BP 2014 Annual Report Download - page 34

Financial performance
$ million
2014 2013 2012
Sale of crude oil through spot
and term contracts 80,003 79,394 56,383
Marketing, spot and term sales
of refined products 227,082 258,015 274,666
Other sales and operating revenues 16,401 13,786 15,342
Sales and other operating revenuesa 323,486 351,195 346,391
RC profit before interest and taxb
Fuels 2,830 1,518 1,403
Lubricants 1,407 1,274 1,276
Petrochemicals (499) 127 185
3,738 2,919 2,864
Net (favourable) unfavourable impact
of non-operating items and fair
value accounting effects
Fuels 389 712 3,609
Lubricants (136) (2) 9
Petrochemicals 450 3 (19)
703 713 3,599
Underlying RC profit before interest
and taxb
Fuels 3,219 2,230 5,012
Lubricants 1,271 1,272 1,285
Petrochemicals (49) 130 166
4,441 3,632 6,463
Capital expenditure and acquisitions 3,106 4,506 5,249
a Includes sales to other segments.
b
Income from petrochemicals produced at our Gelsenkirchen and Mülheim sites is reported within
the fuels business. Segment-level overhead expenses are included within the fuels business.
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, reflected higher prices largely offset by lower volumes and
foreign exchange losses.
The 2014 result included a net non-operating charge of $1,570 million,
primarily relating to impairment charges in our petrochemicals and fuels
businesses, while 2013 and 2012 results included impairment charges in
our fuels business, which were mainly associated with our disposal
programme. In addition, fair value accounting effects had a favourable
impact of $867 million in 2014 versus unfavourable impacts in 2013 and
2012.
After adjusting for non-operating items and fair value accounting effects,
underlying replacement cost (RC) profit before interest and tax in 2014 was
higher than 2013 but lower than 2012.
Our fuels business
The fuels strategy focuses primarily on fuels value chains (FVCs). These
include large-scale, highly upgraded, feedstock-advantaged refineries
which are integrated with logistics and marketing businesses.
We believe that having a quality refining portfolio connected to strong
marketing positions is core to our integrated FVC businesses as this
provides optimization opportunities in highly competitive markets. We look
to build on our strong portfolio of refining assets and, through advantaged
crude, optimize across the supply chain.
We have improved our refining portfolio quality in terms of crude feedstock
and location advantage, scale and have sustained competitive complexity
through portfolio rationalization and selective investment. Across all
regions we expect to operate our portfolio at top quartile availability and
with improved efficiency.
We continue to grow our fuels marketing businesses, including retail,
through differentiated marketing offers and distinctive partnerships. We
partner with leading retailers globally, creating distinctive offers that deliver
good returns and reliable profit and cash generation.
Underlying RC profit before interest and tax was higher than 2013, mainly
due to improved fuels marketing performance, increased heavy crude
processing and higher production, mainly as a result of the ramp-up of
operations at our Whiting refinery following the modernization project. This
was partially offset by a weaker refining environment. Compared with
2012, the 2013 results were impacted by significantly weaker refining
margins, reduced throughput due to the planned Whiting refinery outage
as a result of our modernization project, and the absence of earnings from
the divested Texas City and Carson refineries. This was partially offset by a
significantly improved supply and trading contribution and lower overall
turnaround activity.
Refining marker margin
We track the margin environment by a global refining marker margin
(RMM). Refining margins are a measure of the difference between the
price a refinery pays for its inputs (crude oil) and the market price of its
products. Although refineries produce a variety of petroleum products, we
track the margin environment using a simplified indicator that reflects the
margins achieved on gasoline and diesel only. The RMM may not be
representative of the margin achieved by BP in any period because of BP’s
particular refinery configurations and crude and product slates. In addition,
the RMM does not include estimates of energy or other variable costs.
$ per barrel
Region Crude marker 2014 2013 2012
US North West Alaska North
Slope 16.6 15.2 18.0
US Midwest West Texas
Intermediate 17.4 21.7 27.8
Northwest Europe Brent 12.5 12.9 16.1
Mediterranean Azeri Light 10.6 10.5 12.7
Australia Brent 13.5 13.4 14.8
BP RMM 14.4 15.4 18.2
The average global RMM in 2014 was $14.4/bbl, the lowest level since
2010 and $1.0/bbl lower than 2013. This was largely due to the narrower
West Texas Intermediate-Brent spread as improving pipeline and rail
logistics in the US reduced the discount of US domestic crude oil relative
to the international benchmark.
Refining
At 31 December 2014 we owned or had a share in 14 refineries producing
refined petroleum products that we supply to retail and commercial
customers. For a summary of our interests in refineries and average daily
crude distillation capacities see page 217.
In 2014, refinery operations were strong, with Solomon refining availability
sustained at around 95% and utilization rates of 88% for the year. Overall
refinery throughputs in 2014 were lower than those in 2013, mainly due to
the divestment of the Texas City and Carson refineries.
BP Annual Report and Form 20-F 201430
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
32
40
16
24
8
BP refining marker margin ($/bbl)
2013
5-year range 2014