BP 2011 Annual Report Download - page 197

BP Annual Report and Form 20-F 2011 195
Financial statements
Notes on financial statements
The acquisition-date fair values of the assets and liabilities acquired and the fair value of contingent consideration to be paid are provisional. As we gain
further understanding of the acquired properties and development options, these fair values may be further adjusted to reflect information which may be
obtained in respect of the acquired assets and liabilities.
An analysis of the cash flows relating to the acquisition is provided below.
$ million
Transaction costs of the acquisition (included in cash flows from operating activities) 13
Cash consideration paid (included in cash flows from investing activities) 6,957
Total net cash outflow for the acquisition 6,970
Transaction costs of $13 million have been charged within production and manufacturing expenses in the group income statement.
From the date of acquisition to 31 December 2011, the acquired activities contributed revenues of $268 million and profit of $49 million to the
group. If the business combination had taken place on 1 January 2011, it is estimated that the acquired activities would have contributed revenues of
$884 million and profit of $219 million to the group.
In addition to the Reliance transaction described above, BP undertook a number of other business combinations in 2011. These included the
completion of the final part of the transaction with Devon Energy (Devon), the acquisition of Devon’s equity stake in a number of assets in Brazil for
consideration of $3.6 billion (see below). Additionally, BP’s Alternative Energy business acquired Companhia Nacional de Açúcar e Álcool (CNAA) in Brazil
for consideration of $0.7 billion and increased its share in the Brazilian biofuels company, Tropical BioEnergia S.A., to 100% by acquiring the remaining
50% for consideration of $71 million. There were a number of other individually insignificant business combinations.
Business combinations in 2010
BP undertook a number of business combinations in 2010 for a total consideration of $3.6 billion, of which $3 billion comprised cash consideration. The
most significant acquisition was a transaction in the Exploration and Production segment with Devon, undertaken in a number of stages during 2010 and
2011. This transaction strengthens BP’s position in the Gulf of Mexico, enhances interests in Azerbaijan and facilitates the development of Canadian assets.
On 27 April 2010, BP acquired 100% of Devon’s Gulf of Mexico deepwater properties for $1.8 billion. This included a number of exploration
properties, Devon’s interest in the major Paleogene discovery Kaskida (giving BP a 100% interest in the project), four producing assets and one non-
producing asset. As part of the transaction, BP sold to Devon a 50% stake in its Kirby oil sands interests in Alberta, Canada for $500 million and Devon
committed to fund an additional $150 million of capital costs on BP’s behalf by issuing a promissory note to BP. In addition, the companies formed a 50:50
joint venture, operated by Devon, to pursue the development of the interest. On 16 August 2010, the group acquired Devon’s 3.29% (after pre-emption
exercised by some of the partners) interest in the BP-operated Azeri-Chirag-Gunashli (ACG) development in the Azerbaijan sector of the Caspian Sea for
$1.1 billion, increasing BP’s interest to 37.43%.
The business combination was accounted for using the acquisition method. Goodwill of $332 million was recognized on the 2010 part of the
Devon transaction. As part of the Devon transaction, the gain on the disposal of the group’s 50% interest in the Kirby oil sands in Alberta, Canada
amounted to $633 million.
The final part of the Devon transaction, the acquisition of 100% of Devon’s equity stake in a number of entities holding all of Devon’s assets in
Brazil for consideration of $3.6 billion, completed in May 2011. The acquisition-date fair values are provisional. Goodwill of $966 million was recognized in
2011 for this part of the transaction.
In addition to the Devon transaction, BP undertook a number of other minor business combinations in 2010, the most significant of which was the
acquisition by BP’s Alternative Energy business of Verenium Corporation’s lignocellulosic biofuels business, for consideration of $98 million.
Business combinations in 2009
BP did not undertake any significant business combinations in 2009.
3. Business combinations continued