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Building a stronger,
safer BP
Annual Report and
Form 20-F 2012
bp.com/annualreport

Table of contents

  • Page 1
    Annual Report and Form 20-F 2012 bp.com/annualreport Building a stronger, safer BP

  • Page 2
    Annual Report and Form 20-F 2012 bp.com/annualreport Building a stronger, safer BP Front cover imagery The Petroleum Geo-Services (PGS) Ramform Sterling seismic vessel, which conducts seismic surveys for BP. Left image: the vessel working in the Ceduna Basin, Australia. Centre image: the vessel ...

  • Page 3
    ... review Risk factors Safety Environmental and social responsibility Employees Technology Gulf of Mexico oil spill 63 72 80 82 84 90 94 98 Upstream Downstream TNK-BP Other businesses and corporate Oil and gas disclosures for the group Liquidity and capital resources Regulation of the group's business...

  • Page 4
    ... and information in this document reï¬,ects 100% of the assets and operations of the company and its subsidiaries that were consolidated at the date or for the periods indicated, including minority interests. BP's primary share listing is the London Stock Exchange. Ordinary shares are also traded on...

  • Page 5
    .... 10 Group chief executive's letter Bob Dudley reviews the company's progress as we work to build a stronger, safer BP. 12 Energy outlook Our views on the factors likely to shape energy demand and supply, from population and the energy mix, to policy, prices and access. 15 Our business model...

  • Page 6
    ... of companies. Our worldwide headquarters is in London. Employees by business segment 1 3 1. Downstream* 2. Upstream 3. Other businesses and corporate and Gulf Coast Restoration Organization Total 51,300 24,000 10,400 Upstream Our Upstream segment manages its exploration, development and production...

  • Page 7
    ... International oil and gas markets Biofuels Downstream Our Downstream segment operates hydrocarbon value chains covering three main businesses - fuels, lubricants and petrochemicals. Operating capital employedd 3 1 Investing in renewable energy We develop and invest in biofuels and wind. BP...

  • Page 8
    ... that markets products in more than 45 countries and the global oil supply and trading activities. These businesses sell refined petroleum products including gasoline, diesel, aviation fuel and LPG. Fuels value chains US: North West, South West, East of Rockies. Europe: Rhine, Iberia. Rest of world...

  • Page 9
    Business review: Group overview North Sea region BP was the first company to find hydrocarbons in the North Sea region, in 1965. We now have one of the largest asset bases in the region, operating around 30 oil and gas fields, two major terminals and an extensive network of pipelines. ...

  • Page 10
    ... enhance Rosneft's value over time, as they did at TNK-BP. During the year the board supported Bob Dudley, our group chief executive, on the implementation of the 10-point plan and the further implementation of the functional organization. We worked with him to develop the group strategy beyond...

  • Page 11
    ...top); Professor Dame Ann Dowling on the Thunder Horse platform in the Gulf of Mexico (middle); Brendan Nelson and Phuthuma Nhleko at BP's North America Gas operations in east Texas, US (bottom). Carl-Henric Svanberg Chairman 6 March 2013 Business review: Group overview BP Annual Report and Form 20...

  • Page 12
    ... Rosneft. TNK-BP proved to be an outstanding investment, generating substantial value for BP. From an initial commitment of around $8 billion, it has returned some $19 billion of dividends to us. But the time had come to move on. 10 Business review: Group overview BP Annual Report and Form 20-F 2012

  • Page 13
    ...exploration and enhanced oil recovery to integrating downstream businesses and international developments. We have confidence in the Russian business environment and we look forward to playing a valued role in the country's future. We are enhancing safety and risk management Business review: Group...

  • Page 14
    ...of oil equivalent) Dated Brent oil price Average refining marker margin (RMM)* 150 125 100 75 50 25 2008 2009 2010 2011 2012 Henry Hub gas price (First of Month Index) Source: Platts/BP. *See Downstream on page 73 for further information on RMM. 12 Business review: Group overview BP Annual Report...

  • Page 15
    ...Gas Oil 1.6%per annum Projected world primary energy consumption growth to 2030. In the US, our biofuels business is focusing on the development of cellulosic ethanol technology at facilities in San Diego, California (right) and Jennings, Louisiana. Business review: Group overview BP Annual Report...

  • Page 16
    ... and continually assess a range of potential outcomes and their implications for our strategy. 93% Non-OECD countries' share of energy consumption growth to 2030. +45% Net growth in unconventional global energy production from 2020 to 2030. 14 Business review: Group overview BP Annual Report and...

  • Page 17
    ... aim to create value across the hydrocarbon value chain. This starts with exploration and ends with the supply of energy and other products fundamental to everyday life. Business review: Group overview BP is the largest foreign investor in Azerbaijan and operates two production-sharing agreements...

  • Page 18
    ... research and development programme designed to improve the manufacturing efficiency in petrochemicals. Along with PTA, we have industry leading technology, intellectual property and know-how in paraxylene and acetic acid. 16 Business review: Group overview BP Annual Report and Form 20-F 2012

  • Page 19
    ...% of the oil in a field is extracted, even when wells are ï¬,ooded with water to increase recovery. That means important resources are currently left untapped, all over the world. The LoSal ï¬,ooding process is set to significantly improve recovery rates. Developed at BP's UK research centre, the...

  • Page 20
    ... value to our portfolio. Our upstream technologies support BP's business strategy by focusing on safety and operational risks, helping to obtain new access, increasing recovery and reserves and improving production efficiency. Our strengths in exploration, deep water, giant fields and gas value...

  • Page 21
    ...of a wide range of technologies, processes and techniques, we aim to enhance safety and risk management, improve our margins, increase efficiency and reliability, and create new market opportunities. For example, in lubricants we launched an oil Business review: Group overview BP Annual Report and...

  • Page 22
    ... capital expenditure excludes acquisitions and asset exchanges. See footnote d on page 21. Operated installations a b Operated wells Operated pipelines (km) Reserves (bn boe) See pages 67-71 for information on our major Upstream projects. Since April 2010. 20 Business review: Group overview BP...

  • Page 23
    ...processes. Improved transparency through reporting TNK-BP as a separate segment and breaking out the numbers for the three downstream businesses. 5 What you can measure 6 Active portfolio management to continue by completing $38 billion of disposals over the four years to the end of 2013, in order...

  • Page 24
    ... to start up in late 2013. During the year we made progress in our priority areas of enhancing safety and risk management, restoring trust by meeting our commitments in the Gulf of Mexico and delivering higher returns for shareholders, as evidenced by the increases in quarterly dividend announced...

  • Page 25
    ...cash (which includes a dividend of $0.7 billion received from TNK-BP in December 2012) and an additional 18.5% share in Rosneft, bringing our total shareholding to 19.75%. We took the total of asset sales announced since the start of 2010 to around $38 billion, effectively reaching our target a year...

  • Page 26
    ... a planned start-up safely and on time. And we sold a number of non-strategic assets. BP is currently one of the largest producers of hydrocarbons in the UK. Our investments mean we expect to be part of life in the North Sea for decades to come. 24 Business review: Group overview BP Annual Report...

  • Page 27
    ... on assets with greater potential for growth. In November 2012 we took a major step forward in repositioning BP within Russia, agreeing to sell our 50% shareholding in TNK-BP to Rosneft - the world's largest publicly traded oil company in terms of oil production and reserves. Our intention...

  • Page 28
    ... and drilling platform in late 2013. In the North Sea, 2012 saw high levels of activity. We achieved start-ups, sold a number of non-strategic assets and moved forward with a major programme of long-term investment (see A new chapter in the North Sea, page 24). These actions reï¬,ect our strategy of...

  • Page 29
    ... use the proceeds of improved cash ï¬,ow in a number of ways, including increased investment in upstream development. This will focus on four high-margin areas: Angola, Azerbaijan, the Gulf of Mexico and the North Sea. More development, more exploration The level of planned activity is reï¬,ected in...

  • Page 30
    ... 2009 2010 2011 2012 Replacement cost profit (loss) reï¬,ects the replacement cost of supplies. It is arrived at by excluding from profit inventory holding gains and losses and their associated tax effect. Replacement cost profit for the group is a profitability measure used by management...

  • Page 31
    ... 80 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 88.8 93.6 95.0 94.8 94.8 2009 2010 2011 2012 Total shareholder return (TSR) represents the change in value of a BP shareholding over a calendar year, assuming that dividends are re-invested to purchase additional shares at the closing price...

  • Page 32
    ... where BP may not have full operational control. We seek to manage the risks arising from such joint venture and contractor relationships actively, and this may include monitoring compliance with applicable standards. In 2011 we set out a 10-point plan to address our near-term strategic priorities...

  • Page 33
    ... and plan our response to them. We also operate a range of compliance training and monitoring programmes for our employees, including OpenTalk, our confidential helpline for employees. In the normal course of business, we are subject to risks around our treasury and trading activities, which...

  • Page 34
    ... operating cash margins of new upstream projects, BP's strategies with regard to optimizing value across the business, plans regarding BP's PTA project, the timing of a review of BP's assets and estimation processes, plans regarding the implementation of enhancements to BP's risk management system...

  • Page 35
    ...34 Financial review 38 Risk factors 46 Safety BP in more depth Detailed reporting on activity across the group during a busy year. 51 Environmental and social responsibility 55 Employees 57 Technology 59 Gulf of Mexico oil spill 63 Upstream 72 Downstream 80 TNK-BP 82 Other businesses and corporate...

  • Page 36
    ... corporate Consolidation adjustment - unrealized profit in inventory Net favourable (unfavourable) impact of non-operating items and fair value accounting effectsb By business Upstream Downstream TNK-BP Other businesses and corporate Gulf of Mexico oil spill responsed Replacement cost profit (loss...

  • Page 37
    ...operating items, and fair value accounting effects, can be found on page 37. See Gulf of Mexico oil spill on pages 59-62 and Financial statements - Note 2 on page 194 for further information on the impact of the Gulf of Mexico oil spill on BP's financial results. For the year ended 31 December 2011...

  • Page 38
    ... in 2010. The effective tax rate was 37% in 2012, 33% in 2011 and 31% in 2010. The group earns income in many countries and, on average, pays taxes at rates higher than the UK statutory rate of 24%. The increase in the effective tax rate in 2012 compared with 2011 primarily reï¬,ects the impact of...

  • Page 39
    ...oil and gas production (2011 $683 million and 2012 $256 million)). Non-operating items arising within the equity-accounted earnings of TNK-BP are reported net of tax. Upstream Replacement cost profit before interest and tax adjusted for fair value accounting effects Impact of fair value accounting...

  • Page 40
    .... A prolonged period of low oil prices may impact our cash ï¬,ow, profit and ability to maintain our long-term investment programme with a consequent effect on our growth rate, and may impact shareholder returns, including dividends and share buybacks, or share price. Refining profitability...

  • Page 41
    ... capital expenditure. Reserves progression - inability to progress upstream resources in a timely manner could adversely affect our long-term replacement of reserves and negatively impact our business. Successful execution of our group strategy depends critically on sustaining long-term reserves...

  • Page 42
    ...raise capital to fund growth, to maintain our long-term investment programme and to meet our obligations, and may impact shareholder returns, including dividends and share buybacks, or share price. Decreases in the funded levels of our pension plans may also increase our pension funding requirements...

  • Page 43
    ...are expected to continue to have, a material adverse impact on the group's business. Under the Oil Pollution Act of 1990 (OPA 90), BP Exploration & Production Inc. and BP Corporation North America are among the parties financially responsible for the clean-up of the Gulf of Mexico oil spill and for...

  • Page 44
    ...this ruling. 42 Business review: BP in more depth BP Annual Report and Form 20-F 2012 Other business economic loss claims have continued to be paid at a higher average amount than previously assumed by BP in determining its initial estimate of the total cost. Management has continued to analyse the...

  • Page 45
    ..., financial loss, regulatory intervention or damage to our reputation. In the normal course of business, we are subject to operational risk around our treasury and trading activities. Control of these activities is highly dependent on our ability to process, manage and monitor a large number of...

  • Page 46
    ... material could occur during transportation by road, rail, sea or pipeline. This is a significant risk due to the potential impact of a release on people and the environment and given the high volumes potentially involved. 44 Business review: BP in more depth BP Annual Report and Form 20-F 2012

  • Page 47
    ... in a non-BP operated joint venture which sells crude oil to an Indian entity in which NICO holds a minority, non-controlling stake. In 2012, BP distributed certain scrip dividends to BP shareholder Naftiran Intertrade Co. Limited in accordance with applicable UK law in effect at the time of such...

  • Page 48
    ... and the Gulf of Mexico committee. 600 400 200 2008 2009 2010 2011 2012 Recordable injury frequency (per 200,000 hours worked) Workforce American Petroleum Institute US benchmarka International Association of Oil & Gas Producers benchmarka 1.0 0.8 0.6 0.4 0.2 2008 Employees 0.35 Contractors...

  • Page 49
    ... US government of all federal criminal claims related to the Gulf of Mexico, BP has agreed to appoint a process safety monitor in the US for a term of four years. The monitor will review, evaluate and provide recommendations for the improvement of BP's process safety and risk management procedures...

  • Page 50
    ...deepwater Gulf of Mexico. Safety in the Downstream business In our hydrocarbon facilities across the Downstream business we focus on the safe storage, handling and processing of hydrocarbons via systematic management of associated operating risks. In seeking to manage these risks, BP takes measures...

  • Page 51
    ... with monitoring and review of identified and newly emerging risks. Management plans for the Downstream businesses' high-consequence, low-probability risks are reviewed annually by the segment chief executive and the chief operating officers. Some examples of specific risk reduction work across...

  • Page 52
    ... use contractors in potentially high-consequence activities. The review confirmed to us the value of building long-term relationships with a limited number of contractors, supported by shared structures and common processes. 50 Business review: BP in more depth BP Annual Report and Form 20-F 2012

  • Page 53
    ... from 45 countries, ranging from senior leaders to on-site oil spill response teams. Understanding and mitigating the risks Identifying and assessing the potential oil spill risks and potential impacts helps us to develop appropriate oil spill response and crisis management plans. These plans are...

  • Page 54
    ... on how to assess potential risks and impacts from a changing climate to enable mitigation steps to be incorporated into project planning, design and operations. Gulf of Mexico - our long-term commitments See Gulf of Mexico oil spill on pages 59-62 for further information on BP's response to the...

  • Page 55
    ... projects. The majority of the active clean-up of the shorelines was completed in 2011. See Financial statements - Note 2 on page 194, Note 36 on page 235 and Note 43 on page 253 for further information relating to the Gulf of Mexico oil spill. Business review: BP in more depth BP Annual Report...

  • Page 56
    ... and safety. At the same time BP benefits from the local sourcing of goods and services. BP's social investments, the contributions we make to social and community programmes in locations where we operate, support development activities that aim for a meaningful and sustainable impact. We look for...

  • Page 57
    ... companies. Business review: BP in more depth BP Annual Report and Form 20-F 2012 55 Business review: BP in more depth 3 Number of employees at 31 Decembera US Non-US Total 2012 Upstream Downstreamb Other businesses and corporate Gulf Coast Restoration Organization 2011 Upstream Downstreamb...

  • Page 58
    ... reporting process to capture information on dismissals is presently being put in place for 2013. Following the settlement with the US government of all federal criminal claims related to the Gulf of Mexico, BP has agreed to appoint an ethics monitor in the US for a term of four years to review and...

  • Page 59
    ... on research and development (R&D) in 2012, supporting business priorities across our portfolio. t We successfully progressed a suite of technologies aimed at improving safety and operational risk management. Highlights include: demonstration of our real-time blowout preventer (BOP) monitoring tool...

  • Page 60
    ... in deep water. Upstream Our upstream technologies support BP's business strategy by: t Focusing on safety and operational risks. t Helping to obtain new access. t Increasing recovery and reserves. t Improving production efficiency. Our strengths in exploration, deep water, giant fields...

  • Page 61
    ... further information. Business review: BP in more depth Biofuels t In addition to our biofuel production business in Brazil, we continue to invest in and operate a world-class biofuels research facility in San Diego, California, and a demonstration plant in Jennings, Louisiana, to further develop...

  • Page 62
    ...to process and pay claims under the economic and property damages agreement prior to any such court approval. Accordingly, a court-supervised transitional claims programme took over the processing and payment of economic loss claims from the Gulf Coast Claims Facility on 8 March 2012. On 4 June 2012...

  • Page 63
    ...the loss of 11 lives; one misdemeanour count under the Clean Water Act; one misdemeanour Environmental restoration We continued to support and participate in the Natural Resource Damages Assessment (NRDA) process and made progress in 2012 in a Business review: BP in more depth BP Annual Report and...

  • Page 64
    ... through the Gulf of Mexico Research Initiative. The goal of the research initiative is to improve society's ability to understand, respond to and mitigate the potential impacts of oil spills to marine and coastal ecosystems. 62 Business review: BP in more depth BP Annual Report and Form 20-F 2012

  • Page 65
    ...the group's strategy and integration organization, which comprises finance, procurement and supply chain, human resources, technology and information technology. Our Upstream segment includes upstream and midstream activities, and gas marketing and trading activities in 28 countries with production...

  • Page 66
    ...2008=100) 2009 2010 2011 2012 Day away from work case frequency In 2012 there was one workforce fatality in Upstream. In 2011, there were no workforce fatalities. From Oil Market Report 18 January 2013 ©, OECD/IEA 2013, page 4. BP Statistical Review of World Energy June 2012. 64 Business review...

  • Page 67
    ... feet per day thousand barrels of oil equivalent per day Includes sales between businesses. b Fair value accounting effects represent the (favourable) unfavourable impact relative to management's measure of performance (see page 37 for further details). c Underlying replacement cost profit is...

  • Page 68
    ... associated gas gathering system, to Eagle Rock Energy Partners for $228 million. The sale completed on 1 October 2012. t On 10 September 2012 BP announced that it had agreed to sell its interests in a number of non-strategic assets in the Gulf of Mexico to Plains Exploration and Production Company...

  • Page 69
    ... group. Regional summary The following discussion reviews operations in our upstream business by geographical area, and lists associated significant events. BP's percentage working interest in oil and gas assets is shown in brackets. Working interest is the cost-bearing ownership share of an oil...

  • Page 70
    ... cost of this initial project will be pre-investment for a full scale Point Thomson gas development project with production either to be sold in world markets via a major North Slope gas export project; or to be transported and injected into the main Prudhoe Bay reservoirs to increase oil recovery...

  • Page 71
    ... plateau rates of 150,000 barrels per day of oil over the coming year. In Algeria, BP is a partner with Sonatrach and Statoil in the In Salah (BP 33.15%) and In Amenas (BP 45.89%) projects, which supply gas to the domestic and European markets. In addition, BP is in a joint venture with Sonatrach...

  • Page 72
    ... 21 oil and gas PSAs in India operated by RIL. As part of continued evaluation to high grade the portfolio and focus our efforts, 12 of the blocks acquired were relinquished in 2012. t During 2012 progress continued toward the anticipated ramp-up of drilling and project activity in 2013. Activities...

  • Page 73
    .... Market conditions have become more challenging over the past few years due to the availability of shale gas in North America and an excess of supply on long-term contracts from producers coupled with recession-led demand reduction in Europe. The business (including support functions) operates...

  • Page 74
    ... and process safety incident index improved compared with 2010 and 2011 (see pages 73-74). In 2012 replacement cost profit before interest and tax for the segment was $2.8 billion, compared with $5.5 billion in 2011. After adjusting for non-operating items and fair value accounting effects, we...

  • Page 75
    ... supply-side issues experienced by the industry throughout 2012. We track the margin environment by way of a global refining marker margin. Refining margins are a measure of the difference between the price a refinery pays for its inputs (crude oil) and the market price of its products. Although...

  • Page 76
    ... increased in 2012 to a rate of 0.16 compared with 0.11 in 2011. a Income from petrochemicals produced at our Gelsenkirchen and Mülheim sites is reported within the fuels business. Segment-level overhead expenses are included within the fuels business. b Fair value accounting effects represent...

  • Page 77
    ... addition, fair value accounting effects had a favourable impact of $42 million relative to management's measure of performance. The primary additional factors contributing to the increase in replacement cost profit before interest and tax compared with 2009 were improved operational performance in...

  • Page 78
    ...rate for a consecutive 30-day period. BP share of equity, which is not necessarily the same as BP share of processing entitlements. Refinery classified as assets held for sale at 31 December 2012. d Indicates refineries not operated by BP. a 76 Business review: BP in more depth BP Annual Report...

  • Page 79
    ... control, risk, trade completion, and accounting and reporting. They are further supported by regional and group ethics and compliance and group internal audit. Aviation Our global aviation business, Air BP, is one of the world's largest and best-known aviation fuels suppliers, serving many major...

  • Page 80
    .... t Our energy sector serves the oil and gas and power industries. In the oil and gas industry we supply some of world's largest production and drilling companies. We look to market and sell our products across the world. We sell products direct to our customers in around 45 countries and use...

  • Page 81
    ..., the income and expenditure of these plants is managed and reported through the fuels business. g Group interest varies by product. h BP Zhuhai Chemical Company Ltd is a subsidiary of BP, the capacity of which is shown above at 100%. b Business review: BP in more depth BP Annual Report and Form...

  • Page 82
    ... for sale and therefore equity accounting ceased. h Under equity accounting, BP's share of TNK-BP's earnings after interest and tax has been included in the BP group income statement within profit before interest and tax. 80 Business review: BP in more depth BP Annual Report and Form 20-F 2012

  • Page 83
    ...two months of equity-accounted earnings, lower realizations and the impact of the tax reference price lag on Russian export duties in falling price environments, partly offset by positive foreign exchange effects. BP received $1,399 million in cash dividends from its investment in TNK-BP in 2012, as...

  • Page 84
    ...effects and cost efficiencies. 2012 2011 $ million 2010 cane ethanol mills. In conjunction with joint venture partner DuPont, BP is undertaking leading edge research into the production of biobutanol under the company name Butamax. Across our biofuels business, BP's net share of ethanol-equivalent...

  • Page 85
    ... reviewed following the Deepwater Horizon oil spill but the group concluded that it will continue with its current approach of not generally purchasing insurance cover. Shipping We transport our products across oceans, around coastlines and along waterways, using a combination of BP-operated, time...

  • Page 86
    ... production levels. Governance BP's centrally controlled process for proved reserves estimation approval forms part of a holistic and integrated system of internal control. It consists of the following elements: t Accountabilities of certain officers of the group to ensure that there is review...

  • Page 87
    ...the Upstream segment is assessed by the remuneration committee for the purposes of determining compensation bonuses for the executive directors. Other indicators include a number of financial and operational measures. BP's variable pay programme for the other senior managers in the Upstream segment...

  • Page 88
    ...of approximately 140mb/d. The group holds no other licences due to expire within the next three years that would have a significant impact on BP's reserves or production. For further information on our reserves see page 263. 86 Business review: BP in more depth BP Annual Report and Form 20-F 2012

  • Page 89
    ..., in onshore and offshore concessions in Abu Dhabi, expiring in 2014 and 2018 respectively. g 2012 includes 877mb/d of production in assets held for sale associated with TNK-BP. See TNK-BP on pages 80-81 for further information. Business review: BP in more depth BP Annual Report and Form 20...

  • Page 90
    ... of the producing field, but the related reserves are included in the group's reserves. e 2012 includes 785mmcf/d of production in assets held for sale associated with TNK-BP. See TNK-BP on pages 80-81 for further information. 88 Business review: BP in more depth BP Annual Report and Form 20...

  • Page 91
    ...production Europe North America Rest of North Americab South America Africa Asia $ per unit of productiona Australasia Total group average Rest of Asia UK Rest of Europe US Russia The average production cost per unit of productiona Subsidiaries 2012 2011 2010 Equity-accounted entities 2012 2011...

  • Page 92
    ...assets arising from the Gulf of Mexico oil spill, which may or may not arise at that time. See Financial statements - Note 43 on page 253 for further information on contingent liabilities. c Free cash ï¬,ow is operating cash ï¬,ow less net cash used in investing activities, as presented in the group...

  • Page 93
    ... to meet the group's short-term manufacturing and marketing requirements. The price risk associated with these crude oil, natural gas and power contracts is discussed in Financial statements - Note 26 on page 220. b Business review: BP in more depth BP Annual Report and Form 20-F 2012 91

  • Page 94
    ... losses on sale of businesses and fixed assets, and an increase in dividends received from jointly controlled entities and associates of $2,104 million. Net cash used in investing activities was $12,962 million in 2012, compared with $26,633 million and $3,960 million in 2011 and 2010 respectively...

  • Page 95
    ... financial projections for forward-looking statements in the future. Business review: BP in more depth Sources of cash: Net cash provided by operating activities Disposals Uses of cash: Capital expenditure Acquisitions Net repurchase of shares Dividends paid to BP shareholders Dividends paid to...

  • Page 96
    ...of costs and/or a fee paid in cash rather than production. PSAs entered into with a government entity or state-owned or controlled company generally require BP to provide all the financing and bear the risk of exploration and production activities in exchange for a share of the production remaining...

  • Page 97
    ...be determined at this time. We also expect the industry in general, and BP in particular, to become subject to greater regulation and increased operating costs in the Gulf of Mexico in the future. For further disclosures relating to the consequences of the 2010 Deepwater Horizon oil spill, see Legal...

  • Page 98
    ..., principles were agreed for monitoring, verifying and reporting emissions reductions; establishment of a green fund to help developing countries limit and adapt to climate change; and measures to protect forests and transfer low-carbon technology to poorer nations. In November 2011, parties to the...

  • Page 99
    ... of coal equivalent (7ktoe/a) to have an energy saving target for the next five years. A number of BP joint venture companies in China will be required to participate in these initiatives. Business review: BP in more depth Business review: BP in more depth BP Annual Report and Form 20-F 2012 97

  • Page 100
    ... of the operating segments' measures of profit or loss and the group profit or loss before taxation, as required under IFRS. See Financial statements - Note 6 on page 203. Non-GAAP information on fair value accounting effects BP uses derivative instruments to manage the economic exposure relating...

  • Page 101
    ...BP group. Control is the power to govern the financial and operating policies of an entity so as to obtain the benefits from its activities. PSA A production-sharing agreement (PSA) is an arrangement through which an oil company bears the risks and costs of exploration, development and production...

  • Page 102
    100 Corporate governance BP Annual Report and Form 20-F 2012

  • Page 103
    ... role of executive management 117 Review of risk management 118 BP's risk management system 120 Committee reports 120 Audit committee 122 Safety, ethics and environment assurance committee 124 Gulf of Mexico committee 125 Nomination committee 126 Chairman's committee 126 UK Corporate Governance Code...

  • Page 104
    ...of our work is focused on determining the company's approach to risk. Over the past three years we have reviewed our governance and management of risk, and we have monitored and assessed the group's evolution of its systems. One of the key tasks of the board is to review particular group-level risks...

  • Page 105
    ... operational risk function Group compliance officer Monitoring, information and assurance BP board governance principles: t#P goal t(overnance process tDelegation model tExecutive limitations Delegation Delegation of authority through policy with monitoring Strategy/group risks/annual plan...

  • Page 106
    Board of directors As at 6 March 2013 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 5 9 13 Carl-Henric Svanberg Dr Byron Grote Cynthia ...Davis Andrew Shilston 4 Dr Brian Gilvary 8 Antony Burgmans KBE 12 Professor Dame Ann Dowling 104 Corporate governance BP Annual Report and Form 20-F 2012

  • Page 107
    ... focus on safety matters both in meetings and through visits to the company's operations. His broad experience of the global oil and gas industry and of the US business environment has benefited both the board, the SEEAC and the Gulf of Mexico committee. He has actively supported the work of the BP...

  • Page 108
    ... and Marketing segment's executive committee, taking over responsibility in 2001 for BP's marketing operations in Europe. In 2002 he was appointed chief executive of BP Petrochemicals. Following his appointment to the board in 2004, he served for three years as group executive officer, strategic...

  • Page 109
    ... BP board at the conclusion of the 2013 AGM. Group responsibilities On 1 January 2012, he became executive vice president, corporate business activities. He has accountability for BP's integrated supply and trading operations and shipping businesses, Alternative Energy business, and its technology...

  • Page 110
    ... group's strategy. His financial and commercial experience is relevant to his work on the audit committee. David Jackson Current position David Jackson was appointed company secretary in 2003. A solicitor, he is a director of BP Pension Trustees Limited. 108 Corporate governance BP Annual Report...

  • Page 111
    ... safety, operational risk management, and the systematic management of operations across the BP corporate group. He is Group Head of Safety and Operations, with accountability for group-level disciplines including projects, operations, engineering, health, safety, security, and environment...

  • Page 112
    ... Houston to become strategic performance unit leader for the North American gas business. In 2009, he joined the upstream executive as head of portfolio and technology and in October 2010 he was appointed executive vice president, exploration and production, strategy and integration. In 2013 he was...

  • Page 113
    ... the accountable executive for all of BP's corporate activities in central programme management, government and political affairs, policy, group risk management, economics and competitor intelligence. Career Dev Sanyal joined BP in 1989 and has held a variety of international roles in London, Athens...

  • Page 114
    ... other directors with the chairman when necessary. Neither the chairman nor the SID are employed as executives of the group. The board maintains a succession plan for the chairman and SID, in addition to the group chief executive and senior management. 112 Corporate governance BP Annual Report and...

  • Page 115
    ...remuneration report (see page 127). Diversity BP recognizes the importance of diversity, including gender, at all levels of the company as well as the board. The company is committed to increasing diversity across its operations and has in place a wide range of activities to support the development...

  • Page 116
    ... at two strategy away-days in 2012. Key strategic elements examined included North American gas, Russia, technology and biofuels in Brazil. The board also reviewed the company's planning methodology and strategy development process, looking at energy market structures, long-term price ranges and the...

  • Page 117
    ... group transitioned to a more stable business environment, the board would focus on re-aligning its agenda to increase the focus on strategic issues. There would also be more use of forward agenda planning to enable this to be realised. Corporate governance BP Annual Report and Form 20-F 2012 115

  • Page 118
    ... investor call Annual General Meeting 1Q results Launch of BP Statistical Review of World Energy 2Q results Oil and gas conferences Group SRI meeting Engagement on remuneration 3Q results and investor update Oil sands webinar DoJ resolution investor call Upstream investor day AGM BP's shareholder...

  • Page 119
    ...inform key business process Group risk management reporting and risk management action plan Day-to-day risk management Code of conduct Operating management system People management system Financial management system Leadership teams Businesses How we verify Functions Corporate governance BP Annual...

  • Page 120
    ... The executive and board examine particular group risks both on a periodic basis and as part of the development and review of the annual plan. The board also conducts an annual review of the risk management and internal control systems as required by the UK Corporate Governance Code. During the year...

  • Page 121
    ... risks have been allocated for review by the board and its committees: t The board has been allocated several strategic and commercial group risks, including risks associated with the global economic climate, the delivery of BP's 10-point plan, our activities in Russia and reputation management...

  • Page 122
    .... Other activities in 2012 have included monitoring major project delivery and effectiveness of investment and tracking the progress of implementing BP's finance warehouse programme. The committee places value on discussing issues directly with management and operational leadership, as...

  • Page 123
    ...business regulations. For 2013, the board has agreed that the committee will maintain monitoring of these same group risks. During the year, the committee undertook functional reviews of information technology and services, integrated supply and trading and the governance of major project investment...

  • Page 124
    ... BP's investigation report (the Bly Report) into the tragic accident in April 2010 and visited upstream and downstream operations in the US and Angola and downstream sites in the US and UK. In particular, we would highlight our reviews of key group risks, and associated risk management in: drilling...

  • Page 125
    ... monitoring process safety management, and receive assurance that they are appropriate in design and effective in implementation. The committee met six times in 2012 including three joint meetings with the audit committee, at one of which the general auditor's report on internal control and risk...

  • Page 126
    .... 124 Corporate governance BP Annual Report and Form 20-F 2012 Committee processes Information and advice The committee receives its information from the leadership of the GCRO, internal personnel and external advisers. Privileged briefings are provided by the group general counsel and...

  • Page 127
    ... received regular updates on the progress of clean-up and remediation activities. The committee also monitored the Natural Research Damage (NRD) Assessment process, as well as discussions with Natural Resource Trustees on NRD matters including early restoration negotiations and projects. Claims...

  • Page 128
    ...for BP non-executive directors do not state a time commitment and this is explained annually as part of the compliance statement with the UK Corporate Governance Code. The committee took the view that it would be artificial to set such a metric. The experience of the board over the past three years...

  • Page 129
    ... 2013 remuneration policy 136 2013 remuneration policy overview 137 2013 remuneration policy in more depth 142 Service contracts 143 Further details Corporate governance 145 Non-executive directors' remuneration Corporate governance BP BP Annual Annual Report Reportand andForm Form20-F 20-F 2012...

  • Page 130
    ...restoring value. Progress is being made, reï¬,ecting a clear strategy and disciplined execution. Our remuneration system for executive directors is tied closely to this progress. The company's strategy forms the basis for an annual plan and the measures and targets used for both annual and long-term...

  • Page 131
    ...- Salaries reviewed - Performance annually taking measures reï¬,ect account of both strategy and KPIs se see page 131 e p a g e s 2 8-2 9 2010-2012 plan internal and external - Salaries increased outcomes comparators by up to 3% in 2012 see page 133 - Pensions follow country - Three-year performance...

  • Page 132
    ... employees affected by UK pension tax limits and who wished to remain within these limits, with effect from April 2011, Iain Conn and Dr Brian Gilvary received a cash supplement of 35% of basic salary in lieu of future service pension accrual. Conditional equity - to vest in future years, subject...

  • Page 133
    ... reviewed in May 2012 relative to other oil majors, other large UK and Europe-based international companies and key US companies. The committee also considered the level of pay increases for executives below board level, as well as different employee groups across the business. Based on this review...

  • Page 134
    ... start of the year and were derived from the company's annual plan which, in turn, reï¬,ected its strategy and key performance indicators. Measures were grouped under the three dominant strategy themes of safety and operational risk management (S&OR), rebuilding trust, and restoring value. Targets...

  • Page 135
    ...132 $987 Additional pension earned during the year includes an inï¬,ation increase of 4.8% for UK directors and 1.7% for US directors. Transfer values have been calculated in accordance with guidance issued by the actuarial profession. Corporate governance BP Annual Report and Form 20-F 2012 133

  • Page 136
    ...Remuneration policy Committee operation Salary review Executive directors Executive team and leadership group Annual bonus Assess performance Determine bonus for 2011 Review measures for 2013 Agree measures and targets for 2013 Long-term equity plans Assess performance Determine vesting of 2009-2011...

  • Page 137
    ...shares or loan stock of any subsidiary company. There are no directors or members of senior management who own more than 1% of the ordinary shares in issue. At 25 February 2013, all directors and senior management as a group held interests in 10,878,365 ordinary shares or their calculated equivalent...

  • Page 138
    ...  - Operating cash ï¬,ow. - Underlying replacement cost profit. - Total cash costs. - Upstream unplanned deferrals. - Upstream major project delivery. - Downstream net income per barrel. No change from last year on safety and operational risk management. Weight on value creation increased from 50...

  • Page 139
    ... for what executive directors may get paid for different levels of performance, consistent with the draft UK regulations on remuneration reporting. Dr Byron Grote's chart shows full-year values for illustration and does not reï¬,ect the impact of his announced retirement from the board. The minimum...

  • Page 140
    ... and 30% on his business segment. The group strategy provides the overall context for the company's key performance indicators and the focus for the annual plan. From this, measures and targets are selected at the start of the year for senior managers, including executive directors, to reï¬,ect the...

  • Page 141
    ... bonus - 2013 policy The structure of deferred bonus, paid in shares, places increased focus on long-term alignment with shareholders, and reinforces the critical importance of maintaining high safety and environmental standards. It effectively translates the outcome of a portion of the annual bonus...

  • Page 142
    ...on the operating cash ï¬,ow of the company, reï¬,ecting a central element of value creation. The final third will be based on a set of strategic imperatives; in particular, reserves replacement, safety and operational risk, and major project delivery. 140 Corporate governance BP Annual Report and...

  • Page 143
    ... date. Corporate governance Other benefits - 2013 policy Executive directors are eligible to participate in regular employee benefit plans and in all-employee share saving schemes applying in their home countries. Benefits in kind are not pensionable. Corporate governance BP Annual Report...

  • Page 144
    ...the extent the performance targets or hurdles are met. His 2013 bonus eligibility will likewise be prorated to reï¬,ect his service and based on group results for the year. He will not receive any termination payments on leaving service. 142 Corporate governance BP Annual Report and Form 20-F 2012

  • Page 145
    ... the 2012-2014 plan, 'one-third on safety and operational risk management' should instead read 'one-third on operating cash ï¬,ow'. Full details of the performance conditions are spelt out correctly in the 2011 directors' remuneration report on page 147. Corporate governance BP Annual Report and...

  • Page 146
    ... You Earn employee share scheme. a b c Numbers shown are ADSs under option. One ADS is equivalent to six ordinary shares. Options lapsed. Options exercised on 29 February 2012. Closing market price for information. Shares were retained after exercise of options. 144 Corporate governance BP Annual...

  • Page 147
    ... of cash fees, payable monthly. t Non-executive directors should not receive share options from the company. t Non-executive directors are encouraged to establish a holding in BP shares of the equivalent value of one year's base fee. t Remuneration for non-executive directors is reviewed annually...

  • Page 148
    146 Corporate governance BP Annual Report and Form 20-F 2012

  • Page 149
    ... Internal Control Revised Guidance for Directors (Turnbull) 148 Corporate governance practices 149 Code of ethics 149 Controls and procedures 149 Principal accountants' fees and services 150 Memorandum and Articles of Association Corporate governance Corporate governance BP BP Annual Annual Report...

  • Page 150
    ... of the annual plan presented by the group chief executive. A joint meeting of the audit and safety, ethics and environment assurance committees in January 2013 reviewed a report from the general auditor as part of the board's annual review of the risk management and internal control systems. The...

  • Page 151
    ... and financial reporting matters; internal accounting and risk management control reviews (excluding any services relating to information systems design and implementation); non-statutory audit; project assurance and advice on business and accounting process improvement (excluding any services...

  • Page 152
    ..., exceed the amount paid up on the share capital plus the aggregate of the amount of the capital and revenue reserves of the company. Variation of the 150 Corporate governance BP Annual Report and Form 20-F 2012 Voting rights The Articles of Association of the company provide that voting on...

  • Page 153
    ... or foreign persons to hold or vote the company's ordinary shares or BP ADSs, other than limitations that would generally apply to all of the shareholders and limitations applicable to certain countries and persons subject to EU economic sanctions. Corporate governance BP Annual Report and Form 20...

  • Page 154
    152 Corporate governance BP Annual Report and Form 20-F 2012

  • Page 155
    ... capital 154 Share prices and listings 155 Dividends 155 UK foreign exchange controls on dividends 155 Shareholder taxation information 157 Major shareholders 158 Purchases of equity securities by the issuer and affiliated purchasers 158 Fees and charges payable by ADSs holders 159 Fees and payments...

  • Page 156
    ... a buy and a sell order, the trade is executed and automatically reported to the LSE. Trading is continuous from 8.00 a.m. to 4.30 p.m. UK time but, in the event of a 20% movement in the share price either way, the LSE may impose a temporary halt in the trading of that company's shares in the order...

  • Page 157
    ... the Shareholder information BP Annual Report and Form 20-F 2012 155 Shareholder information 108.6 357.7 51.07 218.5 84 336 - 52.07 - 84 26.82 104.42 42 168 33.53 125.10 54 198 b Dividends announced and paid by the company on ordinary and preference shares is provided in Financial statements Note...

  • Page 158
    ... £100 (or part) or stamp duty reserve tax at the rate of 1.5% of the value of the ordinary shares at the time of the transfer. For ADR holders electing to receive ADSs instead of cash, after the 2012 first quarter dividend payment Taxation of capital gains UK taxation A US holder may be liable for...

  • Page 159
    ... rights of the issued share capital of the company. As at 19 February 2013 BlackRock, Inc. held 5.39%, The Capital Group Companies, Inc. held 3.88% and Legal & General Group Plc held 3.82% of the voting rights of the issued share capital of the company. Lazard Asset Management Limited disposed of...

  • Page 160
    ... the requirements of certain employee share-based payment plans. Maximum number of Total number shares that of shares may yet purchased as Average part of publicly be purchased Total number under the announced of shares paid per share programmea programmes $ purchased 2012 January February March...

  • Page 161
    ... payments or the Scrip Dividend Programme or to change the way you receive your company documents (such as the BP Annual Report and Form 20-F, BP Summary Review and Notice of BP Annual General Meeting) please contact the BP Registrar or the BP ADS Depositary. Ordinary and preference shareholders...

  • Page 162
    160 Shareholder information BP Annual Report and Form 20-F 2012

  • Page 163
    Additional disclosures 162 Legal proceedings 171 Critical accounting policies 174 Relationships with suppliers and contractors 174 Material contracts 175 Related-party transactions 175 Exhibits Additional disclosures Additional disclosures BP Annual Report and Form 20-F 2012 161

  • Page 164
    ... economic loss by private plaintiffs, dismissing plaintiffs' state law claims and limiting the types of maritime law claims plaintiffs may pursue, but also held that certain classes of 162 Additional disclosures BP Annual Report and Form 20-F 2012 claimants may seek punitive damages under general...

  • Page 165
    ... years. A process safety monitor will review, evaluate and provide recommendations for the improvement of BP's process safety and risk management procedures including, but not limited to, BP's risk review of processes concerning deepwater drilling in the Gulf of Mexico. An ethics monitor will review...

  • Page 166
    ... and superseding cause of the oil spill for the majority of its duration. Transocean's defence claims that BP fraudulently misrepresented and concealed information regarding the flow rate at the Macondo well in late April and May 2010, as well as the likelihood of success of a top-kill approach to...

  • Page 167
    On 20 April 2011, Transocean filed claims in its Limitation of Liability action alleging that BP had breached BP America Production Company's contract with Transocean Holdings LLC by BP not agreeing to indemnify Transocean against liability related to the Incident and by not paying certain invoices....

  • Page 168
    ...billion BP commitment to help resolve economic loss claims related to the Gulf seafood industry and a $57million fund to support continued advertising that promotes Gulf Coast tourism. It also resolves property damage in certain areas along the Gulf Coast, as well as claims for additional payments...

  • Page 169
    ... see Financial statements - Note 36 on pages 236-239 of this report. All class member settlements under these agreements are payable under the terms of the Trust. Other costs to be paid from the Trust include State and Local government claims, state and local response costs, natural resource damages...

  • Page 170
    ... environment, and seeking to recover the cost of assessing the alleged damage. BP anticipates further claims from the Mexican federal government. On 18 October 2012, before a Federal District Court located in Mexico City, a class action complaint was filed against BPXP, BP America Production Company...

  • Page 171
    ... activity. On 28 July 2011, the FERC staff issued a Notice of Alleged Violations stating that it had preliminarily determined that several BP entities fraudulently traded physical natural gas in the Houston Ship Channel and Katy markets and trading points to increase the value of their financial...

  • Page 172
    ... gas exploration, production, refining and marketing in Russia (the Arctic Opportunity). Those transactions included the issue or transfer of shares between Rosneft Oil Company and any BP group company (pursuant to the Rosneft Share Swap Agreement). The court granted an interim order restraining BP...

  • Page 173
    ... commodity prices, the effects of inflation on operating expenses, discount rates, production profiles and the outlook for global or regional market supply-and-demand conditions for crude oil, natural gas and refined products. Additional disclosures BP Annual Report and Form 20-F 2012 Additional...

  • Page 174
    ... are not closely related to those of the host contract. Forward contracts to buy or sell equity investments, including investments in associates and joint ventures, are also accounted for as derivative financial instruments. All such derivatives are initially recognized at fair value on the date on...

  • Page 175
    ... fourth quarter of 2012. The income statement charge for 2010 included $20 billion in relation to the trust fund, adjusted to take account of the time value of money. Fines and penalties are not covered by the trust fund. An asset has been recognized representing BP's right to receive reimbursement...

  • Page 176
    ... year. In 2013, when we adopt the revised version of IAS 19 'Employee benefits' (see Note 1 for further information), we will be required to apply the same rate of return on plan assets as we use to discount our pension liabilities. We expect this accounting change to adversely impact our earnings...

  • Page 177
    ...significant jointly controlled entities and associates are summarized in Financial statements - Note 24 on page 218 and Note 25 on page 219. In the ordinary course of its business, the group enters into transactions with various organizations with which certain of its directors or executive officers...

  • Page 178
    176 Additional disclosures BP Annual Report and Form 20-F 2012

  • Page 179
    ...and losses Research and development Operating leases Exploration for and evaluation of oil and natural gas resources Auditor's remuneration Finance costs Taxation Dividends Earnings per ordinary share Property, plant and equipment Goodwill Intangible assets Investments in jointly controlled entities...

  • Page 180
    .... Information on the Gulf of Mexico oil spill and BP's response is included on pages 59-62 and elsewhere in this report, including Safety on pages 46-50. The group has considerable financial resources, and the directors believe that the group is well placed to manage its business risks successfully...

  • Page 181
    ... Governance Code specified for our review; and • certain elements of the report to shareholders by the Board on directors' remuneration. Other matter We have reported separately on the parent company financial statements of BP p.l.c. for the year ended 31 December 2012 and on the information...

  • Page 182
    ... oil spill, which will also impact upon the ultimate cost for BP. Our opinion is not qualified in respect of these matters. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), BP p.l.c.'s internal control over financial reporting...

  • Page 183
    ... Company Accounting Oversight Board (United States), the group balance sheets of BP p.l.c. as at 31 December 2012 and 2011, and the related group income statement, group statement of comprehensive income, group statement of changes in equity and group cash flow statement for each of the three years...

  • Page 184
    ... 2011 $ million 2010 Sales and other operating revenues Earnings from jointly controlled entities - after interest and tax Earnings from associates - after interest and tax Interest and other income Gains on sale of businesses and fixed assets Total revenues and other income Purchases Production...

  • Page 185
    ...translation reserve Sharebased payment reserve Fair value reserves Profit and loss account BP shareholders' equity Minority interest Total equity At 1 January 2012 Profit for the year Other comprehensive income Total comprehensive income Dividends Share-based payments (net of tax) Transactions...

  • Page 186
    ...-current assets Property, plant and equipment Goodwill Intangible assets Investments in jointly controlled entities Investments in associates Other investments Fixed assets Loans Trade and other receivables Derivative financial instruments Prepayments Deferred tax assets Defined benefit pension plan...

  • Page 187
    ... profit (loss) before taxation to net cash provided by operating activities Exploration expenditure written off Depreciation, depletion and amortization Impairment and (gain) loss on sale of businesses and fixed assets Earnings from jointly controlled entities and associates Dividends received...

  • Page 188
    ... Exploration and Production segment was separated to form two new operating segments, Upstream and TNK-BP, reflecting the way in which our investment in TNK-BP is managed. In addition, we began reporting the Refining and Marketing segment as Downstream. 186 Financial statements BP Annual Report...

  • Page 189
    ... evaluation of oil and gas resources, see the accounting policy for oil and natural gas exploration, appraisal and development expenditure below. Intangible assets acquired separately from a business are carried initially at cost. The initial cost is the aggregate amount paid and the fair value of...

  • Page 190
    ...in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money. An assessment is made at each reporting date as to whether there...

  • Page 191
    ...-for-sale financial assets; financial assets at fair value through profit or loss; or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Financial assets include cash and cash equivalents, trade receivables, other receivables, loans, other investments, and...

  • Page 192
    ... of property, plant and equipment, the amounts recognized within other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability. Where the hedged item is an equity investment, such as an 190 Financial statements BP Annual Report and Form 20-F 2012...

  • Page 193
    ...an assessment made at the beginning of the year of long-term market returns on plan assets, adjusted for the forecasts of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognized in the income statement as...

  • Page 194
    ... for trading purposes, the associated sales and purchases are reported net within sales and other operating revenues whether or not physical delivery has occurred. Generally, revenues from the production of oil and natural gas properties in which the group has an interest with joint venture partners...

  • Page 195
    ... Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date i.e. it is an exit price. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 and BP will...

  • Page 196
    ... contributions and BP's regular contributions, the $20-billion commitment was paid in full during 2012. The income statement charge for 2010 included $20 billion in relation to the trust fund, adjusted to take account of the time value of money. 194 Financial statements BP Annual Report and Form...

  • Page 197
    ...in the table under Provisions relating to the Gulf of Mexico oil spill. Movements in the reimbursement asset are presented in the table below. $ million 2012 2011 2010 At 1 January Increase in provision for items covered by the trust fund Derecognition of provision for items that cannot be reliably...

  • Page 198
    ...to take account of the time value of money, was charged to the income statement in 2010. Other items Provisions at 31 December 2012 also include amounts in relation to completing the oil spill response, BP's commitment to a 10-year research programme in the Gulf of Mexico, the discounted cost of the...

  • Page 199
    ...measure the obligation reliably. See Note 43 for further information. Impact upon the group income statement The group income statement for 2012 includes a pre-tax charge of $5,014 million (2011 pre-tax credit of $3,742 million) in relation to the Gulf of Mexico oil spill. The amount charged to date...

  • Page 200
    ... Limited (Reliance) a 30% interest in 21 oil and gas production-sharing agreements (PSAs) operated by Reliance in India for $7,026 million. This included the producing KG D6 block. In addition, on 17 November 2011, the companies formed a 50:50 joint venture for the sourcing and marketing of gas...

  • Page 201
    ... the purchasers differing from the disposal proceeds noted below. Non-current assets held for sale at 31 December 2012 included the following items: Financial statements Upstream On 28 November 2012, BP announced that it had agreed to sell its interests in a number of central North Sea oil and gas...

  • Page 202
    ... 2012 2011 Assets Property, plant and equipment Goodwill Intangible assets Investments in jointly controlled entities Investments in associates Loans Inventories Cash Other current assets Assets classified as held for sale Liabilities Trade and other payables Provisions Deferred tax liabilities...

  • Page 203
    ... Gulf of Mexico oil spill in 2010, the group announced plans to deliver up to $38 billion of disposal proceeds by the end of 2013. At 31 December 2012, BP had announced disposals of $38 billion, excluding the sale of our 50% investment in TNK-BP. See Note 4 for further information relating to assets...

  • Page 204
    ... a number of assets, primarily in the Gulf of Mexico and North Sea, caused by increases in the decommissioning provision resulting from continued review of the expected decommissioning costs; a $144-million write-down of certain gas storage assets in Europe due to changes to the European gas market...

  • Page 205
    ...and TNK-BP. BP's activities in low-carbon energy are managed through our Alternative Energy business, which is reported in Other businesses and corporate. Upstream's activities include oil and natural gas exploration, field development and production; midstream transportation, storage and processing...

  • Page 206
    ...segments based upon the business in which the employees work. Certain financial information is provided separately for the US as this is an individually material country for BP, and for the UK as this is BP's country of domicile. $ million 2012 Other businesses and corporate Gulf of Mexico oil spill...

  • Page 207
    ... business Upstream Downstream TNK-BP Total group Segment revenues Sales and other operating revenues Less: sales and other operating revenues between businesses Third party sales and other operating revenues Equity-accounted earnings Interest income Segment results Replacement cost profit (loss...

  • Page 208
    ... business Upstream Downstream TNK-BP Total group Segment revenues Sales and other operating revenues Less: sales and other operating revenues between businesses Third party sales and other operating revenues Equity-accounted earnings Interest income Segment results Replacement cost profit (loss...

  • Page 209
    ...party sales and other operating revenuesa Results Replacement cost profit (loss) before interest and taxation Non-current assets Other non-current assetsb c Other investments Loans Trade and other receivables Derivative financial instruments Deferred tax assets Defined benefit pension plan surpluses...

  • Page 210
    ...Total interest and other income related to financial instruments amounted to $197 million (2011 $172 million and 2010 $206 million). 2012 includes $709 million of dividends received from TNK-BP. See Note 4 for further information. 8. Production and similar taxes $ million 2012 2011 2010 US Non-US...

  • Page 211
    ...individual economic models and key assumptions agreed by BP's management. Capital expenditure and operating costs for the first four years and expected hydrocarbon production profiles up to 2020 are derived from the business segment plan. Estimated production quantities and cash flows up to the date...

  • Page 212
    ...a 113 (70) 218 Excludes exchange gains and losses arising on financial instruments measured at fair value through profit or loss. 13. Research and development $ million 2012 2011 2010 Expenditure on research and development 674 636 780 210 Financial statements BP Annual Report and Form 20...

  • Page 213
    ... of oil and natural gas resources. All such activity is recorded within the Upstream segment. $ million 2012 2011 2010 Exploration and evaluation costs Exploration expenditure written off Other exploration costs Exploration expense for the year Intangible assets - exploration and appraisal...

  • Page 214
    ... of the accounts of BP p.l.c. including the group's consolidated financial statements. Includes interim reviews and reporting on internal financial controls and non-statutory audit services. The pension plan services include tax compliance services of $50,000 (2011 $108,000 and 2010 $300,000). 2012...

  • Page 215
    ... oil spill 2011 2010 impacts of Gulf of Mexico oil spill 2012 2010 Profit (loss) before taxation Tax charge (credit) on profit (loss) Effective tax rate 18,809 6,993 37% 38,834 12,737 33% 36,110 11,393 32% (40,935) (12,894) 31% (4,825) (1,501) 31% % of profit or loss before taxation UK...

  • Page 216
    ...Pence per share 2012 2011 2010 2012 Cents per share 2011 2010 2012 2011 $ million 2010 Dividends announced and paid in cash Preference shares Ordinary shares March June September December Dividend announced, payable in March 2013 214 Financial statements BP Annual Report and Form 20-F 2012 2 5.096...

  • Page 217
    ... Profit (loss) for the year attributable to BP ordinary shareholders 11,582 2 11,580 25,700 2 25,698 (3,719) 2 (3,721) Shares thousand 2012 2011 2010 Basic weighted average number of ordinary shares Potential dilutive effect of ordinary shares issuable under employee share-based payment plans...

  • Page 218
    ... improvements Oil and gas properties Buildings Transportation Total Cost At 1 January 2012 Exchange adjustments Additions Acquisitions Transfers Reclassified as assets held for sale Deletions At 31 December 2012 Depreciation At 1 January 2012 Exchange adjustments Charge for the year Impairment...

  • Page 219
    ...) (358) 2,259 1,215 1,172 16,879 (21) 5,739 3,700 (1,013) (66) (1,074) 24,144 2,581 (11) 1,388 86 - (46) (956) 3,042 21,102 14,298 Financial statements Financial statements BP Annual Report and Form 20-F 2012 217

  • Page 220
    ... entities for the purchase of LNG, crude oil and oil products, refinery operating costs and storage and handling services. See Note 44 for further information on capital commitments relating to BP's investments in jointly controlled entities. 218 Financial statements BP Annual Report and Form 20...

  • Page 221
    ... and oil products, transportation and storage. See Note 44 for further information on capital commitments relating to BP's investments in associates. Financial statements On 18 October 2010, BP announced that it had reached agreement to sell assets in Vietnam, together with its upstream businesses...

  • Page 222
    ... value through profit or loss Derivative hedging instruments Financial liabilities measured at amortized cost 2011 Note Loans and receivables Total carrying amount Financial assets Other investments - equity shares - other Loans Trade and other receivables Derivative financial instruments Cash...

  • Page 223
    ... subject to close financial and management control. The integrated supply and trading function maintains formal governance processes that provide oversight of market risk associated with trading activity. A policy and risk committee monitors and validates limits and risk exposures, reviews incidents...

  • Page 224
    ... over the year and interest rates will change continually. Furthermore, the effect on earnings shown by this analysis does not consider the effect of any other changes in general economic activity that may accompany such an increase in interest rates. 222 Financial statements BP Annual Report and...

  • Page 225
    ...'s business activities, financial resources and business risk management processes are taken into account in the assessment, to the extent that this information is publicly available or otherwise disclosed to BP by the counterparty, together with external credit ratings. Creditworthiness continues...

  • Page 226
    ... measure, the group continues to maintain suitable levels of cash and cash equivalents, amounting to $19.5 billion at 31 December 2012, invested with highly rated banks or money market funds and readily accessible at immediate and short notice (2011 $14.1 billion). At 31 December 2012, the group...

  • Page 227
    ...quoted market bid prices and as such are in level 1 of the fair value hierarchy. Unlisted investments are stated at cost less accumulated impairment losses. The most significant listed investment is the group's 1.25% stake in Rosneft which had a fair value of $1,179 million at 31 December 2012 (2011...

  • Page 228
    ... floating rate interest with weekly market re-set, and as such are in level 1 of the fair value hierarchy. 28. Inventories $ million 2012 2011 Crude oil Natural gas Refined petroleum and petrochemical products Supplies Trading inventories Cost of inventories expensed in the income statement 9,123...

  • Page 229
    ...the assets to which they apply. 32. Trade and other payables $ million 2012 Current Noncurrent Current 2011 Noncurrent Financial liabilities Trade payables Amounts payable to jointly controlled entities Amounts payable to associates Gulf of Mexico oil spill trust fund liabilitya Other payables Non...

  • Page 230
    ... range of contract types in combination to create incremental gains by arbitraging prices between markets, locations and time periods. The net of these exposures is monitored using market value-at-risk techniques as described in Note 26. 228 Financial statements BP Annual Report and Form 20-F 2012

  • Page 231
    ... shows the changes in the day-one profits and losses deferred on the balance sheet. $ million 2012 Oil price Power price Natural gas price Power price 2011 Natural gas price Fair value of contracts not recognized through the income statement at 1 January Fair value of new contracts at inception...

  • Page 232
    ... market data such as prices based on internal models or other valuation methods. This information is presented on a gross basis, that is, before netting by counterparty. $ million 2012 Less than 1 year 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years Total Fair value of derivative assets Level...

  • Page 233
    ... last of which is in 2018) using all available external pricing information. Additionally, where limited data exists for certain products, prices are interpolated using historic and long-term pricing relationships. Financial statements Financial statements BP Annual Report and Form 20-F 2012 231

  • Page 234
    ... fair value hierarchy. Note 26 outlines the management of risk aspects for currency risk. For cash flow hedges the group only claims hedge accounting for the intrinsic value on the currency with any fair value attributable to time value taken immediately to the income statement. There were no highly...

  • Page 235
    ... not swapped to US dollar is naturally hedged for the foreign currency risk by holding equivalent euro cash and cash equivalent amounts. Finance leases The group uses finance leases to acquire property, plant and equipment. These leases have terms of renewal but no purchase options and escalation...

  • Page 236
    ... company did not repurchase any of its own shares, other than as needed to satisfy the requirements of certain employee share-based payment plans. $ million At 31 December 2012 2011 Gross debt Less: fair value asset of hedges related to finance debt Less: cash and cash equivalents Net debt Equity...

  • Page 237
    ... employee compensation of $618 million (2011 $666 million). These provisions are discounted using either a nominal discount rate of 2.5% (2011 2.5%) or a real discount rate of 0.5% (2011 0.5%), as appropriate. Financial statements Financial statements BP Annual Report and Form 20-F 2012 235

  • Page 238
    ... for removal costs, physical damage to real or personal property, loss of government revenue and increased public services costs ("State and Local Claims"). BP also faces other litigation related to the Incident brought under US state law 236 Financial statements BP Annual Report and Form 20-F 2012

  • Page 239
    ... previously assumed by BP in determining its initial estimate of the total cost. Management has continued to analyse the claims in the period since 5 February 2013 to gain a better understanding of whether or not the number and average value of claims received and processed to date are predictive of...

  • Page 240
    ... States of Alabama, Mississippi and Florida formally presented their claims to BP under OPA 90 for alleged losses including economic and property damage as a result of the Gulf of Mexico oil spill (see Note 43 for further information). BP reached an agreement in November 2012 with the US government...

  • Page 241
    ... primary pension arrangement in the UK is a funded final salary pension plan under which retired employees draw the majority of their benefit as an annuity. With effect from 1 April 2010, BP closed its UK plan to new joiners other than some of those joining the North Sea business. The plan remains...

  • Page 242
    ... for 2013. For 2011 and 2010, the expected long-term rates of return and market values of the various categories of assets held by the defined benefit plans at 31 December are presented. The market values include the effects of derivative financial instruments. The amounts classified as equities...

  • Page 243
    ...benefits continued 2012 Expected long-term rate of return % 2011 Expected long-term rate of return % 2010 Interest rate % Market value $ million Market value $ million Market value $ million UK pension plans Equitiesa Bonds Property/real estate Cash 4.4 US pension plans Equitiesa Bonds Property...

  • Page 244
    ... return on pension plan assets Change in assumptions underlying the present value of the plan liabilities Experience gains and losses arising on the plan liabilities Actuarial (loss) gain recognized in other comprehensive income Movements in benefit obligation during the year Benefit obligation...

  • Page 245
    ... return on pension plan assets Change in assumptions underlying the present value of the plan liabilities Experience gains and losses arising on the plan liabilities Actuarial (loss) gain recognized in other comprehensive income Movements in benefit obligation during the year Benefit obligation...

  • Page 246
    ... other receivables and other payables in the group balance sheet. $ million 2012 2011 2010 2009 2008 History of surplus (deficit) and of experience gains and losses Benefit obligation at 31 December Fair value of plan assets at 31 December Deficit Experience losses on plan liabilities Actual return...

  • Page 247
    ... six months over par value. Treasury shares 2012 Shares thousand Nominal value $ million Shares thousand 2011 Nominal value $ million Shares thousand 2010 Nominal value $ million At 1 January Shares transferred to ESOPs at market price Shares re-issued for employee share-based payment plans At...

  • Page 248
    ...Actuarial loss relating to pensions and other post-retirement benefits Available-for-sale investments (including recycling) Cash flow hedges (including recycling) Share of equity-accounted entities' other comprehensive income, net of tax Profit for the year Total comprehensive income Dividends Share...

  • Page 249
    ... Total own shares and treasury shares Foreign currency translation reserve Availablefor-sale investments Total fair value reserves Sharebased payment reserve Profit and loss account BP shareholders' equity Own shares Treasury shares Cash flow hedges Minority interest Total equity (388 108...

  • Page 250
    ... of employee share-based payment plans where the scheme has not yet been settled by means of an award of shares to an individual. Profit and loss account The balance held on this reserve is the accumulated retained profits of the group. 248 Financial statements BP Annual Report and Form 20-F 2012

  • Page 251
    ...payment plans that existed during the year are detailed below. Plans for executive directors For information on the Executive Directors' Incentive Plan (EDIP) see the Directors' remuneration report on pages 127-145. Plans for senior employees The group operates a number of equity-settled share plans...

  • Page 252
    ... investment options including a BP Stock Fund that holds BP ADSs and a small percentage of cash. Share option transactions Details of share option transactions for the year under the share option plans are as follows: 2012 Number of options Weighted average exercise price $ Number of options 2011...

  • Page 253
    ... Social security costs Share-based payments Pension and other post-retirement benefit costs 10,357 898 674 1,188 13,117 2012 9,827 851 584 1,065 12,327 2011 9,242 789 576 1,166 11,773 2010 Number of employees at 31 Decemberb Upstream Downstreamc Other businesses and corporate Gulf Coast...

  • Page 254
    ... in the directors' remuneration report on pages 127-145. Remuneration of directors and senior management $ million Total for all senior management 2012 2011 2010 Total for all senior management Short-term employee benefits Pensions and other post-retirement benefits Share-based payments Total 27...

  • Page 255
    ... 36 for further information. In January 2013, the States of Alabama, Mississippi and Florida formally presented their claims to BP under OPA 90 for alleged losses including economic and property damage as a result of the Gulf of Mexico oil spill. BP is evaluating these claims. The State of Louisiana...

  • Page 256
    ...property, plant and equipment by group companies for which contracts had been signed at 31 December 2012 amounted to $14,068 million (2011 $12,517 million). In addition, at 31 December 2012, the group had contracts in place for future capital expenditure relating to investments in jointly controlled...

  • Page 257
    ... Africa Trinidad & Tobago BP Trinidad and Tobago UK BP Capital Markets BP Oil UK Britoil US *BP Holdings North America Atlantic Richfield Company BP America BP America Production Company BP Amoco Chemical Company BP Company North America BP Corporation North America BP Exploration & Production BP...

  • Page 258
    ...financial statements of each subsidiary issuer of public debt securities. Investments include the investments in subsidiaries recorded under the equity method for the purposes of the condensed consolidating financial information. Equity accounted income of subsidiaries is the group's share of profit...

  • Page 259
    ...BP group Sales and other operating revenues Earnings from jointly controlled entities - after interest and tax Earnings from associates - after interest and tax Equity-accounted income of subsidiaries - after interest and tax Interest and other revenues Gains on sale of businesses and fixed assets...

  • Page 260
    ... BP group 2011 Sales and other operating revenues Earnings from jointly controlled entities - after interest and tax Earnings from associates - after interest and tax Equity-accounted income of subsidiaries - after interest and tax Interest and other revenues Gains on sale of businesses...

  • Page 261
    ... BP group 2010 Sales and other operating revenues Earnings from jointly controlled entities - after interest and tax Earnings from associates - after interest and tax Equity-accounted income of subsidiaries - after interest and tax Interest and other revenues Gains on sale of businesses...

  • Page 262
    ... in jointly controlled entities Investments in associates Other investments Subsidiaries - equity-accounted basis Fixed assets Loans Other receivables Derivative financial instruments Prepayments Deferred tax assets Defined benefit pension plan surpluses Current assets Loans Inventories Trade and...

  • Page 263
    ... in jointly controlled entities Investments in associates Other investments Subsidiaries - equity-accounted basis Fixed assets Loans Other receivables Derivative financial instruments Prepayments Deferred tax assets Defined benefit pension plan surpluses Current assets Loans Inventories Trade and...

  • Page 264
    ... consolidating information on certain US subsidiaries continued Cash flow statement $ million For the year ended 31 December Issuer BP Exploration (Alaska) Inc. Guarantor BP p.l.c. Other subsidiaries Eliminations and reclassifications BP group 2012 Net cash provided by operating activities Net cash...

  • Page 265
    ... the reserves estimate if the extraction is by means not involving a well. For details on BP's proved reserves and production compliance and governance processes, see pages 84-86. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012...

  • Page 266
    ... drilling expenditures, which are capitalized within intangible assets, and geological and geophysical exploration costs, which are charged to income as incurred. Presented net of transportation costs, purchases and sales taxes. Includes property taxes, other government take and the fair value...

  • Page 267
    ... which our investment was classified as an asset held for sale and therefore equity accounting ceased. The amounts shown exclude BP's share of costs incurred and results of operations for the period 22 October to 31 December 2012. Financial statements Supplementary information on oil and natural...

  • Page 268
    ... drilling expenditures, which are capitalized within intangible assets, and geological and geophysical exploration costs, which are charged to income as incurred. Presented net of transportation costs, purchases and sales taxes. Includes property taxes, other government take and the fair value...

  • Page 269
    Oil and natural gas exploration and production activities continued $ million 2011 Europe North America Rest of North Americag South America Africa Asia Australasia Total UK Rest of Europe US Russia Rest of Asia Equity-accounted entities (BP share)a Capitalized costs at 31 Decemberb Gross ...

  • Page 270
    ... drilling expenditures, which are capitalized within intangible assets, and geological and geophysical exploration costs, which are charged to income as incurred. Presented net of transportation costs, purchases and sales taxes. Includes property taxes, other government take and the fair value loss...

  • Page 271
    ...Production costs - Production taxes - Other costs (income) - Depreciation, depletion and amortization - Impairments and losses on sale of businesses and fixed assets - - Profit (loss) before taxation - Allocable taxes - Results of operations - Exploration and production activities - equity-accounted...

  • Page 272
    ... Sales of reserves-in-place At 31 December 2012d h Developed Undeveloped Equity-accounted entities (BP share)e At 1 January 2012 Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Production Sales...

  • Page 273
    ... feet in Vietnam and 4,376 billion cubic feet in Russia. includes assets held for sale of 590 billion cubic feet. includes assets held for sale of 4,492 billion cubic feet. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012 271

  • Page 274
    ... continued million barrels Bitumena 2012 Total Rest of North America Equity-accounted entities (BP share) At 1 January 2012 Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Production Sales...

  • Page 275
    ... of oil equivalent in Russia. includes assets held for sale of 140 million barrels of oil equivalent. includes assets held for sale of 5,315 million barrels of oil equivalent. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012 273

  • Page 276
    ... law, track record of renewals within the industry and track record of success in obtaining renewals by TNK-BP. This has resulted in an increase in proved liquid reserves of 221 million barrels. 274 Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012

  • Page 277
    ...of renewals within the industry and track record of success in obtaining renewals by TNK-BP. This has resulted in an increase in proved gas reserves of 185 billion cubic feet. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012 275

  • Page 278
    ..., whether payable in cash or in kind, where the royalty owner has a direct interest in the underlying production and the option and ability to make lifting and sales arrangements independently. 276 Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012

  • Page 279
    ... within the industry and track record of success in obtaining renewals by TNK-BP. This has resulted in an increase in proved reserves of 253 million barrels of oil equivalent. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012 277

  • Page 280
    ...payable over the life of the field under the terms of the BP Prudhoe Bay Royalty Trust. Excludes NGLs from processing plants in which an interest is held of 29 thousand barrels per day. Includes 15 million barrels of crude oil sold relating to production from assets held for sale at 31 December 2010...

  • Page 281
    ...137 billion cubic feet of natural gas in respect of the 5.89% minority interest in TNK-BP. Includes 50 billion cubic feet relating to assets held for sale at 31 December 2010. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012 279

  • Page 282
    ..., whether payable in cash or in kind, where the royalty owner has a direct interest in the underlying production and the option and ability to make lifting and sales arrangements independently. 280 Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012

  • Page 283
    ... and 1,114 million barrels of oil equivalent for equity-accounted entities) associated with properties currently held for sale where the disposal has not yet been completed. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012 281

  • Page 284
    ... corporate income tax rates. Future net cash flows from oil and natural gas production are discounted at 10% regardless of the group assessment of the risk associated with its producing activities. Minority interest in BP Trinidad and Tobago LLC amounted to $900 million. The standardized measure...

  • Page 285
    ... received as a result of contractual arrangements, with no associated costs. Total change in the standardized measure during the year includes the effect of exchange rate movements. Financial statements Supplementary information on oil and natural gas (unaudited) BP Annual Report and Form 20-F 2012...

  • Page 286
    ... corporate income tax rates. Future net cash flows from oil and natural gas production are discounted at 10% regardless of the group assessment of the risk associated with its producing activities. Minority interest in BP Trinidad and Tobago LLC amounted to $1,200 million. The standardized measure...

  • Page 287
    ...drilling, productive wells and acreage. Figures include amounts attributable to assets held for sale. Crude oil and natural gas production The following table shows crude oil and natural gas production for the years ended 31 December 2012, 2011 and 2010. Production for the yeara Europe North America...

  • Page 288
    ... the number of exploratory and development oil and natural gas wells in the process of being drilled by the group and its equity-accounted entities as at 31 December 2012. Suspended development wells and long-term suspended exploratory wells are also included in the table. Europe North America Rest...

  • Page 289
    ...the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. BP p.l.c. (Registrant) /s/ David J Jackson Company Secretary 6 March 2013 Financial statements Financial statements BP Annual Report and Form 20-F 2012 287

  • Page 290
    .... Other matter We have reported separately on the consolidated financial statements of BP p.l.c. for the year ended 31 December 2012. That report includes an emphasis of matter on the significant uncertainty over provisions and contingencies related to the Gulf of Mexico oil spill. Ernst & Young LLP...

  • Page 291
    ... year Net assets excluding pension plan deficit Defined benefit pension plan deficit Net assets Represented by Capital and reserves Called-up share capital Share premium account Capital redemption reserve Merger reserve Own shares Treasury shares Share-based payment reserve Profit and loss account...

  • Page 292
    Company cash flow statement For the year ended 31 December Note 2012 $ million 2011 Net cash outflow from operating activities Servicing of finance and returns on investments Interest received Interest paid Dividends received Net cash inflow from servicing of finance and returns on investments Tax ...

  • Page 293
    ...of the year of long-term market returns on plan assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognized in the income statement as other...

  • Page 294
    ... Refining and marketing Investment holding The carrying value of BP International in the accounts of the company at 31 December 2012 was $62.63 billion (2011 $62.63 billion). The parent company financial statements of BP p.l.c. on pages PC1-PC11 do not form part of BP's Annual Report on Form...

  • Page 295
    ... 2 of the consolidated financial statements. $ million 2012 2011 Due within 1 to 2 years 2 to 5 years More than 5 years 230 17 4,240 4,487 49 14 4,236 4,299 Financial statements The parent company financial statements of BP p.l.c. on pages PC1-PC11 do not form part of BP's Annual Report on Form...

  • Page 296
    ... the North Sea business. The plan remains open to those employees who joined BP on or before 31 March 2010. The majority of new joiners in the UK have the option to join a defined contribution plan. The obligation and cost of providing the pension benefits is assessed annually using the projected...

  • Page 297
    ...in the BP Global Pension Trust (2011 $75 million), with $32 million representing the company's share of Merchant Navy Officers Pension Fund (2011 $30 million). Financial statements The parent company financial statements of BP p.l.c. on pages PC1-PC11 do not form part of BP's Annual Report on Form...

  • Page 298
    ...of the capital paid up on the preference shares and (ii) the excess of the average market price of such shares on the London Stock Exchange during the previous six months over par value. The parent company financial statements of BP p.l.c. on pages PC1-PC11 do not form part of BP's Annual Report on...

  • Page 299
    ... on cash flow statement (a) Reconciliation of operating profit to net cash (outflow) inflow from operating activities 9 9 - 9 2012 (4) (4) 4 - 2011 Operating profit Net operating charge for pensions and other post-retirement benefits, less contributions Dividends, interest and other income Share...

  • Page 300
    ... fees paid to the non-executive chairman and the non-executive directors and, for executive directors, salary and benefits earned during the relevant financial year, plus cash bonuses awarded for the year. There was no compensation for loss of office in 2012 (2011 nil and 2010 $3 million). Pension...

  • Page 301
    ... Risk factors Information on the Company History and development of the company Business overview Organizational structure Property, plants and equipment Unresolved Staff Comments Operating and Financial Review and Prospects Operating results Liquidity and capital resources Research and development...

  • Page 302

  • Page 303
    ...and payables Group cash ï¬,ow statement Movement in net debt Capital expenditure, acquisitions and disposals Ratios Employee numbers Information for earnings per share BP shareholding information BP share data 35 Group hydrocarbon data XX Oil and natural gas exploration and production activities XX...