BP 2005 Annual Report Download - page 6

4 Making energy more
DEAR SHAREHOLDER We start from the view that the purpose
of business is to satisfy human needs and, in doing so, to
generate profits for investors. For BP, that means providing
energy to fuel human progress and economic growth. It also
means satisfying the need for a sustainable environment.
On many fronts, our performance in 2005 was very strong
but the year was overshadowed by the industrial accident at
our Texas City refinery in March, which caused 15 deaths and
many more injuries. That incident has been the subject of
rigorous and thorough investigation both by our own team and
by external authorities and lessons have been learned. We are
determined to do everything possible to ensure that no such
accident recurs.
In addition to safety, the primary challenge for BP during
2005 was the maintenance of the flow of secure supplies of
energy to our customers in the face of volatile markets and
the instability caused by continued conflict in the Middle East,
terrorism and extreme weather conditions in the US and
elsewhere. Our success in meeting this fundamental element
of our purpose was due to the talent and dedication of our
staff, often working under conditions of severe difficulty.
FINANCIAL PERFORMANCE In terms of financial performance,
2005 was an exceptional year for BP, with profits of
$19.3 billion, representing a return on average capital
employed of 20%. High oil prices, which averaged $54.48
during 2005 against $38.27 in 2004 (dated Brent), contributed
to the result but the underlying performance of the company
is strong. These results reflect not just a positive operating
environment but were the consequence of the long-run
strategic position of the company and improvements in each
part of our business. That performance is described in the
following pages.
BP now produces more than 4 million barrels of oil
equivalent per day of oil and gas for customers across the
world. To sustain supplies and meet the growing levels of
demand that population growth and prosperity are generating,
we continue to invest for the future. Our profits fund not only
the dividends, which we are delighted to have been able to
increase once again during 2005, and the buybacks of shares,
which totalled $11.6 billion during the year, but also the
investment in new developments that will form the basis
of the group’s business for years to come.
Capital expenditure in the exploration and production
segment totalled $10.1 billion in 2005, bringing the total
so far since the turn of the century to more than $50 billion.
That investment is aimed at providing sustainable supplies of
oil and gas and enabling us to develop the extensive base of
proved reserves and identified resources that we have built up
in recent years. In 2005, we added 662 million barrels of oil
and 4.6 trillion cubic feet of natural gas to our booked reserves
for subsidiaries and equity-accounted entities. That success
made 2005 the 13th consecutive year in which we have
replaced, in accordance with UK generally accepted
accounting practice Statement of Recommended Practice
(SORP), 100% or more of the oil and gas we produced.
Exploration success continues to augment this base. Major
new discoveries were made in the deepwater Gulf of Mexico
and Angola.
We have a strong and successful trading business and
a growing presence as a producer and supplier of natural gas,
with a daily output averaging 8.4 billion cubic feet during 2005
from fields in Trinidad and North Africa, as well as the US and
the North Sea.
We are also investing in the refining and marketing
businesses, developing new and strong positions in those
Group chief executive’s review