed
between Her Majesty's Government and the Company (being not less than the lowest
price at which Her Majesty's Government shall have offered Ordinary Shares to
the public in the United Kingdom in the period of two months immediately
preceding the allotment); and
(b) on terms that such shares (other than those which Her Majesty's
Government would itself otherwise have been offered in accordance with the
arrangements described below), or an equivalent number of shares, be offered by
or on behalf of Her Majesty's Government (at the same fixed price and on the
same terms as to payment of instalments as Her Majesty's Government shall have
offered Ordinary Shares generally to the public in the United Kingdom during
such period) to holders of Ordinary Shares of the register on a fixed record
date in proportion to their then holdings of such shares (but subject to such
exclusions or other arrangements as the Directors may deem necessary or
expedient in relation to fractional entitlements or legal or practical problems
under the laws of or the requirements of any recognised regulatory body or any
stock exchange in any territory or as regards shares represented by depositary
receipts); provided that the authority and powers hereby conferred are in
addition to and without prejudice to the powers and authorities granted pursuant
to the Articles of Association at the Extraordinary General Meeting of the
Company held on 30th April, 1987, and shall lapse if not exercised before the
Annual General Meeting of the Company held in 1988; and
(ii) the Articles of Association of the Company be and are hereby amended
as set out in Schedule I to the letter from The Chairman to the members of the
Company dated 28th August, 1987.
Judith C. Hanratty
Assistant Secretary
Britannic House, Moor Lane, London EC2Y 9BU
SCHEDULE
1 Article 1 shall be amended to read:-
"The regulations in Table A in the Companies (Tables A to F) Regulations 1985
and in any Table A applicable to the Company under any former enactment relating
to companies shall not apply to the Company."
2 In Article 2:-
(a) the definition of "The Acts" shall be deleted and replaced with the
following:-
"The Act The Companies Act 1985."
(b) the definition of "The Statutes" shall be amended to read:-
"the Act and every other Statute for the time being in force concerning
companies and affecting the Company."
(c) the definition of "Securities Seal" shall be amended to read:-
"An official seal kept by the Company by virtue of Section 40 of the Act."
(d) there shall be inserted the following new definition:-
"The Stock Exchange The International Stock Exchange of the United Kingdom
and the Republic of Ireland Limited."
(e) there shall be inserted the following additional paragraph:-
25
<PAGE>
"The expression "Approved Depositary" shall mean a custodian or other person (or
a nominee for such custodian or other person) appointed under contractual
arrangements with the Company or other arrangements approved by the Directors
whereby such custodian or other person or nominee holds or is interested in
shares of the Company or rights or interests in shares of the Company and issues
securities or other documents of title or otherwise evidencing the entitlement
of the holder thereof to or to receive such shares, rights or interests,
provided and to the extent that such arrangements have been approved by the
Directors for the purpose of these presents and shall include, where approved by
the Directors, the trustees (acting in their capacity as such) of any Employees'
Share Scheme established by the Company or any other scheme or arrangements
principally for the benefit of employees of the Company and/or its subsidiaries
which has been approved by the Company in general meeting."
(f) the words "Section 87(1) of the 1980 Act" shall be deleted from the
definition of "Employees' Share Scheme" and replaced with the words
"Section 743 of the Act."
(g) the words "Section 7(2) of The Stock Exchange (Completion of Bargains)
Act 1976" shall be deleted from the definition of "Stock Exchange
Nominee" and replaced with the words "Section 185 of the Act."
(h) in the penultimate paragraph of the Article the word "Acts" shall be
deleted and replaced with the word "Act."
(i) the following words shall be added at the end of the final paragraph
of the Article:-
"or the Statutes and where for any purpose an Extraordinary Resolution is
required a Special Resolution shall be effective."
3 In Article 11:-
(a) in paragraph (B)(i) the words "Section 14 of the 1980 Act" shall be
deleted and replaced with the words "Section 80 of the Act."
(b) in paragraph (B)(ii) the words "Section 17(1) of the 1980 Act" shall
be deleted and replaced with the words "Section 89 of the Act."
(c) in paragraph (B)(iv) the words "represented by depositary receipts or
shares held by or on behalf of Her Majesty's Government" shall be
deleted and replaced with the words "held by any Approved Depositary"
and the words "Part II of the 1980 Act (as modified by the 1981 Act)"
shall be deleted and replaced with the words "Part IV of the Act."
(d) there shall be added at the end of paragraph (c)(vii) the words "or in
respect of Ordinary Shares held by an Approved Depositary."
4 In Article 45(A)(iv) the words "in London" shall be deleted.
5 Article 48 be redesignated as Article 48(A) and there shall be inserted as
a new Article 48(B) the following:-
"(B) The Directors may, for the purpose of facilitating the organisation
and administration of any General Meeting, from time to time make such
arrangements whether involving the issue of tickets (on a basis intended to
afford to all members and proxies otherwise entitled to attend such meeting an
equal opportunity of being admitted to the meeting) or the imposition of some
random means of selection or otherwise as they shall in their absolute
discretion consider to be appropriate, and may from time to time vary any such
arrangements or make new arrangements in place thereof and the entitlement of
any member or proxy to attend a General Meeting at such place shall be subject
to such arrangements as may be for the time being in force and by the notice of
meeting stated to apply to that meeting. In the case of any General Meeting to
which such arrangements apply the Directors shall, and in the case of any other
General Meeting the Directors may, when specifying the place of the General
Meeting, direct that the meeting shall be held at a place specified in the
notice at which the chairman of the meeting shall preside ("the Principal
Place") and make arrangements for simultaneous attendance and participation at
other places by members and proxies otherwise entitled to attend the General
Meeting but excluded therefrom under the provisions of this Article or who wish
to attend at any of such other places. Provided that persons attending at the
Principal Place and at any of such other places shall be able to see and hear
and be seen and heard by persons attending at the Principal Place and at such
other places. Such arrangements for simultaneous attendance may include
arrangements regarding the level of attendance as aforesaid at such other places
provided that they shall operate so that any such excluded members and proxies
as aforesaid are able to attend at one of such other places. For the purposes of
all other provisions of these Articles any such meeting shall be treated as
being held and taking place at the Principal Place."
6 In Article 54 there shall be added before the words "but no business shall
be transacted" the words:-
"and if it appears to the chairman that it is likely to be impracticable to hold
or continue the meeting because of the numbers of members and proxies wishing to
attend the meeting who are not present he may adjourn the meeting to another
time and place (or sine die) without the need for any such consent"
26
<PAGE>
7 In Article 61(A) there shall be added following the word "Subject" the
words "to Article 64 and".
8 Article 64 shall be redesignated as Article 64(A); in the first sentence
of Article 64(A) (as redesignated) the words "Section 74 of the 1981 Act" shall
be deleted and replaced with the words "Section 212 of the Act"; the second
sentence of Article 64(A) (as redesignated) shall be amended to read:-
"For the purposes of this Article a person shall be treated as appearing to be
interested in any shares, inter alia:-
(i) if the member holding such shares has given to the Company a
notification under the said Section 212 which fails to establish the identities
of those interested in the shares and if (after taking into account the said
notification and any other relevant Section 212 notification) the Company knows
or has reasonable cause to believe that the person in question is or may be
interested in the shares; or
(ii) if the member holding such shares is an Approved Depositary and the
person in question has notified the Approved Depositary that he is so
interested." And there shall be added the following additional provisions:-
(B) Where any person appearing to be interested in shares has been duly
served with a notice under Section 212 of the Act and the shares in which he
appears to be interested are held by an Approved Depositary, the provisions of
this Article shall be treated as applying only to those shares held by the
Approved Depositary in which such person appears to be interested and not
(insofar as such person's apparent interest is concerned) to any other shares
held by the Approved Depositary."
(C) Where the member on which a notice under Section 212 of the Act is
served is an Approved Depositary acting in its capacity as such, the obligations
of the Approved Depositary as a member of the Company shall be limited to
disclosing to the Company such information relating to any person appearing to
be interested in the shares held by it as has been recorded by it pursuant to
the arrangements entered into by the Company or approved by the Directors
pursuant to which it was appointed as an Approved Depositary."
9 There shall be added at the end of Article 70 the words "or as otherwise
determined by the Directors where the relevant shares are held by an Approved
Depositary."
10 Article 72 shall be deleted and replaced with the following:-
"Any corporation which is a member of the Company may, by resolution of its
directors or other governing body, authorise such person (or if, but only if,
such corporation is an Approved Depositary acting in its capacity as such,
persons) as it thinks fit to act as its representative (or, as the case may be,
representatives) at any meeting of the Company or of any class of members of the
Company. A person so authorised shall be entitled to exercise the same powers on
behalf of the grantor of the authority (in respect of those shares held in the
name of the grantor in respect of which his authorisation is given, in the case
of any authorisation by an Approved Depositary) as the grantor could exercise if
it were an individual member of the Company, and each person so authorised
shall, if present at any such meeting, for the purposes of these Articles be
deemed to be a member present in person at such meeting."
11 In Article 95(B)(iv) the words "Section 64 of the 1980 Act" shall be
deleted and replaced with the words "Section 346 of the Act".
12 In Article 103(A) the words "save and except Article 141" shall be deleted
from the final sentence.
13 In Article 124 there shall be added after the word "address" in the first
sentence the words "(or in the case of an Approved Depositary, subject to the
approval of the Directors, such persons and addresses)".
14 In Article 126 there shall be added after the words "the close of business"
the words "(or such other time as the Directors may determine)".
15 Article 141 shall be deleted in its entirety.
27
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The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 30th April 1987
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
30th April 1987 the following Resolution was passed as a SPECIAL RESOLUTION,
namely:-
That the Articles of Association of the Company be amended by inserting the
following Article as Article 11(C):
"11(C) (i) The Directors may with the prior sanction of an Ordinary Resolution
of the Company implement and maintain in accordance with the terms and
conditions of such Resolution but otherwise as the Directors may determine from
time to time a share dividend or distribution reinvestment plan for the benefit
of the holders of Ordinary Shares of the Company whereby such holders may be
given one or more of the following options namely:-
(a) instead of taking the net cash amount due to them in respect of any
dividend (or any part thereof) declared or payable on all or any Ordinary Shares
held by them either to invest such cash in subscribing for unissued Ordinary
Shares in the capital of the Company payable in full or by instalments or in
paying up in full or by instalments any unpaid or partly paid Ordinary Shares
held by them on the terms of any such plan; or
(b) instead of taking the net cash amount due to them in respect of any
dividend (or any part thereof) declared or payable on all or any Ordinary Shares
held by them to elect to receive new Ordinary Shares in the capital of the
Company credited as fully paid on the terms and conditions of any such plan; or
(c) to forego their entitlement to any dividend (or any part thereof)
declared or payable on all or any Ordinary Shares held by them and to take
instead fully paid bonus Ordinary Shares on the terms and conditions of any such
plan; or
(d) any other option in respect of the whole or any part of any dividend
on all or any Ordinary Shares held by them as the Directors shall determine.
(ii) The Directors may in their discretion suspend or terminate any such
plan which is in operation.
(iii) For the purpose of any such plan the Directors may capitalise out of
such of the sums standing to the credit of any of the Company's reserve accounts
(including any share premium account, capital redemption reserve or any other
undistributable reserve) or any of the profits available for distribution under
the provisions of the Statutes and which could otherwise have been applied in
paying dividends in cash as the Directors may determine, a sum equal to the
aggregate nominal amount of any Ordinary Shares to be allotted under any such
plan and shall apply the same in paying up in full the appropriate number of
unissued Ordinary Shares for allotment and distribution credited as fully paid
up to and amongst the holders of Ordinary Shares entitled to the same. The
Directors may do all acts and things considered necessary or expedient to give
effect to any such capitalisation and may authorise any person on behalf of all
the holders of Ordinary Shares entitled to the same to enter into an agreement
with the Company providing for any such capitalisation and matters incidental
thereto and any agreement made under such authority shall be effective and
binding on all concerned.
(iv) No fraction of any share shall be allotted. The Directors may make
such provisions as they think fit for any fractional entitlement including
provisions whereby, in whole or in part, the benefit thereof accrues to the
Company.
(v) The Directors shall notify the holders of Ordinary Shares of the terms
and conditions of any such plan and shall make available or provide to them
forms of election so that they may exercise the rights granted.
(vi) The power conferred under this Article and by any authority given by
the Shareholders shall not be exercised unless the Company shall then have:
(a) sufficient unissued shares in the capital of the Company capable of
being issued as Ordinary Shares; and
(b) if any shares are to be allotted other than for cash, sufficient
profits available for distribution or reserves standing to the credit of an
appropriate account to give effect to the terms of any such plan.
(vii) The Directors may in their discretion on any occasion determine that
any such plan shall not be made available to Ordinary Shareholders resident
within or beyond specified territories or jurisdictions."
R.C. Grayson
Secretary
Britannic House, Moor Lane, London EC2Y 9BU
28
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Special Resolution
Passed 5th May 1983
At the ANNUAL GENERAL MEETING of THE BRITISH PETROLEUM COMPANY p.l.c. held on
5th May 1983 the following Resolution was passed as a SPECIAL RESOLUTION:-
That the Articles of Association contained in the document submitted to the
Meeting, and for the purposes of identification signed by the Chairman thereof,
be and are adopted as the Articles of Association of the Company in substitution
for and to the exclusion of the existing Articles of Association.
J.E. Wedgbury
Secretary
Britannic House, Moor Lane, London EC2Y 9BU
29
<PAGE>
The Companies Act 1985 to 1989 No. 102498
Company Limited by Shares The British Petroleum Company p.l.c.
Resolutions
Passed 3rd December 1981
At a Meeting of the Directors of THE BRITISH PETROLEUM COMPANY LIMITED held on
3rd December, 1981 the following Resolutions were passed by virtue of Section
8(3)(a) of the Companies Act 1980, namely:-
(I) THAT the conditions specified in Section 8(11) of the Companies Act 1980
("the Act") being met, the Company be re-registered as a public company in
accordance with the provisions of the Act.
(II) THAT the Memorandum of Association of the Company be amended in accordance
with the provisions of the Act as follows:-
(a) by the deletion of the existing clause 1 and the substitution therefor
of the following as new clause 1:-
"The name of the Company is 'The British Petroleum Company p.l.c.'"
(b) by the renumbering of the existing clauses 2 to 5, inclusive, as
clauses 3 to 6, respectively
(c) by the addition of the following clause as new clause 2:-
"The Company is to be a public company".
J.E. Wedgbury
Secretary
Britannic House, Moor Lane, London EC2Y 9BU
30
<PAGE>
Company Limited by Shares
BP Amoco p.l.c.
Memorandum of Association
The Company was incorporated on 14 April 1909 as Anglo-Persian Oil Company
Limited. The name was changed to Anglo-Iranian Oil Company Limited on 28th June
1935 and to The British Petroleum Company Limited on 17th December 1954. On 4th
January 1982 the Company was re-registered as a public company in accordance
with the Companies Act 1980. The name was changed on 31st December 1998 to BP
Amoco p.l.c. following completion of a merger with Amoco Corporation.
*This refers to Clause 3 of the original Articles of Association. Being obsolete
the clause has been omitted from the Articles of Association since 26th July
1949 when the original Articles of Association were replaced.
1 The name of the Company is "BP Amoco p.l.c."
2 The Company is to be a public company.
3 The Registered Office of the Company will be situate in England.
4 The objects for which the Company is established are:-
(A) To enter into and carry into effect, with such modifications (if any)
as may be agreed upon, the agreement with The Concessions Syndicate, Limited,
The Burmah Oil Company, Limited, and Lord Strathcona and Mount Royal, mentioned
in Clause 3 of the Company's Articles of Association.*
(B) To purchase, take on lease or license, or otherwise acquire any
petroleum or oil-bearing lands in Persia or in any other part of the world, or
any interest in any such lands, or any rights of or connected with the getting
or winning of any natural gas, petroleum or other oil, bitumen, asphalte or
ozokerite, or other similar substances, and to sink wells, to make borings and
otherwise to search for, obtain, exploit, develop, render suitable for trade,
carry away and sell petroleum and other mineral oils, natural gas, asphalte,
ozokerite, or other similar substances and products thereof, and other fuels.
(C) To carry on all or any of the businesses of dealers in and refiners of
petroleum and other mineral oils, natural gas, asphalte, and ozokerite, or other
similar substances and products thereof, and other fuels, mine owners,
merchants, carriers, wharfingers, manufacturers, shipowners, shipbuilders, barge
owners, lightermen, factors and brokers in all or any of their respective
branches, and to treat or turn to account in any other manner any natural gas,
petroleum or other oils, asphalte, or any products thereof, or any other fuel.
(D) To acquire, work and dispose of and deal in any mines, metals,
minerals, mineral wax, clay and other like substances, and to acquire, produce
by cultivation, manufacture, treat, deal in or otherwise turn to account any
mineral, vegetable or mineral products.
(E) To acquire, construct, improve, maintain, work, manage, carry out or
control any roads, ways, tramways, railways, docks, wharves, piers, bridges,
viaducts, aqueducts, canals, watercourses, tanks, wells, reservoirs, stations
and pump services, accumulation services and distribution services, pipes, pipe
lines, and other apparatus in connection with oil, gas, bitumen, asphalte and
ozokerite, and other similar substances, telegraphs, telephones, gasworks,
electric lighting and power works, factories, workshops, warehouses, shops,
stores, fuel stores, fuel stations, guard towers, dwelling-houses, and other
buildings, works and conveniences which may seem calculated directly or
indirectly to advance the Company's interests, and to contribute to, subsidise
or otherwise assist or take part in the construction, improvement, maintenance,
working, management, carrying out or control thereof, and to take any lease or
enter into any working agreement in respect thereof.
(F) To purchase, build, charter, affreight, hire and let out for hire, or
for chartering and affreightment, and to otherwise obtain the possession of, and
use and dispose of, and employ or turn to account ships, lighters, launches,
boats and vessels of all kinds (including tank vessels), and locomotives,
wagons, tank cars and other rolling stock, and to otherwise provide for the
conveyance of oil, gas, asphalte, ozokerite and movable property of all kinds,
and to purchase or otherwise acquire any shares or interests in any ships or
vessels, or in any companies possessed of or interested in any ships or vessels.
(G) To clear, manage, farm, cultivate, irrigate and otherwise work or use
any lands over which for the time being the Company has any rights, and to
dispose of or otherwise deal with any farm or other products of any such lands,
and to lay out sites for and establish permanent camps, towns and villages on
any such lands.
(H) To equip expeditions and employ experts, agents and others for the
purpose of searching for, acquiring, working, proving, and developing lands and
others and concessions, licences, rights, powers and privileges suitable for the
purposes of the Company.
(I) To carry on business as concessionaires, capitalists and financiers,
and to undertake, carry on and execute any kinds of financial, commercial,
trading, trust, exploitation, agency and other operations, and to advance or
provide money, with or without security, to concessionaires, inventors,
patentees and others, for the purpose of improving and developing, or assisting
to improve and develop, any concessions, lands or others, or of experimenting,
testing or developing any invention, design or process, industrial or otherwise.
(J) To carry on as principals, or agents, any branch of agricultural,
manufacturing, metallurgical, chemical or mercantile business for which the
Company's properties, buildings, and employees may be conveniently applicable.
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<PAGE>
(K) To subsidise, or contribute to, or otherwise assist in, or take part
in, the construction, maintenance, improvement, management, working, control or
superintendence of any operations or works or buildings useful or expedient or
convenient or adaptable for the purposes of the Company which may be constructed
by or may belong to or be worked by or be under the control or superintendence
of others.
(L) To manufacture, buy, sell, treat and deal in all kinds of commodities,
substances, materials, articles and things necessary or useful for carrying on
any of the businesses of the Company, or in or for any of the operations of the
Company.
(M) To purchase, lease or otherwise acquire, and to confer and grant
rights of way, light and water and other rights, easements or privileges in
favour of the Company or its properties or any of them, or over or affecting the
Company's properties or any of them.
(N) To guarantee payment of any moneys by, or the performance of any
contracts, liabilities, obligations or engagements of any company, corporation
or person, with, or to any other company, corporation or person; and to become
liable or responsible for money; and to grant guarantees and indemnities of
every description; and to undertake obligations of every description.
(O) To indemnify and secure any person (including any officers of this
Company) or company against debt or liability incurred to him or them by this
Company, or undertaken by him or them for or on behalf of this Company, or
against any costs, losses or expenses in connection with any of the affairs or
businesses of this Company, and to issue to any such person or company, by way
of indemnity or security, any shares, or grant in their favour or give them any
securities, which this Company has power to issue, grant or give.
(P) To pay all printing, legal and other costs, charges and expenses
incidental to or connected with the promotion, formation and incorporation of
the Company (whether of a preliminary nature or not), and the purchase or
acquisition of any properties, businesses, rights and others acquired or to be
acquired for the purposes of the Company and the carrying of any of its objects
into effect; and to remunerate any person or company for services rendered or to
be rendered in placing, or assisting in placing, or obtaining subscriptions for,
any shares or stocks or securities of this Company, or of any company to be
promoted by this Company, or in arranging loans for this Company, or any company
to be promoted by it, or in relation to the formation or promotion of this
Company, or of any company to be promoted by this Company, or otherwise in
relation to the businesses or objects of this Company; and to adopt all acts and
preliminary arrangements in reference to all or any of these matters.
(Q) To carry on any other businesses which may seem to the Company capable
of being conveniently carried on in connection with any business which the
Company is authorised to carry on, or may seem to the Company calculated
directly or indirectly to benefit this Company, or to enhance the value of or
render profitable any of the Company's properties or rights.
(R) To acquire and carry on all or any part of the business or property,
and to undertake any liabilities of any person, firm, association or company
possessed of property suitable for any of the purposes of this Company, or
carrying on any business which this Company is authorised to carry on, and as
the consideration for the same to pay cash or to issue any shares, stocks or
obligations of this Company.
(S) To enter into partnership or into any arrangement for sharing profits,
union of interest, joint adventure, reciprocal concessions or co-operation with
any person or company carrying on, engaged in, or about to carry on or engage
in, any business or transaction which the Company is authorised to carry on or
engage in, or any business or transaction capable of being conducted so as
directly or indirectly to benefit this Company, and to take or otherwise acquire
and hold, sell, re-issue or otherwise deal with the shares or stock in or
securities or obligations of, and to subsidise or otherwise assist any such
company, and to guarantee the principal or interest of any such securities or
obligations, or any dividends upon any such shares or stock.
(T) To purchase, take on lease or in exchange, hire or otherwise acquire
any real or personal property, rights or privileges which the Company may think
suitable or convenient for any purposes of its business; and to erect and
construct buildings and works of all kinds.
(U) To apply for, purchase or otherwise acquire any patents, licenses and
the like, conferring an exclusive or non-exclusive or limited right to use, or
any secret or other information as to any invention which may seem capable of
being used for any of the purposes of the Company, or the acquisition of which
may seem calculated directly or indirectly to benefit this Company, and to use,
exercise, develop, grant licenses in respect of, or otherwise turn to account
the rights and information so acquired.
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<PAGE>
(V) To purchase, subscribe for or otherwise acquire, and to hold the
shares, stocks or obligations of any company, in the United Kingdom or
elsewhere, and upon a distribution of assets or division of profits to
distribute any such shares, stocks or obligations amongst the Members of this
Company in kind.
(W) To borrow or raise or secure the payment of money, and for those or
other purposes to mortgage or charge the undertaking and all or any part of the
property and rights of the Company, present or after acquired, including
uncalled capital, and to create, issue, make, draw, accept and negotiate
perpetual or redeemable debentures or debenture stock, bonds or other
obligations, bills of exchange, promissory notes or other negotiable
instruments.
(X) To sell, let, develop, dispose of or otherwise deal with the
undertaking and property of the Company, or any part thereof or share or
interest therein, upon any terms, with power to accept as the consideration any
shares, stocks or obligations of or interest in any other company.
(Y) To allow or cause the legal estate and interest in any businesses or
property acquired, established or carried on by the Company, to remain or be
vested or registered in the name of or carried on by any foreign company or
companies, formed or to be formed, or persons, either upon trust for or as
agents or nominees of this Company.
(Z) To pay out of the funds of the Company all expenses which the Company
may lawfully pay of or incident to the formation, registration and advertising
of or raising money for the Company and the issue of its capital, including
brokerage and commissions for obtaining applications for or taking, placing or
underwriting shares, debentures or debenture stock, and to apply at the cost of
the Company to Parliament for any extension of the Company's powers.
*See notes at end of Memorandum of Association.
(AA) To enter into any arrangement with any governments or authority,
supreme, municipal, local or otherwise, and to obtain from any such government
or authority any rights, concessions and privileges that may seem conducive to
the Company's objects or any of them.
(BB) To procure the Company to be domiciled, registered and recognised in
accordance with the laws and constitution of Persia, and any other country or
place, and to take such steps and do such acts and things as may be necessary or
expedient to give the Company the same rights and privileges in Persia, or in
any other place or country outside the United Kingdom as may be possessed by
local companies or partnerships of a similar nature.
(CC) To establish and support, or aid in the establishment and support of
associations, institutions and conveniences calculated to benefit any of the
employees or ex-employees of the Company, or the dependents or connections of
such persons, and to grant pensions and allowances, and to make payments towards
insurance, and to subscribe or guarantee money for charitable or benevolent
objects, or for any exhibition, or for any public, general or useful object and
to purchase and maintain for the benefit of any persons (including Directors)
any insurance.
(DD) To establish and maintain, and to contribute to, any scheme for
encouraging or facilitating the holding of shares or debentures in the Company
by or for the benefit of its employees or former employees, or those of its
subsidiary or holding companies or subsidiaries of its holding company, or by or
for the benefit of such other persons as may for the time being be permitted by
law, or any scheme for sharing profits with its employees or those of its
subsidiary and/or associated companies.
(EE) To promote any company or companies for the purpose of its or their
acquiring all or any of the property, rights and liabilities of the Company or
share or interest therein, or for any other purpose which may seem directly or
indirectly calculated to benefit this Company, and to pay all the expenses of or
incident to such promotion.
(FF) To carry out all or any of the foregoing objects as principals or
agents, or in partnership or conjunction with any other person, firm,
association or company, and in any part of the world.
(GG) To do all such other things as are incidental or conducive to the
attainment of the above objects.
5 The liability of the Members is limited.
6 The capital of the Company is *(pound)2,000,000 divided into 1,000,000
Preference Shares of (pound)1 each and 1,000,000 Ordinary Shares of (pound)1
each, with power to increase and with power from time to time to issue any
shares of the original or new capital with any preference or priority in the
payment of dividends or the distribution of assets, or otherwise, over any other
shares, whether Ordinary or Preference, and whether issued or not, and to vary
the regulations of the Company as far as necessary to give effect to any such
preference or priority, and upon the subdivision of a share, to apportion the
right to participate in profits or surplus assets, or the right to vote in any
manner as between the shares resulting from such subdivision.
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WE, the several persons whose names and addresses are subscribed are desirous of
being formed into a Company in pursuance of this Memorandum of Association, and
we respectively agree to take the number of shares in the capital of the Company
set opposite our respective names.
Names, addresses and descriptions Number of Preference Shares
of subscribers Shares taken by each Subscriber
Strathcona,
28 Grosvenor Square, London W., One thousand
G.C.M.G., G.C.V.O. Preference
Charles William Wallace,
Director, The Burmah Oil Company, Limited, One thousand
Winchester House, Old Broad Street, Preference
London E.C.
Francis of Teck,
36 Welbeck Street, London W. One thousand
K.C.V.O. Preference
H. S. Barnes, K.C.S.I., K.C.V.O.
East India United Service Club, One thousand
16 St. James' Square, London S.W. Preference
William Garson,
Writer to the "Signet", One thousand
5 Albyn Place, Edinburgh. Preference
John T. Cargill
Chairman, The Burmah Oil Company, Limited, One thousand
175 West George Street, Glasgow. Preference
W. K. D'Arcy
Chairman, London Board, One thousand
Mount Morgan Gold Co., Limited, Preference
42 Grosvenor Square, London W.
Dated the 14th day of April, 1909.
Witness to the above Signatures:-
Charles Crisp,
Solicitor,
17 Throgmorton Avenue, London E.C.
1 The following increases in the Company's original capital of [sterling]
2,000,000 have been made:-
Date of Resolution By Creation of Increased to
shares of [sterling] 1 each
29th May 1914 2,000,000 Ordinary Shares [sterling] 4,000,000
3rd December 1917 1,000,000 Preference Shares [sterling] 5,000,000
1st December 1919 3,000,000 Preference Shares [sterling]20,000,000
4,500,000 Ordinary Shares
7,500,000 Shares
2nd November 1926 4,000,000 Ordinary Shares [sterling]24,000,000
31st December 1931 2,500,000 Shares [sterling]26,500,000
21st June 1937 6,500,000 Ordinary Shares [sterling]33,000,000
16th December 1954 87,000,000 Ordinary Shares [sterling]120,000,000
22nd October 1957 80,000,000 Shares [sterling]200,000,000
9th October 1958 50,000,000 Shares [sterling]250,000,000
26th October 1961 50,000,000 Shares [sterling]300,000,000
14th May 1964 75,000,000 Shares [sterling]375,000,000
11th May 1967 50,000,000 Shares [sterling]425,000,000
4th May 1972 75,000,000 Shares [sterling]500,000,000
shares of 25p each
6th May 1982 400,000,000 Ordinary Shares [sterling]600,000,000
30th April 1987 4,600,000,000 Ordinary Shares [sterling]1,750,000,000
28th April 1988 1,000,000,000 Ordinary Shares [sterling]2,000,000,000
shares of US$0.50 each
25 November 1998 12,000,000,000 Ordinary Shares $6,000,000,000
and [sterling]12,750,000
2 At an Extraordinary General Meeting held on 4th October 1979 the following
Special Resolution was passed:-
THAT as from the close of business on Friday, 5th October 1979:-
(a) each (pound)1 of the (pound)7,232,838 Cumulative Preference Stock be
hereby converted into one Cumulative First Preference Share of (pound)1 and each
(pound)1 of the (pound)5,473,414 Cumulative Second Preference Stock be hereby
converted into one Cumulative Second Preference Share of (pound)1 and each
(pound)1 of the (pound)386,518,085 Ordinary Stock be hereby converted and
sub-divided into four Ordinary Shares of 25p each;
(b) each of the 100,731,915 unissued and unclassified shares of [sterling]
1 be hereby sub-divided into and designated as four Ordinary Shares of 25p each;
(c) Article 68 of the Company's Articles of Association* be hereby altered
by deleting the words "one vote for every five Preference Shares and two votes
for every Ordinary Share" and substituting therefor the words "two votes for
every (pound)5 in nominal amount of the Preference Shares and one vote for every
25p in nominal amount of the Ordinary Shares"; and
(d) all standing resolutions for the conversion of shares into stock be
hereby rescinded and cancelled.
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<PAGE>
*This refers to Article 68 of previous Articles of Association replaced by those
adopted on 5th May 1983.
3 At an Extraordinary General Meeting held on 25th November 1998 the following
Special Resolution was passed (and the conditions referred to therein were
satisfied on 31st December 1998):-
"THAT, conditional upon the passing as an extraordinary resolution at a separate
meeting of the holders of the Ordinary Shares in the capital of the Company (or
any adjournment thereof) of the resolution set out in the notice dated 30
October 1998 convening such meeting and upon and with effect from the Merger
Agreement becoming unconditional in all respects (save as regards the condition
relating to the admission of the shares in the Company to be issued as
consideration pursuant to the Merger to the Official List of the London Stock
Exchange becoming effective) and not having been terminated in accordance with
its terms:
11.1 the ordinary share capital of the Company be reduced by cancelling
and extinguishing all the Ordinary Shares of 25p each in the capital of the
Company ("Sterling Shares"), whether issued or authorised but unissued, and the
reserve arising as a result of such cancellation be credited to a special
reserve account of the Company (the "Ordinary Share Reserve");
11.2 subject to and forthwith upon such reduction of capital taking effect:
(a) the authorised share capital of the Company be increased to
(pound)12,750,000 and $6,000,000,000 by the creation of 12,000,000,000
new Ordinary Shares of $0.50 each;
(b) the Ordinary Share Reserve be converted into US dollars at such spot
rate of exchange for the purchase of US dollars with pounds sterling
at or around 4.00 pm (London time) on the Record Date as may be
selected by the Directors of the Company ("the Selected Rate");
(c) the sum standing in the books of the Company as a result of such
conversion ("the US Dollar Reserve") be applied in paying up Dollar
Shares in full at par in accordance with paragraph 11.2(e) of this
Resolution 11, provided that, if there would otherwise be any amount
remaining in the US Dollar Reserve once as many as possible Dollar
Shares have been paid up in full at par, one of such Dollar Shares be
paid up at a premium equal to such amount;
(d) there be converted into US dollars at the Selected Rate and
capitalised in accordance with paragraph 11.2(e) of this Resolution 11
such part of the share premium account of the Company ("the US Dollar
Share Premium") as is necessary to pay up in full at par such number
of Dollar Shares so that when it is added to the number of Dollar
Shares to be paid up by application of the US Dollar Reserve, the
aggregate number of Dollar Shares to be paid up pursuant to this
Resolution 11 is equal to the Requisite Number;
(e) each of the US Dollar Reserve and the US Dollar Share Premium be
separately applied so as to pay up in aggregate the Requisite Number
of Dollar Shares, such shares to be allotted and issued credited as
fully paid to the holders of Sterling Shares in the register of
members of the Company at the close of business on the Record Date on
the basis of one Dollar Share for each Sterling Share then held;
(f) as an exception to Article 17, unless the Directors decide otherwise,
no new share certificates be completed and delivered in respect of the
Dollar Shares to be issued pursuant to paragraph 11.2(e) of this
Resolution 11; and
(g) for the period ending on the date of the Annual General Meeting in
1999 or 15 July 1999, whichever is the earlier, the Directors be and
are hereby authorised and empowered pursuant to Article 11(B) of the
Articles of Association:
(i) to allot relevant securities up to an aggregate nominal amount of
$6,000,000,000 (the Section 80 amount), and
(ii) to allot equity securities wholly for cash:
(a) in connection with a rights issue; and
(b) otherwise than in connection with a rights issue up to an aggregate
nominal amount of $244,000,000 (the Section 89 amount),
this authority to be in substitution for that granted to the Directors at the
Annual General Meeting of the Company held on 16 April 1998;
11.3 for the purposes of this Resolution:
(a) "Dollar Shares" means ordinary shares of $0.50 each in the capital of
the Company;
(b) "Requisite Number" means the number of Sterling Shares in issue at the
close of business on the Record Date; and
(c) "Record Date" means the business day immediately prior to the date on
which the reduction of capital proposed to be effected by this
Resolution 11 becomes effective; and
11.4 the Articles of Association of the Company be and are hereby amended
as set out in Schedule B to this Notice of Extraordinary General Meeting."
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<PAGE>
"SCHEDULE B TO THE NOTICE OF EXTRAORDINARY GENERAL MEETING
1 Article 2: After the definition of "Paid", insert the following line:
"US dollars The lawful currency of the United States of America".
2 Article 3(A): Delete the first sentence in this article and replace
with:
"The share capital of the Company at the date of the adoption of this Article is
(pound)12,750,000 (divided into 7,250,000 8 per cent. Cumulative Preference
Shares of (pound)1 each (of which 7,232,838 have been issued and are fully paid
and 17,162 are unissued) and 5,500,000 9 per cent. Cumulative Second Preference
Shares of (pound)1 each (of which 5,473,414 have been issued and are fully paid
and 26,586 are unissued)) and $6,000,000,000 divided into 12,000,000,000
Ordinary Shares of $0.50 each".
3 Article 11(C)(vii): Delete the words "foreign currency" and replace
with the words "a currency other than US dollars or sterling".
4 Article 61(A): Delete the word "25p" and replace with the word
"$0.50"."
4 At an Extraordinary General Meeting held on 1st September 1999 the following
Special Resolution was passed:
"THAT the Articles of Association of the Company be and are hereby amended as
set out in Schedules A and B to this Notice of Extraordinary General Meeting,
such amendments to take effect from the dates set out in such schedules."
"SCHEDULE B TO THE NOTICE OF EXTRAORDINARY GENERAL MEETING
A With effect from the date on which the New BP Amoco Ordinary Shares are
admitted to the Official List of the London Stock Exchange:
1 Article 3(A): in the first sentence, delete the figure "12,000,000,000"
and replace with the figure "24,000,000,000" or, if the amendment set out in
Paragraph B 2(ii) below has come into effect, delete the figure "18,000,000,000"
and replace with the figure "36,000,000,000".
2 Article 3(A): in the first sentence, delete the word "US$0.50" and
replace with the word "US$0.25".
3 Article 61(A): delete the word "US$0.50" and replace with the word
"US$0.25".
B With effect from the date upon which the Merger Agreement becomes
unconditional not having been terminated in accordance with its terms:
1 Article 3(A): in the first sentence, delete the word
"US$6,000,000,000" and replace with the word "US$9,000,000,000".
2 Article 3(A): in the first sentence:
(i) if the Subdivision has occurred, delete the figure "24,000,000,000"
and replace with the figure "36,000,000,000"; or
(ii) if the Subdivision has not occurred, delete the figure
"12,000,000,000" and replace with the figure "18,000,000,000"."
36
<PAGE>
Company Limited by Shares BP Amoco p.l.c.
Articles of Association
Adopted by Special Resolution passed 5th May 1983 and amended by Special
Resolutions passed 30th April 1987, 21st September 1987, 28th April 1988, 27th
April 1989. 26th April 1990, 18th April 1991, 16th April 1992, 15th April 1993,
7th April 1994, 13th April 1995, 11th April 1996, 10th April 1997, 16th April
1998, 25th November 1998, 15th April 1999 and 1st September 1999.
Preliminary
1 The regulations in Table A in the Companies (Tables A to F) Regulations 1985
and in any Table A applicable to the Company under any former enactment relating
to companies shall not apply to the Company.
2 In these presents (if not inconsistent with the subject or context) the words
and expressions set out in the first column below shall bear the meanings set
opposite to them respectively:-
The Act The Companies Act 1985
The Statutes The Act and every other
Statute for the time being in
force concerning companies and
affecting the Company
These presents These Articles of Association
as from time to time altered
Office The registered office of the
Company for the time being
Other Resolutions All Resolutions of a
procedural nature (such as a
Resolution on a mere clerical
amendment to correct a patent
error in a Substantive
Resolution, a Resolution on
adjournment of meeting or a
Resolution on choice of a Chairman
Transfer Office The place where the Register
of Members is situate for the
time being
Seal The Common Seal of the Company
Securities Seal An official seal kept by the Company
by virtue of Section 40 of the Act
Sterling The lawful currency of the United Kingdom
Substantive Resolutions All Resolutions which are not
Other Resolutions
The London Stock Exchange The London Stock Exchange Limited
The United Kingdom Great Britain and Northern Ireland
Electronic mail Includes any electronic transmission
in any form through any medium
Month Calendar month
Year Calendar year
In writing Written or produced by any
substitute for writing or
partly one and partly another
Paid Paid or credited as paid
US dollars The lawful currency of the
United States of America
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<PAGE>
The word "Act" as related to a particular year refers to the Companies Act of
that year.
The expression "Approved Depositary" shall mean a custodian or other person (or
a nominee for such custodian or other person) appointed under contractual
arrangements with the Company or other arrangements approved by the Directors
whereby such custodian or other person or nominee holds or is interested in
shares of the Company or rights or interests in shares of the Company and issues
securities or other documents of title or otherwise evidencing the entitlement
of the holder thereof to or to receive such shares, rights or interests,
provided and to the extent that such arrangements have been approved by the
Directors for the purpose of these presents and shall include, where approved by
the Directors, the trustees (acting in their capacity as such) of any Employees'
Share Scheme established by the Company or any other scheme or arrangements
principally for the benefit of employees of the Company and/or its subsidiaries
which has been approved by the Company in general meeting.
The expressions "debenture" and "debenture holder" shall respectively include
"debenture stock" and "debenture stockholder".
The expression "Designated Shares" shall mean fully paid shares in a body
corporate (which both immediately before and after the distribution hereafter
referred to is a subsidiary of the Company) which have been distributed by the
Company pursuant to Article 120 and which, at or before the record date for the
purpose of determining entitlement to receipt of such distribution, are
designated by the Directors to be "Designated Shares" for the purposes of
Article 37(A) and any further shares of the same class which may, with the prior
consent of the Company, be allotted by such body corporate after such
distribution, provided that the Directors may at any time after such
distribution declare such shares nolonger to be "Designated Shares" for the
purposes of such Article by giving not less than 15 days prior notice thereof to
the London Stock Exchange, and provided further that there shall not at anytime
be more than one class of shares constituting Designated Shares.
The expression "Designated Subsidiary" shall mean the body corporate referred to
in the definition of "Designated Shares".
The expression "Employees' Share Scheme" bears the meaning ascribed thereto by
Section 743 of the Act.
The expression "Secretary" shall include any person appointed by the Directors
to perform any of the duties of the Secretary and where two or more persons are
appointed to act as Joint Secretaries shall include any one of these persons.
The expression "Stock Exchange Nominee" bears the meaning ascribed thereto by
Section 185 of the Act.
The word "subsidiary" bears the meaning ascribed thereto by Section 736 of the
Act and shall bear such meaning notwithstanding any provision contained in these
presents which would otherwise require the reference to the said Section of the
Act to be construed as relating to any statutory modification or re-enactment
thereof.
All such of the provisions of these presents as are applicable to paid-up shares
shall apply to stock, and the words "share" and "shareholder" shall be construed
accordingly.
Words denoting the singular shall include the plural and vice versa. Words
denoting the masculine shall include the feminine. Words denoting persons shall
include bodies corporate and unincorporate. References to any statute or
statutory provision shall be construed as relating to any statutory modification
or re-enactment thereof for the time being in force.
Subject as aforesaid any words or expressions defined in the Act shall (if not
inconsistent with the subject or context) bear the same meanings in these
presents.
A Special or Extraordinary Resolution shall be effective for any purpose for
which an Ordinary Resolution is expressed to be required under any provision of
these presents or the Statutes and where for any purpose an Extraordinary
Resolution is required a Special Resolution shall be effective.
SHARE CAPITAL
3 (A) The share capital of the Company at the date of the adoption of this
Article is (pound)12,750,000 (divided into 7,250,000 8 per cent. Cumulative
Preference Shares of (pound)1 each (of which 7,232,838 have been issued and are
fully paid and 17,162 are unissued) and 5,500,000, 9 per cent. Cumulative Second
Preference Shares of [sterling] 1 each (of which 5,473,414 have been issued and
are fully paid and 26,586 are unissued)) and *US$6,000,000,000 divided into
*24,000,000,000 Ordinary Shares of US$0.25 each. The 8 per cent. Cumulative
Preference Shares (hereinafter called "the First Preference Shares") and the 9
per cent. Cumulative Second Preference Shares (hereinafter called "the Second
Preference Shares") had attached thereto respectively on 5th April 1973 the
rights as regards participation in the profits and assets of the Company set out
below (and have attached thereto at the date of the adoption of these presents
such rights as modified or affected by the provisions of paragraph 18 of
Schedule 23 to the Finance Act 1972 and Section 46 of the Finance Act 1976):-
*with effect from the date upon which the agreement and plan of merger dated 31
March 1999 between BP Amoco, ARCO and Prairie Holdings becomes unconditional,
the Ordinary share capital of the Company will increase to US$9,000,000,000
divided into 36,000,000,000 Ordinary Shares of US$0.25 each.
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(i) the First Preference Shares, together with any further shares
hereafter issued ranking pari passu therewith pursuant to the provisions
hereinafter contained, entitle the holders to a fixed cumulative preferential
dividend on the amounts paid up thereon at the rate of 8 per cent. per annum,
and on a return of assets of the Company on winding up to have the assets of the
Company available for distribution amongst the members applied in the first
place in paying to them (a) the amounts paid up on such First Preference Shares,
(b) a sum equal to any arrears or deficiency of the fixed cumulative
preferential dividend on such First Preference Shares, such arrears or
deficiency to be calculated down to the date of the commencement of the winding
up, and (c) a sum equal to 10 per cent. on the amounts paid up on the First
Preference Shares, or to the average premium above par at which the First
Preference Shares have during the six months before the commencement of the
winding up been dealt in on the market (such average premium to be certified by
the Secretary of the London Stock Exchange), whichever sum is the greater, but
the holders of the First Preference Shares shall not be entitled in respect
thereof to any further or other participation in the profits or assets of the
Company.
(ii) the Second Preference Shares, together with any further shares
hereafter issued ranking pari passu therewith pursuant to the provisions
hereinafter contained, entitle the holders to a fixed cumulative preferential
dividend on the amounts paid up thereon (payable next after the dividend on the
First Preference Shares, but in priority to any dividend on the Ordinary Shares)
at the rate of 9 per cent. per annum, and on a return of assets of the Company
on winding up to have the assets of the Company available for distribution
amongst the members and remaining after making to the holders of the First
Preference Shares the payments to which they are entitled, applied in the next
place in paying to the holders of the Second Preference Shares (a) the amounts
paid up on such Second Preference Shares, (b) a sum equal to any arrears or
deficiency of the fixed cumulative preferential dividend on such Second
Preference Shares, such arrears or deficiency to be calculated down to the date
of the commencement of the winding up, and (c) a sum equal to 10 per cent. on
the amounts paid up on the Second Preference Shares, or to the average premium
above par at which the Second Preference Shares have during the six months
before the commencement of the winding up been dealt in on the market (such
average premium to be certified by the Secretary of the London Stock Exchange),
whichever sum is the greater, but the holders of the Second Preference Shares
shall not be entitled in respect thereof to any further or other participation
in the profits or assets of the Company.
(B) Unless otherwise expressly resolved by the Company in General Meeting,
further shares may be created and issued (without any further sanction or
approval by the Company in General Meeting or by any class of members thereof
pursuant to Article 4) as First Preference Shares ranking pari passu with the
First Preference Shares in the present capital, provided that the total nominal
amount of such First Preference Shares at any one time in issue shall not exceed
[sterling] 10,000,000, or as Second Preference Shares ranking pari passu with
the Second Preference Shares in the present capital, provided that the total
nominal amount of such Second Preference Shares at any one time in issue shall
not exceed [sterling] 10,000,000.
(C) Subject as aforesaid no new shares entitled to rank pari passu with or
to any preference over the existing First and Second Preference Shares shall be
issued by the Company without the sanction of an Extraordinary Resolution of the
holders of such Preference Shares passed at a meeting held under the conditions
hereinafter contained.
VARIATION OF RIGHTS
4 The holders of any class of shares may at any time and from time to time, and
whether before or during liquidation, by an Extraordinary Resolution passed at a
meeting of such holders, consent on behalf of all the holders of shares of the
class to the issue or creation of any shares ranking equally therewith, or
having any priority thereto, or to the abandonment of any preference or priority
or of any accrued dividend, or the reduction for any time or permanently of the
dividends payable thereon, or to the amalgamation into one class of the shares
of any two or more classes or to the sub-division of shares of one class into
shares of different classes, or any alteration in these presents varying or
taking away any rights or privileges attached to shares of the class, or to any
scheme for the reduction of the Company's capital affecting the class of shares
in a manner not otherwise authorised by these presents, or to any scheme for the
distribution (though not in accordance with legal rights) of assets in money or
in kind in or before liquidation, or to any contract for the sale of the whole
or any part of the Company's property or business determining the way in which
as between the several classes of shareholders the purchase consideration shall
be distributed, and generally consent to any alteration, contract, compromise or
arrangement which the persons voting thereon could if sui juris and holding all
the shares of the class consent to or enter into, and such Resolution shall be
binding upon all the holders of shares of the class.
5 Any meeting for the purpose of the last preceding Article shall be convened
and conducted in all respects as nearly as possible in the same way as an
Extraordinary General Meeting of the Company provided that no member, not being
a Director, shall be entitled to notice thereof or to attend thereat, unless he
be a holder of shares of the class intended to be affected by the Resolution,
and that no vote shall be given except in respect of a share of that class, and
that the quorum at any such meeting shall (subject to the provisions as to an
adjourned meeting hereinafter contained) by persons holding or representing by
proxy one-tenth of the issued shares of that class (as regards the First
Preference Shares and the Second Preference Shares) and one-third of the issued
shares of that class (as regard all other classes of share), and that at any
such meeting a poll may be demanded in writing by not less than five members
present in person or by proxy and entitled to vote.
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ALTERATION OF SHARE CAPITAL
6 The Company may from time to time by Ordinary Resolution increase its capital
by such sum to be divided into shares of such amounts as the Resolution shall
prescribe. All new shares shall be subject to the provisions of the Statutes and
of these presents with reference to allotment, payment of calls, lien, transfer,
transmission, forfeiture and otherwise.
7 (A) The Company may by Ordinary Resolution:-
(i) consolidate and divide all or any of its share capital into shares
of larger amount than its existing shares;
(ii) cancel any shares which, at the date of the passing of the
Resolution, have not been taken, or agreed to be taken, by any person and
diminish the amount of its capital by the amount of the shares so cancelled;
(iii) sub-divide its shares, or any of them, into shares of smaller amount
than is fixed by the Memorandum of Association (subject, nevertheless, to the
provisions of the Statutes), and so that the Resolution whereby any share is
sub-divided may determine that, as between the holders of the shares resulting
from such sub-division, one or more of the shares may, as compared with the
others, have any such preferred, deferred or other special rights, or be subject
to any such restrictions, as the Company has power to attach to unissued or new
shares.
(B) Whenever as a result of a consolidation and division or sub-division
of shares any difficulty arises, the Directors may settle the matter in any
manner they deem fit, and, in particular, may sell shares representing fractions
to which any members would become entitled to any person (including, subject to
the provisions of the Statutes, the Company) and distribute the net proceeds of
sale in due proportion among those members, and the Directors may authorise some
person to execute an instrument of transfer of the shares to, or in accordance
with the directions of, the purchaser. The transferee shall not be bound to see
to the application of the purchase money nor shall his title to the shares be
affected by any irregularity in or invalidity of the proceedings relating to the
sale.
8 Subject to the provisions of the Statutes the Company may purchase any of
its own shares (including any redeemable shares).
9 The Company may reduce its share capital or any capital redemption reserve,
share premium account or other undistributable reserve in any manner and with
and subject to any incident authorised and consent required by law.
SHARES
10 Without prejudice to any special rights previously conferred on the holders
of any shares or class of shares for the time being issued, any share in the
Company may be issued with such preferred, deferred or other special rights, or
subject to such restrictions, whether as regards dividend, return of capital,
voting or otherwise, as the Company may from time to time by Ordinary Resolution
determine (or, in the absence of any such determination, as the Directors may
determine) and subject to the provisions of the Statutes the Company may issue
any shares which are, or at the option of the Company or the holder are liable,
to be redeemed.
11 (A) Subject to the provisions of the Statutes relating to authority,
pre-emption rights and otherwise and of any Resolution of the Company in General
Meeting passed pursuant thereto, all unissued shares shall be at the disposal of
the Directors and they may allot (with or without conferring a right of
renunciation), grant options over or otherwise dispose of them to such persons,
at such times and on such terms as they think proper.
(B) (i) Pursuant to and in accordance with Section 80 of the Act the
Directors shall be generally and unconditionally authorised to exercise for each
prescribed period all the powers of the Company to allot relevant securities up
to an aggregate nominal amount equal to the Section 80 Amount; and
(ii) pursuant to and within the terms of the said authority the Directors
shall be empowered during each prescribed period to allot equity securities
wholly for cash (a) in connection with a rights issue; and (b) otherwise than in
connection with a rights issue up to an aggregate nominal amount equal to the
Section 89 Amount; and
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(iii) during each prescribed period the Company and its Directors by such
authority and power may make offers or agreements which would or might require
equity securities or other relevant securities to be allotted after the expiry
of such period; and
(iv) for the purposes of this Article 11(B):-
(a) "rights issue" means an offer of equity securities open for acceptance
for a period fixed by the Directors to holders of equity securities on the
register on a fixed record date in proportion to their respective holdings of
such securities or in accordance with the rights attached thereto but subject to
such exclusions or other arrangements as the Directors may deem necessary or
expedient in relation to fractional entitlements or legal or practical problems
under the laws of, or the requirements of any recognised regulatory body or any
stock exchange in, any territory or as regards shares held by an Approved
Depositary;
(b) "prescribed period" means any period (not exceeding 5 years on any
occasion) for which the authority conferred in the case of sub-paragraph (i) is
renewed by Ordinary or Special Resolution stating the Section 80 Amount, and the
power conferred in the case of sub-paragraph (ii) is renewed by Special
Resolution stating the Section 89 amount;
(c) "the Section 80 Amount" shall for any prescribed period be
that stated in the relevant Ordinary or Special Resolution;
(d) "the Section 89 Amount" shall for any prescribed period by that
stated in the relevant Special Resolution;
(e) the nominal amount of any securities shall be taken to be, in the case
of rights to subscribe for or to convert any securities into shares of the
Company, the nominal amount of such shares which may be allotted pursuant to
such rights; and
(f) words and expressions defined in or for the purposes of Part IV of the
Act shall bear the same meanings herein.
(C) (i) The Directors may with the prior sanction of an Ordinary
Resolution of the Company implement and maintain in accordance with the terms
and conditions of such Resolution but otherwise as the Directors may determine
from time to time a share dividend or distribution reinvestment plan or plans
for the benefit of the holders of Ordinary Shares of the Company whereby such
holders may be given one or more of the following options namely:
(a) instead of taking the net cash amount due to them in respect of any
dividend (or any part thereof) declared or payable on all or any Ordinary Shares
held by them either to invest such cash in subscribing for unissued Ordinary
Shares in the capital of the Company payable in full or by instalments or in
paying up in full or by instalments any unpaid or partly paid Ordinary Shares
held by them on the terms of any such plan; or
(b) instead of taking the net cash amount due to them in respect of any
dividend (or any part thereof) declared or payable on all or any Ordinary Shares
held by them to elect to receive new Ordinary Shares in the capital of the
Company credited as fully paid on the terms and conditions of any such plan; or
(c) to forego their entitlement to any dividend (or any part thereof)
declared or payable on all or any Ordinary Shares held by them and to take
instead fully paid bonus Ordinary Shares on the terms and conditions of any such
plan; or
(d) any other option in respect of the whole or any part of any dividend
on all or any Ordinary Shares held by them as the Directors shall determine.
Where in the case of any plan such as those contemplated in paragraphs (b)
and (c) above, holders of Ordinary Shares are not entitled to payment of a cash
dividend (otherwise than in respect of fractional entitlements), the plan may
provide for them to receive allotments of Ordinary Shares credited as fully paid
having a value of more than the net cash amount which would otherwise be due to
them in respect of the relevant dividend but not exceeding a value equivalent to
the sum of the net cash amount of the dividend together with the associated tax
credit (as defined in sub-paragraph (viii) below).
(ii) The Directors may in their discretion suspend or terminate or modify
in any manner not inconsistent with these presents or the sanctioning Resolution
any such plan which is in operation.
(iii) For the purposes of any such plan the Directors may capitalise out
of such of the sums standing to the credit of any of the Company's reserve
accounts (including any share premium account, capital redemption reserve or any
other undistributable reserve) or any of the profits available for distribution
under the provisions of the Statutes and which could otherwise have been applied
in paying dividends in cash as the Directors may determine, a sum equal to the
aggregate nominal amount of any Ordinary Shares to be allotted under any such
plan and shall apply the same in paying up in full the appropriate number of
unissued Ordinary Shares for allotment and distribution credited as fully paid
up to and amongst the holders of Ordinary Shares entitled to the same. The
Directors may do all acts and things considered necessary or expedient to give
effect to any such capitalisation and may authorise any person on behalf of all
the holders of Ordinary Shares entitled to the same to enter into an agreement
with the Company providing for any such capitalisation and matters incidental
thereto and any agreement made under such authority shall be effective and
binding on all concerned.
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(iv) No fraction of any share shall be allotted. The Directors may make
such provisions as they think fit for any fractional entitlements including
provisions whereby, in whole or in part, the benefit thereof accrues to the
Company and/or under which fractional entitlements are accrued and/or retained
and in each case accumulated on behalf of any shareholder and such accruals or
retentions are applied to the allotment (by reference to the aggregate net cash
amount thereof or value equivalent to the sum of the aggregate net cash amount
thereof together with the associated tax credit which it would have attracted if
paid as a dividend) by way of bonus to or cash subscription on behalf of such
shareholder of fully paid Ordinary Shares.
(v) The Directors shall notify the holders of Ordinary Shares of the terms
and conditions of any such plan and shall make available or provide to them
forms of election so that they may exercise the rights granted.
(vi) The power conferred under this Article and by any authority given by
the Shareholders shall not be exercised unless the Company shall then have:-
(a) sufficient unissued shares in the capital of the Company capable of
being issued as Ordinary Shares; and
(b) if any shares are to be allotted other than for cash, sufficient
profits available for distribution or reserves standing to the credit of an
appropriate account to give effect to the terms of any such plan.
(vii) The Directors may in their discretion on any occasion determine that
any such plan shall not be made available to Ordinary Shareholders resident
within or beyond specified territories or jurisdictions or in respect of
Ordinary Shares held by an Approved Depositary or in respect of Ordinary Shares
the dividends on which are payable or liable to be payable in a currency other
than US dollars or sterling pursuant to provision made under these presents.
(viii) "Associated tax credit" means for the purposes of this Article and
any plan the tax credit which would be available to the recipient of a dividend
under Section 231 of the Income and Taxes Act 1988 on the assumption that such
recipient is an individual resident in the UK for UK taxation purposes.
12 The Company may exercise the powers of paying commissions conferred by the
Statutes to the full extent thereby permitted. The Company may also on any issue
of shares pay such brokerage as may be lawful.
13 The Directors may at any time after the allotment of any share but before any
person has been entered in the Register of Members as the holder recognise a
renunciation thereof by the allottee in favour of some other person and may
accord to any allottee of a share a right to effect such renunciation upon and
subject to such terms and conditions as the Directors may think fit to impose.
14 Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust, and the Company shall not be bound by or
compelled in any way to recognise any equitable, contingent, future or partial
interest in any share, or any interest in any fractional part of a share, or
(except only as by these presents or by law otherwise provided) any other right
in respect of any share, except an absolute right to the entirety thereof in the
registered holder.
SHARE CERTIFICATES
15 Every share certificate shall be executed by the Company in such manner as
the Directors may decide, which may include the use of the Seal or the
Securities Seal (or, in the case of shares on a branch register, an official
seal for use in the relevant territory). No certificate shall be issued
representing shares of more than one class. No certificate shall normally be
issued in respect of shares held by a Stock Exchange Nominee.
16 In the case of a share held jointly by several persons the Company shall not
be bound to issue more than one certificate therefor and delivery of a
certificate to one of the joint holders shall be sufficient delivery to all.
17 Any person (subject as aforesaid) whose name is entered in the Register of
Members in respect of any shares of any one class upon the issue or transfer
thereof shall (subject, in the case of issue, to the terms of the issue of any
such shares) be entitled without payment to a certificate therefor (in the case
of issue) within one month (or such longer period as the terms of issue shall
provide) after allotment or (in the case of a transfer of fully paid shares)
within fourteen days after lodgment of a transfer or (in the case of a transfer
of partly paid shares) within two months after lodgment of a transfer.
18 Where some only of the shares comprised in a share certificate are
transferred the old certificate shall be cancelled and a new certificate for the
balance of such shares issued in lieu without charge.
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19 (A) Any two or more certificates representing shares of any one class held
by any member may at his request be cancelled and a single new certificate for
such shares issued in lieu without charge.
(B) If any member shall surrender for cancellation a share certificate
representing shares held by him and request the Company to issue in lieu share
certificates representing such shares in such proportions as he may specify, the
Directors may, if they think fit, comply with such request.
(C) If a share certificate shall be damaged or defaced or alleged to have
been lost, stolen or destroyed, a new certificate representing the same shares
may be issued to the holder upon request subject to delivery up of the old
certificate or (if alleged to have been lost, stolen or destroyed) compliance
with such conditions as to evidence and indemnity and the payment of
out-of-pocket expenses of the Company in connection with the request as the
Directors may think fit.
(D) In the case of shares held jointly by several persons any such request
may be made by any one of the joint holders.
CALLS ON SHARES
20 The Directors may from time to time make calls upon the members in respect of
any moneys unpaid on their shares (whether on account of the nominal value of
the shares, or when permitted, by way of premium) but subject always to the
terms of issue of such shares. A call shall be deemed to have been made at the
time when the Resolution of the Directors authorising the call was passed and
may be made payable by instalments.
21 Each member shall (subject to receiving at least fourteen days' notice
specifying the time or times and place of payment) pay to the Company at the
time or times and place so specified the amount called on his shares. The joint
holders of a share shall be jointly and severally liable to pay all calls in
respect thereof. A call may be revoked or postponed as the Directors may
determine.
22 If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is due shall pay
interest on the sum from the day appointed for payment thereof to the time of
actual payment at such rate (not exceeding 15 per cent. per annum) as the
Directors may determine but the Directors shall be at liberty in any case or
cases to waive payment of such interest wholly or in part.
23 Any sum (whether on account of the nominal value of the share or by way of
premium) which by the terms of issue of a share becomes payable upon allotment
or at any fixed date shall for all the purposes of these presents be deemed to
be a call duly made and payable on the date on which by the term of issue the
same becomes payable. In case of non-payment all the relevant provisions of
these presents as to payment of interest and expenses, forfeiture or otherwise
shall apply as if such sum had become payable by virtue of a call duly made and
notified.
24 The Directors may on the issue of shares differentiate between the holders as
to the amount of calls to be paid and the times of payment.
25 (A) The Directors may if they think fit receive from any member willing to
advance the same all or any part of the moneys (whether on account of the
nominal value of the shares or by way of premium) uncalled and unpaid upon the
shares held by him and such payment in advance of calls shall extinguish pro
tanto the liability upon the shares in respect of which it is made and upon the
money so received (until and to the extent that the same would but for such
advance become payable) the Company may pay interest at such rate (not exceeding
12 per cent. per annum) as the member paying such sum and the Directors may
agree.
(B) Whenever any law for the time being of any country, state or place
imposes or purports to impose any immediate or future or possible liability upon
the Company to make any payment or empowers any government or taxing authority
or government official to require the Company to make any payment in respect of
any shares registered in any of the Company's registers as held either jointly
or solely by any member or in respect of any dividends, bonuses or other moneys
due or payable or accruing due or which may become due or payable to such member
by the Company on or in respect of any shares registered as aforesaid or for or
on account or in respect of any member and whether in consequence of:-
(i) the death of such member;
(ii) the non-payment of any income tax or other tax by such member;
(iii) the non-payment of any estate, probate, succession, death, stamp, or
other duty by the executor or administrator of such member or by or out of his
estate; or
(iv) any other act or thing; the Company in every such case:-
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(a) shall be fully indemnified by such member or his executor or
administrator from all liability; and
(b) may recover as a debt due from such member or his executor or
administrator wherever constituted or residing any monies paid by the Company
under or in consequence of any such law together with interest thereon at the
rate of 15 per cent. per annum thereon from date of payment to date of
repayment. Nothing herein contained shall prejudice or affect any right or
remedy which any law may confer or purport to confer on the Company and as
between the Company and every such member as aforesaid, his executor,
administrator, and estate wheresoever constituted or situate, any right or
remedy which such law shall confer or purport to confer on the Company shall be
enforceable by the Company.
FORFEITURE AND LIEN
26 If a member fails to pay in full any call or instalment of a call on the due
date for payment thereof, the Directors may at any time thereafter serve a
notice on him requiring payment of so much of the call or instalment as is
unpaid together with any interest which may have accrued thereon and any
expenses incurred by the Company by reason of such non-payment.
27 The notice shall name a further day (not being less than seven days from the
date of service of the notice) on or before which and the place where the
payment required by the notice is to be made, and shall state that in the event
of non-payment in accordance therewith the shares on which the call has been
made will be liable to be forfeited.
28 If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls and interest and expenses due in respect
thereof has been made, be forfeited by a Resolution of the Directors to that
effect. Such forfeiture shall include all dividends declared in respect of the
forfeited share and not actually paid before forfeiture. The Directors may
accept a surrender of any share liable to be forfeited hereunder.
29 A share so forfeited or surrendered shall become the property of the Company
and may be sold, re-allotted or otherwise disposed of either to the person who
was before such forfeiture or surrender the holder thereof or entitled thereto
or to any other person upon such terms and in such manner as the Directors shall
think fit and at any time before a sale, re-allotment or disposition the
forfeiture or surrender may be cancelled on such terms as the Directors think
fit. The Directors may, if necessary, authorise some person to transfer a
forfeited or surrendered share to any such other person as aforesaid.
30 A member whose shares have been forfeited or surrendered shall cease to be a
member in respect of the shares but shall notwithstanding the forfeiture or
surrender remain liable to pay to the Company all moneys which at the date of
forfeiture or surrender were presently payable by him to the Company in respect
of the shares with interest thereon at 15 per cent. Per annum (or such lower
rate as the Directors may determine) from the date of forfeiture or surrender
until payment and the Directors may at their absolute discretion enforce payment
without any allowance for the value of the shares at the time of forfeiture or
surrender or waive payment in whole or in part.
31 The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys (whether presently payable or not) called or
payable at a fixed time in respect of such share and the Company shall also have
a first and paramount lien on every share (not being a fully paid share)
standing registered in the name of a single member for all the debts and
liabilities of such member or his estate to the Company whether the same shall
have been incurred before or after notice to the Company of any equitable or
other interest of any person other than such member and whether the period for
the payment or discharge of the same shall have actually arrived or not and
notwithstanding that the same are joint debts or liabilities of such member or
his estate and any other person, whether a member of the Company or not. The
Directors may waive any lien which has arisen and may resolve that any share
shall for some limited period be exempt wholly or partially from the provisions
of this Article.
32 The Company may sell in such manner as the Directors think fit any share on
which the Company has a lien, but no sale shall be made unless some sum in
respect of which the lien exists is presently payable nor until the expiration
of 14 days after a notice in writing stating and demanding payment of the sum
presently payable and giving notice of intention to sell in default shall have
been given to the holder for the time being of the share or the person entitled
thereto by reason of the holder's death or bankruptcy.
33 The net proceeds of such sale after payment of the costs of such sale shall
be applied in or towards payment or satisfaction of the debts or liabilities in
respect whereof the lien exists so far as the same are then payable and any
residue shall (subject to a like lien for debts or liabilities not presently
payable as existed upon the shares prior to the sale) be paid to the person
entitled to the shares at the time of the sale. For the purpose of giving effect
to any such sale the Directors may authorise some person to transfer the shares
sold to the purchaser.
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34 A statutory declaration in writing that the declarant is a Director or the
Secretary of the Company and that a share has been duly forfeited or surrendered
or sold to satisfy a lien of the Company on a date stated in the declaration
shall be conclusive evidence of the facts therein stated as against all persons
claiming to be entitled to the share. Such declaration and the receipt of the
Company for the consideration (if any) given for the share on the sale,
re-allotment or disposal thereof together with the share certificate delivered
to a purchaser or allottee thereof shall (subject to the execution of a transfer
if the same be required) constitute a good title to the share and the person to
whom the share is sold, re-allotted or disposed of shall be registered as the
holder of the share and shall not be bound to see to the application of the
purchase money (if any) nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings relating to the forfeiture,
surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
35 All transfers of shares, other than shares represented by share warrants to
bearer, may be effected by transfer in writing in any usual or common form or in
any other form acceptable to the Directors and may be under hand only. The
instrument of transfer shall be signed by or on behalf of the transferor and
(except in the case of fully paid shares) by or on behalf of the transferee. The
transferor shall remain the holder of the shares concerned until the name of the
transferee is entered in the Register of Members in respect thereof.
36 The registration of transfers may be suspended at such times and for such
periods as the Directors may from time to time determine and either generally or
in respect of any class of shares. The Register of Members shall not be closed
for more than 30 days in any year.
37 (A) The Directors may, in their absolute discretion and without giving any
reason, refuse to register the transfer of a share which is not fully paid and
shall (for so long as there is in issue any Designated Share) decline to
register the transfer of any Ordinary Share unless there is produced to the
Directors such evidence as they may in their discretion require to ensure that
on the same occasion there is being transferred to the same person one
Designated Share for every Ordinary Share included in such transfer. For so long
as there is in issue any Designated Share, every transfer of one or more
Ordinary Shares shall, except so far as otherwise stated on the instrument of
transfer, constitute a transfer of the same number of Designated Shares provided
that, where any such shares are admitted to the Official List of the London
Stock Exchange, such discretion may not be exercised in such a way as to prevent
dealings in the shares of that class from taking place on an open and proper
basis. The Directors may also refuse to register a transfer of shares (whether
fully paid or not) in favour of more than four persons jointly.
(B) If the Directors refuse to register a transfer they shall within two
months after the date on which the transfer was lodged with the Company, or ten
days after the Directors have determined to refuse such transfer, whichever is
the earlier, send to the transferee notice of the refusal.
38 The Directors may decline to recognise any instrument of transfer unless the
instrument of transfer is in respect of only one class of share and is lodged at
the Transfer Office accompanied by the relevant share certificate(s) and such
other evidence as the Directors may reasonably require to show the right of the
transferor to make the transfer (and, if the instrument of transfer is executed
by some other person on his behalf, the authority of that person so to do). In
the case of a transfer by a Stock Exchange Nominee the lodgment of share
certificates will only be necessary if and to the extent that certificates have
been issued in respect of the shares in question.
39 All instruments of transfer which are registered may be retained by the
Company.
40 No fee will be charged by the Company in respect of the registration of any
instrument of transfer or probate or letters of administration or certificate of
marriage or death or stop notice or power of attorney relating to or affecting
the title to any shares.
41 The Company shall be entitled to destroy all instruments of transfer which
have been registered at any time after the expiration of six years from the date
of registration thereof and all dividend mandates and notifications of change of
address at any time after the expiration of two years from the date of recording
thereof and all share certificates which have been cancelled at any time after
the expiration of one year from the date of the cancellation thereof and it
shall conclusively be presumed in favour of the Company that every entry in the
register purporting to have been made on the basis of an instrument of transfer
or other document so destroyed was duly and properly made and every instrument
of transfer so destroyed was a valid and effective instrument duly and properly
registered and every share certificate so destroyed was a valid and effective
certificate duly and properly cancelled and every other document herein before
mentioned so destroyed was a valid and effective document in accordance with the
recorded particulars thereof in the books or records of the Company, provided
always that:-
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(i) the provisions aforesaid shall apply only to the destruction of a
document in good faith and without notice of any claim (regardless of the
parties thereto) to which the document might be relevant;
(ii) nothing herein contained shall be construed as imposing upon the
Company any liability in respect of the destruction of any such document earlier
than as aforesaid or in any other circumstances which would not attach to the
Company in the absence of this Article;
(iii) references herein to the destruction of any document include
references to the disposal thereof in any manner.
TRANSMISSION OF SHARES
42 In the case of the death of a shareholder, the survivors or survivor where
the deceased was a joint holder, and the executors or administrators of the
deceased where he was a sole or only surviving holder, shall be the only persons
recognised by the Company as having any title to his interest in the shares, but
nothing in this Article shall release the estate of a deceased holder (whether
sole or joint) from any liability in respect of any share held by him.
43 Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member may (subject as hereinafter provided) upon supplying to
the Company such evidence as the Directors may reasonably require to show his
title to the share either be registered himself as holder of the share upon
giving to the Company notice in writing of his desire to be registered as holder
or transfer such share to some other person. All the limitations, restrictions
and provisions of these presents relating to the right to transfer and the
registration of transfers of shares shall be applicable to any such notice or
transfer as aforesaid as if the death or bankruptcy of the member had not
occurred and the notice or transfer were a transfer executed by such member.
44 Save as otherwise provided by or in accordance with these presents, a person
becoming entitled to a share in consequence of the death or bankruptcy of a
member (upon supplying to the Company such evidence as the Directors may
reasonably require to show his title to the share) shall be entitled to the same
dividends and other advantages as those to which he would be entitled if he were
the registered holder of the share except that he shall not be entitled in
respect thereof (except with the authority of the Directors) to exercise any
right conferred by membership in relation to meetings of the Company until he
shall have been registered as a member in respect of the share.
UNTRACED SHAREHOLDERS
45 (A) The Company shall be entitled to sell the shares of a member or the
shares to which a person is entitled by virtue of transmission on death or
bankruptcy if and provided that:-
(i) during the period of 12 years prior to the date of the publication of
the advertisements referred to in paragraph (ii) below (or, if published on
different dates, the later thereof) at least three dividends have become payable
on or in respect of the shares in question but all dividends or other moneys
payable on or in respect of such shares during such period remain unclaimed; and
(ii) the Company shall have inserted advertisements, both in a leading
London newspaper and in a newspaper circulating in the area of the address at
which service of notices upon such member or other person may be effected in
accordance with these presents (or, if there be no such address the Office),
giving notice of its intention to sell the said shares; and
(iii) during the said period of 12 years and the period of three months
following the publication of the said advertisements the Company shall have
received indication neither of the whereabouts nor of the existence of such
member or person; and
(iv) notice shall have been given to the London Stock Exchange of its
intention to make such sale.
(B) To give effect to any such sale the Company may appoint some person to
execute as transferor an instrument of transfer of the said shares and such
instrument of transfer shall be as effective as if it had been executed by the
registered holder of or person entitled by transmission to such shares and the
title of the transferee shall not be affected by any irregularity or invalidity
in the proceedings relating thereto. The net proceeds of sale shall belong to
the Company which shall be obliged to account to the former member or other
person previously entitled as aforesaid for an amount equal to such proceeds and
shall enter the name of such former member or other person in the books of the
Company as a creditor for such amount. No trust shall be created in respect of
the debt, no interest shall be payable in respect of the same and the Company
shall not be required to account for any money earned on the net proceeds, which
may be employed in the business of the Company or invested in such investments
(other than shares of the Company or its holding company if any) as the
Directors may from time to time think fit.
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GENERAL MEETINGS
46 An Annual General Meeting shall be held once in every year, at such time
(within a period of not more than fifteen months after the holding of the last
preceding Annual General Meeting) and place as may be determined by the
Directors. All other General Meetings shall be called Extraordinary General
Meetings. All General Meetings shall be held in England.
47 (A) The Directors may whenever they think fit, and shall on requisition in
accordance with the Statutes proceed with proper expedition to convene an
Extraordinary General Meeting.
(B) The provisions of these presents relating to General Meetings shall
apply, with necessary modifications, to any separate meeting of the holders of
shares of a particular class which is convened otherwise than in connection with
the variation or abrogation of the rights attached to shares of that class.
NOTICE OF GENERAL MEETINGS
48 (A) An Annual General Meeting and any Extraordinary General Meeting at which
it is proposed to pass a Special Resolution or (save as provided by the
Statutes) a Resolution of which special notice has been given to the Company,
shall be called by twenty-one days' notice in writing (including, subject to the
provisions of the Statutes, electronic mail) at the least and any other
Extraordinary General Meeting by fourteen days' notice in writing (including,
subject to the provisions of the Statutes, electronic mail) at the least. The
period of notice shall in each case be exclusive of the day on which the notice
is served or deemed to be served and of the day on which the meeting is to be
held and shall be given in manner hereinafter mentioned to all members other
than such as are not under the provisions of these presents entitled to receive
such notices from the Company, provided that a General Meeting notwithstanding
that it has been called by a shorter notice than that specified above shall be
deemed to have been duly called if it is so agreed:-
(i) in the case of an Annual General Meeting by all the members entitled
to attend and vote thereat; and
(ii) in the case of an Extraordinary General Meeting by a majority in
number of the members having a right to attend and vote thereat, being a
majority together holding not less than 95 per cent. in nominal value of the
shares giving that right. The accidental omission to give notice to or the
non-receipt of notice by any person entitled thereto shall not invalidate the
proceedings at any General Meeting.
(B) The Directors may, for the purpose of facilitating the organisation
and administration of any General Meeting, from time to time make such
arrangements whether involving the issue of tickets (on a basis intended to
afford to all members and proxies otherwise entitled to attend such meeting an
equal opportunity of being admitted to the meeting) or the imposition of some
random means of selection or otherwise as they shall in their absolute
discretion consider to be appropriate, and may from time to time vary any such
arrangements or make new arrangements in place thereof and the entitlement of
any member or proxy to attend a General Meeting at such place shall be subject
to such arrangements as may be for the time being in force and by the notice of
meeting stated to apply to that meeting. In the case of any General Meeting to
which such arrangements apply the Directors shall, and in the case of any other
General Meeting the Directors may, when specifying the place of the General
Meeting, direct that the meeting shall be held at a place specified in the
notice at which the chairman of the meeting shall preside ("the Principal
Place") and make arrangements for simultaneous participation at other places by
members and proxies otherwise entitled to attend the General Meeting but
excluded therefrom under the provisions of this Article or who wish to attend at
any of such other places provided that persons attending at the Principal Place
and at any of such other places shall be able to see and hear and be seen and
heard by persons attending at the Principal Place and at such other places. Such
arrangements for simultaneous attendance may include arrangements regarding the
level of attendance as aforesaid at such other places provided that they shall
operate so that any such excluded members and proxies as aforesaid are able to
attend at one of such other places. For the purposes of all other provisions of
these presents any such meeting shall be treated as being held and taking place
at the Principal Place and under no circumstance will a failure for any reason
of communication equipment or otherwise in respect of the arrangements for
simultaneous attendance and participation at any other place affect the validity
of such meeting at the Principal Place, any business conducted thereat or any
action taken pursuant thereto.
49 (A) Every notice calling a General Meeting shall specify the place and the
day and hour of the meeting, and there shall appear with reasonable prominence
in every such notice a statement that a member entitled to attend and vote is
entitled to appoint a proxy or proxies to attend, speak and vote instead of him
and that a proxy need not be a member of the Company.
(B) In the case of an Annual General Meeting, the notice shall also
specify the meeting as such.
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(C) In the case of any General Meeting at which business other than
routine business is to be transacted, the notice shall specify the general
nature of such business; and if any Resolution is to be proposed as an
Extraordinary Resolution or as a Special Resolution, the notice shall contain a
statement to that effect.
(D) For the purposes of determining which persons are entitled to attend
or vote at a meeting and how many votes such persons may cast, the Company may
specify in the notice of the meeting a time, not more than 48 hours before the
time fixed for the meeting, by which a person who holds shares in registered
form must be entered on the Register in order to have the right to attend or
vote at the meeting or to appoint a proxy to do so.
50 Routine business shall mean and include only business transacted at an Annual
General Meeting of the following classes, that is to say:-
(i) declaring dividends;
(ii) receiving and/or adopting the accounts, the reports of the Directors
and Auditors and other documents required to be attached or annexed to
the accounts;
(iii)appointing or re-appointing Directors to fill vacancies arising at
the meeting on retirement whether by rotation or otherwise;
(iv) re-appointing the retiring Auditors (unless they were last appointed
otherwise than by the Company in General Meeting);
(v) fixing the remuneration of the Auditors or determining the manner in
which such remuneration is to be fixed.
PROCEEDINGS AT GENERAL MEETINGS
51 Subject to Article 138, the Chairman of the Directors, failing whom the
Deputy Chairman, shall preside as chairman at a General Meeting. If there be no
such Chairman or Deputy Chairman, or if at any meeting neither be present within
five minutes after the time appointed for holding the meeting and willing to
act, the Directors present shall choose one of their number (or, if no Director
be present or if all the Directors present decline to take the chair) the
members present shall choose one of their number to be chairman of the meeting.
52 No business other than the appointment of a chairman shall be transacted at
any General Meeting unless a quorum is present at the time when the meeting
proceeds to business. Five members present in person or by proxy and entitled to
vote shall be a quorum for all purposes.
53 If within five minutes from the time appointed for a General Meeting (or such
longer interval as the chairman of the meeting may think fit to allow) a quorum
is not present, the meeting, if convened on the requisition of members, shall be
dissolved. In any other case it shall stand adjourned to such other day and such
time and place as may have been specified for the purpose in the notice
convening the meeting or (if not so specified) as the chairman of the meeting
may determine and in the latter case not less than seven days' notice of the
adjourned meeting shall be given in like manner as in the case of the original
meeting. At the adjourned meeting any two members present in person or by proxy
shall be a quorum.
54 The chairman of any General Meeting at which a quorum is present may with or
without the consent of the meeting (and shall if so directed by the meeting)
adjourn the meeting from time to time (or sine die) and from place to place, and
if it appears to the chairman that it is likely to be impracticable to hold or
continue the meeting because of the numbers of members and proxies wishing to
attend the meeting who are not present he may adjourn the meeting to another
time and place (or sine die) without the need for any such consent, but no
business shall be transacted at any adjourned meeting except business which
might lawfully have been transacted at the meeting from which the adjournment
took place. Where a meeting is adjourned sine die, the time and place for the
adjourned meeting shall be fixed by the Directors. When a meeting is adjourned
for thirty days or more or sine die, not less than seven days' notice of the
adjourned meeting shall be given in like manner as in the case of the original
meeting.
55 Save as hereinbefore expressly provided, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an adjourned
meeting.
56 If an amendment shall be proposed to any Resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting the
proceedings on the substantive Resolution shall not be invalidated by any error
in such ruling. In the case of a Resolution duly proposed as a Special or
Extraordinary Resolution no amendment thereto (other than a mere clerical
amendment to correct a patent error) may in any event be considered or voted
upon.
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57 At any General Meeting all Substantive Resolutions put to the vote of the
meeting shall be decided on a poll and all Other Resolutions put to the vote of
the meeting shall be decided on a show of hands unless a poll is (before or on
the declaration of the result of the show of hands) demanded by:-
(i) the chairman of the meeting, or
(ii) not less than five members present in person or by proxy and entitled
to vote; or
(iii)a member or members present in person or by proxy and representing
not less than one-tenth of the total voting rights of all the members
having the right to vote at the meeting; or
(iv) a member or members present in person or by proxy and holding shares
in the Company conferring a right to vote at the meeting being shares
on which an aggregate sum has been paid up equal to not less than
one-tenth of the total sum paid up on all the shares conferring that
right. The chairman of the meeting shall use his absolute discretion
to determine whether a resolution is an Other Resolution or a
Substantive Resolution and his decision shall be final.
58 A demand for a poll may be withdrawn only with the approval of the meeting. A
demand so withdrawn shall not be taken to have invalidated the result of a show
of hands on an Other Resolution declared before the demand was made. Unless a
poll is required or demanded a declaration by the chairman of the meeting that
an Other Resolution has been carried, or carried unanimously, or by a particular
majority, or lost, and an entry to that effect in the minute book, shall be
conclusive evidence of that fact without proof of the number or proportion of
the votes recorded for or against such Resolution. If a poll is required or
demanded, it shall be taken in such manner (including the use of ballot or
voting papers or tickets) as the chairman of the meeting may direct, and the
result of the poll shall be deemed to be the Resolution of the meeting at which
the poll was demanded. The chairman of the meeting may (and if so directed by
the meeting shall) appoint scrutineers and may adjourn the meeting to someplace
and time fixed by him for the purpose of declaring the result of the poll.
59 In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman of the meeting at which the show of hands takes place or at which
the poll is demanded shall be entitled to a casting vote.
60 A poll demanded on the choice of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either immediately or at such subsequent time (not being more than thirty days
from the date of the meeting) and place as the chairman may direct. No notice
need be given of a poll not taken immediately. The demand for a poll shall not
prevent the continuance of the meeting for the transaction of any business other
than the question on which the poll has been demanded.
VOTES OF MEMBERS
61 (A) Subject to Articles 49(D) and 63 and to any special rights or
restrictions as to voting attached to any class of shares, on a show of hands
every member who is present in person and every person present who has been duly
appointed as a proxy shall have one vote and on a poll every member who is
present in person or by proxy shall have two votes for every [sterling] 5 in
nominal amount of the First Preference Shares and Second Preference Shares and
one vote for every US$0.25 in nominal amount of all other shares of which he is
the holder or in respect of which his appointment as proxy has been made.
(B) In the case of joint holders of a share the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders and for this purpose seniority
shall be determined by the order in which the names stand in the Register of
Members in respect of the share.
62 Where in England or elsewhere a receiver or other person (by whatever name
called) has been appointed by any court claiming jurisdiction in that behalf to
exercise powers with respect to the property or affairs of any member on the
ground (however formulated) of mental disorder, the Directors may in their
absolute discretion, upon or subject to production of such evidence of the
appointment as the Directors may require, permit such receiver or other person
on behalf of such member to vote in person or by proxy at any General Meeting or
to exercise any other right conferred by membership in relation to meetings of
the Company.
63 No member shall, unless the Directors otherwise determine, be entitled in
respect of shares held by him to vote at a General Meeting either personally or
by proxy or to exercise any other right conferred by membership in relation to
meetings of the Company if any call or other sum presently payable by him to the
Company in respect of such shares remains unpaid.
64 No objection shall be raised as to the admissibility of any vote except at
the meeting or adjourned meeting at which the vote objected to is or may be
given or tendered and every vote not disallowed at such meeting shall be valid
for all purposes. Any such objection shall be referred to the chairman of the
meeting whose decision shall be final and conclusive.
65 On a poll votes may be given either personally or by proxy and a person
entitled to more than one vote need not use all his votes or cast all the votes
he uses in the same way.
66 A proxy need not be a member of the Company.
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67 (A) Subject to Article 68(B), an instrument appointing a proxy shall be in
writing in any usual or common form or in any other form which the Directors may
approve and:-
(i) in the case of an individual shall be signed by the appointor or his
attorney; and
(ii) in the case of a corporation shall be either given under its common
seal or signed on its behalf by an attorney or a duly authorised
officer of the corporation. The signature on such instrument need not
be witnessed. Where an instrument appointing a proxy is signed on
behalf of the appointor by an attorney, the letter or power of
attorney or a duly certified copy thereof must (failing previous
registration with the Company) be lodged with the instrument of proxy
pursuant to the next following Article, failing which the instrument
may be treated as invalid.
(B) A proxy may also be appointed in accordance with Articles 145, 147 and
150.
68 (A) An instrument appointing a proxy must be left at such place or one of
such places (if any) as may be specified for the purpose in or by way of note to
or in any document accompanying the notice convening the meeting (or, if no
place is so specified, at the Transfer Office) not less than forty-eight hours
(or such shorter time as the Directors may determine) before the time appointed
for the holding of the meeting or adjourned meeting or (in the case of a poll
taken otherwise than at or on the same day as the meeting or adjourned meeting)
for the taking of the poll at which it is to be used, and in default shall not
be treated as valid. The instrument shall, unless the contrary is stated
thereon, be valid as well for any adjournment of the meeting as for the meeting
to which it relates, provided that an instrument of proxy relating to more than
one meeting (including any adjournment thereof) having once been so delivered
for the purposes of any meeting shall not require again to be delivered for the
purposes of any subsequent meeting to which it relates.
(B) Subject to the provisions of the Statutes, the Directors may allow a
proxy to be appointed in electronic form, by telephone or by facsimile, subject
to any limitations, conditions or restrictions that they decide and Article
67(A) shall not apply in relation to an instrument appointing a proxy delivered
in this way. The Directors may establish such procedures as they deem
appropriate to receive and verify the validity and acceptance of proxy
appointments delivered in such manner.
69 (A) An instrument appointing a proxy shall be deemed to include the right to
demand or join in demanding a poll and shall confer the right to speak at a
meeting.
(B) A vote cast by proxy shall not be invalidated by the previous death or
insanity of the principal or by the revocation of the appointment of the proxy
or of the authority under which the appointment was made, provided that no
intimation in writing of such death, insanity or revocation (which revocation
may also be effected electronically or by telephone) shall have been received by
the Company at the Transfer Office 48 hours or such lesser time as the Directors
may determine before the commencement of the meeting or adjourned meeting or (in
the case of a poll taken otherwise than at or on the same day as the meeting or
adjourned meeting) the time appointed for the taking of the poll at which the
vote is cast. The Directors may establish such procedures as they deem
appropriate to receive and verify the validity and acceptance of the revocation
of proxy.
DISCLOSURE OF INTERESTS
70 (A) If any member, or any other person appearing to be interested in shares
held by such member, has been duly served with a notice under Section 212 of the
Act and is in default for the Prescribed Period in supplying to the Company the
information thereby required, then the Directors may in their absolute
discretion at any time thereafter by notice (a "Direction Notice") to such
member direct that in respect of the shares in relation to which the default
occurred (the "Default Shares") (which expression shall include any further
shares which are issued in respect of such shares) the member shall not (for so
long as the default continues) nor shall any transferee to whom any of such
shares are transferred (other than pursuant to an approved transfer or pursuant
to Article 70(C) below) be entitled to vote either personally or by proxy at a
General Meeting of the Company or a meeting of the holders of any class of
shares of the Company or to exercise any other right conferred by membership in
relation to General Meetings of the Company or meetings of the holders of any
class of shares of the Company.
(B) The Company shall send to each other person appearing to be interested
in the shares the subject of any Direction Notice a copy of the said Notice, but
the failure or omission by the Company to do so shall not invalidate such
Direction Notice.
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(C) Where the Default Shares represent at least 0.25 per cent. of the
issued shares of that class then the Direction Notice may additionally direct:-
(i) that any cash dividend or other money which would otherwise be payable
in respect of each of the Default Shares shall (in whole or any part thereof) be
retained by the Company without any liability to pay interest thereon when such
dividend or other money is finally paid to the member; and/or
(ii) that no transfer of any of the shares held by such member shall be
registered unless:-
(a) the member is not himself in default as regards supplying the
information required and the transfer is of part only of the member's holding
and when presented for registration is accompanied by a certificate by the
member in a form satisfactory to the Directors to the effect that after due and
careful enquiry the member is satisfied that no person in default as regards
supplying such information is interested in any of the shares the subject of the
transfer; or
(b) the transfer is an approved transfer.
(D) Where any person appearing to be interested in the Default Shares has
been duly served with a Direction Notice and the Default Shares which are the
subject of such Direction Notice are held by an Approved Depositary, the
provisions of this Article shall be treated as applying only to such Default
Shares held by the Approved Depositary and not (insofar as such person's
apparent interest is concerned) to any other shares held by the Approved
Depositary.
(E) Where the member on which a notice under Section 212 of the Act is
served is an Approved Depositary acting in its capacity as such, the obligations
of the Approved Depositary as a member of the Company shall be limited to
disclosing to the Company such information relating to any person appearing to
be interested in the shares held by it as has been recorded by it pursuant to
the arrangements entered into by the Company or approved by the Directors
pursuant to which it was appointed as an Approved Depositary.
(F) Any Direction Notice shall have effect in accordance with its terms
for so long as the default in respect of which the Direction Notice was issued
continues and (unless the Directors otherwise determine) for a period of one
week thereafter but shall cease to have effect in relation to any Default Shares
which are transferred by such member by means of an approved transfer. The
Directors may at any time give notice cancelling a Direction Notice.
(G) For the purpose of this Article:-
(i) a person shall be treated as appearing to be interested in any shares
if the member holding such shares has given to the Company a notification under
the said Section 212 of the Act which either (a) names such person as being so
interested or (b) fails to establish the identities of those interested in the
shares and (after taking into account the said notification and any other
relevant Section 212 notification) the Company knows or has reasonable cause to
believe or suspects on reasonable grounds that the person in question is or may
be interested in the shares;
(ii) the Prescribed Period is 28 days from the date of service of the
notice under the said Section 212 except that if the Default Shares represent at
least 0.25 per cent. of the issued shares of that class, the Prescribed Period
is 14 days from such date; and
(iii) a transfer of shares is an approved transfer if but only if:-
(a) it is a transfer of shares to an offeror by way or in pursuance of
acceptance of a take-over offer for a company (as defined in Section 428 of the
Act); or
(b) the Directors are satisfied that the transfer is made pursuant to a
sale of the whole of the beneficial ownership of the shares to a party
unconnected with the member and with other persons appearing to be interested in
such shares; or
(c) the transfer results from a sale made through a recognised investment
exchange as defined in the Financial Services Act 1986 or any other stock
exchange outside the United Kingdom on which the Company's shares are normally
traded.
(H) Nothing contained in this Article shall limit the power of the
Directors under Section 216 of the Act.
CORPORATIONS ACTING BY REPRESENTATIVES
71 Any corporation which is a member of the Company may authorise such person as
it thinks fit to act as its representative at any meeting of the Company or of
any class of members of the Company. A person so authorised shall be entitled to
exercise the same powers on behalf of the grantor of the authority as the
grantor could exercise if it were an individual member of the Company, and a
person so authorised shall, if present at any such meeting, for the purposes of
these presents be deemed to be a member present in person at such meeting.
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DIRECTORS
72 (A) Subject as hereinafter provided, the number of Directors shall not be
less than three nor more than twenty two (or such lesser maximum as the
Directors may from time to time resolve).
(B) The Company may by Ordinary Resolution from time to time vary the
minimum number and/or maximum number of Directors.
73 A Director shall not be required to hold any shares of the Company by way of
qualification. A Director who is not a member of the Company shall nevertheless
be entitled to attend and speak at General Meetings.
74 The remuneration payable to the Directors for their services in such capacity
shall be determined from time to time by Ordinary Resolution of the Company.
Such amount shall be divided among the Directors as they may agree unless the
resolution provides otherwise. The amount of remuneration so determined will
include remuneration for serving as Chairman or Deputy Chairman and serving on
committees of Directors but will not include remuneration of Directors for
performing an executive office of the Company.
75 The Directors may repay to any Director all such reasonable expenses as he
may incur in attending and returning from meetings of the Directors or of any
committee of the Directors or General Meetings or otherwise in or about the
business of the Company.
76 The Directors shall have power to pay and agree to pay pensions or other
retirement, superannuation, death or disability benefits to (or to any person in
respect of) any Director or ex-Director and for the purpose of providing any
such pensions or other benefits to contribute to any scheme or fund or to pay
premiums.
77 A Director may be party to or in any way interested in any contract or
arrangement or transaction to which the Company is a party or in which the
Company is in any way interested and he may hold and be remunerated in respect
of any office or place of profit (other than the office of Auditor of the
Company or any subsidiary thereof) under the Company or any other company in
which the Company is in any way interested and he (or any firm of which he is a
member) may act in a professional capacity for the Company or any such other
company and be remunerated therefor and in any such case as aforesaid (save as
otherwise agreed) he may retain for his own absolute use and benefit all profits
and advantages accruing to him thereunder or in consequence thereof.
78 (A) The Directors may from time to time appoint one or more of their body to
be the holder of any executive office on such terms (including such terms as to
remuneration by way of salary, commission or otherwise) and for such period as
they may (subject to the provisions of the Statutes) determine and, without
prejudice to the terms of any contract entered into in any particular case, may
at any time revoke any such appointment.
(B) The appointment of any Director to the office of Chairman or Deputy
Chairman shall automatically determine if he ceases to be a Director but without
prejudice to any claim for damages for breach of any contract of service between
him and the Company.
(C) The appointment of any Director to an executive office shall not
automatically determine if he ceases from any cause to be a Director, unless the
contract or resolution under which he holds office shall expressly state
otherwise, in which event such determination shall be without prejudice to any
claim for damages for breach of any contract of service between him and the
Company.
79 The Directors may entrust to and confer upon any Director holding any
executive office any of the powers exercisable by them as Directors upon such
terms and conditions and with such restrictions as they think fit, and either
collaterally with or to the exclusion of their own powers, and may from time to
time revoke, withdraw, alter or vary all or any of such powers.
APPOINTMENT AND RETIREMENT OF DIRECTORS
80 Any provision of the Statutes which, subject to the provisions of these
presents, would have the effect of rendering any person ineligible for
appointment as a Director or liable to vacate office as a Director on account of
his having reached any specified age or of requiring special notice or any other
special formality in connection with the appointment of any Director over a
specified age, shall apply to the Company.
81 The office of a Director shall be vacated in any of the following events,
namely:-
(i) if he shall become prohibited by law from acting as a Director;
(ii) if he shall resign in writing left at the Office or if he shall in
writing offer to resign and the Directors shall resolve to accept such offer;
(iii) if he shall have a receiving order made against him or shall
compound with his creditors generally;
(iv) if in England or elsewhere an order shall be made by any court
claiming jurisdiction in that behalf on the ground (however formulated) of
mental disorder for his detention or for the appointment of a guardian or for
the appointment of a receiver or other person (by whatever name called) to
exercise powers with respect to his property or affairs.
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82 At each Annual General Meeting all those Directors who have held office for
three years or more since they were elected or re-elected shall retire from
office by rotation.
83 A retiring Director shall be eligible for re-election.
84 The Company at the meeting at which a Director retires under any provision of
these presents may by Ordinary Resolution fill the office being vacated by
electing thereto the retiring Director or some other person eligible for
appointment. In default the retiring Director shall be deemed to have been
re-elected except in any of the following cases:-
(i) where at such meeting it is expressly resolved not to fill such office
or a Resolution for the re-election of such Director is put to the meeting and
lost;
(ii) where such Director has given notice in writing to the Company that
he is unwilling to be re-elected;
(iii) where the default is due to the moving of a Resolution in
contravention of the next following Article;
(iv) where such Director has attained any retiring age applicable to him
as Director.
The retirement shall not have effect until the conclusion of the meeting except
where a Resolution is passed to elect some other person in the place of the
retiring Director or a Resolution for his re-election is put to the meeting and
lost and accordingly a retiring Director who is re-elected or deemed to have
been re-elected will continue in office without a break.
85 A Resolution for the appointment of two or more persons as Directors by a
single Resolution shall not be moved at any General Meeting unless a Resolution
that it shall be so moved has first been agreed to by the meeting without any
vote being given against it; and any Resolution moved in contravention of this
provision shall be void.
86 No person other than a Director retiring at the meeting shall, unless
recommended by the Directors for election, be eligible for appointment as a
Director at any General Meeting unless not less than seven nor more than
forty-two days (inclusive of the date on which the notice is given) before the
date appointed for the meeting there shall have been lodged at the Office notice
in writing signed by some member (other than the person to be proposed) duly
qualified to attend and vote at the meeting for which such notice is given of
his intention to propose such person for election and also notice in writing
signed by the person to be proposed of his willingness to be elected.
87 The Company may in accordance with and subject to the provisions of the
Statutes by Ordinary Resolution of which special notice has been given remove
any Director from office (notwithstanding any provision of these presents or of
any agreement between the Company and such Director, but without prejudice to
any claim he may have for damages for breach of any such agreement) and appoint
another person in place of a Director so removed from office. In default of such
appointment the vacancy arising upon the removal of a Director from office may
be filled as a casual vacancy.
88 The Company may by Ordinary Resolution appoint any person to be a Director
either to fill a casual vacancy or as an additional Director. Without prejudice
thereto the Directors shall have power at any time so to do, but so that the
total number of Directors shall not thereby exceed the maximum number (if any)
fixed by or in accordance with these presents. Any person so appointed by the
Directors shall hold office only until the next General Meeting and shall then
be eligible for re-election.
MEETINGS AND PROCEEDINGS OF DIRECTORS
89 (A) Subject to the provisions of these presents the Directors may meet
together for the despatch of business, adjourn and otherwise regulate their
meetings as they think fit.
(B) Subject always to Article 89(A), all or any of the Directors or any
committee thereof may participate in a meeting of the Directors or that
committee by means of a conference telephone or any communication equipment
which allows all persons participating in the meeting to hear each other. Any
person so participating shall be deemed to be present in person at the meeting
and shall be entitled to vote or be counted in a quorum accordingly. Such a
meeting shall be deemed to take place where the largest group of those
participating is assembled, or, if there is no such group, where the chairman of
the meeting is then present.
90 At any time any Director may, and the Secretary on the requisition of a
Director shall, summon a meeting of the Directors. Any Director may waive notice
of any meeting and any such waiver may be retroactive.
91 The quorum necessary for the transaction of the business of the Directors may
be fixed from time to time by the Directors and unless so fixed at any other
number shall be two. A meeting of the Directors at which a quorum is present
shall be competent to exercise all powers and discretions for the time being
exercisable by the Directors.
92 Questions arising at any meeting of the Directors shall be determined by a
majority of votes. In case of an equality of votes the chairman of the meeting
shall have a second or casting vote.
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93 (A) Save as herein provided, a Director shall not vote in respect of any
contract or arrangement or any other proposal whatsoever in which he has any
material interest otherwise than by virtue of his interests in shares or
debentures or other securities of or otherwise in or through the Company. A
Director shall not be counted in the quorum at a meeting in relation to any
resolution on which he is debarred from voting.
(B) Subject to the provisions of the Statutes a Director shall (in the
absence of some other material interest than is indicated below) be entitled to
vote (and be counted in the quorum) in respect of any resolution concerning any
of the following matters, namely:-
(i) the giving of any security or indemnity to him in respect of money
lent or obligations incurred by him at the request of or for the benefit of the
Company or any of its subsidiaries;
(ii) the giving of any security or indemnity to a third party in respect
of a debt or obligation of the Company or any of its subsidiaries for which he
himself has assumed responsibility in whole or in part under a guarantee or
indemnity or by the giving of security;
(iii) any proposal concerning an offer of shares or debentures or other
securities of or by the Company or any of its subsidiaries for subscription or
purchase in which offer he is or is to be interested as a participant in the
underwriting or sub-underwriting thereof;
(iv) any proposal concerning any other company in which he is interested,
directly or indirectly and whether as an officer or shareholder or otherwise
howsoever, provided that he (together with persons connected with him within the
meaning of Section 346 of the Act) is not the holder of or beneficially
interested in one per cent. or more of the issued shares of any class of such
company (or of any third company through which his interest is derived) or of
the voting rights available to members of the relevant company (any such
interest being deemed for the purposes of this Article to be a material interest
in all circumstances);
(v) any proposal concerning the adoption, modification or operation of a
superannuation fund or retirement benefits scheme or Employees' Share Scheme
under which he may benefit and which has been approved by or is subject to and
conditional upon approval by the Board of Inland Revenue for taxation purposes
or by the Company in General Meeting;
(vi) any proposal concerning the purchase and/or maintenance of any
insurance policy under which he may benefit.
(C) Where proposals are under consideration concerning the appointment
(including fixing or varying the terms of appointment) of two or more Directors
to offices or employments with the Company or any company in which the Company
is interested, such proposals may be divided and considered in relation to each
Director separately and in such case each of the Directors concerned (if not
debarred from voting under paragraph (B) (iv) of this Article) shall be entitled
to vote (and be counted in the quorum) in respect of each resolution except that
concerning his own appointment.
(D) If any question shall arise at any time as to the materiality of a
Director's interest or as to the entitlement of any Director to vote and such
question is not resolved by his voluntarily agreeing to abstain from voting,
such question shall be referred to the chairman of the meeting and his ruling in
relation to any other Director shall be final and conclusive except in a case
where the nature or extent of the interests of such Director has not been fairly
disclosed.
(E) The Company may by Ordinary Resolution suspend or relax the provisions
of this Article to any extent or ratify any transaction not duly authorised by
reason of a contravention of this Article.
94 The continuing Directors may act notwithstanding any vacancies, but if and so
long as the number of Directors is reduced below the minimum number fixed by or
in accordance with these presents the continuing Directors or Director may act
for the purpose of filling such vacancies or of summoning General Meetings, but
not for any other purpose. If there be no Directors or Director able or willing
to act, then any two members may summon a General Meeting for the purpose of
appointing Directors.
95 (A) The Directors may elect from their number a Chairman and a Deputy
Chairman (or two or more Deputy Chairmen) and determine the period for which
each is to hold office. If no Chairman or Deputy Chairman shall have been
appointed or if at any meeting of the Directors no Chairman or Deputy Chairman
shall be present within five minutes after the time appointed for holding the
meeting, the Directors present may choose one of their number to be chairman of
the meeting.
(B) If at any time there is more than one Deputy Chairman the right in the
absence of the Chairman to preside at a meeting of the Directors or of the
Company shall be determined as between the Deputy Chairmen present (if more than
one) by seniority in length of appointment as Deputy Chairman or otherwise as
resolved by the Directors.
96 A resolution in writing signed by all the Directors shall be effective as a
resolution duly passed at a meeting of the Directors held in the United Kingdom
and may consist of several documents in the like form, each signed by one or
more Directors. The documents may be facsimile or electronic copies of the
resolution, in which case the resolution shall be effective upon receipt by the
Secretary of the final document.
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97 The Directors may delegate any of their powers or discretions to committees
consisting of one or more members of their body and (if thought fit) one or more
other persons co-opted as hereinafter provided. Any committee so formed shall in
the exercise of the powers so delegated conform to any regulations which may
from time to time be imposed by the Directors. Any such regulations may provide
for or authorise the co-option to the committee of persons other than Directors
and for such co-opted members to have voting rights as members of the committee
but so that (a) the number of co-opted members shall be less than one-half of
the total number of members of the committee and (b) no resolution of the
committee shall be effective unless a majority of the members of the committee
present at the meeting are Directors.
98 The meetings and proceedings of any such committee consisting of two or more
members shall be governed mutatis mutandis by the provisions of these presents
regulating the meetings and proceedings of the Directors, so far as the same are
not superseded by any regulations made by the Directors under the last preceding
Article.
99 All acts done by any meeting of Directors, or of any such committee, or by
any person acting as a Director or as a member of any such committee, shall as
regards all persons dealing in good faith with the Company, notwithstanding that
there was some defect in the appointment of any of the persons acting as
aforesaid, or that any such persons were disqualified or had vacated office, or
were not entitled to vote, be as valid as if every such person had been duly
appointed and was qualified and had continued to be a Director or member of the
committee and had been entitled to vote.
BORROWING POWERS
100 (A) Subject as hereinafter provided and to the provisions of the Statutes
the Directors may exercise all the powers of the Company to borrow money, and to
mortgage or charge its undertaking, property and uncalled capital, and to issue
debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or of any third party.
(B) The Directors shall restrict the borrowings of the Company and
exercise all voting and other rights or powers of control exercisable by the
Company in relation to its subsidiaries incorporated in the United Kingdom so as
to secure that the aggregate amount for the time being remaining undischarged of
all moneys borrowed by the Company and/or any of its subsidiaries incorporated
in the United Kingdom (exclusive of moneys borrowed by the Company from and for
the time being owing to any such subsidiary or by any such subsidiary from and
for the time being owing to the Company or another such subsidiary) shall not,
except with the consent of the Company in General Meeting, at any one time
exceed:-
(i) the amount paid up on the Share Capital of the Company for the time
being issued, plus
(ii) the aggregate of the sums for the time being standing to the credit
of the Capital and Revenue Reserves (including Share Premium Account and
Undistributed Profits but excluding amounts set aside for Taxation) of the
Company and its subsidiaries incorporated in the United Kingdom as appearing in
the latest audited accounts of those Companies.
(C) For the purposes of the said limits:-
(i) the issue of debentures shall be deemed to constitute borrowing
notwithstanding that the same may be issued in whole or in part for a
consideration other than cash;
(ii) moneys borrowed for the purpose of repaying or redeeming (with or
without premium) in whole or in part any other borrowed moneys falling to be
taken into account and intended to be applied for such purpose within six months
after the borrowing thereof shall not during such period, except to the extent
so applied, themselves be taken into account;
(iii) any amounts borrowed from bankers or others for the purpose of
financing any contract up to an amount not exceeding that part of the price
receivable under such contract which is guaranteed or insured by the Export
Credits Guarantee Department or other like institution carrying on a similar
business shall be deemed not to be borrowed moneys;
(iv) borrowed moneys expressed in or calculated by reference to a currency
other than sterling shall be translated into sterling by reference to the rate
of exchange used for the conversion of such currency in the latest audited
balance sheet of the relevant company or, if the relevant currency was not
thereby involved, by reference to the rate of exchange or approximate rate of
exchange ruling on such date and determined on such basis as the Auditors may
determine or approve.
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(D) No person dealing with the Company or any of its subsidiaries shall be
concerned to see or enquire whether the said limit is observed and no debt
incurred or security given in excess of such limit shall be invalid or
ineffectual unless the lender or the recipient of the security had, at the time
when the debt was incurred or security given, express notice that the said limit
had been or would thereby be exceeded.
GENERAL POWERS OF DIRECTORS
101 (A) The business and affairs of the Company shall be managed by the
Directors, who may exercise all such powers of the Company as are not by the
Statutes or by these presents required to be exercised by the Company in General
Meeting, subject nevertheless to any regulations of these presents, to the
provisions of the Statutes and to such regulations, being not inconsistent with
the aforesaid regulations or provisions, as may be prescribed by Special
Resolution of the Company, but no regulation so made by the Company shall
invalidate any prior act of the Directors which would have been valid if such
regulation had not been made. The general powers given by this Article shall not
be limited or restricted by any special authority or power given to the
Directors by any other Article.
(B) The Directors shall ensure that the head office of the Company remains
in England at all times.
102 The Directors may establish any local boards or agencies for managing any of
the affairs of the Company, either in the United Kingdom or elsewhere, and may
appoint any persons to be members of such local boards, or any managers or
agents, and may fix their remuneration, and may delegate to any local board,
manager or agent any of the powers, authorities and discretions vested in the
Directors, with power to sub-delegate, and may authorise the members of any
local boards, or any of them, to fill any vacancies therein, and to act
notwithstanding vacancies, and any such appointment or delegation may be made
upon such terms and subject to such conditions as the Directors may think fit,
and the directors may remove any person so appointed, and may annul or vary any
such delegation, but no person dealing in good faith and without notice of any
such annulment or variation shall be affected thereby.
103 The Directors may from time to time and at any time by power of attorney or
otherwise appoint any company, firm or person or any fluctuating body of
persons, whether nominated directly or indirectly by the Directors, to be the
attorney or attorneys of the Company for such purposes and with such powers,
authorities and discretions (not exceeding those vested in or exercisable by the
Directors under these presents) and for such period and subject to such
conditions as they may think fit, and any such power of attorney may contain
such provisions for the protection and convenience of persons dealing with any
such attorney as the Directors may think fit, and may also authorise any such
attorney to sub-delegate all or any of the powers, authorities and discretions
vested in him.
104 Subject to and to the extent permitted by the Statutes, the Company, or the
Directors on behalf of the Company, may cause to be kept in any territory a
branch register of members resident in such territory, and the Directors may
make and vary such regulations as they may think fit respecting the keeping of
any such register.
105 All cheques, promissory notes, drafts, bills of exchange, and other
negotiable or transferable instruments, and all receipts for moneys paid to the
Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as
the case may be, in such manner as the Directors shall from time to time by
Resolution determine.
SECRETARY
106 The Secretary shall be appointed by the Directors on such terms and for such
period as they may think fit. Any Secretary so appointed may at any time be
removed from office by the Directors, but without prejudice to any claim for
damages for breach of any contract of service between him and the Company. If
thought fit two or more persons may be appointed as Joint Secretaries. The
Directors may also appoint from time to time on such terms as they may think fit
one or more Deputy Secretaries, Assistant Secretaries and Deputy Assistant
Secretaries. A signature or attestation or certification of or on any document
by a Deputy, Assistant or Deputy Assistant Secretary in that capacity shall in
favour of any person dealing with the Company on the faith thereof be as
effective as if it were the signature or attestation or certification of or on
such document by the Secretary.
AUTHENTICATION OF DOCUMENTS
107 Any Director or the Secretary or any person appointed by the Directors for
the purpose shall have power to authenticate any documents affecting the
constitution of the Company and any Resolutions passed by the Company or the
Directors or any committee, and any books, records, documents and accounts
relating to the business of the Company, and to certify copies thereof or
extracts there from as true copies or extracts; and where any books, records,
documents or accounts are elsewhere than at the Office the local manager or
other officer of the Company having the custody thereof shall be deemed to be a
person appointed by the Directors as aforesaid. A document purporting to be a
copy of a Resolution, or an extract from the minutes of a meeting, of the
Company or of the Directors or any committee which is certified as aforesaid
shall be conclusive evidence in favour of all persons dealing with the Company
upon the faith thereof that such Resolution has been duly passed or, as the case
may be, that any minute so extracted is a true and accurate record of
proceedings at a duly constituted meeting.
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RESERVES
108 (A) After payment of the dividends upon any Preference Shares of the
Company, and of a dividend of 4.2 per cent. upon the Ordinary Shares, there
shall be set aside a Special Reserve Fund out of the balance of the profits of
each year such sum as the Directors may determine, and no part of the moneys so
set aside nor of the interest thereon shall without the sanction of an
Extraordinary Resolution of the holders of the Preference Shares be applied
otherwise than for the purpose of making up any deficit of cumulative dividend
on the Preference Shares, or in the event of a reduction of capital or a winding
up, for the purpose of repaying to the holders of the Preference Shares the
amounts paid up on such shares together with the 10 per cent. referred to in
sub-paragraphs (i) and (ii) of paragraph (A) of Article 3 but the same may be
used by the Directors as part of the working capital of the Company. All moneys
from time to time standing to the credit of the Special Reserve Fund may be
invested in or upon such securities or investments as the Directors shall think
fit, including the debentures of any company formed or promoted by this Company,
or in which this Company shall hold shares.
(B) The Directors may from time to time set aside out of the profits of
the Company and carry to a general reserve such further sums as they think
proper which, at the discretion of the Directors, shall be applicable for any
purpose to which the profits of the Company may properly be applied and pending
such application may either be employed in the business of the Company or be
invested. The Directors may divide the general reserve into such special funds
as they think fit and may consolidate into one fund any special funds or any
parts of any special funds into which the general reserve may have been divided.
The Directors may also without placing the same to reserve carry forward any
profits.
(C) In carrying sums to reserve and in applying the same the Directors
shall comply with the provisions of the Statutes.
THE SEAL
109 The Company may exercise the powers conferred by the Statutes with regard to
having an official seal for use abroad and such powers shall be vested in the
Directors.
110 (A) The Directors shall provide for the safe custody of the Seal and any
Securities Seal and neither shall be used without the authority of the Directors
or of a committee authorised by the Directors in that behalf.
(B) Every instrument to which the Seal shall be affixed shall be signed
autographically by one Director and the Secretary or by two Directors save that
as regards any certificates for shares or debentures or other securities of the
Company the Directors may by resolution determine that such signatures or either
of them shall be dispensed with or affixed by some method or system of
mechanical signature.
(C) The Securities Seal shall be used only for sealing securities issued
by the Company and documents creating or evidencing securities so issued. Any
such securities or documents sealed with the Securities Seal shall not require
to be signed.
(D) Where the Statutes so permit, any instrument signed by one Director
and the Secretary or by two Directors and expressed to be executed by the
Company shall have the same effect as if executed under the Seal, provided that
no instrument shall be so signed which makes it clear on its face that it is
intended by the person or persons making it to have effect as a deed without the
authority of the Directors or of a committee authorised by the Directors in that
behalf.
DIVIDENDS
111 (A) The Company may by Ordinary Resolution declare dividends but no such
dividend shall exceed the amount recommended by the Directors.
(B) In the period to 31 December 2003, the Directors shall announce any
dividends on Ordinary Shares in US dollars together with a sterling equivalent
for any such dividend which shall be determined in accordance with Article
113(C) below.
(C) Holders of Ordinary Shares shall be entitled to be paid dividends in
sterling.
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112 If and so far as in the opinion of the Directors the profits of the Company
justify such payments, the Directors may declare and pay the fixed dividends on
any class of shares carrying a fixed dividend expressed to be payable on fixed
dates on the half-yearly or other dates prescribed for the payment thereof and
may also from time to time pay interim dividends on shares of any class of such
amounts and on such dates and in respect of such periods as they think fit.
113 (A) Unless and to the extent that the rights attached to any shares, the
terms of issue thereof or these presents otherwise provide, all dividends shall
(as regards any shares not fully paid throughout the period in respect of which
the dividend is paid) be apportioned and paid pro rata according to the amounts
paid on the shares during any portion or portions of the period in respect of
which the dividend is paid. For the purposes of this Article no amount paid on a
share in advance of calls shall be treated as paid on the share.
(B) The Directors may at their discretion make provisions to enable an
Approved Depositary and/or any other member to receive dividends duly payable in
a currency or currencies other than sterling.
(C) For the purposes of the calculation of the amount receivable in
respect of any dividend, the rate of exchange to be used to determine the
relevant currency equivalent of any sum payable as a dividend shall be such
market rate (whether spot or forward) selected by the Directors as they shall
consider appropriate ruling at the close of business in London on the date which
is the business day last preceding (a) in the case of a dividend to be declared
by the Company in general meeting, the date on which the Directors publicly
announce their intention to recommend that specific dividend and
(b) in the case of any other dividend, the date on which the Directors publicly
announce their intention to pay that specific dividend. Provided that where the
Directors consider the circumstances to be appropriate they shall determine such
relevant currency equivalent of any sums payable as a dividend by reference to
such market rate or rates or the mean of such market rates prevailing at such
time or times or on such other date or dates, in each case falling before the
time of the relevant announcement, as the Directors may in their discretion
select.
114 No dividend shall be paid otherwise than out of profits available for
distribution under the provisions of the Statutes.
115 Subject to the provisions of the Statutes, where any asset, business or
property is bought by the Company as from a past date the profits and losses
thereof as from such date may at the discretion of the Directors in whole or in
part be carried to revenue account and treated for all purposes as profits or
losses of the Company. Subject as aforesaid, if any shares or securities are
purchased cum dividend or interest, such dividend or interest may at the
discretion of the Directors be treated as revenue, and it shall not be
obligatory to capitalise the same or any part thereof.
116 No dividend or other moneys payable on or in respect of a share shall bear
interest as against the Company.
117 (A) The Directors may retain any dividend or other moneys payable on or in
respect of a share on which the Company has a lien and may apply the same in or
towards satisfaction of the debts, liabilities or engagements in respect of
which the lien exists.
(B) The Directors may retain the dividends payable upon shares in respect
of which any person is under the provisions as to the transmission of shares
hereinbefore contained entitled to become a member, or which any person is under
those provisions entitled to transfer, until such person shall become a member
in respect of such shares or shall transfer the same.
118 The waiver in whole or in part of any dividend on any share by any document
(whether or not under seal) shall be effective only if such document is signed
by the shareholder (or the person entitled to the share in consequence of the
death or bankruptcy of the holder) and delivered to the Company and if or to the
extent that the same is accepted as such or acted upon by the Company.
119 The payment by the Directors of any unclaimed dividend or other moneys
payable on or in respect of a share into a separate account shall not constitute
the Company a trustee in respect thereof and any dividend unclaimed after a
period of twelve years from the date of declaration of such dividend shall be
forfeited and shall revert to the Company.
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120 The Company may upon the recommendation of the Directors by Ordinary
Resolution direct payment of a dividend in whole or in part by the distribution
of specific assets (and in particular of paid-up shares or debentures of any
other company) and the Directors shall give effect to such Resolution. In
addition the Directors may direct payment of any dividend in whole or in part by
the distribution of Designated Shares. If at any time and from time to time
there have been, or will be, allotted any shares which are Designated Shares,
the Directors resolve to allot to any person any Ordinary Shares (whether or not
pursuant to an existing obligation of the Company) the Directors may, if and so
far as in the opinion of the Directors the profits of the Company justify such
payments, either at the time of such allotment or at any time thereafter,
resolve that there be paid to the registered holder of such Ordinary Shares as
at the close of business (or at such other time as the Directors may determine)
on such date as the Directors may specify a dividend to be paid by the
distribution of Designated Shares in such amount and manner as will secure that
such holder will receive one Designated Share for each Ordinary Share held by
him. (If and so far as the foregoing provisions are inconsistent with those
contained in Articles 112, 113, 121 or 123, the foregoing provisions shall
prevail.) Where any difficulty arises in regard to such distribution, the
Directors may settle the same as they think expedient and in particular may
issue fractional certificates, may fix the value for distribution of such
specific assets or any part thereof, may determine that cash payments shall be
made to any members upon the footing of the value so fixed in order to adjust
the rights of all parties and may vest any such specific assets in trustees as
may seem expedient to the Directors. The Directors may in relation to any such
distribution of Designated Shares authorise any person to enter on behalf of all
the members interested into an agreement with the relevant Designed Subsidiary
whereby such members agree to become members and to be bound, in respect of
their holdings of Designated shares from time to time, by the Memorandum and
Articles of Association (as amended from time to time), of such Designated
Subsidiary and each mandate or other instruction relating to the payment of
dividends or making of distributions by the Company, and which is in force at
the time of determining entitlement to any distribution of Designated Shares,
shall, unless and until revoked, become a valid and binding mandate or other
instruction to such Designated Subsidiary in respect of any dividend or other
distribution paid or made by it, and any agreement made under the authority
given to the Directors pursuant to this Article shall be effective and binding
on all concerned.
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121 (A) Any dividend or other moneys payable in cash (whether in sterling or
foreign currency pursuant to provision made under these presents) on or in
respect of a share may be paid by cheque or warrant sent through the post to the
registered address (or in the case of an Approved Depositary, subject to the
approval of the Directors, such persons and addresses as an Approved Depositary
may direct) of the member or person entitled thereto (or, if two or more persons
are registered as joint holders of the share or are entitled thereto in
consequence of the death or bankruptcy of the holder, to any one of such
persons) or to such person and such address as such member or person or persons
may by writing direct. Every such cheque or warrant shall be made payable to, or
to the order of, the person to whom it is sent or to such person as the holder
or joint holders or person or persons entitled to the share in consequence of
the death or bankruptcy of the holder may direct and payment of the cheque or
warrant by the banker upon whom it is drawn shall be a good discharge to the
Company. If any such cheque or warrant has or shall be alleged to have been
lost, stolen or destroyed, the Directors may, on request of the person entitled
thereto, issue a replacement cheque or warrant subject to compliance with such
conditions as to evidence and indemnity and the payment of out of pocket
expenses of the Company in connection with the request as the Directors may
think fit. Every such cheque or warrant shall be sent at the risk of the person
entitled to the money represented thereby. If on three consecutive occasions
cheques or warrants in payment of dividends or other moneys payable on or in
respect of any share have been sent through the post in accordance with the
provisions of this Article but have been returned undelivered or left uncashed
during the periods for which the same are valid, the Company need not thereafter
despatch further cheques or warrants in payment of dividends or other moneys
payable on or in respect of the share in question until the member or other
person entitled thereto shall have communicated with the Company and supplied in
writing to the Transfer Office an address for the purpose.
(B) Where an Approved Depositary approved by the Directors for the purposes of
this Article has elected or agreed pursuant to provision made under these
presents to receive dividends in a foreign currency, the Directors may in their
discretion approve the entering into of arrangements with such Approved
Depositary to enable payment of the dividend to be made to such Approved
Depositary in such foreign currency for value on the date on which the relevant
dividend is paid, or such later date as the Directors may determine.
122 If two or more persons are registered as joint holders of any share, or are
entitled jointly to a share in consequence of the death or bankruptcy of the
holder, any one of them may give effectual receipts for any dividend or other
moneys payable or property distributable on or in respect of the share.
RECORD DATE
123 Notwithstanding any other provision of these presents but subject always to
the Statutes, the Company or the Directors may by resolution specify any date
(the "record date") as the date at the close of business (or such other time as
the Directors may determine) on which persons registered as the holders of
shares or other securities shall be entitled to receipt of any dividend,
distribution, interest, allotment, issue, notice, information, document or
circular and such record date may be on or at any time before the date on which
the same is paid or made or (in the case of any dividend, distribution,
interest, allotment or issue) at any time after the same is recommended,
resolved, declared or announced but without prejudice to the rights inter se in
respect of the same of transferors and transferees of any such shares or other
securities.
CAPITALISATION OF PROFITS AND RESERVES
124 The Directors may, with the sanction of an Ordinary Resolution of the
Company, capitalise any sum standing to the credit of any of the Company's
reserve accounts (including any share premium account, capital redemption
reserve or other undistributable reserve) or any sum standing to the credit of
profit and loss account by appropriating such sum to the members who would have
been entitled to it if it were distributed by way of dividend on the Ordinary
Shares and in the same proportions and applying such sum on their behalf in
paying up in full unissued Ordinary Shares (or, subject to any special rights
previously conferred on any shares or class of shares for the time being issued,
unissued shares of any other class not being redeemable shares) for allotment
and distribution credited as fully paid up to and amongst them as bonus shares
in the proportions aforesaid. The Directors may do all acts and things
considered necessary or expedient to give effect to any such capitalisation,
with full power to the Directors to make such provisions as they think fit for
any fractional entitlements which would arise on the basis aforesaid (including
provisions as to the date or dates by reference to which the entitlement of such
members is to be determined and provisions whereby fractional entitlements are
disregarded or the benefit thereof accrues to the Company rather than to the
members concerned). The Directors may authorise any person to enter on behalf of
all the members interested into an agreement with the Company providing for any
such capitalisation and matters incidental thereto and any agreement made under
such authority shall be effective and binding on all concerned.
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ACCOUNTS
125 Accounting records sufficient to show and explain the Company's transactions
and otherwise complying with the Statutes shall be kept at the Office, or at
such other place as the Directors think fit, and shall always be open to
inspection by the officers of the Company. Subject as aforesaid no member of the
Company or other person shall have any right of inspecting any account or book
or document of the Company except as conferred by statute or ordered by a court
of competent jurisdiction or authorised by the Directors.
126 A copy of every balance sheet and profit and loss account which is to be
laid before a General Meeting of the Company (including every document required
by law to be comprised therein or attached or annexed thereto) shall not less
than twenty-one days before the date of the meeting be sent to every member of,
and every holder of debentures of, the Company and to every other person who is
entitled to receive notices of meetings from the Company under the provisions of
the Statutes or of these presents. Provided that this Article shall not require
a copy of these documents to be sent to more than one of joint holders or to any
person of whose address the Company is not aware, but any member or holder of
debentures to whom a copy of these documents has not been sent shall be entitled
to receive a copy free of charge on application at the Office and provided
further that if the Statutes so permit the Company need not send copies of these
documents to members who do not wish to receive them but may send them such
summary financial statement or other documents as may be authorised by the
Statutes. So long as and whenever any of the shares or debentures of the Company
are for the time being listed or dealt in on the London Stock Exchange, there
shall be forwarded to the appropriate officer of the London Stock Exchange such
number of copies of such documents as may for the time being be required under
its regulations or practice.
AUDITORS
127 Subject to the provisions of the Statutes, all acts done by any person
acting as an Auditor shall, as regards all persons dealing in good faith with
the Company, be valid, notwithstanding that there was some defect in his
appointment or that he was at the time of his appointment not qualified for
appointment or subsequently become disqualified.
128 An Auditor shall be entitled to attend any General Meeting and to receive
all notices of and other communications relating to any General Meeting which
any member is entitled to receive and to be heard at any General Meeting on any
part of the business of the meeting which concerns him as Auditor.
NOTICES
129 (A) Any notice or document (including a share certificate) may be served on
or delivered to any member by the Company either personally or by sending it
through the post in a prepaid cover (in such form as any Director or the
Secretary may determine) addressed to such member at his registered address, or
(if he has no registered address within the United Kingdom) to the address, if
any, within the United Kingdom supplied by him to the Company as his address for
the service of notices, or by delivering it to such address addressed as
aforesaid. In the case of a member registered on a branch register any such
notice or document may be posted either in the United Kingdom or in the
territory in which such branch register is maintained. The Directors may also
determine, subject to the provisions of the Statutes, that any notice or
document (excluding a share certificate) may be served on or delivered to any
member by the Company either by facsimile to a facsimile number supplied by him
to the Company or by electronic mail to an electronic address supplied by him to
the Company.
(B) Where a notice or other document is served or sent by post, service or
delivery shall be deemed to be effected at the expiration of twenty-four hours
(or, where second-class mail is employed, forty-eight hours) after the time when
the cover containing the same is posted and in proving such service or delivery
it shall be sufficient to prove that such cover was properly addressed, stamped
and posted. Subject to the provisions of the Statutes and these presents, where
a notice or other document is sent by electronic mail or by facsimile, service
or delivery shall be deemed to be effected at the expiration of two hours from
the time of transmission.
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130 Any notice given to that one of the joint holders of a share whose name
stands first in the Register of Members in respect of the share shall be
sufficient notice to all the joint holders in their capacity as such. For such
purpose a joint holder having no registered address in the United Kingdom and
not having supplied an address within the United Kingdom for the service of
notices shall be disregarded.
131 A person entitled to a share in consequence of the death or bankruptcy of a
member upon supplying to the Company such evidence as the Directors may
reasonably require to show his title to the share, and upon supplying also an
address within the United Kingdom for the service of notices, shall be entitled
to have served upon or delivered to him at such address any notice or document
to which the member but for his death or bankruptcy would have been entitled,
and such service or delivery shall for all purposes be deemed a sufficient
service or delivery of such notice or document on all persons interested
(whether jointly with or as claiming through or under him) in the share. Save as
aforesaid any notice or document delivered or sent by post to or left at the
address of any member in pursuance of these presents shall, notwithstanding that
such member be then dead or bankrupt or in liquidation, and whether or not the
Company have notice of his death or bankruptcy or liquidation, be deemed to have
been duly served or delivered in respect of any share registered in the name of
such member as sole or first-named joint holder.
132 A member who (having no registered address within the United Kingdom) has
not supplied to the Company an address within the United Kingdom for the service
of notices shall not be entitled to receive notices from the Company. If on
three consecutive occasions notices have been sent through the post to any
member at his registered address or his address for the service of notices but
have been returned undelivered, such member shall not thereafter be entitled to
receive notices from the Company until he shall have communicated with the
Company and supplied in writing to the Transfer Office a new registered address
or address within the United Kingdom for the service of notices.
133 If at any time by reason of the suspension or curtailment of postal services
within the United Kingdom the Company is unable effectively to convene a General
Meeting by notices sent through the post, a General Meeting may be convened by a
notice advertised on the same date in at least two leading daily newspapers with
appropriate circulation and such notice shall be deemed to have been duly served
on all members entitled thereto at noon on the day when the advertisement
appears. In any such case the Company shall send confirmatory copies of the
notice by post if at least seven days prior to the meeting the posting of
notices to addresses throughout the United Kingdom again becomes practicable.
134 Nothing in any of the preceding five Articles shall affect any requirement
of the Statutes that any particular offer, notice or other document be served in
any particular manner.
WINDING UP
135 The Directors shall have power in the name and on behalf of the Company to
present a petition to the Court for the Company to be wound up.
136 If the Company shall be wound up (whether the liquidation is voluntary,
under supervision or by the Court) the Liquidator may, with the authority of an
Extraordinary Resolution, divide among the members in specie or kind the whole
or any part of the assets of the Company and whether or not the assets shall
consist of property of one kind or shall consist of properties of different
kinds, and may for such purpose set such value as he deems fair upon any one or
more class or classes of property and may determine how such division shall be
carried out as between the members or different classes of members. The
Liquidator may, with the like authority, vest any part of the assets in trustees
upon such trusts for the benefit of members as the Liquidator with the like
authority shall think fit, and the liquidation of the Company may be closed and
the Company dissolved, but so that no contributory shall be compelled to accept
any shares or other property in respect of which there is a liability.
INDEMNITY
137 Subject to the provisions of and so far as may be consistent with the
Statutes, every Director, Auditor, Secretary or other officer of the Company
shall be entitled to be indemnified by the Company against all costs, charges,
losses, expenses and liabilities incurred by him in the execution and/or
discharge of his duties and/or the exercise of his powers and/or otherwise in
relation to or in connection with his duties, powers or office.
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CO-CHAIRMAN
138 (A) The Directors may appoint one of their number as
Co-Chairman on such terms as they may determine and the provisions of Articles
51, 78 and 95 shall apply to any person so appointed and references herein to
Chairman shall be construed to mean Co-Chairman, or any one of them.
(B) For so long as there are Co-Chairmen, the Chairman to preside at a
meeting of the Directors or of the Company shall be determined by agreement
between them, or if no such agreement can be reached, by the Directors present.
SHARE WARRANTS
139 Subject to the Statutes and Articles 140 to 144, the Company with respect to
any fully-paid shares may issue to such persons as the Directors may decide (the
"Bearer") share warrants to bearer ("Share Warrants") under the Seal stating
that the Bearer is entitled to the shares therein specified and may provide (by
coupons or otherwise) for the payment or making of future dividends or other
distributions, and the issue of shares pursuant to Article 124, on or in respect
of the shares included in such Share Warrants.
140 A Share Warrant shall entitle the Bearer thereof to the shares specified in
it, and the shares represented by it may be transferred by the delivery of the
Share Warrant, and the provisions of these presents (other than this Article
140) with respect to the transfer and transmission of shares and untraced
shareholders shall not apply thereto.
141 (A) The Directors shall be entitled (but not obliged) to accept a
certificate (in such form as the Directors may approve) of the ADR Depositary
(as hereinafter defined), or of any bank or agent of the Company, that such
banks, agent or the ADR Depositary holds a specified Share Warrant on behalf of
the person named in the certificate as sufficient evidence of the facts stated
in such certificate including the number of shares specified in it, and may
treat the deposit of such certificate at the Transfer Office as equivalent to
the deposit there of the Share Warrant for the purposes of these presents other
than in relation to Article 144.
(B) The expression "ADR Depositary" shall mean a custodian or other person
or persons appointed from time to time by the Company to hold Share Warrants.
142 The Share Warrants shall be subject to the following conditions:-
(i) Except as otherwise provided in sub-paragraph (vii) of this Article,
no Share Warrant shall be issued except upon a request in writing by the person
for the time being named in the Register of Members as the holder of the shares
in respect of which the Share Warrant is to be issued. The Directors shall not
be under any obligation to accede to any such request.
(ii) The request shall be in such form, and supported by such evidence as
to the identity of the person making the same and of his right or title to the
shares, as the Directors shall from time to time require, and shall be lodged at
the Transfer Office.
(iii) Before the issue of a Share Warrant the share certificates (if any)
then outstanding in respect of the shares to be included in the Share Warrant
shall be delivered up to the Company for cancellation.
(iv) Save as otherwise agreed by the Company, any person applying to have
a Share Warrant issued shall be responsible for, and shall indemnify the Company
against, any stamp duties, stamp duty reserve tax, bearer instrument duty,
taxes, charges, fees, interest and penalties payable (if any) in respect of the
issue of the Share Warrant and shall pay to the Company at the time of such
issue such amount in respect thereof as the Company may require.
(v) Each Share Warrant shall represent such number of shares and be in
such language and form as the Directors shall think fit.
(vi) The Company shall be entitled to recognise an absolute right in the
Bearer for the time being of any Share Warrant to such amount of dividend or
other moneys payable on or in respect of the shares included in such Share
Warrant, as shall have been declared or otherwise be payable, upon the
presentation or delivery of such Share Warrant, and payment by or on behalf of
the Company to an account or accounts specified by the person presenting such
Share Warrant to the Transfer Office against such presentation or delivery shall
be a good discharge to the Company accordingly.
(vii) Save as otherwise agreed by the Company, subject to the payment to
the Company of all (if any) stamp duties, stamp duty reserve tax, bearer
instrument duty, taxes, charges, fees, interest and penalties which may thereby
be involved and for which the Company may be required to account:-
(a) if any Share Warrant is worn out, damaged or defaced, a replacement
Share Warrant will be issued upon request and upon surrender of the old Share
Warrant for cancellation;
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(b) if any Share Warrant is alleged to have been lost, stolen or
destroyed, a replacement Share Warrant may, at the discretion of the Directors,
be issued to the person claiming to be entitled thereto upon request and upon
compliance with such conditions as to evidence and indemnity and the payment of
out-of-pocket expenses of the Company in connection with the request as the
Directors may think fit provided that no new Share Warrant may be issued to
replace one that has been lost unless the Directors are satisfied beyond
reasonable doubt that the original has been destroyed; and
(c) a Bearer may surrender for cancellation
any Share Warrant and request that the Company issue in lieu two or more Share
Warrants which together represent the same shares in such proportion as he may
specify and the Directors may, if they think fit, authorise the cancellation of
the original Share Warrants and the issuance of such new Share Warrants.
(viii) A Bearer may at any time deposit the Share Warrant together with a
written declaration specifying his name and address at such place as the
Directors may from time to time appoint (or, in default of such appointment, at
the Transfer Office), and, so long as the Share Warrant remains so deposited,
the depositor shall have the same right of signing a requisition for calling a
meeting of the Company, of giving notice of intention to submit a resolution to
a meeting, of attending and voting, giving a proxy and exercising the other
rights and privileges of a member at any meeting held after the expiration of 48
hours from the time of deposit, as if from the time of deposit his name were
inserted in the Register as the holder of the shares specified in the deposited
Share Warrant. Not more than one person shall be recognised as depositor of any
Share Warrant. Every Share Warrant which shall have been so deposited as
aforesaid shall remain so deposited until after the close of the meeting at
which the depositor desires to attend or to be represented. Save as otherwise
expressly provided, no person shall, as bearer of a Share Warrant, be entitled
to sign a requisition for calling a General Meeting.
(ix) Subject as otherwise expressly provided in Articles 139 to 144, a
Bearer (or the depositor of a Share Warrant in accordance with Article
142(viii)) shall be entitled in all other respects to the same rights, benefits,
privileges and advantages, accorded from time to time pursuant to these presents
or by the Statutes (subject to these presents) and subject to the same
obligations and duties as if he were named in the Register as the holder of the
shares specified in the Share Warrant, and he shall be deemed to be a member of
the Company for these purposes.
143 (A) In the case of an offer of shares, securities or debentures to members
or any class of members, or a proposed issue of shares pursuant to Article 124,
it shall be sufficient, so far as any Bearer is concerned, to advertise the fact
of the proposed offer or issue once in a leading London daily newspaper, and
such other newspapers (if any) as the Directors may from time to time determine,
and upon the Bearer depositing the Share Warrant (or, if appropriate, the
requisite coupon) at the Transfer Office, or some other place or places
mentioned in the advertisement, within the time limit prescribed in the offer,
he shall have the same right to receive the offer and accept the proportionate
number of shares, securities or debentures within the time limit prescribed in
the offer, or to participate in the proposed issue of shares pursuant to Article
124, as if he were the registered holder of the shares comprised in the Share
Warrant.
(B) In the case of any notice or document or other
communication with members or any class of members, it shall be sufficient, so
far as any Bearer is concerned, to advertise the notice, document or other
communication once in a leading London daily newspaper, and such other
newspapers (if any) as the Directors may from time to time determine, and giving
an address where copies of the notice, document or other communication may be
obtained by any Bearer.
144 If a Bearer shall desire to surrender a Share Warrant and be registered as a
member or request that another person be registered as a member in respect of
all or any of the shares included in such Share Warrant, he shall lodge at such
place as the Directors may from time to time appoint (or, in default of such
appointment, at the Transfer Office) for cancellation of such Share Warrant
together with a declaration in writing signed by him in such form and
authenticated in such manner as the Directors may require, requesting to be
registered as a member in respect of all or some of the shares specified in such
Share Warrant and stating in such declaration his full name and address. Save as
otherwise agreed by the Company, upon the payment to the Company of all (if any)
stamp duties, stamp duty reserve tax, bearer instrument duty, taxes, charges,
fees, interest and penalties which may thereby be incurred by the Company or for
which the Company is required to account, the person giving such declaration
shall thereupon be entitled to have his name entered as a member in the Register
in respect of the relevant shares specified in the Share Warrant so surrendered
and to receive a share certificate therefor. If the Bearer shall desire to be
registered as a member in respect of part only of the shares included in such
Share Warrant, a Share Warrant for the balance of the shares shall be issued to
such person without charge upon cancellation of the Share Warrant so
surrendered.
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APPROVED DEPOSITARIES
145 Without prejudice to the right of an Approved Depositary to exercise any
rights conferred hereinbefore in these presents, an Approved Depositary may
appoint as its proxy or proxies such person or persons as it thinks fit and may
determine the method by which, and the terms on which, such appointments are
made, save that each such appointment shall specify the number of Ordinary
Shares in respect of which the appointment is made and the aggregate number of
Ordinary Shares in respect of which appointments subsist at any one time shall
not exceed the aggregate number of Ordinary Shares (such aggregate number of
Ordinary Shares for the time being hereinafter called "the Depositary Shares")
which for the time being shall either:-
(i) be registered in the name of the Approved Depositary or its nominee;
or
(ii) be represented by Share Warrants which
have been deposited by or on behalf of the Approved Depositary pursuant to
Article 142(viii) or are the subject matter of a certificate accepted by the
Directors pursuant to Article 141(A).
146 The Approved Depositary shall maintain a register or system(s) ("the Proxy
Register") in which shall be recorded such details as the Directors may
determine of each person who is for the time being so appointed as a proxy
pursuant to Article 145 (an "Appointed Proxy") and the number of Depositary
Shares (his "Appointed Number") in respect of which his appointment for the time
being subsists. The Proxy Register shall be open to inspection by any person
authorised by the Company during usual business hours and the Approved
Depositary shall furnish to the Company or its agents upon demand all such
information as to the contents of the Proxy Register, or any part of it, as may
be requested.
147 Subject to the Statutes and subject to the provisions of these presents, and
so long as the Depositary Shares shall be of a sufficient number so as to
include his Appointed Number, an Appointed Proxy:-
(i) shall upon production to the Company at a General Meeting of written
evidence of his appointment (which shall be in such form as the Company and the
Approved Depositary shall determine from time to time) be entitled to the same
rights, and subject to the same restrictions, in relation to his Appointed
Number of the Depositary Shares as though such shares were registered in the
name of the Appointed Proxy and he were a person appointed as proxy pursuant to
an instrument of proxy duly signed by the Approved Depositary in accordance with
Article 67(A) and left at the Transfer Office (or at such other place as may
have been specified for the purpose in accordance with Article 67(A)) not less
than 48 hours (or such shorter time as the Directors may determine) before the
time appointed for the meeting (or adjourned meeting) or (in the case of a poll
taken otherwise than at or on the same day as the meeting or adjourned meeting)
for the taking of the poll at which it is to be used;
(ii) shall himself be entitled, by an instrument of proxy duly signed by
him pursuant to Article 67(A), to appoint another person as his proxy in
relation to his Appointed Number of Depositary Shares, and so that the
provisions of these presents shall apply (mutatis mutandis) in relation to an
instrument signed pursuant to this paragraph (ii) of this article and to a
person appointed pursuant to such an instrument as though such shares were
registered in the name of the Appointed Proxy and the instrument were a form of
proxy signed by the Appointed Proxy in accordance with Article 67(A); and
(iii) shall be entitled to exercise all other rights capable of being
exercised in relation to a General Meeting by a person who has deposited
pursuant to Article 142(viii) (and has left on such deposit) a Share Warrant or
Share Warrants representing Ordinary Shares of a number equivalent to his
Appointed Number.
148 The Company may send to the Appointed Proxies as appearing in the Proxy
Register at their addresses as so appearing all notices and other documents
which are sent to the holders of Ordinary Shares.
149 The Company may pay to an Appointed Proxy at his address as shown in the
Proxy Register all dividends payable on the Ordinary Shares in respect of which
he has been appointed as Appointed Proxy, and payment of any such dividend shall
be a good discharge to the Company of its obligation to make payment to the
Approved Depositary in respect of the shares concerned.
150 (A)For the purposes of determining which persons are entitled as Appointed
Proxies:-
(i) to exercise the rights conferred by Article 147;
(ii) to receive documents sent pursuant to Article 148; and
(iii) to be paid dividends paid pursuant to Article 149,
and the number of Depositary Shares in respect of which a person is to be
treated as having been appointed as an Appointed Proxy for such purpose, the
Approved Depositary may determine that the Appointed Proxies who are so entitled
shall be the persons entered in the Proxy Register at the close of business on a
date (a "Record Date") determined by the Approved Depositary in consultation
with the Company.
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(B) When a Record Date is determined for a particular purpose:-
(i) the number of Depositary Shares in respect of which a person entered
in the Proxy Register as an Appointed Proxy is to be treated as having been
appointed for that purpose shall be the number appearing against his name in the
Proxy Register as at the close of business on the Record Date; and
(ii) changes to entries in the Proxy Register after the close of business
on the Record Date shall be disregarded in determining the entitlement of any
person for the purpose concerned.
151 Except as required by law, no Appointed Proxy shall be recognised by the
Company as holding any interest in shares upon any trust and subject to the
recognition of the rights conferred in relation to General Meetings by
appointments made by Appointed Proxies pursuant to Article 147(ii) the Company
shall be entitled to treat any person entered in the Proxy Register as an
Appointed Proxy as the only person (other than the Approved Depositary) who has
any interest in the Ordinary Shares in respect of which the Appointed Proxy has
been appointed.
152 If any question shall arise as to whether any particular person or persons
has or have been validly appointed to vote (or exercise any other right) in
respect of any Depositary Shares (whether by reason of the aggregate number of
shares in respect of which appointments are recorded in the Proxy Register
exceeding the aggregate number of Depositary Shares or for any other reason)
such question shall if arising at or in relation to a General Meeting be
determined by the chairman of the meeting (and if arising in any other
circumstances shall be determined by the Directors) whose determination (which
may include declining to recognise a particular appointment or appointments as
valid) shall if made in good faith be conclusive and binding on all persons
interested.
* with effect from the date upon which the agreement and plan of merger dated 31
March 1999 between BP Amoco, ARCO and Prairie Holdings becomes unconditional,
the Ordinary share capital of the Company will increase to US$9,000,000,000
divided into 36,000,000,000 Ordinary Shares of US$0.25 each.
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Company Limited by Shares BP Amoco p.l.c.
Index to Articles of Association
Article
Accounts 125-126
Approved Depositaries 145-152
Auditors 127-128
Authentication of Documents 107
Borrowing Powers 100
Calls on Shares 20-25
Capitalisation of Profits and Reserve 124
Co-Chairman 138
Corporations Acting by Representatives 71
Directors
Appointment and Retirement 80-88
Borrowing Powers 100
Committees 97-99
Executive Directors 78-79
Expenses 75
Interests in contracts -
entitlement 77
voting 93
Meetings and proceedings 89-99
Number 72
Pensions 76
Powers -
borrowing 100
general 101-105
Share qualification 73
Remuneration 74
Disclosure of Interests 70
Dividends 11C; 111-122
Executive Directors 78-79
Forfeiture and Lien 26-34
General Meetings 46-47
Notice of 48-50
Proceedings at 51-60
Indemnity 137
Interpretation 2
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Article
Notices 129-134
Preliminary 1-2
Record Date 123
Reserves 108
Seal 109-110
Secretary 106
Share Capital 3
Alteration 6-9
Increase 6
Reduction 9
Sub-division, Consolidation, etc. 7
Share Certificates 15-19
Share Dividends 11C
Shares 10-14
Calls 20-25
Equitable interests not recognised 14
Forfeiture and lien 26-34
Issue 10-12
Purchase of own 8
Renunciation of allotment 13
Transfer 35-41
Transmission 42-44
Variation of Rights 4-5
Share Warrants 139-144
Untraced Shareholders 45
Votes of Members 61-69
Winding Up 135-136
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