BP 2010 Annual Report Download - page 26

Businessreview
Prot or loss for the year
LossattributabletoBPshareholdersfortheyearended31December2010
was$3,719millionandincludedinventoryholdinggainsa,netoftax,of
$1,195millionandanetchargefornon-operatingitems,aftertax,of
$25,449million.Inaddition,fairvalueaccountingeffectshadafavourable
impact,netoftax,of$13millionrelativetomanagement’smeasureof
performance.Non-operatingitemsin2010includeda$40.9billionpre-tax
chargerelatingtotheGulfofMexicooilspill.Moreinformationon
non-operatingitemsandfairvalueaccountingeffectscanbefoundon
pages25-26.SeeGulfofMexicooilspillonpage34andinFinancial
statements–Note2onpage158forfurtherinformationontheimpactof
theGulfofMexicooilspillonBP’snancialresults.SeeExplorationand
Productiononpage40,ReningandMarketingonpage55andOther
businessesandcorporateonpage61forfurtherinformationon
segmentresults.
ProtattributabletoBPshareholdersfortheyearended
31December2009includedinventoryholdinggains,netoftax,of
$2,623millionandanetchargefornon-operatingitems,aftertax,of
$1,067million.Inaddition,fairvalueaccountingeffectshadafavourable
impact,netoftax,of$445millionrelativetomanagement’smeasure
ofperformance.
ProtattributabletoBPshareholdersfortheyearended
31December2008includedinventoryholdinglosses,netoftax,of
$4,436millionandanetchargefornon-operatingitems,aftertax,of
$796million.Inaddition,fairvalueaccountingeffectshadafavourable
impact,netoftax,of$146millionrelativetomanagement’smeasure
ofperformance.
Theprimaryadditionalfactorsaffectingthenancialresultsfor
2010,comparedwith2009,werehigherrealizations,lowerdepreciation,
higherearningsfromequity-accountedentities,improvedoperational
performance,furthercostefcienciesandamorefavourablerening
environmentinReningandMarketing,partlyoffsetbylowerproduction,
asignicantlylowercontributionfromsupplyandtrading(includinggas
marketing)andhigherproductiontaxes.
Theprimaryadditionalfactorsreectedinprotfor2009,compared
with2008,werelowerrealizationsandreningmarginsandhigher
depreciation,partlyoffsetbyhigherproduction,strongeroperational
performanceandlowercosts.
Finance costs and net nance expense relating to pensions and
other post-retirement benets
Financecostscompriseinterestpayablelessamountscapitalized,and
interestaccretiononprovisionsandlong-termotherpayables.Finance
costsin2010were$1,170millioncomparedwith$1,110millionin2009
and$1,547millionin2008.Thedecreasein2009,whencomparedwith
2008,islargelyattributabletothereductionininterestrates.
Netnanceincomerelatingtopensionsandotherpost-retirement
benetsin2010was$47millioncomparedwithnetnanceexpenseof
$192millionin2009andnetnanceincomeof$591millionin2008.In
2010,comparedwith2009,theimprovementreectedtheadditional
expectedreturnsonassetsfollowingtheincreasesinthepensionasset
baseattheendof2009comparedwiththeendof2008.In2009,the
expectedreturnonassetsdecreasedsignicantlyasthepensionasset
basereduced,consistentwithfallsinequitymarketsduring2008.

aIn
ventoryholdinggainsandlossesrepresentthedifferencebetweenthecostofsalescalculated
usingtheaveragecosttoBPofsuppliesacquiredduringtheyearandthecostofsalescalculated
ontherst-inrst-out(FIFO)method,afteradjustingforanychangesinprovisionswherethenet
realizablevalueoftheinventoryislowerthanitscost.
BP’smanagementbelievesitishelpfultodisclosethisinformation.Ananalysisofinventoryholding
gainsandlossesbybusinessisshowninFinancialstatements–Note7onpage167andfurther
informationoninventoryholdinggainsandlossesisprovidedonpage81.
Taxation
Thecreditforcorporatetaxesin2010was$1,501million,comparedwitha
chargeof$8,365millionin2009andachargeof$12,617millionin2008.
Theeffectivetaxratewas31%in2010,33%in2009and37%in2008.
Thegroupearnsincomeinmanycountriesand,onaverage,paystaxesat
rateshigherthantheUKstatutoryrateof28%.Thedecreaseinthe
effectivetaxratein2010comparedwith2009primarilyreectsthe
absenceofaone-offdisbenetthatfeaturedin2009inrespectofgoodwill
impairment,andotherfactors.Thedecreaseintheeffectivetaxratein2009
comparedwith2008primarilyreectsahigherproportionofincomefrom
associatesandjointlycontrolledentitieswheretaxisincludedinthepre-tax
operatingresult,foreignexchangeeffectsandchangestothegeographical
mixofthegroup’sincome.
Acquisitions and disposals
In2010,BPacquiredamajorportfolioofdeepwaterexplorationacreage
andprospectsintheUSGulfofMexicoandanadditionalinterestinthe
BP-operatedAzeri-Chirag-Gunashli(ACG)developmentsintheCaspianSea,
Azerbaijanfor$2.9billion,aspartofa$7-billiontransactionwithDevon
Energy.Forfurtherinformationonthistransaction,includingrequired
governmentapprovals,seeExplorationandProductiononpage43.Aspart
oftheresponsetotheGulfofMexicooilspill,thegroupplanstodeliverup
to$30billionofdisposalproceedsbytheendof2011.Totaldisposal
proceedsduring2010were$17billion,whichincluded$7billionfromthe
saleofUSPermianBasin,WesternCanadiangasassets,andWestern
DesertexplorationconcessionsinEgypttoApacheCorporation(andan
existingpartnerthatexercisedpre-emptionrights),and$6.2billionof
depositsreceivedinadvanceofdisposaltransactionsexpectedtocomplete
in2011.Ofthesedepositsreceived,$3.5billionisforthesaleofour
interestinPanAmericanEnergytoBridasCorporation,$1billionforthe
saleofourupstreaminterestsinVenezuelaandVietnamtoTNK-BP,and
$1.3billionforthesaleofouroilandgasexploration,productionand
transportationbusinessinColombiatoaconsortiumofEcopetroland
Talisman,thelattercompletinginJanuary2011.SeeFinancialstatements
–Note4onpage163.
InReningandMarketingwemadedisposalstotalling$1.8billion,
whichincludedourFrenchretailfuelsandconveniencebusinesstoDelek
Europe,thefuelsmarketingbusinessinBotswanatoPumaEnergy,certain
non-strategicpipelinesandterminalsintheUS,ourinterestsinethylene
andpolyethyleneproductioninMalaysiatoPetronasandourinterestina
futuresexchange.
Therewerenosignicantacquisitionsin2009.Disposalproceedsin
2009were$2.7billion,principallyfromthesaleofourinterestsinBPWest
JavaLimited,KazakhstanPipelineVenturesLLCandLukArco,andthesale
ofourgroundfuelsmarketingbusinessinGreeceandretailchurninthe
US,EuropeandAustralasia.FurtherproceedsfromthesaleofLukArco
arereceivablein2011.SeeFinancialstatements–Note5onpage164.
In2008,wecompletedanassetexchangewithHuskyEnergyInc.,
andassetpurchasesfromChesapeakeEnergyCorporationasdescribed
onpage23.
24BPAnnualReportandForm20-F2010