BP 2008 Annual Report Download - page 152

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Financial statements
BP Annual Report and Accounts 2008
Notes on financial statements
34. Derivative financial instruments continued
$ million
Oil Natural gas Power
Currency price price price Other Total
Fair value of contracts at 1 January 2007 105 296 855 42 113 1,411
Contracts realized or settled in the year (109) (289) (602) (68) (83) (1,151)
Fair value of options at inception – 28 168 36 – 232
Fair value of other new contracts entered into during the year – – 1 – – 1
Changes in fair values relating to price (167) (253) (58) (20) – (498)
Exchange adjustments 1 – 2 (9) – (6)
Fair value of contracts at 31 December 2007 (170) (218) 366 (19) 30 (11)
If at inception of a contract the valuation cannot be supported by observable market data, any gain determined by the valuation methodology is not
recognized in the income statement but is deferred on the balance sheet and is commonly known as ‘day-one profit’. This deferred gain is recognized
in the income statement over the life of the contract until substantially all of the remaining contract term can be valued using observable market data
at which point any remaining deferred gain is recognized in income. Changes in valuation from this initial valuation are recognized immediately
through income.
The following table shows the changes in the day-one profits deferred on the balance sheet.
$ million
2008 2007
Natural Natural
Oil price gas price Oil price gas price
Fair value of contracts not recognized through the income statement at 1 January –36 – 36
Fair value of new contracts at inception not recognized in the income statement 66 49 –
Fair value recognized in the income statement (34) (2) – (1)
Fair value of contracts not recognized through profit at 31 December 32 83 – 36
Derivative assets held for trading have the following fair values and maturities.
$ million
2008
Less than Over
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
Currency derivatives 53 90 67 37 20 11 278
Oil price derivatives 3,368 353 61 11 11 9 3,813
Natural gas price derivatives 3,940 1,090 545 436 271 663 6,945
Power price derivatives 688 256 31 1 2 – 978
Other derivatives 90 –––––
8,139 1,789 704 485 304 683 12,104
$ million
2007
Less than Over
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
Currency derivatives 123 10 6 5 1 2 147
Oil price derivatives 2,545 471 113 39 26 20 3,214
Natural gas price derivatives 2,170 677 333 283 216 709 4,388
Power price derivatives 819 250 52 – – – 1,121
Other derivatives 12 18 – – – – 30
5,669 1,426 504 327 243 731 8,900
Derivative liabilities held for trading have the following fair values and maturities.
$ million
2008
Less than Over
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
Currency derivatives (257) – (2) (1) (13) – (273)
Oil price derivatives (3,001) (458) (36) (18) (9) (1) (3,523)
Natural gas price derivatives (3,484) (987) (438) (310) (283) (611) (6,113)
Power price derivatives (722) (159) (18) (4) (1) – (904)
Other derivatives (95) (1) – – – – (96)
(7,559) (1,605) (494) (333) (306) (612) (10,909)
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