BP 2013 Annual Report Download - page 22

Our key performance indicators
Operating cash flow ($ billion) Gearing (net debt ratio) (%)
Refining availability (%)
Operating cash flow is net cash flow
provided by operating activities, from
the group cash flow statement.
Operating activities are the principal
revenue-generating activities of the
group and other activities that are not
investing or financing activities.
2013 performance Higher operating
cash flow in 2013 reflected a lower
cash outflow relating to the Gulf of
Mexico oil spill, partly offset by higher
cash outflows as a result of working
capital build.
Our gearing (net debt ratio) shows
investors how significant net debt is
relative to equity from shareholders in
funding BP’s operations.
We aim to keep our gearing within the
10-20% range to give us the flexibility to
deal with an uncertain environment.
Gearing is calculated by dividing net debt
by total equity plus net debt. Net debt is
equal to gross finance debt, plus
associated derivative financial
instruments, less cash and cash
equivalents. Net debt and net debt ratio
are non-GAAP measures. See Financial
statements – Note 28 for the nearest
equivalent measure on an IFRS basis and
for further information.
2013 performance Gearing at the end of
2013 was 16.2%, down 2.5% on 2012
and within our target band of 10-20%.
Refining availability represents Solomon
Associates’ operational availability. The
measure shows the percentage of the
year that a unit is available for
processing after deducting the time
spent on turnaround activity and all
mechanical, process and regulatory
maintenance downtime.
Refining availability is an important
indicator of the operational performance
of our Downstream businesses.
2013 performance Refining availability
increased by 0.5% from 2012 to 95.3%
reflecting strong operations around our
global refining portfolio.
Reported recordable injury frequency
(RIF) measures the number of reported
work-related employee and contractor
incidents that result in a fatality or injury
(apart from minor first aid cases) per
200,000 hours worked.
The measure gives an indication of the
personal safety of our workforce.
2013 performance Our workforce RIF,
which includes employees and
contractors combined, was 0.31,
compared with 0.35 in 2012 and 0.36 in
2011. These successive reductions are
encouraging and we continue pursuing
improvement in personal safety.
Loss of primary containment (LOPC) is
the number of unplanned or
uncontrolled releases of oil, gas or other
hazardous materials from a tank, vessel,
pipe, railcar or other equipment used for
containment or transfer.
By tracking these losses we can monitor
the safety and efficiency of our
operations as well as our progress in
making improvements.
2013 performance Our reported LOPC
shows 31 fewer reported incidents in
2013 than in 2012, with divestments
accounting for a significant part of the
reduction. We remain committed to
using our operating management system
to further improve our operations.
Reported recordable injury
frequencya
Loss of primary containmenta
BP Annual Report and Form 20-F 201318
Not all financial KPIs are
recognized GAAP measures, but
are provided for investors
because they are closely tracked
by management to evaluate BP’s
operating performance and to
make financial, strategic and
operating decisions.
Replacement cost profit (loss)
per ordinary share (cents)
Replacement cost profit (loss) is a useful
measure for investors because it is a
profitability measure BP management
use to assess performance and allocate
resources.
It reflects the replacement cost of
supplies and is calculated by removing
inventory holding gains and losses and
their associated tax effect from profit.
This is a non-GAAP measure for the
group. The IFRS equivalent can be
found on page 236.
2013 performance The increase in
replacement cost profit per ordinary
share for the year compared with 2012
reflected the gain on disposal of our
interest in TNK-BP.
We assess the group’s performance
according to a wide range of
measures and indicators. Our key
performance indicators (KPIs) help
the board and executive
management measure performance
against our strategic priorities and
business plans. We keep these
metrics under periodic review and
test their relevance to our strategy
regularly. We believe non-financial
measures – such as safety and an
engaged and diverse workforce –
have a useful role to play as leading
indicators of future performance.
Changes to KPIs
This year, we introduced two new
KPIs: tier 1 process safety events
and major project delivery. These
demonstrate two of our strategic
objectives and are used as
measures for executive
remuneration.
We have removed the number of
oil spills as a group KPI as this is
reflected within the loss of primary
containment and tier 1 process
safety events KPIs. We continue to
report on oil spills, see Safety on
page 41.
Remuneration
To help align the focus of our board
and executive management with the
interests of our shareholders, certain
measures are reflected in the
variable elements of executive
remuneration.
Overall annual bonuses, deferred
bonuses and performance shares are
all based on performance against
measures and targets linked directly
to strategy and KPIs. For details of
our remuneration policy see page 96.
KPIs used to measure progress
against our strategy.
KPIs used to determine 2013
and 2014 remuneration.
160
120
80
40
0
2009 2010 2011 2012 2013
(28.01)
123.83 125.08
60.05
73.34
2009 2010 2011 2012 2013
1.00
0.75
0.50
0.25
Employees Contractors
0.23
0.25
0.31
0.43
0.41
0.84
0.26
0.43
0.25
0.36
2009 2010 2011 2012 2013
875
700
525
350
175
537
418 361 292
261
2009 2010 2011 2012 2013
50
40
30
20
10
13.6
22.2 21.1
27.7
20.5
2009 2010 2011 2012 2013
25
20
15
10
5
18.7
20.4 21.2 20.4
16.2
2009 2010 2011 2012 2013
98
96
94
92
90
95.0 94.8 95.3
93.6
94.8