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Building a stronger,
safer BP
Annual Report and
Form 20-F 2014
bp.com/annualreport

Table of contents

  • Page 1
    Annual Report and Form 20-F 2014 bp.com/annualreport Building a stronger, safer BP

  • Page 2
    ...nance, research and technology and other business functions. We have well-established operations in Europe, North and South America, Australasia, Asia and Africa. a BP proposition We prioritize value over volume by actively managing a high-value upstream and downstream portfolio and investing only...

  • Page 3
    ... model Our strategy Our key performance indicators Our markets in 2014 Group performance 24 29 33 35 36 39 46 48 Upstream Downstream Rosneft Other businesses and corporate Gulf of Mexico oil spill Corporate responsibility Our management of risk Risk factors Strategic report 51 Corporate governance...

  • Page 4
    ... listing is the London Stock Exchange. Ordinary shares are also traded on the Frankfurt Stock Exchange in Germany and, in the US, the company's securities are traded on the New York Stock Exchange (NYSE) in the form of ADSs (see page 244 for more details). The term 'shareholder' in this report means...

  • Page 5
    ...plan performance Financial and operating performance 24 Upstream 29 Downstream 33 Rosneft 35 Other businesses and corporate 36 Gulf of Mexico oil spill 39 Corporate responsibility 39 42 44 Safety Environment and society Employees 46 Our management of risk 48 Risk factors BP Annual Report and Form...

  • Page 6
    ... the world. Through our two main operating segments, Upstream and Downstream, we find, develop and produce essential sources of energy, turning them into products that people need. We also buy and sell at each stage of the hydrocarbon value chain. In renewable energy, our activities are focused on...

  • Page 7
    ... energy International oil and gas markets We develop and invest in biofuels and operate a wind business. Biofuels Downstream Our Downstream segment operates hydrocarbon value chains covering three main businesses - fuels, lubricants and petrochemicals. See Downstream page 29. Operating capital...

  • Page 8
    ... integrated fuels value chains. These include refineries and fuels marketing businesses together with global oil supply and trading activities. We supply fuel and related convenience services to consumers at around 17,200 BP-branded retail sites and market our products in over 50 countries. The...

  • Page 9
    ... and onshore pipelines has made Azerbaijan a focal point of the global energy market. Rosneft Rosneft is Russia's largest oil company and the world's largest publicly traded oil company in terms of hydrocarbon production. BP's 19.75% share of Rosneft's proved reserves - on an SEC basis is 5 billion...

  • Page 10
    ...-year dividend history UK (pence per ordinary share) 40 29.39 30 19.15 20 8.68 10 21.10 21.00 17.40 20.85 23.40 23.85 36.42 We successfully sold assets at a time of higher oil prices and are now going through a rapid cost adjustment to address this new landscape and improve our underlying business...

  • Page 11
    ... a constant scrutiny on safety. Each year we review and monitor the group level risks through our own work and our committees, who carry out the majority of the work, leaving the board free to address strategic issues. There are, however, longer-term issues on which we also have to focus, such as...

  • Page 12
    Group chief executive's letter Our efforts over the past three years have helped prepare us to face the new oil price challenge with resilience. Bob Dudley Dear fellow shareholder, The year 2014 was pivotal for BP. Despite the increasingly challenging business environment, we completed the 10-point...

  • Page 13
    ... discoveries in the Gulf of Mexico, Brazil, the North Sea, Egypt and Angola. We began operating our onshore oil and gas operations in the 'Lower 48' states of the US as a separate business in January 2015. In the Downstream, we improved performance from fuels marketing, increased our capacity to...

  • Page 14
    ... Our balance sheet gives us resilience to withstand a period of low prices. With a third of our production from production-sharing agreements and an increasing portfolio of high-quality gas projects, we are reducing our vulnerability to global oil price movements. We continue to right-size the group...

  • Page 15
    .../International Energy Agency 2014, page 607. The IEA's 450 policy scenario assumes governments adopt commitments to limit the long-term concentration of greenhouse gases in the atmosphere to 450 parts-per-million of CO2 equivalent. Our strategy Find out how BP can help meet energy demand for years...

  • Page 16
    ... investment, infrastructure and revenues for governments and local communities. Our business model spans everything from exploration to marketing. We have a diverse integrated portfolio that is focused and adaptable to prevailing conditions. Integration across the group allows us to share functional...

  • Page 17
    ...our exploration position, reloading our upstream pipeline. We focus on high-value upstream assets in deep water, giant fields and selected gas value chains. And, in our downstream businesses, we plan to leverage our newly upgraded assets, customer relationships and technology to grow operating cash...

  • Page 18
    ... Competitive project execution Delivering energy to the world Grow our exploration position Focus on high-value upstream assets Grow our exploration position Focus on high-value upstream assets Quality portfolio Build high-quality downstream businesses Build high-quality downstream businesses...

  • Page 19
    ... tier 1 process safety events. Increasing value An alternative solution to increase long-term value. See page 21. $32.8bn operating cash ï¬,ow. Unlocking hidden resources Using our advanced technology major project start-ups and exploration experience in Upstream. to access gas in Oman. See page...

  • Page 20
    ... oil and gas, improve our processes for conversion into valuable products and develop lower-carbon energy solutions. We aim to build strategic relationships with universities for research, recruitment, policy insights and education. Our long-term research programmes around the world are exploring...

  • Page 21
    ... complex issues, work effectively with our partners, engage with our stakeholders and help create shared value. Universities and research institutions National and international oil companies In t Banks and providers of finance er na l r e l a ti o n s ps hi Governments and regulators BP...

  • Page 22
    ...KPIs) help the board and executive management measure performance against our strategic priorities and business plans. We periodically review our metrics and test their relevance to our strategy. We believe non-financial measures - such as safety and an engaged and diverse workforce - have a useful...

  • Page 23
    Strategic report Total shareholder return (%) Reserves replacement ratio (%) Major project delivery Production (mboe/d) ADS basis 60 40 Ordinary share basis 140 120 14.7 14.0 (16.5) 106 129 10 8 103 6 77 63 4 2 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 3 2 3,200 2010 2011 2012 2013 5 4...

  • Page 24
    ... Oil and gas pricing For more on upstream markets in 2014 see page 25. Refining margins For more on downstream markets in 2014 see page 30. 20 BP Annual Report and Form 20-F 2014 a From Oil Market Report 10 February 2015©, OECD/IEA 2015, page 4. b BP Statistical Review of World Energy June 2014...

  • Page 25
    ... all BP-operated drilling and wells activity and manage the development of our major projectsâ˜.... More visibility and transparency to value We provide downstream results by fuels, petrochemicals and lubricants, and report earnings from Rosneft as a separate operating segment. 6 Active portfolio...

  • Page 26
    ... to BP shareholders. Segment RC profit (loss) before interest and tax ($ billion) Downstream Upstream Other businesses Gulf of Mexico and corporate oil spill Group RC profit (loss) before interest and tax 35 TNK-BP Unrealized profit in inventory Rosneft 25 15 5 (5) 2012 2013 2014 Pro...

  • Page 27
    ..., but the majority of the group's funding requirements for new investment come from cash generated by existing operations. We expect capital expenditure, excluding acquisitions and asset exchanges, to be around $20 billion in 2015. Total cash disposal proceeds received during 2014 were $3.5 billion...

  • Page 28
    ... 40 30 20 10 2010 2011 2012 2013 2014 28.3 25.1 26.4 25.2 Underlying RC profit before interest and tax Our business model and strategy The Upstream segment is responsible for our activities in oil and natural gas exploration, field development and production, and midstream transportation, storage...

  • Page 29
    ... trading revenues. Replacement cost (RC) profit before interest and tax for the segment included a net non-operating charge of $6,298 million. This is primarily related to impairments associated with several assets, mainly in the North â˜... Defined on page 252. BP Annual Report and Form 20-F 2014...

  • Page 30
    ... gas marketing and trading activities, one-off benefits related to production taxes and a cost pooling settlement agreement between the owners of the Trans-Alaska Pipeline System (TAPS), and higher gas realizations. Total capital expenditure including acquisitions and asset exchanges in 2014 was...

  • Page 31
    ... drilling. The segment's total hydrocarbon reserves on an oil equivalent basis, including equity-accounted entities at 31 December 2014, decreased by 5% (5% for subsidiaries and 4% for equity-accounted entities) compared with reserves at 31 December 2013. â˜... Defined on page 252. BP Annual Report...

  • Page 32
    ... a focused portfolio with growth potential around four operated and three non-operated hubs. Development expenditure of subsidiaries incurred in 2014, excluding midstream activities, was $15.1 billion (2013 $13.6 billion, 2012 $12.6 billion). Our total hydrocarbon production for the segment in 2014...

  • Page 33
    Downstream In 2014 we saw continued improvement in our process safety and delivered strong operational performance resulting in profit and operating cash ï¬,ow growth. Strategic report Fuels marketing and lubricants - we will invest in higher returning businesses which have operating cash ï¬,ow ...

  • Page 34
    ... fuels business. Financial results Sales and other operating revenues in 2014 decreased compared with 2013 primarily due to falling crude prices. The increase in 2013, compared with 2012, reï¬,ected higher prices largely offset by lower volumes and foreign exchange losses. The 2014 result included...

  • Page 35
    ... and trading function is responsible for delivering value across the overall crude and oil products supply chain. This structure enables the optimization of our FVCs to maintain a single interface with oil trading markets and to operate with a single set of trading compliance and risk management...

  • Page 36
    ... the financial risks associated with this trading activity, is described in Financial statements - Note 27. The range of contracts that the group enters into is described in Glossary - commodity trading contracts on page 252. Aviation Air BP's strategic aim is to maintain its position in the core...

  • Page 37
    ...19.75% share in Rosneft. Upstream Rosneft is the largest oil company in Russia and the largest publicly traded oil company in the world based on hydrocarbon production volume. Rosneft has a major resource base of hydrocarbons onshore and offshore, with assets in all key hydrocarbon regions of Russia...

  • Page 38
    ...segment for 2014 is based on preliminary operational and financial results of Rosneft for the three months ended 31 December 2014. Actual results may differ from these amounts. c 2013 reï¬,ects production for the period 21 March to 31 December, averaged over the full year. Information on BP's share...

  • Page 39
    ... BP's projects around the world. Treasury trades foreign exchange and interest rate products in the financial markets, hedging group exposures and generating incremental value through optimizing and managing cash ï¬,ows and the short-term investment of operational cash balances. Trading activities...

  • Page 40
    ...the BP group company that conducts exploration and production operations in the Gulf of Mexico), BP America Production Company and various other parties are each liable under general maritime law for the blowout, explosion and oil spill from the Macondo well. With respect to the United States' claim...

  • Page 41
    ... to enter into new contracts or leases with the US government. Under the terms and conditions of the administrative agreement, which applies for five years, BP has agreed to safety and operations, ethics and compliance and corporate governance requirements. BP Annual Report and Form 20-F 2014 37

  • Page 42
    ... from securities-related litigation. The cost of business economic loss claims under the PSC settlement not yet received, or received but not yet processed, or processed but not yet paid (except where an eligibility notice had been issued before the end of the month following the balance sheet date...

  • Page 43
    ... 2010 2011 2012 2013 2014 Tier 2 Loss of primary containment Tier 1 process safety eventsâ˜... Tier 2 process safety events Loss of primary containment - number of all incidentse Loss of primary containment - number of oil spillsf Number of oil spills to land and water Volume of oil spilled (thousand...

  • Page 44
    ... 46. Operating management system (OMS) BP's OMS is a group-wide framework designed to help us manage risks in our operating activities. It brings together BP requirements on health, safety, security, the environment, social responsibility and operational reliability, as well as related issues, such...

  • Page 45
    ..., which aims to help sites apply our OMS using continuous improvement processes. Process safety expert The board appointed Duane Wilson as process safety expert for our downstream activities in 2012 for a three-year term and assigned him to work in a global capacity with the business. Mr Wilson...

  • Page 46
    ... with government regulators in Angola, the UK and the US. See page 39 for information on volume of oil spilled by our operations in 2014, including volume of oil unrecovered. 54.0 50.3b 50.0 +0.8 -3 +0.6 -0.1 48.6 46.0 a b This is based on BP's equity share basis. The reported 2013 figure...

  • Page 47
    ... Principles on Security and Human Rights, with periodic internal assessments to identify areas for improvement. BP Annual Report and Form 20-F 2014 43 Water BP recognizes the importance of managing fresh water use and water discharges effectively in our operations and evaluates risks, including...

  • Page 48
    ... more information about our approach to human rights. Safety Respect Excellence Courage One Team BP headcount Number of employees at 31 Decembera 2014 2013 2012 Business ethics Bribery and corruption are significant risks in the oil and gas industry. We have a responsibility to our shareholders...

  • Page 49
    ... of BP and how it is managed in terms of leadership and standards. This measure remained stable in 2014 at 72% (2013 72%, 2012 71%). Business leadership teams review the results of the survey and agree actions to address focus areas. The 2014 survey found that employees remain clear about the safety...

  • Page 50
    ... system (OMS)â˜... integrates BP requirements on health, safety, security, environment, social responsibility, operational reliability and related issues. Business and strategic risk management - our businesses and functions integrate risk into key business processes such as strategy, planning...

  • Page 51
    ... positive and collaborative relationship with regulators and the industry at large. For further information see Upstream gas marketing and trading activities on page 28, Downstream supply and trading on page 31 and Financial statements - Note 27. â˜... Defined on page 252. BP Annual Report and Form...

  • Page 52
    ...products, exchange rate ï¬,uctuations and the general macroeconomic outlook. Oil, gas and product prices are subject to international supply and demand and margins can be volatile. Political developments, increased supply from new oil and gas sources, technological change, global economic conditions...

  • Page 53
    ... changes to pension or financial market regulation could also impact funding requirements of the group. Safety and operational risks Process safety, personal safety, and environmental risks - we are exposed to a wide range of health, safety, security and environmental risks that could result...

  • Page 54
    ...Gulf of Mexico oil spill, there have been cases of additional oversight and more stringent regulation of BP and other companies' oil and gas activities in the US and elsewhere, particularly relating to environmental, health and safety controls and oversight of drilling operations, which could result...

  • Page 55
    ... and responsibilities Appointment and time commitment Independence and conï¬,icts of interest Succession Board activity Risk and assurance Corporate governance 61 Board effectiveness 61 61 Induction and board learning Board evaluation 62 Shareholder engagement 62 62 62 62 Institutional investors...

  • Page 56
    Board of directors As at 3 March 2015 See BP's board governance principles related to director independence on page 239. Bob Dudley Carl-Henric Svanberg Group chief executive Chairman Chair of nomination and chairman's committees; attends Gulf of Mexico, a SEEAC and remuneration committees Paul ...

  • Page 57
    .... Over the four years that he has been group chief executive, Bob has used these skills in leading BP's recovery. He initiated the 10-point plan, the main 2014 tasks of which have been completed. He has changed the way in which the group operates and focused its delivery on value not volume. He has...

  • Page 58
    ...2007, she became the chief executive of Anglo American plc, the global mining group, operating in 45 countries with 150,000 employees, and was chairman of Anglo Platinum Limited and of De Beers s.a. She stepped down from these roles in April 2013. Relevant skills and experience Cynthia Carroll is an...

  • Page 59
    ... of the board in 2015. Corporate governance Brendan Nelson Independent non-executive director Tenure Appointed 8 November 2010 Outside interests Non-executive director and chairman of the group audit committee of The Royal Bank of Scotland Group plc Member of the Financial Reporting Council...

  • Page 60
    ... engineering, health, safety, security, and the environment. In this capacity, he looks after the group-wide operating management system implementation and capability programmes. Bob has 29 years' experience in the oil and gas industry, having joined Amoco Production Company in 1985. Between 2010...

  • Page 61
    ...non-executive director, Man Group plc. Member, Accenture Global Energy Board Member, Board of Advisors of the Fletcher School of Law and Diplomacy Age 49 Nationality British and Indian Career Dev Sanyal is responsible for Europe, Asia, strategy and long-term planning, risk management, government and...

  • Page 62
    ...to BP's values and the code, and have received training on its application. In 2014 the UK Corporate Governance Code was revised. We have taken this into account at the board and in the committees whose work it impacts. There is particular focus on how risk is governed and managed. As a result there...

  • Page 63
    ... board The board is responsible for the overall conduct of the group's business and the directors have duties under both UK company law and BP's articles of association. The primary tasks of the board include: Active consideration and direction of long-term strategy and approval of the annual plan...

  • Page 64
    ... the board's review of the annual plan at the end of 2013. Those group risks reviewed by the board during 2014 included risks associated with the delivery of BP's 10-point plan and geopolitical risk associated with BP's operations around the world. The board considered at the half year whether...

  • Page 65
    .... In 2014 the board received training on BP's code of conduct and briefings on key business developments and changes to the UK Corporate Governance Code. The board met local management and external stakeholders at its board meetings in Istanbul and Chicago. Non-executive directors are expected...

  • Page 66
    ... BP's annual SRI meeting. The meeting examined a number of operational and strategic issues, including how the board looks at risk and strategy, BP's Energy Outlook 2035, how the company approaches operational risk, upstream contractor management, technology and BP's portfolio. See bp.com/investors...

  • Page 67
    ...of the group in this process. As part of this process, the board and the audit, Gulf of Mexico and safety, ethics and environment assurance committees requested, received and reviewed reports from executive management, including management of the business segments, corporate activities and functions...

  • Page 68
    ...on director responsibilities for assurance over joint ventures, trends and developments in the use of third-party agents and developments in global accounting standards. Financial disclosure The committee reviewed the quarterly, half-year and annual financial statements with management, focusing on...

  • Page 69
    ...Gulf of Mexico oil spill with management, external auditors and external counsel, including as part of the review of BP's stock exchange announcement at each quarter end. The committee examined developments relating to US court rulings (including Clean Water Act penalties, business and economic loss...

  • Page 70
    ...in 2014 included those associated with trading activities, compliance with applicable laws and regulations and security threats against BP's digital infrastructure. The committee held in-depth reviews of these group risks over the year. It also examined the group's governance of the tax function and...

  • Page 71
    ... when its expertise and experience of the company is important. A two-tier system operates for approval of audit-related and non-audit work. For services relating to accounting, auditing and financial reporting matters, internal accounting and risk management control reviews or non-statutory audit...

  • Page 72
    ... for executive management on the group's health, safety and environmental performance and operational integrity. These included quarter-by-quarter measures of personal and process safety, environmental and regulatory compliance and audit findings. Operational risk and performance forms a large...

  • Page 73
    ... the management and mitigation of legal and licence-to-operate risks arising out of the Deepwater Horizon accident and oil spill. Its work is integrated with that of the board, which retains ultimate accountability for oversight of the group's response to the accident. BP Annual Report and Form 20...

  • Page 74
    ... with settlements and claims. Review the environmental work to remediate or mitigate the effects of the oil spill in the waters of the Gulf of Mexico and on the affected shorelines. Oversee management strategy and actions to restore the group's reputation in the US. Review compliance with government...

  • Page 75
    ... 2010 Member since April 2012 Activities during the year The committee met five times in the year to: Assess the effect of sanctions on Russia on BP's relationship with Rosneft. Monitor the progress of the Gulf of Mexico litigation. Determine the framework for board evaluation in 2015. Review...

  • Page 76
    ... by shareholders earlier in the year. In this context: 2014 saw the end of an improving three-year period for BP. This is demonstrated elsewhere in the report. The high-performance gearing in remuneration of the executive directors reï¬,ects good business results through an overall increase in...

  • Page 77
    ... project financial execution choices Quality portfolio Build high-quality downstream businesses Distinctive capabilities Proven expertise Strong relationships 2015 bonus and equity plans supporting BP's strategic priorities Short-term: annual bonus Safety and operational risk Operating cash...

  • Page 78
    ... from 2014 AGM Review committee tasks and operation Salary review Executive directors Executive team and leadership group Annual bonus Assess performance Determine bonus for 2013 Agree measures and targets for 2014 Review measures for 2015 Consider measures and targets for 2015 Long-term equity plan...

  • Page 79
    Executive directors Total remuneration summary 2014 Salary - reviewed mid-year and increased by an average of 3% for all directors - this was in line with average employee increases in the UK and US. Annual bonus - the key focus for 2014 was delivery of the group's 10-point plan, strong operating ...

  • Page 80
    ...-term performance against the annual plan. Policy summary Operation and opportunity reï¬,ects BP's strategy. 2015 implementation The committee determined that in future years, salaries would be reviewed in January to be effective in April, consistent with the rest of BP's employees. No increases...

  • Page 81
    .... After review, it concluded that this result fairly represented the overall performance of the business during the year. In the downstream segment, safety results were good with improvements in loss of primary containment and process safety tier 2 events. Operating cash ï¬,ow was ahead of plan but...

  • Page 82
    ...-point plan), current short-term imperatives and the group's strategy. The committee will continue to focus on the two overall themes of safety and value. In order to focus on priorities of the short term, the number of value measures has been reduced from six in 2014 to five in 2015. The measures...

  • Page 83
    ... shares awarded in the 2012-2014 plan are expected to vest. Relative TSR did not achieve the minimum required for any vesting. The significant weight associated with this measure (one third in total) aligns the actual value delivered to executive directors with that to shareholders. Operating cash...

  • Page 84
    ... priorities Quality portfolio Distinctive capabilities Total shareholder return 1/3 Cumulative operating cash ï¬,ow 1/3 Safety and operational risk Strategic priorities 1/3 Reserves replacement Major project delivery Creating long-term shareholder value 80 BP Annual Report and Form 20-F 2014

  • Page 85
    ... in the US plans described above. These are aimed at an accrual rate of 1.3% of final earnings (which include salary and bonus), for each year of service. The committee continues to keep under review the increase in the value of pension benefits for individual directors. There are signi...

  • Page 86
    ... BT Group plcb Rolls-Royce plcc Director Non-executive director Senior independent director and chairman of the ethics committee 0 £54,000 £29,300 £50 2008 2009 2010 2011 2012 2013 2014 Bob Dudley holds this appointment as a result of the company's shareholding in Rosneft. b Appointed...

  • Page 87
    ...for further information. d Dividends includes both scrip dividends as well as those paid in cash. See Financial statements - Note 8 for further information. At 23 February 2015, the following directors held the numbers of options under the BP group share option schemes over ordinary shares or their...

  • Page 88
    ... conditions and he receives deferred shares at each scrip payment date as part of his election choice. g All matching shares have been pro-rated to reï¬,ect actual service during the performance period and these figures have been used to calculate the face value. 84 BP Annual Report and Form...

  • Page 89
    ... against the same peer group; and 30% against a balanced scorecard of strategic imperatives. For awards under the 2012-2014, 2013-2015 and 2014-2016 plans, performance conditions are measured one third on TSR against ExxonMobil, Shell, Total and Chevron; one third on operating cash ï¬,ow; and one...

  • Page 90
    ... 2013 2014 Total 2013 Carl-Henric Svanberg a 785 773 37 49 822 822 Benefits include travel and other expenses relating to the attendance at board and other meetings. Amounts disclosed have been grossed up using a tax rate of 45%, where relevant, as an estimation of tax due. 86 BP Annual...

  • Page 91
    ... incurred by non-executive directors based outside the UK in connection with advice and assistance on UK tax compliance matters. The maximum remuneration for non-executive directors is set in accordance with the Articles of Association. Corporate governance BP Annual Report and Form 20-F 2014 87

  • Page 92
    ...executive chairman of BP Pension Trustees Limited on 1 October 2010. During 2014, he received £100,000 for this role. This directors' remuneration report was approved by the board and signed on its behalf by David J Jackson, company secretary on 3 March 2015. 88 BP Annual Report and Form 20-F 2014

  • Page 93
    ...statement of total recognized gains and losses Notes on financial statements 1. Accounting policies 2. Taxation 3. Fixed assets - investments 4. Debtors 197 198 198 199 199 200 200 201 5. 6. 7. 8. 9. 10. 11. 12. 13. Creditors Pensions Called-up share capital Capital and reserves Cash flow Contingent...

  • Page 94
    ...consolidated financial statements which describes the uncertainties surrounding the amounts and timings of liabilities arising from the Gulf of Mexico oil spill. The group's business activities, performance, position and risks are set out in this report. The financial position of the group, its cash...

  • Page 95
    ... of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. Emphasis of matter - significant uncertainty over provisions and contingencies related to the Gulf of Mexico oil spill In forming our opinion on the group financial statements we have...

  • Page 96
    ...a significant effect on the carrying value of the group's assets. A significant and rapid drop in prices will also quickly impact the group's operations and cash flows. We assessed the principal risk arising in relation to the financial statements to be associated with the carrying value of tangible...

  • Page 97
    ...the UK Corporate Governance Code specified for our review. John C. Flaherty (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 3 March 2015 Financial statements This page does not form part of BP's Annual Report on Form 20-F as filed with the SEC. BP Annual...

  • Page 98
    Consolidated financial statements of the BP group Report of Independent Registered Public Accounting Firm on the Annual Report on Form 20-F The Board of Directors and Shareholders of BP p.l.c. We have audited the accompanying group balance sheets of BP p.l.c. as of 31 December 2014, 31 December 2013...

  • Page 99
    ... the standards of the Public Company Accounting Oversight Board (United States), the group balance sheets of BP p.l.c. as of 31 December 2014 and 2013, and the related group income statement, group statement of comprehensive income, group statement of changes in equity and group cash flow statement...

  • Page 100
    Group income statement For the year ended 31 December Note 2014 2013 $ million 2012 Sales and other operating revenues Earnings from joint ventures - after interest and tax Earnings from associates - after interest and tax Interest and other income Gains on sale of businesses and fixed assets Total...

  • Page 101
    ... information. Group statement of changes in equitya $ million Share capital and capital reserves Foreign currency Fair value Treasury translation shares reserve reserves Profit and loss account BP Nonshareholders' controlling interests equity Total equity At 1 January 2014 Profit for the year...

  • Page 102
    ... Non-current liabilities Other payables Derivative financial instruments Accruals Finance debt Deferred tax liabilities Provisions Defined benefit pension plan and other post-retirement benefit plan deficits Total liabilities Net assets Equity BP shareholders' equity Non-controlling interests...

  • Page 103
    ... on sale of businesses and fixed assets Earnings from joint ventures and associates Dividends received from joint ventures and associates Interest receivable Interest received Finance costs Interest paid Net finance expense relating to pensions and other post-retirement benefits Share-based payments...

  • Page 104
    ... Financial Reporting Standards The consolidated financial statements of the BP group for the year ended 31 December 2014 were approved and signed by the group chief executive and chairman on 3 March 2015 having been duly authorized to do so by the board of directors. BP p.l.c. is a public limited...

  • Page 105
    ... the consolidated financial statements, the assets and liabilities of non-US dollar functional currency subsidiaries, joint ventures and associates, including related goodwill, are translated into US dollars at the rate of exchange ruling at the balance sheet date. The results and cash flows of non...

  • Page 106
    ... plans and timing. If no future activity is planned, the remaining balance of the licence and property acquisition costs is written off. Lower value licences are pooled and amortized on a straight-line basis over the estimated period of exploration. Upon recognition of proved reserves and internal...

  • Page 107
    ... 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. Fair value less costs of disposal is the price that would be received to sell the asset...

  • Page 108
    ... for trading purposes are stated at fair value less costs to sell and any changes in fair value are recognized in the income statement. Supplies are valued at cost to the group mainly using the average method or net realizable value, whichever is the lower. 104 BP Annual Report and Form 20-F 2014

  • Page 109
    ...-for-sale debt instruments, foreign exchange gains or losses and any changes in fair value arising from revised estimates of future cash flows, which are recognized in profit or loss. Impairment of loans and receivables The group assesses at each balance sheet date whether a financial asset or group...

  • Page 110
    ... sheet date. Any gains or losses arising from changes in fair value are taken directly to the income statement. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The group...

  • Page 111
    ... lower of the amount of the associated restoration, environmental or other provision and the group's share of the fair value of the net assets of the fund available to contributors. Significant estimate or judgement: provision relating to the Gulf of Mexico oil spill Detailed information on the Gulf...

  • Page 112
    ... rate used in discounting the cash flows. The interest rate used to determine the balance sheet obligation at the end of 2014 was a real rate of 0.75% (2013 1.0%), which was based on long-dated US government bonds. Provisions and contingent liabilities relating to the Gulf of Mexico oil spill...

  • Page 113
    ... income in the period in which they occur and are not subsequently reclassified to profit and loss. The defined benefit pension plan surplus or deficit in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high...

  • Page 114
    ... effective interest rate that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). Dividend income from investments is recognized when the shareholders' right to receive the payment...

  • Page 115
    ... of the Gulf of Mexico oil spill on the income statement, balance sheet and cash flow statement of the group are included within the relevant line items in those statements and are shown in the table below. $ million 2014 2013 2012 Income statement Production and manufacturing expenses Profit (loss...

  • Page 116
    ... five years. At 31 December 2014, the remaining criminal claims payable, within Other payables, was $2,995 million, of which $595 million falls due in 2015. BP also reached a settlement with the US Securities and Exchange Commission (SEC) in 2012, resolving the SEC's Gulf of Mexico oil spill-related...

  • Page 117
    ... review BP's petition. As a result, the final deadline for filing claims in the Economic and Property Damages Settlement is 8 June 2015. Management believes that no reliable estimate can currently be made of any business economic loss claims (i) not yet received; (ii) received, but not yet processed...

  • Page 118
    ...the trust fund of $3,051 million and payments made directly by BP of $726 million), and after adjustments for discounting, the remaining provision as at 31 December 2014 was $8,605 million (2013 $9,346 million). The total amounts that will ultimately be paid by BP for all obligations relating to the...

  • Page 119
    ... following the balance sheet date and is not subject to appeal by BP within the claims facility) is not provided for and is disclosed as a contingent liability. A significant number of business economic loss claims have been received but have not yet been processed and paid and further claims are...

  • Page 120
    ... Gulf of Mexico oil spill - continued Impact upon the group income statement The amount of the provision recognized during the year can be reconciled to the charge to the income statement as follows: $ million 2014 2013 2012 Cumulative since the incident Net increase in provision Change in discount...

  • Page 121
    ...number of interests in the North Sea. Downstream In 2014, gains principally resulted from the disposal of our global aviation turbine oils business. Losses principally arose from costs associated with the decision to cease refining operations at Bulwer Island in Australia. BP Annual Report and Form...

  • Page 122
    ...to reserves revisions, lower values being attributed to recent market transactions and a fall in the gas price; a $999-million impairment loss relating to the decision to suspend the Liberty project in Alaska; a $706-million aggregate write-down of a number of assets, primarily in the Gulf of Mexico...

  • Page 123
    ...engaged. At 31 December 2014, BP had three reportable segments: Upstream, Downstream and Rosneft. Upstream's activities include oil and natural gas exploration, field development and production; midstream transportation, storage and processing; and the marketing and trading of natural gas, including...

  • Page 124
    ... 2014 Other businesses and corporate Gulf of Mexico oil spill response Consolidation adjustment and eliminations By business Upstream Downstream Rosneft Total group Segment revenues Sales and other operating revenues Less: sales and other operating revenues between segments Third party sales...

  • Page 125
    ... 2013 Other businesses and corporate Gulf of Mexico oil spill response Consolidation adjustment and eliminations By business Upstream Downstream Rosneft TNK-BP Total group Segment revenues Sales and other operating revenues Less: sales and other operating revenues between segments Third...

  • Page 126
    ... 2012 Other businesses and corporate Gulf of Mexico oil spill response Consolidation adjustment and eliminations By business Upstream Downstream TNK-BP Total group Segment revenues Sales and other operating revenues Less: sales and other operating revenues between segments Third party sales...

  • Page 127
    ... assets; investments in joint ventures; investments in associates; and non-current prepayments. 5. Income statement analysis $ million 2014 2013 2012 Currency exchange losses charged to the income statementa Expenditure on research and development Finance costs Interest payable Capitalized...

  • Page 128
    ...evaluation of oil and natural gas resources. All such activity is recorded within the Upstream segment. For information on significant estimates and judgements made in relation to oil and natural gas accounting see Intangible assets within Note 1. $ million 2014 2013 2012 Exploration and evaluation...

  • Page 129
    ... 2013, this relates to the non-taxable gain on disposal of our investment in TNK-BP. Financial statements Legislation to reduce the UK supplementary charge tax rate applicable to profits arising in the North Sea is expected to be enacted in 2015. The evaluation of the effect of this change for BP...

  • Page 130
    ... average number of shares outstanding during the year is adjusted for the dilutive effect of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method. $ million 2014 2013 2012 Profit attributable to BP shareholders Less: dividend...

  • Page 131
    ... Financial statements Numbers of options shown are ordinary share equivalents (one ADS is equivalent to six ordinary shares). At 31 December 2014 the quoted market price of one BP ordinary share was $6.35 (2013 $8.10). In addition, the group operates a number of equity-settled employee share plans...

  • Page 132
    ...plant and equipment within Note 1. 11. Capital commitments Authorized future capital expenditure for property, plant and equipment by group companies for which contracts had been signed at 31 December 2014 amounted to $15,635 million (2013 $13,705 million). 128 BP Annual Report and Form 20-F 2014

  • Page 133
    ... volumes are based on detailed data for each field and take into account development plans agreed by management as part of the long-term planning process. The average production for the purposes of goodwill impairment testing over the next 15 years is 847mmboe per year BP Annual Report and Form...

  • Page 134
    ... operating unit margins, sales volumes, and discount rate. The values assigned to these key assumptions reflect past experience. No reasonably possible change in any of these key assumptions would cause the unit's carrying amount to exceed its recoverable amount. Cash flows beyond the two-year plan...

  • Page 135
    ... Rosneft. The net cash inflow in 2013 relating to the transaction included in Net cash used in investing activities in the cash flow statement was $11.8 billion. From 22 October 2012, the investment in TNK-BP was classified as an asset held for sale and, therefore, equity accounting ceased. Profits...

  • Page 136
    ... statement, the amount reported for Rosneft sales and other operating revenue is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year. $ million Gross amount 2014 Rosneft 2013 Rosneft 2012 TNK-BPa Sales and other operating...

  • Page 137
    ... information shown below includes data relating to associates classified as assets held for sale during the period prior to their classification as assets held for sale. $ million BP share 2014 Rosnefta Other Total Rosneft Otherb 2013 Total TNK-BP Other 2012 Total Sales and other operating revenues...

  • Page 138
    ...of the fair value hierarchy. 18. Trade and other receivables $ million 2014 Current Non-current Current 2013 Non-current Financial assets Trade receivables Amounts receivable from joint ventures and associates Other receivables Non-financial assets Gulf of Mexico oil spill trust fund reimbursement...

  • Page 139
    ... and judgements made in relation to provisions, including those for the Gulf of Mexico oil spill, see Provisions, contingencies and reimbursement assets within Note 1. 22. Pensions and other post-retirement benefits Most group companies have pension plans, the forms and benefits of which vary with...

  • Page 140
    ... the following year. % Financial assumptions used to determine benefit obligation 2014 2013 UK 2012 2014 2013 US 2012 2014 2013 Eurozone 2012 Discount rate for plan liabilities Rate of increase in salaries Rate of increase for pensions in payment Rate of increase in deferred pensions Inflation for...

  • Page 141
    ... portfolios are highly diversified. The current asset allocation policy for the major plans is as follows: UK Asset category % US % Total equity (including private equity) Bonds/cash Property/real estate 70 23 7 60 40 - Financial statements The group's main pension plans do not invest directly...

  • Page 142
    ...Total Fair value of pension plan assets At 31 December 2014 Listed equities - developed markets - emerging markets Private equity Government issued nominal bonds Index-linked bonds Corporate bonds Property Cash Other At 31 December 2013 Listed equities - developed markets - emerging markets Private...

  • Page 143
    22. Pensions and other post-retirement benefits - continued $ million 2014 UK US Eurozone Other Total Analysis of the amount charged to profit before interest and taxation Current service costa Past service costb Settlementc Operating charge relating to defined benefit plans Payments to defined ...

  • Page 144
    22. Pensions and other post-retirement benefits - continued $ million 2013 UK US Eurozone Other Total Analysis of the amount charged to profit before interest and taxation Current service costa Past service costb Settlement Operating charge relating to defined benefit plans Payments to defined ...

  • Page 145
    ... 2014 for the group's plans would have had the effects shown in the table below. The effects shown for the expense in 2015 comprise the total of current service cost and net finance income or expense. $ million One percentage point Increase Decrease Financial statements Discount ratea Effect...

  • Page 146
    ...quoted prices for similar instruments in active markets are used. The fair value of the group's finance lease obligations is estimated using discounted cash flow analyses based on the group's current incremental borrowing rates for similar types and maturities of borrowing. $ million 2014 Fair value...

  • Page 147
    ...The terms and conditions of these operating leases do not impose any significant financial restrictions on the group. Some of the leases of ships and buildings allow for renewals at BP's option, and some of the group's operating leases contain escalation clauses. BP Annual Report and Form 20-F 2014...

  • Page 148
    ... experience and supervision. These teams are subject to close financial and management control. The integrated supply and trading function maintains formal governance processes that provide oversight of market risk, credit risk and operational risk associated with trading activity. A policy and risk...

  • Page 149
    ... separately in the group's reported results. The main underlying economic currency of the group's cash flows is the US dollar. This is because BP's major product, oil, is priced internationally in US dollars. BP's foreign currency exchange management policy is to limit economic and material...

  • Page 150
    ... invest any net surplus in the market or arrange for necessary external borrowings, while managing the group's overall net currency positions. Standard & Poor's Rating Services changed BP's long-term credit rating to A (negative outlook) from A (positive outlook) and Moody's Investors Service rating...

  • Page 151
    ... manage its normal business exposures in relation to commodity prices, foreign currency exchange rates and interest rates, including management of the balance between floating rate and fixed rate debt, consistent with risk management policies and objectives. An outline of the group's financial risks...

  • Page 152
    ...their original business objective, and are recognized at fair value with changes in fair value recognized in the income statement. Trading activities are undertaken by using a range of contract types in combination to create incremental gains by arbitraging prices between markets, locations and time...

  • Page 153
    ... for trading, analysed by maturity period and by methodology of fair value estimation. This information is presented on a gross basis, that is, before netting by counterparty. $ million 2014 Less than 1 year 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years Total Financial statements Fair value...

  • Page 154
    ... are for normal procurement or sales activity for the group but that are required to be fair valued under accounting standards. Also included within sales and other operating revenues are gains and losses on inventory held for trading purposes. The total amount relating to all these items (excluding...

  • Page 155
    ..., Australian dollar, Canadian dollar, Norwegian Krone and Hong Kong dollar denominated fixed rate borrowings into floating rate debt. Note 27 outlines the group's approach to interest rate and foreign currency exchange risk management. Financial statements BP Annual Report and Form 20-F 2014 151

  • Page 156
    ... 8.8% (2013 8.7% and 2012 8.8%) of the called-up ordinary share capital of the company. During 2014, the movement in treasury shares represented less than 0.1% (2013 less than 0.2% and 2012 less than 0.1%) of the ordinary share capital of the company. 152 BP Annual Report and Form 20-F 2014

  • Page 157
    THIS PAGE INTENTIONALLY LEFT BLANK BP Annual Report and Form 20-F 2014 153

  • Page 158
    ...-for-sale investments (including recycling) Cash flow hedges (including recycling) Share of items relating to equity-accounted entities, net of tax Other Items that will not be reclassified to profit or loss Remeasurements of the net pension and other post-retirement benefit liability or asset Share...

  • Page 159
    ...407 Financial statements Treasury shares Availablefor-sale investments Cash flow hedges Total fair value reserves Profit and loss account BP shareholders' equity Noncontrolling interests Total equity... (39) 23 (1,132) (6) 12,226 (5,376) 284 33 119,752 BP Annual Report and Form 20-F 2014 155

  • Page 160
    ... flow hedge that is determined to be an effective hedge. For further information see Note 1 - Derivative financial instruments and hedging activities. Profit and loss account The balance held on this reserve is the accumulated retained profits of the group. 156 BP Annual Report and Form 20-F 2014

  • Page 161
    ...-for-sale investments (including recycling) Cash flow hedges (including recycling) Share of items relating to equity-accounted entities, net of tax Other Items that will not be reclassified to profit or loss Remeasurements of the net pension and other post-retirement benefit liability or asset Share...

  • Page 162
    ... directors $ million 2014 2013 2012 Total for senior management and non-executive directors Short-term employee benefits Pensions and other post-retirement benefits Share-based payments Total Senior management, comprises members of the executive team, see pages 56-57 for further information...

  • Page 163
    ... 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 $398,000 (2013 $240,000 and 2012 $50,000). 2014...

  • Page 164
    ... and production Exploration and production Finance Investment holding Exploration and production, refining and marketing pipelines and petrochemicals Finance Associates % Principal activities Russia Rosneft 20 Russia Integrated oil operations 160 BP Annual Report and Form 20-F 2014

  • Page 165
    ... and losses on sale of businesses and fixed assets Exploration expense Distribution and administration expenses Fair value gain on embedded derivatives Profit before interest and taxation Finance costs Net finance (income) expense relating to pensions and other post-retirement benefits Profit before...

  • Page 166
    ... and losses on sale of businesses and fixed assets Exploration expense Distribution and administration expenses Fair value gain on embedded derivatives Profit before interest and taxation Finance costs Net finance (income) expense relating to pensions and other post-retirement benefits Profit before...

  • Page 167
    ... and losses on sale of businesses and fixed assets Exploration expense Distribution and administration expenses Fair value gain on embedded derivatives Profit before interest and taxation Finance costs Net finance expense relating to pensions and other post-retirement benefits Profit before...

  • Page 168
    ...reclassifications 2014 BP p.l.c. BP group Non-current assets Property, plant and equipment Goodwill Intangible assets Investments in joint ventures Investments in associates Other investments Subsidiaries - equity-accounted basis Fixed assets Loans Trade and other receivables Derivative financial...

  • Page 169
    ... directly associated with assets classified as held for sale Non-current liabilities Other payables Derivative financial instruments Accruals Finance debt Deferred tax liabilities Provisions Defined benefit pension plan and other post-retirement benefit plan deficits Total liabilities Net assets...

  • Page 170
    ...2014 BP p.l.c. BP group Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Currency translation differences relating to cash and cash equivalents Increase in cash and cash equivalents Cash and cash equivalents at beginning of year...

  • Page 171
    ... reserves and production compliance and governance processes, see pages 219-224. a Financial statements 2013 equity-accounted entities information includes BP's share of TNK-BP from 1 January to 20 March, and Rosneft for the period 21 March to 31 December. BP Annual Report and Form 20-F 2014...

  • Page 172
    ...and payables amounting to $207 million which is included in finance costs in the group income statement. Midstream and other activities excludes inventory holding gains and losses. The profits of equity-accounted entities are included after interest and tax. 168 BP Annual Report and Form 20-F 2014

  • Page 173
    ... include BP's share of Rosneft's worldwide activities, including insignificant amounts outside Russia. These tables contain information relating to oil and natural gas exploration and production activities of equity-accounted entities. They do not include amounts relating to assets held for sale...

  • Page 174
    ...and payables amounting to $141 million which is included in finance costs in the group income statement. Midstream and other activities excludes inventory holding gains and losses. The profits of equity-accounted entities are included after interest and tax. 170 BP Annual Report and Form 20-F 2014

  • Page 175
    ... include BP's share of Rosneft's worldwide activities, including insignificant amounts outside Russia. These tables contain information relating to oil and natural gas exploration and production activities of equity-accounted entities. They do not include amounts relating to assets held for sale...

  • Page 176
    ... in the group income statement. Midstream and other activities exclude inventory holding gains and losses. The profits of equity-accounted entities are included after interest and tax and the results exclude balances associated with assets held for sale. 172 BP Annual Report and Form 20-F 2014

  • Page 177
    ... BP's share of costs incurred and results of operations for the period 22 October to 31 December 2012. These tables contain information relating to oil and natural gas exploration and production activities of equity-accounted entities. They do not include amounts relating to assets held for sale...

  • Page 178
    ... interest in Rosneft. Total proved crude oil reserves held as part of our equity interest in Rosneft is 4,961 million barrels, comprising less than 1 million barrels in Vietnam and Canada, 30 million barrels in Venezuela and 4,930 million barrels in Russia. 174 BP Annual Report and Form 20-F 2014

  • Page 179
    ... volumes of equity-accounted investments of those entities. Total proved NGL reserves held as part of our equity interest in Rosneft is 47 million barrels, comprising less than 1 million barrels in Venezuela, Vietnam and Canada, and 46 million barrels in Russia. BP Annual Report and Form 20-F 2014...

  • Page 180
    ... million barrels Bitumena b Rest of North America 2014 Total Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Production Sales of reserves-in-place At 31 December...

  • Page 181
    ...America Africa Asia Australasia 2014 Total UK Rest of Europe USc Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productiond Sales of reserves...

  • Page 182
    ... America Africa Asia Australasia 2014 Total UK Rest of Europe US Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productionc Sales of reserves...

  • Page 183
    ...% non-controlling interest in BP Trinidad and Tobago LLC. Volumes of equity-accounted entities include volumes of equity-accounted investments of those entities. Includes 54 million barrels of oil equivalent in respect of the non-controlling interest in Rosneft. Total proved reserves held as part of...

  • Page 184
    ... of North America South America Africa Asia Australasia 2013 Total UK USc Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Production Sales of...

  • Page 185
    ...volumes of equity-accounted investments of those entities. Total proved NGL reserves held as part of our equity interest in Rosneft is 115 million barrels, comprising less than 1 million barrels in Venezuela, Vietnam and Canada, and 115 million barrels in Russia. BP Annual Report and Form 20-F 2014...

  • Page 186
    ... million barrels Bitumena b Rest of North America 2013 Total Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Production Sales of reserves-in-place At 31 December...

  • Page 187
    ...America Africa Asia Australasia 2013 Total UK Rest of Europe USc Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productiond Sales of reserves...

  • Page 188
    ... America Africa Asia Australasia 2013 Total UK Rest of Europe US Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productionc Sales of reserves...

  • Page 189
    ...of North America South America Africa Asia Australasia 2013 Total UK USd Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productione f Sales of...

  • Page 190
    ... in TNK-BP. Total proved crude oil reserves held as part of our equity interest in TNK-BP is 4,463 million barrels, comprising 87 million barrels in Venezuela and 4,376 million barrels in Russia. Includes assets held for sale of 4,463 million barrels. 186 BP Annual Report and Form 20-F 2014

  • Page 191
    ... LLC. Volumes of equity-accounted entities include volumes of equity-accounted investments of those entities. Total proved NGL reserves held as part of our equity interest in TNK-BP is 78 million barrels, all in Russia. Includes assets held for sale of 78 million barrels. BP Annual Report and Form...

  • Page 192
    ... million barrels Bitumena b Rest of North America 2012 Total Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Production Sales of reserves-in-place At 31 December...

  • Page 193
    ... interest in TNK-BP. Total proved liquid reserves held as part of our equity interest in TNK-BP is 4,540 million barrels, comprising 87 million barrels in Venezuela and 4,454 million barrels in Russia. Includes assets held for sale of 39 million barrels. BP Annual Report and Form 20-F 2014 189

  • Page 194
    ... America Africa Asia Australasia 2012 Total UK Rest of Europe US Russia Rest of Asia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productionc Sales of reserves...

  • Page 195
    ... of North America South America Africa Asia Australasia Total Rest of Asia 2012 UK USd Russia Subsidiaries At 1 January Developed Undeveloped Changes attributable to Revisions of previous estimates Improved recovery Purchases of reserves-in-place Discoveries and extensions Productione f Sales of...

  • Page 196
    ... in Rosneft amounted to $100 million in Russia. h No equity-accounted future cash flows in Africa because proved reserves are received as a result of contractual arrangements, with no associated costs. i Total change in the standardized measure during the year includes the effect of exchange rate...

  • Page 197
    ... in Rosneft amounted to $200 million in Russia. h No equity-accounted future cash flows in Africa because proved reserves are received as a result of contractual arrangements, with no associated costs. i Total change in the standardized measure during the year includes the effect of exchange rate...

  • Page 198
    ... reserves are received as a result of contractual arrangements, with no associated costs. i Includes future net cash flows for assets held for sale at 31 December 2012. j Total change in the standardized measure during the year includes the effect of exchange rate movements. 194 BP Annual Report...

  • Page 199
    ... component parts. Amounts reported for Russia include BP's share of Rosneft (2014, 2013), and TNK-BP (2012) worldwide activities, including insignificant amounts outside Russia. Crude oil includes condensate. Natural gas production excludes gas consumed in operations. Productive oil and gas wells...

  • Page 200
    ... the process of being drilled by the group and its equity-accounted entities as of 31 December 2014. Suspended development wells and long-term suspended exploratory wells are also included in the table. Europe North America Rest of North America South America Africa Asia Australasia Total UK Rest...

  • Page 201
    ... on 3 March 2015 having been duly authorized to do so by the board of directors: R W Dudley Group Chief Executive The parent company financial statements of BP p.l.c. on pages 197-206 do not form part of BP's Annual Report on Form 20-F as filed with the SEC. BP Annual Report and Form 20-F 2014 197

  • Page 202
    ...flow statement For the year ended 31 December Note 2014 $ million 2013 Net cash inflow (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 paid...

  • Page 203
    ... in full within the statement of total recognized gains and losses in the period in which they occur. The defined benefit pension plan surplus or deficit in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high...

  • Page 204
    ... Lubricants Investment holding Investment holding The carrying value of BP International in the accounts of the company at 31 December 2014 was $67.63 billion (2013 $62.63 billion). The parent company financial statements of BP p.l.c. on pages 197-206 do not form part of BP's Annual Report on Form...

  • Page 205
    ...are reviewed by management at the end of each year, and are used to evaluate accrued pension benefits at 31 December and pension expense for the following year. Financial assumptions used to determine benefit obligation 2014 2013 % 2012 Discount rate for pension plan liabilities Rate of increase in...

  • Page 206
    ... approach, a form of investing designed to match the movement in pension plan assets with the movement in projected benefit obligations over time. 2014 2013 Analysis of the amount charged to operating profit Current service costa Settlement, curtailment and special termination benefits Payments to...

  • Page 207
    .... 2014 2013 2012 2011 2010 History of (deficit) surplus and of experience gains and losses Benefit obligation at 31 December Fair value of plan assets at 31 December (Deficit) surplus Experience gains and losses on plan liabilities Amount ($ million) Percentage of benefit obligation Actual return...

  • Page 208
    ... and payable in March 2015; this will be treated as an appropriation of profit in the year ended 31 December 2015. The parent company financial statements of BP p.l.c. on pages 197-206 do not form part of BP's Annual Report on Form 20-F as filed with the SEC. 204 BP Annual Report and Form 20-F 2014

  • Page 209
    ... Gulf of Mexico oil spill (see Note 2 to the consolidated financial statements), and in relation to potential losses arising from environmental incidents involving ships leased and operated by a subsidiary. 11. Share-based payments Effect of share-based payment transactions on the company's result...

  • Page 210
    ...US BP Retirement Accumulation Plan during 2014. Further information Full details of individual directors' remuneration are given in the directors' remuneration report on pages 72-88. The parent company financial statements of BP p.l.c. on pages 197-206 do not form part of BP's Annual Report on Form...

  • Page 211
    ... 239 Corporate governance practices 240 Code of ethics 240 Controls and procedures 241 Principal accountants' fees and services 241 Directors' report information 241 Disclosures required under Listing Rule 9.8.4R 241 Cautionary statement Additional disclosures BP Annual Report and Form 20-F 2014...

  • Page 212
    ... except per share amounts 2014 2013 2012 2011 2010 Income statement data Sales and other operating revenues Underlying replacement cost (RC) profit before interest and taxation* Net favourable (unfavourable) impact of non-operating items* and fair value accounting effects* RC profit (loss) before...

  • Page 213
    ... using the group's discrete quarterly effective tax rate (adjusted for the items noted above, equity-accounted earnings and certain deferred tax adjustments relating to changes in UK taxation). For dividends received from TNK-BP in 2012, there is no tax arising. Non-operating items reported...

  • Page 214
    ... (427) 2,864 20,330 (561) 19,769 Operating capital employed* $ million 2014 Upstream Downstream TNK-BP Rosneft Other businesses and corporate Gulf of Mexico oil spill response Consolidation adjustment - UPII* Total operating capital employed Liabilities for current and deferred taxation Goodwill...

  • Page 215
    ... Gulf of Mexico oil spill contain any additional financial covenants compared with the group's capital markets issuances prior to the incident. See Financial statements - Note 24 for more information on the short-term balance. Standard & Poor's Ratings Services changed BP's long-term credit rating...

  • Page 216
    .... Environmental liabilities include those relating to the Gulf of Mexico oil spill. Represents the expected future contributions to funded pension plans and payments by the group for unfunded pension plans and the expected future payments for other post-retirement benefits. The future minimum lease...

  • Page 217
    ... market. David Lawler was named chief executive officer in August. BP Annual Report and Form 20-F 2014 213 Europe BP is active in the North Sea and the Norwegian Sea. Our activities focus on maximizing recovery from existing producing fields and selected new field developments. BP's production...

  • Page 218
    ...2012. The remaining owners and Unocal 214 BP Annual Report and Form 20-F 2014 have not yet reached agreement regarding the terms for the transfer of Unocal's interest in TAPS and related litigation will continue in 2015. In Canada, BP is currently focused on oil sands development and intends to use...

  • Page 219
    ... and plant capacity issues. The plant is projected to re-start fully in 2016. • In December, several fields in Angola were subject to impairment charges, primarily as a result of changes in estimates of reserves and resources and decreases in near-term oil price assumptions. The total impairment...

  • Page 220
    ... 216 BP Annual Report and Form 20-F 2014 on the new pricing policy and the premiums for future developments to emerge in due course. In Iraq, BP holds a 47.6% working interest and is the lead contractor in the Rumaila technical service contract. Rumaila is one of the world's largest oil fields...

  • Page 221
    ...Group interestb (%) BP share thousand barrels per day Fuels value chain Country Refinery US US North West US East of Rockies US Cherry Point Whiting Toledo 100 100 50 234 430 80 744 49 132 39 95 45 377 110 847 102 146 28 90 366 1,957 Europe Rhine Germany Iberia Rest of world Australia New...

  • Page 222
    ...Gelsenkirchen refinery, 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 218 BP Annual Report and Form 20-F 2014

  • Page 223
    ... volume of investigation associated with a short-term flow test. There is a strong track record of proved reserves recorded using these methods, validated by actual production levels. Additional disclosures Governance BP's centrally controlled process for proved reserves estimation approval forms...

  • Page 224
    ... 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 is based on individual performance contracts. Individual performance contracts are based on agreed items from the business...

  • Page 225
    ..., India, Indonesia, Oman and a non-material volume of our proved reserves in Trinidad. In addition, the technical service contract (TSC) governing our investment in the Rumaila field in Iraq functions as a PSA. Additional disclosures * Defined on page 252. BP Annual Report and Form 20-F 2014 221

  • Page 226
    ... full year. g 2014 is based on preliminary operational results of Rosneft for the three months ended 31 December 2014. Actual results may differ from these amounts. 2013 reflects production for the period 21 March to 31 December, averaged over the full year. h BP holds interests, through associates...

  • Page 227
    ... field, but the related reserves are included in the group's reserves. d Estimated production for 2013 represents BP's share of TNK-BP's estimated production from 1 January to 20 March, averaged over the full year. e 2014 is based on preliminary operational results of Rosneft for the three months...

  • Page 228
    ...transfers between businesses, except in the case of Russia in 2014 and 2013. Amounts reported for Russia in 2014 and 2013 include BP's share of Rosneft's worldwide activities, including insignificant amounts outside Russia. The operational and financial information of the Rosneft segment for 2014 is...

  • Page 229
    ...environmental activities in relation to the Gulf of Mexico oil spill, see Financial statements - Note 2. Regulation of the group's business BP's activities, including its oil and gas exploration and production, pipelines and transportation, refining and marketing, petrochemicals production, trading...

  • Page 230
    ... trust fund for legitimate state and local government response claims, final judgments and settlement claims, legitimate state and local response costs, natural resource damages and related costs and legitimate individual and business claims (see Gulf of Mexico oil spill on page 36). BP is also...

  • Page 231
    ... the UK. Environmental maritime regulations BP's shipping operations are subject to extensive national and international regulations governing liability, operations, training, spill prevention and insurance. These include: • In US waters, OPA 90 imposes liability and spill prevention and planning...

  • Page 232
    ... business, competitive position, financial performance, cash flows, prospects, liquidity, shareholder returns and/or implementation of its strategic agenda, particularly in the US. The potential liabilities may continue to have a material adverse effect on the group's results and financial condition...

  • Page 233
    ...April 2011, Transocean filed claims in the Limitation Action alleging that BP had breached BP America Production Company's (BPAPC) contract with Transocean Holdings LLC by BP not agreeing to indemnify Transocean against liability related to the Incident and by not paying certain invoices. Transocean...

  • Page 234
    ... of payments made under the Economic and Property Damages Settlement Agreement and BP's separate claims for spill-related damages, such as lost profits from the Macondo well, which claims were assigned by BP to the Economic and Property Damages Settlement Class. On 17 January 2013, Halliburton filed...

  • Page 235
    ... held for natural resource damage early restoration projects. When the cash balances in the Trust are exhausted, payments in respect of legitimate claims and other costs will be made directly by BP. See Financial statements - Note 2. The economic and property damages claims process is under court...

  • Page 236
    ... seeking to recall and stay the Fifth Circuit's mandate in order to halt the processing and payment of business economic loss claims pending further review. The US Supreme Court denied BP's application on 9 June 2014. On 1 August 2014, BP filed a petition for certiorari with the US Supreme Court for...

  • Page 237
    ... facts regarding safety procedures and BP's (and other defendants') ability to manage the oil spill, unjust enrichment from economic and other damages to the State of Louisiana and its citizens, and punitive damages. On 10 December 2010, the Mississippi Department of Environmental Quality issued...

  • Page 238
    ..., and 44 projects that were filed with 234 BP Annual Report and Form 20-F 2014 the court on 2 October 2014, following a regulatory review and public comment process. As part of the project agreements, BP will receive Natural Resource Damages (NRD) restoration credits that can be used to offset...

  • Page 239
    ... former officers and directors seeking damages for alleged losses those funds suffered because of their purchases of BP ordinary shares and, in two cases, ADSs. The funds assert various state law and federal law claims. From July 2012 to April 2014, 27 additional cases were filed in Texas state and...

  • Page 240
    ..., to further enhance the safety of drilling operations in the Gulf of Mexico. These requirements relate to BP's risk management processes, such as third-party auditing and verification, BP's oil spill response plan, training, and well control equipment and processes such as blowout preventers and...

  • Page 241
    ...of Natural Resources (LDNR) issued a Cease and Desist Order (the Order) directing BP to apply for a Coastal Use Permit to remove certain 'orphan' anchors that had been placed in coastal waters to secure the containment boom during oil spill response operations in 2010. On 18 September 2013, BP filed...

  • Page 242
    ...On 4 November 2014 the California Attorney General filed a notice in California state court that it was intervening in a previously-sealed California False Claims Act (CFCA) lawsuit filed by relator Christopher Schroen against BP, BP Energy Company, BP Corporation North America Inc., BP Products and...

  • Page 243
    ... resulting oil spill. The administrative agreement allows BP entities to enter into new contracts or leases with the US government. Under the terms and conditions of this agreement, which will apply for five years, BP has agreed to a set of safety and operations, ethics and compliance and corporate...

  • Page 244
    ... material effect on our financial statements. BP's internal control over financial reporting as of 31 December 2014 has been audited by Ernst & Young, an independent registered public accounting firm, as stated in their report appearing on page 95 of BP Annual Report and Form 20-F 2014. Shareholder...

  • Page 245
    ... 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 relating...

  • Page 246
    ... business model', 'Our strategy', 'Outlook' and 'Outlook for 2015', and including but not limited to statements regarding plans and prospects relating to future value creation, capital discipline and growth in sustainable free cash flow; plans to develop resources, increase production, strengthen BP...

  • Page 247
    Shareholder information 244 Share prices and listings 244 Dividends 245 UK foreign exchange controls on dividends 245 Shareholder taxation information 247 Major shareholders 247 Annual general meeting 247 Memorandum and Articles of Association 250 Purchases of equity securities by the issuer and ...

  • Page 248
    ...periods shown. These are derived from the highest and lowest intra-day sales prices as reported on the LSE and NYSE, respectively. Pence Ordinary shares High Low High Dollars American depositary sharesa Low Year ended 31 December 2010 2011 2012 2013 2014 Year ended 31 December 2013: First quarter...

  • Page 249
    ... the UK or under the company's Articles of Association, restricting the right of non-resident or foreign owners to hold or vote BP ordinary or preference shares in the company other than limitations that would generally apply to all of the shareholders and limitations applicable to certain countries...

  • Page 250
    ... 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 HM Revenue & Customs no longer seeks to impose 1.5% stamp duty reserve tax on issues of UK shares and securities to non-EU...

  • Page 251
    ... Capital Group Companies, Inc held 3.51% and Legal & General Group plc held 3.27% of the voting rights of the issued share capital of the company. Under the US Securities Exchange Act of 1934 BP has received notification of the following interests as at 17 February 2015: Percentage of ordinary share...

  • Page 252
    ... dividend, cash will automatically be paid instead. Apart from shareholders' rights to share in BP's profits by dividend (if any is declared or announced), the Articles of Association provide that the directors may set aside: • A special reserve fund out of the balance of profits each year...

  • Page 253
    ... the UK or under the company's Articles of Association, restricting the right of non-resident or foreign owners to hold or vote BP ordinary or preference shares in the company other than limitations that would generally apply to all of the shareholders and limitations applicable to certain countries...

  • Page 254
    ...-BP to Rosneft. The programme expected to return to BP shareholders an amount equivalent to the value of BP's original investment in TNK-BP and to exceed that required to offset the earnings per share dilution expected as a result of the sale of TNK-BP. It also reflected the reduction in BP's asset...

  • Page 255
    ... material to ADR beneficial holders in the Depository Trust Company. Corporate materials include information related to shareholders' meetings and related voting instructions. These fees are SEC approved. Payment of fees to Precision IR for investor support. BP Annual Report and Form 20-F 2014 251

  • Page 256
    ... the way you receive your company documents (such as the BP Annual Report and Form 20-F, BP Strategic Report and Notice of BP Annual General Meeting) please contact the BP Registrar or the BP ADS Depositary. Ordinary and preference shareholders The BP Registrar Capita Asset Services The Registry, 34...

  • Page 257
    ... in the year as a percentage of the year-end share price on the respective exchange. Fair value accounting effects We use derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS...

  • Page 258
    ... the group, the terms refer to the segment's share thereof. Operating management system (OMS) BP's OMS helps us manage risks in our operating activities by setting out BP's principles for good operating practice. It brings together BP requirements on health, safety, security, the environment, social...

  • Page 259
    ... operating segment under International Financial Reporting Standards (IFRS). RC profit or loss for the group is not a recognized GAAP measure. Management believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period...

  • Page 260
    ... hereby certifies that it meets all of 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 3 March 2015 256 BP Annual Report and Form 20-F 2014

  • Page 261
    ... changes The Offer and Listing Offer and listing details Plan of distribution Markets Selling shareholders Dilution Expenses of the issue Additional Information Share capital Memorandum and articles of association Material contracts Exchange controls Taxation Dividends and paying agents Statements...

  • Page 262

  • Page 263
    ... Operating Information 2010-2014 Five-year financial and operating data in PDF and Excel format. Published in April. bp.com/financialandoperating Statistical Review of World Energy 2015 An objective review of key global energy trends. Published in June. bp.com/statisticalreview You can order BP...