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Exhibit 1
FOR IMMEDIATE RELEASE
JULY 11, 2000 35/00
BP AMOCO AIMS FOR DOUBLE-DIGIT EARNINGS GROWTH
BP Amoco said that it expects to increase gross capital
spending to an average of $13.5 billion a year for the next
three years and aims to grow underlying earnings for the
group by at least ten per cent a year over the same period.
The additional spend - up from a comparable annual average of
some $12 billion for the three years to 1999 for BP Amoco,
ARCO and Burmah Castrol combined - will be used to accelerate
high-return projects from the group's enlarged portfolio, in
particular gas production from Trinidad and oil production
from the deep water Gulf of Mexico.
Speaking to financial analysts in London, chief executive Sir
John Browne said he and his management team are determined
that the extra spend, which excludes acquisitions, will be
accompanied by a continuing focus on unit costs and enhanced
productivity from existing assets.
"We anticipate disposals of some $1.5 billion a year over the
next three years, as we continue to high-grade our
portfolio," Browne said. "This means total net investment
will average around $12 billion per annum, so capital
employed should grow by around four to six per cent a year.
Add to that improved productivity of between four and eight
per cent a year, which we believe we can achieve across the
group, and we can see bottom-line growth of ten per cent a
year and possibly more.
"Let me be clear, there is no question of us taking a pause
in earnings growth while we go through an investment phase.
We will work our existing assets, as well as the new ones, so
that the new level of performance can be achieved without any
such pause."
Browne said the newly-enlarged BP Amoco group now had a
superlative asset base from which to grow, with oil reserves
of 7.5 billion barrels and 43 trillion cubic feet of gas, a
global retail network of 28,000 sites and a world-class
petrochemicals business.
"We also have a stronger financial base, a much wider set of
opportunities and a superb array of people skills from across
the world. We are now ready to move from a phase of
retrenchment to a phase of expansion."
Browne said that over the next three years he expected BP
Amoco's oil production to rise by four to five per cent a
year and gas by eight to ten per cent. By 2003, gas would
account for over 40 per cent of overall output.
Sales of gas were scheduled to rise by between nine and 11
per cent and petroleum products by up to four per cent.
Petrochemical volumes were set to rise by eight to ten per
cent and convenience market sales by up to 15 per cent.
Gross capital spending on exploration and production would
rise to an average of $8 billion a year, on
refining and marketing to $2.8 billion and on petrochemicals
to $2 billion. The new gas and power business would
spend some $400 million annually and investment in
renewables, including solar, would double to around $500
million.
Browne said the group would continue to plan on the basis of
a prudent financial framework, with dividends based on 50 per
cent of pro forma income. Against the background of current
world crude prices, which he expected to remain strong for at
least the next year, the group's mid-cycle oil price
assumption would rise from $14 to $16 dollars a
barrel, although upstream projects would still be tested to
return the cost of capital at a price of $11 a barrel.
Gearing would remain capped at 30 per cent, with an average
target of 25 per cent but a new floor of 20 per cent at above
mid-cycle conditions to allow either increased investment in
top-quality projects or share buybacks in excess of the
current programme. The average tax rate over the three-year
period was expected to rise from around 25 per cent to 30 per
cent.
Highlighting progress on existing group targets, Browne said
the group expected to deliver cost-savings of $4.7 billion by
year-end - 80 per cent of the projected total of $5.8
billion, well ahead of schedule. "This means we can be
confident of delivering the target we set out last year - a
five to six percentage point underlying improvement in return
on capital employed by around the end of this year."
Exploration chief executive Dick Olver told analysts that the
company was strongly encouraged by the results of appraisal
wells currently drilling in its Crazy Horse and Atlantis
fields in the deep water Gulf of Mexico.
He said: "In Crazy Horse we have two active wells showing
exciting multiple zones, some not seen in the original
discovery well. In Atlantis, our first appraisal well has
encountered 280 feet of net oil pay in a horizon again not
encountered in the discovery well, with additional zones yet
to be drilled. Drilling is continuing in both fields, so we
will have to wait for more news."
Olver said BP Amoco had large stakes in nine of the ten big
deep water fields so far found in the Gulf of Mexico, with a
net share of discoveries totalling 3.5 billion barrels of oil
equivalent, 500 million barrels of which were added in the
past year. With the acquisition of Vastar, BP Amoco would be
the biggest lease-holder in the Gulf, with 20 per cent of the
acreage so far licensed, Olver said.
Doug Ford, chief executive of refining and marketing, told
analysts that the company was planning to sell further
refinery capacity, including its interest in the Singapore
Refining Company (SRC). "With the Alliance refinery in
Louisiana, which is close to sale, we expect to divest over
500,000 barrels of capacity, around 15 per cent of our
portfolio," he said.
"We expect to dispose of this excess capacity in the first
half of next year, so that our refining coverage for the
combined group is reduced to less than 70 per cent by the end
of 2001. We will emerge with a capacity of some 2.8 million
barrels a day - a material, high-graded portfolio from which
we will deliver further efficiencies and integration
opportunities."
Ford also disclosed that the company would shortly launch a
new brand, under the name `BP' and a new logo radically
different from the BP shield and Amoco torch, which would be
gradually introduced at the group's retail sites, except for
the US West Coast where the company intended to retain the
ARCO brand.
"A single, global brand will help unite our employees around
a common vision of the future," Ford said. "We have spent
around $7 million on researching the new brand, including
legal and copyright work and design for its different
applications.
"We plan to spend some $25 million a quarter on its launch
and ongoing support, which is little more than was spent on
the separate brands that now make up the new BP." Amoco
Ultimate gasoline would retain its distinctive brand in the
US, and the Castrol lubricants would remain unaffected.
Ford said that the company also planned to update its global
retail network in a phased programme spanning four years.
Revamped sites would incorporate new convenience store
design, thin-film solar canopies and be fully digitised for e-
commerce transactions.
Concluding his remarks to analysts, Sir John Browne said: "BP
Amoco is now a truly global company, with substantial
operations in more than 100 countries worldwide. We have
become a major producer of natural gas, for which demand has
grown 30 per cent faster than for oil over the past decade.
We are participants in nearly all the significant, accessible
oil and gas provinces around the world, and we're one of the
leading refiners and marketers.
"All that is supported by an organisation with strategic
leadership from the centre but delivery delegated to 150
business units, each with clear accountability for
performance, and the whole connected by the very best modern
technology so that we can spread knowledge and learning. We
have a disciplined and prudent financial framework.
"The result, I believe, is that we can look forward with
confidence to underlying growth in earnings of at least 10
per cent a year - on constant assumptions which don't rely on
exceptional prices or margin."
- ENDS -
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