Implementing new UK accounting standard

FRS 19

Thursday 21st March 2002

This presentation and the associated slides and discussion contain statements, particularly those regarding capital employed, capital expenditure, cash flows, costs, savings, debt, demand, disposals, dividends, earnings, efficiency, gearing, growth, margins, performance, prices, production, productivity, profits, reserves, returns, sales, strategy, synergies, tax rates, trends, value, volumes, the effects of BP merger and acquisition activity, which are or may be forward looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors including future levels of industry product supply; demand and pricing; political stability and economic growth; development and use of new technology; actions of competitors; and natural disasters, wars and acts of terrorism.

Statements and data contained in this presentation and the associated slides and discussions, which relate to the performance of BP in this and future years, represent plans, targets or projections.

Unless otherwise made clear, references to forward measures are to such measures calculated on a pro forma basis, which in the case of past performance have been adjusted for special items.

March 2002

delivering strategyorganic investment

high grade portfolio

capital efficiency

operating efficiency

increase mid-cycle returns

grow capital employed

grow dividend

…within a disciplined financial framework

What is FRS 19

New UK GAAP Financial Reporting Standard

Requires full provision for deferred taxes in P&L

BP to implement for 2002

History to be stated on a comparable basis

No economic impact

No economic change due to FRS 19

Cash unchanged

Performance targets unchanged

Income tax rate increases to include all deferred tax

Equivalent reductions in income & capital employed

Neutral ROACE impact

Financial framework maintained on an equivalent basis

Impact of FRS 19 - 2001

$mPre

FRS19Post

FRS19

Proforma RCOP 19,608 19,608

Interest expense (1,608) (1,608)

Pre Tax Result 18,000 18,000

Income Tax (4,749) (6,380) (1,631)

Effective Tax Rate 26% 35% 9%

Statutory tax rate 37% 37%

Stock holding losses (1%) (1%)

Permanent Differences (3%) (3%)

Timing Differences / Losses (7%) 2% 9%

Effective Tax Rate 26% 35% 9%

Source: BP data

Effective Tax Rate

Impact of FRS 19 - 2001Earnings and Cash

Source: BP data

* Pre-Tax, including affiliate dividends and net financing costs.

$mPre

FRS 19Post

FRS 19

Proforma RCOP 19,608 19,608

Interest Expense (1,608) (1,608)

Income Tax (4,749) (6,380) (1,631)

Minority Interest (73) (61) 12

Proforma Result 13,178 11,559 (1,619)

Oper. Cash Flow * 22,093 22,093

Cash Tax Paid (4,660) (4,660)

Net Cash Investment (11,604) (11,604)

Equity Dividends Paid (4,827) (4,827)

Net Cash Flow 1,002 1,002

Impact of FRS 19 - 2001Returns

Source: BP data

$mPre

FRS19Post

FRS19

Proforma RCOP 19,608 19,608

Income Tax (4,749) (6,380) (1,631)

Proforma result before MSI and Interest

14,921 13,290 (1,631)

Proforma Average Capital Employed

76,604 67,112 (9,492)

Proforma ROACE 19.4% 19.7% 0.3%

Minimal Change to ROACEProforma ROACE

* Competitors: XOM, Shell, CVX, TFE; 2001 estimated

Consistent handling of major transactionsSource: BP data

0%

5%

10%

15%

20%

25%

1997 1998 1999 2000 2001

Competitor range*BP Post FRS 19BP Pre FRS 19

Financial Framework Unchanged

Proforma Net Debt Ratio• Previous target 20% - 30%• FRS19 increases 2001 by 4%• Target band re-calibrated to equivalent 25% - 35%

Dividend Mid-Cycle Payout Ratio• Previous target around 50%• FRS19 increases 2001 mid-cycle payout by 9%• Target re-calibrated to around 60%

Source: BP data

$mPre

FRS19Post

FRS19

Net Debt* 19,609 19,609

Proforma Equity 57,008 46,877 (10,131)

End period Proforma Net Cap. Emp.

76,617 66,486 (10,131)

Proforma Net Debt Ratio 25.6% 29.5% 3.9%

Impact of FRS 19 - 2001Debt Ratio

Source: BP data

*Net debt = gross debt - cash

$mPre

FRS 19Post

FRS 19

Proforma Result 13,178 11,559 (1,619)

Proforma EPS (¢/share) 58.7 51.5 (7.2)

Dividend (¢/share) 22.0 22.0

Proforma Dividend Payout

37% 43% 6%

Impact of FRS 19 - 2001Dividend Payout

Source: BP data

FRS 19 increases the 2001 payout ratio by 9% at mid-cycle conditions

Summary - No economic impact

Cash unchanged

Target Returns constant or rising at mid-cycle

Performance potential unchanged

- $1.4bn pre tax in 2002

Financial framework maintained on an equivalent basis

Gearing 25% - 35 %

Payout around 60% of mid-cycle proforma result

Dividend growing with underlying performance improvement

Q&A panel

John Buchanan Chief Financial Officer

Mike Starkie Chief Accountant

Patrick Chapman Head of Group Tax

Greg Coleman VP, Investor Relations