BP 2014 Annual Report Download - page 258

disclosing management’s estimate of this difference provides useful
information for investors because it enables investors to see the
economic effect of these activities as a whole.
Free cash flow
Operating cash flow less net cash used in investing activities, as
presented in the condensed group cash flow statement.
Gearing
See Net debt and net debt ratio definition.
Hydrocarbons
Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8
billion cubic feet = 1 million barrels.
Inventory holding gains and losses
The difference between the cost of sales calculated using the
replacement cost of inventory and the cost of sales calculated on the
first-in first-out (FIFO) method after adjusting for any changes in
provisions where the net realizable value of the inventory is lower than its
cost. Under the FIFO method, which we use for IFRS reporting, the cost
of inventory charged to the income statement is based on its historical
cost of purchase or manufacture, rather than its replacement cost. In
volatile energy markets, this can have a significant distorting effect on
reported income. The amounts disclosed represent the difference
between the charge to the income statement for inventory on a FIFO
basis (after adjusting for any related movements in net realizable value
provisions) and the charge that would have arisen based on the
replacement cost of inventory. For this purpose, the replacement cost of
inventory is calculated using data from each operation’s production and
manufacturing system, either on a monthly basis, or separately for each
transaction where the system allows this approach. The amounts
disclosed are not separately reflected in the financial statements as a
gain or loss. No adjustment is made in respect of the cost of inventories
held as part of a trading position and certain other temporary inventory
positions. See Replacement cost (RC) profit or loss definition below.
Joint arrangement
An arrangement in which two or more parties have joint control.
Joint control
Contractually agreed sharing of control over an arrangement, which exists
only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
Joint operation
A joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities,
relating to the arrangement.
Joint venture
A joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement.
Liquids
Comprises crude oil, condensate and natural gas liquids. For reserves, it
also includes bitumen.
Major projects
Have a BP net investment of at least $250 million, or are considered to
be of strategic importance to BP or of a high degree of complexity.
Net debt and net debt ratio (gearing)
Non-GAAP measures. Net debt includes the fair value of associated
derivative financial instruments that are used to hedge foreign exchange
and interest rate risks relating to finance debt, for which hedge
accounting is claimed. The derivatives are reported on the balance sheet
within the headings ‘Derivative financial instruments’. We believe that
net debt and net debt ratio provide useful information to investors. Net
debt enables investors to see the economic effect of gross debt, related
hedges and cash and cash equivalents in total. The net debt ratio enables
investors to see how significant net debt is relative to equity from
shareholders. The net debt ratio is defined as the ratio of finance debt
(borrowings, including the fair value of associated derivative financial
instruments that are used to hedge foreign exchange and interest rate
risks relating to finance debt, plus obligations under finance leases) to the
total of finance debt plus shareholders’ interest. See Financial
statements – Note 25 for information on gross debt, which is the nearest
equivalent measure to net debt on an IFRS basis.
Net wind generation capacity
The sum of the rated capacities of the assets/turbines that have entered
into commercial operation, including BP’s share of equity-accounted
entities. The gross data is the equivalent capacity on a gross-JV basis,
which includes 100% of the capacity of equity-accounted entities where
BP has partial ownership.
Non-operating items
Charges and credits arising in consolidated entities and in TNK-BP and
Rosneft that are included in the financial statements and that BP
discloses separately because it considers such disclosures to be
meaningful and relevant to investors. They are items that management
considers not to be part of underlying business operations and are
disclosed in order to enable investors better to understand and evaluate
the group’s reported financial performance.
Operating capital employed
Non-GAAP measure. Total assets (excluding goodwill) less total liabilities,
excluding finance debt and current and deferred taxation.
Operating cash flow and operating cash
Net cash provided by (used in) operating activities as stated in the
condensed group cash flow statement. When used in the context of a
segment rather than 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
responsibility and operational reliability, as well as related issues, such as
maintenance, contractor relations and organizational learning, into a
common management system.
Organic capital expenditure
Excludes acquisitions, asset exchanges, and other inorganic capital
expenditure. An analysis of capital expenditure by segment and region is
shown in Financial statements – Note 4.
Plant efficiency
Plant efficiency is calculated taking 100% less the ratio of total plant
deferrals divided by installed production capacity. Plant deferrals include
planned and unplanned deferrals associated with the topside plant and
where applicable the subsea equipment (excluding wells and reservoir).
Plant deferrals include breakdowns, planned events, turnarounds, and
weather.
Production-sharing agreement (PSA)
An arrangement through which an oil company bears the risks and costs
of exploration, development and production. In return, if exploration is
successful, the oil company receives entitlement to variable physical
volumes of hydrocarbons, representing recovery of the costs incurred
and a stipulated share of the production remaining after such cost
recovery.
Proved reserves replacement ratio
The extent to which production is replaced by proved reserves additions.
This ratio is expressed in oil equivalent terms and includes changes
resulting from revisions to previous estimates, improved recovery, and
extensions and discoveries.
Refining availability
Represents Solomon Associates’ operational availability, which is defined
as the percentage of the year that a unit is available for processing after
subtracting the annualized time lost due to turnaround activity and all
planned mechanical, process and regulatory downtime.
Refining marker margin (RMM)
The average of regional indicator margins weighted for BP’s crude
refining capacity in each region. Each regional marker margin is based on
product yields and a marker crude oil deemed appropriate for the region.
The regional indicator margins may not be representative of the margins
achieved by BP in any period because of BP’s particular refinery
configurations and crude and product slate.
254 BP Annual Report and Form 20-F 2014