BP 2011 Annual Report Download - page 159

Additional information for shareholders
BP Annual Report and Form 20-F 2011 157
Additional information for shareholders
Contingent liabilities relating to the Gulf of Mexico oil spill
BP has provided for its best estimate of certain claims under the Oil
Pollution Act 1990 (OPA 90) that will be paid through the $20-billion
trust fund, including the increased estimate of the cost of individual and
business claims as a result of the proposed settlement announced on
3 March 2012 as described in Note 2 and Note 36. It is not possible, at
this time, to measure reliably any other items that will be paid from the
trust fund, namely any obligation in relation to Natural Resource Damages
claims (except for the estimated costs of the assessment phase and the
costs relating to emergency and early restoration agreements) and claims
asserted in civil litigation, including any further litigation through potential
opt-outs from the proposed settlement agreement with the Plaintiffs’
Steering Committee announced on 3 March 2012 (see page 76 for further
information), nor is it practicable to estimate their magnitude or possible
timing of payment. Although these items, which will be paid through the
trust fund, have not been provided for at this time, BP’s full obligation
under the $20-billion trust fund was expensed in the income statement in
2010, taking account of the time value of money.
For those items not covered by the trust fund it is not possible to
measure reliably any obligation in relation to other litigation or potential
fines and penalties except, subject to certain assumptions, for those
relating to the Clean Water Act. Therefore no amounts have been provided
for these items as at 31 December 2011. There are a number of federal
and state environmental and other provisions of law, other than the Clean
Water Act, under which one or more governmental agencies could seek
civil fines and penalties from BP. Given the large number of claims that
may be asserted, it is not possible at this time to determine whether and
to what extent any such claims would be successful or what penalties or
fines would be assessed.
Pensions and other post-retirement benefits
Accounting for pensions and other post-retirement benefits involves
judgement about uncertain events, including estimated retirement
dates, salary levels at retirement, mortality rates, rates of return on plan
assets, determination of discount rates for measuring plan obligations,
assumptions for inflation rates, US healthcare cost trend rates and rates of
utilization of healthcare services by US retirees.
These assumptions are based on the environment in each country.
Determination of the projected benefit obligations for the group’s defined
benefit pension and post-retirement plans is important to the recorded
amounts for such obligations on the balance sheet and to the amount of
benefit expense in the income statement. The assumptions used may
vary from year to year, which will affect future results of operations. Any
differences between these assumptions and the actual outcome also
affect future results of operations.
Pension and other post-retirement benefit assumptions are
reviewed by management at the end of each year. These assumptions
are used to determine the projected benefit obligation at the year-end and
hence the surpluses and deficits recorded on the group’s balance sheet,
and pension and other post-retirement benefit expense for the following
year.
The pension and other post-retirement benefit assumptions at
December 2011, 2010 and 2009 are provided in Financial statements –
Note 37 on page 234.
The assumed rate of investment return, discount rate, inflation
rate and the US healthcare cost trend rate have a significant effect on the
amounts reported. A sensitivity analysis of the impact of changes in these
assumptions on the benefit expense and obligation is provided in Financial
statements – Note 37 on page 234.
In addition to the financial assumptions, we regularly review the
demographic and mortality assumptions. Mortality assumptions reflect
best practice in the countries in which we provide pensions and have been
chosen with regard to the latest available published tables adjusted where
appropriate to reflect the experience of the group and an extrapolation of
past longevity improvements into the future. A sensitivity analysis of the
impact of changes in the mortality assumptions on the benefit expense
and obligation is provided in Financial statements – Note 37 on page 234.
Actuarial gains and losses are recognized in full within other
comprehensive income in the year in which they occur.
Property, plant and equipment
BP has freehold and leasehold interests in real estate in numerous
countries, but no individual property is significant to the group as a whole.
See Exploration and Production on page 80 for a description of the group’s
significant reserves and sources of crude oil and natural gas. Significant
plans to construct, expand or improve specific facilities are described under
each of the business headings within this section.
Share ownership
Directors and senior management
As at 1 March 2012, the following directors of BP p.l.c. held interests in BP
ordinary shares of 25 cents each or their calculated equivalent as set out
below:
Director
Ordinary
shares
Performance
sharesaRestricted sharesb
C-H Svanberg 933,971 – –
R W Dudley 337,301c1,911,414c–
P M Anderson 6,000c– –
F L Bowman 12,720c– –
A Burgmans 10,156 – –
C B Carroll 10,500c– –
Sir William Castell 82,500 – –
I C Conn 497,501d1,322,606 133,452b
G David 579,000c– –
I E L Davis 10,391 – –
Professor Dame Ann Dowling – – –
Dr B Gilvary 331,088 45,000 269,145e
Dr B E Grote 1,484,603f1,693,704c–
B R Nelson 11,040 – –
F P Nhleko – – –
A Shilston – – –
a
Performance shares awarded under the BP Executive Directors’ Incentive Plan. These figures
represent the maximum possible vesting levels. The actual number of shares/ADSs that vest
will depend on the extent to which performance conditions have been satisfied over a three-year
period.
b Restricted share award under the BP Executive Directors’ Incentive Plan. These shares will vest in
2013, subject to the director’s continued service and satisfactory performance.
c
Held as ADSs.
d
Includes 48,024 shares held as ADSs.
e
Held as restricted share units under the BP Deferred Annual Bonus Plan and the BP Executive
Performance Plan.
f
Held as ADSs, except for 94 shares held as ordinary shares.
As at 1 March 2012, the following directors of BP p.l.c. held options under
the BP group share option schemes for ordinary shares or their calculated
equivalent as set out below:
Director Options
R W Dudleya107,010
I C Conn 3,622
Dr B Gilvary 504,191
Dr B E Grotea–
a Held as ADSs.
There are no directors or members of senior management who own more
than 1% of the ordinary shares outstanding. At 1 March 2012, all directors
and senior management as a group held interests in 10,760,373 ordinary
shares or their calculated equivalent, 5,536,676 performance shares or
their calculated equivalent and 7,575,135 options for ordinary shares or
their calculated equivalent under the BP group share options schemes.
Additional details regarding the options granted and performance
shares awarded can be found in the Directors’ remuneration report on
pages 139-151.