BP 2007 Annual Report Download - page 199

BP ANNUAL REPORT AND ACCOUNTS 2007 197
9Cashflow
Reconciliation of net cash flow to movement in net debt $ million
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2007 2006 2005
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Increase (decrease) in cash 265 (24) (1)
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Movement in net debt 265 (24) (1)
Net debt at 1 January (21) 3
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Net debt at 31 December 244 (21) 3
Notes on cash flow statement $ million
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(a) Reconciliation of operating profit to net cash (outflow) inflow from operating activities 2007 2006 2005
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Operating profit 15,699 24,768 20,674
Net operating charge for pensions and other post-retirement benefits, less contributions 7(83) 186
Dividends, interest and other income (16,624) (25,036) (21,197)
Share-based payments 338 325 278
(Increase) decrease in debtors 2,238 (2,140) (368)
Increase (decrease) in creditors (2,491) (1,537) (681)
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Net cash outflow from operating activities (833) (3,703) (1,108)
(b) Analysis of movements in net cash (debt) $ million
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At At
1January Cash 31 December
2007 flow 2007
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Cash at bank – 244 244
Bank overdrafts (21) 21 –
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(21) 265 244
10 Contingent liabilities
The parent company has issued guarantees under which amounts outstanding at 31 December 2007 were $27,665 million (2006 $20,458 million and
2005 $16,878 million), including $27,610 million (2006 $20,402 million and 2005 $16,822 million) in respect of borrowings by its subsidiary
undertakings and $55 million (2006 $56 million and 2005 $56 million) in respect of liabilities of other third parties.
11 Share-based payments
$ million
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Effect of share-based payment transactions on the company’s result and financial position 2007 2006 2005
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Total expense recognized for equity-settled share-based payment transactions 412 405 348
Total expense recognized for cash-settled share-based payment transactions 16 14 20
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Total expense recognized for share-based payment transactions 428 419 368
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Closing balance of liability for cash-settled share-based payment transactions 40 38 48
Total intrinsic value for vested cash-settled share-based payments 22 23 41
For ease of presentation, option and share holdings detailed in the tables within this note are stated as UK ordinary share equivalents in US dollars. US
employees are granted American depositary shares (ADSs) or options over the company’s ADSs (one ADS is equivalent to six ordinary shares). The
share-based payment plans that existed during the year are detailed below. All plans are ongoing unless otherwise stated.
Plans for executive directors
Executive Directors’ Incentive Plan (EDIP) – share element (2005 onwards)
An equity-settled incentive share plan for executive directors driven by one performance measure over a three-year performance period. The award of
shares is determined by comparing BP’s total shareholder return (TSR) against the other oil majors. In addition, for the group chief executive, 27% of
the grant is based on long-term leadership (LTL) measures. After the performance period, the shares that vest (net of tax) are then subject to a three-
year retention period. The directors’ remuneration report on pages 63-73 includes full details of this plan.
Executive Directors’ Incentive Plan (EDIP) – share element (pre-2005)
An equity-settled incentive share plan for executive directors driven by three performance measures over a three-year performance period. The
primary measure is BP’s shareholder return against the market (SHRAM) versus that of the companies within the FTSE All World Oil & Gas Index. This
accounts for nearly two-thirds of the potential total award, with the remainder being assessed on BP’s relative return on average capital employed
(ROACE) and earnings per share (EPS) growth compared with the other oil majors. After the performance period, the shares that vest (net of tax) are
then subject to a three-year retention period. The directors’ remuneration report on pages 63-73 includes full details of this plan. For 2005 and
subsequent years, the share element of EDIP was amended as described above.
Executive Directors’ Incentive Plan (EDIP) – share option element (pre-2005)
An equity-settled share option plan for executive directors that permits options to be granted at an exercise price no lower than the market price of a
share on the date that the option is granted. Options vest over three years (one-third each after one, two and three years respectively) and must be
exercised within seven years of the date of grant. Last grants were made in 2004. From 2005 onwards the remuneration committee’s policy is not to
make further grants of share options to executive directors.
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