TIDMBP.
RNS Number : 5516N
BP PLC
29 July 2014
BP p.l.c. Top of page
Group results 1
Second quarter and half year results 2014(a)
FOR IMMEDIATE RELEASE London 29 July 2014
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== =========
2,042 3,528 3,369 Profit for the period(b) 6,897 18,905
Inventory holding (gains) losses*,
358 (53) (187) net of tax (240) 91
======== ======== ======== ==================================== ====== =========
2,400 3,475 3,182 Replacement cost profit* 6,657 18,996
Net (favourable) unfavourable
impact of non-operating
items* and fair value accounting
312 (250) 453 effects*, net of tax 203 (12,069)
======== ======== ======== ==================================== ====== =========
2,712 3,225 3,635 Underlying replacement cost profit* 6,860 6,927
======== ======== ======== ==================================== ====== =========
Replacement cost profit
12.62 18.80 17.25 per ordinary share (cents) 36.05 99.55
0.76 1.13 1.03 per ADS (dollars) 2.16 5.97
Underlying replacement cost profit
14.26 17.45 19.71 per ordinary share (cents) 37.15 36.30
0.86 1.05 1.18 per ADS (dollars) 2.23 2.18
======== ======== ======== ==================================== ====== =========
-- BP's second-quarter replacement cost (RC) profit was $3,182
million, compared with $2,400 million a year ago. After adjusting
for a net charge for non-operating items of $481 million and net
favourable fair value accounting effects of $28 million (both on a
post-tax basis), underlying RC profit for the second quarter 2014
was $3,635 million, compared with $2,712 million for the same
period in 2013. For the half year, RC profit was $6,657 million,
compared with $18,996 million a year ago which included a
$12.5-billion gain relating to the disposal of our interest in
TNK-BP. After adjusting for a net charge for non-operating items of
$257 million and net favourable fair value accounting effects of
$54 million (both on a post-tax basis), underlying RC profit for
the half year was $6,860 million, compared with $6,927 million for
the same period last year. RC profit or loss for the group,
underlying RC profit or loss and fair value accounting effects are
non-GAAP measures and further information is provided on pages 3
and 31.
-- All amounts relating to the Gulf of Mexico oil spill have
been treated as non-operating items, with a net pre-tax charge of
$260 million for the quarter and $299 million for the half year.
For further information on the Gulf of Mexico oil spill and its
consequences, including information on utilization of the Deepwater
Horizon Oil Spill Trust fund, see page 10 and Note 2 on page 18.
See also Principal risks and uncertainties on page 35 and Legal
proceedings on page 42.
-- Including the impact of the Gulf of Mexico oil spill, net
cash provided by operating activities for the quarter and half year
was $7.9 billion and $16.1 billion respectively, compared with $5.4
billion and $9.4 billion for the same periods in 2013. Excluding
amounts related to the Gulf of Mexico oil spill, net cash provided
by operating activities for the second quarter and half year was
$7.6 billion and $16.5 billion respectively, compared with $5.2
billion and $9.5 billion respectively for the same periods in
2013.
-- Net debt at 30 June 2014 was $24.4 billion, compared with
$18.2 billion a year ago. The ratio of net debt to net debt plus
equity at 30 June 2014 was 15.5%, compared with 12.3% a year ago.
Net debt and the ratio of net debt to net debt plus equity are
non-GAAP measures. See page 27 for more information.
-- Total capital expenditure on an accruals basis for the second
quarter was $5.6 billion, almost all of which was organic*. For the
half year, total capital expenditure on an accruals basis was $11.7
billion, of which organic capital expenditure was $11.0
billion.
-- In October 2013, BP announced plans to divest a further $10
billion of assets before the end of 2015, having completed its
earlier divestment programme of $38 billion in 2012. BP has agreed
around $3.4 billion of such further divestments to date. Disposal
proceeds received in cash were $0.8 billion for the quarter and
$1.8 billion for the half year.
-- BP today announced a quarterly dividend of 9.75 cents per
ordinary share ($0.585 per ADS), which is expected to be paid on 19
September 2014. The corresponding amount in sterling will be
announced on 9 September 2014. See page 27 for further
information.
For items marked with an asterisk throughout this document, definitions
* are provided in the Glossary on page 33.
(a) This results announcement also represents BP's half-yearly financial
report (see page 11).
(b) Profit attributable to BP shareholders.
The commentaries above and following should be read in conjunction
with the cautionary statement on page 45.
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Group headlines (continued)
-- The effective tax rate (ETR) on RC profit for the second
quarter and half year was 34% and 32% respectively, compared with
46% and 20% for the same periods in 2013. Adjusting for
non-operating items and fair value accounting effects, the
underlying ETR in the second quarter and half year was 33% for both
periods, compared with 45% and 41% for the same periods in 2013.
The underlying ETR was higher in 2013 due to foreign exchange
impacts on deferred tax and a lower level of equity-accounted
earnings (which are reported net of tax), compared with the
corresponding periods in 2014.
-- Finance costs and net finance expense relating to pensions
and other post-retirement benefits were a charge of $356 million
for the second quarter, compared with $369 million for the same
period in 2013. For the half year, the respective amounts were $723
million and $773 million.
-- BP repurchased 53 million ordinary shares at a cost of $0.5
billion, including fees and stamp duty, during the second quarter
of 2014. For the half year, BP repurchased 298 million ordinary
shares at a cost of $2.4 billion, including fees and stamp duty. As
at 30 June 2014, BP had bought back 1,051 million shares for a
total amount of $7.9 billion, including fees and stamp duty, since
the announcement on 22 March 2013 of a share repurchase programme
with a total value of up to $8 billion. The $8-billion share
repurchase programme was completed in July 2014.
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Analysis of RC profit before interest and tax
and reconciliation to profit for the period
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
RC profit before interest and
tax*
4,400 4,659 4,049 Upstream 8,708 9,962
1,016 794 933 Downstream 1,727 2,663
- - - TNK-BP(a) - 12,500
218 518 1,024 Rosneft(b) 1,542 303
(573) (497) (434) Other businesses and corporate (931) (1,040)
(199) (29) (251) Gulf of Mexico oil spill response(c) (280) (221)
129 90 (76) Consolidation adjustment - UPII* 14 556
======== ======== ======== ========================================== ======== ========
RC profit before interest and
4,991 5,535 5,245 tax 10,780 24,723
Finance costs and net finance
expense relating to
pensions and other post-retirement
(369) (367) (356) benefits (723) (773)
(2,138) (1,602) (1,643) Taxation on a RC basis (3,245) (4,791)
(84) (91) (64) Non-controlling interests (155) (163)
======== ======== ======== ========================================== ======== ========
2,400 3,475 3,182 RC profit attributable to BP shareholders 6,657 18,996
======== ======== ======== ========================================== ======== ========
(506) 102 258 Inventory holding gains (losses) 360 (100)
Taxation (charge) credit on inventory
holding gains
148 (49) (71) and losses (120) 9
======== ======== ======== ========================================== ======== ========
Profit for the period attributable
2,042 3,528 3,369 to BP shareholders 6,897 18,905
======== ======== ======== ========================================== ======== ========
(a) BP ceased equity accounting for its share of TNK-BP's earnings from
22 October 2012. First half 2013 includes the gain arising on disposal
of BP's interest in TNK-BP.
(b) BP's investment in Rosneft is accounted under the equity method
from 21 March 2013. See page 8 for further information.
(c) See Note 2 on page 18 for further information on the accounting
for the Gulf of Mexico oil spill response.
Analysis of underlying RC profit before interest and tax
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Underlying RC profit before interest
and tax*
4,288 4,401 4,655 Upstream 9,056 9,990
1,201 1,011 733 Downstream 1,744 2,842
218 271 1,024 Rosneft 1,295 303
(438) (489) (438) Other businesses and corporate (927) (899)
129 90 (76) Consolidation adjustment - UPII 14 556
======== ======== ======== ===================================== ======== ========
Underlying RC profit before interest
5,398 5,284 5,898 and tax 11,182 12,792
Finance costs and net finance
expense relating to
pensions and other post-retirement
(359) (357) (347) benefits (704) (753)
(2,243) (1,611) (1,852) Taxation on an underlying RC basis (3,463) (4,949)
(84) (91) (64) Non-controlling interests (155) (163)
======== ======== ======== ===================================== ======== ========
Underlying RC profit attributable
2,712 3,225 3,635 to BP shareholders 6,860 6,927
======== ======== ======== ===================================== ======== ========
Reconciliations of underlying RC profit or loss to the nearest
equivalent IFRS measure are provided on page 1 for the group and on
pages 4-9 for the segments.
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Upstream
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
4,396 4,653 4,048 Profit before interest and tax 8,701 9,956
4 6 1 Inventory holding (gains) losses* 7 6
======== ======== ======== ===================================== ====== ======
RC profit before interest and
4,400 4,659 4,049 tax 8,708 9,962
Net (favourable) unfavourable
impact of non-operating
items* and fair value accounting
(112) (258) 606 effects* 348 28
======== ======== ======== ===================================== ====== ======
Underlying RC profit before interest
4,288 4,401 4,655 and tax*(a) 9,056 9,990
======== ======== ======== ===================================== ====== ======
(a) See page 5 for a reconciliation to segment RC profit before interest
and tax by region.
Financial results
The replacement cost profit before interest and tax for the
second quarter and half year was $4,049 million and $8,708 million
respectively, compared with $4,400 million and $9,962 million for
the same periods in 2013. The second quarter and half year included
a net non-operating charge of $516 million and $240 million
respectively, compared with a net non-operating gain of $143
million and $63 million a year ago. Fair value accounting effects
in the second quarter and half year had unfavourable impacts of $90
million and $108 million respectively, compared with unfavourable
impacts of $31 million and $91 million in the same periods of
2013.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the second quarter and half year was $4,655
million and $9,056 million respectively, compared with $4,288
million and $9,990 million for the same periods in 2013. The result
for the second quarter reflected higher production in higher-margin
areas and higher liquids and gas realizations, partly offset by
higher costs, primarily depreciation, depletion and amortization
and wellwork, and the impact of divestments. The result for the
first half reflected the same factors as the second quarter, with
the exception of liquids realizations, which were lower, the impact
of higher exploration write-offs, mainly in the first quarter, and
a benefit from stronger gas marketing and trading activities, again
mainly in the first quarter.
Production
Reported production for the quarter was 2,106mboe/d, 6% lower
than the second quarter of 2013. Underlying production* for the
quarter was 3.1% higher. This reflected growth in production from
higher-margin areas, mainly driven by strong performance in the
Gulf of Mexico. For the first half, production was 2,118mboe/d,
7.3% lower than in the same period of 2013. First-half underlying
production was 1.4% higher than in 2013.
Key events
In May, Rosneft and BP signed a heads of agreement that provides
for implementation of a joint pilot project relating to the Domanik
formations in Central Russia's Volga-Urals region and, in the event
of success, the possible development of unconventional Domanik
resources.
In June, production commenced from the CLOV (Cravo, Lirio,
Orquidea and Violeta) major project in Angola (BP 16.67%). This is
the fifth major project start-up in 2014.
Also in June, BP and the China National Offshore Oil Corporation
(CNOOC) announced a heads of agreement for BP to supply up to 1.5
million tonnes of liquefied natural gas (LNG) per year over 20
years starting in 2019.
Furthermore, BP and Pantera Acquisition Group, LLC (Pantera)
signed an agreement under which Pantera has agreed to acquire BP's
interests in the Panhandle West and Texas Hugoton gas fields for a
purchase price of $390 million.
This builds on the progress we announced with our first-quarter
results, which comprised: the start-up of production from the
Chirag Oil project in Azerbaijan and from the Na Kika Phase 3, Mars
B and Atlantis North expansion Phase 2 projects in the Gulf of
Mexico; the award of further key contracts for the development of
the Shah Deniz Stage 2 and South Caucasus Pipeline expansion
projects; our intention to create a separate BP business to manage
our US lower 48 onshore oil and gas assets; BP being high bidder on
24 out of 31 blocks in the March Gulf of Mexico lease sales
(regulatory approval has now been received); and the agreement to
sell interests in four BP-operated oilfields on the North Slope of
Alaska to Hilcorp (see Note 3 on page 23 for further
information).
Outlook
Looking ahead, we expect third-quarter 2014 reported production
to be lower than the second quarter, primarily reflecting planned
major turnaround and seasonal maintenance activities in Alaska and
the Gulf of Mexico. We expect the seasonal reduction to be slightly
larger than we experienced in the same quarters of 2013 due to
phasing of these activities.
See also Note 1 on page 18.
The commentary above contains forward-looking statements and should
be read in conjunction with the cautionary statement on page 45.
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Upstream
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
Underlying RC profit before interest
and tax(a)
561 731 1,419 US(b) 2,150 1,515
3,727 3,670 3,236 Non-US(c) 6,906 8,475
======== ======== ======== ===================================== ====== ======
4,288 4,401 4,655 9,056 9,990
======== ======== ======== ===================================== ====== ======
Non-operating items
62 (59) (72) US (131) 56
81 335 (444) Non-US (109) 7
======== ======== ======== ===================================== ====== ======
143 276 (516) (240) 63
======== ======== ======== ===================================== ====== ======
Fair value accounting effects
(33) (49) (31) US (80) (73)
2 31 (59) Non-US (28) (18)
======== ======== ======== ===================================== ====== ======
(31) (18) (90) (108) (91)
======== ======== ======== ===================================== ====== ======
RC profit before interest and
tax(a)
590 623 1,316 US 1,939 1,498
3,810 4,036 2,733 Non-US 6,769 8,464
======== ======== ======== ===================================== ====== ======
4,400 4,659 4,049 8,708 9,962
======== ======== ======== ===================================== ====== ======
Exploration expense
85 659 68 US(d) 727 165
349 289 321 Non-US 610 591
======== ======== ======== ===================================== ====== ======
434 948 389 1,337 756
======== ======== ======== ===================================== ====== ======
Production (net of royalties)(e)
Liquids* (mb/d)
335 396 429 US 413 351
97 106 92 Europe 99 106
732 582 562 Rest of World 572 722
======== ======== ======== ===================================== ====== ======
1,165 1,085 1,083 1,084 1,179
======== ======== ======== ===================================== ====== ======
Natural gas (mmcf/d)
1,573 1,478 1,525 US 1,502 1,553
286 199 166 Europe 182 307
4,386 4,390 4,244 Rest of World 4,317 4,558
======== ======== ======== ===================================== ====== ======
6,244 6,067 5,936 6,001 6,418
======== ======== ======== ===================================== ====== ======
Total hydrocarbons* (mboe/d)
606 651 692 US 672 618
147 140 121 Europe 130 159
1,488 1,339 1,293 Rest of World 1,316 1,508
======== ======== ======== ===================================== ====== ======
2,241 2,131 2,106 2,118 2,285
======== ======== ======== ===================================== ====== ======
Average realizations(f)
94.92 97.16 96.90 Total liquids ($/bbl) 97.03 99.08
5.37 6.20 5.67 Natural gas ($/mcf) 5.94 5.45
61.27 66.16 64.90 Total hydrocarbons ($/boe) 65.53 63.23
======== ======== ======== ===================================== ====== ======
(a) A minor amendment has been made to the analysis by region for the
comparative periods in 2013.
(b) The increase in the second quarter 2014 compared with the second
quarter 2013 primarily reflects higher production in the Gulf of
Mexico and higher realizations.
(c) The decrease in the second quarter 2014 compared with the second
quarter 2013 primarily reflects higher costs, mainly depreciation,
depletion and amortization, and the impact of divestments, partly
offset by higher realizations.
(d) Following on from the decision to create a separate BP business
around our US lower 48 onshore oil and gas activities, and as a
consequence of disappointing appraisal results, we have decided
not to proceed with development plans in the Utica shale. First
quarter and first half 2014 include a $521-million write-off relating
to the Utica acreage.
(e) Includes BP's share of production of equity-accounted entities in
the Upstream segment.
(f) Based on sales by consolidated subsidiaries only - this excludes
equity-accounted entities.
Because of rounding, some totals may not agree exactly with the sum
of their component parts.
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Downstream
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
501 871 1,166 Profit before interest and tax 2,037 2,556
515 (77) (233) Inventory holding (gains) losses* (310) 107
======== ======== ======== ===================================== ====== ======
1,016 794 933 RC profit before interest and tax 1,727 2,663
Net (favourable) unfavourable impact
of non-operating
items* and fair value accounting
185 217 (200) effects* 17 179
======== ======== ======== ===================================== ====== ======
Underlying RC profit before interest
1,201 1,011 733 and tax*(a) 1,744 2,842
======== ======== ======== ===================================== ====== ======
(a) See page 7 for a reconciliation to segment RC profit before interest
and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the
second quarter and half year was $933 million and $1,727 million
respectively, compared with $1,016 million and $2,663 million for
the same periods in 2013.
The 2014 results included net non-operating gains of $50 million
for the second quarter and a net non-operating charge of $228
million for the half year, compared with net non-operating charges
of $323 million and $304 million for the same periods a year ago
(see pages 7 and 30 for further information on non-operating
items). The second-quarter net non-operating gains are principally
associated with divestments in the fuels and lubricants businesses,
and the charges for the half year reflect an impairment relating to
the announced halt of the refining operations at the Bulwer
refinery in Australia, planned for 2015. Fair value accounting
effects had favourable impacts of $150 million for the second
quarter and $211 million for the half year, compared with $138
million for the second quarter and $125 million for the half year
of 2013.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the second quarter and half year was $733
million and $1,744 million respectively, compared with $1,201
million and $2,842 million a year ago.
Replacement cost profit before interest and tax for the fuels,
lubricants and petrochemicals businesses is set out on page 7.
Fuels business
The fuels business delivered an underlying replacement cost
profit before interest and tax of $516 million for the second
quarter and $1,216 million for the half year, compared with $853
million and $2,090 million for the same periods in 2013. The lower
result in the first half was principally due to significantly
weaker refining margins in both the quarter and half year and a
lower contribution from supply and trading in the second quarter.
These impacts were partially offset by significantly higher
production at the Whiting refinery due to the commissioning of its
largest crude unit which had a planned outage in the same period
last year, and associated processing of heavy crude. Heavy crude
processing reached a peak of 270,000 barrels per day during the
quarter.
Lubricants business
The lubricants business delivered an underlying replacement cost
profit before interest and tax of $315 million in the second
quarter and $622 million in the half year, compared with $372
million and $717 million in the same periods last year. The lower
result was due to restructuring programmes and foreign exchange
effects. The positive long-term performance trend continues to
reflect execution of our strategy, including delivery from our
premium brands and focus on high growth markets.
Petrochemicals business
The petrochemicals business incurred an underlying replacement
cost loss before interest and tax of $98 million in the second
quarter and $94 million in the half year, compared with $24 million
and an underlying replacement cost profit before interest and tax
of $35 million, respectively, in the same periods last year. The
loss was principally due to environmental factors, especially in
the aromatics business, as excess supply in Asia and high xylene
prices in the US created downward pressures on product margins. In
the first quarter we acquired the remaining 50% joint venture
interests in our purified terephthalic acid (PTA) plant in
Indonesia.
Outlook
In the third quarter, in the fuels business we expect stronger
margin capture relative to the second quarter, driven by a lower
level of turnarounds and Whiting operations. In the petrochemicals
business the challenging environment is expected to continue, but
we should benefit from a lower level of turnarounds.
The commentary above contains forward-looking statements and should
be read in conjunction with the cautionary statement on page 45.
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Downstream
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
Underlying RC profit before interest
and tax -
by region
557 412 331 US 743 1,307
644 599 402 Non-US 1,001 1,535
======== ======== ======== ===================================== ====== ======
1,201 1,011 733 1,744 2,842
======== ======== ======== ===================================== ====== ======
Non-operating items
(17) (1) 180 US 179 11
(306) (277) (130) Non-US (407) (315)
======== ======== ======== ===================================== ====== ======
(323) (278) 50 (228) (304)
======== ======== ======== ===================================== ====== ======
Fair value accounting effects
219 91 206 US 297 154
(81) (30) (56) Non-US (86) (29)
======== ======== ======== ===================================== ====== ======
138 61 150 211 125
======== ======== ======== ===================================== ====== ======
RC profit before interest and
tax
759 502 717 US 1,219 1,472
257 292 216 Non-US 508 1,191
======== ======== ======== ===================================== ====== ======
1,016 794 933 1,727 2,663
======== ======== ======== ===================================== ====== ======
Underlying RC profit (loss) before
interest and tax -
by business(a)(b)
853 700 516 Fuels 1,216 2,090
372 307 315 Lubricants 622 717
(24) 4 (98) Petrochemicals (94) 35
======== ======== ======== ===================================== ====== ======
1,201 1,011 733 1,744 2,842
======== ======== ======== ===================================== ====== ======
Non-operating items and fair value
accounting
effects(c)
(188) (217) 15 Fuels (202) (177)
3 - 186 Lubricants 186 (2)
- - (1) Petrochemicals (1) -
======== ======== ======== ===================================== ====== ======
(185) (217) 200 (17) (179)
======== ======== ======== ===================================== ====== ======
RC profit (loss) before interest
and tax(a)(b)
665 483 531 Fuels 1,014 1,913
375 307 501 Lubricants 808 715
(24) 4 (99) Petrochemicals (95) 35
======== ======== ======== ===================================== ====== ======
1,016 794 933 1,727 2,663
======== ======== ======== ===================================== ====== ======
BP average refining marker margin
19.1 13.3 15.4 (RMM)* ($/bbl) 14.4 18.2
======== ======== ======== ===================================== ====== ======
Refinery throughputs (mb/d)
711 614 645 US 630 824
745 798 757 Europe 777 775
252 308 250 Rest of World 279 287
======== ======== ======== ===================================== ====== ======
1,708 1,720 1,652 1,686 1,886
======== ======== ======== ===================================== ====== ======
95.3 95.0 95.3 Refining availability* (%) 95.1 95.2
======== ======== ======== ===================================== ====== ======
Marketing sales of refined products
(mb/d)
1,340 1,120 1,183 US 1,152 1,371
1,316 1,139 1,154 Europe 1,146 1,237
549 545 515 Rest of World 530 553
======== ======== ======== ===================================== ====== ======
3,205 2,804 2,852 2,828 3,161
Trading/supply sales of refined
2,527 2,416 2,468 products 2,442 2,418
======== ======== ======== ===================================== ====== ======
Total sales volumes of refined
5,732 5,220 5,320 products 5,270 5,579
======== ======== ======== ===================================== ====== ======
Petrochemicals production (kte)
1,081 1,071 969 US 2,040 2,157
814 972 895 Europe 1,867 1,828
1,519 1,422 1,501 Rest of World 2,923 2,936
======== ======== ======== ===================================== ====== ======
3,414 3,465 3,365 6,830 6,921
======== ======== ======== ===================================== ====== ======
(a) Segment-level overhead expenses are included in the fuels business
result.
(b) BP's share of income from petrochemicals at our Gelsenkirchen and
Mülheim sites in Germany is reported in the fuels business.
(c) For Downstream, fair value accounting effects arise solely in the
fuels business.
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Rosneft
Second First Second First First
quarter quarter quarter half half
2013(a) 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
231 549 1,050 Profit before interest and tax(b) 1,599 316
(13) (31) (26) Inventory holding (gains) losses* (57) (13)
======== ======== ======== ====================================== ====== ======
RC profit before interest and
218 518 1,024 tax 1,542 303
Net charge (credit) for non-operating
- (247) - items* (247) -
======== ======== ======== ====================================== ====== ======
Underlying RC profit before interest
218 271 1,024 and tax* 1,295 303
======== ======== ======== ====================================== ====== ======
Replacement cost profit before interest and tax for the second
quarter and half year was $1,024 million and $1,542 million
respectively, compared with $218 million and $303 million for the
same periods in 2013.
There were no non-operating items in the second quarter of 2014
and a non-operating gain of $247 million in the first half of 2014,
relating to Rosneft's sale of its interest in the
Yugragazpererabotka joint venture. There were no non-operating
items in the first half of 2013.
After adjusting for non-operating items, the underlying
replacement cost profit for the second quarter and half year was
$1,024 million and $1,295 million respectively, compared with $218
million and $303 million for the same periods in 2013. The primary
factor impacting the second-quarter result, compared with the same
period last year, was favourable foreign exchange effects. The
half-year result reflected a full six months this year compared
with 11 days of the first quarter and three months of the second
quarter reported in the same period last year as well as favourable
foreign exchange effects.
On 27 June 2014, Rosneft's Annual General Meeting of
Shareholders approved the distribution of a dividend of 12.85
roubles per share. We received our share of this dividend in July
2014, which amounted to $693 million after the deduction of
withholding tax.
See also Principal risks and uncertainties - Rosneft investment
on page 36 and Other matters on page 44 for information on
sanctions.
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 2014 2013(c)
======== ======== ======== ====== ========
Production (net of royalties)
(BP share)
826 827 816 Liquids* (mb/d) 822 466
689 987 1,000 Natural gas (mmcf/d) 993 391
945 997 988 Total hydrocarbons* (mboe/d) 993 533
======== ======== ======== ============================== ====== ========
(a) Second quarter 2013 as reported includes an amendment to first-quarter
profit, which was reported based on a BP estimate.
(b) The Rosneft segment result includes equity-accounted earnings arising
from BP's 19.75% shareholding in Rosneft as adjusted for the accounting
required under IFRS relating to BP's purchase of its interest in
Rosneft and the amortization of the deferred gain relating to the
disposal of BP's interest in TNK-BP. BP's share of Rosneft's earnings
after their finance costs, taxation and non-controlling interests,
as adjusted, is included in the BP group income statement within
profit before interest and taxation.
(c) First half 2013 reflects production for the period 21 March - 30
June averaged over the half year.
Top of page 9
Other businesses and corporate
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ========
Profit (loss) before interest and
(573) (497) (434) tax (931) (1,040)
- - - Inventory holding (gains) losses* - -
======== ======== ======== ====================================== ====== ========
RC profit (loss) before interest
(573) (497) (434) and tax (931) (1,040)
Net charge (credit) for non-operating
135 8 (4) items* 4 141
======== ======== ======== ====================================== ====== ========
Underlying RC profit (loss) before
(438) (489) (438) interest and tax* (927) (899)
======== ======== ======== ====================================== ====== ========
Underlying RC profit (loss) before
interest and tax
(142) (99) (226) US (325) (263)
(296) (390) (212) Non-US (602) (636)
======== ======== ======== ====================================== ====== ========
(438) (489) (438) (927) (899)
======== ======== ======== ====================================== ====== ========
Non-operating items
(134) (1) 4 US 3 (138)
(1) (7) - Non-US (7) (3)
======== ======== ======== ====================================== ====== ========
(135) (8) 4 (4) (141)
======== ======== ======== ====================================== ====== ========
RC profit (loss) before interest
and tax
(276) (100) (222) US (322) (401)
(297) (397) (212) Non-US (609) (639)
======== ======== ======== ====================================== ====== ========
(573) (497) (434) (931) (1,040)
======== ======== ======== ====================================== ====== ========
Other businesses and corporate comprises the Alternative Energy
business, Shipping, Treasury (which includes interest income on the
group's cash and cash equivalents), and corporate activities
including centralized functions.
Financial results
The replacement cost loss before interest and tax for the second
quarter and half year was $434 million and $931 million
respectively, compared with $573 million and $1,040 million for the
same periods last year.
The second-quarter result included a net non-operating gain of
$4 million, compared with a net non-operating charge of $135
million a year ago. The charge in the second quarter last year
related principally to impairments of assets in our wind business.
For the half year, the net non-operating charge was $4 million,
compared with a net non-operating charge of $141 million a year
ago.
After adjusting for non-operating items, the underlying
replacement cost loss before interest and tax for the second
quarter and half year was $438 million and $927 million
respectively, compared with $438 million and $899 million for the
same periods last year.
Alternative Energy
Biofuels
In our biofuels business we have three operating mills in Brazil
where ethanol-equivalent production (which includes ethanol and
sugar) for the second quarter was 113 million litres compared with
116 million litres in the same period a year ago. There was no
production at our Brazilian mills in the first quarter of 2014 or
2013 due to the inter-harvest season. In the UK, the Vivergo joint
venture (BP 47%) had ethanol production of 26 million litres (54
million litres gross) for the second quarter and 43 million litres
(90 million litres gross) for the first half of 2014.
Wind
Net wind generation capacity*(a) was 1,590MW (2,619MW gross) at
30 June 2014, the same level as at 30 June 2013. BP's net share of
wind generation for the second quarter and half year was 1,248GWh
(2,082GWh gross) and 2,540GWh (4,303GWh gross) respectively,
compared with 1,143GWh (1,957GWh gross) and 2,287GWh (4,021GWh
gross) for the same periods of 2013.
(a) Capacity figures include 32MW in the Netherlands managed by our Downstream
segment.
Top of page 10
Gulf of Mexico oil spill
In April 2014, the US Coast Guard ended patrols and operations
on the final three shoreline miles in Louisiana. The Coast Guard
has now transitioned all shoreline areas to the National Response
Center process and has indicated that if oil is later discovered in
a shoreline segment where removal actions have been deemed
complete, it will follow long-standing response protocols
established under the law and contact whoever it believes is the
responsible party or parties.
Financial update
The replacement cost loss before interest and tax for the second
quarter and half year was $251 million and $280 million
respectively, compared with a $199 million loss and a $221 million
loss for the same periods last year. The second-quarter charge
reflects an increase in the provision for legal costs and the
ongoing costs of the Gulf Coast Restoration Organization. The
cumulative pre-tax charge recognized to date amounts to $43.0
billion.
The cumulative income statement charge does not include amounts
for obligations that BP considers are not possible, at this time,
to measure reliably. The total amounts that will ultimately be paid
by BP in relation to all the obligations relating to the incident
are subject to significant uncertainty and the ultimate exposure
and cost to BP will be dependent on many factors, as discussed
under Provisions and contingent liabilities in Note 2 on page 18,
including in relation to any new information or future
developments. These could have a material impact on our
consolidated financial position, results and cash flows. The risks
associated with the incident could also heighten the impact of the
other risks to which the group is exposed, as further described
under Principal risks and uncertainties on page 35.
Trust update
During the second quarter, $219 million was paid out of the
Deepwater Horizon Oil Spill Trust (the Trust) and qualified
settlement funds (QSFs), including $201 million for claims
payments, administrative costs of the Deepwater Horizon Court
Supervised Settlement Program (DHCSSP) and other resolved items,
and $18 million for natural resource damage assessment. In
addition, $15 million was paid to claimants from the seafood
compensation fund, for which the related provision and
reimbursement asset had been previously derecognized upon funding
of the QSF. At 30 June 2014, the aggregate cash balances in the
Trust and the QSFs amounted to $6.3 billion, including $1.1 billion
remaining in the seafood compensation fund which is yet to be
distributed, and $0.9 billion held for natural resource damage
early restoration projects.
As at 30 June 2014, the cumulative charges to be paid from the
Trust, and the associated reimbursement asset recognized, amounted
to $19.3 billion. No amount is provided for business economic loss
claims not yet received, processed, and paid by the DHCSSP. See
Note 2 on page 18 and Legal proceedings on page 42 for further
details.
Legal proceedings
The federal district court in New Orleans (the District Court)
scheduled the penalty phase in MDL 2179 to commence in January
2015. In this phase, the District Court will determine the amount
of civil penalties owed to the United States under the Clean Water
Act based on the court's rulings as to the presence of negligence,
gross negligence or wilful misconduct and quantification of
discharge in the earlier phases of the trial and the application of
the penalty factors under the Clean Water Act. The District Court
could issue its decision on the issues presented in the earlier
trial phases at any time.
The District Court ruled in December 2013 requiring the claims
administrator, in administering business economic loss claims, to
match a claimant's revenue with corresponding variable expenses and
develop a revised matching policy accordingly. In March 2014, the
claims administrator issued a revised matching policy reflecting
this order and in May 2014 it was approved by the District Court.
The Plaintiffs' Steering Committee has filed a motion seeking to
amend the revised policy.
In March 2014, the US Court of Appeals for the Fifth Circuit
(the Fifth Circuit) affirmed the District Court's ruling that the
Economic and Property Damages Settlement Agreement contained no
causation requirement beyond the revenue and related tests set out
in an exhibit to that agreement. In March 2014, BP filed a petition
that all the active judges of the Fifth Circuit review the
decision; in May 2014 this was denied. The District Court dissolved
the injunction that had halted the processing and payment of
business economic loss claims and instructed the claims
administrator to resume the processing and payment of claims. BP
has announced it will seek review by the US Supreme Court of the
Fifth Circuit's decisions relating to compensation of claims for
losses with no apparent connection to the Deepwater Horizon spill.
In June 2014, BP also asked the District Court to order the return
of excessive payments made by the DHCSSP under the matching policy
in effect before the December 2013 Ruling.
The Medical Benefits Class Action Settlement Agreement provides
for claims to be paid to qualifying class members for one year from
the agreement's effective date, which was February 2014.
In March 2014, BP p.l.c., BP Exploration & Production and
all other temporarily suspended BP entities entered into an
agreement with the US Environmental Protection Agency resolving all
issues related to suspension or debarment arising from the
Deepwater Horizon incident, allowing BP entities to enter into new
contracts or leases with the US Government. Under the terms and
conditions of the agreement, which will apply for five years, BP
has agreed to a set of safety and operations, ethics and compliance
and corporate governance requirements.
In May 2014, the judge denied plaintiffs' motion in the
multi-district litigation proceeding in federal district court in
Houston (MDL 2185) to certify a proposed class of ADS purchasers
before the explosion (from 8 November 2007 to 20 April 2010) and
granted plaintiffs' motion to certify a class of post-explosion ADS
purchasers (from 26 April 2010 to 28 May 2010). Both defendants and
plaintiffs were granted permission by the Fifth Circuit to appeal
from that decision in July 2014.
For further details, see Legal proceedings on page 42.
Top of page 11
Half-yearly financial report
This results announcement also represents BP's half-yearly
financial report for the purposes of the Disclosure and
Transparency Rules made by the UK Financial Conduct Authority. In
this context: (i) the condensed set of financial statements can be
found on pages 13-28; (ii) pages 1-10, and 29-45 comprise the
interim management report; and (iii) the directors' responsibility
statement and auditors' independent review report can be found on
pages 11-12.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
condensed set of financial statements on pages 13-28 has been
prepared in accordance with IAS 34 'Interim Financial Reporting',
and that the interim management report on pages 1-10 and 29-45
includes a fair review of the information required by the
Disclosure and Transparency Rules.
The directors draw attention to Note 2 to the condensed set of
financial statements on pages 18-23 which describes the
uncertainties surrounding the amounts and timings of liabilities
arising from the Gulf of Mexico oil spill.
The directors of BP p.l.c. are listed on pages 61-65 of BP
Annual Report and Form 20-F 2013.
By order of the board
Bob Dudley Brian Gilvary
Group Chief Executive Chief Financial Officer
28 July 2014 28 July 2014
Top of page 12
Independent review report to BP p.l.c.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2014 which comprises the group income
statement, group statement of comprehensive income, group statement
of changes in equity, group balance sheet, condensed group cash
flow statement, and Notes 1 to 11. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board for use in the United Kingdom (ISRE 2410).
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our work, for
this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB) and IFRS as adopted by the
European Union (EU). The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as issued by the IASB and as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with ISRE 2410. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2014 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as issued by the IASB and
as adopted by the EU and the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Emphasis of matter - significant uncertainty over provisions and
contingent liabilities related to the Gulf of Mexico oil spill
In forming our review conclusion we have considered the adequacy
of the disclosures made in Note 2 to the condensed financial
statements concerning the provisions, future expenditures for which
reliable estimates cannot be made and other contingencies related
to the Gulf of Mexico oil spill. The total amounts that will
ultimately be paid by BP in relation to all obligations relating to
the incident are subject to significant uncertainty and the
ultimate exposure and cost to BP will be dependent on many factors.
Furthermore, significant uncertainty exists in relation to the
amount of claims that will become payable by BP, the amount of
fines that will ultimately be levied on BP (including any
determination of BP's culpability based on any findings of
negligence, gross negligence or wilful misconduct), the outcome of
litigation, and any costs arising from any longer-term
environmental consequences of the oil spill, which will also impact
upon the ultimate cost for BP. Our review conclusion is not
qualified in respect of these matters.
Ernst & Young LLP
London
28 July 2014
The maintenance and integrity of the BP p.l.c. website are the
responsibility of the directors; the review work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial information since it was
initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Top of page 13
Financial statements
Group income statement
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Sales and other operating revenues
94,711 91,710 93,957 (Note 5) 185,667 188,818
Earnings from joint ventures -
102 115 155 after interest and tax 270 227
Earnings from associates - after
448 783 1,228 interest and tax 2,011 732
207 331 157 Interest and other income 488 364
Gains on sale of businesses and
236 49 330 fixed assets 379 12,777
======== ======== ======== ========================================= ======== ========
95,704 92,988 95,827 Total revenues and other income 188,815 202,918
75,127 71,468 74,536 Purchases 146,004 146,788
7,126 6,831 6,980 Production and manufacturing expenses 13,811 13,994
Production and similar taxes (Note
1,672 986 816 6) 1,802 3,667
3,162 3,590 3,751 Depreciation, depletion and amortization 7,341 6,359
Impairment and losses on sale of
businesses and
610 426 774 fixed assets 1,200 720
434 948 389 Exploration expense 1,337 756
Distribution and administration
3,223 3,200 3,110 expenses 6,310 6,177
(135) (98) (32) Fair value gain on embedded derivatives (130) (166)
======== ======== ======== ========================================= ======== ========
4,485 5,637 5,503 Profit before interest and taxation 11,140 24,623
252 287 277 Finance costs 564 534
Net finance expense relating to
pensions and other
117 80 79 post-retirement benefits 159 239
======== ======== ======== ========================================= ======== ========
4,116 5,270 5,147 Profit before taxation 10,417 23,850
1,990 1,651 1,714 Taxation 3,365 4,782
======== ======== ======== ========================================= ======== ========
2,126 3,619 3,433 Profit for the period 7,052 19,068
======== ======== ======== ========================================= ======== ========
Attributable to
2,042 3,528 3,369 BP shareholders 6,897 18,905
84 91 64 Non-controlling interests 155 163
======== ======== ======== ========================================= ======== ========
2,126 3,619 3,433 7,052 19,068
======== ======== ======== ========================================= ======== ========
Earnings per share (Note 7)
Profit for the period attributable
to BP shareholders
Per ordinary share (cents)
10.73 19.09 18.26 Basic 37.35 99.07
10.68 18.97 18.15 Diluted 37.11 98.53
Per ADS (dollars)
0.64 1.15 1.10 Basic 2.24 5.94
0.64 1.14 1.09 Diluted 2.23 5.91
======== ======== ======== ========================================= ======== ========
Top of page 14
Financial statements (continued)
Group statement of comprehensive income
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ========
2,126 3,619 3,433 Profit for the period 7,052 19,068
======== ======== ======== ============================================= ====== ========
Other comprehensive income
Items that may be reclassified
subsequently to profit
or loss
(1,506) (913) 1,005 Currency translation differences 92 (2,093)
Available-for-sale investments
- (3) 2 marked to market (1) (172)
Available-for-sale investments
reclassified to the
- - 1 income statement 1 (523)
(25) 23 77 Cash flow hedges marked to market(a) 100 (2,166)
Cash flow hedges reclassified
(1) (20) (49) to the income statement (69) (1)
Cash flow hedges reclassified
12 (1) (2) to the balance sheet (3) 15
Share of items relating to equity-accounted
entities,
(88) (73) 51 net of tax (22) (55)
Income tax relating to items
26 - 9 that may be reclassified 9 195
======== ======== ======== ============================================= ====== ========
(1,582) (987) 1,094 107 (4,800)
======== ======== ======== ============================================= ====== ========
Items that will not be reclassified
to profit or loss
Remeasurements of the net pension
and other post-
retirement benefit liability
2,206 (936) 222 or asset (714) 2,156
Share of items relating to equity-accounted
entities,
- 5 - net of tax 5 -
Income tax relating to items
(732) 294 (73) that will not be reclassified 221 (731)
======== ======== ======== ============================================= ====== ========
1,474 (637) 149 (488) 1,425
======== ======== ======== ============================================= ====== ========
(108) (1,624) 1,243 Other comprehensive income (381) (3,375)
======== ======== ======== ============================================= ====== ========
2,018 1,995 4,676 Total comprehensive income 6,671 15,693
======== ======== ======== ============================================= ====== ========
Attributable to
1,956 1,903 4,606 BP shareholders 6,509 15,556
62 92 70 Non-controlling interests 162 137
======== ======== ======== ============================================= ====== ========
2,018 1,995 4,676 6,671 15,693
======== ======== ======== ============================================= ====== ========
(a) First half 2013 includes $2,061 million loss relating to the contracts
to acquire Rosneft shares.
Top of page 15
Financial statements (continued)
Group statement of changes in equity
BP
shareholders' Non-controlling Total
$ million equity interests equity
============== ================ ========
At 1 January 2014 129,302 1,105 130,407
======================================== ============== ================ ========
Total comprehensive income 6,509 162 6,671
Dividends (2,999) (153) (3,152)
Repurchases of ordinary share capital (1,527) - (1,527)
Share-based payments, net of tax 576 - 576
Transactions involving non-controlling
interests - 3 3
======================================== ============== ================ ========
At 30 June 2014 131,861 1,117 132,978
======================================== ============== ================ ========
BP
shareholders' Non-controlling Total
$ million equity interests equity
============== ================ ========
At 1 January 2013 118,546 1,206 119,752
======================================== ============== ================ ========
Total comprehensive income 15,556 137 15,693
Dividends (3,020) (236) (3,256)
Repurchases of ordinary share capital (2,469) - (2,469)
Share-based payments, net of tax 378 - 378
Transactions involving non-controlling
interests - 35 35
======================================== ============== ================ ========
At 30 June 2013 128,991 1,142 130,133
======================================== ============== ================ ========
Top of page 16
Financial statements (continued)
Group balance sheet
30 June 31 December
$ million 2014 2013
======== ============
Non-current assets
Property, plant and equipment 135,854 133,690
Goodwill 12,197 12,181
Intangible assets 21,931 22,039
Investments in joint ventures 9,173 9,199
Investments in associates 17,370 16,636
Other investments 1,270 1,565
======================================================== ======== ============
Fixed assets 197,795 195,310
Loans 681 763
Trade and other receivables 5,782 5,985
Derivative financial instruments 3,609 3,509
Prepayments 983 922
Deferred tax assets 1,308 985
Defined benefit pension plan surpluses 978 1,376
======================================================== ======== ============
211,136 208,850
======================================================== ======== ============
Current assets
Loans 334 216
Inventories 29,442 29,231
Trade and other receivables 40,056 39,831
Derivative financial instruments 2,852 2,675
Prepayments 1,630 1,388
Current tax receivable 648 512
Other investments 376 467
Cash and cash equivalents 27,506 22,520
======================================================== ======== ============
102,844 96,840
Assets classified as held for sale (Note 3) 1,475 -
======================================================== ======== ============
104,319 96,840
======================================================== ======== ============
Total assets 315,455 305,690
======================================================== ======== ============
Current liabilities
Trade and other payables 50,025 47,159
Derivative financial instruments 2,323 2,322
Accruals 7,245 8,960
Finance debt 7,570 7,381
Current tax payable 2,386 1,945
Provisions 4,454 5,045
======================================================== ======== ============
74,003 72,812
Liabilities directly associated with assets classified 428 -
as held for sale (Note 3)
======================================================== ======== ============
74,431 72,812
======================================================== ======== ============
Non-current liabilities
Other payables 3,652 4,756
Derivative financial instruments 1,765 2,225
Accruals 807 547
Finance debt 45,336 40,811
Deferred tax liabilities 18,328 17,439
Provisions 28,204 26,915
Defined benefit pension plan and other post-retirement
benefit plan deficits 9,954 9,778
======================================================== ======== ============
108,046 102,471
======================================================== ======== ============
Total liabilities 182,477 175,283
======================================================== ======== ============
Net assets 132,978 130,407
======================================================== ======== ============
Equity
BP shareholders' equity 131,861 129,302
Non-controlling interests 1,117 1,105
======================================================== ======== ============
132,978 130,407
======================================================== ======== ============
Top of page 17
Financial statements (continued)
Condensed group cash flow statement
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ========= =========
Operating activities
4,116 5,270 5,147 Profit before taxation 10,417 23,850
Adjustments to reconcile profit
before taxation to net
cash provided by operating activities
Depreciation, depletion and amortization
and
exploration expenditure written
3,453 4,422 3,953 off 8,375 6,822
Impairment and (gain) loss on
sale of businesses and
374 377 444 fixed assets 821 (12,057)
Earnings from equity-accounted
entities, less
(254) (684) (1,080) dividends received (1,764) (454)
Net charge for interest and other
finance expense,
21 170 (3) less net interest paid 167 193
175 106 178 Share-based payments 284 221
Net operating charge for pensions
and other post-
retirement benefits, less contributions
and benefit
(86) (102) (105) payments for unfunded plans (207) (370)
Net charge for provisions, less
1,308 (193) 56 payments (137) 1,505
Movements in inventories and other
current and
(1,796) (315) 654 non-current assets and liabilities(a) 339 (7,141)
(1,924) (820) (1,367) Income taxes paid (2,187) (3,215)
======== ======== ======== ============================================ ========= =========
Net cash provided by operating
5,387 8,231 7,877 activities 16,108 9,354
======== ======== ======== ============================================ ========= =========
Investing activities
(6,111) (5,891) (5,499) Capital expenditure (11,390) (11,840)
- (10) - Acquisitions, net of cash acquired (10) -
(47) (33) (3) Investment in joint ventures (36) (98)
(8) (88) (47) Investment in associates (135) (4,891)
Proceeds from disposal of fixed
656 978 227 assets 1,205 17,436
Proceeds from disposal of businesses,
net of
2,284 26 571 cash disposed 597 3,785
68 17 53 Proceeds from loan repayments 70 90
======== ======== ======== ============================================ ========= =========
Net cash provided by (used in)
(3,158) (5,001) (4,698) investing activities (9,699) 4,482
======== ======== ======== ============================================ ========= =========
Financing activities
(1,890) (1,726) (447) Net issue (repurchase) of shares (2,173) (1,835)
3,039 5,979 856 Proceeds from long-term financing 6,835 3,102
(891) (1,237) (1,720) Repayments of long-term financing (2,957) (1,179)
Net increase (decrease) in short-term
(382) 77 (57) debt 20 (1,873)
Dividends
(1,398) (1,427) (1,572) paid - BP shareholders (2,999) (3,020)
(85) (13) (140) - non-controllinginterests (153) (116)
======== ======== ======== ============ ============================== ========= =========
Net cash provided by (used in)
(1,607) 1,653 (3,080) financing activities (1,427) (4,921)
======== ======== ======== ============================================ ========= =========
Currency translation differences
relating to cash and
12 (45) 49 cash equivalents 4 (237)
======== ======== ======== ============================================ ========= =========
Increase (decrease) in cash and
634 4,838 148 cash equivalents 4,986 8,678
======== ======== ======== ============================================ ========= =========
Cash and cash equivalents at beginning
27,679 22,520 27,358 of period 22,520 19,635
Cash and cash equivalents at end
28,313 27,358 27,506 of period 27,506 28,313
======== ======== ======== ============================================ ========= =========
(a) Includes
509 (74) (233) Inventory holding (gains) losses (307) 102
(135) (98) (32) Fair value gain on embedded derivatives (130) (166)
Movements related to the Gulf of
(1,430) (578) (33) Mexico oil spill response (611) (2,258)
======== ====== ====== ======================================== ====== ========
Inventory holding gains and losses and fair value gains on embedded
derivatives are also included within profit before taxation. See
Note 2 for further information on the cash flow impacts of the Gulf
of Mexico oil spill.
Top of page 18
Financial statements (continued)
Notes
1. Basis of preparation
The interim financial information included in this report has
been prepared in accordance with IAS 34 'Interim Financial
Reporting'.
The results for the interim periods are unaudited and, in the
opinion of management, include all adjustments necessary for a fair
presentation of the results for each period. All such adjustments
are of a normal recurring nature. This report should be read in
conjunction with the consolidated financial statements and related
notes for the year ended 31 December 2013 included in the BP Annual
Report and Form 20-F 2013.
After making enquiries, the directors have a reasonable
expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, the
directors continue to adopt the going concern basis of accounting
in preparing the interim financial statements.
BP prepares its consolidated financial statements included
within BP Annual Report and Form 20-F on the basis of International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), IFRS as adopted by the European
Union (EU) and in accordance with the provisions of the UK
Companies Act 2006. IFRS as adopted by the EU differs in certain
respects from IFRS as issued by the IASB; however, the differences
have no impact on the group's consolidated financial statements for
the periods presented.
The financial information presented herein has been prepared in
accordance with the accounting policies expected to be used in
preparing BP Annual Report and Form 20-F 2014, which do not differ
significantly from those used in BP Annual Report and Form 20-F
2013.
In BP Annual Report and Form 20-F 2013 we disclosed a
significant estimate or judgement in relation to exploration and
appraisal expenditure which is capitalized and is subject to
regular technical, commercial and management review on at least an
annual basis to confirm the continued intent to develop, or
otherwise extract value from, the discovery. Under IFRS 6
'Exploration for and Evaluation of Mineral Resources', one of the
facts and circumstances which indicates that an entity should test
such assets for impairment, is that the period for which the entity
has a right to explore in the specific area has expired during the
period or will expire in the near future, and is not expected to be
renewed.
BP has leases in the Gulf of Mexico making up a prospect, some
with terms which were scheduled to expire at the end of last year
and some with terms which are scheduled to expire in the near
future. A significant proportion of our capitalized exploration and
appraisal costs in the Gulf of Mexico relate to this prospect. This
prospect requires the development of subsea technology to ensure
that the hydrocarbons can be extracted safely. BP is in
correspondence with the US Bureau of Safety and Environmental
Enforcement in relation to seeking extension of these leases so
that the discovered hydrocarbons can be developed. BP remains
committed to developing this prospect and expects that the lease
terms will be extended and therefore continues to carry the
capitalized costs on its balance sheet. See also Notes 10 and 16 in
BP Annual Report and Form 20-F 2013 - Financial statements.
2. Gulf of Mexico oil spill
(a) Overview
As a consequence of the Gulf of Mexico oil spill, BP continues
to incur various costs and has also recognized liabilities for
future costs. The information presented in this note should be read
in conjunction with BP Annual Report and Form 20-F 2013 - Financial
statements - Note 2 and Legal proceedings on pages 257-265 and page
42 of this report.
The group income statement includes a pre-tax charge of $260
million for the second quarter and $299 million for the first half
of 2014 in relation to the Gulf of Mexico oil spill. The
second-quarter charge reflects an increase in the provision for
legal costs and the ongoing costs of the Gulf Coast Restoration
Organization. The cumulative pre-tax income statement charge since
the incident, in April 2010, amounts to $42,975 million.
The cumulative income statement charge does not include amounts
for obligations that BP considers are not possible, at this time,
to measure reliably. For further information, including
developments in relation to the interpretation of business economic
loss claims under the Plaintiffs' Steering Committee (PSC)
settlement, see Provisions below.
The total amounts that will ultimately be paid by BP in relation
to all the obligations relating to the incident are subject to
significant uncertainty and the ultimate exposure and cost to BP
will be dependent on many factors, as discussed under Provisions
and contingent liabilities below, including in relation to any new
information or future developments. These could have a material
impact on our consolidated financial position, results and cash
flows. The risks associated with the incident could also heighten
the impact of the other risks to which the group is exposed as
further described under Principal risks and uncertainties on page
35.
Top of page 19
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The amounts set out below reflect the impacts on the financial
statements of the Gulf of Mexico oil spill for the periods
presented. The income statement, balance sheet and cash flow
statement impacts are included within the relevant line items in
those statements as set out below.
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
Income statement
Production and manufacturing
199 29 251 expenses 280 221
======== ======== ======== ============================== ====== ======
Profit (loss) before interest
(199) (29) (251) and taxation (280) (221)
10 10 9 Finance costs 19 20
======== ======== ======== ============================== ====== ======
(209) (39) (260) Profit (loss) before taxation (299) (241)
42 10 44 Taxation 54 37
======== ======== ======== ============================== ====== ======
(167) (29) (216) Profit (loss) for the period (245) (204)
======== ======== ======== ============================== ====== ======
$ million 30 June 2014 31 December
2013
============= ============
Balance sheet
Current assets
Trade and other receivables 1,944 2,457
Current liabilities
Trade and other payables (838) (1,030)
Provisions (2,345) (2,951)
====================================== ============= ============
Net current assets (liabilities) (1,239) (1,524)
====================================== ============= ============
Non-current assets
Other receivables 2,569 2,442
Non-current liabilities
Other payables (2,397) (2,986)
Accruals (170) -
Provisions (6,653) (6,395)
Deferred tax 2,285 2,748
====================================== ============= ============
Net non-current assets (liabilities) (4,366) (4,191)
====================================== ============= ============
Net assets (liabilities) (5,605) (5,715)
====================================== ============= ============
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ========
Cash flow statement - Operating
activities
(209) (39) (260) Profit (loss) before taxation (299) (241)
Adjustments to reconcile profit
(loss) before
taxation to net cash provided
by
operating activities
Net charge for interest and
other finance
expense, less net interest
10 10 9 paid 19 20
Net charge for provisions,
1,390 (97) 116 less payments 19 1,694
Movements in inventories and
other current
and non-current assets and
(1,430) (578) (33) liabilities (611) (2,258)
======== ======== ======== ================================ ====== ========
(239) (704) (168) Pre-tax cash flows (872) (785)
======== ======== ======== ================================ ====== ========
Net cash from operating activities relating to the Gulf of
Mexico oil spill, on a post-tax basis, amounted to an inflow of
$229 million and outflow of $355 million in the second quarter and
first half of 2014 respectively. For the same periods in 2013, the
amounts were an inflow of $142 million and an outflow of $189
million respectively.
Trust fund
BP established the Deepwater Horizon Oil Spill Trust (the
Trust), funded in the amount of $20 billion, to satisfy legitimate
individual and business claims, state and local government claims
resolved by BP, final judgments and settlements, state and local
response costs, and natural resource damages and related costs.
Fines and penalties are not covered by the trust fund.
Top of page 20
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The funding of the Trust was completed in the fourth quarter of
2012. The obligation to fund the $20-billion trust fund, adjusted
to take account of the time value of money, was recognized in full
in 2010 and charged to the income statement. An asset has been
recognized representing BP's right to receive reimbursement from
the trust fund. This is the portion of the estimated future
expenditure provided for that will be settled by payments from the
trust fund.
The table below shows movements in the reimbursement asset
during the period to 30 June 2014. For more information about the
movement in provisions for items covered by the trust fund, see
Provisions below. At 30 June 2014, $4,487 million of the
provisions, and $26 million of the payables are eligible to be paid
from the Trust. The reimbursement asset is recorded within other
receivables on the balance sheet apportioned between current and
non-current elements.
Second First
quarter half
$ million 2014 2014
======== ======
Opening balance 4,730 4,899
Net increase in provision for items covered by
the trust fund 2 6
Amounts paid directly by the trust fund (219) (392)
=================================================== ======== ======
At 30 June 2014 4,513 4,513
=================================================== ======== ======
Of which - current 1,944 1,944
- non-current 2,569 2,569
================================================== ======== ======
Increases in estimated future expenditure that will be covered
by the trust fund up to an aggregate of $20 billion have no net
income statement effect as a reimbursement asset is also
recognized, as described above. As at 30 June 2014, the cumulative
charges, and the associated reimbursement asset recognized,
amounted to $19,344 million. Thus, a further $656 million could be
charged in subsequent periods for items covered by the trust fund
with no net impact on the income statement. Additional liabilities
in excess of this amount regarding claims under the Oil Pollution
Act of 1990 (OPA 90), claims that are currently administered by the
Deepwater Horizon Court Supervised Settlement Program (DHCSSP), or
otherwise, including the various claims described in Legal
proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013
and page 42 of this report, would be expensed to the income
statement. Information on those items that currently cannot be
estimated reliably is provided under Provisions and contingent
liabilities below.
As at 30 June 2014, the aggregate cash balances in the Trust and
the associated qualifying settlement funds amounted to $6.3
billion, including $1.1 billion remaining in the seafood
compensation fund which has yet to be distributed and $0.9 billion
held for natural resource damage early restoration. Should the cash
balances in the trust fund not be sufficient, payments in respect
of legitimate claims and other costs will be made directly by
BP.
(b) Provisions and contingent liabilities
BP has recorded certain provisions and disclosed certain
contingent liabilities as a consequence of the Gulf of Mexico oil
spill. These are described below and in more detail in BP Annual
Report and Form 20-F 2013 - Financial statements - Note 2.
Provisions
BP has recorded provisions relating to the Gulf of Mexico oil
spill in relation to environmental expenditure, litigation and
claims, and Clean Water Act penalties. Movements in each class of
provision during the second quarter and first half are presented in
the tables below.
Litigation Clean
and Water Act
$ million Environmental claims penalties Total
============== =========== ========== ======
At 1 April 2014 1,627 3,939 3,510 9,076
Increase in provision - items
not covered by
the trust fund - 224 - 224
Net increase in provision
- items
covered by the trust fund - 2 - 2
Utilization - paid by BP (16) (94) - (110)
- paid by the trust
fund (18) (176) - (194)
================================== ============== =========== ========== ======
At 30 June 2014 1,593 3,895 3,510 8,998
=================================== ============== =========== ========== ======
Of which - current 747 1,598 - 2,345
- non-current 846 2,297 3,510 6,653
================================== ============== =========== ========== ======
Top of page 21
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Litigation Clean
and Water Act
Environmental claims penalties Total
============== =========== ========== =======
$ million
At 1 January 2014 1,679 4,157 3,510 9,346
Increase (decrease) in provision
- items not
covered by the trust fund - 224 - 224
Net increase in provision
- items covered by
the trust fund - 6 - 6
Utilization - paid by BP (44) (167) - (211)
- paid by the trust
fund (42) (325) - (367)
============== =========== ========== =======
At 30 June 2014 1,593 3,895 3,510 8,998
====================================== ============== =========== ========== =======
Environmental
The environmental provision includes amounts for BP's commitment
to fund the Gulf of Mexico Research Initiative, estimated natural
resource damage assessment costs and early natural resource damage
restoration projects under the $1-billion framework agreement with
natural resource trustees for the US and five Gulf coast states.
Until the size, location and duration of the impact is assessed, it
is not possible to estimate reliably the amounts or timing of any
further natural resource damages claims, therefore no additional
amounts have been provided for these items and they are disclosed
as a contingent liability.
Litigation and claims
The litigation and claims provision includes amounts that can be
estimated reliably for the future cost of settling claims by
individuals and businesses for damage to real or personal property,
lost profits or impairment of earning capacity and loss of
subsistence use of natural resources (Individual and Business
Claims), and claims by state and local government entities for
removal costs, damage to real or personal property, loss of
government revenue and increased public services costs (State and
Local Claims) under OPA 90 and other legislation, except as
described under Contingent liabilitiesbelow. Claims administration
costs and legal costs have also been provided for.
BP has provided for its best estimate of the cost associated
with the PSC settlement agreements with the exception of the cost
of business economic loss claims. As disclosed in BP Annual Report
and Form 20-F 2013, as part of its monitoring of payments made by
the DHCSSP, BP identified multiple business economic loss claim
determinations that appeared to result from an interpretation of
the Economic and Property Damages Settlement Agreement (EPD
Settlement Agreement) by the claims administrator that BP believes
was incorrect. See Legal proceedings on pages 257-265 of BP Annual
Report and Form 20-F 2013 and page 42 of this report for further
details on the settlements with the PSC and related matters.
Until the uncertainties described below are resolved, management
is unable to estimate reliably the value and volume of future
business economic loss claims and whether, and to what extent,
received or processed but unpaid business economic loss claims will
be paid. Firstly, the inherent uncertainty as to the interpretation
of the EPD Settlement Agreement in respect of causation issues will
continue until the issue of causation and the requirements for
class membership under the EPD Settlement Agreement are resolved on
appeal, if an appeal to the Supreme Court is allowed, and until the
impact of any new policies and procedures implemented in response
to these issues and of the revised policy for the matching of
revenue and expenses for business economic loss claims on the value
and volume of business economic loss claims becomes clear.
Secondly, uncertainty arises from the lack of sufficient claims
data under the DHCSSP from which to extrapolate any reliable trends
- the number of business economic loss claims received and the
average amounts paid in respect of such claims prior to the
district court's injunction were higher than previously assumed by
BP. This inability to extrapolate any reliable trends may or may
not continue once claims have been assessed against the revised
policy for the matching of revenue and expenses for business
economic loss claims (implemented in May 2014) and uncertainties
concerning interpretation of the EPD Settlement Agreement described
above have been resolved. Reassessment of existing claims by the
DHCSSP under the revised matching policy is ongoing. The PSC has
filed a motion seeking to amend the revised matching policy.
Thirdly, the ultimate deadline for filing business economic loss
claims is uncertain as claims can be brought at any point up to six
months after the date on which all relevant appeals are concluded
and the date when all relevant appeals will be concluded is not yet
known. Management believes, therefore, that no reliable estimate
can currently be made of any business economic loss claims not yet
received, processed and paid by the DHCSSP. A provision for
business economic loss claims will be established when a reliable
estimate can be made of the liability.
Top of page 22
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The current estimate for the total cost of those elements of the
PSC settlement that BP considers can be reliably estimated is $9.2
billion. The DHCSSP has issued eligibility notices, most of which
are disputed by BP, in respect of business economic loss claims of
$987 million which have not yet been paid. The majority of these
claims are being re-assessed using the new matching policy.
Furthermore, a significant number of business economic loss claims
have been received but have not yet been processed, and further
claims are likely to be received. The total cost of the PSC
settlement is likely to be significantly higher than the amount
recognized to date of $9.2 billion because the current estimate
does not reflect business economic loss claims not yet received,
processed and paid.
The provision recognized for litigation and claims includes an
estimate for State and Local Claims. Although the provision
recognized is BP\'s current reliable best estimate of the amount
required to settle these obligations, significant uncertainty
exists in relation to the outcome of any litigation proceedings and
the amount of claims that will become payable by BP. See Legal
proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013
and Contingent liabilities below for further details.
Significant uncertainties exist in relation to the amount of
claims that are to be paid and will become payable, including
claims payable under the DHCSSP and State and Local Claims. There
is significant uncertainty in relation to the amounts that
ultimately will be paid in relation to current claims, and the
number, type and amounts payable for claims not yet reported as
described above and in Legal proceedings on page 42 and the
outcomes of any further litigation including in relation to
potential opt-outs from the PSC settlement or otherwise. There is
also uncertainty as to the cost of administering the claims process
under the DHCSSP.
Clean Water Act penalties
A provision was recognized in 2010 for the estimated civil
penalties for strict liability under the Clean Water Act, which are
based on a specified range per barrel of oil released. No
adjustments have been made subsequently to this estimate. The
penalty rate per barrel used to calculate the provision is based
upon the company's conclusion, amongst other things, that it did
not act with gross negligence or engage in wilful misconduct. The
amount and timing of the amount to be paid ultimately is subject to
significant uncertainty since it will depend on what is determined
by the court in the federal multi-district litigation proceedings
in New Orleans (MDL 2179) as to negligence, gross negligence or
wilful misconduct, the volume of oil spilled and the application of
statutory penalty factors. The trial court could issue its decision
on the first two phases of the trial at any time and has scheduled
a trial on the subsequent phase regarding the application of
statutory penalty factors starting on 20 January 2015. The court
has wide discretion in its determination as to whether a
defendant's conduct involved negligence or gross negligence as well
as in its determinations on the volume of oil spilled and the
application of statutory penalty factors. See BP Annual Report and
Form 20-F 2013 - Financial statements - Note 2 for further details
and Legal proceedings on pages 257-265 and on page 42 of this
report.
Provision movements and analysis of income statement charge
An increase in the provision for the estimated cost of the
settlement with the PSC of $32 million for the second quarter and
$36 million for the first half was recognized, partially offset by
other provision reductions. The second-quarter income statement
charge reflects an increase in the provision for legal costs and
the ongoing costs of the Gulf Coast Restoration Organization. The
total charge in the income statement is analysed in the table
below.
Second First Cumulative
quarter half since
the
$ million 2014 2014 incident
====== ===========
Environmental costs - - 3,031
Spill response costs - - 14,304
Litigation and claims costs 226 230 25,873
Clean Water Act penalties - amount provided - - 3,510
Other costs charged directly to the income
statement 27 56 1,199
Recoveries credited to the income statement - - (5,681)
Charge (credit) related to the trust
fund (2) (6) 519
Other costs of the trust fund - - 8
================================================ ======== ====== ===========
Loss before interest and taxation 251 280 42,763
Finance
costs - related to the trust fund - - 137
- not related to the trust fund 9 19 75
=============================================== ======== ====== ===========
Loss before taxation 260 299 42,975
================================================ ======== ====== ===========
Further information on provisions is provided in BP Annual
Report and Form 20-F 2013 - Financial statements - Note 2.
Top of page 23
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Contingent liabilities
BP considers that it is not possible, at this time, to measure
reliably other obligations arising from the incident, namely any
obligation in relation to natural resource damages claims or
associated legal costs (except for the estimated costs of the
assessment phase and the costs relating to early restoration
agreements referred to above), claims asserted in civil litigation
including any further litigation through excluded parties from the
PSC settlement including as set out in Legal proceedings on pages
257-265 of BP Annual Report and Form 20-F 2013 and page 42 of this
report, the cost of business economic loss claims under the PSC
settlement not yet received, processed and paid by the DHCSSP, any
further obligation that may arise from state and local government
submissions under OPA 90, any obligation that may arise from
securities-related litigation, and any obligation in relation to
other potential private or governmental litigation, fines or
penalties (except for the Clean Water Act civil penalty claims and
State and Local Claims as described above under Provisions), nor is
it practicable to estimate their magnitude or possible timing of
payment.
The magnitude and timing of all possible obligations in relation
to the Gulf of Mexico oil spill continue to be subject to a very
high degree of uncertainty.
See also BP Annual Report and Form 20-F 2013 - Financial
statements - Note 2.
3. Non-current assets held for sale
On 22 April 2014, BP announced that it had reached agreement to
sell its interests in the Northstar and Endicott oilfields and 50%
of its interests in each of the Milne Point and Liberty oilfields
on the North Slope of Alaska to Hilcorp Alaska LLC, a subsidiary of
Hilcorp Energy for $1.25 billion plus an additional carry of up to
$250 million if the Liberty field is developed. The sale also
includes BP's interests in the oil and gas pipelines associated
with these fields. These assets, amounting to $1,475 million, and
associated liabilities of $428 million, have been classified as
held for sale in the group balance sheet at 30 June 2014. The sale
is expected to be complete by the end of the year, subject to state
and federal regulatory approval.
Top of page 24
Financial statements (continued)
Notes
4. Analysis of replacement cost profit before interest and tax and reconciliation to
profit before taxation
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======= ========
4,400 4,659 4,049 Upstream 8,708 9,962
1,016 794 933 Downstream 1,727 2,663
- - - TNK-BP(a) - 12,500
218 518 1,024 Rosneft(b) 1,542 303
(573) (497) (434) Other businesses and corporate (931) (1,040)
======== ======== ======== ================================== ======= ========
5,061 5,474 5,572 11,046 24,388
(199) (29) (251) Gulf of Mexico oil spill response (280) (221)
Consolidation adjustment -
129 90 (76) UPII* 14 556
======== ======== ======== ================================== ======= ========
RC profit before interest
4,991 5,535 5,245 and tax 10,780 24,723
Inventory holding gains (losses)*
(4) (6) (1) Upstream (7) (6)
(515) 77 233 Downstream 310 (107)
13 31 26 Rosneft (net of tax) 57 13
======== ======== ======== ================================== ======= ========
Profit before interest and
4,485 5,637 5,503 tax 11,140 24,623
252 287 277 Finance costs 564 534
Net finance expense relating
to pensions
and other post-retirement
117 80 79 benefits 159 239
======== ======== ======== ================================== ======= ========
4,116 5,270 5,147 Profit before taxation 10,417 23,850
======== ======== ======== ================================== ======= ========
RC profit before interest
and tax*(c)
1,156 1,125 1,643 US 2,768 2,883
3,835 4,410 3,602 Non-US 8,012 21,840
======== ======== ======== ================================== ======= ========
4,991 5,535 5,245 10,780 24,723
======== ======== ======== ================================== ======= ========
(a) BP ceased equity accounting for its share of TNK-BP's earnings
from 22 October 2012. First half 2013 includes the gain arising
on disposal of BP's interest in TNK-BP.
(b) BP's investment in Rosneft is accounted under the equity method
from 21 March 2013. See Rosneft on page 8 for further information.
(c) A minor amendment has been made to the analysis by region for
the comparative periods in 2013.
Top of page 25
Financial statements (continued)
Notes
5. Sales and other operating revenues
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
By segment
16,418 17,006 16,739 Upstream 33,745 34,636
88,348 84,298 86,871 Downstream 171,169 175,132
414 431 412 Other businesses and corporate 843 834
======== ======== ======== ================================ ======== ========
105,180 101,735 104,022 205,757 210,602
======== ======== ======== ================================ ======== ========
Less: sales and other operating
revenues
between segments
10,116 9,217 9,729 Upstream 18,946 20,977
109 562 152 Downstream 714 349
244 246 184 Other businesses and corporate 430 458
======== ======== ======== ================================ ======== ========
10,469 10,025 10,065 20,090 21,784
======== ======== ======== ================================ ======== ========
Third party sales and other
operating revenues
6,302 7,789 7,010 Upstream 14,799 13,659
88,239 83,736 86,719 Downstream 170,455 174,783
170 185 228 Other businesses and corporate 413 376
======== ======== ======== ================================ ======== ========
Total third party sales and
other operating
94,711 91,710 93,957 revenues 185,667 188,818
======== ======== ======== ================================ ======== ========
By geographical area(a)
34,536 34,825 35,507 US 70,332 69,731
69,919 66,305 67,303 Non-US 133,608 138,286
======== ======== ======== ================================ ======== ========
104,455 101,130 102,810 203,940 208,017
Less: sales and other operating
revenues
9,744 9,420 8,853 between areas 18,273 19,199
======== ======== ======== ================================ ======== ========
94,711 91,710 93,957 185,667 188,818
======== ======== ======== ================================ ======== ========
(a) A minor amendment has been made to the analysis by region for
the comparative periods in 2013.
6. Production and similar taxes
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
218 279 215 US 494 590
1,454 707 601 Non-US 1,308 3,077
======== ======== ======== ========== ====== ======
1,672 986 816 1,802 3,667
======== ======== ======== ========== ====== ======
Top of page 26
Financial statements (continued)
Notes
7. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated
by dividing the profit for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the period. During the quarter the company
repurchased 53 million ordinary shares at a cost of $450 million as
part of the share repurchase programme announced on 22 March 2013.
The number of shares in issue is reduced when shares are
repurchased, but is not reduced in respect of the period-end
commitment to repurchase shares subsequent to the end of the
period. The calculation of EpS is performed separately for each
discrete quarterly period, and for the year-to-date period. As a
result, the sum of the discrete quarterly EpS amounts in any
particular year-to-date period may not be equal to the EpS amount
for the year-to-date period.
For the diluted EpS calculation the weighted average number of
shares outstanding during the period is adjusted for the number of
shares that are potentially issuable in connection with employee
share-based payment plans using the treasury stock method.
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
=========== =========== =========== =========== ===========
Results for the period
Profit for the period
attributable to BP
2,042 3,528 3,369 shareholders 6,897 18,905
1 - 1 Less: preference dividend 1 1
=========== =========== =========== =============================== =========== ===========
Profit attributable to
BP ordinary
2,041 3,528 3,368 shareholders 6,896 18,904
=========== =========== =========== =============================== =========== ===========
Number of shares (thousand)(a)
Basic weighted average
number of
19,015,720 18,480,826 18,440,909 shares outstanding 18,460,787 19,081,305
3,169,287 3,080,137 3,073,484 ADS equivalent 3,076,797 3,180,218
=========== =========== =========== =============================== =========== ===========
Weighted average number
of shares
outstanding used to
calculate diluted
19,108,668 18,594,518 18,556,789 earnings per share 18,580,165 19,185,749
3,184,778 3,099,086 3,092,798 ADS equivalent 3,096,694 3,197,625
=========== =========== =========== =============================== =========== ===========
18,935,572 18,457,009 18,435,266 Shares in issue at period-end 18,435,266 18,935,572
3,155,929 3,076,168 3,072,544 ADS equivalent 3,072,544 3,155,929
=========== =========== =========== =============================== =========== ===========
(a) Excludes treasury shares and the shares held by the Employee
Share Ownership Plans (ESOPs) and includes certain shares that
will be issued in the future under employee share-based payment
plans.
Top of page 27
Financial statements (continued)
Notes
8. Dividends
Dividends payable
BP today announced a dividend of 9.75 cents per ordinary share
expected to be paid in September. The corresponding amount in
sterling will be announced on 9 September 2014, calculated based on
the average of the market exchange rates for the four dealing days
commencing on 3 September 2014. Holders of American Depositary
Shares (ADSs) will receive $0.585 per ADS. The dividend is due to
be paid on 19 September 2014 to shareholders and ADS holders on the
register on 8 August 2014. A scrip dividend alternative is
available, allowing shareholders to elect to receive their dividend
in the form of new ordinary shares and ADS holders in the form of
new ADSs. Details of the second-quarter dividend and timetable are
available at bp.com/dividends and details of the scrip dividend
programme are available at bp.com/scrip.
Dividends paid
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 2014 2013
======== ======== ======== ======= =======
Dividends paid per ordinary
share
9.000 9.500 9.750 cents 19.250 18.000
5.834 5.707 5.807 pence 11.514 11.835
54.00 57.00 58.50 Dividends paid per ADS (cents) 115.50 108.00
======== ======== ======== =================================== ======= =======
Scrip dividends
43.8 40.2 26.5 Number of shares issued (millions) 66.7 58.3
Value of shares issued ($
315 326 225 million) 551 416
======== ======== ======== =================================== ======= =======
9. Net debt*
Net debt ratio*
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
46,990 53,249 52,906 Gross debt 52,906 46,990
Fair value (asset) liability
of hedges related
(460) (633) (1,001) to finance debt (1,001) (460)
======== ======== ======== ================================ ======== ========
46,530 52,616 51,905 51,905 46,530
28,313 27,358 27,506 Less: cash and cash equivalents 27,506 28,313
======== ======== ======== ================================ ======== ========
18,217 25,258 24,399 Net debt 24,399 18,217
======== ======== ======== ================================ ======== ========
130,133 130,200 132,978 Equity 132,978 130,133
12.3% 16.2% 15.5% Net debt ratio 15.5% 12.3%
======== ======== ======== ================================ ======== ========
Top of page 28
Financial statements (continued)
Notes
9. Net debt* (continued)
Analysis of changes in net debt
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======== ========
Opening balance
46,425 48,192 53,249 Finance debt 48,192 48,800
Fair value (asset) liability
of hedges
(1,083) (477) (633) related to finance debt (477) (1,700)
27,679 22,520 27,358 Less: cash and cash equivalents 22,520 19,635
======== ======== ======== ================================== ======== ========
17,663 25,195 25,258 Opening net debt 25,195 27,465
======== ======== ======== ================================== ======== ========
Closing balance
46,990 53,249 52,906 Finance debt 52,906 46,990
Fair value (asset) liability
of hedges
(460) (633) (1,001) related to finance debt (1,001) (460)
28,313 27,358 27,506 Less: cash and cash equivalents 27,506 28,313
======== ======== ======== ================================== ======== ========
18,217 25,258 24,399 Closing net debt 24,399 18,217
======== ======== ======== ================================== ======== ========
Decrease (increase) in net
(554) (63) 859 debt 796 9,248
======== ======== ======== ================================== ======== ========
Movement in cash and cash
equivalents
622 4,883 99 (excluding exchange adjustments) 4,982 8,915
Net cash outflow (inflow)
from financing
(excluding share capital
(1,766) (4,819) 921 and dividends) (3,898) (50)
Movement in finance debt relating
to
632 - - investing activities - 632
20 (118) (276) Other movements (394) (106)
======== ======== ======== ================================== ======== ========
Movement in net debt before
(492) (54) 744 exchange effects 690 9,391
(62) (9) 115 Exchange adjustments 106 (143)
======== ======== ======== ================================== ======== ========
Decrease (increase) in net
(554) (63) 859 debt 796 9,248
======== ======== ======== ================================== ======== ========
10. Inventory valuation
A provision of $468 million was held at 30 June 2014 ($410
million at 31 March 2014) to write inventories down to their net
realizable value. The net movement charged to the income statement
during the second quarter 2014 was $59 million (first quarter 2014
was a charge of $88 million and second quarter 2013 was a charge of
$35 million).
11. Statutory accounts
The financial information shown in this publication, which was
approved by the Board of Directors on 28 July 2014, is unaudited
and does not constitute statutory financial statements. BP Annual
Report and Form 20-F 2013 has been filed with the Registrar of
Companies in England and Wales. The report of the auditor on those
accounts was unqualified and contained an emphasis of matter
paragraph relating to significant uncertainty over provisions and
contingencies related to the Gulf of Mexico oil spill. The report
of the auditor on those accounts did not contain a statement under
section 498(2) or section 498(3) of the UK Companies Act 2006.
Top of page 29
Additional non-GAAP and other information
Capital expenditure and acquisitions
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======= =======
By segment
Upstream(a)
1,555 1,698 1,435 US 3,133 3,085
2,851 3,699 3,351 Non-US(b) 7,050 5,817
======== ======== ======== ========================================== ======= =======
4,406 5,397 4,786 10,183 8,902
======== ======== ======== ========================================== ======= =======
Downstream
777 206 232 US 438 1,616
397 344 378 Non-US 722 612
======== ======== ======== ========================================== ======= =======
1,174 550 610 1,160 2,228
======== ======== ======== ========================================== ======= =======
Rosneft
- - - Non-US(c) - 11,941
======== ======== ======== ========================================== ======= =======
- - - - 11,941
======== ======== ======== ========================================== ======= =======
Other businesses and corporate
68 3 13 US 16 92
172 135 204 Non-US 339 308
======== ======== ======== ========================================== ======= =======
240 138 217 355 400
======== ======== ======== ========================================== ======= =======
5,820 6,085 5,613 11,698 23,471
======== ======== ======== ========================================== ======= =======
By geographical area(a)
2,400 1,907 1,680 US 3,587 4,793
3,420 4,178 3,933 Non-US(b)(c) 8,111 18,678
======== ======== ======== ========================================== ======= =======
5,820 6,085 5,613 11,698 23,471
======== ======== ======== ========================================== ======= =======
Included above:
- 236 10 Acquisitions and asset exchanges 246 -
- 442 - Other inorganic capital expenditure(b)(c) 442 11,941
======== ======== ======== ========================================== ======= =======
(a) A minor amendment has been made to the analysis by region for the
comparative periods in 2013.
(b) First quarter and first half 2014 include $442 million relating
to the purchase of additional 3.3% equity in Shah Deniz, Azerbaijan
and the South Caucasus Pipeline.
(c) First half 2013 includes $11,941 million relating to our investment
in Rosneft.
Capital expenditure shown in the table above is presented on an
accruals basis.
Top of page 30
Additional non-GAAP and other information (continued)
Non-operating items*
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== =======
Upstream
Impairment and gain (loss) on
sale of businesses and
65 (116) (527) fixed assets (643) (37)
- - - Environmental and other provisions - -
- - - Restructuring, integration and - -
rationalization costs
Fair value gain (loss) on embedded
135 98 32 derivatives 130 166
(57) 294 (21) Other 273 (66)
======== ======== ======== =================================== ====== =======
143 276 (516) (240) 63
======== ======== ======== =================================== ====== =======
Downstream
Impairment and gain (loss) on
sale of businesses and
(310) (255) 79 fixed assets (176) (276)
- - - Environmental and other provisions - (9)
Restructuring, integration and
(2) (1) (1) rationalization costs (2) (4)
- - - Fair value gain (loss) on embedded - -
derivatives
(11) (22) (28) Other (50) (15)
======== ======== ======== =================================== ====== =======
(323) (278) 50 (228) (304)
======== ======== ======== =================================== ====== =======
TNK-BP
Impairment and gain (loss) on
sale of businesses and
- - - fixed assets - 12,500
- - - Environmental and other provisions - -
- - - Restructuring, integration and - -
rationalization costs
- - - Fair value gain (loss) on embedded - -
derivatives
- - - Other - -
======== ======== ======== =================================== ====== =======
- - - - 12,500
======== ======== ======== =================================== ====== =======
Rosneft
Impairment and gain (loss) on
sale of businesses and
- 247 - fixed assets 247 -
- - - Environmental and other provisions - -
- - - Restructuring, integration and - -
rationalization costs
- - - Fair value gain (loss) on embedded - -
derivatives
- - - Other - -
======== ======== ======== =================================== ====== =======
- 247 - 247 -
======== ======== ======== =================================== ====== =======
Other businesses and corporate
Impairment and gain (loss) on
sale of businesses and
(129) (6) 4 fixed assets (2) (130)
(6) - - Environmental and other provisions - (6)
Restructuring, integration and
- (1) - rationalization costs (1) (2)
- - - Fair value gain (loss) on embedded - -
derivatives
- (1) - Other (1) (3)
======== ======== ======== =================================== ====== =======
(135) (8) 4 (4) (141)
======== ======== ======== =================================== ====== =======
(199) (29) (251) Gulf of Mexico oil spill response (280) (221)
======== ======== ======== =================================== ====== =======
(514) 208 (713) Total before interest and taxation (505) 11,897
(10) (10) (9) Finance costs(a) (19) (20)
======== ======== ======== =================================== ====== =======
(524) 198 (722) Total before taxation (524) 11,877
158 26 241 Taxation credit (charge)(b) 267 181
======== ======== ======== =================================== ====== =======
(366) 224 (481) Total after taxation for period (257) 12,058
======== ======== ======== =================================== ====== =======
(a) Finance costs relate to the Gulf of Mexico oil spill. See Note 2
for further details.
(b) From the first quarter 2014, tax is based on statutory rates except
for non-deductible or non-taxable items. For earlier periods tax
for the Gulf of Mexico oil spill and certain impairment losses,
disposal gains and fair value gains and losses on embedded derivatives,
is based on statutory rates, except for non-deductible items; for
other items reported for consolidated subsidiaries, tax is calculated
using the group's discrete quarterly effective tax rate (adjusted
for the items noted above and equity-accounted earnings). Non-operating
items reported within the equity-accounted earnings of Rosneft are
reported net of income tax.
Top of page 31
Additional non-GAAP and other information (continued)
Non-GAAP information on fair value accounting effects
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ====== ======
Favourable (unfavourable) impact
relative to
management's measure of performance
(31) (18) (90) Upstream (108) (91)
138 61 150 Downstream 211 125
======== ======== ======== ===================================== ====== ======
107 43 60 103 34
(53) (17) (32) Taxation credit (charge)(a) (49) (23)
======== ======== ======== ===================================== ====== ======
54 26 28 54 11
======== ======== ======== ===================================== ====== ======
(a) From the first quarter 2014, tax is calculated using statutory rates.
For earlier periods tax is calculated using the group's discrete
quarterly effective tax rate (adjusted for certain non-operating
items and equity-accounted earnings).
BP uses derivative instruments to manage the economic exposure
relating to inventories above normal operating requirements of
crude oil, natural gas and petroleum products. Under IFRS, these
inventories are recorded at historic cost. The related derivative
instruments, however, are required to be recorded at fair value
with gains and losses recognized in income because hedge accounting
is either not permitted or not followed, principally due to the
impracticality of effectiveness testing requirements. Therefore,
measurement differences in relation to recognition of gains and
losses occur. Gains and losses on these inventories are not
recognized until the commodity is sold in a subsequent accounting
period. Gains and losses on the related derivative commodity
contracts are recognized in the income statement, from the time the
derivative commodity contract is entered into, on a fair value
basis using forward prices consistent with the contract
maturity.
BP enters into commodity contracts to meet certain business
requirements, such as the purchase of crude for a refinery or the
sale of BP's gas production. Under IFRS these contracts are treated
as derivatives and are required to be fair valued when they are
managed as part of a larger portfolio of similar transactions.
Gains and losses arising are recognized in the income statement
from the time the derivative commodity contract is entered
into.
IFRS requires that inventory held for trading be recorded at its
fair value using period-end spot prices whereas any related
derivative commodity instruments are required to be recorded at
values based on forward prices consistent with the contract
maturity. Depending on market conditions, these forward prices can
be either higher or lower than spot prices resulting in measurement
differences.
BP enters into contracts for pipelines and storage capacity, oil
and gas processing and liquefied natural gas (LNG) that, under
IFRS, are recorded on an accruals basis. These contracts are
risk-managed using a variety of derivative instruments, which are
fair valued under IFRS. This results in measurement differences in
relation to recognition of gains and losses.
The way that BP manages the economic exposures described above,
and measures performance internally, differs from the way these
activities are measured under IFRS. BP calculates this difference
for consolidated entities by comparing the IFRS result with
management's internal measure of performance. Under management's
internal measure of performance the inventory and capacity
contracts in question are valued based on fair value using relevant
forward prices prevailing at the end of the period, the fair values
of certain derivative instruments used to risk manage LNG and oil
and gas processing contracts are deferred to match with the
underlying exposure and the commodity contracts for business
requirements are accounted for on an accruals basis. We believe
that 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. The impacts
of fair value accounting effects, relative to management's internal
measure of performance, are shown in the table above. A
reconciliation to GAAP information is set out below.
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 $ million 2014 2013
======== ======== ======== ======= =======
Upstream
Replacement cost profit before
interest and tax adjusted
4,431 4,677 4,139 for fair value accounting effects 8,816 10,053
Impact of fair value accounting
(31) (18) (90) effects (108) (91)
======== ======== ======== ==================================== ======= =======
Replacement cost profit before
4,400 4,659 4,049 interest and tax 8,708 9,962
======== ======== ======== ==================================== ======= =======
Downstream
Replacement cost profit (loss)
before interest and tax
adjusted for fair value accounting
878 733 783 effects 1,516 2,538
Impact of fair value accounting
138 61 150 effects 211 125
======== ======== ======== ==================================== ======= =======
Replacement cost profit (loss)
1,016 794 933 before interest and tax 1,727 2,663
======== ======== ======== ==================================== ======= =======
Total group
Profit before interest and tax
adjusted for fair value
4,378 5,594 5,443 accounting effects 11,037 24,589
Impact of fair value accounting
107 43 60 effects 103 34
======== ======== ======== ==================================== ======= =======
4,485 5,637 5,503 Profit before interest and tax 11,140 24,623
======== ======== ======== ==================================== ======= =======
Top of page 32
Additional non-GAAP and other information (continued)
Realizations and marker prices
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 2014 2013
======== ======== ======== ======= =======
Average realizations(a)
Liquids* ($/bbl)
90.51 89.81 89.61 US 89.71 93.44
99.12 104.10 101.43 Europe 102.88 103.49
97.26 102.69 103.37 Rest of World 103.04 102.50
94.92 97.16 96.90 BP Average 97.03 99.08
======== ======== ======== ================================== ======= =======
Natural gas ($/mcf)
3.37 4.62 3.86 US 4.23 3.15
9.37 9.76 8.07 Europe 8.99 9.59
5.89 6.62 6.31 Rest of World 6.47 6.01
5.37 6.20 5.67 BP Average 5.94 5.45
======== ======== ======== ================================== ======= =======
Total hydrocarbons* ($/boe)
58.62 65.70 63.83 US 64.74 60.82
84.24 92.63 88.22 Europe 90.61 87.86
59.53 62.76 62.89 Rest of World 62.83 60.90
61.27 66.16 64.90 BP Average 65.53 63.23
======== ======== ======== ================================== ======= =======
Average oil marker prices ($/bbl)
102.43 108.21 109.67 Brent 108.93 107.50
94.07 98.69 103.05 West Texas Intermediate 100.90 94.17
77.43 76.98 82.66 Western Canadian Select 79.86 72.61
104.53 105.73 108.05 Alaska North Slope 106.91 107.65
99.41 100.83 100.70 Mars 100.76 104.10
101.89 106.24 107.30 Urals (NWE - cif) 106.76 106.21
51.28 54.55 57.51 Russian domestic oil 56.07 53.22
======== ======== ======== ================================== ======= =======
Average natural gas marker prices
4.10 4.95 4.68 Henry Hub gas price ($/mmBtu)(b) 4.81 3.72
UK Gas - National Balancing Point
65.60 60.28 44.81 (p/therm) 52.67 69.72
======== ======== ======== ================================== ======= =======
(a) Based on sales of consolidated subsidiaries only - this excludes
equity-accounted entities.
(b) Henry Hub First of Month Index.
Exchange rates
Second First Second First First
quarter quarter quarter half half
2013 2014 2014 2014 2013
======== ======== ======== ====== ======
US dollar/sterling average rate
1.54 1.65 1.68 for the period 1.67 1.54
US dollar/sterling period-end
1.52 1.66 1.70 rate 1.70 1.52
US dollar/euro average rate for
1.31 1.37 1.37 the period 1.37 1.31
1.30 1.38 1.36 US dollar/euro period-end rate 1.36 1.30
Rouble/US dollar average rate
31.66 35.07 34.96 for the period 35.02 31.03
32.78 35.69 33.73 Rouble/US dollar period-end rate 33.73 32.78
======== ======== ======== ================================= ====== ======
Top of page 33
Glossary
Consolidation adjustment - UPII is unrealized profit in
inventory arising on inter-segment transactions.
Fair value accounting effects are non-GAAP adjustments to our
IFRS profit relating to certain physical inventories, pipelines and
storage capacity. Management uses a fair-value basis to value these
items which, under IFRS, are accounted for on an accruals basis
with the exception of trading inventories, which are valued using
spot prices. The adjustments have the effect of aligning the
valuation basis of the physical positions with that of any
associated derivative instruments, which are required to be fair
valued under IFRS, in order to provide a more representative view
of the ultimate economic value. Further information and a
reconciliation to GAAP information is provided on page 31.
Inventory holding gains and losses represent the difference
between the cost of sales calculated using the average cost to BP
of supplies acquired during the period 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 historic 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 if an average
cost of supplies was used for the period. For this purpose, the
average cost of supplies during the period is principally
calculated on a monthly basis by dividing the total cost of
inventory acquired in the period by the number of barrels acquired.
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 below.
Hydrocarbons - Liquids and natural gas. Natural gas is converted
to oil equivalent at 5.8 billion cubic feet = 1 million
barrels.
Liquids comprise crude oil, condensate and natural gas
liquids.
Net debt and net debt ratio are 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.
Net wind generation capacity is 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 are 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. An analysis of non-operating items
by region is shown on pages 5, 7 and 9.
Organic capital expenditure excludes acquisitions, asset
exchanges, and other inorganic capital expenditure. An analysis of
capital expenditure by segment and region is shown on page 29.
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 maintenance downtime.
The Refining marker margin (RMM) is 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.
Replacement cost (RC) profit or loss reflects the replacement
cost of supplies and is arrived at by excluding inventory holding
gains and losses from profit or loss. RC profit or loss is the
measure of profit or loss for each operating segment that is
required to be disclosed 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 and that the
impact on our reported result under IFRS can be significant.
Inventory holding gains and losses vary from period to period due
principally to changes in oil prices as well as changes to
underlying inventory levels. In order for investors to understand
the operating performance of the group excluding the impact of oil
price changes on the replacement of inventories, and to make
comparisons of operating performance between reporting periods,
BP's management believes it is helpful to disclose this
measure.
Top of page 34
Glossary (continued)
Underlying production - 2014 underlying production, when
compared with 2013, is after adjusting for the effects of the Abu
Dhabi onshore concession expiry in January 2014, divestments, and
entitlement impacts in our production-sharing agreements.
Underlying RC profit or loss is RC profit or loss after
adjusting for non-operating items and fair value accounting
effects. Underlying RC profit or loss and fair value accounting
effects are not recognized GAAP measures. See pages 30 and 31 for
additional information on the non-operating items and fair value
accounting effects that are used to arrive at underlying RC profit
or loss in order to enable a full understanding of the events and
their financial impact.
BP believes that underlying RC profit or loss is a useful
measure for investors because it is a measure closely tracked by
management to evaluate BP's operating performance and to make
financial, strategic and operating decisions and because it may
help investors to understand and evaluate, in the same manner as
management, the underlying trends in BP's operational performance
on a comparable basis, period on period, by adjusting for the
effects of these non-operating items and fair value accounting
effects.
Top of page 35
Principal risks and uncertainties
We urge you to consider carefully the risks described below. The
potential impact of the occurrence, or recurrence, of any of the
risks described below could have a material adverse effect on BP's
business, financial position, results of operations, competitive
position, cash flows, prospects, liquidity, shareholder returns
and/or implementation of its strategic agenda, including the
10-point plan.
The risks are categorized against the following areas: strategic
and commercial; compliance and control; and safety and operational.
In addition, we have set out one separate risk for your attention -
the risk resulting from the 2010 Gulf of Mexico oil spill.
Gulf of Mexico oil spill
The spill has had and could continue to have a material adverse
impact on BP.
There is significant uncertainty regarding the extent and timing
of the remaining costs and liabilities relating to the 2010 Gulf of
Mexico oil spill (the Incident), the impact of the Incident on our
reputation and the resulting possible impact on our licence to
operate including our ability to access new opportunities. The
amount of claims, fines and penalties that become payable by BP
(including as a result of any potential determination of BP's
negligence or gross negligence), the outcome of litigation, the
terms of any further settlements including the amount and timing of
any payments thereunder, and any costs arising from any longer-term
environmental consequences of the Incident, will also impact upon
the ultimate cost for BP. These uncertainties are likely to
continue for a significant period and may cause our costs to
increase materially. Thus, the Incident has had, and could continue
to have, a material adverse impact on the group's business,
competitive position, financial performance, cash flows, prospects,
liquidity, shareholder returns and/or implementation of its
strategic agenda, particularly in the US. The risks associated with
the Incident could also heighten the impact of the other risks to
which the group is exposed as further described below. See, in
particular: Access and renewal; Liquidity, financial capacity and
financial, including credit, exposure; Insurance; US government
settlements and debarment; Regulatory; Liabilities and provisions;
Reporting; and Process safety, personal safety and environmental
risks below.
Strategic and commercial risks
Access and renewal - BP's future hydrocarbon production depends
on our ability to renew and reposition our portfolio. Increasing
competition for access to investment opportunities and the effects
of the Incident on our reputation and cash flows could result in
decreased access to opportunities globally.
Successful execution of our group strategy depends on
implementing activities to renew and reposition our portfolio. The
challenges to renewal of our upstream portfolio are growing due to
increasing competition for access to opportunities globally among
both national and international oil companies, and heightened
political and economic risks in certain countries where significant
hydrocarbon basins are located. Lack of material positions could
impact our future hydrocarbon production.
Moreover, the Incident has affected BP's reputation, which may
have a long-term impact on the group's ability to access new
opportunities, both in the US and elsewhere. Adverse public,
political, regulatory and industry sentiment towards BP, and
towards oil and gas drilling activities generally, could damage or
impair our existing commercial relationships with counterparties,
partners and host governments and could impair our access to new
investment opportunities, exploration properties, operatorships or
other essential commercial arrangements with potential partners and
host governments, particularly in the US. In addition, costs and
liabilities relating to the Incident have placed, and will continue
to place, a significant burden on our cash flow, which could impede
our ability to invest in new opportunities and deliver long-term
growth.
Prices and markets - BP's financial performance is subject to
the fluctuating prices of crude oil and gas, the volatile prices of
refined products and the profitability of our refining and
petrochemicals operations, as well as exchange rate fluctuations
and the general macroeconomic outlook.
Oil, gas and product prices and margins can be very volatile,
and are subject to international supply and demand. Political
developments (including conflict situations), increased supply from
the development of new oil and gas sources, technological change,
global economic conditions and the influence of OPEC can
particularly affect world supply and oil prices. Previous oil price
increases have resulted in increased fiscal take, cost inflation
and more onerous terms for access to resources. As a result,
increased oil prices may not improve margin performance. Decreases
in oil, gas or product prices are likely to have an adverse effect
on revenues, margins and profitability, and a material rapid
change, or a sustained change, in oil, gas or product prices may
mean investment or other decisions need to be reviewed, assets may
be impaired, and the viability of projects may be affected. A
prolonged period of low oil prices may impact our cash flow, profit
and ability to maintain our long-term investment programme with a
consequent effect on our growth rate, and may impact shareholder
returns, including dividends and share buybacks, or share
price.
Refining profitability can be volatile, with both periodic
over-supply and supply tightness in various regional markets,
coupled with fluctuations in demand. Sectors of the petrochemicals
industry are also subject to fluctuations in supply and demand,
with a consequent effect on prices and profitability.
Crude oil prices are generally set in US dollars, while sales of
refined products may be in a variety of currencies. In addition, a
high proportion of our major project development costs are
denominated in local currencies, which may be subject to volatile
fluctuations against the US dollar. Fluctuations in exchange rates
can therefore give rise to foreign exchange exposures, with a
consequent impact on underlying costs and revenues.
Periods of global recession or prolonged instability in
financial markets could negatively impact parties with whom we do
or may do business, the demand for our products and the prices at
which they can be sold and could affect the viability of the
markets in which we operate.
Top of page 36
Principal risks and uncertainties (continued)
Climate change and carbon pricing - climate change and carbon
pricing policies could result in higher costs and reduction in
future revenue and strategic growth opportunities.
Compliance with changes in laws, regulations and obligations
relating to climate change could result in substantial capital
expenditure, taxes, reduced profitability from changes in operating
costs, potential restrictions on the commercial viability of, or
our ability to progress, upstream resources and reserves, and
impacts on revenue generation and strategic growth opportunities.
In addition, the changed nature of our participation in alternative
energies could carry reputational, economic and technology
risks.
Geopolitical - the diverse nature of our operations around the
world exposes us to a wide range of political developments and
consequent changes to the operating environment, regulatory
environment and law.
We have operations, and are seeking new opportunities, in
countries and regions where political, economic and social
transition is taking place. Some countries have experienced or been
subject to, or may in the future experience or be subject to,
political instability, changes to the regulatory environment,
changes in taxation, expropriation or nationalization of property,
civil strife, strikes, acts of terrorism, acts of war,
international sanctions and insurrections. Any of these conditions
occurring could disrupt or terminate our operations, causing our
development activities to be curtailed or terminated in these
areas, or our production to decline, could limit our ability to
pursue new opportunities, could affect the recoverability of our
assets and could cause us to incur additional costs. See page 4 of
BP Annual Report and Form 20-F 2013 for information on the
locations of our major areas of operation and activities.
We set ourselves high standards of corporate citizenship and
aspire to contribute to a better quality of life through the
products and services we provide. If it is perceived that we are
not respecting or advancing the economic and social progress of the
communities in which we operate or that we have not satisfactorily
addressed all relevant stakeholder concerns in respect of our
operations, our reputation and shareholder value could be damaged
and development opportunities may be precluded.
Competition - BP's group strategy depends upon continuous
innovation and efficiency in a highly competitive market.
The oil, gas and petrochemicals industries are highly
competitive. There is strong competition, both within the oil and
gas industry and with other industries, in supplying the fuel needs
of commerce, industry and the home. Competition puts pressure on
the terms of access to new opportunities, licence costs and product
prices, affects oil products marketing and requires continuous
management focus on improving efficiency, while ensuring safety and
operational risk is not compromised. The implementation of group
strategy requires continued technological advances and innovation
including advances in exploration, production, refining,
petrochemicals manufacturing technology and advances in technology
related to energy usage. Our performance could be impeded if
competitors developed or acquired intellectual property rights to
technology that we require, if our innovation lagged the industry,
or if we fail to adequately protect our company brands and trade
marks. Our competitive position in comparison to our peers could be
adversely affected if competitors offer superior terms for access
rights or licences, if we fail to control our operating costs or
manage our margins, or if we fail to sustain, develop and operate
efficiently a high quality portfolio of assets.
Joint and other contractual arrangements - BP may not have full
operational control and may have exposure to counterparty credit
risk and disruptions to our operations and strategic objectives due
to the nature of some of its business relationships.
Many of our major projects and operations are conducted through
joint arrangements or associates and through contracting and
sub-contracting arrangements. These arrangements often involve
complex risk allocation, decision-making processes and
indemnification arrangements, and BP has less control of such
activities than we would have if BP had full ownership and
operational control. Our partners may have economic or business
interests or objectives that are inconsistent with, or opposed to,
those of BP and may exercise veto rights to block certain key
decisions or actions that BP believes are in its or the joint
arrangement's or associate's best interests, or approve such
matters without our consent. Additionally, our joint arrangement
partners or associates or contractual counterparties are primarily
responsible for the adequacy of the human or technical competencies
and capabilities which they bring to bear on the joint project and,
in the event these are found to be lacking, then safety, the
performance of the project and BP's costs may be adversely
affected. Our joint arrangement partners or associates may not be
able to meet their financial or other obligations to their
counterparties or to the relevant project, potentially threatening
the viability of such projects. Furthermore, should accidents or
incidents occur in operations in which BP participates, whether as
operator or otherwise, and where it is held that our subcontractors
or joint arrangement partners are legally liable to share any
aspects of the cost of responding to such incidents, the financial
capacity of these third parties may prove inadequate to fully
indemnify BP against the costs we incur on behalf of the joint or
contractual arrangement. Should a key sub-contractor, such as a
lessor of drilling rigs, no longer be able to make these assets
available to BP, this could result in serious disruption to our
operations. Where BP does not have operational control of a
venture, BP may nonetheless still be pursued by regulators or
claimants in the event of an incident.
Rosneft investment - any future erosion of our relationship with
Rosneft, or the impact of further economic sanctions, could
adversely impact our business and strategic objectives in Russia,
the level of our income, production and reserves, our investment in
Rosneft and our reputation.
On 21 March 2013, we completed the sale of our 50% interest in
TNK-BP to Rosneft and the purchase of additional shares in Rosneft.
We now own a total shareholding in Rosneft of 19.75%. To the extent
we fail to maintain a good commercial relationship with Rosneft in
the future, or if as a result of our non-controlling interest in
Rosneft or otherwise we are unable in the future to exercise
significant influence over our investment in Rosneft or pursue
other growth opportunities in Russia, our business and strategic
objectives in Russia and our ability to recognize our share of
Rosneft's income, production and reserves may be adversely
impacted.
Top of page 37
Principal risks and uncertainties (continued)
If further international sanctions are imposed on Rosneft or new
sanctions are imposed on Russia or other Russian individuals or
entities, this could have a material adverse impact on our
relationship with and investment in Rosneft, our business and
strategic objectives in Russia and our financial position and
results of operations.
Investment efficiency - poor investment decisions could
negatively impact our business.
Our organic growth is dependent on creating a portfolio of
quality options and investing in the best options. Ineffective
group strategy, investment selection and/or subsequent execution
could lead to loss of opportunity, loss of value and higher capital
expenditure.
Reserves progression - inability to progress upstream resources
in a timely manner could adversely affect our long-term replacement
of reserves and negatively impact our business.
Successful execution of our group strategy depends critically on
sustaining long-term reserves replacement. If upstream resources
are not progressed in a timely and efficient manner due to
commercial, technical, regulatory or other reasons, we will be
unable to sustain long-term replacement of reserves.
Major project delivery - our group plan depends upon successful
delivery of major projects, and failure to deliver major projects
successfully could adversely affect our financial performance.
Successful execution of our group plan depends critically on
implementing the activities to deliver major projects over the plan
period. Poor delivery of or operational challenges at any major
project that underpins production or production growth and/or any
other major programme designed to enhance shareholder value,
including maintenance turnaround programmes, could adversely affect
our financial performance and our operating cash flows.
Digital infrastructure - a breach of our digital security or a
failure of our digital infrastructure could result in serious
damage to business operations, personal injury, damage to assets,
harm to the environment, reputational damage, breaches of
regulations, litigation, legal liabilities and reparation
costs.
The reliability and security of our digital infrastructure are
critical to maintaining the availability of our business
applications, including the reliable operation of technology in our
various business operations and the collection and processing of
financial and operational data, as well as the confidentiality of
certain third-party information. A breach of our digital security
or failure of our digital infrastructure, due to intentional
actions such as cyber-attacks, negligence or otherwise, could cause
serious damage to business operations and, in some circumstances,
could result in the loss of data or sensitive information, injury
to people, loss of control of or damage to assets, harm to the
environment, reputational damage, breaches of regulations,
litigation, legal liabilities and reparation costs.
Crisis management, business continuity and disaster recovery -
the group must be able to respond to and recover quickly and
effectively from any disruption or incident, as failure to do so
could adversely affect our business and operations.
Crisis management and contingency plans are required to respond
to, and to continue or recover operations following, a disruption
or an incident. If we do not respond, or are perceived not to
respond, in an appropriate manner to either an external or internal
crisis, our business and operations could be severely disrupted.
Inability to restore or replace critical capacity to an agreed
level within an agreed timeframe would prolong the impact of any
disruption and could severely affect our business and
operations.
People and capability - successful recruitment, development and
utilization of staff is central to our plans.
Successful recruitment of new staff, employee training,
development and continuing enhancement of skills, in particular
technical capabilities such as petroleum engineers and scientists,
are key to implementing our plans. Inability to develop and retain
human capacity and capability, both across the organization and in
specific operating locations, could jeopardize performance
delivery. The group relies on recruiting and retaining high-quality
employees to execute its strategic plans and to operate its
business.
In addition, significant board and management focus continues to
be required in responding to matters related to the Incident.
Although BP set up the Gulf Coast Restoration Organization to
manage the group's long-term response, other key management
personnel will need to continue to devote substantial attention to
addressing the associated consequences for the group, which may
negatively impact our staff's capability to address and respond to
other operational matters affecting the group but unrelated to the
Incident.
Liquidity, financial capacity and financial, including credit,
exposure - failure to operate within our financial framework could
impact our ability to operate and result in financial loss.
The group seeks to maintain a financial framework to ensure that
it is able to maintain an appropriate level of liquidity and
financial capacity, and commercial credit risk is measured and
controlled to determine the group's total credit risk. Failure to
accurately forecast, manage or maintain sufficient liquidity and
credit to meet our needs (including a failure to understand and
respond to potential liabilities) could impact our ability to
operate and result in a financial loss. Trade and other
receivables, including overdue receivables, may not be recovered
whether an impairment provision has been recognized or not.
Inability to determine adequately our credit exposure could lead to
financial loss. Furthermore, a substantial and unexpected cash call
or funding request could disrupt our financial framework or
overwhelm our capacity to meet our obligations.
External events could materially impact the effectiveness of the
group's financial framework. A credit crisis or significant
economic shock affecting banks and other sectors of the economy
could impact the ability of counterparties to meet their financial
obligations to the group. It could also affect our ability to raise
capital to fund growth, to maintain our long-term
Top of page 38
Principal risks and uncertainties (continued)
investment programme and to meet our obligations, and may impact
shareholder returns, including dividends and share buybacks, or
share price. Decreases in the funded levels of our pension plans
may also increase our pension funding requirements.
In addition, a significant operational incident could result in
decreases in our credit ratings which, together with the
assessments published by analysts, the reputational consequences of
any such incident and concerns about the group's costs arising from
any such incident, ongoing contingencies, liquidity, financial
performance and credit spreads, could increase the group's
financing costs and limit the group's access to financing. The
group's ability to engage in both its trading activities and
non-trading businesses could also be impacted in such circumstances
due to counterparty concerns about the group's financial and
business risk profile and resulting collateral demands, which could
be significant. In addition, BP may be unable to make a drawdown
under certain of its committed borrowing facilities in the event
that we are aware that there are pending or threatened legal,
arbitration or administrative proceedings which, if determined
adversely, might reasonably be expected to have a material adverse
effect on our ability to meet the payment obligations under any of
these facilities. Credit rating downgrades could trigger a
requirement for the company to review its funding arrangements with
the BP pension trustees. Any extended constraints on the group's
ability to obtain financing and to engage in its trading activities
on acceptable terms (or at all) would put pressure on the group's
liquidity. If such constraints occur at a time when cash flows from
our business operations are constrained, such as following a
significant operational incident, the group could be required to
reduce planned capital expenditures and/or increase asset disposals
in order to provide additional liquidity, as the group did
following the Incident.
See Financial statements - Note 19 of BP Annual Report and Form
20-F 2013 for more information on financial instruments and
financial risk factors.
Insurance - the limited capacity of the insurance market and
BP's insurance strategy could, from time to time, expose the group
to material uninsured losses which could have a material adverse
effect on BP's financial condition and results of operations.
In the context of the limited capacity of the insurance market,
many significant risks are retained by BP. The group generally
restricts its purchase of insurance to situations where this is
required for legal or contractual reasons. This means that the
group could be exposed to material uninsured losses, which could
have a material adverse effect on its financial condition and
results of operations. In particular, these uninsured costs could
arise at a time when BP is facing material costs arising out of
some other event which could put pressure on BP's liquidity and
cash flows. For example, BP has borne and may continue to bear the
entire burden of its share of any property damage, well control,
pollution clean-up and third-party liability expenses arising out
of the Incident.
Compliance and control risks
US government settlements and debarment - our settlement with
the US Department of Justice and the US Securities and Exchange
Commission in respect of certain charges related to the Incident
may expose us to further penalties, liabilities and private
litigation, and may impact our operations and adversely affect our
ability to quickly and efficiently access US capital markets.
On 15 November 2012, BP reached an agreement with the US
government to resolve all federal criminal and securities claims
arising out of the Incident and comprising settlements with the US
Department of Justice (DoJ) and the US Securities and Exchange
Commission (SEC). For a description of the terms of the DoJ and SEC
settlements, see Legal proceedings on page 264 of BP Annual Report
and Form 20-F 2013. Under the DoJ settlement, BP has agreed to
retain an independent third-party auditor who will review and
report to the probation officer, the DoJ, and BP regarding
compliance by BP Exploration & Production (BPXP) with the key
terms of the settlement including the completion of safety and
environmental management systems audits, operational oversight
enhancements, oil spill response training and drills and the
implementation of best practices. The DoJ settlement also provides
for the appointment of an ethics monitor and a process safety
monitor. See Gulf of Mexico oil spill on page 39 of BP Annual
Report and Form 20-F 2013. The DoJ criminal and SEC settlements
impose significant compliance and remedial obligations on BP and
its directors, officers and employees. Failure to comply with the
terms of these settlements could result in further enforcement
action by the DoJ and the SEC, expose BP to severe penalties,
financial or otherwise, and subject BP to further private
litigation, each of which could impact our operations and have a
material adverse effect on the group's business.
As previously disclosed, in November 2012 the US Environmental
Protection Agency (EPA) temporarily suspended a number of BP
entities from participating in new federal contracts, and
subsequently in 2013, subjected BPXP to mandatory debarment at its
Houston headquarters and issued suspensions to additional BP
entities. See Legal proceedings on page 264 of BP Annual Report and
Form 20-F 2013. On 13 March 2014, BP p.l.c., BPXP and all other
temporarily suspended BP entities entered into an administrative
agreement with the EPA resolving all issues related to suspension
or debarment arising from the Incident, allowing BP entities to
enter into new contracts or leases with the US government. Under
the terms and conditions of the administrative agreement, which
will apply for five years, BP has agreed to a set of safety and
operations, ethics and compliance and corporate governance
requirements. Failure to satisfy these requirements or otherwise
comply with the terms of the administrative agreement could result
in suspension or debarment of BP entities in the future. BP has a
significant amount of operations in the US. See Upstream on page 25
and Oil and gas disclosures for the group on page 245 of BP Annual
Report and Form 20-F 2013. Suspension or debarment from entering
new federal contracts, or further suspension or debarment
proceedings in the future against BP and/or its subsidiaries as a
result of violations of the terms of the DoJ or SEC settlements,
the administrative agreement with the EPA or otherwise, could have
a material adverse impact on the group's operations in the US in
the future.
As a result of the SEC settlement, as of 5 February 2013 and for
a period of three years thereafter, we are no longer qualified as a
'well known seasoned issuer' (WKSI) as defined in Rule 405 of the
Securities Act of 1933, as amended (Securities Act), and
Top of page 39
Principal risks and uncertainties (continued)
therefore will not be able to take advantage of the benefits
available to a WKSI, including engaging in delayed or continuous
offerings of securities using an automatic shelf registration
statement. In addition, as of the SEC settlement date of 10
December 2012 and for a period of five years thereafter, we are no
longer able to utilize certain registration exemptions provided by
the Securities Act in connection with certain securities offerings.
We also may be denied certain trading authorizations under the
rules of the US Commodities Futures Trading Commission, which may
prevent us in the future from entering certain routine swap
transactions for an indefinite period of time.
Regulatory - BP, and the oil industry in general, face increased
regulation in the US and elsewhere that could increase the cost of
regulatory compliance, affect the adequacy of our provisions and
limit our access to new exploration properties.
The oil industry in general is subject to regulation and
intervention by governments throughout the world in such matters as
the award of exploration and production interests, the imposition
of specific drilling obligations, environmental, health and
safety
controls, controls over the development and decommissioning of a
field (including restrictions on production) and, possibly,
nationalization, expropriation, cancellation or non-renewal of
contract rights. The oil industry is also subject to the payment of
royalties and taxation, which tend to be high compared with those
payable in respect of other commercial activities, and operates in
certain tax jurisdictions that have a degree of uncertainty
relating to the interpretation of, and changes to, tax law. We
remain exposed to changes in the regulatory and legislative
environment, such as new laws and regulations (whether imposed by
international treaty or by national or local governments in the
jurisdictions in which we operate), changes in tax or royalty
regimes, price controls, the imposition of trade or other
sanctions, government actions to cancel or renegotiate contracts or
other factors. Governments are facing greater pressure on public
finances, which may increase their motivation to intervene in the
fiscal and regulatory frameworks of the oil and gas industry and we
remain exposed to increases in amounts payable to governments or
government agencies. Such factors could reduce our profitability
from operations in certain jurisdictions, limit our opportunities
for new access, require us to divest or write-down certain assets
or curtail or cease certain operations, or affect the adequacy of
our provisions for pensions, tax, environmental and legal
liabilities. Potential changes to pension or financial market
regulation could also impact funding requirements of the group.
Due to the Incident and remedial provisions contained in or that
may result from the DoJ and SEC settlements and other past events
in the US, it is likely that there will be additional oversight and
more stringent regulation of BP's oil and gas activities in the US
and elsewhere, particularly relating to environmental, health and
safety controls and oversight of drilling operations, as well as
access to new drilling areas. BP may be subjected to a higher
number of citations and/or level of fines imposed in relation to
any alleged breaches of safety or environmental regulations. New
regulations and legislation, the terms of BP's settlements with US
government authorities and future settlements or litigation
outcomes related to the Incident, and/or evolving practices could
increase the cost of compliance, require changes to our drilling
operations, exploration, development and decommissioning plans,
impact our ability to capitalize on our assets and limit our access
to new exploration properties or operatorships, particularly in the
deepwater Gulf of Mexico.
We buy, sell and trade oil and gas products in certain regulated
commodity markets. Failure to respond to changes in or to comply
with trading regulations could result in regulatory action and
damage to our reputation.
See page 254 of BP Annual Report and Form 20-F 2013 for more
information on environmental regulation.
Ethical misconduct and non-compliance - ethical misconduct or
breaches of applicable laws by our businesses or our employees
could be damaging to our reputation and shareholder value.
Incidents of ethical misconduct, non-compliance with the
recommendations of the ethics monitor appointed under the terms of
the DoJ settlement or non-compliance with applicable laws and
regulations, including anti-bribery, anti-corruption and
anti-manipulation laws and trade or other sanctions, could be
damaging to our reputation and shareholder value and could subject
us to litigation and regulatory action or penalties under the terms
of the DoJ settlement or otherwise. Multiple events of
non-compliance could call into question the integrity of our
operations. For example, in our trading functions, there is the
risk that a determined individual could operate as a 'rogue
trader', acting outside BP's delegations, controls or code of
conduct and in contravention of our values in pursuit of personal
objectives that could be to the detriment of BP and its
shareholders.
For certain legal proceedings involving the group, see Legal
proceedings on page 42 herein and Legal proceedings on page 257 of
BP Annual Report and Form 20-F 2013. For further information on the
risks involved in BP's trading activities, see Treasury and trading
activities below.
Liabilities and provisions - BP's potential liabilities
resulting from pending and future claims, lawsuits, settlements and
enforcement actions relating to the Incident, together with the
potential cost and burdens of implementing remedies sought in the
various proceedings, have had and are expected to continue to have
a material adverse impact on the group's business.
Under the Oil Pollution Act of 1990 (OPA 90), BPXP and BP
Corporation North America are among the parties financially
responsible for the clean-up of the Incident and for certain
economic damages as provided for in OPA 90, as well as certain
natural resource damages associated with the spill and certain
costs determined by federal and state trustees engaged in a joint
assessment of such natural resource damages. BP and certain of its
subsidiaries have also been named as defendants in numerous
lawsuits in the US arising out of the Incident, including actions
for personal injury and wrongful death, purported class actions for
commercial or economic injury, actions for breach of contract,
violations of statutes, property and other environmental damage,
securities law claims and various other claims, and additional
lawsuits or private claims arising out of the Incident may be
brought in the future.
Top of page 40
Principal risks and uncertainties (continued)
While significant charges have been recognized in the income
statement since the Incident occurred in 2010, the provisions
recognized represent only the current best estimates of
expenditures required to settle certain present obligations that
can be reasonably estimated at the end of the reporting period, and
there are future expenditures for which it is not possible to
measure our obligations reliably. BP's total potential liabilities
resulting from pending and future claims, lawsuits, settlements and
enforcement actions relating to the Incident (including as a result
of any potential determination of BP's negligence or gross
negligence), together with the potential cost and burdens of
implementing remedies sought in the various proceedings, cannot be
fully estimated at this time and are subject to significant
uncertainty but they have had, and are expected to continue to
have, a material adverse impact on the group's business.
See Note 2 and Legal proceedings on page 42 herein, and
Financial statements - Note 2 and Legal proceedings on page 257 of
BP Annual Report and Form 20-F 2013.
Reporting - failure to accurately report our data could lead to
regulatory action, legal liability and reputational damage.
External reporting of financial and non-financial data is
reliant on the integrity of systems and people. Failure to report
data accurately and in compliance with external standards could
result in regulatory action, legal liability and damage to our
reputation.
As of the date of the SEC settlement, 10 December 2012, and for
a period of three years thereafter, we are unable to rely on the
safe harbor provisions regarding forward-looking statements
provided by the regulations issued under the Securities Act, and
the Securities Exchange Act of 1934, as amended. Our inability to
rely on these safe harbor provisions may expose us to future
litigation and liabilities in connection with forward-looking
statements in our public disclosures.
Treasury and trading activities - control of these activities
depends on our ability to process, manage and monitor a large
number of transactions. Failure to do this effectively could lead
to business disruption, financial loss, regulatory intervention or
damage to our reputation.
In the normal course of business, we are subject to operational
risk around our treasury and trading activities. Control of these
activities is highly dependent on our ability to process, manage
and monitor a large number of complex transactions across many
markets and currencies.
Shortcomings or failures in our systems, risk management
methodology, internal control processes or people could lead to
disruption of our business, financial loss, regulatory intervention
or damage to our reputation. See Legal proceedings on page 257 of
BP Annual Report and Form 20-F 2013.
Safety and operational risks
The risks inherent in our operations include a number of hazards
that, although many may have a low probability of occurrence, can
have extremely serious consequences if they do occur, such as the
Gulf of Mexico oil spill. The occurrence of any such risks could
have a consequent material adverse impact on the group's business,
competitive position, cash flows, results of operations, financial
position, prospects, liquidity, shareholder returns and/or
implementation of the group's strategic goals.
Process safety, personal safety and environmental risks - the
nature of our operations exposes us to a wide range of significant
health, safety, security and environmental risks, the occurrence of
which could result in regulatory action, legal liability and
increased costs and damage to our reputation.
The nature of the group's operations exposes us to a wide range
of significant health, safety, security and environmental risks.
The scope of these risks is influenced by the geographic range,
operational diversity and technical complexity of our activities.
In addition, in many of our major projects and operations, risk
allocation and management is shared with third parties such as
contractors, sub-contractors, joint arrangement partners and
associates. See Strategic and commercial risks - Joint and other
contractual arrangements above.
There are risks of technical integrity failure as well as risk
of natural disasters and other adverse conditions in many of the
areas in which we operate, which could lead to loss of containment
of hydrocarbons and other hazardous material, as well as the risk
of fires, explosions or other incidents. In addition, inability to
provide safe environments for our workforce and the public while at
our facilities or premises could lead to injuries or loss of life
and could result in regulatory action, legal liability and damage
to our reputation.
Our operations are often conducted in hazardous, remote or
environmentally sensitive locations, in which the consequences of a
spill, explosion, fire or other incident could be greater than in
other locations. These operations are subject to various
environmental and safety laws, regulations and permits and the
consequences of failure to comply with these requirements can
include remediation obligations, penalties, loss of operating
permits and other sanctions. Accordingly, inherent in our
operations is the risk that if we fail to abide by environmental
and safety and protection standards, such failure could lead to
damage to the environment and could result in regulatory action,
legal liability, material costs, damage to our reputation or denial
of our licence to operate.
BP's group-wide operating management system (OMS) addresses
health, safety, security, environmental and operations risks, and
aims to provide a consistent framework within which the group can
analyse the performance of its activities and identify and
remediate shortfalls. There can be no assurance that OMS will
adequately identify all process safety, personal safety and
environmental risk or provide the correct mitigations, or that all
operations will be in conformance with OMS at all times.
Top of page 41
Principal risks and uncertainties (continued)
Under the terms of the DoJ settlement (see Legal proceedings on
page 264 of BP Annual Report and Form 20-F 2013), a process safety
monitor will review, evaluate, and provide recommendations
concerning BPXP's process safety and risk management procedures for
deepwater drilling in the Gulf of Mexico. Incidents of
non-compliance with the recommendations of the process safety
monitor could be damaging to our reputation and shareholder value
and could subject us to further regulatory action or penalties
under the terms of the DoJ settlement. Multiple events of
non-compliance could call into question the integrity of our
operations.
Security - hostile acts against our staff and activities could
cause harm to people and disrupt our operations.
Security threats require continuous oversight and control. Acts
of terrorism, piracy, sabotage, cyber-attacks and similar
activities directed against our operations and facilities,
pipelines, transportation or computer systems could cause harm to
people and could severely disrupt business and operations. Our
business activities could also be severely disrupted by, among
other things, conflict, civil strife or political unrest in areas
where we operate.
Product quality - failure to meet product quality standards
could lead to harm to people and the environment and loss of
customers.
Supplying customers with on-specification products is critical
to maintaining our licence to operate and our reputation in the
marketplace. Failure to meet product quality standards throughout
the value chain could lead to harm to people and the environment
and loss of customers.
Drilling and production - these activities require high levels
of investment and are subject to natural hazards and other
uncertainties. Activities in challenging environments heighten many
of the drilling and production risks including those of integrity
failures, which could lead to curtailment, delay or cancellation of
drilling operations, or inadequate returns from exploration
expenditure.
Exploration and production require high levels of investment and
are subject to natural hazards and other uncertainties, including
those relating to the physical characteristics of an oil or natural
gas field. Our exploration and production activities are often
conducted in extremely challenging environments, which heighten the
risks of technical integrity failure and natural disasters
discussed above. The cost of drilling, completing or operating
wells is often uncertain. We may be required to curtail, delay or
cancel drilling operations because of a variety of factors,
including unexpected drilling conditions, pressure or
irregularities in geological formations, equipment failures or
accidents, adverse weather conditions and compliance with
governmental requirements. In addition, exploration expenditure may
not yield adequate returns, for example in the case of unproductive
wells or discoveries that prove uneconomic to develop. The Gulf of
Mexico oil spill illustrates the risks we face in our drilling and
production activities.
Transportation - all modes of transportation of hydrocarbons
involve inherent and significant risks.
All modes of transportation of hydrocarbons involve inherent
risks. An explosion or fire or loss of containment of hydrocarbons
or other hazardous material could occur during transportation by
road, rail, sea or pipeline. This is a significant risk due to the
potential impact of a release on people and the environment and
given the high volumes potentially involved.
Top of page 42
Legal proceedings
The following discussion sets out the material developments in
the group's material legal proceedings during the half year 2014.
For a full discussion of the group's material legal proceedings,
see pages 257-267 of BP Annual Report and Form 20-F 2013.
Matters relating to the Deepwater Horizon accident and oil spill
(the Incident)
Federal multi-district litigation proceeding in New Orleans (MDL
2179) and related matters
Trial Phases. The federal district court in New Orleans (the
District Court) scheduled the penalty phase (the Penalty Phase) in
the Trial of Liability, Limitation, Exoneration and Fault
Allocation in MDL 2179 to commence on 20 January 2015. Discovery in
the Penalty Phase is currently in progress, and the Penalty Phase
trial is expected to last three weeks. In the Penalty Phase, the
District Court will determine the amount of civil penalties owed to
the United States under the Clean Water Act based on the court's
rulings as to the presence of negligence, gross negligence or
wilful misconduct in Phases 1 and 2, the court's rulings as to
quantification of discharge in Phase 2 and the application of the
penalty factors under the Clean Water Act.
BP is not currently aware of the timing of the court's rulings
in respect of issues presented in Phase 1 or Phase 2 and the court
could issue its decision on these phases at any time. The District
Court has wide discretion in its determination as to whether a
defendant's conduct involved negligence or gross negligence as well
as in its determinations on the volume of oil spilled and the
application of statutory penalty factors. For further information,
see pages 257-265 of BP Annual Report and Form 20-F 2013.
Plaintiffs' Steering Committee (PSC) Settlements - Deepwater
Horizon Court Supervised Settlement Program (DHCSSP) and
interpretation of the Economic and Property Damages Settlement
Agreement. As disclosed in BP Annual Report and Form 20-F 2013, on
24 December 2013, the District Court ruled (the December 2013
Ruling) on the two issues remanded to it in October 2013 by the
business economic loss panel of the US Court of Appeals for the
Fifth Circuit (the Fifth Circuit): (1) requiring the claims
administrator, in administering business economic loss claims, to
match revenue with corresponding variable expenses (the matching
issue), and (2) determining whether the settlement agreement can
properly be interpreted to permit payment to business economic loss
claimants whose losses (if any) were not caused by the spill (the
causation issue).
As to the matching issue, the District Court ordered the claims
administrator to develop a revised policy addressing the matching
of revenue and expenses for business economic loss claims, which
would require the matching of revenue with the expenses incurred by
claimants to generate that revenue, even where the revenue and
expenses were recorded at different times. On 13 March 2014, the
claims administrator issued a revised matching policy reflecting
this order. On 19 March 2014, BP submitted its response to the
revised matching policy, and the claims administrator submitted the
policy to the District Court for consideration on 25 March 2014. On
5 May 2014, the District Court approved the revised policy. The PSC
filed a motion on 27 May 2014 seeking to alter or amend the revised
policy. On 27 June 2014, the District Court issued an order
establishing the process for the parties and claims administrator
to determine which already-determined but unpaid claims should be
subject to the revised policy.
As to the causation issue, the District Court ruled that the
Economic and Property Damages Settlement Agreement contained no
causation requirement beyond the revenue and related tests set
forth in an exhibit to that agreement. The District Court also held
that the absence of a further causation requirement does not defeat
class certification or invalidate the settlement under the federal
class certification rule or Article III of the US Constitution. On
30 December 2013, BP filed a motion with the Fifth Circuit
requesting an injunction that would prevent the claims
administrator from making awards to claimants whose alleged
injuries are not fairly traceable to the spill. In a 2-to-1
decision on 3 March 2014, the business economic loss panel affirmed
the District Court's ruling on causation and denied BP's motion for
a permanent injunction.
BP filed a petition on 17 March 2014 requesting that all active
Fifth Circuit judges review the business economic loss panel's 3
March 2014 decision. On 19 May 2014, the Fifth Circuit declined (in
a 5-to-8 decision) to grant further review of the 3 March 2014
decision.
On 21 May 2014, BP asked the Fifth Circuit to stay the issuance
of the mandate transferring the case back to the District Court
until the Supreme Court could decide whether to review the Fifth
Circuit's decision. The Fifth Circuit denied BP's request for a
stay on 27 May 2014, and issued its mandate on 28 May 2014. On that
same day, the District Court dissolved the injunction that had
halted the processing and payment of business economic loss claims
and instructed the claims administrator to resume the processing
and payment of claims.
On 28 May 2014, BP filed an application with the Supreme Court
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 Supreme Court denied BP's application
on 9 June 2014, and the claims administrator has continued to
process and pay business economic loss claims while BP seeks
Supreme Court review of the Fifth Circuit's decision.
BP's petition for review by the Supreme Court is due to be filed
on or before 18 August 2014. BP intends to seek review of the Fifth
Circuit's decision, as well as a related decision by a different
panel of the Fifth Circuit similarly interpreting the Economic and
Property Damages Settlement Agreement to permit payment to business
economic loss claimants whose losses (if any) were not caused by
the spill.
Top of page 43
Legal proceedings (continued)
On 27 June 2014, BP asked the District Court to order the return
of excessive payments made by the DHCSSP under the matching policy
in effect before the December 2013 Ruling. BP has also requested
that the District Court enter an injunction preventing the business
economic loss claimants specified in its motion from spending the
excessive payments until the correct compensation amount has been
definitively determined under the revised matching policy. Even if
the District Court enters such an order and injunction as requested
by BP, there is significant uncertainty as to the amounts of any
such excessive payments that may actually be recoverable by BP.
Medical Benefits Class Action Settlement (Medical Settlement) -
As previously disclosed, the District Court approved the Medical
Settlement Agreement (MSA) in a final order and judgment on 11
January 2013. The effective date was 12 February 2014. As of 27
June 2014, the claims administrator under the Medical Settlement
(the Medical Claims Administrator) had received claim forms for
certain Specified Physical Conditions from 9,974 claimants, and
thus far has determined 189 claims to be eligible for monetary
compensation totalling approximately $250,000. For those claimants
seeking benefits under the Periodic Medical Consultation Program
only, approximately 600 claims have been determined to be eligible.
The deadline for submitting claims under the settlement is one year
from the effective date. The Medical Claims Administrator has
issued a policy statement, with which BP agrees, regarding the
consistent treatment of all physical conditions first diagnosed
after 16 April 2012 under the MSA. The PSC disagrees with the
policy statement. The District Court ordered briefing on the issue,
which was completed on 14 July 2014. The parties are awaiting a
ruling.
US Department of Justice (DoJ) Action - Liability under Section
311(b)(7)(A) of the Clean Water Act (CWA) - As previously
disclosed, on 8 December 2011, the United States brought a motion
for partial summary judgment in the DoJ Action seeking, among other
things, an order finding that BP Exploration & Production Inc.
(BPXP), Transocean and Anadarko are strictly liable for a civil
penalty under Section 311(b)(7)(A) of the CWA. On 22 February 2012,
the District Court held that the subsurface discharge which
occurred during the Incident was from the Macondo well, rather than
from the Deepwater Horizon, and that BPXP and Anadarko, and not
Transocean, are strictly liable for civil penalties under Section
311 of the CWA as owners of the well. Anadarko, BPXP and the United
States each appealed to the Fifth Circuit, and on 4 June 2014 the
Fifth Circuit unanimously affirmed the District Court's 22 February
2012 decision. On 21 July 2014, Anadarko and BPXP filed petitions
requesting that all active judges of the Fifth Circuit review the 4
June 2014 decision.
OPA Test Case Proceedings - On 3 June 2014 the District Court
entered an Agreed Upon Scheduling Order (the OPA Scheduling Order)
for seven test cases (OPA Test Cases) regarding claims under the
Oil Pollution Act of 1990 (OPA 90). The OPA Test Cases will address
certain OPA 90 liability questions for the District Court focusing
on, among other issues, whether plaintiffs' alleged losses tied to
the 2010 federal government moratoria on deepwater drilling "arise
from" or are "due to" the Incident. The OPA Scheduling Order
provides for fact and expert discovery up to March 2015. At the
conclusion of discovery, the parties will have an opportunity to
file summary judgment briefs, followed by trial, if necessary, no
earlier than the third quarter of 2015. The District Court has not
yet set any trial dates for the OPA Test Cases.
State of Alabama Damages Case Proceedings - On 16 July 2014 the
District Court issued a scheduling order for the State of Alabama's
OPA economic damages claims against BP and other parties, with fact
and expert discovery into 2015 and a request by the District Court
for the parties to set aside the month of November 2015 for a
trial.
For further information, see pages 257-265 of BP Annual Report
and Form 20-F 2013. For information about BP's current estimate of
the total cost of the PSC settlements, see Note 2.
US Environmental Protection Agency (EPA) matters
On 28 November 2012, the EPA notified BP that it had temporarily
suspended BP p.l.c., BPXP and a number of other BP subsidiaries
from participating in new federal contracts. In addition, as a
result of BP's agreement with the Department of Justice to resolve
all federal criminal charges against BP, on 1 February 2013 the EPA
issued a notice that BPXP was mandatorily debarred at its Houston
headquarters. On 12 August 2013, BP filed a lawsuit in the US
District Court for the Southern District of Texas challenging the
EPA's suspension and mandatory debarment decisions. On 26 November
2013, the EPA suspended two additional BP entities (BP Alternative
Energy and BP Pipelines (Alaska) Inc.) and proposed discretionary
debarment of all suspended BP entities. For further information,
see pages 257-265 of BP Annual Report and Form 20-F 2013.
On 13 March 2014, BP p.l.c., BPXP, and all other temporarily
suspended BP entities entered into an administrative agreement with
the EPA resolving all issues related to suspension or debarment
arising from the Incident, allowing BP entities to enter into new
contracts or leases with the United States Government. Under the
terms and conditions of the administrative agreement, which will
apply for five years, BP has agreed to a set of safety and
operations, ethics and compliance and corporate governance
requirements.
As a result of the agreement, on 19 March 2014, BP dismissed its
lawsuit against the EPA filed in the Southern District of
Texas.
MDL 2185 and other securities-related litigation
Securities class action - On 6 December 2013, the judge in the
multi-district litigation proceeding in federal district court in
Houston (MDL 2185) denied the plaintiffs' motion for class
certification and gave the plaintiffs 30 days to renew that motion.
The plaintiffs renewed their motion on 6 January 2014. On 20 May
2014, the judge denied plaintiffs' motion to certify a proposed
class of ADS purchasers before the Deepwater Horizon explosion
(from 8 November 2007 to 20 April 2010) and granted plaintiffs'
motion to certify a class of post-explosion ADS purchasers from 26
April 2010 to 28 May 2010. Both parties sought permission to appeal
from that decision, and on 3 July 2014, the Fifth Circuit granted
both parties' requests. Briefing on that appeal is expected to
proceed in the upcoming months.
Top of page 44
Legal proceedings (continued)
Individual securities litigation - The judge in the MDL 2185
proceedings granted in part and denied in part the defendants'
motion to dismiss three of the 29 cases filed by certain pension
funds, investment funds or advisers against BP entities and current
and former officers and directors seeking damages for alleged
losses suffered as a result of purchases of BP ordinary shares or
ADSs. A subset of the claims was dismissed. The judge held that
English law governs the plaintiffs' remaining claims (with the
exception of the federal law claims based on purchases of ADSs and
a potential claim under Ohio state law against BP p.l.c. by certain
Ohio funds). On 11 December 2013, defendants moved to dismiss 10 of
the cases and answered the complaints in two others. On 5 December
2013, the Ohio funds (plaintiffs in one of the first three cases
defendants moved to dismiss) filed an amended complaint withdrawing
their English law claim and asserting only a claim under Ohio state
law. On 6 January 2014, BP moved to dismiss that case for the
second time, and on 7 April 2014, the judge dismissed the Ohio
action with leave to replead English law claims within 30 days. On
8 June 2014, the Ohio funds filed a second amended complaint
asserting only English law claims. On 22 July 2014, BP moved to
dismiss the case again.
ERISA - On 30 March 2012, the district court in MDL 2185 issued
a decision granting the defendants' motions to dismiss the ERISA
case related to BP share funds in several employee benefit savings
plans. Final judgment dismissing the case was entered on 4
September 2012 and, on 25 September 2012, the plaintiffs filed a
notice of appeal to the Fifth Circuit. On 15 July 2014, the Fifth
Circuit remanded the case to the district court in light of new
pleading standards recently set forth by the Supreme Court. BP
intends to renew its motion to dismiss in the district court.
For further information about MDL 2185 and other
securities-related litigation, see pages 257-265 of BP Annual
Report and Form 20-F 2013.
Pending investigations and reports relating to the Deepwater
Horizon oil spill
CSB investigation - The US Chemical Safety and Hazard
Investigation Board (CSB) released the first two volumes of its
four-volume report on its investigation into the Incident at a
public hearing in Houston on 5 June 2014. The first two volumes
provide an introduction to the Incident as well as the CSB's
findings regarding the operation of the blowout preventer and other
technical issues. The CSB has stated that it plans to release
Volume 3 (concerning the role of the regulator in the oversight of
the offshore industry) and Volume 4 (concerning organizational and
cultural factors) later in 2014.
Other matters
In April 2014, the United States Office for Foreign Assets
Control (OFAC) added the name of certain individuals and entities
to its list of Specially Designated Nationals.
On 16 July 2014, OFAC created the Sectoral Sanctions
Identification List (SSI List) and imposed limited, specific
sanctions on certain Russian entities, including Rosneft, and their
property. These sectoral sanctions prohibit the following
transactions by US persons or within the United States: transacting
in, providing financing for, or otherwise dealing in new debt of
longer than 90 days maturity for entities on the SSI List. This
prohibition also applies to entities owned 50% or more by any of
the entities on the SSI List. Ruhr Oel GmbH (ROG) is a 50:50 joint
operation with Rosneft, operated by BP, which holds interests in a
number of refineries in Germany. The same prohibition applies to
new debt of longer than 90 days maturity for ROG. OFAC has made it
clear that these sectoral sanctions only apply to new debt issued
on or after 16 July 2014; that all other transactions involving the
covered Russian entities or their property are permitted unless
otherwise prohibited by other US sanctions; and that these sectoral
sanctions do not freeze the funds or assets of any of the covered
entities.
To date, these sanctions have had no material adverse impact on
BP or ROG. However, BP will continue to keep this under review.
Top of page 45
Cautionary statement
Cautionary statement regarding forward-looking statements: The
discussion in this results announcement contains certain forecasts,
projections and forward-looking statements - that is, statements
related to future, not past events - with respect to the financial
condition, results of operation and businesses of BP and certain of
the plans and objectives of BP with respect to these items. These
statements may generally, but not always, be identified by the use
of words such as 'will', 'expects', 'is expected to', 'aims',
'should', 'may', 'objective', 'is likely to', 'intends',
'believes', 'anticipates', 'plans', 'we see' or similar
expressions. In particular, among other statements, plans regarding
future divestment of $10 billion in assets by 2015; the expected
quarterly dividend payment and timing of the payment; expectations
regarding BP's plans to separate its US lower 48 oil and gas
businesses; the expected level of reported production in the third
quarter of 2014 and the expected impact of turnaround and seasonal
maintenance activities thereon; the
expected timing of the halt in refinery operations at the Bulwer
refinery; the expected level of Downstream turnaround activity; the
expected higher margin capture in the fuels business in the third
quarter of 2014 and the drivers thereof; BP's expectations
regarding the continuation of a challenging environment and the
expected impact of turnarounds in petrochemicals; and certain
statements regarding the legal and trial proceedings, court
decisions, potential investigations and civil actions by
regulators, government entities and/or other entities or parties,
and the risks associated with such proceedings; are all forward
looking in nature. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and
depend on circumstances that will or may occur in the future.
Actual results may differ from those expressed in such statements,
depending on a variety of factors including the timing of bringing
new fields onstream; the timing and level of maintenance and/or
turnaround activity; the nature, timing and volume of refinery
additions and outages; the timing, quantum and nature of
divestments; the receipt of relevant third-party and/or regulatory
approvals; future levels of industry product supply; demand and
pricing; OPEC quota restrictions; PSA effects; operational
problems; economic and financial market conditions generally or in
various countries and regions; political stability and economic
growth in relevant areas of the world; changes in laws and
governmental regulations; regulatory or legal actions including
court decisions, the types of enforcement action pursued and the
nature of remedies sought or imposed; the impact on our reputation
following the Gulf of Mexico oil spill; exchange rate fluctuations;
development and use of new technology; the success or otherwise of
partnering; the actions of competitors, trading partners,
creditors, rating agencies and others; natural disasters and
adverse weather conditions; changes in public expectations and
other changes to business conditions; wars and acts of terrorism,
cyber-attacks or sabotage; and other factors discussed under
"Principal risks and uncertainties" herein.
Contacts
London United States
Press Office David Nicholas Scott Dean
+44 (0)20 7496 4708 +1 630 420 4990
Investor Relations Jessica Mitchell Craig Marshall
bp.com/investors +44 (0)20 7496 4962 +1 281 366 3123
This information is provided by RNS
The company news service from the London Stock Exchange
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