BP 2012 Annual Report Download - page 83

Business review: BP in more depth
Business review: BP in more depth
BP Annual Report and Form 20-F 2012
81
The 2012 result also included a net non-operating gain of $246 million,
primarily dividend income from TNK-BP of $709 million, partly offset by a
charge of $325 million to settle disputes with AAR. With the cessation of
equity accounting, under IFRS dividends from our investment in TNK-BP
are recognized as revenue in the period in which they become receivable.
In addition, within equity-accounted earnings, there was an impairment
loss associated with the temporary shutdown of the Lisichansk refinery in
the Ukraine (due to deteriorating economic conditions) and environmental
provisions, partly offset by gains on disposals. Prior to 2012, non-
operating items for the TNK-BP segment were not identified or disclosed.
After adjusting for non-operating items, the underlying replacement cost
profit before interest and taxa b for the TNK-BP segment was $3,127
million, compared with $4,134 million in 2011. The primary factors
impacting the 2012 result, compared with 2011, were the absence of
more than 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 compared with $3,747 million during 2011. This
included $709 million received after reaching agreement with Rosneft for
the sale of BP’s shareholding in TNK-BP.
a
Underlying replacement cost profit is not a recognized GAAP measure. See footnote b on
page 34 for information on underlying replacement cost profit.
b See footnote h on page 80.
Production and reserves
BP’s share of TNK-BP production for the full year of 2012 was
1,012mboe/d, 2% higher than in 2011. After adjusting for the effect of the
acquisition of BP’s upstream interests in Vietnam and Venezuela,
production increased only slightly compared with 2011, with the ramp-up
of new developments offsetting declines from mature fields and the
impact of divestments.
The TNK-BP segment’s total hydrocarbon reserves, on an oil equivalent
basis, was 5,315mmboe at 31 December 2012, an increase of 11%
(increase of 5% for crude oil and increase of 56% for natural gas),
compared with the 31 December 2011 reserves of 4,802mmboe.
The proved reserves replacement ratio is the extent to which production
is replaced by proved reserves additions. For 2012, the proved reserves
replacement ratio excluding acquisitions and disposals was 242% (2011
245%, 2010 165%). For more information on proved reserves
replacement for the group, see pages 85-86.
Key business events
On 11 March, TNK-BP announced the acquisition of two companies that
operate the jet fuel storage and re-fuelling services at the Koltsovo
International Airport in Ekaterinburg. The airport is the fifth largest in the
Russian Federation in terms of number of passengers.
On 21 May, TNK-BP announced the appointment of Evert Henkes to the
board of TNK-BP Ltd as a BP-nominated independent director. He became
the tenth member of the board of TNK-BP Ltd and the second of the
board’s three independent directors. This appointment followed the
resignations of Gerhard Schroeder and James Leng.
On 28 May, TNK-BP announced that Mikhail Fridman had resigned from
the position of chief executive officer of the TNK-BP group. He also
resigned from the position of chairman of the management board of
TNK-BP Management, a Russian subsidiary of TNK-BP, which manages
the company’s assets in Russia and Ukraine, including the publicly traded
company, TNK-BP Holding. Both resignations took effect at the end of
June 2012.
On 20 August, TNK-BP announced that it had sold OJSC
Novosibirskneftegaz and OJSC Severnoeneftegaz as part of the
company’s strategy to optimize the asset portfolio and improve per barrel
efficiency.
On 9 October, TNK-BP announced that the group’s subsidiary, TNK
Vietnam, had produced the first gas from the Lan Do field in Block 06.1,
offshore of Ba Ria Vung Tau province. Two sub-sea wells were tied back
to the Lan Tay platform, through 28 kilometres of flow line and umbilical,
enabling TNK Vietnam to produce gas from the existing infrastructure.
The Lan Do field is expected to bring 2 billion cubic metres (70 billion
cubic feet) of gas to market annually.
On 13 November, BP and AAR announced they had reached an
agreement to settle all outstanding disputes between them, including the
arbitrations brought by each against the other. The agreement included a
waiver of the new opportunities provision in the TNK-BP shareholder
agreement, allowing each party to explore new opportunities and
partnerships in Russia and Ukraine. BP paid AAR $325 million as part of
the settlement. See Legal proceedings on pages 169-171 for further
information.