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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bp Plc | LSE:BP. | London | Ordinary Share | GB0007980591 | $0.25 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -5.40 | -1.05% | 510.40 | 509.40 | 509.50 | 516.60 | 506.10 | 516.30 | 26,147,354 | 16:35:10 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Petroleum Refining | 211.6B | 15.24B | 0.8934 | 5.70 | 86.91B |
TIDMBP.
RNS Number : 8396D
BP PLC
03 February 2015
Hot Features
Premium
BP p.l.c. Top of page
Group results 1
Fourth quarter and full year 2014
FOR IMMEDIATE RELEASE London 3 February 2015
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======= =========
1,042 1,290 (4,407) Profit (loss) for the period(a) 3,780 23,451
Inventory holding (gains)
465 1,095 3,438 losses*, net of tax 4,293 230
======== ======== ======== ================================ ======= =========
Replacement cost profit
1,507 2,385 (969) (loss)* 8,073 23,681
Net (favourable) unfavourable
impact of non-operating
items* and fair value
accounting effects*, net
1,302 652 3,208 of tax 4,063 (10,253)
======== ======== ======== ================================ ======= =========
Underlying replacement
2,809 3,037 2,239 cost profit* 12,136 13,428
======== ======== ======== ================================ ======= =========
Replacement cost profit
(loss)
8.06 12.97 (5.32) per ordinary share (cents) 43.90 125.08
0.48 0.78 (0.32) per ADS (dollars) 2.63 7.50
Underlying replacement
cost profit
15.02 16.51 12.28 per ordinary share (cents) 66.00 70.92
0.90 0.99 0.74 per ADS (dollars) 3.96 4.26
======== ======== ======== ================================ ======= =========
-- BP's fourth-quarter replacement cost (RC) result was a loss of $969 million, compared with a profit of $1,507 million a year ago. After adjusting for a net charge for non-operating items of $3,565 million, mainly relating to impairments in Upstream, reflecting the impact of the lower near-term price environment, revisions to reserves and other factors (see page 4 and Note 3 on page 22), and net favourable fair value accounting effects of $357 million (both on a post-tax basis), underlying RC profit for the fourth quarter 2014 was $2,239 million, compared with $2,809 million for the same period in 2013.
-- For the full year, RC profit was $8,073 million, compared with $23,681 million a year ago which included a $12.5-billion gain relating to the disposal of our interest in TNK-BP. After adjusting for a net charge for non-operating items of $4,620 million and net favourable fair value accounting effects of $557 million (both on a post-tax basis), underlying RC profit for the full year was $12,136 million, compared with $13,428 million for the same period in 2013. RC profit or loss for the group, underlying RC profit or loss and fair value accounting effects are non-GAAP measures and further information is provided on pages 3 and 29.
-- All amounts relating to the Gulf of Mexico oil spill have been treated as non-operating items, with a net pre-tax charge of $477 million for the quarter and $819 million for the full year. For further information on the Gulf of Mexico oil spill and its consequences see page 10 and Note 2 on page 16. See also Legal proceedings on page 33.
-- Including the impact of the Gulf of Mexico oil spill, net cash provided by operating activities for the quarter and full year was $7.2 billion and $32.8 billion respectively, compared with $5.4 billion and $21.1 billion for the same periods in 2013. Excluding amounts related to the Gulf of Mexico oil spill, net cash provided by operating activities for the fourth quarter and full year was $6.9 billion and $32.8 billion respectively, compared with $5.3 billion and $21.2 billion respectively for the same periods in 2013.
-- Net debt at 31 December 2014 was $22.6 billion, compared with $25.2 billion a year ago. The ratio of net debt to net debt plus equity at 31 December 2014 was 16.7%, compared with 16.2% a year ago. We continue to target a net debt ratio in the 10-20% range. Net debt and the ratio of net debt to net debt plus equity are non-GAAP measures. See page 25 for more information.
-- The reserves replacement ratio* on a combined basis of subsidiaries and equity-accounted entities was estimated at 62%(b) for the year, excluding the impact of acquisitions and disposals.
-- Total capital expenditure on an accruals basis for the fourth quarter was $6.7 billion, of which organic capital expenditure* was $6.6 billion. For the full year, total capital expenditure on an accruals basis was $23.8 billion, of which organic capital expenditure was $22.9 billion. In 2015, we expect organic capital expenditure to be around $20 billion.
-- In October 2013, BP announced plans to divest a further $10 billion of assets before the end of 2015, having completed its earlier divestment programme of $38 billion. BP has agreed around $4.7 billion of such further divestments to date. Disposal proceeds received in cash were $1.1 billion for the quarter and $3.5 billion for the full year.
-- BP today announced a quarterly dividend of 10.00 cents per ordinary share ($0.600 per ADS), which is expected to be paid on 27 March 2015. The corresponding amount in sterling will be announced on 16 March 2015. See page 25 for further information.
* For items marked with an asterisk throughout this
document, definitions are provided in the Glossary
on page 31.
(a) Profit (loss) attributable to BP shareholders.
(b) Includes estimated reserves data from Rosneft. The
reserves replacement ratio will be finalized and
reported in BP Annual Report and Form 20-F 2014
which is scheduled to be published in early March
2015.
The commentaries above and following should be read
in conjunction with the cautionary statement on page
36.
------------------------------------------------------------
Top of page 2
Group headlines (continued)
-- The effective tax rate (ETR) on RC profit or loss for the fourth quarter and full year was 70% and 26% respectively, compared with 15% and 21% for the same periods in 2013. Adjusting for non-operating items and fair value accounting effects, the underlying ETR for the fourth quarter and full year was 38% and 36% respectively, compared with 24% and 35% for the same periods in 2013. The underlying ETR was higher for the fourth quarter 2014 mainly due to foreign exchange impacts on deferred tax and a lower level of equity-accounted earnings (which are reported net of tax), compared to the corresponding period in 2013. In the current environment, with our current portfolio of assets, the underlying ETR in 2015 is expected to be lower than 2014.
-- Finance costs and net finance expense relating to pensions and other post-retirement benefits were a charge of $381 million for the fourth quarter, compared with $378 million for the same period in 2013. For the full year, the respective amounts were $1,462 million and $1,548 million.
-- BP repurchased 105 million ordinary shares at a cost of $0.7 billion, including fees and stamp duty, during the fourth quarter of 2014. For the full year, BP repurchased 612 million ordinary shares at a cost of $4.8 billion, including fees and stamp duty. The $8-billion share repurchase programme announced on 22 March 2013 was completed in July 2014.
-- Reported production for the fourth quarter, including BP's share of Rosneft's production, was 3,214 thousand barrels of oil equivalent per day (mboe/d), compared with 3,231mboe/d for the same period in 2013 (see Upstream on page 4 and Rosneft on page 8). This reduction reflected the Abu Dhabi onshore concession expiry and divestments, substantially offset by increased production from higher-margin areas and favourable entitlement impacts in our production-sharing agreements (PSAs), resulting from lower oil prices in Upstream and higher production in Rosneft. Reported production for the full year, including BP's share of Rosneft's production, was 3,151mboe/d, compared with 3,230mboe/d in 2013 which includes BP's share of Rosneft and TNK-BP production. This reduction reflected the Abu Dhabi onshore concession expiry and divestments, partially offset by increased production from higher-margin areas and higher production in Rosneft in 2014 compared to the aggregate production in Rosneft and TNK-BP in 2013.
-- The charge for depreciation, depletion and amortization was $15.2 billion in 2014, compared with $13.5 billion in 2013, reflecting the impact of new major projects coming onstream. In 2015, we expect a flatter trend relative to 2014.
Top of page 3
Analysis of RC profit before interest and tax
and reconciliation to profit for the period
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
RC profit (loss) before
interest and tax*
2,537 3,311 (3,085) Upstream 8,934 16,657
(360) 1,231 780 Downstream 3,738 2,919
- - - TNK-BP(a) - 12,500
1,058 107 451 Rosneft(b) 2,100 2,153
(605) (432) (647) Other businesses and corporate (2,010) (2,319)
Gulf of Mexico oil spill
(179) (33) (468) response(c) (781) (430)
Consolidation adjustment
(240) 370 257 - UPII* 641 579
======== ======== ======== ==================================== ======== ========
RC profit (loss) before
2,211 4,554 (2,712) interest and tax 12,622 32,059
Finance costs and net finance
expense relating to
pensions and other post-retirement
(378) (358) (381) benefits (1,462) (1,548)
(270) (1,777) 2,158 Taxation on a RC basis (2,864) (6,523)
(56) (34) (34) Non-controlling interests (223) (307)
======== ======== ======== ==================================== ======== ========
RC profit (loss) attributable
1,507 2,385 (969) to BP shareholders 8,073 23,681
======== ======== ======== ==================================== ======== ========
Inventory holding gains
(634) (1,585) (4,985) (losses) (6,210) (290)
Taxation (charge) credit
on inventory holding gains
169 490 1,547 and losses 1,917 60
======== ======== ======== ==================================== ======== ========
Profit (loss) for the period
1,042 1,290 (4,407) attributable to BP shareholders 3,780 23,451
======== ======== ======== ==================================== ======== ========
(a) BP ceased equity accounting for its share of TNK-BP's
earnings from 22 October 2012. Full year 2013 includes
the gain arising on the disposal of BP's interest
in TNK-BP.
(b) BP's investment in Rosneft is accounted under the
equity method from 21 March 2013. See page 8 for
further information.
(c) See Note 2 on page 16 for further information on
the accounting for the Gulf of Mexico oil spill
response.
Analysis of underlying RC profit before interest and tax
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Underlying RC profit before
interest and tax*
3,852 3,899 2,246 Upstream 15,201 18,265
70 1,484 1,213 Downstream 4,441 3,632
1,087 110 470 Rosneft 1,875 2,198
(614) (293) (120) Other businesses and corporate (1,340) (1,898)
Consolidation adjustment
(240) 370 257 - UPII 641 579
======== ======== ======== ==================================== ======== ========
Underlying RC profit before
4,155 5,570 4,066 interest and tax 20,818 22,776
Finance costs and net finance
expense relating to
pensions and other post-retirement
(368) (348) (372) benefits (1,424) (1,509)
Taxation on an underlying
(922) (2,151) (1,421) RC basis (7,035) (7,532)
(56) (34) (34) Non-controlling interests (223) (307)
======== ======== ======== ==================================== ======== ========
Underlying RC profit attributable
2,809 3,037 2,239 to BP shareholders 12,136 13,428
======== ======== ======== ==================================== ======== ========
Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 4-9 for the segments.
Top of page 4
Upstream
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======= =======
Profit (loss) before interest
2,540 3,312 (3,165) and tax 8,848 16,661
Inventory holding (gains)
(3) (1) 80 losses* 86 (4)
======== ======== ======== ============================== ======= =======
RC profit (loss) before
2,537 3,311 (3,085) interest and tax 8,934 16,657
Net (favourable) unfavourable
impact of non-operating
items* and fair value
1,315 588 5,331 accounting effects* 6,267 1,608
======== ======== ======== ============================== ======= =======
Underlying RC profit before
3,852 3,899 2,246 interest and tax*(a) 15,201 18,265
======== ======== ======== ============================== ======= =======
(a) See page 5 for a reconciliation to segment RC profit
before interest and tax by region.
Financial results
The replacement cost result before interest and tax for the fourth quarter and full year was a loss of $3,085 million and a profit of $8,934 million respectively, compared with a profit of $2,537 million and $16,657 million for the same periods in 2013. The fourth quarter and full year included a net non-operating charge of $5,557 million and $6,298 million respectively. These are primarily related to impairments associated with several assets, mainly in the North Sea and Angola reflecting the impact of the lower near-term price environment, revisions to reserves and other factors (see Note 3 on page 22 for further information). In 2013, the net non-operating charge for the fourth quarter and full year was $1,201 million and $1,364 million, respectively. Fair value accounting effects in the fourth quarter and full year had favourable impacts of $226 million and $31 million respectively, compared with unfavourable impacts of $114 million and $244 million in the same periods of 2013.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the fourth quarter and full year was $2,246 million and $15,201 million respectively, compared with $3,852 million and $18,265 million for the same periods in 2013. The result for the fourth quarter reflected significantly lower liquids realizations, the absence of a one-off benefit to production taxes which occurred in 2013 and higher exploration write-offs, partly offset by lower costs, higher production in higher-margin areas and a benefit from stronger gas marketing and trading activities. The result for the full year reflected lower liquids realizations, higher costs, mainly depreciation, depletion and amortization and exploration write-offs and the absence of one-off benefits which occurred in 2013 related to production taxes and a cost pooling settlement agreement between the owners of the Trans-Alaska Pipeline System (TAPS), partly offset by higher production in higher-margin areas, higher gas realizations and a benefit from stronger gas marketing and trading activities.
Production
Production for the quarter was 2,187mboe/d, 2.6% lower than the fourth quarter of 2013. Underlying production* increased by 2.3%, reflecting growth in production from higher-margin areas. For the full year, reported production was 2,143mboe/d, 5% lower than in 2013. Underlying production for the full year was 2.2% higher than in 2013, also from higher-margin areas.
Key events
In November, BP was awarded two new exploration blocks as a result of the 2013 Egyptian Natural Gas Holding Company (EGAS) bid round: Block 3 - North El Mataria (BP 50%), in the onshore Nile Delta, will be operated by BP; Block 8 - Karawan Offshore (BP 50%) is located in the Mediterranean Sea and will be operated by ENI. BP and its partners have committed to invest a total of $240 million in the blocks over different phases. Also in November, BP completed the sale of its interests and transfer of operatorship in four BP-operated oilfields on the North Slope of Alaska to Hilcorp.
In December, BP announced the start of operations by Husky Energy at the Sunrise Phase 1 in-situ oil sands project in Alberta, Canada (BP 50%), with the start of steam generation. BP also announced the start of production from the Kinnoull field (BP 77.06%) in the central North Sea. The Kinnoull reservoir is tied back to BP's Andrew platform. These were the final two of seven major project start-ups in 2014. In Azerbaijan, BP and the State Oil Company of the Republic of Azerbaijan (SOCAR) signed a new production-sharing agreement (PSA) to jointly explore for and develop potential resources in the shallow water area around the Absheron Peninsula in the Azerbaijan sector of the Caspian Sea.
After the end of the quarter, BP announced the formation of a new ownership and operating model with Chevron and ConocoPhillips in the deepwater Gulf of Mexico. Under the agreements, BP will sell to Chevron approximately half of its current equity interests in the Gila and Tiber fields. BP, Chevron and ConocoPhillips also have agreed to joint ownership interests in exploration blocks east of Gila known as Gibson. Chevron will operate Tiber, Gila and Gibson, with operatorship transferring after BP finishes drilling appraisal wells at Gila and Tiber.
Outlook
Reported production for the full year 2015 is expected to be higher than 2014. The actual reported outcome will depend on the exact timing of project start-ups, divestments, OPEC quotas and entitlement impacts in our PSAs. We expect full-year underlying production in 2015 to be broadly flat with 2014. We expect first-quarter 2015 reported production to be higher than the fourth quarter, mainly reflecting higher entitlements in PSA regions on the basis of assumed lower oil prices.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36. ---------------------------------------------------------
Top of page 5
Upstream
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Underlying RC profit before
interest and tax(a)
1,050 1,181 1,007 US 4,338 3,836
2,802 2,718 1,239 Non-US 10,863 14,429
======== ======== ======== ================================= ======== ========
3,852 3,899 2,246 15,201 18,265
======== ======== ======== ================================= ======== ========
Non-operating items(b)
(3) 125 (30) US (36) 58
(1,198) (626) (5,527) Non-US(c)(d) (6,262) (1,422)
======== ======== ======== ================================= ======== ========
(1,201) (501) (5,557) (6,298) (1,364)
======== ======== ======== ================================= ======== ========
Fair value accounting effects
(112) (49) 152 US 23 (269)
(2) (38) 74 Non-US 8 25
======== ======== ======== ================================= ======== ========
(114) (87) 226 31 (244)
======== ======== ======== ================================= ======== ========
RC profit (loss) before
interest and tax(a)
935 1,257 1,129 US 4,325 3,625
1,602 2,054 (4,214) Non-US 4,609 13,032
======== ======== ======== ================================= ======== ========
2,537 3,311 (3,085) 8,934 16,657
======== ======== ======== ================================= ======== ========
Exploration expense
126 142 426 US(e) 1,295 438
2,048 698 1,029 Non-US(c)(d)(f) 2,337 3,003
======== ======== ======== ================================= ======== ========
2,174 840 1,455 3,632 3,441
======== ======== ======== ================================= ======== ========
Production (net of royalties)(g)
Liquids* (mb/d)
392 410 407 US 411 363
97 91 85 Europe 94 96
712 605 656 Rest of World 602 718
======== ======== ======== ================================= ======== ========
1,201 1,106 1,149 1,106 1,176
======== ======== ======== ================================= ======== ========
Natural gas (mmcf/d)
1,507 1,546 1,526 US 1,519 1,539
190 164 163 Europe 173 237
4,360 4,328 4,332 Rest of World 4,324 4,483
======== ======== ======== ================================= ======== ========
6,057 6,038 6,021 6,016 6,259
======== ======== ======== ================================= ======== ========
Total hydrocarbons* (mboe/d)
652 676 670 US 673 628
130 119 114 Europe 123 137
1,464 1,352 1,403 Rest of World 1,347 1,491
======== ======== ======== ================================= ======== ========
2,246 2,147 2,187 2,143 2,256
======== ======== ======== ================================= ======== ========
Average realizations(h)
98.26 91.42 69.03 Total liquids ($/bbl) 87.96 99.24
5.49 5.40 5.54 Natural gas ($/mcf) 5.70 5.35
65.04 61.61 51.53 Total hydrocarbons ($/boe) 60.85 63.58
======== ======== ======== ================================= ======== ========
(a) A minor amendment has been made to the analysis
by region for the comparative periods in 2013.
(b) See Note 3 for more information on impairment losses
in the fourth quarter and full year 2014.
(c) Third quarter, fourth quarter and full year 2014
include write-offs of $375 million, $20 million
and $395 million respectively relating to Block
KG D6 in India. This is classified in the 'other'
category of non-operating items (see page 28). In
addition, impairment charges of $395 million, $20
million and $415 million for the same periods were
also recorded in relation to this block.
(d) Fourth quarter and full year 2013 include an $845-million
write-off relating to the value ascribed to block
BM-CAL-13 offshore Brazil as part of the accounting
for the acquisition of upstream assets from Devon
Energy in 2011 and $216 million of costs relating
to the Pitanga exploration well, which was drilled
in this block and did not encounter commercial quantities
of oil or gas. The $845-million write-off has been
classified in the 'other' category of non-operating
items (see page 28).
(e) Fourth quarter and full year 2014 include the write-off
of costs relating to the Moccasin discovery in the
deepwater Gulf of Mexico. Following on from the
decision to create a separate BP business around
our US lower 48 onshore oil and gas activities,
and as a consequence of disappointing appraisal
results, we have decided not to proceed with development
plans in the Utica shale. Third quarter and full
year 2014 include write-offs of $23 million and
$544 million respectively, relating to the Utica
acreage.
(f) Fourth quarter and full year 2014 include the write-off
of $524 million relating to the Bourarhat Sud block
licence in the Illizi Basin of Algeria. Fourth quarter
and full year 2013 include the write-off of costs
relating to the Risha concession in Jordan.
(g) Includes BP's share of production of equity-accounted
entities in the Upstream segment.
(h) Based on sales by consolidated subsidiaries only
- this excludes equity-accounted entities.
Because of rounding, some totals may not agree exactly
with the sum of their component parts.
Top of page 6
Downstream
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ======
Profit (loss) before interest
(840) (335) (4,064) and tax (2,362) 2,725
Inventory holding (gains)
480 1,566 4,844 losses* 6,100 194
======== ======== ======== ============================== ======== ======
RC profit (loss) before
(360) 1,231 780 interest and tax 3,738 2,919
Net (favourable) unfavourable
impact of non-operating
items* and fair value
430 253 433 accounting effects* 703 713
======== ======== ======== ============================== ======== ======
Underlying RC profit before
70 1,484 1,213 interest and tax*(a) 4,441 3,632
======== ======== ======== ============================== ======== ======
(a) See page 7 for a reconciliation to segment RC profit
before interest and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the fourth quarter and full year was $780 million and $3,738 million respectively, compared with a replacement cost loss before interest and tax of $360 million and a replacement cost profit before interest and tax of $2,919 million for the same periods in 2013.
The 2014 results included net non-operating charges of $790 million for the fourth quarter and $1,570 million for the full year, compared with net non-operating charges of $74 million and $535 million for the same periods a year ago (see pages 7 and 28 for further information on non-operating items). The fourth-quarter non-operating charges are mainly related to impairment losses in our fuels business and costs associated with our restructuring programme and charges for the full year are mainly related to impairment losses in our fuels and petrochemicals businesses. Fair value accounting effects had favourable impacts of $357 million for the fourth quarter and $867 million for the full year, compared with unfavourable impacts of $356 million for the fourth quarter and $178 million for the full year in 2013.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the fourth quarter and full year was $1,213 million and $4,441 million respectively, compared with $70 million and $3,632 million a year ago with the increase in profits mainly arising in the fuels business.
Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 7.
Fuels business
The fuels business reported an underlying replacement cost profit before interest and tax of $925 million for the fourth quarter and $3,219 million for the full year, compared with an underlying replacement cost loss before interest and tax of $204 million and an underlying replacement cost profit before interest and tax of $2,230 million for the same periods in 2013. Relative to the same period in 2013, despite an overall weaker refining environment which was primarily due to falling crude price differentials in the US, the result for the quarter benefited from an improved fuels marketing performance, increased heavy crude processing in the US, lower turnaround activity and an improved contribution from supply and trading. The stronger full-year result was also impacted by the weaker refining environment which was more than offset by higher fuels marketing performance, increased heavy crude processing and increased production, mainly associated with the ramp-up of operations at our Whiting refinery following the completion of the modernization project.
Lubricants business
The lubricants business reported an underlying replacement cost profit before interest and tax of $313 million in the fourth quarter and $1,271 million for the full year, compared with $230 million and $1,272 million in the same periods last year. The fourth-quarter result reflects continued margin improvement in growth markets and benefits, in comparison with the same period in 2013, from the absence of restructuring charges which were recorded in the same period in 2013. These factors were partially offset by adverse foreign exchange impacts. Similarly the full-year result benefited from improved margin across the portfolio, contributing to a 6% improvement in the result which, however, was offset by adverse foreign exchange translation impacts.
Petrochemicals business
The petrochemicals business reported an underlying replacement cost loss before interest and tax of $25 million in the fourth quarter and $49 million in the full year, compared with an underlying replacement cost profit before interest and tax of $44 million and $130 million respectively in the same periods last year. The decrease in the fourth quarter and full year reflects a continuation of the weak margin environment, particularly in the Asian aromatics sector, and unplanned operational events.
Outlook
Looking to 2015, at this point, we anticipate a weaker refining environment due to narrowing crude differentials in the low crude price environment. We expect the financial impact of refinery turnarounds to be at similar levels as 2014 and the petrochemicals margin environment to gradually improve.
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 36. ---------------------------------------------------------
Top of page 7
Downstream
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== =======
Underlying RC profit (loss)
before interest and tax
-
by region
(162) 603 338 US 1,684 1,123
232 881 875 Non-US 2,757 2,509
======== ======== ======== ============================== ======== =======
70 1,484 1,213 4,441 3,632
======== ======== ======== ============================== ======== =======
Non-operating items
(20) (181) (337) US (339) (154)
(54) (371) (453) Non-US (1,231) (381)
======== ======== ======== ============================== ======== =======
(74) (552) (790) (1,570) (535)
======== ======== ======== ============================== ======== =======
Fair value accounting effects
(446) 238 379 US 914 (211)
90 61 (22) Non-US (47) 33
======== ======== ======== ============================== ======== =======
(356) 299 357 867 (178)
======== ======== ======== ============================== ======== =======
RC profit (loss) before
interest and tax
(628) 660 380 US 2,259 758
268 571 400 Non-US 1,479 2,161
======== ======== ======== ============================== ======== =======
(360) 1,231 780 3,738 2,919
======== ======== ======== ============================== ======== =======
Underlying RC profit (loss)
before interest and tax
-
by business(a)(b)
(204) 1,078 925 Fuels 3,219 2,230
230 336 313 Lubricants 1,271 1,272
44 70 (25) Petrochemicals (49) 130
======== ======== ======== ============================== ======== =======
70 1,484 1,213 4,441 3,632
======== ======== ======== ============================== ======== =======
Non-operating items and
fair value accounting
effects(c)
(430) 196 (383) Fuels (389) (712)
- (5) (45) Lubricants 136 2
- (444) (5) Petrochemicals (450) (3)
======== ======== ======== ============================== ======== =======
(430) (253) (433) (703) (713)
======== ======== ======== ============================== ======== =======
RC profit (loss) before
interest and tax(a)(b)
(634) 1,274 542 Fuels 2,830 1,518
230 331 268 Lubricants 1,407 1,274
44 (374) (30) Petrochemicals (499) 127
======== ======== ======== ============================== ======== =======
(360) 1,231 780 3,738 2,919
======== ======== ======== ============================== ======== =======
BP average refining marker
11.0 15.6 13.0 margin (RMM)* ($/bbl) 14.4 15.4
======== ======== ======== ============================== ======== =======
Refinery throughputs (mb/d)
641 651 657 US 642 726
742 766 807 Europe 782 766
312 312 318 Rest of World 297 299
======== ======== ======== ============================== ======== =======
1,695 1,729 1,782 1,721 1,791
======== ======== ======== ============================== ======== =======
Refining availability*
95.6 94.8 94.8 (%) 94.9 95.3
======== ======== ======== ============================== ======== =======
Marketing sales of refined
products (mb/d)
1,179 1,197 1,166 US 1,166 1,282
1,189 1,240 1,173 Europe 1,177 1,237
603 522 534 Rest of World 529 565
======== ======== ======== ============================== ======== =======
2,971 2,959 2,873 2,872 3,084
Trading/supply sales of
2,504 2,439 2,470 refined products 2,448 2,485
======== ======== ======== ============================== ======== =======
Total sales volumes of
5,475 5,398 5,343 refined products 5,320 5,569
======== ======== ======== ============================== ======== =======
Petrochemicals production
(kte)
993 932 872 US 3,844 4,264
952 1,048 937 Europe 3,851 3,779
1,426 1,676 1,719 Rest of World 6,319 5,900
======== ======== ======== ============================== ======== =======
3,371 3,656 3,528 14,014 13,943
======== ======== ======== ============================== ======== =======
(a) Segment-level overhead expenses are included in
the fuels business result.
(b) BP's share of income from petrochemicals at our
Gelsenkirchen and Mülheim sites in Germany
is reported in the fuels business.
(c) For Downstream, fair value accounting effects arise
solely in the fuels business.
Top of page 8
Rosneft
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014(a) $ million 2014(a) 2013
======== ======== ======== ======== ======
Profit before interest
901 87 390 and tax(b)(c) 2,076 2,053
Inventory holding (gains)
157 20 61 losses* 24 100
======== ======== ======== ============================ ======== ======
RC profit before interest
1,058 107 451 and tax 2,100 2,153
Net charge (credit) for
29 3 19 non-operating items* (225) 45
======== ======== ======== ============================ ======== ======
Underlying RC profit before
1,087 110 470 interest and tax* 1,875 2,198
======== ======== ======== ============================ ======== ======
Replacement cost profit before interest and tax for the fourth quarter and full year was $451 million and $2,100 million respectively, compared with $1,058 million and $2,153 million for the same periods in 2013.
The 2014 results included a non-operating charge of $19 million for the fourth quarter and a gain of $225 million for the full year relating to Rosneft's sale of its interest in the Yugragazpererabotka joint venture, compared with a non-operating charge of $29 million and $45 million for the same periods in 2013.
After adjusting for non-operating items, the underlying replacement cost profit for the fourth quarter and full year was $470 million and $1,875 million respectively, compared with $1,087 million and $2,198 million for the same periods in 2013. Compared with 2013, the results for both periods were affected by anunfavourable duty lag effect, lower oil prices and other items, partially offset by certain foreign exchange effects which had a favourable impact on the result. See also Group statement of comprehensive income - Share of items relating to equity-accounted entities, net of tax, and footnote (a), on page 12 for other foreign exchange effects.
On 27 June 2014, Rosneft's Annual General Meeting of Shareholders approved the distribution of a dividend of 12.85 roubles per share. We received our share of this dividend in July 2014, which amounted to $693 million after the deduction of withholding tax.
See also Other matters on page 35 for information on sanctions.
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014(a) 2014(a) 2013(d)
======== ======== ======== ======== ========
Production (net of royalties)
(BP share)
833 817 819 Liquids* (mb/d) 821 650
884 1,073 1,203 Natural gas (mmcf/d) 1,084 617
985 1,002 1,027 Total hydrocarbons* (mboe/d) 1,008 756
======== ======== ======== ============================== ======== ========
(a) The operational and financial information of the
Rosneft segment for the fourth quarter and full
year 2014 is based on preliminary operational and
financial results of Rosneft for the three months
ended 31 December 2014. Actual results may differ
from these amounts.
(b) The Rosneft segment result includes equity-accounted
earnings arising from BP's 19.75% shareholding in
Rosneft as adjusted for the accounting required
under IFRS relating to BP's purchase of its interest
in Rosneft and the amortization of the deferred
gain relating to the disposal of BP's interest in
TNK-BP. BP's share of Rosneft's earnings after finance
costs, taxation and non-controlling interests, as
adjusted, is included in the BP group income statement
within profit before interest and taxation.
(c) Third quarter and full year 2014 include $25 million
of foreign exchange losses arising on the dividend
received ($5 million loss in the full year 2013).
(d) Full year 2013 reflects production for the period
21 March - 31 December averaged over the full year.
Top of page 9
Other businesses and corporate
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Profit (loss) before interest
(605) (432) (647) and tax (2,010) (2,319)
- - - Inventory holding (gains) - -
losses*
======== ======== ======== ============================== ======== ========
RC profit (loss) before
(605) (432) (647) interest and tax (2,010) (2,319)
Net charge (credit) for
(9) 139 527 non-operating items* 670 421
======== ======== ======== ============================== ======== ========
Underlying RC profit (loss)
(614) (293) (120) before interest and tax* (1,340) (1,898)
======== ======== ======== ============================== ======== ========
Underlying RC profit (loss)
before interest and tax
(228) (102) (167) US (594) (800)
(386) (191) 47 Non-US (746) (1,098)
======== ======== ======== ============================== ======== ========
(614) (293) (120) (1,340) (1,898)
======== ======== ======== ============================== ======== ========
Non-operating items
(14) (144) (219) US (360) (449)
23 5 (308) Non-US (310) 28
======== ======== ======== ============================== ======== ========
9 (139) (527) (670) (421)
======== ======== ======== ============================== ======== ========
RC profit (loss) before
interest and tax
(242) (246) (386) US (954) (1,249)
(363) (186) (261) Non-US (1,056) (1,070)
======== ======== ======== ============================== ======== ========
(605) (432) (647) (2,010) (2,319)
======== ======== ======== ============================== ======== ========
Other businesses and corporate comprises biofuels and wind businesses, shipping, treasury (which includes interest income on the group's cash and cash equivalents), and corporate activities including centralized functions.
Financial results
The replacement cost loss before interest and tax for the fourth quarter and full year was $647 million and $2,010 million respectively, compared with $605 million and $2,319 million for the same periods in 2013.
The fourth-quarter result included a net non-operating charge of $527 million, primarily relating to restructuring provisions and impairments, compared with a net credit of $9 million a year ago. For the full year, the net non-operating charge was $670 million, compared with a net charge of $421 million in 2013.
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the fourth quarter was $120 million, compared with $614 million for the same period in 2013. For the full year, the underlying replacement cost loss before interest and tax was $1,340 million compared with $1,898 million in 2013. The underlying charge in the fourth quarter and full year 2014 was lower than 2013 resulting from improved business performances and a number of one-off credits.
Biofuels
The net ethanol-equivalent production (which includes ethanol and sugar) for the fourth quarter and full year was 242 million litres and 653 million litres respectively, compared with 140 million litres and 521 million litres for the same periods in 2013.
Wind
Net wind generation capacity*(a) was 1,588MW at 31 December 2014, compared with 1,590MW at 31 December 2013. BP's net share of wind generation for the fourth quarter and full year was 1,240GWh and 4,617GWh respectively, compared with 1,203GWh and 4,203GWh for the same periods in 2013.
Outlook
In 2015, Other businesses and corporate average quarterly charges, excluding non-operating items, are expected to be around $400 million although this will fluctuate from quarter to quarter.
(a) Capacity figures include 32MW in the Netherlands
managed by our Downstream segment.
The commentary above contains forward-looking statements
and should be read in conjunction with the cautionary
statement on page 36.
---------------------------------------------------------
Top of page 10
Gulf of Mexico oil spill
Financial update
The replacement cost loss before interest and tax for the fourth quarter and full year was $468 million and $781 million respectively, compared with $179 million and $430 million for the same periods last year. The fourth-quarter charge reflects an increased provision for litigation costs, additional business economic loss claims and the ongoing costs of the Gulf Coast Restoration Organization. The cumulative pre-tax charge recognized to date amounts to $43.5 billion.
The cumulative income statement charge does not include amounts for obligations that BP currently considers are not possible to measure reliably. The total amounts that will ultimately be paid by BP in relation to all the obligations relating to the incident are subject to significant uncertainty and the ultimate exposure and cost to BP will be dependent on many factors, as discussed under Provisions and contingent liabilities in Note 2 on page 18. These could have a material impact on our consolidated financial position, results and cash flows.
Trust update
As previously disclosed in our third-quarter results announcement, the cumulative charges to be paid from the Trust, and the associated reimbursement asset recognized, had reached $20 billion. Subsequent additional costs are being charged to the income statement as incurred. In the fourth quarter this included a $235-million charge for additional business economic loss claims under the Plaintiffs' Steering Committee settlement. See Note 2 on page 16 and Legal proceedings on page 33 for further details.
During the fourth quarter, $1.0 billion was paid out of the Deepwater Horizon Oil Spill Trust (the Trust) and qualified settlement funds (QSFs), including $419 million for claims payments, administrative costs of the Deepwater Horizon Court Supervised Settlement Program (DHCSSP) and other resolved items, and $581 million for natural resource damage early restoration projects and assessment. At 31 December 2014, the aggregate cash balances in the Trust and the QSFs amounted to $5.1 billion, including $1.1 billion remaining in the seafood compensation fund which is yet to be distributed, and $0.4 billion held for natural resource damage early restoration projects.
Legal proceedings
The federal district court in New Orleans (the District Court) issued its ruling on Phase 1 in the Trial of Liability, Limitation, Exoneration and Fault Allocation in MDL 2179 (the Trial) on 4 September 2014. It found that BP Exploration & Production Inc. (BPXP), BP America Production Company (BPAPC) and various other parties are each liable under general maritime law for the blowout, explosion and oil spill from the Macondo well. With respect to the United States' claim against BPXP under the Clean Water Act, the District Court found that the discharge of oil was the result of BPXP's gross negligence and wilful misconduct and that BPXP is therefore subject to enhanced civil penalties, which may be up to $4,300 per barrel of oil discharged into the Gulf of Mexico.
BPXP and BPAPC have filed a notice of appeal of the Phase 1 ruling to the United States Court of Appeals for the Fifth Circuit (the Fifth Circuit).
The District Court issued its ruling on Phase 2 of the Trial on 15 January 2015, finding that 3.19 million barrels of oil were discharged into the Gulf of Mexico and therefore subject to a Clean Water Act penalty. In addition, the District Court found that BP was not grossly negligent in its source control efforts.
The penalty phase of the Trial began on 20 January 2015 and is scheduled to last three weeks. In this phase, the District Court will determine the amount of civil penalties owed to the United States under the Clean Water Act based on the court's rulings (or ultimate determinations on appeal) in Phases 1 and 2, and the application of the penalty factors under the Clean Water Act.
With regard to the Plaintiffs' Steering Committee (PSC) settlement, on 24 September 2014, the District Court denied BP's motion to order the return of excessive payments made by the DHCSSP under the matching policy in effect before the District Court's December 2013 ruling requiring a claimant's revenue to be matched with variable expenses. BP has appealed this decision to the Fifth Circuit.
In March 2014, the Fifth Circuit affirmed the District Court's ruling that the Economic and Property Damages Settlement Agreement (EPD Settlement Agreement) contained no causation requirement beyond the revenue and related tests set out in an exhibit to that agreement. The District Court dissolved the injunction that had halted the processing and payment of business economic loss claims and instructed the claims administrator to resume the processing and payment of claims. In August 2014, BP petitioned for review by the US Supreme Court of the Fifth Circuit's decisions relating to compensation of claims for losses with no apparent connection to the Deepwater Horizon spill. On 8 December 2014, the US Supreme Court declined to review BP's petition. As a result, the final deadline for filing claims under the EPD Settlement Agreement (other than those that fall under the Seafood Compensation Program) is 8 June 2015.
For further details, see Legal proceedings on page 33.
Top of page 11
Financial statements
Group income statement
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Sales and other operating
93,717 93,904 73,997 revenues (Note 5) 353,568 379,136
Earnings from joint ventures
101 119 181 - after interest and tax 570 447
Earnings from associates
1,000 272 519 - after interest and tax 2,802 2,742
235 117 238 Interest and other income 843 777
Gains on sale of businesses
43 355 161 and fixed assets 895 13,115
======== ======== ======== ================================= ======== ========
Total revenues and other
95,096 94,767 75,096 income 358,678 396,217
74,960 75,492 60,411 Purchases 281,907 298,351
Production and manufacturing
7,257 6,562 7,002 expenses 27,375 27,527
Production and similar
1,491 744 412 taxes (Note 6) 2,958 7,047
Depreciation, depletion
3,736 3,956 3,866 and amortization 15,163 13,510
Impairment and losses on
sale of businesses and
474 997 6,768 fixed assets (Note 3) 8,965 1,961
2,174 840 1,455 Exploration expense 3,632 3,441
Distribution and administration
3,482 3,320 3,066 expenses 12,696 13,070
Fair value gain on embedded
(55) (113) (187) derivatives (430) (459)
======== ======== ======== ================================= ======== ========
Profit (loss) before interest
1,577 2,969 (7,697) and taxation 6,412 31,769
255 285 299 Finance costs 1,148 1,068
Net finance expense relating
to pensions and other
123 73 82 post-retirement benefits 314 480
======== ======== ======== ================================= ======== ========
1,199 2,611 (8,078) Profit (loss) before taxation 4,950 30,221
101 1,287 (3,705) Taxation 947 6,463
======== ======== ======== ================================= ======== ========
1,098 1,324 (4,373) Profit (loss) for the period 4,003 23,758
======== ======== ======== ================================= ======== ========
Attributable to
1,042 1,290 (4,407) BP shareholders 3,780 23,451
56 34 34 Non-controlling interests 223 307
======== ======== ======== ================================= ======== ========
1,098 1,324 (4,373) 4,003 23,758
======== ======== ======== ================================= ======== ========
Earnings per share (Note
7)
Profit (loss) for the period
attributable to BP shareholders
Per ordinary share (cents)
5.57 7.01 (24.18) Basic 20.55 123.87
5.54 6.97 (24.18) Diluted 20.42 123.12
Per ADS (dollars)
0.33 0.42 (1.45) Basic 1.23 7.43
0.33 0.42 (1.45) Diluted 1.23 7.39
======== ======== ======== ================================= ======== ========
Top of page 12
Financial statements (continued)
Group statement of comprehensive income
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ========= ========= ========
1,098 1,324 (4,373) Profit (loss) for the period 4,003 23,758
======== ======== ========= ===================================== ========= ========
Other comprehensive income
Items that may be reclassified
subsequently to profit
or loss
(177) (3,434) (3,496) Currency translation differences(a) (6,838) (1,608)
Exchange gains (losses)
on translation of foreign
operations reclassified
to gain or loss on sale
of
13 (3) 54 business and fixed assets 51 22
Available-for-sale investments
- - - marked to market (1) (172)
Available-for-sale investments
reclassified to the
- - - income statement 1 (523)
Cash flow hedges marked
62 (144) (111) to market(b) (155) (2,000)
Cash flow hedges reclassified
3 (21) 17 to the income statement (73) 4
Cash flow hedges reclassified
(8) (8) - to the balance sheet (11) 17
Share of items relating
to equity-accounted entities,
- (144) (2,418) net of tax(a) (2,584) (24)
Income tax relating to
(23) (13) 151 items that may be reclassified 147 147
======== ======== ========= ===================================== ========= ========
(130) (3,767) (5,803) (9,463) (4,137)
======== ======== ========= ===================================== ========= ========
Items that will not be
reclassified to profit
or loss
Remeasurements of the
net pension and other post-
retirement benefit liability
2,298 (1,051) (2,825) or asset (4,590) 4,764
Share of items relating
to equity-accounted entities,
2 - (1) net of tax 4 2
Income tax relating to
items that will not be
(676) 257 856 reclassified 1,334 (1,521)
======== ======== ========= ===================================== ========= ========
1,624 (794) (1,970) (3,252) 3,245
======== ======== ========= ===================================== ========= ========
1,494 (4,561) (7,773) Other comprehensive income (12,715) (892)
======== ======== ========= ===================================== ========= ========
2,592 (3,237) (12,146) Total comprehensive income (8,712) 22,866
======== ======== ========= ===================================== ========= ========
Attributable to
2,533 (3,257) (12,155) BP shareholders (8,903) 22,574
59 20 9 Non-controlling interests 191 292
======== ======== ========= ===================================== ========= ========
2,592 (3,237) (12,146) (8,712) 22,866
======== ======== ========= ===================================== ========= ========
(a) Fourth quarter and full year 2014 are principally
affected by a weakening of the rouble compared to
the US dollar.
(b) Full year 2013 includes $2,061 million loss relating
to the contracts to acquire Rosneft shares.
Top of page 13
Financial statements (continued)
Group statement of changes in equity
BP
shareholders' Non-controlling Total
$ million equity interests equity
============== ================ ========
At 1 January 2014 129,302 1,105 130,407
========================================= ============== ================ ========
Total comprehensive income (8,903) 191 (8,712)
Dividends (5,850) (255) (6,105)
Repurchases of ordinary share
capital (3,366) - (3,366)
Share-based payments, net of
tax 185 - 185
Share of equity-accounted entities'
changes in equity, net of tax 73 - 73
Transactions involving non-controlling
interests - 160 160
========================================= ============== ================ ========
At 31 December 2014 111,441 1,201 112,642
========================================= ============== ================ ========
BP
shareholders' Non-controlling Total
$ million equity interests equity
============== ================ ========
At 1 January 2013 118,546 1,206 119,752
========================================= ============== ================ ========
Total comprehensive income 22,574 292 22,866
Dividends (5,441) (469) (5,910)
Repurchases of ordinary share
capital (6,923) - (6,923)
Share-based payments, net of
tax 473 - 473
Share of equity-accounted entities'
changes in equity, net of tax 73 - 73
Transactions involving non-controlling
interests - 76 76
========================================= ============== ================ ========
At 31 December 2013 129,302 1,105 130,407
========================================= ============== ================ ========
Top of page 14
Financial statements (continued)
Group balance sheet
31 December 31 December
$ million 2014 2013
============ ============
Non-current assets
Property, plant and equipment 130,692 133,690
Goodwill 11,868 12,181
Intangible assets 20,907 22,039
Investments in joint ventures 8,753 9,199
Investments in associates 10,403 16,636
Other investments 1,228 1,565
========================================= ============ ============
Fixed assets 183,851 195,310
Loans 659 763
Trade and other receivables 4,787 5,985
Derivative financial instruments 4,442 3,509
Prepayments 964 922
Deferred tax assets 2,309 985
Defined benefit pension plan surpluses 31 1,376
========================================= ============ ============
197,043 208,850
============ ============
Current assets
Loans 333 216
Inventories 18,373 29,231
Trade and other receivables 31,038 39,831
Derivative financial instruments 5,165 2,675
Prepayments 1,424 1,388
Current tax receivable 837 512
Other investments 329 467
Cash and cash equivalents 29,763 22,520
========================================= ============ ============
87,262 96,840
Total assets 284,305 305,690
========================================= ============ ============
Current liabilities
Trade and other payables 40,118 47,159
Derivative financial instruments 3,689 2,322
Accruals 7,102 8,960
Finance debt 6,877 7,381
Current tax payable 2,011 1,945
Provisions 3,818 5,045
========================================= ============ ============
63,615 72,812
Non-current liabilities
Other payables 3,587 4,756
Derivative financial instruments 3,199 2,225
Accruals 861 547
Finance debt 45,977 40,811
Deferred tax liabilities 13,893 17,439
Provisions 29,080 26,915
Defined benefit pension plan and other
post-retirement benefit plan deficits 11,451 9,778
========================================= ============ ============
108,048 102,471
============ ============
Total liabilities 171,663 175,283
========================================= ============ ============
Net assets 112,642 130,407
========================================= ============ ============
Equity
BP shareholders' equity 111,441 129,302
Non-controlling interests 1,201 1,105
========================================= ============ ============
112,642 130,407
============ ============
Top of page 15
Financial statements (continued)
Condensed group cash flow statement
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ========= =========
Operating activities
1,199 2,611 (8,078) Profit (loss) before taxation 4,950 30,221
Adjustments to reconcile
profit (loss) before taxation
to
net cash provided by operating
activities
Depreciation, depletion
and amortization and
exploration expenditure
5,633 4,602 5,215 written off 18,192 16,220
Impairment and (gain)
loss on sale of businesses
and
431 642 6,607 fixed assets 8,070 (11,154)
Earnings from equity-accounted
entities, less
(855) 527 (224) dividends received (1,461) (1,798)
Net charge for interest
and other finance expense,
(40) 114 49 less net interest paid 330 323
(77) 153 (58) Share-based payments 379 297
Net operating charge for
pensions and other post-
retirement benefits, less
contributions and benefit
payments for unfunded
(483) (92) (664) plans (963) (920)
Net charge for provisions,
(84) 705 551 less payments 1,119 1,061
Movements in inventories
and other current and
non-current assets and
1,110 1,744 4,842 liabilities(a) 6,925 (6,843)
(1,420) (1,607) (993) Income taxes paid (4,787) (6,307)
======== ======== ======== ======================================= ========= =========
Net cash provided by operating
5,414 9,399 7,247 activities 32,754 21,100
======== ======== ======== ======================================= ========= =========
Investing activities
(6,798) (5,256) (5,900) Capital expenditure (22,546) (24,520)
Acquisitions, net of cash
(67) (3) (118) acquired (131) (67)
(299) (78) (65) Investment in joint ventures (179) (451)
(39) (73) (128) Investment in associates (336) (4,994)
Proceeds from disposal
372 391 224 of fixed assets 1,820 18,115
Proceeds from disposal
of businesses, net of
5 194 880 cash disposed 1,671 3,884
52 9 48 Proceeds from loan repayments 127 178
======== ======== ======== ======================================= ========= =========
Net cash provided by (used
(6,774) (4,816) (5,059) in) investing activities (19,574) (7,855)
======== ======== ======== ======================================= ========= =========
Financing activities
Net issue (repurchase)
(2,265) (1,623) (793) of shares (4,589) (5,358)
Proceeds from long-term
2,467 2,780 2,779 financing 12,394 8,814
Repayments of long-term
(4,212) (388) (2,937) financing (6,282) (5,959)
Net increase (decrease)
(268) (527) (186) in short-term debt (693) (2,019)
Net increase (decrease)
3 - 9 in non-controlling interests 9 32
Dividends
(1,174) (1,122) (1,729) paid - BP shareholders (5,850) (5,441)
(213) (62) (40) - non-controllinginterests (255) (469)
======== ======== ======== ========== =========================== ========= =========
Net cash provided by (used
(5,662) (942) (2,897) in) financing activities (5,266) (10,400)
======== ======== ======== ======================================= ========= =========
Currency translation differences
relating to cash and
43 (418) (257) cash equivalents (671) 40
======== ======== ======== ======================================= ========= =========
Increase (decrease) in
(6,979) 3,223 (966) cash and cash equivalents 7,243 2,885
======== ======== ======== ======================================= ========= =========
Cash and cash equivalents
29,499 27,506 30,729 at beginning of period 22,520 19,635
Cash and cash equivalents
22,520 30,729 29,763 at end of period 29,763 22,520
======== ======== ======== ======================================= ========= =========
(a) Includes
482 1,560 4,904 Inventory holding losses 6,157 190
Fair value gain on embedded
(55) (113) (187) derivatives (430) (459)
Movements related to the
Gulf of Mexico oil spill
(33) (846) 3 response (1,454) (2,099)
===== ====== ====== ============================ ======== ========
Inventory holding losses and fair value gains on
embedded derivatives are also included within profit
(loss) before taxation. See Note 2 for further information
on the cash flow impacts of the Gulf of Mexico oil
spill.
Top of page 16
Financial statements (continued)
Notes
1. Basis of preparation
The results for the interim periods and for the year ended 31 December 2014 are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2013 included in BP Annual Report and Form 20-F 2013.
After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.The directors draw attention to Note 2 on pages 16-22 which describes the uncertainties surrounding the amounts and timings of liabilities arising from the Gulf of Mexico oil spill. It is likely that the independent auditor's report in BP Annual Report and Form 20-F 2014 will contain an emphasis of matter paragraph in relation to this matter.
BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB; however, the differences have no impact on the group's consolidated financial statements for the periods presented.
The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing BP Annual Report and Form 20-F 2014, which do not differ significantly from those used in BP Annual Report and Form 20-F 2013.
In BP Annual Report and Form 20-F 2013 we disclosed a significant estimate or judgement in relation to the provision for penalties under the US Clean Water Act arising from the Gulf of Mexico oil spill, which had been estimated based on the assumption that BP did not act with gross negligence or engage in wilful misconduct. However, in September 2014 the district court ruled that the discharge of oil was the result of BP's gross negligence and wilful misconduct. No adjustment has been made to the provision and a contingent liability has been disclosed in relation to the potential for a higher penalty due to this ruling. See Note 2 for further information.
In BP Annual Report and Form 20-F 2013 we disclosed a significant estimate or judgement in relation to exploration and appraisal expenditure which is capitalized and is subject to regular technical, commercial and management review on at least an annual basis to confirm the continued intent to develop, or otherwise extract value from, the discovery. Under IFRS 6 'Exploration for and Evaluation of Mineral Resources', one of the facts and circumstances which indicates that an entity should test such assets for impairment is that the period for which the entity has a right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.
BP has leases in the Gulf of Mexico making up a prospect, some with terms which were scheduled to expire at the end of 2013 and some with terms which were scheduled to expire at the end of 2014. A significant proportion of our capitalized exploration and appraisal costs in the Gulf of Mexico relate to this prospect. This prospect requires the development of subsea technology to ensure that the hydrocarbons can be extracted safely. BP is in negotiation with the US Bureau of Safety and Environmental Enforcement in relation to seeking extension of these leases so that the discovered hydrocarbons can be developed. BP remains committed to developing this prospect and expects that the leases will be renewed and, therefore, continues to carry the capitalized costs on its balance sheet. See also Notes 10 and 16 in BP Annual Report and Form 20-F 2013 - Financial statements.
2. Gulf of Mexico oil spill
(a) Overview
As a consequence of the Gulf of Mexico oil spill, BP continues to incur various costs and has also recognized liabilities for future costs. The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2013 - Financial statements - Note 2 and Legal proceedings on page 257 and on page 33 of this report.
The group income statement includes a pre-tax charge of $477 million for the fourth quarter and $819 million for the full year in relation to the Gulf of Mexico oil spill. The fourth-quarter charge reflects an increased provision for litigation costs, additional business economic loss claims and the ongoing costs of the Gulf Coast Restoration Organization. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $43,495 million.
Top of page 17
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The cumulative income statement charge does not include amounts for obligations that BP currently considers are not possible to measure reliably. For further information, including developments in relation to the interpretation of business economic loss claims under the Plaintiffs' Steering Committee (PSC) settlement, see Provisions below.
The total amounts that will ultimately be paid by BP in relation to all the obligations relating to the incident are subject to significant uncertainty and the ultimate exposure and cost to BP will be dependent on many factors, as discussed under Provisions and contingent liabilities below, including in relation to any new information or future developments. These could have a material impact on our consolidated financial position, results and cash flows.
The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
Income statement
Production and manufacturing
179 33 468 expenses 781 430
======== ======== ======== ============================= ====== ======
Profit (loss) before
(179) (33) (468) interest and taxation (781) (430)
10 10 9 Finance costs 38 39
======== ======== ======== ============================= ====== ======
Profit (loss) before
(189) (43) (477) taxation (819) (469)
80 45 163 Taxation 262 73
======== ======== ======== ============================= ====== ======
Profit (loss) for the
(109) 2 (314) period (557) (396)
======== ======== ======== ============================= ====== ======
$ million 31 December 31 December
2014 2013
============ ============
Balance sheet
Current assets
Trade and other receivables 1,154 2,457
Current liabilities
Trade and other payables (655) (1,030)
Provisions (1,702) (2,951)
======================================= ============ ============
Net current assets (liabilities) (1,203) (1,524)
======================================= ============ ============
Non-current assets
Other receivables 2,701 2,442
Non-current liabilities
Other payables (2,412) (2,986)
Accruals (169) -
Provisions (6,903) (6,395)
Deferred tax 1,723 2,748
======================================= ============ ============
Net non-current assets (liabilities) (5,060) (4,191)
======================================= ============ ============
Net assets (liabilities) (6,263) (5,715)
======================================= ============ ============
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Cash flow statement
- Operating activities
Profit (loss) before
(189) (43) (477) taxation (819) (469)
Adjustments to reconcile
profit (loss) before
taxation to net cash
provided by
operating activities
Net charge for interest
and other finance
expense, less net
10 10 9 interest paid 38 39
Net charge for provisions,
11 586 334 less payments 939 1,129
Movements in inventories
and other current
and non-current assets
(33) (846) 3 and liabilities (1,454) (2,099)
======== ======== ======== =========================== ======== ========
(201) (293) (131) Pre-tax cash flows (1,296) (1,400)
======== ======== ======== =========================== ======== ========
Top of page 18
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an inflow of $304 million and outflow of $9 million in the fourth quarter and full year of 2014 respectively. For the same periods in 2013, the amounts were an inflow of $120 million and an outflow of $73 million respectively.
Trust fund
BP established the Deepwater Horizon Oil Spill Trust (the Trust), funded in the amount of $20 billion, to satisfy legitimate individual and business claims, state and local government claims resolved by BP, final judgments and settlements, state and local response costs, and natural resource damages and related costs. Fines and penalties are not covered by the trust fund.
The funding of the Trust was completed in 2012. The obligation to fund the $20-billion trust fund, adjusted to take account of the time value of money,was recognized in full in 2010 and charged to the income statement. An asset has been recognized representing BP's right to receive reimbursement from the trust fund. This is the portion of the estimated future expenditure provided for that will be settled by payments from the trust fund.
The table below shows movements in the reimbursement asset during the period to 31 December 2014. At 31 December 2014, $3,855 million of the provisions and payables are eligible to be paid from the Trust. The reimbursement asset is recorded within other receivables on the balance sheet apportioned between current and non-current elements.
Fourth
quarter Year
$ million 2014 2014
======== ========
Opening balance 4,855 4,899
Net increase in provision for items
covered by the trust fund - 662
Amounts paid directly by the trust
fund (1,000) (1,706)
======================================== ======== ========
At 31 December 2014 3,855 3,855
======================================== ======== ========
Of which - current 1,154 1,154
- non-current 2,701 2,701
======================= ======== ========
During the third quarter, cumulative charges to be paid by the Trust reached $20 billion. Subsequent additional costs, over and above those provided within the $20 billion, are being expensed to the income statement as incurred.
As at 31 December 2014, the aggregate cash balances in the Trust and the associated qualifying settlement funds amounted to $5.1 billion, including $1.1 billion remaining in the seafood compensation fund which has yet to be distributed and $0.4 billion held for natural resource damage early restoration. When the cash balances in the trust fund are exhausted, payments in respect of legitimate claims and other costs will be made directly by BP.
(b) Provisions and contingent liabilities
BP has recorded certain provisions and disclosed certain contingent liabilities as a consequence of the Gulf of Mexico oil spill. These are described below and in more detail in BP Annual Report and Form 20-F 2013 - Financial statements - Note 2.
Provisions
BP has recorded provisions relating to the Gulf of Mexico oil spill in relation to environmental expenditure, litigation and claims, and Clean Water Act penalties. Movements in each class of provision during the fourth quarter and full year are presented in the tables below.
Litigation Clean
and Water
Act
$ million Environmental claims penalties Total
============== =========== ========== ========
At 1 October 2014 1,740 4,020 3,510 9,270
Net increase in provision - 435 - 435
Change in discount
rate 2 - - 2
Unwinding of discount 1 - - 1
Utilization - paid by BP (21) (82) - (103)
- paid by the
trust fund (581) (419) - (1,000)
=============== ============== =========== ========== ========
At 31 December 2014 1,141 3,954 3,510 8,605
============================== ============== =========== ========== ========
Of which - current 528 1,174 - 1,702
- non-current 613 2,780 3,510 6,903
=============== ============== =========== ========== ========
Top of page 19
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Litigation Clean
and Water
Act
Environmental claims penalties Total
============== =========== ========== ========
$ million
At 1 January 2014 1,679 4,157 3,510 9,346
Net increase in provision 190 1,137 - 1,327
Change in discount
rate 2 - - 2
Unwinding of discount 1 - - 1
Utilization - paid by BP (83) (307) - (390)
- paid by the
trust fund (648) (1,033) - (1,681)
=============== =============== ============== =========== ========== ========
At 31 December 2014 1,141 3,954 3,510 8,605
=============================== ============== =========== ========== ========
Environmental
The environmental provision includes amounts for BP's commitment to fund the Gulf of Mexico Research Initiative, estimated natural resource damage assessment costs and early natural resource damage restoration projects under the $1-billion framework agreement with natural resource trustees for the US and five Gulf coast states. In October 2014, phase three of the natural resource damage early restoration projects was formally approved (comprising $627 million of approved project spend, of which $563 million has been paid) under the framework agreement. Until the size, location and duration of the impact is assessed, it is not possible to estimate reliably the amounts or timing of any further natural resource damages claims, therefore no additional amounts have been provided for these items and they are disclosed as a contingent liability.
Litigation and claims
The litigation and claims provision includes amounts that can be estimated reliably for the future cost of settling claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources (Individual and Business Claims), and claims by state and local government entities for removal costs, damage to real or personal property, loss of government revenue and increased public services costs under the Oil Pollution Act of 1990 and other legislation (State and Local Claims), except as described under Contingent liabilities below. Claims administration costs, legal and litigation costs have also been provided for.
BP has provided for its best estimate of the cost associated with the PSC settlement agreements with the exception of the cost of business economic loss claims, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility. As disclosed in BP Annual Report and Form 20-F 2013, as part of its monitoring of payments made by the Deepwater Horizon Court Supervised Settlement Program (DHCSSP), BP identified multiple business economic loss claim determinations that appeared to result from an interpretation of the Economic and Property Damages Settlement Agreement (EPD Settlement Agreement) by the claims administrator that BP believes was incorrect. See Legal proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013 and page 33 of this report for further details on the settlements with the PSC and related matters.
Management believes that no reliable estimate can currently be made of any business economic loss claims (i) not yet received; (ii) received, but not yet processed; or (iii) processed, but not yet paid, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility. The inability to estimate reliably such claims is due to uncertainty regarding both the volume of such claims and the average value per claim.
In respect of uncertainty regarding the volume of claims, in December 2014, the US Supreme Court declined to hear BP's appeal of the district court ruling that the EPD Settlement Agreement contained no causation requirement beyond the revenue and related tests set forth in that agreement. This resolution, however, does not reduce uncertainty regarding the volume of claims in the short-term, since it is possible that additional claims will be made. In addition, a claims submission deadline of 8 June 2015 has now been set, which may lead to an increase in the rate of claims received until the deadline, compounding management's inability to estimate the total volume of claims that will be made.
In respect of uncertainty regarding the average value per claim, a small proportion of the filed claims have been determined under the revised policy for the matching of revenue and expenses for business economic loss claims (introduced in May 2014) and disputes, disagreements and uncertainties regarding the proper application of the revised policy to particular claims and categories of claims continue to arise as the claims administrator has begun applying the revised policy. Furthermore, there have been no, or only a small number of, claim determinations made under some of the specialised frameworks that have been put in place for particular industries and so determinations to date may not be representative of the total population of claims. In addition, due to a data secrecy order, detailed data about claims that have not yet been determined is not currently available to BP and so it is not possible to review claim demographics or identify potential populations for each category of claim.
Top of page 20
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
There is therefore very little data to build up a track record of claims determinations under the policies and protocols that are now being applied following resolution of the matching and causation issues. We therefore cannot estimate future trends of the number and proportion of claims that will be determined to be eligible, nor can we estimate the value of such claims. A provision for such business economic loss claims will be established when these uncertainties are resolved and a reliable estimate can be made of the liability.
The current estimate for the total cost of those elements of the PSC settlement that BP considers can be reliably estimated is $9.9 billion. The DHCSSP has issued eligibility notices, most of which are disputed by BP, in respect of business economic loss claims of approximately $400 million which have not been provided for. The majority of these claims are being re-assessed using the new matching policy. Furthermore, a significant number of business economic loss claims have been received but have not yet been processed, and further claims are likely to be received. The total cost of the PSC settlement is likely to be significantly higher than the amount recognized to date of $9.9 billion because the current estimate does not reflect business economic loss claims not yet received, or received but not yet processed, or processed but not yet paid, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility.
The provision recognized for litigation and claims includes an estimate for State and Local Claims. Although the provision recognized is BP's current reliable best estimate of the amount required to settle these obligations, significant uncertainty exists in relation to the outcome of any litigation proceedings and the amount of claims that will become payable by BP. See Legal proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013 and Contingent liabilities below for further details.
Significant uncertainties exist in relation to the amount of claims that are to be paid and will become payable, including claims payable under the DHCSSP and State and Local Claims. There is significant uncertainty in relation to the amounts that ultimately will be paid in relation to current claims, and the number, type and amounts payable for claims not yet reported as described above and in Legal proceedings on page 33 and the outcomes of any further litigation including in relation to potential opt-outs from the PSC settlement or otherwise. There is also uncertainty as to the cost of administering the claims process under the DHCSSP.
Clean Water Act penalties
A provision of $3,510 million was recognized in 2010 for estimated civil penalties under Section 311 of the Clean Water Act. The Clean Water Act penalty is calculated by multiplying the number of barrels of oil spilled by a penalty rate per barrel. The number of barrels of oil spilled was determined by using the mid-point in the range of estimates (3.2 million barrels). A penalty rate of $1,100 per barrel was applied, the statutory maximum penalty in the absence of gross negligence or wilful misconduct.
In January 2015, the district court issued its decision in the Phase 2 trial that 3.19 million barrels of oil were discharged into the Gulf of Mexico and therefore subject to a Clean Water Act penalty. This amount is consistent with the number of barrels BP has used to calculate the provision. In addition, the district court found that BP was not grossly negligent in its source control efforts.
In September 2014, the district court issued its decision in the Phase 1 trial that the discharge of oil was the result of the gross negligence and wilful misconduct of BP Exploration & Production Inc. (BPXP) and that BPXP is therefore subject to enhanced civil penalties. The statutory maximum penalty is up to $4,300 per barrel of oil discharged where gross negligence or wilful misconduct is proven. BP does not believe that the evidence at trial supports a finding of gross negligence and wilful misconduct and in December 2014 filed notice of appeal of the Phase 1 ruling.
BP continues to believe that a provision of $3,510 million represents a reliable estimate of the amount of the liability if the appeal is successful and this provision, calculated on the basis of the previous assumptions, has been maintained in the accounts.
If BP is unsuccessful in its appeal, and the ruling of gross negligence and wilful misconduct is upheld, the maximum penalty that could be imposed is up to $4,300 per barrel. Based upon this penalty rate and the district court's ruling on the number of barrels spilled, the maximum penalty could be up to $13.7 billion.
However, in assessing the amount of the penalty, the court is directed to consider the following statutory penalty factors: 'the seriousness of the violation or violations, the economic benefit to the violator, if any, resulting from the violation, the degree of culpability involved, any other penalty for the same incident, any history of prior violations, the nature, extent, and degree of success of any efforts of the violator to minimize or mitigate the effects of the discharge, the economic impact of the penalty on the violator, and any other matters as justice may require'. The court has wide discretion in deciding how to apply these factors to determine the penalty and what weighting to ascribe to different factors. BP is therefore unable to ascribe probabilities to possible outcomes within the range of potential penalties and cannot determine a reliable estimate for any additional penalty which might apply should the gross negligence finding be upheld. The trial phase to determine the amount of the Clean Water Act penalty commenced on 20 January 2015.
Top of page 21
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The amount that may become payable by BP is subject to a very high level of uncertainty since it will depend on the outcome of BP's appeal as well as what is determined by the district court with respect to the application of statutory penalty factors as noted above. The court has wide discretion in the application of statutory penalty factors. The timing of any payment is also uncertain.
Given the significant uncertainty, the very wide range of possible outcomes if BP is unsuccessful in its appeal of the September ruling, and the inability to ascribe probabilities to possible outcomes within the range, management is not able to estimate reliably any further liability for the Clean Water Act penalty arising in the event that BP is not successful in its appeal. A contingent liability is therefore disclosed. See Contingent liabilities below for further information.
See BP Annual Report and Form 20-F 2013 - Financial statements - Note 2 for further details and Legal proceedings on pages 257-265 and on page 33 of this report.
Provision movements and analysis of income statement charge
A net increase in provisions of $435 million for the fourth quarter ($1,327 million for the full year) arises due to increases in the provision for litigation costs and the provision for business economic loss claims. The increase in provisions for the year also includes increases in estimated claims administration and legal costs.
Expenses incurred that are eligible to be paid from the Trust exceeded the Trust headroom by $260 million during the year.
Fourth Cumulative
quarter Year since
the
$ million 2014 2014 incident
====== ===========
Environmental costs 2 192 3,223
Spill response costs - - 14,304
Litigation and claims costs 435 1,137 26,780
Clean Water Act penalties -
amount provided - - 3,510
Other costs charged directly
to the income statement 31 114 1,257
Recoveries credited to the income
statement - - (5,681)
Charge (credit) related to the
trust fund - (662) (137)
Other costs of the trust fund - - 8
====================================== ======== ====== ===========
Loss before interest and taxation 468 781 43,264
Finance - related to the trust
costs funds - - 137
- not related to the
trust funds 9 38 94
=========================== ======== ====== ===========
Loss before taxation 477 819 43,495
====================================== ======== ====== ===========
Further information on provisions is provided in BP Annual Report and Form 20-F 2013 - Financial statements - Note 2.
Contingent liabilities
BP currently considers that it is not possible to measure reliably other obligations arising from the incident, namely:
-- Any obligation in relation to natural resource damages claims or associated legal costs (except for the estimated costs of the assessment phase and the costs relating to early restoration agreements referred to above).
-- Claims asserted in civil litigation, including any further litigation through excluded parties from the PSC settlement, including as set out in Legal proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013 and page 33 of this report.
-- The cost of business economic loss claims under the PSC settlement not yet received, or received but not yet processed, or processed but not yet paid (except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility).
-- Any further obligation that may arise from State and Local Claims. -- Any obligation that may arise from securities-related litigation.
-- Any obligation in relation to any further liability for the Clean Water Act penalty arising in the event that BP is not successful in its appeal of the Phase 1 ruling.
-- Any obligation in relation to other potential private or governmental litigation, fines or penalties (except for those items provided for as described above under Provisions).
Top of page 22
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
It is not practicable to estimate the magnitude or possible timing of payment of these contingent liabilities.
The magnitude and timing of all possible obligations in relation to the Gulf of Mexico oil spill continue to be subject to a very high degree of uncertainty.
See also BP Annual Report and Form 20-F 2013 - Financial statements - Note 2.
3. Impairment of fixed assets
Included within the line item in the income statement for Impairment and losses on sale of businesses and fixed assets is a net impairment loss for the fourth quarter and full year of $6,491 million and $8,216 million respectively. The fourth-quarter net impairment loss comprised $5,663 million in Upstream, $517 million in Downstream, and $311 million in Other businesses and corporate. The full-year net impairment loss comprised $6,635 million in Upstream, $1,264 million in Downstream, and $317 million in Other businesses and corporate.
The main elements of Upstream impairment losses were in the North Sea (fourth quarter 2014 $4,518 million, and full year 2014 $4,774 million) and in Angola (fourth quarter and full year 2014 $968 million).
The impairments arose for various reasons, including the impact of a lower price environment in the near term, technical reserves revisions, and increases in expected decommissioning cost estimates.
4. Analysis of replacement cost profit before interest and tax and reconciliation to
profit before taxation
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
2,537 3,311 (3,085) Upstream 8,934 16,657
(360) 1,231 780 Downstream 3,738 2,919
- - - TNK-BP(a) - 12,500
1,058 107 451 Rosneft(b) 2,100 2,153
Other businesses and
(605) (432) (647) corporate (2,010) (2,319)
======== ======== ======== =========================== ======== ========
2,630 4,217 (2,501) 12,762 31,910
Gulf of Mexico oil
(179) (33) (468) spill response (781) (430)
Consolidation adjustment
(240) 370 257 - UPII* 641 579
======== ======== ======== =========================== ======== ========
RC profit (loss) before
2,211 4,554 (2,712) interest and tax 12,622 32,059
Inventory holding gains
(losses)*
3 1 (80) Upstream (86) 4
(480) (1,566) (4,844) Downstream (6,100) (194)
(157) (20) (61) Rosneft (net of tax) (24) (100)
======== ======== ======== =========================== ======== ========
Profit (loss) before
1,577 2,969 (7,697) interest and tax 6,412 31,769
255 285 299 Finance costs 1,148 1,068
Net finance expense
relating to pensions
and other post-retirement
123 73 82 benefits 314 480
======== ======== ======== =========================== ======== ========
Profit (loss) before
1,199 2,611 (8,078) taxation 4,950 30,221
======== ======== ======== =========================== ======== ========
RC profit (loss) before
interest and tax*(c)
(299) 1,800 683 US 5,251 3,114
2,510 2,754 (3,395) Non-US 7,371 28,945
======== ======== ======== =========================== ======== ========
2,211 4,554 (2,712) 12,622 32,059
======== ======== ======== =========================== ======== ========
(a) BP ceased equity accounting for its share of
TNK-BP's earnings from 22 October 2012. Full
year 2013 includes the gain arising on the disposal
of BP's interest in TNK-BP.
(b) BP's investment in Rosneft is accounted under
the equity method from 21 March 2013. See Rosneft
on page 8 for further information.
(c) A minor amendment has been made to the analysis
by region for the comparative periods in 2013.
Top of page 23
Financial statements (continued)
Notes
5. Sales and other operating revenues
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
By segment
18,928 15,879 15,800 Upstream 65,424 70,374
85,582 87,068 65,249 Downstream 323,486 351,195
Other businesses and
517 530 616 corporate 1,989 1,805
======== ======== ======== ========================== ======== ========
105,027 103,477 81,665 390,899 423,374
======== ======== ======== ========================== ======== ========
Less: sales and other
operating revenues
between segments
10,838 9,427 8,270 Upstream 36,643 42,327
256 (73) (814) Downstream (173) 1,045
Other businesses and
216 219 212 corporate 861 866
======== ======== ======== ========================== ======== ========
11,310 9,573 7,668 37,331 44,238
======== ======== ======== ========================== ======== ========
Third party sales and
other operating revenues
8,090 6,452 7,530 Upstream 28,781 28,047
85,326 87,141 66,063 Downstream 323,659 350,150
Other businesses and
301 311 404 corporate 1,128 939
======== ======== ======== ========================== ======== ========
Total third party sales
and other operating
93,717 93,904 73,997 revenues 353,568 379,136
======== ======== ======== ========================== ======== ========
By geographical area(a)
32,267 34,678 27,300 US 132,310 137,539
70,139 66,402 51,933 Non-US 251,943 280,317
======== ======== ======== ========================== ======== ========
102,406 101,080 79,233 384,253 417,856
Less: sales and other
operating revenues
8,689 7,176 5,236 between areas 30,685 38,720
======== ======== ======== ========================== ======== ========
93,717 93,904 73,997 353,568 379,136
======== ======== ======== ========================== ======== ========
(a) A minor amendment has been made to the analysis
by region for the comparative periods in 2013.
6. Production and similar taxes
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
299 140 56 US 690 1,112
1,192 604 356 Non-US 2,268 5,935
======== ======== ======== ========== ====== ======
1,491 744 412 2,958 7,047
======== ======== ======== ========== ====== ======
Top of page 24
Financial statements (continued)
Notes
7. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit (loss) for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. During the quarter the company repurchased 105 million ordinary shares at a cost of $715 million as part of the share buybacks as announced on 29 April 2014. The number of shares in issue is reduced when shares are repurchased, but is not reduced in respect of the period-end commitment to repurchase shares subsequent to the end of the period.
The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.
For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method. If the inclusion of potentially issuable shares would decrease the loss per share, the potentially issuable shares are excluded from the diluted EpS calculation.
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
=========== =========== =========== =========== ===========
Results for the
period
Profit (loss) for
the period attributable
to
1,042 1,290 (4,407) BP shareholders 3,780 23,451
Less: preference
1 - 1 dividend 2 2
=========== =========== =========== =========================== =========== ===========
Profit (loss) attributable
to BP ordinary
1,041 1,290 (4,408) shareholders 3,778 23,449
=========== =========== =========== =========================== =========== ===========
Number of shares
(thousand)(a)
Basic weighted average
number of
18,689,386 18,390,006 18,232,147 shares outstanding 18,385,458 18,931,021
3,114,897 3,065,001 3,038,691 ADS equivalent 3,064,243 3,155,170
=========== =========== =========== =========================== =========== ===========
Weighted average
number of shares
outstanding used
to calculate diluted
18,802,026 18,499,505 18,332,091 earnings per share 18,497,294 19,046,173
3,133,671 3,083,250 3,055,348 ADS equivalent 3,082,882 3,174,362
=========== =========== =========== =========================== =========== ===========
Shares in issue
18,611,489 18,311,461 18,199,882 at period-end 18,199,882 18,611,489
3,101,914 3,051,910 3,033,313 ADS equivalent 3,033,313 3,101,914
=========== =========== =========== =========================== =========== ===========
(a) Excludes treasury shares and the shares held
by the Employee Share Ownership Plans (ESOPs)
and includes certain shares that will be issued
in the future under employee share-based payment
plans.
Top of page 25
Financial statements (continued)
Notes
8. Dividends
Dividends payable
BP today announced a dividend of 10.00 cents per ordinary share expected to be paid in March. The corresponding amount in sterling will be announced on 16 March 2015, calculated based on the average of the market exchange rates for the four dealing days commencing on 10 March 2015. Holders of American Depositary Shares (ADSs) will receive $0.600 per ADS. The dividend is due to be paid on 27 March 2015 to shareholders and ADS holders on the register on 13 February 2015. A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the fourth-quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
Dividends paid
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 2014 2013
======== ======== ======== ======= =======
Dividends paid per
ordinary share
9.500 9.750 10.000 cents 39.000 36.500
5.801 5.959 6.377 pence 23.850 23.399
Dividends paid per
57.00 58.50 60.00 ADS (cents) 234.00 219.00
======== ======== ======== ======================== ======= =======
Scrip dividends
Number of shares issued
78.1 85.2 13.7 (millions) 165.6 202.1
Value of shares issued
602 672 95 ($ million) 1,318 1,470
======== ======== ======== ======================== ======= =======
9. Net debt*
Net debt ratio*
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
48,192 53,610 52,854 Gross debt 52,854 48,192
Fair value asset of
hedges related
(477) (434) (445) to finance debt (445) (477)
======== ======== ======== ==================== ======== ========
47,715 53,176 52,409 52,409 47,715
Less: cash and cash
22,520 30,729 29,763 equivalents 29,763 22,520
======== ======== ======== ==================== ======== ========
25,195 22,447 22,646 Net debt 22,646 25,195
======== ======== ======== ==================== ======== ========
130,407 126,894 112,642 Equity 112,642 130,407
16.2% 15.0% 16.7% Net debt ratio 16.7% 16.2%
======== ======== ======== ==================== ======== ========
Top of page 26
Financial statements (continued)
Notes
9. Net debt* (continued)
Analysis of changes in net debt
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Opening balance
50,284 52,906 53,610 Finance debt 48,192 48,800
Fair value asset of
hedges
related to finance
(734) (1,001) (434) debt (477) (1,700)
Less: cash and cash
29,499 27,506 30,729 equivalents 22,520 19,635
======== ======== ======== ========================== ======== ========
20,051 24,399 22,447 Opening net debt 25,195 27,465
======== ======== ======== ========================== ======== ========
Closing balance
48,192 53,610 52,854 Finance debt 52,854 48,192
Fair value asset of
hedges
related to finance
(477) (434) (445) debt (445) (477)
Less: cash and cash
22,520 30,729 29,763 equivalents 29,763 22,520
======== ======== ======== ========================== ======== ========
25,195 22,447 22,646 Closing net debt 22,646 25,195
======== ======== ======== ========================== ======== ========
Decrease (increase)
(5,144) 1,952 (199) in net debt 2,549 2,270
======== ======== ======== ========================== ======== ========
Movement in cash and
cash equivalents
(excluding exchange
(7,022) 3,641 (709) adjustments) 7,914 2,845
Net cash outflow (inflow)
from financing
(excluding share capital
2,013 (1,865) 344 and dividends) (5,419) (836)
Movement in finance
debt relating to
- - - investing activities - 632
(69) (38) (3) Other movements (435) (192)
======== ======== ======== ========================== ======== ========
Movement in net debt
before
(5,078) 1,738 (368) exchange effects 2,060 2,449
(66) 214 169 Exchange adjustments 489 (179)
======== ======== ======== ========================== ======== ========
Decrease (increase)
(5,144) 1,952 (199) in net debt 2,549 2,270
======== ======== ======== ========================== ======== ========
10. Inventory valuation
A provision of $2,879 million was held at 31 December 2014 ($1,006 million at 30 September 2014 and $322 million at 31 December 2013) to write inventories down to their net realizable value. The net movement charged to the income statement during the fourth quarter 2014 was $1,924 million (third quarter 2014 was a charge of $554 million and fourth quarter 2013 was a charge of $313 million).
11. Statutory accounts
The financial information shown in this publication, which was approved by the Board of Directors on 2 February 2015, is unaudited and does not constitute statutory financial statements. Audited financial information is expected to be published in BP Annual Report and Form 20-F 2014 in early March 2015 and delivered to the Registrar of Companies in due course. BP Annual Report and Form 20-F 2013 has been filed with the Registrar of Companies in England and Wales. The report of the auditor on those accounts was unqualified and contained an emphasis of matter paragraph relating to significant uncertainty over provisions and contingencies related to the Gulf of Mexico oil spill. The report of the auditor on those accounts did not contain a statement under section 498(2) or section 498(3) of the UK Companies Act 2006.
Top of page 27
Additional information
Capital expenditure and acquisitions
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======= =======
By segment
Upstream(a)
1,726 1,510 1,560 US 6,203 6,410
3,752 2,973 3,546 Non-US(b) 13,569 12,705
======== ======== ======== =============================== ======= =======
5,478 4,483 5,106 19,772 19,115
======== ======== ======== =============================== ======= =======
Downstream
360 239 265 US 942 2,535
921 458 984 Non-US 2,164 1,971
======== ======== ======== =============================== ======= =======
1,281 697 1,249 3,106 4,506
======== ======== ======== =============================== ======= =======
Rosneft
- - - Non-US(c) - 11,941
======== ======== ======== =============================== ======= =======
- - - - 11,941
======== ======== ======== =============================== ======= =======
Other businesses and corporate
85 28 38 US 82 231
375 141 341 Non-US 821 819
======== ======== ======== =============================== ======= =======
460 169 379 903 1,050
======== ======== ======== =============================== ======= =======
7,219 5,349 6,734 23,781 36,612
======== ======== ======== =============================== ======= =======
By geographical area(a)
2,171 1,777 1,863 US 7,227 9,176
5,048 3,572 4,871 Non-US(b)(c) 16,554 27,436
======== ======== ======== =============================== ======= =======
7,219 5,349 6,734 23,781 36,612
======== ======== ======== =============================== ======= =======
Included above:
Acquisitions and asset
71 24 150 exchanges 420 71
Other inorganic capital
- - 27 expenditure(b)(c) 469 11,941
======== ======== ======== =============================== ======= =======
(a) A minor amendment has been made to the analysis
by region for the comparative periods in 2013.
(b) Fourth quarter and full year 2014 include $27 million
and $469 million respectively relating to the purchase
of additional 3.3% equity in Shah Deniz, Azerbaijan
and the South Caucasus Pipeline.
(c) The full year 2013 includes $11,941 million relating
to our investment in Rosneft.
Capital expenditure shown in the table above is presented on an accruals basis.
Top of page 28
Additional information (continued)
Non-operating items*
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Upstream
Impairment and gain (loss)
on sale of businesses and
(391) (248) (5,685) fixed assets(a) (6,576) (802)
Environmental and other
1 (59) (1) provisions (60) (20)
Restructuring, integration
- - (100) and rationalization costs (100) -
Fair value gain (loss)
55 113 187 on embedded derivatives 430 459
(866) (307) 42 Other(b) 8 (1,001)
======== ======== ======== =============================== ======== ========
(1,201) (501) (5,557) (6,298) (1,364)
======== ======== ======== =============================== ======== ========
Downstream
Impairment and gain (loss)
on sale of businesses and
(61) (400) (614) fixed assets(a) (1,190) (348)
Environmental and other
7 (128) (5) provisions (133) (134)
Restructuring, integration
(11) (5) (158) and rationalization costs (165) (15)
- - - Fair value gain (loss) - -
on embedded derivatives
(9) (19) (13) Other (82) (38)
======== ======== ======== =============================== ======== ========
(74) (552) (790) (1,570) (535)
======== ======== ======== =============================== ======== ========
TNK-BP
Impairment and gain (loss)
on sale of businesses and
- - - fixed assets - 12,500
- - - Environmental and other - -
provisions
- - - Restructuring, integration - -
and rationalization costs
- - - Fair value gain (loss) - -
on embedded derivatives
- - - Other - -
======== ======== ======== =============================== ======== ========
- - - - 12,500
======== ======== ======== =============================== ======== ========
Rosneft
Impairment and gain (loss)
on sale of businesses and
(19) (3) (19) fixed assets 225 (35)
Environmental and other
(10) - - provisions - (10)
- - - Restructuring, integration - -
and rationalization costs
- - - Fair value gain (loss) - -
on embedded derivatives
- - - Other - -
======== ======== ======== =============================== ======== ========
(29) (3) (19) 225 (45)
======== ======== ======== =============================== ======== ========
Other businesses and corporate
Impairment and gain (loss)
on sale of businesses and
21 6 (308) fixed assets(a) (304) (196)
Environmental and other
(19) (145) (35) provisions (180) (241)
Restructuring, integration
3 - (175) and rationalization costs (176) (3)
- - - Fair value gain (loss) - -
on embedded derivatives
4 - (9) Other (10) 19
======== ======== ======== =============================== ======== ========
9 (139) (527) (670) (421)
======== ======== ======== =============================== ======== ========
Gulf of Mexico oil spill
(179) (33) (468) response (781) (430)
======== ======== ======== =============================== ======== ========
Total before interest and
(1,474) (1,228) (7,361) taxation (9,094) 9,705
(10) (10) (9) Finance costs(c) (38) (39)
======== ======== ======== =============================== ======== ========
(1,484) (1,238) (7,370) Total before taxation (9,132) 9,666
481 440 3,805 Taxation credit (charge)(d) 4,512 867
======== ======== ======== =============================== ======== ========
Total after taxation for
(1,003) (798) (3,565) period (4,620) 10,533
======== ======== ======== =============================== ======== ========
(a) See Note 3 for further information.
(b) Third quarter, fourth quarter and full year 2014
include write-offs of $375 million, $20 million
and $395 million respectively relating to Block
KG D6 in India (see page 5 for further information).
Fourth quarter and full year 2013 include $845 million
relating to the value ascribed to block BM-CAL-13
offshore Brazil, following the acquisition of upstream
assets from Devon Energy in 2011, which was written
off as a result of the Pitanga exploration well
not encountering commercial quantities of oil or
gas.
(c) Finance costs relate to the Gulf of Mexico oil spill.
See Note 2 for further details.
(d) From the first quarter 2014, tax is based on statutory
rates except for non-deductible or non-taxable items.
For earlier periods tax for the Gulf of Mexico oil
spill and certain impairment losses, disposal gains
and fair value gains and losses on embedded derivatives,
is based on statutory rates, except for non-deductible
items; for other items reported for consolidated
subsidiaries, tax is calculated using the group's
discrete quarterly effective tax rate (adjusted
for the items noted above, equity-accounted earnings
and a deferred tax adjustment in the third quarter
2013 relating to a reduction in UK corporation tax
rates). Non-operating items reported within the
equity-accounted earnings of Rosneft are reported
net of income tax.
Top of page 29
Additional information (continued)
Non-GAAP information on fair value accounting effects
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
Favourable (unfavourable)
impact relative to
management's measure of
performance
(114) (87) 226 Upstream 31 (244)
(356) 299 357 Downstream 867 (178)
======== ======== ======== ============================ ====== ======
(470) 212 583 898 (422)
171 (66) (226) Taxation credit (charge)(a) (341) 142
======== ======== ======== ============================ ====== ======
(299) 146 357 557 (280)
======== ======== ======== ============================ ====== ======
(a) From the first quarter 2014, tax is calculated using
statutory rates. For earlier periods tax is calculated
using the group's discrete quarterly effective tax
rate (adjusted for certain non-operating items,
equity-accounted earnings and a deferred tax adjustment
in the third quarter 2013 relating to a reduction
in UK corporation tax rates).
BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in income because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness testing requirements. Therefore, measurement differences in relation to recognition of gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices consistent with the contract maturity.
BP enters into commodity contracts to meet certain business requirements, such as the purchase of crude for a refinery or the sale of BP's gas production. Under IFRS these contracts are treated as derivatives and are required to be fair valued when they are managed as part of a larger portfolio of similar transactions. Gains and losses arising are recognized in the income statement from the time the derivative commodity contract is entered into.
IFRS requires that inventory held for trading be recorded at its fair value using period-end spot prices whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices resulting in measurement differences.
BP enters into contracts for pipelines and storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments, which are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.
The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management's internal measure of performance. Under management's internal measure of performance the inventory and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period, the fair values of certain derivative instruments used to risk manage LNG and oil and gas processing contracts are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management's estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to management's internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== =======
Upstream
Replacement cost profit
(loss) before interest
and tax
adjusted for fair value
2,651 3,398 (3,311) accounting effects 8,903 16,901
Impact of fair value accounting
(114) (87) 226 effects 31 (244)
======== ======== ======== ================================ ====== =======
Replacement cost profit
(loss) before interest
2,537 3,311 (3,085) and tax 8,934 16,657
======== ======== ======== ================================ ====== =======
Downstream
Replacement cost profit
(loss) before interest
and tax
adjusted for fair value
(4) 932 423 accounting effects 2,871 3,097
Impact of fair value accounting
(356) 299 357 effects 867 (178)
======== ======== ======== ================================ ====== =======
Replacement cost profit
(loss) before interest
(360) 1,231 780 and tax 3,738 2,919
======== ======== ======== ================================ ====== =======
Total group
Profit (loss) before interest
and tax adjusted for fair
value
2,047 2,757 (8,280) accounting effects 5,514 32,191
Impact of fair value accounting
(470) 212 583 effects 898 (422)
======== ======== ======== ================================ ====== =======
Profit (loss) before interest
1,577 2,969 (7,697) and tax 6,412 31,769
======== ======== ======== ================================ ====== =======
Top of page 30
Additional information (continued)
Realizations and marker prices
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 2014 2013
======== ======== ======== ====== =======
Average realizations(a)
Liquids* ($/bbl)
89.87 87.26 71.41 US 84.24 91.88
105.23 96.33 71.10 Europe 93.84 104.77
104.60 94.14 66.61 Rest of World 90.19 104.20
98.26 91.42 69.03 BP Average 87.96 99.24
======== ======== ======== ================================= ====== =======
Natural gas ($/mcf)
3.08 3.48 3.30 US 3.80 3.07
9.95 6.41 8.19 Europe 8.18 9.68
6.21 6.15 6.33 Rest of World 6.35 5.97
5.49 5.40 5.54 BP Average 5.70 5.35
======== ======== ======== ================================= ====== =======
Total hydrocarbons* ($/boe)
62.11 60.69 51.92 US 60.37 60.78
93.29 82.16 65.35 Europe 82.63 90.46
63.36 59.91 49.88 Rest of World 58.61 61.72
65.04 61.61 51.53 BP Average 60.85 63.58
======== ======== ======== ================================= ====== =======
Average oil marker prices
($/bbl)
109.24 101.93 76.58 Brent 98.95 108.66
97.59 97.56 73.62 West Texas Intermediate 93.28 97.99
66.07 77.67 57.47 Western Canadian Select 73.65 73.33
104.80 101.47 74.66 Alaska North Slope 97.52 107.67
95.98 97.34 72.69 Mars 92.93 102.23
107.65 100.73 75.19 Urals (NWE - cif) 97.23 107.38
55.95 51.42 38.79 Russian domestic oil 50.40 54.97
======== ======== ======== ================================= ====== =======
Average natural gas marker
prices
3.60 4.07 4.04 Henry Hub gas price ($/mmBtu)(b) 4.43 3.65
UK Gas - National Balancing
67.48 42.17 52.83 Point (p/therm) 50.01 67.99
======== ======== ======== ================================= ====== =======
(a) Based on sales of consolidated subsidiaries only
- this excludes equity-accounted entities.
(b) Henry Hub First of Month Index.
Exchange rates
Fourth Third Fourth
quarter quarter quarter Year Year
2013 2014 2014 2014 2013
======== ======== ======== ====== ======
US dollar/sterling average
1.62 1.67 1.58 rate for the period 1.65 1.56
US dollar/sterling period-end
1.65 1.62 1.56 rate 1.56 1.65
US dollar/euro average
1.36 1.33 1.25 rate for the period 1.33 1.33
US dollar/euro period-end
1.38 1.27 1.22 rate 1.22 1.38
Rouble/US dollar average
32.53 36.25 47.71 rate for the period 38.52 31.87
Rouble/US dollar period-end
32.81 39.48 55.65 rate 55.65 32.81
======== ======== ======== ============================== ====== ======
Top of page 31
Glossary
Consolidation adjustment - UPIIis unrealized profit in inventory arising on inter-segment transactions.
Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information and a reconciliation to GAAP information is provided on page 29.
Hydrocarbons -Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation's production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.
Liquids comprises crude oil, condensate and natural gas liquids.
Net debt and net debt ratio are non-GAAP measures. Net debt includes the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt, for which hedge accounting is claimed. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'. We believe that net debt and net debt ratio provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The net debt ratio is defined as the ratio of finance debt (borrowings, including the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt, plus obligations under finance leases) to the total of finance debt plus shareholders' interest.
Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP's share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
Non-operating itemsare charges and credits arising in consolidated entities and in TNK-BP and Rosneft that are included in the financial statements and that BP discloses separately because it considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the group's reported financial performance. An analysis of non-operating items by region is shown on pages 5, 7 and 9, and by segment and type is shown on page 28.
Organic capital expenditureexcludes acquisitions, asset exchanges, and other inorganic capital expenditure. An analysis of capital expenditure by segment and region is shown on page 27.
Proved reserves replacement ratio is the extent to which production is replaced by proved reserves additions. This ratio is expressed in oil equivalent terms and includes changes resulting from revisions to previous estimates, improved recovery, and extensions and discoveries.
Refining availabilityrepresents Solomon Associates' operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory downtime.
The Refining marker margin (RMM) is the average of regional indicator margins weighted for BP's crude refining capacity in each region. Each regional marker margin is based on product yields and a marker crude oil deemed appropriate for the region. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP's particular refinery configurations and crude and product slate.
Top of page 32
Glossary (continued)
Replacement cost (RC) profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss. RC profit or loss is the measure of profit or loss that is required to be disclosed for each operating segment under International Financial Reporting Standards (IFRS). RC profit or loss for the group is not a recognized GAAP measure. Management believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP's management believes it is helpful to disclose this measure.
Underlying production -2014 underlying production, when compared with 2013, is after adjusting for the effects of the Abu Dhabi onshore concession expiry in January 2014, divestments and entitlement impacts in our production-sharing agreements. 2015 underlying production, when comparing with 2014, is after adjusting for divestments and entitlement impacts in our production-sharing agreements.
Underlying RC profit or lossis RC profit or loss after adjusting for non-operating items and fair value accounting effects. Underlying RC profit or loss and fair value accounting effects are not recognized GAAP measures. See pages 28 and 29 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact.
BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by management to evaluate BP's operating performance and to make financial, strategic and operating decisions and because it may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss for the year attributable to BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and taxation.
Top of page 33
Legal proceedings
The following discussion sets out the material developments in the group's material legal proceedings during the recent period. For a full discussion of the group's material legal proceedings, see pages 257-267 of BP Annual Report and Form 20-F 2013, pages 42-44 of our second-quarter 2014 results announcement and pages 33-36 of our third-quarter 2014 results announcement.
Matters relating to the Deepwater Horizon accident and oil spill (the Incident)
Federal multi-district litigation proceeding in New Orleans (MDL 2179) and related matters
US Department of Justice (DoJ) Action - Liability under Section 311(b)(7)(A) of the Clean Water Act - As previously disclosed, on 8 December 2011, the US brought a motion for partial summary judgment in the DoJ Action seeking, among other things, an order finding that BP Exploration & Production Inc. (BPXP), Transocean Ltd. and Anadarko Petroleum Company (Anadarko) are strictly liable for a civil penalty under Section 311(b)(7)(A) of the Clean Water Act. On 22 February 2012, the federal district court in New Orleans (the District Court) held that the subsurface discharge which occurred during the Incident was from the Macondo well, rather than from the Deepwater Horizon vessel, and that BPXP and Anadarko, and not Transocean Ltd., are strictly liable for civil penalties under Section 311 of the Clean Water Act as owners of the well. On 4 June 2014, the US Court of Appeals for the Fifth Circuit (Fifth Circuit) unanimously affirmed the District Court's 22 February 2012 decision. On 21 July 2014, Anadarko and BPXP filed petitions requesting that all active judges of the Fifth Circuit review the 4 June 2014 decision. On 9 January 2015, the Fifth Circuit denied the petitions on a 7-6 vote. Absent an extension, BPXP's deadline for seeking US Supreme Court review is 9 April 2015.
Trial Phases. On 4 September 2014, the District Court issued its ruling on Findings of Fact and Conclusion of Law for Phase 1 (the Phase 1 Ruling) of the Trial of Liability, Limitation, Exoneration and Fault Allocation in MDL 2179. The District Court found that BPXP, BP America Production Company (BPAPC), Transocean Holdings LLC, Transocean Deepwater Inc., Transocean Offshore Deepwater Drilling Inc. (Transocean, but excluding Transocean Ltd), and Halliburton Energy Services, Inc. (Halliburton) are each liable under general maritime law for the blowout, explosion, and oil spill from the Macondo well.
With respect to the US' claims against BPXP under the Clean Water Act, the District Court found that the discharge of oil was the result of BPXP's gross negligence and wilful misconduct and that BPXP is therefore subject to enhanced civil penalties. The court further found that BPXP was an 'operator' and 'person in charge' of the Macondo well and the Deepwater Horizon vessel for the purposes of the Clean Water Act.
On 2 October 2014, BPXP and BPAPC filed a motion with the District Court to amend the findings in the Phase 1 Ruling, to alter or amend the judgment, or for a new trial on the grounds that the court's allocation of fault and findings of gross negligence and wilful misconduct relied upon testimony which had been excluded from the evidence presented at the Phase 1 trial and as to which BPXP and BPAPC did not have adequate notice and opportunity to present evidence in rebuttal. On 13 November 2014, the court denied BPXP's and BPAPC's motion to amend the Phase 1 Ruling. On 11 December 2014, BPXP and BPAPC filed a notice of appeal of the Phase 1 Ruling to the Fifth Circuit, and subsequently notices of appeal were also filed by the PSC, Transocean, Halliburton and the State of Alabama.
On 15 January 2015, the District Court issued its ruling for Phase 2 of MDL 2179 on the quantification of oil spilled and BP's source control efforts following the accident. The District Court found that 3.19 million barrels of oil were discharged into the Gulf of Mexico and are therefore subject to a Clean Water Act penalty. In addition, the District Court found that BP was not grossly negligent in its source control efforts.
Trial in the penalty phase of MDL 2179 (the Penalty Phase) commenced on 20 January 2015 and is scheduled to last three weeks. In the Penalty Phase, the District Court will determine the amount of civil penalties owed to the US under the Clean Water Act based on the court's rulings (or ultimate determinations on appeal) in Phases 1 and 2, and the application of the penalty factors under the Clean Water Act. On 7 January 2015, the court established a post-trial briefing schedule for the Penalty Phase under which briefing is to be concluded on 24 April 2015. The District Court has wide discretion in its application of statutory penalty factors.
For further information, see pages 257-265 of BP Annual Report and Form 20-F 2013 and Note 2 on page 16.
Plaintiffs' Steering Committee (PSC) Settlements - Deepwater Horizon Court Supervised Settlement Program (DHCSSP) and interpretation of the Economic and Property Damages Settlement Agreement. As previously disclosed, on 1 August 2014, BP filed a petition for certiorari with the US Supreme Court for review of the Fifth Circuit's decision upholding the District Court's ruling that the Economic and Property Damages Settlement Agreement contained no causation requirement beyond the revenue and related tests set forth in an exhibit to that agreement, as well as a related decision by a different panel of the Fifth Circuit interpreting the Economic and Property Damages Settlement Agreement to permit payment to business economic loss claimants whose losses (if any) were not caused by the spill. On 8 December 2014, the US Supreme Court denied that petition. Accordingly, the effective date of the Economic and Property Damages Settlement Agreement is 8 December 2014, and the final deadline for filing all claims other than those that fall under the Seafood Compensation Program is 8 June 2015.
Top of page 34
Legal proceedings (continued)
On 2 September 2014, BP filed a motion seeking an order removing Patrick Juneau from his roles as Claims Administrator and Settlement Trustee for the Economic and Property Damages Settlement. On 10 November 2014, the District Court denied BP's motion. BP appealed this decision to the Fifth Circuit on 18 November 2014 and oral argument has been scheduled for 3 February 2015.
For information about BP's current estimate of the total cost of the PSC settlements, see Note 2 on page 16.
PSC settlements - Seafood Compensation Fund (Fund) - Pursuant to the Economic and Property Damages Settlement, BP paid $2.3 billion to the Fund to help resolve economic loss claims related to the Gulf seafood industry, a portion of which has not yet been distributed. On 19 September 2014, the District Court designated-neutrals appointed to preside over the settlement of the seafood program (the Neutrals) submitted to the District Court their report on Recommendations for Seafood Compensation Program Supplement Distribution (Recommendations). The Neutrals observed that there remain some claims against the Fund which have not been paid, and that BP has filed a motion which seeks a return of part of the Fund, on the basis that it is currently impossible to fully distribute the balance of the Fund. The Neutrals recommended that the Court target a $500-million partial distribution in the second round of payments using a proportionate distribution method. The District Court issued an Order filing the Recommendations into the court record and requiring that any objections to or comments on the Recommendations to be filed by 20 October 2014. BP filed a motion asserting that the District Court should not yet order second round distributions on the basis that, amongst other things, the first round distributions are not complete. On 18 November 2014, the District Court approved the Neutrals' Recommendations.
Medical Benefits Class Action Settlement (Medical Settlement) - The District Court approved the Medical Settlement Agreement (MSA) in a final order and judgment on 11 January 2013. The effective date was 12 February 2014 and the deadline for submitting claims for Specified Physical Conditions (SPC) under the MSA is 12 February 2015. Claimants filed a motion to extend the date to 12 August 2015. The Medical Claims Administrator issued a policy statement, with which BP agrees, classifying physical conditions first diagnosed after 16 April 2012 as Later-Manifested Physical Conditions (LMPC), requiring a class member seeking compensation to file a notice of intent to sue that allows BP the option to mediate the claim in lieu of litigation. On 23 July 2014, the District Court issued an order affirming the policy statement. On 26 November 2014, the District Court directed the Medical Claims Administrator to issue another policy statement regarding the impact of the release provisions under the MSA on the filing of SPC and LMPC claims, which was filed on 17 December. The court's decision to adopt, modify or reject the policy statement is pending.
MDL 2185 and other securities-related litigation
Securities class litigation - The trial of the consolidated securities fraud complaint filed on behalf of a certified class of BP ADS holders who purchased ADSs between 26 April 2010 and 28 May 2010 has been scheduled to commence on 11 January 2016.
ERISA - On 30 March 2012, the federal district court in Houston in MDL 2185 issued a decision granting the defendants' motions to dismiss the ERISA case related to BP share funds in several employee benefit savings plans. Final judgment dismissing the case was entered on 4 September 2012 and, on 25 September 2012, the plaintiffs filed a notice of appeal to the Fifth Circuit. On 15 July 2014, the Fifth Circuit remanded the case to the district court in light of new pleading standards recently set forth by the US Supreme Court. BP opposed that motion. On 15 January 2015, the district court granted in part and denied in part the motion to amend, permitting plaintiffs to amend their complaint to allege some of their proposed claims against certain defendants. Plaintiffs must file an amended complaint by 12 February 2015.
For further information about MDL 2185 and other securities-related litigation, see pages 257-264 of BP Annual Report and Form 20-F 2013, pages 43-44 of our second-quarter 2014 results announcement and page 35 of our third-quarter 2014 results announcement.
Top of page 35
Legal proceedings (continued)
Other legal proceedings
Bolivia - In March 2012 Pan American Energy (PAE) commenced an arbitration proceeding against the Republic of Bolivia (Bolivia) in connection with the expropriation of its shares in Empresa Petrolera Chaco S.A. On 18 December 2014 Bolivia and PAE signed a $357-million settlement agreement and agreed to terminate the arbitration.
California False Claims Act matters - On 4 November 2014 the California Attorney General filed a notice in California state court that it was intervening in a previously-sealed California False Claims Act (CFCA) lawsuit filed by relator Christopher Schroen against BP p.l.c., BP Energy Company, BP Corporation North America Inc., BP Products and BPAPC. On 7 January 2015, the California Attorney General filed a complaint in intervention alleging that BP violated the CFCA and the California Unfair Competition Law by falsely and fraudulently overcharging California state entities for natural gas. The relator's complaint makes similar allegations, in addition to individual claims. The complaints seek treble damages, punitive damages, penalties and injunctive relief.
US Federal Energy Regulatory Commission (FERC) and US Commodity Futures Trading Commission (CFTC) matters - The CFTC is currently investigating certain practices relating to crude oil pipeline nominations procedures on Canadian pipelines. On 17 November 2014, the CFTC Enforcement staff notified BP that it intends to recommend an enforcement action naming certain parties, including several BP entities, alleging violations of the anti-fraud and false reporting provisions of the Commodity Exchange Act in connection with these nomination procedures and related trades. On 17 December 2014 BP submitted a detailed defence responding to the allegations in the notice and challenging the CFTC's jurisdiction over the alleged conduct.
Investigations by the CFTC and the FERC into BP's trading activities continue to be conducted from time to time.
Other matters
During 2014 the US and the EU have imposed sanctions on certain Russian activities, individuals and entities, including Rosneft. To date, these sanctions have had no material adverse impact on BP or Ruhr Oel GmbH.
Top of page 36
Cautionary statement
Cautionary statement regarding forward-looking statements: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events - with respect to the financial condition, results of operation and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as 'will', 'expects', 'is expected to', 'aims', 'should', 'may', 'objective', 'is likely to', 'intends', 'believes', 'anticipates', 'plans', 'we see' or similar expressions. In particular, among other statements, the expected level of organic capital expenditure in 2015; plans regarding the divestment of $10 billion in assets by the end of 2015; the expected quarterly dividend payment and timing of such payment; expectations regarding the underlying effective tax rate during 2015; expectations regarding the 2015 charge for depreciation, depletion and amortization; expectations regarding BP's operatorship in the onshore Nile Delta and future investments in that region; expectations and plans regarding the formation of a new ownership and operating model with Chevron and ConocoPhillips in deepwater Gulf of Mexico; expectations regarding the level of reported production for first quarter 2015 and full year 2015; the expected level of underlying production in full year 2015; expectations regarding the refining environment and the financial impact of refinery turnarounds in 2015; expectations regarding gradual improvement in the petrochemicals margin environment; the expected level of Other businesses and corporate average quarterly charges in 2015; and certain statements regarding the legal and trial proceedings, court decisions, potential investigations and civil actions by regulators, government entities and/or other entities or parties, and the risks associated with such proceedings; are all 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 or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors including the timing of bringing new fields onstream; the timing and level of maintenance and/or turnaround activity; the nature, timing and volume of refinery additions and outages; the timing, quantum and nature of divestments; the receipt of relevant third-party and/or regulatory approvals; future levels of industry product supply, demand and pricing; OPEC quota restrictions; PSA effects; operational problems; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including court decisions, the types of enforcement action pursued and the nature of remedies sought or imposed; the impact on our reputation following the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; the success or otherwise of partnering; the actions of competitors, trading partners, creditors, rating agencies and others; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism, cyber-attacks or sabotage; and other factors discussed under "Principal risks and uncertainties" in our Form 6-K for the period ended 30 June 2014 and under "Risk factors" in BP Annual Report and Form 20-F 2013, each as filed with the US Securities and Exchange Commission.
Notice to investors: BP has received written comments from the US Securities and Exchange Commission regarding its Form 6-K for the fiscal quarter ended 30 September 2014 in a letter dated 17 December 2014.
Contacts
London United States
Press Office David Nicholas Scott Dean
+44 (0)20 7496 4708 +1 630 420 4990
Investor Relations Jessica Mitchell Craig Marshall
bp.com/investors +44 (0)20 7496 4962 +1 281 366 3123
This information is provided by RNS
The company news service from the London Stock Exchange
END
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