TIDMBP.
RNS Number : 4644L
BP PLC
28 April 2015
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BP p.l.c.
Group results
First quarter 2015
FOR IMMEDIATE RELEASE London 28 April 2015
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Profit (loss) for the period(a) 2,602 (4,407) 3,528
Inventory holding (gains) losses*, net of tax (499) 3,438 (53)
======================================================== ======== ======== ========
Replacement cost profit (loss)* 2,103 (969) 3,475
Net (favourable) unfavourable impact of non-operating
items* and fair
value accounting effects*, net of tax 474 3,208 (250)
======================================================== ======== ======== ========
Underlying replacement cost profit* 2,577 2,239 3,225
======================================================== ======== ======== ========
Replacement cost profit (loss)
per ordinary share (cents) 11.54 (5.32) 18.80
per ADS (dollars) 0.69 (0.32) 1.13
Underlying replacement cost profit
per ordinary share (cents) 14.14 12.28 17.45
per ADS (dollars) 0.85 0.74 1.05
======================================================== ======== ======== ========
-- BP's first-quarter replacement cost (RC) profit was $2,103
million, compared with $3,475 million a year ago. After adjusting
for a net charge for non-operating items of $413 million and net
unfavourable fair value accounting effects of $61 million (both on
a post-tax basis), underlying RC profit for the first quarter was
$2,577 million, compared with $3,225 million for the same period in
2014. The underlying result for the group was lower, mainly due to
reduced profit in Upstream, which was partly offset by an improved
result in Downstream, as well as certain favourable tax impacts.
The Upstream result for the first quarter was a profit of $604
million comprising a loss of $545 million in the US and a profit of
$1,149 million for non-US. This compares with a profit of $4,401
million for Upstream for the first quarter of 2014. 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 27.
-- All amounts relating to the Gulf of Mexico oil spill have
been treated as non-operating items, with a net pre-tax charge of
$332 million for the first quarter. For further information on the
Gulf of Mexico oil spill and its consequences see page 10 and Note
2 on page 16. See also Legal proceedings on page 31.
-- Including the impact of the Gulf of Mexico oil spill, net
cash provided by operating activities for the first quarter was
$1.9 billion, compared with $8.2 billion for the same period in
2014. Excluding amounts related to the Gulf of Mexico oil spill,
net cash provided by operating activities for the first quarter was
$2.5 billion, compared with $8.8 billion for the same period in
2014.
-- Net debt* at 31 March 2015 was $25.1 billion, compared with
$25.3 billion a year ago. The net debt ratio* at 31 March 2015 was
18.4%, compared with 16.2% a year ago. Net debt and the net debt
ratio are non-GAAP measures. See page 24 for more information.
-- Total capital expenditure on an accruals basis for the first
quarter was $4.5 billion, of which organic capital expenditure* was
$4.4 billion, compared with $6.1 billion for the same period in
2014, of which organic capital expenditure was $5.4 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. Transactions to date
have reached around $7.1 billion. Disposal proceeds were $1.7
billion for the first quarter. The amounts include proceeds from
our Toledo refinery partner, Husky Energy, in place of capital
commitments relating to the original divestment transaction that
have not been subsequently sanctioned.
-- The effective tax rate (ETR) on RC profit for the first
quarter was -42%, compared with 31% for the same period in 2014.
Adjusting for non-operating items and fair value accounting
effects, the underlying ETR for the first quarter was -21%,
compared with 33% for the same period in 2014. The tax credit for
the quarter reflects a one-off deferred tax adjustment as a result
of the reduction in the rate of the UK North Sea supplementary
charge. The opposite effect was reported in 2011 when the
supplementary charge was increased. In the near term we do not
expect that there will be any cash flow impact from this change.
Excluding this one-off adjustment for the North Sea, the underlying
ETR for the first quarter would have been 21% compared with 33% a
year ago mainly due to changes in the mix of our profits and
certain one-off items, partly offset by foreign exchange effects
from a stronger US dollar.
-- Finance costs and net finance expense relating to pensions
and other post-retirement benefits were a charge of $358 million
for the first quarter, compared with $367 million for the same
period in 2014.
-- BP today announced a quarterly dividend of 10.00 cents per
ordinary share ($0.600 per ADS), which is expected to be paid on 19
June 2015. The corresponding amount in sterling will be announced
on 8 June 2015. See page 23 for further information.
* For items marked with an asterisk throughout this document, definitions
are provided in the Glossary on page 29.
(a) Profit (loss) attributable to BP shareholders.
The commentaries above should be read in conjunction with the cautionary
statement on page 33.
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Analysis of RC profit before interest and tax
and reconciliation to profit for the period
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
RC profit (loss) before interest and tax*
Upstream 372 (3,085) 4,659
Downstream 2,083 780 794
Rosneft 183 451 518
Other businesses and corporate (308) (647) (497)
Gulf of Mexico oil spill response(a) (323) (468) (29)
Consolidation adjustment - UPII* (129) 257 90
=================================================== ======== ======== ========
RC profit (loss) before interest and tax 1,878 (2,712) 5,535
Finance costs and net finance expense relating
to pensions and other
post-retirement benefits (358) (381) (367)
Taxation on a RC basis 632 2,158 (1,602)
Non-controlling interests (49) (34) (91)
=================================================== ======== ======== ========
RC profit (loss) attributable to BP shareholders 2,103 (969) 3,475
=================================================== ======== ======== ========
Inventory holding gains (losses) 756 (4,985) 102
Taxation (charge) credit on inventory holding
gains and losses (257) 1,547 (49)
=================================================== ======== ======== ========
Profit (loss) for the period attributable to
BP shareholders 2,602 (4,407) 3,528
=================================================== ======== ======== ========
(a) See Note 2 on page 16 for further information on the accounting
for the Gulf of Mexico oil spill response.
Analysis of underlying RC profit before interest and tax
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Underlying RC profit before interest and tax*
Upstream 604 2,246 4,401
Downstream 2,158 1,213 1,011
Rosneft 183 470 271
Other businesses and corporate (290) (120) (489)
Consolidation adjustment - UPII (129) 257 90
======================================================= ======== ======== ========
Underlying RC profit before interest and tax 2,526 4,066 5,284
Finance costs and net finance expense relating
to pensions and other
post-retirement benefits (349) (372) (357)
Taxation on an underlying RC basis 449 (1,421) (1,611)
Non-controlling interests (49) (34) (91)
======================================================= ======== ======== ========
Underlying RC profit attributable to BP shareholders 2,577 2,239 3,225
======================================================= ======== ======== ========
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
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Profit (loss) before interest and tax 390 (3,165) 4,653
Inventory holding (gains) losses* (18) 80 6
======================================================== ======== ======== ========
RC profit (loss) before interest and tax 372 (3,085) 4,659
Net (favourable) unfavourable impact of non-operating
items* and fair
value accounting effects* 232 5,331 (258)
======================================================== ======== ======== ========
Underlying RC profit before interest and tax*(a) 604 2,246 4,401
======================================================== ======== ======== ========
(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
first quarter was $372 million, compared with $4,659 million for
the same period in 2014. The first quarter included a net
non-operating charge of $242 million, compared with a net
non-operating gain of $276 million a year ago. Fair value
accounting effects in the first quarter had a favourable impact of
$10 million, compared with an unfavourable impact of $18 million in
the same period of 2014.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the first quarter was $604 million, compared
with $4,401 million for the same period in 2014. The result for the
first quarter reflected significantly lower liquids and gas
realizations, and lower gas marketing and trading results compared
with strong results in the first quarter last year, partly offset
by increased production and lower costs. Costs were lower, mainly
due to lower exploration write-offs, and also reflecting
simplification and efficiency activities, but this was partially
offset by rig cancellation costs of $375 million for two deepwater
rigs in the Gulf of Mexico. These factors contributed to a
$545-million first-quarter loss in the US.
Production
Production for the quarter was 2,307mboe/d, 8.3% higher than the
first quarter of 2014. Underlying production* increased by 3.7%,
mainly due to the ramp-up of major projects which started up in
2014.
Key events
In March, BP announced a gas discovery in the North Damietta
Offshore Concession in the East Nile Delta in Egypt at the Atoll-1
Deepwater exploration well (BP 100%). In addition, BP signed final
agreements for two West Nile Delta projects Taurus/Libra and
Giza/Fayoum/Raven (BP 65%) with an estimated investment of around
$12 billion by BP and its partner. Production from West Nile Delta
is expected to start in 2017.
Following the start of steam generation at the Sunrise Phase 1
in-situ oil sands project in Alberta, Canada (BP 50%) in December
2014, oil production began in March. Production is expected to ramp
up to full capacity of 60,000 barrels per day around the end of
2016.
On 23 April, BP announced the sale of its equity in the Central
Area Transmission System (CATS) business in the UK North Sea to
Antin Infrastructure Partners for $486 million. BP is currently the
operator of CATS. Subject to the receipt of regulatory and other
third-party approvals, BP aims to complete the sale and transfer of
operatorship before the end of 2015.
Outlook
Looking ahead, we expect second-quarter 2015 reported production
to be lower than the first quarter, reflecting significant seasonal
turnaround and maintenance activity, primarily in the Gulf of
Mexico, and PSA* entitlement impacts.
The commentary above contains forward-looking statements and should
be read in conjunction with the cautionary statement on page 33.
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Upstream
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Underlying RC profit (loss) before interest
and tax
US (545) 1,007 731
Non-US 1,149 1,239 3,670
============================================== ======== ======== ========
604 2,246 4,401
======== ======== ========
Non-operating items
US (68) (30) (59)
Non-US(a) (174) (5,527) 335
============================================== ======== ======== ========
(242) (5,557) 276
======== ======== ========
Fair value accounting effects
US (3) 152 (49)
Non-US 13 74 31
============================================== ======== ======== ========
10 226 (18)
======== ======== ========
RC profit (loss) before interest and tax
US (616) 1,129 623
Non-US 988 (4,214) 4,036
============================================== ======== ======== ========
372 (3,085) 4,659
======== ======== ========
Exploration expense
US(b) 78 426 659
Non-US(c) 94 1,029 289
============================================== ======== ======== ========
172 1,455 948
======== ======== ========
Production (net of royalties)(d)
Liquids* (mb/d)
US 392 407 396
Europe 112 85 106
Rest of World 754 656 582
============================================== ======== ======== ========
1,258 1,149 1,085
======== ======== ========
Natural gas (mmcf/d)
US 1,517 1,526 1,478
Europe 264 163 199
Rest of World 4,307 4,332 4,390
============================================== ======== ======== ========
6,088 6,021 6,067
======== ======== ========
Total hydrocarbons* (mboe/d)
US 653 670 651
Europe 158 114 140
Rest of World 1,496 1,403 1,339
============================================== ======== ======== ========
2,307 2,187 2,131
======== ======== ========
Average realizations*(e)
Total liquids ($/bbl) 46.79 69.03 97.16
Natural gas ($/mcf) 4.44 5.54 6.20
Total hydrocarbons ($/boe) 37.00 51.53 66.16
============================================== ======== ======== ========
(a) Fourth quarter 2014 includes impairment losses of $5,663 million.
See page 26 for more information.
(b) Fourth quarter 2014 includes the write-off of costs relating to
the Moccasin discovery in the deepwater Gulf of Mexico. First quarter
2014 includes a $521-million write-off relating to the Utica shale
acreage in Ohio, following the decision not to proceed with development
plans.
(c) Fourth quarter 2014 includes the write-off of $524 million relating
to the Bourarhat Sud block licence in the Illizi Basin of Algeria.
(d) Includes BP's share of production of equity-accounted entities in
the Upstream segment.
(e) 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
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Profit (loss) before interest and tax 2,783 (4,064) 871
Inventory holding (gains) losses* (700) 4,844 (77)
======================================================== ======== ======== ========
RC profit before interest and tax 2,083 780 794
Net (favourable) unfavourable impact of non-operating
items* and fair
value accounting effects* 75 433 217
======================================================== ======== ======== ========
Underlying RC profit before interest and tax*(a) 2,158 1,213 1,011
======================================================== ======== ======== ========
(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 was $2,083
million for the first quarter, compared with $794 million for the
same period in 2014.
The first-quarter result includes a net non-operating gain of
$37 million, compared with a net non-operating charge of $278
million for the same period in 2014 (see pages 7 and 26 for further
information on non-operating items). Fair value accounting effects
had unfavourable impacts of $112 million for the first quarter,
compared with favourable impacts of $61 million in the same period
of 2014.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the first quarter was $2,158 million, compared
with $1,011 million for the same period in 2014.
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 reported an underlying replacement cost
profit before interest and tax of $1,796 million for the first
quarter compared with $700 million for the same period in 2014. The
result reflects a stronger overall refining environment, despite
weaker crude oil differentials in the US, increased refining
optimization and production and improved marketing performance.
Additionally, the first quarter saw a stronger contribution from
oil supply and trading as well as the benefits of our
simplification and efficiency programmes resulting in lower
costs.
In the quarter we announced the sale of our bitumen business in
Australia and completed the sale of our interest in UTA, a European
fuel cards business.
Lubricants business
The lubricants business reported an underlying replacement cost
profit before interest and tax of $345 million in the first quarter
compared with $307 million in the same period last year. This
performance reflects continued momentum in growth markets and
improved efficiency resulting in lower costs, partially offset by
adverse foreign exchange impacts.
Petrochemicals business
The petrochemicals business reported an underlying replacement
cost profit before interest and tax of $17 million in the first
quarter, compared with $4 million in the same period last year. The
benefit from lower costs was partially offset by a slightly weaker
environment.
In March, we started up the new advanced technology purified
terephthalic acid (PTA) plant in Zhuhai, China which will add over
one million tonnes of PTA capacity per year.
Outlook
In the second quarter we expect refining margins to be similar
to the first quarter and a significantly higher level of turnaround
activity.
The commentary above contains forward-looking statements and should
be read in conjunction with the cautionary statement on page 33.
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Downstream
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Underlying RC profit before interest and tax
- by region
US 661 338 412
Non-US 1,497 875 599
=================================================== ======== ======== ========
2,158 1,213 1,011
======== ======== ========
Non-operating items
US (4) (337) (1)
Non-US 41 (453) (277)
=================================================== ======== ======== ========
37 (790) (278)
======== ======== ========
Fair value accounting effects
US (127) 379 91
Non-US 15 (22) (30)
=================================================== ======== ======== ========
(112) 357 61
======== ======== ========
RC profit before interest and tax
US 530 380 502
Non-US 1,553 400 292
=================================================== ======== ======== ========
2,083 780 794
======== ======== ========
Underlying RC profit before interest and tax
- by business(a)(b)
Fuels 1,796 925 700
Lubricants 345 313 307
Petrochemicals 17 (25) 4
=================================================== ======== ======== ========
2,158 1,213 1,011
======== ======== ========
Non-operating items and fair value accounting
effects(c)
Fuels (60) (383) (217)
Lubricants (14) (45) -
Petrochemicals (1) (5) -
=================================================== ======== ======== ========
(75) (433) (217)
======== ======== ========
RC profit (loss) before interest and tax(a)(b)
Fuels 1,736 542 483
Lubricants 331 268 307
Petrochemicals 16 (30) 4
=================================================== ======== ======== ========
2,083 780 794
======== ======== ========
BP average refining marker margin (RMM)* ($/bbl) 15.2 13.0 13.3
=================================================== ======== ======== ========
Refinery throughputs (mb/d)
US 623 657 614
Europe 805 807 798
Rest of World 324 318 308
=================================================== ======== ======== ========
1,752 1,782 1,720
======== ======== ========
Refining availability* (%) 94.3 94.8 95.0
=================================================== ======== ======== ========
Marketing sales of refined products (mb/d)
US 1,098 1,166 1,120
Europe 1,174 1,173 1,139
Rest of World 607 534 545
=================================================== ======== ======== ========
2,879 2,873 2,804
Trading/supply sales of refined products 2,544 2,470 2,416
=================================================== ======== ======== ========
Total sales volumes of refined products 5,423 5,343 5,220
=================================================== ======== ======== ========
Petrochemicals production (kte)
US 905 872 1,071
Europe 972 937 972
Rest of World 1,663 1,719 1,422
=================================================== ======== ======== ========
3,540 3,528 3,465
======== ======== ========
(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
First Fourth First
quarter quarter quarter
$ million 2015(a) 2014 2014
======== ======== ========
Profit before interest and tax(b) 221 390 549
Inventory holding (gains) losses* (38) 61 (31)
================================================ ======== ======== ========
RC profit before interest and tax 183 451 518
Net charge (credit) for non-operating items* - 19 (247)
================================================ ======== ======== ========
Underlying RC profit before interest and tax* 183 470 271
================================================ ======== ======== ========
Replacement cost profit before interest and tax for the first
quarter was $183 million, compared with $518 million for the same
period in 2014.
There were no non-operating items in the first quarter of 2015
and a non-operating gain of $247 million in the first quarter of
2014.
After adjusting for non-operating items, the underlying
replacement cost profit for the first quarter was $183 million,
compared with $271 million for the same period in 2014. Compared
with the first quarter 2014, the result was affected by lower oil
prices and the unfavourable impact of changes in minerals
extraction tax and export duty rates offset by favourable foreign
exchange effects.
See also Group statement of comprehensive income - Share of
items relating to equity-accounted entities, net of tax, and
footnote (a), on page 12 for other foreign exchange effects.
First Fourth First
quarter quarter quarter
2015(a) 2014 2014
======== ======== ========
Production (net of royalties) (BP share)
Liquids* (mb/d) 816 819 829
Natural gas (mmcf/d) 1,225 1,203 1,023
Total hydrocarbons* (mboe/d) 1,027 1,027 1,006
=========================================== ======== ======== ========
(a) The operational and financial information of the Rosneft segment
for the first quarter is based on preliminary operational and financial
results of Rosneft for the three months ended 31 March 2015. Actual
results may differ from these amounts.
(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 finance costs, taxation and non-controlling interests, as
adjusted, is included in the BP group income statement within profit
before interest and taxation. These adjustments have increased the
reported profit for the first quarter 2015, as shown in the table
above, compared with the equivalent amount in Russian roubles that
we expect Rosneft to report in its own financial statements under
IFRS. BP's share of Rosneft's profit before interest and tax for
each year-to-date period is calculated by translating the amounts
reported in Russian roubles into US dollars using the average exchange
rate for the year to date.
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Other businesses and corporate
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Profit (loss) before interest and tax (308) (647) (497)
Inventory holding (gains) losses* - - -
============================================== ======== ======== ========
RC profit (loss) before interest and tax (308) (647) (497)
Net charge (credit) for non-operating items* 18 527 8
=============================================== ======== ======== ========
Underlying RC profit (loss) before interest
and tax* (290) (120) (489)
=============================================== ======== ======== ========
Underlying RC profit (loss) before interest
and tax
US (62) (167) (99)
Non-US (228) 47 (390)
=============================================== ======== ======== ========
(290) (120) (489)
======== ======== ========
Non-operating items
US (1) (219) (1)
Non-US (17) (308) (7)
=============================================== ======== ======== ========
(18) (527) (8)
======== ======== ========
RC profit (loss) before interest and tax
US (63) (386) (100)
Non-US (245) (261) (397)
=============================================== ======== ======== ========
(308) (647) (497)
======== ======== ========
Other businesses and corporate comprises biofuels and wind
businesses, 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 first
quarter was $308 million, compared with $497 million for the same
period in 2014.
The first-quarter result included a net non-operating charge of
$18 million, compared with a net charge of $8 million a year
ago.
After adjusting for non-operating items, the underlying
replacement cost loss before interest and tax for the first quarter
was $290 million, compared with $489 million for the same period in
2014.
The lower charge in the first quarter results from improved
business performance and lower corporate and functional costs
compared with the same period in 2014.
Biofuels
The first quarter is the inter-harvest period in Brazil so our
three operating mills were on planned turnaround; hence there was
no production.
Wind
Net wind generation capacity*(a) was 1,588MW at 31 March 2015,
compared with 1,590MW at 31 March 2014. BP's net share of wind
generation for the first quarter was 1,128GWh, compared with
1,292GWh for the same period in 2014.
(a) Capacity figures include 32MW in the Netherlands managed by our Downstream
segment.
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Gulf of Mexico oil spill
Financial update
The replacement cost loss before interest and tax for the first
quarter was $323 million, compared with $29 million for the same
period last year. The first-quarter loss reflects additional
business economic loss claims under the Plaintiffs' Steering
Committee settlement, as well as the ongoing costs of the Gulf
Coast Restoration Organization. The cumulative pre-tax charge
recognized to date amounts to $43.8 billion.
The cumulative income statement charge does not include amounts
for obligations that BP currently considers are not possible to
measure reliably. The total amounts that will ultimately be paid by
BP in relation 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. These could have a
material impact on our consolidated financial position, results and
cash flows.
Trust update
As previously disclosed, the cumulative charges to be paid from
the Trust, and the associated reimbursement asset recognized,
reached $20 billion during 2014. Subsequent additional costs are
being charged to the income statement as incurred. See Note 2 on
page 16 for further details.
During the first quarter, $472 million was paid out of the
Deepwater Horizon Oil Spill Trust (the Trust) and qualified
settlement funds (QSFs), including $435 million for claims
payments, administrative costs of the Deepwater Horizon Court
Supervised Settlement Program (DHCSSP) and other resolved items,
and $37 million for natural resource damage early restoration
projects and assessment. At 31 March 2015, the aggregate cash
balances in the Trust and the QSFs amounted to $4.3 billion,
including $0.8 billion remaining in the seafood compensation fund
which is yet to be distributed, and $0.4 billion held for natural
resource damage early restoration projects.
Legal proceedings
In March 2015, following a detailed review of internal controls
and fraud prevention and detection measures at the DHCSSP, which
was facilitated by Special Master Louis Freeh, BP withdrew its
appeal related to its motion to remove the claims administrator.
This action is contributing to a more constructive relationship
with the claims programme.
The penalty phase of the Trial of Liability, Limitation,
Exoneration and Fault Allocation in the Federal multi-district
litigation proceeding in New Orleans (MDL 2179) concluded in
February 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 (or ultimate determinations
on appeal) in Phases 1 and 2, and the application of the penalty
factors under the Clean Water Act. Post-trial briefing on the
penalty phase concluded on 24 April 2015 and the court could issue
its decision at any time.
For further details, see Legal proceedings on page 31.
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Financial statements
Group income statement
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Sales and other operating revenues (Note 4) 54,196 73,997 91,710
Earnings from joint ventures - after interest
and tax 104 181 115
Earnings from associates - after interest and
tax 362 519 783
Interest and other income 120 238 331
Gains on sale of businesses and fixed assets 138 161 49
================================================ ======== ======== ========
Total revenues and other income 54,920 75,096 92,988
Purchases 37,936 60,411 71,468
Production and manufacturing expenses 7,000 7,002 6,831
Production and similar taxes (Note 5) 362 412 986
Depreciation, depletion and amortization 3,836 3,866 3,590
Impairment and losses on sale of businesses
and fixed assets 197 6,768 426
Exploration expense 172 1,455 948
Distribution and administration expenses 2,783 2,879 3,102
Profit (loss) before interest and taxation 2,634 (7,697) 5,637
Finance costs 281 299 287
Net finance expense relating to pensions and
other post-retirement benefits 77 82 80
================================================ ======== ======== ========
Profit (loss) before taxation 2,276 (8,078) 5,270
Taxation (375) (3,705) 1,651
================================================ ======== ======== ========
Profit (loss) for the period 2,651 (4,373) 3,619
================================================ ======== ======== ========
Attributable to
BP shareholders 2,602 (4,407) 3,528
Non-controlling interests 49 34 91
================================================ ======== ======== ========
2,651 (4,373) 3,619
======== ======== ========
Earnings per share (Note 6)
Profit (loss) for the period attributable to
BP shareholders
Per ordinary share (cents)
Basic 14.28 (24.18) 19.09
Diluted 14.21 (24.18) 18.97
Per ADS (dollars)
Basic 0.86 (1.45) 1.15
Diluted 0.85 (1.45) 1.14
================================================ ======== ======== ========
Top of page 12
Financial statements (continued)
Group statement of comprehensive income
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ========= ========
Profit (loss) for the period 2,651 (4,373) 3,619
========================================================= ======== ========= ========
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Currency translation differences (1,612) (3,496) (913)
Exchange gains (losses) on translation of
foreign operations reclassified
to gain or loss on sale of businesses and - 54 -
fixed assets
Available-for-sale investments marked to market - - (3)
Cash flow hedges marked to market (212) (111) 23
Cash flow hedges reclassified to the income
statement 74 17 (20)
Cash flow hedges reclassified to the balance
sheet 5 - (1)
Share of items relating to equity-accounted
entities, net of tax(a) (80) (2,418) (73)
Income tax relating to items that may be reclassified 124 151 -
========================================================= ======== ========= ========
(1,701) (5,803) (987)
======== ========= ========
Items that will not be reclassified to profit
or loss
Remeasurements of the net pension and other
post-retirement benefit
liability or asset (568) (2,825) (936)
Share of items relating to equity-accounted
entities, net of tax - (1) 5
Income tax relating to items that will not
be reclassified 158 856 294
========================================================= ======== ========= ========
(410) (1,970) (637)
======== ========= ========
Other comprehensive income (2,111) (7,773) (1,624)
========================================================= ======== ========= ========
Total comprehensive income 540 (12,146) 1,995
========================================================= ======== ========= ========
Attributable to
BP shareholders 513 (12,155) 1,903
Non-controlling interests 27 9 92
========================================================= ======== ========= ========
540 (12,146) 1,995
======== ========= ========
(a) Includes the effects of hedge accounting adopted by Rosneft from
1 October 2014 in relation to a portion of future export revenue
denominated in US dollars. For further information see BP Annual
Report and Form 20-F 2014 - Financial statements - Note 15.
Top of page 13
Financial statements (continued)
Group statement of changes in equity
BP
shareholders' Non-controlling Total
$ million equity interests equity
============== ================ ========
At 1 January 2015 111,441 1,201 112,642
========================================= ============== ================ ========
Total comprehensive income 513 27 540
Dividends (1,709) (12) (1,721)
Share-based payments, net of tax 51 - 51
Transactions involving non-controlling
interests - (3) (3)
========================================= ============== ================ ========
At 31 March 2015 110,296 1,213 111,509
========================================= ============== ================ ========
BP
shareholders' Non-controlling Total
$ million equity interests equity
============== ================ ========
At 1 January 2014 129,302 1,105 130,407
========================================= ============== ================ ========
Total comprehensive income 1,903 92 1,995
Dividends (1,426) (79) (1,505)
Repurchases of ordinary share capital (1,026) - (1,026)
Share-based payments, net of tax 327 - 327
Transactions involving non-controlling
interests - 2 2
========================================= ============== ================ ========
At 31 March 2014 129,080 1,120 130,200
========================================= ============== ================ ========
Top of page 14
Financial statements (continued)
Group balance sheet
31 March 31 December
$ million 2015 2014
========= ============
Non-current assets
Property, plant and equipment 129,113 130,692
Goodwill 11,633 11,868
Intangible assets 20,809 20,907
Investments in joint ventures 8,871 8,753
Investments in associates 10,312 10,403
Other investments 1,133 1,228
========================================================= ========= ============
Fixed assets 181,871 183,851
Loans 599 659
Trade and other receivables 4,334 4,787
Derivative financial instruments 4,829 4,442
Prepayments 968 964
Deferred tax assets 2,349 2,309
Defined benefit pension plan surpluses 31 31
========================================================= ========= ============
194,981 197,043
========= ============
Current assets
Loans 374 333
Inventories 18,925 18,373
Trade and other receivables 28,756 31,038
Derivative financial instruments 4,103 5,165
Prepayments 1,736 1,424
Current tax receivable 793 837
Other investments 309 329
Cash and cash equivalents 32,434 29,763
========================================================= ========= ============
87,430 87,262
Total assets 282,411 284,305
========================================================= ========= ============
Current liabilities
Trade and other payables 37,817 40,118
Derivative financial instruments 3,167 3,689
Accruals 5,777 7,102
Finance debt 8,538 6,877
Current tax payable 1,977 2,011
Provisions 3,495 3,818
========================================================= ========= ============
60,771 63,615
========= ============
Non-current liabilities
Other payables 2,941 3,587
Derivative financial instruments 4,425 3,199
Accruals 858 861
Finance debt 49,193 45,977
Deferred tax liabilities 12,903 13,893
Provisions 28,569 29,080
Defined benefit pension plan and other post-retirement
benefit plan deficits 11,242 11,451
========================================================= ========= ============
110,131 108,048
========= ============
Total liabilities 170,902 171,663
========================================================= ========= ============
Net assets 111,509 112,642
========================================================= ========= ============
Equity
BP shareholders' equity 110,296 111,441
Non-controlling interests 1,213 1,201
========================================================= ========= ============
111,509 112,642
========= ============
Top of page 15
Financial statements (continued)
Condensed group cash flow statement
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Operating activities
Profit (loss) before taxation 2,276 (8,078) 5,270
Adjustments to reconcile profit (loss) before
taxation to net cash
provided by operating activities
Depreciation, depletion and amortization and
exploration
expenditure written off 3,928 5,215 4,422
Impairment and (gain) loss on sale of businesses
and fixed assets 59 6,607 377
Earnings from equity-accounted entities, less
dividends received (276) (224) (684)
Net charge for interest and other finance
expense, less net interest paid 129 49 170
Share-based payments (238) (58) 106
Net operating charge for pensions and other
post-retirement benefits,
less contributions and benefit payments for
unfunded plans (57) (664) (102)
Net charge for provisions, less payments 388 551 (193)
Movements in inventories and other current
and non-current
assets and liabilities (3,858) 4,842 (315)
Income taxes paid (493) (993) (820)
======================================================== ======== ======== ========
Net cash provided by operating activities 1,858 7,247 8,231
======================================================== ======== ======== ========
Investing activities
Capital expenditure (4,636) (5,900) (5,891)
Acquisitions, net of cash acquired - (118) (10)
Investment in joint ventures (69) (65) (33)
Investment in associates (87) (128) (88)
Proceeds from disposal of fixed assets 653 224 978
Proceeds from disposal of businesses, net of
cash disposed 1,087 880 26
Proceeds from loan repayments 3 48 17
======================================================== ======== ======== ========
Net cash used in investing activities (3,049) (5,059) (5,001)
======================================================== ======== ======== ========
Financing activities
Net repurchase of shares - (793) (1,726)
Proceeds from long-term financing 7,788 2,779 5,979
Repayments of long-term financing (2,307) (2,937) (1,237)
Net increase (decrease) in short-term debt 725 (186) 77
Net increase in non-controlling interests - 9 -
Dividends
paid - BP shareholders (1,709) (1,729) (1,427)
- non-controlling interests (12) (40) (13)
======================================== ======== ======== ========
Net cash provided by (used in) financing activities 4,485 (2,897) 1,653
======================================================== ======== ======== ========
Currency translation differences relating to
cash and cash equivalents (623) (257) (45)
======================================================== ======== ======== ========
Increase (decrease) in cash and cash equivalents 2,671 (966) 4,838
======================================================== ======== ======== ========
Cash and cash equivalents at beginning of period 29,763 30,729 22,520
Cash and cash equivalents at end of period 32,434 29,763 27,358
======================================================== ======== ======== ========
Top of page 16
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 2014 included in the BP Annual
Report and Form 20-F 2014.
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. 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 2015, which do not differ
significantly from those used in BP Annual Report and Form 20-F
2014.
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 2014 - Financial
statements - Note 2 and Legal proceedings on page 228 and on page
31 of this report.
The group income statement includes a pre-tax charge of $332
million for the first quarter in relation to the Gulf of Mexico oil
spill. The first-quarter charge reflects additional business
economic loss claims under the Plaintiffs' Steering Committee (PSC)
settlement 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 $43,827 million.
The cumulative income statement charge does not include amounts
for obligations that BP currently considers are not possible, at
this time, to measure reliably. For further information, see
Provisions below.
The total amounts that will ultimately be paid by BP in relation
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 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.
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Income statement
Production and manufacturing expenses 323 468 29
============================================= ======== ======== ========
Profit (loss) before interest and taxation (323) (468) (29)
Finance costs 9 9 10
============================================= ======== ======== ========
Profit (loss) before taxation (332) (477) (39)
Taxation 112 163 10
============================================= ======== ======== ========
Profit (loss) for the period (220) (314) (29)
============================================= ======== ======== ========
Top of page 17
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
31 March 31 December
$ million 2015 2014
========= ============
Balance sheet
Current assets
Trade and other receivables 1,079 1,154
Current liabilities
Trade and other payables (724) (655)
Provisions (1,562) (1,702)
======================================= ========= ============
Net current assets (liabilities) (1,207) (1,203)
======================================= ========= ============
Non-current assets
Trade and other receivables 2,304 2,701
Non-current liabilities
Other payables (2,098) (2,412)
Accruals (154) (169)
Provisions (6,472) (6,903)
Deferred tax 1,835 1,723
======================================= ========= ============
Net non-current assets (liabilities) (4,585) (5,060)
======================================= ========= ============
Net assets (liabilities) (5,792) (6,263)
======================================= ========= ============
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Cash flow statement - Operating activities
Profit (loss) before taxation (332) (477) (39)
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 paid 9 9 10
Net charge for provisions, less payments 227 334 (97)
Movements in inventories and other current
and non-current
assets and liabilities (595) 3 (578)
============================================== ======== ======== ========
Pre-tax cash flows (691) (131) (704)
============================================== ======== ======== ========
Net cash from operating activities relating to the Gulf of
Mexico oil spill, on a post-tax basis, amounted to an outflow of
$691 million in the first quarter. For the first quarter and fourth
quarter of 2014, the amounts were an outflow of $584 million and an
inflow of $304 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.
The funding of the Trust was completed in 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. During 2014,
cumulative charges to be paid by the Trust reached $20 billion.
Subsequent additional costs, over and above those provided within
the $20 billion, are expensed to the income statement as
incurred.
At 31 March 2015, $3,383 million of the provisions and payables
are eligible to be paid from the Trust. The reimbursement asset is
recorded within other receivables on the balance sheet, of which
$1,079 million is classified as current and $2,304 million as
non-current. During the first quarter of 2015, $470 million of
provisions and $2 million of payables were paid from the Trust.
At 31 March 2015, the aggregate cash balances in the Trust and
the associated qualifying settlement funds amounted to $4.3
billion, including $0.8 billion remaining in the seafood
compensation fund which has yet to be distributed and $0.4 billion
held for natural resource damage early restoration projects. When
the cash balances in the trust fund are exhausted, payments in
respect of legitimate claims and other costs will be made directly
by BP.
Top of page 18
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
(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 2014 - 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 first quarter are presented in the table
below.
Litigation Clean
and Water Act
$ million Environmental claims penalties Total
============== =========== ========== ======
At 1 January 2015 1,141 3,954 3,510 8,605
Net increase in provision 1 294 - 295
Unwinding of discount 1 - - 1
Reclassified to other payables (329) - - (329)
Utilization - paid by BP (19) (49) - (68)
- paid by the trust
fund (35) (435) - (470)
===================== ============== =========== ========== ======
At 31 March 2015 760 3,764 3,510 8,034
=================================== ============== =========== ========== ======
Of which - current 405 1,157 - 1,562
- non-current 355 2,607 3,510 6,472
===================== ============== =========== ========== ======
Environmental
The environmental provision includes amounts for estimated
natural resource damage assessment costs and natural resource
damage early 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 under the
Oil Pollution Act of 1990 and other legislation (State and Local
Claims). Amounts that cannot be measured reliably and which have
therefore not been provided for are described under Contingent
liabilities below. Claims administration costs and legal costs have
also been provided for. The timing of payment of litigation and
claims provisions classified as non-current is dependent upon
ongoing legal and claims facility activity and is therefore
uncertain.
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, except where an eligibility
notice has been issued and is not subject to appeal by BP within
the claims facility. As disclosed in BP Annual Report and Form 20-F
2014, as part of its monitoring of payments made by the Deepwater
Horizon Court Supervised Settlement Program (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 228-237 of BP Annual Report and Form 20-F 2014
and page 31 of this report for further details on the settlements
with the PSC and related matters.
Management believes that no reliable estimate can currently be
made of any business economic loss claims (i) not yet received;
(ii) received, but not yet processed; or (iii) processed, but not
yet paid, except where an eligibility notice has been issued and is
not subject to appeal by BP within the claims facility. The
inability to estimate reliably such claims is due to uncertainty
regarding both the volume of such claims and the average value per
claim, as described further below.
In respect of uncertainty regarding the volume of claims, in
December 2014, the US Supreme Court declined to hear BP's appeal of
the district court ruling that the EPD Settlement Agreement
contained no causation requirement beyond the revenue and related
tests set forth in that agreement. This resolution, however, does
not reduce uncertainty in the short term regarding the volume of
claims, since it is possible that additional claims will be made.
In addition, a claims submission deadline of 8 June 2015 has now
been set, which may lead to an increase in the rate of claims
received until the deadline, compounding management's inability to
estimate the total volume of claims that will be made.
Top of page 19
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
In respect of uncertainty regarding the average value per claim,
a small proportion of the filed claims have been determined under
the revised policy for the matching of revenue and expenses for
business economic loss claims (introduced in May 2014) and
disputes, disagreements and uncertainties regarding the proper
application of the revised policy to particular claims and
categories of claims continue to arise as the claims administrator
has begun applying the revised policy. Furthermore, there have been
no, or only a small number of, claim determinations made under some
of the specialized frameworks that have been put in place for
particular industries and so determinations to date may not be
representative of the total population of claims. In addition, due
to a data secrecy order, detailed data about claims that have not
yet been determined is not currently available to BP and so it is
not possible to review claim demographics or identify potential
populations for each category of claim.
There is therefore very little data to build up a track record
of claims determinations under the policies and protocols that are
now being applied following resolution of the matching and
causation issues. We therefore cannot estimate future trends of the
number and proportion of claims that will be determined to be
eligible, nor can we estimate the value of such claims. A provision
for such business economic loss claims will be established when
these uncertainties are resolved and a reliable estimate can be
made of the liability.
The current estimate for the total cost of those elements of the
PSC settlement that BP considers can be reliably estimated,
including amounts already paid, is $10.3 billion. The DHCSSP has
issued eligibility notices, most of which are disputed by BP, in
respect of business economic loss claims of approximately $377
million which have not been provided for. 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 $10.3 billion because the current estimate does not reflect
business economic loss claims not yet received, or received but not
yet processed, or processed but not yet paid, except where an
eligibility notice has been issued and is not subject to appeal by
BP within the claims facility.
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 228-237 of BP Annual Report and Form 20-F 2014
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 31 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 and in relation to future legal costs.
Clean Water Act penalties
A provision of $3,510 million was recognized in 2010 for
estimated civil penalties under Section 311 of the Clean Water Act.
The Clean Water Act penalty is calculated by multiplying the number
of barrels of oil spilled by a penalty rate per barrel. The number
of barrels of oil spilled was determined by using the mid-point in
the range of estimates (3.2 million barrels). A penalty rate of
$1,100 per barrel was applied, the statutory maximum penalty in the
absence of gross negligence or wilful misconduct.
In September 2014, the district court issued its decision in the
Phase 1 trial that the discharge of oil was the result of the gross
negligence and wilful misconduct of BP Exploration & Production
Inc. (BPXP) and that BPXP is therefore subject to enhanced civil
penalties. The statutory maximum penalty is up to $4,300 per barrel
of oil discharged where gross negligence or wilful misconduct is
proven. BP does not believe that the evidence at trial supports the
finding of gross negligence and wilful misconduct and in December
2014 filed notice of appeal of the Phase 1 ruling.
In January 2015, the district court issued its decision in the
Phase 2 trial that 3.19 million barrels of oil were discharged into
the Gulf of Mexico and therefore subject to a Clean Water Act
penalty. This amount is consistent with the number of barrels BP
has used to calculate the provision. In addition, the district
court found that BP was not grossly negligent in its source control
efforts. The estimates of cumulative discharge presented by experts
testifying in the Phase 2 trial varied significantly. BPXP and the
Department of Justice have appealed the district court's ruling
with regard to the quantity of oil discharged. Other parties have
also appealed the Phase 2 ruling. Therefore, the findings from the
Phase 2 trial remain subject to uncertainty.
BP continues to believe that a provision of $3,510 million
represents a reliable estimate of the amount of the liability if
the appeal of the Phase 1 ruling is successful and this provision,
calculated on the basis of the previous assumptions, has been
maintained in the accounts.
Top of page 20
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
If BP is unsuccessful in its appeal, and the ruling of gross
negligence and wilful misconduct is upheld, the maximum penalty
that could be imposed is up to $4,300 per barrel. Based upon this
penalty rate and the district court's ruling on the number of
barrels spilled, which as noted above is also subject to appeal,
the maximum penalty could be up to $13.7 billion.
However, in assessing the amount of the penalty, the court is
directed to consider the following statutory penalty factors: 'the
seriousness of the violation or violations, the economic benefit to
the violator, if any, resulting from the violation, the degree of
culpability involved, any other penalty for the same incident, any
history of prior violations, the nature, extent, and degree of
success of any efforts of the violator to minimize or mitigate the
effects of the discharge, the economic impact of the penalty on the
violator, and any other matters as justice may require'. The court
has wide discretion in deciding how to apply these factors to
determine the penalty and what weighting to ascribe to different
factors. BP is therefore unable to ascribe probabilities to
possible outcomes within the range of potential penalties and
cannot determine a reliable estimate for any additional penalty
which might apply should the gross negligence finding be upheld.
Post-trial briefing on the trial phase to determine the amount of
the Clean Water Act penalty concluded on 24 April 2015 and the
court could issue its decision at any time.
The amount that may become payable by BP is subject to a very
high level of uncertainty since it will depend on the outcome of
the pending appeals as well as what is determined by the district
court with respect to the application of statutory penalty factors
as noted above. The court has wide discretion in the application of
statutory penalty factors. The timing of any payment is also
uncertain.
Given the significant uncertainty, the very wide range of
possible outcomes if BP is unsuccessful in its appeal of the
September ruling, and the inability to ascribe probabilities to
possible outcomes within the range, management is not able to
estimate reliably any further liability for the Clean Water Act
penalty arising in the event that BP is not successful in its
appeal. A contingent liability is therefore disclosed. See
Contingent liabilities below for further information.
See BP Annual Report and Form 20-F 2014 - Financial statements -
Note 2 for further details and Legal proceedings on pages 228-237
and on page 31 of this report.
Provision movements and analysis of income statement charge
A net increase in provisions of $295 million for the first
quarter arises primarily due to increases in the provision for
business economic loss claims. The following table shows an
analysis of the income statement charge.
First Fourth Cumulative
quarter quarter since the
$ million 2015 2014 incident
======== ======== ===========
Environmental costs 1 2 3,224
Spill response costs - - 14,304
Litigation and claims costs 294 435 27,074
Clean Water Act penalties - amount
provided - - 3,510
Other costs charged directly to the
income statement 28 31 1,285
Recoveries credited to the income statement - - (5,681)
Charge (credit) related to the trust
fund - - (137)
Other costs of the trust fund - - 8
================================================ ======== ======== ===========
Loss before interest and taxation 323 468 43,587
Finance
costs - related to the trust funds - - 137
- not related to the trust
funds 9 9 103
==================================== ======== ======== ===========
Loss before taxation 332 477 43,827
================================================ ======== ======== ===========
Further information on provisions is provided in BP Annual
Report and Form 20-F 2014 - Financial statements - Note 2.
Top of page 21
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Contingent liabilities
BP currently considers that it is not possible 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 228-237 of BP
Annual Report and Form 20-F 2014 and page 31 of this report.
-- The cost of business economic loss claims under the PSC
settlement not yet received, or received but not yet processed, or
processed but not yet paid (except where an eligibility notice has
been issued and is not subject to appeal by BP within the claims
facility).
-- Any further obligation that may arise from State and Local Claims.
-- Any obligation that may arise from securities-related litigation.
-- Any obligation in relation to any further liability for the
Clean Water Act penalty arising in the event that BP is not
successful in its appeal of the Phase 1 ruling, or if any appeal of
the Phase 2 ruling results in the determination of a higher volume
of oil discharged.
-- Any obligation in relation to other potential private or
governmental litigation, fines or penalties (except for those items
provided for as described above under Provisions).
It is not practicable to estimate the magnitude or possible
timing of payment of these contingent liabilities.
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 2014 - Financial
statements - Note 2.
3. Analysis of replacement cost profit before interest and tax and reconciliation to
profit before taxation
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Upstream 372 (3,085) 4,659
Downstream 2,083 780 794
Rosneft 183 451 518
Other businesses and corporate (308) (647) (497)
============================================ ======== ======== ========
2,330 (2,501) 5,474
Gulf of Mexico oil spill response (323) (468) (29)
Consolidation adjustment - UPII* (129) 257 90
============================================ ======== ======== ========
RC profit (loss) before interest and tax 1,878 (2,712) 5,535
Inventory holding gains (losses)*
Upstream 18 (80) (6)
Downstream 700 (4,844) 77
Rosneft (net of tax) 38 (61) 31
============================================ ======== ======== ========
Profit (loss) before interest and tax 2,634 (7,697) 5,637
Finance costs 281 299 287
Net finance expense relating to pensions
and other
post-retirement benefits 77 82 80
============================================ ======== ======== ========
Profit (loss) before taxation 2,276 (8,078) 5,270
============================================ ======== ======== ========
RC profit (loss) before interest and tax*
US (497) 683 1,125
Non-US 2,375 (3,395) 4,410
============================================ ======== ======== ========
1,878 (2,712) 5,535
======== ======== ========
Top of page 22
Financial statements (continued)
Notes
4. Sales and other operating revenues
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
By segment
Upstream 11,630 15,800 17,006
Downstream 48,125 65,249 84,298
Other businesses and corporate 428 616 431
============================================== ======== ======== ========
60,183 81,665 101,735
======== ======== ========
Less: sales and other operating revenues
between segments
Upstream 5,563 8,270 9,217
Downstream 176 (814) 562
Other businesses and corporate 248 212 246
============================================== ======== ======== ========
5,987 7,668 10,025
======== ======== ========
Third party sales and other operating
revenues
Upstream 6,067 7,530 7,789
Downstream 47,949 66,063 83,736
Other businesses and corporate 180 404 185
============================================== ======== ======== ========
Total third party sales and other operating
revenues 54,196 73,997 91,710
============================================== ======== ======== ========
By geographical area
US 18,841 27,300 34,825
Non-US 38,688 51,933 66,305
============================================== ======== ======== ========
57,529 79,233 101,130
Less: sales and other operating revenues
between areas 3,333 5,236 9,420
============================================== ======== ======== ========
54,196 73,997 91,710
======== ======== ========
5. Production and similar taxes
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
US 34 56 279
Non-US 328 356 707
============ ======== ======== ========
362 412 986
======== ======== ========
6. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated
by dividing the profit (loss) for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during 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.
Top of page 23
Financial statements (continued)
Notes
6. Earnings per share and shares in issue (continued)
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. If the
inclusion of potentially issuable shares would decrease the loss
per share, the potentially issuable shares are excluded from the
diluted EpS calculation.
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
=========== =========== ===========
Results for the period
Profit (loss) for the period attributable
to BP shareholders 2,602 (4,407) 3,528
Less: preference dividend - 1 -
=============================================== =========== =========== ===========
Profit (loss) attributable to BP ordinary
shareholders 2,602 (4,408) 3,528
================================================ =========== =========== ===========
Number of shares (thousand)(a)
Basic weighted average number of shares
outstanding 18,220,486 18,232,147 18,480,826
ADS equivalent 3,036,747 3,038,691 3,080,137
================================================ =========== =========== ===========
Weighted average number of shares outstanding
used
to calculate diluted earnings per share 18,309,730 18,332,091 18,594,518
ADS equivalent 3,051,621 3,055,348 3,099,086
================================================ =========== =========== ===========
Shares in issue at period-end 18,249,422 18,199,882 18,457,009
ADS equivalent 3,041,570 3,033,313 3,076,168
================================================ =========== =========== ===========
(a) Excludes treasury shares and includes certain shares that will
be issued in the future under employee share-based payment
plans.
7. Dividends
Dividends payable
BP today announced an interim dividend of 10.00 cents per
ordinary share which is expected to be paid on 19 June 2015 to
shareholders and American Depositary Share (ADS) holders on the
register on 8 May 2015. The corresponding amount in sterling is due
to be announced on 8 June 2015, calculated based on the average of
the market exchange rates for the four dealing days commencing on 2
June 2015. Holders of ADSs are expected to receive $0.600 per ADS.
With effect from and including this dividend, an annual fee of
$0.02 per ADS (or $0.005 per ADS per quarter) will be charged. A
scrip dividend alternative is available, allowing shareholders to
elect to receive their dividend in the form of new ordinary shares
and ADS holders in the form of new ADSs. Details of the
first-quarter dividend and timetable are available at
bp.com/dividends and details of the scrip dividend programme are
available at bp.com/scrip.
Dividends paid
First Fourth First
quarter quarter quarter
2015 2014 2014
======== ======== ========
Dividends paid per ordinary share
cents 10.000 10.000 9.500
pence 6.670 6.377 5.707
Dividends paid per ADS (cents) 60.00 60.00 57.00
===================================== ======== ======== ========
Scrip dividends
Number of shares issued (millions) 15.7 13.7 40.2
Value of shares issued ($ million) 109 95 326
===================================== ======== ======== ========
Top of page 24
Financial statements (continued)
Notes
8. Net debt*
Net debt ratio*
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Gross debt 57,731 52,854 53,249
Fair value asset of hedges related to
finance debt(a) (174) (445) (633)
======================================== ======== ======== ========
57,557 52,409 52,616
Less: cash and cash equivalents 32,434 29,763 27,358
======================================== ======== ======== ========
Net debt 25,123 22,646 25,258
======================================== ======== ======== ========
Equity 111,509 112,642 130,200
Net debt ratio 18.4% 16.7% 16.2%
======================================== ======== ======== ========
Analysis of changes in net debt
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Opening balance
Finance debt 52,854 53,610 48,192
Fair value asset of hedges related to
finance debt(a) (445) (434) (477)
Less: cash and cash equivalents 29,763 30,729 22,520
=============================================== ======== ======== ========
Opening net debt 22,646 22,447 25,195
=============================================== ======== ======== ========
Closing balance
Finance debt 57,731 52,854 53,249
Fair value asset of hedges related to
finance debt(a) (174) (445) (633)
Less: cash and cash equivalents 32,434 29,763 27,358
=============================================== ======== ======== ========
Closing net debt 25,123 22,646 25,258
=============================================== ======== ======== ========
Decrease (increase) in net debt (2,477) (199) (63)
=============================================== ======== ======== ========
Movement in cash and cash equivalents
(excluding exchange adjustments) 3,294 (709) 4,883
Net cash outflow (inflow) from financing
(excluding share capital and dividends) (6,206) 344 (4,819)
Other movements 11 (3) (118)
=============================================== ======== ======== ========
Movement in net debt before exchange effects (2,901) (368) (54)
Exchange adjustments 424 169 (9)
=============================================== ======== ======== ========
Decrease (increase) in net debt (2,477) (199) (63)
=============================================== ======== ======== ========
(a) Derivative financial instruments entered into for the purpose
of managing interest rate and foreign currency exchange risk
associated with net debt with a fair value liability position
of $1,650 million (fourth quarter 2014 liability of $774 million
and first quarter 2014 asset of $44 million) are not included
in the calculation of net debt shown above as hedge accounting
was not applied for these instruments.
9. Inventory valuation
A provision of $797 million was held at 31 March 2015 ($2,879
million at 31 December 2014 and $410 million at 31 March 2014) to
write inventories down to their net realizable value. The net
movement credited to the income statement during the first quarter
2015 was $2,024 million (fourth quarter 2014 was a charge of $1,924
million and first quarter 2014 was a charge of $88 million).
10. Statutory accounts
The financial information shown in this publication, which was
approved by the Board of Directors on 27 April 2015, is unaudited
and does not constitute statutory financial statements. BP Annual
Report and Form 20-F 2014 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 25
Additional information
Capital expenditure and acquisitions
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
By segment
Upstream
US 1,135 1,560 1,698
Non-US(a) 2,896 3,546 3,699
========================================= ======== ======== ========
4,031 5,106 5,397
======== ======== ========
Downstream
US 145 265 206
Non-US 199 984 344
========================================= ======== ======== ========
344 1,249 550
======== ======== ========
Other businesses and corporate
US 16 38 3
Non-US 74 341 135
========================================= ======== ======== ========
90 379 138
======== ======== ========
4,465 6,734 6,085
======== ======== ========
By geographical area
US 1,296 1,863 1,907
Non-US(a) 3,169 4,871 4,178
========================================= ======== ======== ========
4,465 6,734 6,085
======== ======== ========
Included above:
Acquisitions and asset exchanges 28 150 236
Other inorganic capital expenditure(a) - 27 442
========================================= ======== ======== ========
(a) First quarter and fourth quarter 2014 include $442 million and $27
million respectively relating to the purchase of additional 3.3%
equity in Shah Deniz, Azerbaijan and the South Caucasus Pipeline.
Capital expenditure shown in the table above is presented on an
accruals basis.
Top of page 26
Additional information (continued)
Non-operating items*
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Upstream
Impairment and gain (loss) on sale of businesses
and fixed assets(a) (113) (5,685) (116)
Environmental and other provisions 11 (1) -
Restructuring, integration and rationalization
costs (181) (100) -
Fair value gain (loss) on embedded derivatives 41 187 98
Other - 42 294
=================================================== ======== ======== ========
(242) (5,557) 276
======== ======== ========
Downstream
Impairment and gain (loss) on sale of businesses
and fixed assets 66 (614) (255)
Environmental and other provisions - (5) -
Restructuring, integration and rationalization
costs (28) (158) (1)
Fair value gain (loss) on embedded derivatives - - -
Other (1) (13) (22)
=================================================== ======== ======== ========
37 (790) (278)
======== ======== ========
Rosneft
Impairment and gain (loss) on sale of businesses
and fixed assets - (19) 247
Environmental and other provisions - - -
Restructuring, integration and rationalization - - -
costs
Fair value gain (loss) on embedded derivatives - - -
Other - - -
================================================== ======== ======== ========
- (19) 247
======== ======== ========
Other businesses and corporate
Impairment and gain (loss) on sale of businesses
and fixed assets (12) (308) (6)
Environmental and other provisions - (35) -
Restructuring, integration and rationalization
costs (6) (175) (1)
Fair value gain (loss) on embedded derivatives - - -
Other - (9) (1)
=================================================== ======== ======== ========
(18) (527) (8)
======== ======== ========
Gulf of Mexico oil spill response (323) (468) (29)
=================================================== ======== ======== ========
Total before interest and taxation (546) (7,361) 208
Finance costs(b) (9) (9) (10)
=================================================== ======== ======== ========
Total before taxation (555) (7,370) 198
Taxation credit (charge)(c) 142 3,805 26
=================================================== ======== ======== ========
Total after taxation for period (413) (3,565) 224
=================================================== ======== ======== ========
(a) The main elements of Upstream fourth quarter 2014 impairment losses
were in the North Sea ($4,518 million) and in Angola ($968 million).
(b) Finance costs relate to the Gulf of Mexico oil spill. See Note 2
for further details.
(c) Non-operating items reported within the equity-accounted earnings
of Rosneft are reported net of income tax.
Top of page 27
Additional information (continued)
Non-GAAP information on fair value accounting effects
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Favourable (unfavourable) impact relative to
management's
measure of performance
Upstream 10 226 (18)
Downstream (112) 357 61
=============================================== ======== ======== ========
(102) 583 43
Taxation credit (charge) 41 (226) (17)
=============================================== ======== ======== ========
(61) 357 26
======== ======== ========
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 historical 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 is 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.
First Fourth First
quarter quarter quarter
$ million 2015 2014 2014
======== ======== ========
Upstream
Replacement cost profit (loss) before interest
and tax adjusted for fair value
accounting effects 362 (3,311) 4,677
Impact of fair value accounting effects 10 226 (18)
================================================= ======== ======== ========
Replacement cost profit (loss) before interest
and tax 372 (3,085) 4,659
================================================= ======== ======== ========
Downstream
Replacement cost profit before interest and
tax adjusted for fair value
accounting effects 2,195 423 733
Impact of fair value accounting effects (112) 357 61
================================================= ======== ======== ========
Replacement cost profit before interest and
tax 2,083 780 794
================================================= ======== ======== ========
Total group
Profit (loss) before interest and tax adjusted
for fair value accounting effects 2,736 (8,280) 5,594
Impact of fair value accounting effects (102) 583 43
================================================= ======== ======== ========
Profit (loss) before interest and tax 2,634 (7,697) 5,637
================================================= ======== ======== ========
Top of page 28
Additional information (continued)
Realizations* and marker prices
First Fourth First
quarter quarter quarter
2015 2014 2014
======== ======== ========
Average realizations(a)
Liquids* ($/bbl)
US 46.24 71.41 89.81
Europe 52.28 71.10 104.10
Rest of World 46.13 66.61 102.69
BP Average 46.79 69.03 97.16
============================================== ======== ======== ========
Natural gas ($/mcf)
US 2.39 3.30 4.62
Europe 7.32 8.19 9.76
Rest of World 5.05 6.33 6.62
BP Average 4.44 5.54 6.20
============================================== ======== ======== ========
Total hydrocarbons* ($/boe)
US 33.20 51.92 65.70
Europe 49.35 65.35 92.63
Rest of World 37.41 49.88 62.76
BP Average 37.00 51.53 66.16
============================================== ======== ======== ========
Average oil marker prices ($/bbl)
Brent 53.94 76.58 108.21
West Texas Intermediate 48.49 73.62 98.69
Western Canadian Select 36.69 57.47 76.98
Alaska North Slope 51.95 74.66 105.73
Mars 49.15 72.69 100.83
Urals (NWE - cif) 52.59 75.19 106.24
============================================== -------- -------- --------
Average natural gas marker prices
Henry Hub gas price ($/mmBtu)(b) 2.99 4.04 4.95
UK Gas - National Balancing Point (p/therm) 47.90 52.83 60.28
============================================== ======== ======== ========
(a) Based on sales of consolidated subsidiaries only - this excludes
equity-accounted entities.
(b) Henry Hub First of Month Index.
Exchange rates
First Fourth First
quarter quarter quarter
2015 2014 2014
======== ======== ========
$/GBP average rate for the period 1.51 1.58 1.65
$/GBP period-end rate 1.48 1.56 1.66
$/EUR average rate for the period 1.12 1.25 1.37
$/EUR period-end rate 1.08 1.22 1.38
Rouble/$ average rate for the period 63.03 47.71 35.07
Rouble/$ period-end rate 57.79 55.65 35.69
======================================= ======== ======== ========
Top of page 29
Glossary
Consolidation adjustment - UPIIis unrealized profit in inventory
arising on inter-segment transactions.
Fair value accounting effects are non-GAAP adjustments to our
IFRS profit (loss) 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 27.
Hydrocarbons -Liquids and natural gas. Natural gas is converted
to oil equivalent at 5.8 billion cubic feet = 1 million
barrels.
Inventory holding gains and losses represent the difference
between the cost of sales calculated using the replacement cost of
inventory and the cost of sales calculated on the first-in
first-out (FIFO) method after adjusting for any changes in
provisions where the net realizable value of the inventory is lower
than its cost. Under the FIFO method, which we use for IFRS
reporting, the cost of inventory charged to the income statement is
based on its historical cost of purchase or manufacture, rather
than its replacement cost. In volatile energy markets, this can
have a significant distorting effect on reported income. The
amounts disclosed represent the difference between the charge to
the income statement for inventory on a FIFO basis (after adjusting
for any related movements in net realizable value provisions) and
the charge that would have arisen based on the replacement cost of
inventory. For this purpose, the replacement cost of inventory is
calculated using data from each operation's production and
manufacturing system, either on a monthly basis, or separately for
each transaction where the system allows this approach. The amounts
disclosed are not separately reflected in the financial statements
as a gain or loss. No adjustment is made in respect of the cost of
inventories held as part of a trading position and certain other
temporary inventory positions. See Replacement cost (RC) profit or
loss definition below.
Liquids comprises crude oil, condensate and natural gas
liquids.
Net debt and net debt ratio are non-GAAP measures. Net debt is
calculated as gross finance debt, as shown in the balance sheet,
plus the fair value of associated derivative financial instruments
that are used to hedge foreign currency exchange and interest rate
risks relating to finance debt, for which hedge accounting is
applied, less cash and cash equivalents. The net debt ratio is
defined as the ratio of net debt to the total of net debt plus
shareholders' equity. All components of equity are included in the
denominator of the calculation. BP believes these measures 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 derivatives are reported on the balance sheet within the
headings 'Derivative financial instruments'.
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 itemsare charges and credits included in the
financial statements 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. Non-operating items within
equity-accounted earnings are reported net of incremental income
tax reported by the equity-accounted entity. An analysis of
non-operating items by region is shown on pages 5, 7 and 9, and by
segment and type is shown on page 26.
Organic capital expenditureexcludes acquisitions, asset
exchanges, and other inorganic capital expenditure. An analysis of
capital expenditure by segment and region is shown on page 25.
Production-sharing agreement (PSA) is an arrangement through
which an oil company bears the risks and costs of exploration,
development and production. In return, if exploration is
successful, the oil company receives entitlement to variable
physical volumes of hydrocarbons, representing recovery of the
costs incurred and a stipulated share of the production remaining
after such cost recovery.
Realizations are the result of dividing revenue generated from
hydrocarbon sales, excluding revenue generated from purchases made
for resale and royalty volumes, by revenue generating hydrocarbon
production volumes. Revenue generating hydrocarbon production
reflects the BP share of production as adjusted for any production
which does not generate revenue. Adjustments may include losses due
to shrinkage, amounts consumed during processing, and contractual
or regulatory host committed volumes such as royalties.
Refining availabilityrepresents Solomon Associates' operational
availability, which is defined as the percentage of the year that a
unit is available for processing after subtracting the annualized
time lost due to turnaround activity and all planned mechanical,
process and regulatory downtime.
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.
Top of page 30
Glossary (continued)
Replacement cost (RC) profit or loss reflects the replacement
cost of inventories sold in the period 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 that is required
to be disclosed for each operating segment under International
Financial Reporting Standards (IFRS). RC profit or loss for the
group is not a recognized GAAP measure. Management believes this
measure is useful to illustrate to investors the fact that crude
oil and product prices can vary significantly from period to period
and that the impact on our reported result under IFRS can be
significant. Inventory holding gains and losses vary from period to
period due to changes in prices as well as changes in underlying
inventory levels. In order for investors to understand the
operating performance of the group excluding the impact of 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.
Underlying production is production after adjusting for
divestments and entitlement impacts in our production-sharing
agreements.
Underlying RC profit or lossis 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 26 and 27 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. The nearest equivalent measure on an IFRS basis for the
group is profit or loss for the year attributable to BP
shareholders. The nearest equivalent measure on an IFRS basis for
segments is RC profit or loss before interest and taxation.
Top of page 31
Legal proceedings
The following discussion sets out the material developments in
the group's material legal proceedings during the recent period.
For a full discussion of the group's material legal proceedings,
see pages 228-238 of BP Annual Report and Form 20-F 2014.
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
US Department of Justice (DoJ) Action - Liability under Section
311(b)(7)(A) of the Clean Water Act - As previously disclosed, on
22 February 2012, the federal district court in New Orleans (the
District Court) held that the subsurface discharge which occurred
during the Incident was from the Macondo well, rather than from the
Deepwater Horizon vessel, and that BP Exploration & Production
Inc. (BPXP) and Anadarko Petroleum Company (Anadarko), and not
Transocean Ltd., are liable for civil penalties under Section 311
of the Clean Water Act as owners of the well. Following an
unsuccessful appeal to the US Court of Appeals for the Fifth
Circuit (the Fifth Circuit), on 21 July 2014, Anadarko and BPXP
filed petitions requesting that all active judges of the Fifth
Circuit review the appeal. On 9 January 2015, the Fifth Circuit
issued an order denying the petition for rehearing, on a 7-6 vote.
On 24 March 2015 and 9 April 2015, Anadarko and BPXP, respectively,
filed petitions for certiorari with the US Supreme Court seeking
review of the Fifth Circuit's order.
Trial Phases - As previously disclosed, on 4 September 2014, the
District Court issued its ruling on Findings of Fact and Conclusion
of Law for Phase 1 (Phase 1) of the Trial of Liability, Limitation,
Exoneration and Fault Allocation in MDL 2179. The court found that
BPXP, BP America Production Company's (BPAPC), Transocean Holdings
LLC, Transocean Deepwater Inc., Transocean Offshore Deepwater
Drilling Inc. (Transocean Entities), and Halliburton Energy
Services, Inc. (Halliburton) are each liable under general maritime
law for the blowout, explosion, and oil spill from the Macondo
well. The court found that the conduct of BPXP and BPAPC was
reckless, and apportioned the fault for the blowout, explosion, and
oil spill among the liable parties.
The District Court found that the discharge of oil was the
result of BPXP's gross negligence and wilful misconduct and that
BPXP is therefore subject to enhanced civil penalties. The court
further found that BPXP was an 'operator' and 'person in charge' of
the Macondo well and the Deepwater Horizon vessel for the purposes
of the Clean Water Act. On 11 December 2014, BPXP and BPAPC filed a
notice of appeal of the Phase 1 ruling to the Fifth Circuit, and
subsequently notices of appeal were also filed by the PSC,
Transocean, Halliburton and the State of Alabama. The Fifth Circuit
has set a briefing schedule for the Phase 1 appeal under which BP's
opening brief is due on 11 May 2015 and briefing is to be completed
by September 2015.
On 15 January 2015, the District Court issued its ruling for
phase 2 of MDL 2179 (Phase 2) on the quantification of oil spilled
and BP's source control efforts following the accident. The
District Court found that 3.19 million barrels of oil were
discharged into the Gulf of Mexico and are therefore subject to a
Clean Water Act penalty and that BP was not grossly negligent in
its source control efforts. On 23 February 2015, BPXP filed a
notice of appeal of the Phase 2 ruling to the Fifth Circuit. On 13
March 2015, the United States also filed a notice of appeal. Other
parties have also appealed the Phase 2 ruling. No briefing schedule
has yet been issued for the Phase 2 appeal.
Trial in the penalty phase of MDL 2179 (the Penalty Phase)
commenced on 20 January 2015 and concluded on 2 February 2015. In
the Penalty Phase, the District Court will determine the amount of
civil penalties owed to the US under the Clean Water Act based on
the court's rulings (or ultimate determinations on appeal) in
Phases 1 and 2, and the application of the penalty factors under
the Clean Water Act. Post-trial briefing concluded on 24 April
2015. The District Court has wide discretion in its application of
statutory penalty factors. BP is not aware of the timing of the
District Court's ruling in respect of the Penalty Phase and the
District Court could issue its decision at any time.
For further information, see pages 228-237 of BP Annual Report
and Form 20-F 2014 and Note 2 on page 16.
Plaintiffs' Steering Committee (PSC) Settlements - Deepwater
Horizon Court Supervised Settlement Program (DHCSSP) and
interpretation of the Economic and Property Damages Settlement
Agreement. On 24 December 2013, the District Court issued a ruling
on the issues remanded to it in October 2013 by the business
economic loss panel of the Fifth Circuit. Part of that ruling
directed the claims administrator, in administering business
economic loss claims, to match revenue with corresponding variable
expenses. On 13 March 2014, the claims administrator issued a
revised matching policy reflecting this order. 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. This
motion was denied by the district court on 31 March 2015 and, on 23
April 2015, the PSC appealed this decision to the Fifth
Circuit.
On 10 November 2014, the District Court denied BP's motion
seeking an order removing Patrick Juneau from his roles as claims
administrator and settlement trustee for the Economic and Property
Damages Settlement. BP appealed this decision to the Fifth Circuit
on 18 November 2014. On 6 March 2015, BP gave notice that it was
not proceeding with this appeal.
For information about BP's current estimate of the total cost of
the PSC settlements, see Note 2 on page 16.
Top of page 32
Legal proceedings (continued)
Medical Benefits Class Action Settlement (Medical Settlement) -
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 and the deadline for submitting claims
for Specified Physical Conditions (SPCs) under the MSA was 12
February 2015. As of 3 April 2015, the MSA claims administrator had
received 16,274 claim forms, including 15,367 for certain SPCs, and
has determined 1,453 claims to be eligible for monetary
compensation totaling approximately $2.7 million. For those
claimants seeking benefits under the Periodic Medical Consultation
Program, approximately 9,850 claims have been determined to be
eligible. A final count of total claim forms received by the bar
date is expected shortly. Given the District Court's decision to
classify all physical conditions first diagnosed after 16 April
2012 as Later-Manifested Physical Conditions (LMPC), class members
must pursue compensation for LMPCs by submitting a Notice of Intent
to Sue (NOIS) under the Back-End Litigation Option (BELO). As of 15
April 2015, 16 compliant NOISs have been received by the MSA claims
administrator, of which four have filed BELO lawsuits.
State and local civil claims, including under OPA 90 - State of
Alabama Damages Case Proceedings. On 19 April 2013, the State of
Alabama filed an action against BP alleging general maritime law
claims of negligence, gross negligence, and wilful misconduct;
claims under OPA 90 seeking damages for removal costs, natural
resource damages, property damage, lost tax and other revenue and
damages for providing increased public services during or after
removal activities; and various state law claims. On 14 February
2014, BP moved to strike the State of Alabama's jury trial demand
as to its claim for compensatory damages under OPA 90. On 30 March
2015, the District Court denied BP's motion and BP has asked the
District Court to certify its ruling for appeal to the Fifth
Circuit. On 16 March 2015 the District Court issued an amended
scheduling order for the State of Alabama's claims against BP and
other parties under which the pre-trial matters will be concluded
in April 2016.
MDL 2185 and other securities-related litigation
Canadian Class Action - On 26 March 2015, the Supreme Court of
Canada dismissed the plaintiff's appeal to the August 2014 decision
by the Ontario Court of Appeal which held that claims made on
behalf of Canadian residents who purchased BP ordinary shares and
ADSs on exchanges outside of Canada should be litigated in those
countries, and that only claims asserted on behalf of Canadian
residents who purchased ADSs on the Toronto Stock Exchange could be
litigated in Canada. On 27 March 2015, the plaintiff filed a
complaint in Texas federal court asserting claims under Canadian
law against BP on behalf of a class of Canadian residents who
allegedly suffered losses because of their purchase of BP ADSs on
the New York Stock Exchange. That action has been transferred to
the judge presiding over MDL 2185.
Other legal proceedings
Scharfstein v. BP West Coast Products, LLC - A purported class
action lawsuit was filed against BP West Coast Products, LLC in
Oregon State Court under the Oregon Unlawful Trade Practices Act on
behalf of customers who used a debit card at ARCO gasoline stations
in Oregon during the period 1 January 2011 to 30 August 2013,
alleging that ARCO's Oregon sites failed to provide sufficient
notice of the 35 cents per transaction debit card fee. After a jury
trial and subsequent hearing, in 2014 the jury rendered judgment
against BP and determined that statutory damages of $200 per class
member should be awarded. A post-trial claims process in late 2014
identified approximately 1.7 million class members, subject to
final determination. BP disputes the judgment and intends to
appeal. No provision has been made for damages arising out of this
class action.
Top of page 33
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 operations 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
the divestment of $10 billion in assets by the end of 2015; the
expected quarterly dividend payment and timing of such payment;
expectations regarding the underlying effective tax rate during
2015 and the effect of the change in the UK North Sea supplementary
charge on cash flow; expectations regarding projects in Egypt and
future investments in that region; expectations regarding projects
in Alberta Canada; expectations regarding the level of reported
production for second quarter 2015; expectations regarding second
quarter refining margins and level of turnaround activity;
expectations regarding the new plant in Zhuhai, China; and certain
statements regarding the legal and trial proceedings, court
decisions, claims, penalties, potential investigations and civil
actions by regulators, government entities and/or other entities or
parties, 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 and are outside the control of BP. Actual results may differ
materially from those expressed in such statements, depending on a
variety of factors, including: the specific factors identified in
the discussions accompanying such forward-looking statements; the
receipt of relevant third party and/or regulatory approvals; the
timing and level of maintenance and/or turnaround activity; the
timing and volume of refinery additions and outages; the timing of
bringing new fields onstream; the timing, quantum and nature of
certain divestments; future levels of industry product supply,
demand and pricing, including supply growth in North America; OPEC
quota restrictions; PSA effects; operational and safety problems;
potential lapses in product quality; 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 the types of enforcement action pursued and the
nature of remedies sought or imposed; the actions of prosecutors,
regulatory authorities and courts; the impact on our reputation
following the Gulf of Mexico oil spill; the timing and amount of
future payments relating to the Gulf of Mexico oil spill; exchange
rate fluctuations; development and use of new technology;
recruitment and retention of a skilled workforce; the success or
otherwise of partnering; the actions of competitors, trading
partners, contractors, subcontractors, creditors, rating agencies
and others; our access to future credit resources; business
disruption and crisis management; the impact on our reputation of
ethical misconduct and non-compliance with regulatory obligations;
trading losses; major uninsured losses; decisions by Rosneft's
management and board of directors; the actions of contractors;
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 elsewhere in this report and under "Risk factors" in BP
Annual Report and Form 20-F 2014 as filed with the US Securities
and Exchange Commission.
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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