TIDMBP.
RNS Number : 0855T
BP PLC
22 March 2021
BP P.L.C. ANNUAL FINANCIAL REPORT - DTR 6.3.5 DISCLOSURE
BP p.l.c. ('the Company')
The Company announces that the bp Annual Report and Form 20-F
2020 has been published. This document is publicly available via a
direct link at www.bp.com/annualreport . This follows the release
on 2 February 2021 of the Company's unaudited Fourth Quarter and
Full Year 2020 results announcement (the 'Preliminary
Announcement').
In compliance with 9.6.1 of the Listing Rules, on 22 March 2021
the Company submitted a copy of the bp Annual Report and Form 20-F
2020 to the National Storage Mechanism.
This document will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The bp Annual Report and Form 20-F 2020 will be delivered to the
Registrar of Companies in due course and copies of this document
may also be obtained from:
The Company Secretary's Office
BP p.l.c.
1 St James's Square
London
SW1Y 4PD
Tel: +44 (0)20 7496 4000
The Disclosure Guidance and Transparency Rules (DTR) require
that an announcement of the publication of an Annual Report should
include the disclosure of such information from the Annual Report
as is of a type that would be required to be disseminated in a
Half-yearly Report in compliance with the DTR 6.3.5(2) disclosure
requirement. Accordingly the following disclosures are made in the
Appendices below. References to page numbers and notes to the
accounts made in the following Appendices, refer to page numbers
and notes to the accounts in the bp Annual Report and Form 20-F
2020. This announcement should be read in conjunction with, and is
not a substitute for reading, the full bp Annual Report and Form
20-F 2020.
The extracts from bp Annual Report and Form 20-F 2020 included
in this announcement contain certain forecasts, projections and
forward-looking statements - that is, statements related to future,
not past events and circumstances - 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. 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
of 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 and other
factors discussed elsewhere in bp Annual Report and Form 20-F
2020.
APPIX A - AUDIT REPORTS
Audited financial statements for 2020 are contained in the bp
Annual Report and Form 20-F 2020. The Independent Auditor's Report
on the consolidated financial statements is set out in full on
pages 130-149 of the bp Annual Report and Form 20-F 2020. The
Independent Auditor's Report on the consolidated financial
statements is unqualified and does not contain any statements under
section 498(2) or section 498(3) of the Companies Act 2006.
APPIX B - DIRECTORS' RESPONSIBILITY STATEMENT
The following statement is extracted in full and is unedited
text from page 127 of the bp Annual Report and Form 20-F 2020. This
statement relates solely to the bp Annual Report and Form 20-F 2020
and is not connected to the extracted information set out in this
announcement or the Preliminary Announcement.
Statement of directors' responsibilities
The directors confirm that to the best of their knowledge:
-- The consolidated financial statements, prepared on the basis
of IFRS as issued by the IASB, IFRS adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the EU and in accordance with
the provisions of the Companies Act 2006 as applicable to companies
reporting under international accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the group.
-- The parent company financial statements, prepared in
accordance with United Kingdom generally accepted accounting
practice, give a true and fair view of the assets, liabilities,
financial position, performance and cash flows of the Company.
-- The management report, which is incorporated in the strategic
report and directors' report, includes a fair review of the
development and performance of the business and the position of the
group, together with a description of the principal risks and
uncertainties that they face.
Helge Lund
Chairman
22 March 2021
APPIX C - RISKS AND UNCERTAINITIES
The principal risks and uncertainties relating to the Company
are set out on pages 67-70 of the bp Annual Report and Form 20-F
2020. The following is extracted in full and unedited text from the
bp Annual Report and Form 20-F 2020:
Risk factors
The risks discussed below, separately or in combination, could
have a material adverse effect on the implementation of our
strategy, our business, financial performance, results of
operations, cash flows, liquidity, prospects, shareholder value and
returns and reputation.
Strategic and commercial risks
Prices and markets - our financial performance is impacted by
fluctuating prices of oil, gas and refined products, technological
change, exchange rate fluctuations, and the general macroeconomic
outlook.
Oil, gas and product prices are subject to international supply
and demand and margins can be volatile. Political developments,
increased supply from new oil and gas or alternative low carbon
energy sources, technological change, global economic conditions,
public health situations (including the continued impact of the
COVID-19 pandemic or any future epidemic or pandemic) and the
influence of OPEC can impact supply and demand and prices for our
products. Decreases in oil, gas or product prices could have an
adverse effect on revenue, margins, profitability and cash flows.
If significant or for a prolonged period, we may have to write down
assets and re-assess the viability of certain projects, which may
impact future cash flows, profit, capital expenditure, the ability
to work within our financial frame and maintain our long-term
investment programme. Conversely, an increase in oil, gas and
product prices may not improve margin performance as there could be
increased fiscal take, cost inflation and more onerous terms for
access to resources. The profitability of our refining activities
can be volatile, with periodic over-supply or supply tightness in
regional markets and fluctuations in demand.
Exchange rate fluctuations can create currency exposures and
impact underlying costs and revenues. Crude oil prices are
generally set in US dollars, while products vary in currency. Many
of our major project development costs are denominated in local
currencies, which may be subject to fluctuations against the US
dollar.
Access, renewal and reserves progression - inability to access,
renew and progress upstream resources in a timely manner could
adversely affect our long-term replacement of reserves.
Focused renewal of our reserve base in line with our strategy
depends on our ability to progress upstream resources from our
existing portfolio and access new resource in our core areas,
generating future opportunities for oil and natural gas production.
Competition for access to investment opportunities, heightened
political and economic risks where we operate, unsuccessful
exploration activity, technical challenges and capital commitments
may adversely affect our reserve replacement. This, and our ability
to progress upstream resources at a level in line with our
strategic outlook for hydrocarbon production, could impact our
future production and financial performance.
Major project delivery - failure to invest in the best
opportunities or deliver major projects successfully could
adversely affect our financial performance.
We face challenges in developing major projects, particularly in
geographically and technically challenging areas. Poor investment
choice, efficiency or delivery, or operational challenges at any
major project that underpins production or production growth could
adversely affect our financial performance.
Geopolitical - exposure to a range of political developments and
consequent changes to the operating and regulatory environment
could cause business disruption.
We operate and may seek new opportunities in countries, regions
and cities where political, economic and social transition may take
place. Political instability, changes to the regulatory environment
or taxation, international trade disputes and barriers to free
trade, international sanctions, expropriation or nationalization of
property, civil strife, strikes, insurrections, acts of terrorism,
acts of war and public health situations (including the continued
impact of the COVID-19 pandemic or any future epidemic or pandemic)
may disrupt or curtail our operations or development activities.
These may in turn cause production to decline, limit our ability to
pursue new opportunities, affect the recoverability of our assets
or cause us to incur additional costs, particularly due to the
long-term nature of many of our projects and significant capital
expenditure required. Events in or relating to Russia, including
trade restrictions and other sanctions, could adversely impact our
income and investment in or relating to Russia. Our ability to
pursue business objectives and to recognize production and reserves
relating to these investments could also be adversely impacted.
Liquidity, financial capacity and financial, including credit,
exposure - failure to work within our financial framework could
impact our ability to operate and result in financial loss.
Failure to accurately forecast or work within our financial
framework could impact our ability to operate and result in
financial loss. Trade and other receivables, including overdue
receivables, may not be recovered, divestments may not be
successfully completed and a substantial and unexpected cash call
or funding request could disrupt our financial framework or
overwhelm our ability to meet our obligations.
An event such as a significant operational incident, legal
proceedings or a geopolitical event in an area where we have
significant activities, could reduce our financial liquidity and
our credit ratings. Credit rating downgrades could potentially
increase financing costs and limit access to financing or
engagement in our trading activities on acceptable terms, which
could put pressure on the group's liquidity.
bp's credit rating downgrades could also trigger a requirement
for the company to review its funding arrangements with the bp
pension trustees and may cause other impacts on financial
performance. In the event of extended constraints on our ability to
obtain financing, we could be required to reduce capital
expenditure or increase asset disposals in order to provide
additional liquidity. See Liquidity and capital resources on page
306 and Financial statements - Note 29.
Joint arrangements and contractors - varying levels of control
over the standards, operations and compliance of our partners,
contractors and sub-contractors could result in legal liability and
reputational damage.
We conduct many of our activities through joint arrangements,
associates or with contractors and sub-contractors where we may
have limited influence and control over the performance of such
operations. Our partners and contractors are responsible for the
adequacy of the resources and capabilities they bring to a project.
If these are found to be lacking, there may be financial,
operational or safety exposures for bp. Should an incident occur in
an operation that bp participates in, our partners and contractors
may be unable or unwilling to fully compensate us against costs we
may incur on their behalf or on behalf of the arrangement. Where we
do not have operational control of a venture, we may still be
pursued by regulators or claimants in the event of an incident.
Digital infrastructure and cyber security - breach or failure of
our or third parties' digital infrastructure or cyber security,
including loss or misuse of sensitive information could damage our
operations, increase costs and damage our reputation.
The energy industry is subject to fast-evolving risks from cyber
threat actors, including nation states, criminals, terrorists,
hacktivists and insiders. A breach or failure of our or third
parties' digital infrastructure - including control systems - due
to breaches of our cyber defences, or those of third parties,
negligence, intentional misconduct or other reasons, could
seriously disrupt our operations. This could result in the loss or
misuse of data or sensitive information, injury to people,
disruption to our business, harm to the environment or our assets,
legal or regulatory breaches and legal liability. Furthermore, the
rapid detection of attempts to gain unauthorized access to our
digital infrastructure, often through the use of sophisticated and
co-ordinated means, is a challenge and any delay or failure to
detect could compound these potential harms. These could result in
significant costs including fines, cost of remediation or
reputational consequences.
Climate change and the transition to a lower carbon economy -
developments in policy, law, regulation, technology and markets,
including societal and investor sentiment, related to the issue of
climate change could increase costs, constrain our operations and
affect our business plans and financial performance.
Laws, regulations, policies, obligations, government actions,
social attitudes and customer preferences relating to climate
change and the transition to a lower carbon economy, including the
pace of change to any of these factors, and also the pace of the
transition itself, could have adverse impacts on our business
including on our access to and realization of competitive
opportunities in any of our strategic focus areas, a decline in
demand for, or constraints on our ability to sell certain products,
constraints on production and supply and access to new reserves,
adverse litigation and regulatory or litigation outcomes, increased
costs from compliance and increased provisions for environmental
and legal liabilities.
Investor preferences and sentiment are influenced by
environmental, social and corporate governance (ESG) considerations
including climate change and the transition to a lower carbon
economy. Changes in those preferences and sentiment could affect
our access to capital markets and our attractiveness to potential
investors, potentially resulting in reduced access to financing,
increased financing costs and impacts upon our business plans and
financial performance.
Technological improvements or innovations that support the
transition to a lower carbon economy, and customer preferences or
regulatory incentives that alter fuel or power choices, could
impact demand for oil and gas. Depending on the nature and speed of
any such changes and our response, these changes could increase
costs, reduce our profitability, reduce demand for certain
products, limit our access to new opportunities, require us to
write down certain assets or curtail or cease certain operations,
and affect investor sentiment, our access to capital markets, our
competitiveness and financial performance.
Policy, legal regulatory, technological and market developments
related to climate change could also affect future price
assumptions used in the assessment of recoverability of asset
carrying values including goodwill, the judgement as to whether
there is continued intent to develop exploration and appraisal
intangible assets, the timing of decommissioning of assets and the
useful economic lives of assets used for the calculation of
depreciation and amortization. See Financial statements - Note 1
and Climate change and the environment on page 52.
Competition - inability to remain efficient, maintain a
high-quality portfolio of assets, innovate and retain an
appropriately skilled workforce could negatively impact delivery of
our strategy in a highly competitive market.
Our strategic progress and performance could be impeded if we
are unable to control our development and operating costs and
margins, if we fail to scale our businesses at pace, or to sustain,
develop and operate a high-quality portfolio of assets efficiently.
Furthermore, as we transition from an International Oil Company to
an Integrated Energy Company, we face an expanded and rapidly
evolving range of competitors in the sectors in which we operate.
We could be adversely affected if competitors offer superior terms
for access rights or licences, or if our innovation in areas such
as new low carbon technologies, digital, customer offer,
exploration, production, refining, manufacturing or renewable
energy lags those of our competitors. Our performance could also be
negatively impacted if we fail to protect our intellectual
property. Our industry faces increasing challenges to recruit and
retain diverse, skilled and experienced talent. Successful
recruitment, development and retention of specialist staff is
essential to our plans.
Crisis management and business continuity - failure to address
an incident effectively could potentially disrupt our business.
Our business activities could be disrupted if we do not respond,
or are perceived not to respond, in an appropriate manner to any
major crisis or if we are not able to restore or replace critical
operational capacity.
Insurance - our insurance strategy could expose the group to
material uninsured losses.
bp generally purchases insurance only in situations where this
is legally and contractually required. Some risks are insured with
third parties and reinsured by group insurance companies. Uninsured
losses could have a material adverse effect on our financial
position, particularly if they arise at a time when we are facing
material costs as a result of a significant operational event which
could put pressure on our liquidity and cash flows.
Safety and operational risks
Process safety, personal safety, and environmental risks -
exposure to a wide range of health, safety, security and
environmental risks could cause harm to people, the environment and
our assets and result in regulatory action, legal liability,
business interruption, increased costs, damage to our reputation
and potentially denial of our licence to operate.
Technical integrity failure, natural disasters, extreme weather
or a change in its frequency or severity, human error and other
adverse events or conditions, including breach of digital security,
could lead to loss of containment of hydrocarbons or other
hazardous materials. This could also lead to constrained
availability of resources used in our operating activities, as well
as fires, explosions or other personal and process safety
incidents, including when drilling wells, operating facilities and
those associated with transportation by road, sea or pipeline.
There can be no certainty that our operating management system or
other policies and procedures will adequately identify all process
safety, personal safety and environmental risks or that all our
operating activities, including acquired businesses, will be
conducted in conformance with these systems. See Safety on page
59.
Such events or conditions, including a marine incident, or
inability to provide safe environments for our workforce and the
public while at our facilities, premises or during transportation,
could lead to injuries, loss of life or environmental damage. As a
result we could face regulatory action and legal liability,
including penalties and remediation obligations, increased costs
and potentially denial of our licence to operate. Our activities
are sometimes conducted in hazardous, remote or environmentally
sensitive locations, where the consequences of such events or
conditions could be greater than in other locations.
Drilling and production - challenging operational environments
and other uncertainties could impact drilling and production
activities.
Our activities require high levels of investment and are
sometimes conducted in challenging environments such as those prone
to natural disasters and extreme weather, which heightens the risks
of technical integrity failure. The physical characteristics of an
oil or natural gas field, and cost of drilling, completing or
operating wells is often uncertain. We may be required to curtail,
delay or cancel drilling operations or stop production because of a
variety of factors, including unexpected drilling conditions,
pressure or irregularities in geological formations, equipment
failures or accidents, adverse weather conditions and compliance
with governmental requirements.
Security - hostile acts against our staff and activities could
cause harm to people and disrupt our operations.
Acts of terrorism, piracy, sabotage and similar activities
directed against our operations and facilities, pipelines,
transportation or digital infrastructure could cause harm to people
and severely disrupt operations. Our activities could also be
severely affected by conflict, civil strife or political
unrest.
Product quality - supplying customers with off-specification
products could damage our reputation, lead to regulatory action and
legal liability, and impact our financial performance.
Failure to meet product quality specifications could cause harm
to people and the environment, damage our reputation, result in
regulatory action and legal liability, and impact financial
performance.
Compliance and control risks
Ethical misconduct and non-compliance - ethical misconduct or
breaches of applicable laws by our businesses or our employees
could be damaging to our reputation, and could result in
litigation, regulatory action and penalties.
Incidents of ethical misconduct or non-compliance with
applicable laws and regulations, including anti-bribery and
corruption and anti-fraud laws, trade restrictions or other
sanctions, could damage our reputation, and result in litigation,
regulatory action, penalties and potentially affect our licence to
operate.
Regulation - changes in the law and regulation could increase
costs, constrain our operations and affect our business plans and
financial performance.
Our businesses and operations are subject to the laws and
regulations applicable in each country, state or other regional or
local area in which they occur. These laws and regulations result
in an often complex, uncertain and changing legal and regulatory
environment for our global businesses and operations. Changes in
laws or regulations, including how they are interpreted and
enforced, can and does impact all aspects of our business.
Royalties and taxes, particularly those applied to our
hydrocarbon activities, tend to be high compared with those imposed
on similar commercial activities. In certain jurisdictions there is
also a degree of uncertainty relating to tax law interpretation and
changes. Governments may change their fiscal and regulatory
frameworks in response to public pressure on finances, resulting in
increased amounts payable to them or their agencies.
Changes in law or regulation could increase the compliance and
litigation risk and costs, reduce our profitability, reduce demand
for or constrain our ability to sell certain products, limit our
access to new opportunities, require us to divest or write down
certain assets or curtail or cease certain operations, or affect
the adequacy of our provisions for pensions, tax, decommissioning,
environmental and legal liabilities. Changes in laws or regulations
could result in the nationalization, expropriation, cancellation,
non-renewal or renegotiation of our interests, assets and related
rights. Potential changes to pension or financial market regulation
could also impact funding requirements of the group. Following the
Gulf of Mexico oil spill, we may be subjected to a higher level of
fines or penalties imposed in relation to any alleged breaches of
laws or regulations, which could result in increased costs. See
Regulation of the group's business on page 321.
Treasury and trading activities - ineffective oversight of
treasury and trading activities could lead to business disruption,
financial loss, regulatory intervention or damage to our
reputation.
We are subject to operational risk around our treasury and
trading activities in financial and commodity markets, some of
which are regulated. Failure to process, manage and monitor a large
number of complex transactions across many markets and currencies
while complying with all regulatory requirements could hinder
profitable trading opportunities. There is a risk that a single
trader or a group of traders could act outside of our delegations
and controls, leading to regulatory intervention and resulting in
financial loss, fines and potentially damaging our reputation. See
Financial statements - Note 29.
Reporting - failure to accurately report our data could lead to
regulatory action, legal liability and reputational damage.
External reporting of financial and non-financial data,
including reserves estimates, relies on the integrity of the
control environment, our systems and people operating them. Failure
to report data accurately and in compliance with applicable
standards could result in regulatory action, legal liability and
damage to our reputation.
APPIX D - RELATED PARTY TRANSACTIONS
Disclosures in relation to the related party transactions are
set out on pages 192-194 and page 326 of the bp Annual Report and
Form 20-F 2020. The following is extracted in full and unedited
text from the bp Annual Report and Form 20-F 2020:
Extract from Note 16 Investments in joint ventures, bp Annual
Report and Form 20-F 2020, page 192:
Transactions between the group and its joint ventures are
summarized below.
$ million
---------------------------- --------- ------------ --------- ------------ --------- --------------
Sales to joint ventures 2020 2019 2018
---------------------------- --------- ------------ --------- ------------ --------- --------------
Amount Amount Amount
receivable receivable receivable
at at at
Product Sales 31 December Sales 31 December Sales 31 December
---------------------------- --------- ------------ --------- ------------ --------- --------------
LNG, crude oil and oil
products,
natural gas 2,974 180 4,884 431 4,603 251
----------------------------- --------- ------------ --------- ------------ --------- ------------
$ million
---------------------------- --------- ------------ --------- ------------ --------- --------------
Purchases from joint
ventures 2020 2019 2018
---------------------------- --------- ------------ --------- ------------ --------- --------------
Amount Amount Amount
payable payable payable
at at at
Product Purchases 31 December Purchases 31 December Purchases 31 December
---------------------------- --------- ------------ --------- ------------ --------- --------------
LNG, crude oil and oil
products,
natural gas, refinery
operating
costs, plant processing fees 959 84 1,812 225 1,336 300
----------------------------- --------- ------------ --------- ------------ --------- ------------
The terms of the outstanding balances receivable from joint
ventures are typically 30 to 45 days. The balances are unsecured
and will be settled in cash. There are no significant provisions
for doubtful debts relating to these balances and no significant
expense recognized in the income statement in respect of bad or
doubtful debts. Dividends receivable are not included in the table
above.
Extract from Note 17 Investments in associates, bp Annual Report
and Form 20-F 2020, page 194:
Transactions between the group and its associates are summarized
below.
$ million
---------------------------- --------- ------------ --------- ------------ --------- --------------
Sales to associates 2020 2019 2018
---------------------------- --------- ------------ --------- ------------ --------- --------------
Amount Amount Amount
receivable receivable receivable
at at at
Product Sales 31 December Sales 31 December Sales 31 December
---------------------------- --------- ------------ --------- ------------ --------- --------------
LNG, crude oil and oil
products,
natural gas 855 169 1,544 243 2,064 393
----------------------------- --------- ------------ --------- ------------ --------- ------------
$ million
---------------------------- --------- ------------ --------- ------------ --------- --------------
Purchases from associates 2020 2019 2018
---------------------------- --------- ------------ --------- ------------ --------- --------------
Amount Amount Amount
payable payable payable
at at at
Product Purchases 31 December Purchases 31 December Purchases 31 December
---------------------------- --------- ------------ --------- ------------ --------- --------------
Crude oil and oil products,
natural
gas, transportation tariff 4,926 1,280 9,503 1,641 14,112 2,069
----------------------------- --------- ------------ --------- ------------ --------- ------------
In addition to the transactions shown in the table above, in
2018 bp acquired a 49% stake in LLC Kharampurneftegaz, a Rosneft
subsidiary, which develops resources within the Kharampurskoe and
Festivalnoye licence areas in Yamalo-Nenets in northern Russia.
bp's interest in LLC Kharampurneftegaz is accounted for as an
associate.
The terms of the outstanding balances receivable from associates
are typically 30 to 45 days. The balances are unsecured and will be
settled in cash. There are no significant provisions for doubtful
debts relating to these balances and no significant expense
recognized in the income statement in respect of bad or doubtful
debts. Dividends receivable are not included in the table
above.
The majority of purchases from associates relate to crude oil
and oil products transactions with Rosneft. Sales to associates are
related to various entities.
bp has commitments amounting to $10,777 million (2019 $11,198
million), primarily in relation to contracts with its associates
for the purchase of transportation capacity. For information on
capital commitments in relation to associates see Note 13.
Extract from bp Annual Report and Form 20-F 2020, page 326:
Related-party transactions
Transactions between the group and its significant joint
ventures and associates are summarized in Financial statements -
Note 16 and Note 17. In the ordinary course of its business, the
group enters into transactions with various organizations with
which some of its directors or executive officers are associated.
Except as described in this report, the group did not have any
material transactions or transactions of an unusual nature with,
and did not make loans to, related parties in the period commencing
1 January 2020 to 22 March 2021.
APPIX E - IMPORTANT EVENTS DURING THE YEAR
For a full glossary of terms, see bp Annual Report and Form 20-F
2020, pages 341-347.
1. Extracted in full and unedited text from the Chairman's
letter, bp Annual Report and Form 20-F 2020, pages 4-5:
Dear fellow shareholders,
2020: the year of the pandemic
In every sense, 2020 was an extraordinary year. The worst
pandemic in a century has cost well over 2 million lives and caused
worldwide economic and social disruption. While vaccination
programmes are now building momentum, the path to recovery remains
uncertain.
Because demand for energy is closely linked to human activity,
our sector was deeply affected. The combination of a steep fall in
share values for almost all oil and gas companies and a new bp
distribution policy significantly affected your shareholder
returns.
As chairman of your board, I am conscious of my responsibilities
to bp's shareholders. When the board decided to reset our
distribution policy, it did so with a view to your long-term
interests. Our priorities were, and remain, weathering the
immediate challenge of the pandemic; paying a resilient dividend;
strengthening our balance sheet; investing into the energy
transition; investing in our resilient hydrocarbons business and,
after that, returning surplus cash to shareholders through
buybacks.
The board was unanimous in its support for this course of
action, which will help establish bp as an integrated energy
company. I hope that bp's new investor proposition and financial
frame give reasons for optimism about bp's long-term prospects. As
we turn to 2021, the board's focus is on supporting bp's leadership
team to deliver our new strategy, and on building renewed
shareholder confidence through strategic progress and operational
and financial performance.
2020 was also tough for our people. My board colleagues and I
are proud of them. Their commitment - on rigs, in refineries,
across retail stations and everywhere else in bp - helped keep the
world's lights on and allowed us to provide many emergency services
with free or heavily discounted fuel. Despite new COVID-19-related
practical challenges, our people maintained the safety of bp's
operations. That is a testament to their careful work.
bp's new purpose
2020 was a remarkable year for bp for other reasons too. With
the backing of the board, our new CEO, Bernard Looney, introduced a
new company purpose: reimagining energy for people and our planet.
That purpose - together with our strong culture and values -
underpins the net zero ambition that we set out last year, together
with our new strategy, financial frame and investor proposition. It
also informed bp's reinvention - the selection of a new leadership
team, and the replacement of bp's upstream/downstream model with a
new, integrated group structure.
Change of this scale necessitated a reorganization of how we
work. That reorganization will ultimately see close to 10,000
colleagues leaving bp. Saying goodbye has been difficult, but the
result is a leaner, flatter, nimbler company - better able to
realize the opportunities of the energy transition.
Macro-economic developments have only strengthened the board's
belief that the direction in which we are taking bp is the right
one - including China's new net zero target, the EU's Green Deal,
the UK's plan for a green industrial revolution, and the US's
recommitment to the Paris Agreement. Today, global energy markets
are even further down the path of fundamental change - and bp is
well-positioned to help to speed the world's journey to net
zero.
A year of engagement
While this is a journey that will require patience, our goal is
that bp over time will become a more valuable company for its
shareholders and bring wider benefits for society. Of course, the
journey to net zero is, in part, one of discovery. For that reason,
the board and bp's leadership team know that we must be fully open
to advice, learning and challenge.
2020 was therefore a year of engagement with our stakeholders,
and I am grateful for the inputs we received - which helped us
shape our new strategy, financial frame and investor proposition,
sustainability frame and position on biodiversity. We will keep
listening, and we count on you to share your feedback with us as we
travel the road to net zero together.
Evolution of the board
As the company evolves, the board's composition will evolve too
- reflecting the need for new experiences and skills aligned with
bp's new direction. During the year, the board said goodbye to our
former CEO, Bob Dudley, and to Brian Gilvary, our former CFO. Sir
Ian Davis, Nils Andersen and Dame Alison Carnwath have also stepped
down from the board, and we shall shortly say farewell to Brendan
Nelson. Collectively and individually they served with distinction
- bp is very fortunate to have had their wise advice and strong
leadership. We are just as fortunate to welcome Tushar Morzaria,
Karen Richardson and Johannes Teyssen to bp's board for the first
time.
Closing thanks
I would like to thank Bernard Looney, his leadership team and
everyone in bp for their work during 2020. Throughout this
challenging year, they showed characteristic determination.
Finally, I thank you, our shareholders. I am grateful both for
the continued support we received during 2020, and also for the
support of our new shareholders. During 2020, we received
investment and other endorsement from those who told us they would
not have considered supporting bp were it not for the
transformation we have begun. We look forward to repaying the faith
you have placed in bp.
Helge Lund
Chairman
22 March 2021
2. Extracted in full and unedited text from the Chief executive
officer's letter, bp Annual Report and Form 20-F 2020, page 6:
Dear shareholders,
The year 2020 will be remembered above all for the pain, sadness
and loss of life caused by COVID-19. At bp, our thoughts are with
the families and loved ones of the colleagues we have lost.
Thousands more on our teams have had the virus, and life under
lockdown has meant additional challenges, and anxiety for everyone.
I want to pay particular tribute to those on the frontline of our
business who have kept our plants and platforms running, our shops
and forecourts open, and energy flowing to the world. They have
sacrificed so much and earned our deepest respect and
appreciation.
Responding to brutal conditions
We began our transformation from an international oil company to
an integrated energy company against this backdrop, along with
lower oil and gas prices, lower refining margins and unprecedented
falls in demand for our retail and aviation fuels. Our response
included lowering costs, strengthening the balance sheet with an
innovative hybrid bond issue, and advancing our strategy to become
a more diversified, resilient and lower carbon company. As part of
our strategy planning process, we reviewed our portfolio and
development plans. This work - informed by bp's views of the
long-term price environment - led to significant impairment charges
and non-cash exploration write-offs in the second quarter.
For shareholders, all this was reflected in a reset dividend and
a diminished share price. I recognize the financial impact this
must have had on you. However, I wholeheartedly believe we will not
just restore, but will enhance the long-term sustainable value of
your company through the actions we are taking to reinvent bp. And
despite the most brutal operating conditions I can remember in
almost 30 years in this industry, we have made considerable
operational and strategic progress.
Performing while transforming
The loss of $20.3 billion we reported for the year is clearly
disappointing. However, it in no way reflects the heroic efforts of
the bp team in extremely difficult circumstances, or their deep
commitment to performing while transforming:
-- Most importantly - our safety performance continued to improve.
-- Reliability of 94% for bp's operated plants and refining
availability of 96% represents remarkably strong performance,
especially given the challenges faced by our frontline staff.
-- Capital was reset and we delivered at the lower end of the range.
-- We made good progress towards our net debt target, including
the contribution from high grading our portfolio and $6.6 billion
of divestment and other proceeds received during the year.
-- New oil and gas production came on from four major
projects<< - in India, Oman, the UK and the US.
-- Natural gas from the Shah Deniz field in the Caspian Sea
arrived in Italy following final completion of the historic
Southern Gas Corridor project.
-- And we doubled our retail network in growth markets to around
2,700 retail sites, plus the addition of around 300 strategic
convenience sites.
Reinventing bp
This performance is even more remarkable given that we have been
carrying out the most extensive reorganization in bp's 112-year
history. We have retired the upstream/downstream business model
that has served bp very well. In its place we have introduced a
leaner, flatter structure, stripping away tiers of management and
lowering the workforce towards a target of around 10,000 fewer
jobs. My role is now five layers at most away from more than half
of our employees. That means people's ideas and voices can be more
easily heard - and decisions taken much faster.
We are now more centralized, more agile, and better integrated.
This enables us to maximize value creation in a rapidly evolving
market through economies of scale, and by exploiting synergies and
driving continuous improvement in operational performance.
We are now organized around four business groups.
-- Production & operations is the operating heart of the
company - and is focusing our resilient hydrocarbons portfolio on
value.
-- Customers & products is growing our convenience and
mobility offers for an increasing number of customers.
-- Gas & low carbon energy is growing to help meet rapidly increasing clean energy demand.
-- Innovation & engineering acts as a catalyst, opening up
new and disruptive business models and driving our digital
transformation.
And our trading & shipping business and regions, cities
& solutions team knit together the offers of our four core
groups to drive greater value creation.
Reimagining energy
Completing our transformation to a net zero Integrated Energy
Company will take time. But we are led by our purpose - to
reimagine energy for people and our planet - and motivated by the
opportunity we see in the energy transition. Trillions of dollars
of investment will be needed over the next 30 years in replumbing
and rewiring the global energy system.
We now have offshore wind partnerships in the US with Equinor
and in the UK with EnBW - two of the best regions globally for the
world's fastest-growing source of energy. Our solar development
joint venture<<, Lightsource bp, is growing prolifically. We
are working with Ørsted to develop green hydrogen for our Lingen
refinery. We have joined forces with the mobility platform DiDi to
build a network of electric vehicle chargers in China, by far the
world's biggest market for EVs. And we have a growing list of low
carbon partnerships with cities such as Aberdeen and Houston and
some of the world's leading companies, including Amazon, Microsoft,
Qantas and Uber.
A compelling investor proposition
We are fully focused at all times on the bottom line of the
business - on executing our strategy while operating safely,
reliably and with discipline. We continue to build resilience and
strength in the balance sheet as conditions remain challenging and
uncertain while vaccines roll out, the pandemic recedes, and
economies look to recover. At the same time, we are transforming to
create value from the energy transition over the long term.
We see tremendous business opportunity in providing people with
the reliable, affordable, clean energy they want and need. Our net
zero ambition is clearly the right thing for society, but we know
it does not give us a free pass in a fast-changing world. We have
to show you the evidence that we can compete fiercely and add value
- in service of the compelling investor proposition we believe we
offer:
-- Committed distributions - including the dividend as the number one priority;
-- Profitable growth; and
-- Sustainable value.
This is all in service of growing long-term shareholder value,
that is our job. And I promise to keep you well informed as we
execute our plans. As ever, thank you for your continued support -
I will never take that for granted. And I look forward to any
feedback you might have.
Thank you.
Bernard Looney
Chief executive officer
22 March 2021
3. Extracted in full and unedited text from "Group performance",
bp Annual Report and Form 20-F 2020, pages 42-47:
Financial and operating performance
$ million except per
share amounts
----------------------------
2020 2019 2018
------------------------------------------------------ -------- ------- ---------
Sales and other operating revenues 180,366 278,397 298,756
------------------------------------------------------- -------- ------- -------
Profit before interest and taxation (21,740) 11,706 19,378
Finance costs and net finance expense relating
to pensions and other post-retirement benefits (3,148) (3,552) (2,655)
Taxation 4,159 (3,964) (7,145)
Non-controlling interests 424 (164) (195)
------------------------------------------------------- -------- ------- -------
Profit (loss) for the year attributable to bp
shareholders (20,305) 4,026 9,383
Inventory holding (gains) losses, before tax 2,868 (667) 801
Taxation charge (credit) on inventory holding
gains and losses (667) 156 (198)
------------------------------------------------------- -------- ------- -------
RC profit (loss) for the year attributable to
bp shareholders (18,104) 3,515 9,986
Net (favourable) adverse impact of non-operating
items and fair value accounting effects before
tax 16,649 8,263 3,380
Taxation charge (credit) on non-operating items
and fair value accounting effects (4,235) (1,788) (643)
------------------------------------------------------- -------- ------- -------
Underlying RC profit (loss) for the year attributable
to bp shareholders (5,690) 9,990 12,723
------------------------------------------------------- -------- ------- -------
Dividends paid per share - cents 31.5 41.0 40.5
- pence 24.458 31.977 30.568
------------------------------------------------------- -------- ------- -------
Results
The loss for the year ended 31 December 2020 attributable to bp
shareholders was $20.3 billion, compared with a profit of $4.0
billion in 2019. Adjusting for inventory holding losses,
replacement cost (RC) loss was $18.1 billion, compared with a
profit of $3.5 billion in 2019.
After adjusting RC loss for a net charge for non-operating items
of $12.2 billion and net adverse fair value accounting effects of
$0.2 billion (both on a post-tax basis), underlying RC loss for the
year ended 31 December 2020 was $5.7 billion. The result reflected
lower oil and gas prices, significant exploration write-offs and
lower refining margins and depressed demand.
The profit for the year ended 31 December 2019 attributable to
bp shareholders was $4.0 billion, excluding inventory holding
gains, RC profit was $3.5 billion. After adjusting RC profit for a
net charge for non-operating items of $7.2 billion and net
favourable fair value accounting effects of $0.7 billion (both on a
post-tax basis), underlying RC profit for the year ended 31
December 2019 was $10.0 billion, a decrease of $2.7 billion
compared with 2018. The decrease was predominantly due to lower oil
and gas prices in the Upstream segment and a significantly weaker
environment in the Downstream segment.
Non-operating items
In 2020 the net charge for non-operating items was $12.2
billion, mainly related to impairment charges, a gain on the
disposal of our petrochemicals business, certain exploration
write-offs (reported within the 'other' category), and
restructuring costs associated with the reinvent bp programme. The
impairment charges mainly relate to producing assets and
principally arose as a result of changes to the group's oil and gas
price assumptions. Impairment charges also include amounts relating
to the disposal of the group's interests in its Alaska
business.
In 2019 the net charge was $7.2 billion, mainly related to
impairment charges, principally resulting from the announcements to
dispose of certain assets in the US and reclassification of
accumulated foreign exchange losses from reserves to the income
statement on the formation of the bp Bunge Bioenergia joint
venture.
See pages 304 and 305 for more information on non-operating
items and fair value accounting effects.
Taxation
The credit for corporate income taxes was $4,159 million in 2020
compared with a charge of $3,964 million in 2019. The decrease
mainly reflects the loss in 2020. The effective tax rate (ETR) on
the loss for the year in 2020 was impacted by the impairment
charges and exploration write-offs. The ETRs for 2020 and 2019 were
also impacted by various other one-off items.
Adjusting for inventory holding impacts, non-operating items and
fair value accounting effects, the underlying ETR in 2020 was lower
than in 2019, mainly reflecting the exploration write-offs with a
limited deferred tax benefit and the reassessment of deferred tax
asset recognition. The underlying ETR for 2021 is expected to be
higher than 40% but is sensitive to the impact that volatility in
the current environment may have on the geographical mix of the
group's profits and losses. Underlying ETR is a non-GAAP measure. A
reconciliation to GAAP information is provided on page 348.
$ million
-------- ------- -----------
Non-operating items 2020 2019 2018
Gains on sale of businesses and fixed assets 2,874 193 456
Impairment and losses on sale of businesses and fixed
assets (14,369) (8,075) (860)
Environmental and other provisions (212) (341) (758)
Restructuring, integration and rationalization costs (1,296) 2 (726)
Fair value gain (loss) on embedded derivatives - - 17
Gulf of Mexico oil spill response (255) (319) (714)
Other (2,554) (78) (372)
------------------------------------------------------- -------- ------- ---------
Total before interest and taxation (15,812) (8,618) (2,957)
Finance costs (625) (511) (479)
------------------------------------------------------- -------- ------- ---------
(16,437) (9,129) (3,436)
Taxation credit (charge) on non-operating items 4,345 1,943 510
Taxation - impact of US tax reform - - 121
Taxation - impact of foreign exchange (99) - -
------------------------------------------------------- -------- ------- ---------
Total after taxation (12,191) (7,186) (2,805)
------------------------------------------------------- -------- ------- ---------
%
------------------
Effective tax rate 2020 2019 2018
--------------------------------------------------- ---- ---- ------
Effective tax rate (ETR) on profit or loss for the
year 17 49 43
Underlying ETR (14) 36 38
---------------------------------------------------- ---- ---- ----
Reporting
The group's organizational structure reflects the various
activities in which bp is engaged. At 31 December 2020, bp reported
Upstream, Downstream, Rosneft and Other businesses and
corporate.
Upstream's activities included oil and natural gas exploration,
field development and production; midstream transportation, storage
and processing; and the marketing and trading of natural gas,
including liquefied natural gas (LNG), together with power and
natural gas liquids (NGLs). For further details of Upstream's
activities during the year see page 308.
Downstream's activities covered convenience and mobility offers,
including next-gen mobility to our customers. It also included the
refining, manufacturing, marketing, transportation, and supply and
trading of crude oil, petroleum, lubricants and petrochemicals
products.
The Rosneft segment result includes equity-accounted earnings
arising from bp's interest in Rosneft.
Other businesses and corporate comprised the biofuels and wind
businesses, the group's shipping and treasury functions, and
corporate activities worldwide.
In February 2020 bp announced plans for a future reorganization
of the group's operating segments. The group's segmental reporting
structure described above remained in place throughout 2020 and
changes, as described on page 38, were effective from 1 January
2021.
$ million
-------- --------- ------------
2020 2019 2018
---------------------------------------------------------- -------- --------- ------------
Sales and other operating revenues
Upstream 34,197 54,501 56,399
Downstream 162,974 250,897 270,689
Other businesses and corporate 1,716 1,788 1,678
----------------------------------------------------------- -------- --------- ----------
198,887 307,186 328,766
Less: sales and other operating revenues between segments 18,521 28,789 30,010
----------------------------------------------------------- -------- --------- ----------
Total sales and other operating revenues 180,366 278,397 298,756
----------------------------------------------------------- -------- --------- ----------
RC profit (loss) before interest and tax
Upstream (21,547) 4,917 14,328
Downstream 3,418 6,502 6,940
Rosneft (149) 2,316 2,221
Other businesses and corporate (683) (2,771) (3,521)
Consolidation adjustment - UPII 89 75 211
----------------------------------------------------------- -------- --------- ----------
(18,872) 11,039 20,179
-------- --------- ----------
Net (favourable) adverse impact of non-operating items
and fair value accounting effects
Upstream 16,506 6,241 222
Downstream (330) (83) 621
Rosneft 205 103 95
Other businesses and corporate (357) 1,491 1,963
----------------------------------------------------------- -------- --------- ----------
16,024 7,752 2,901
-------- --------- ----------
Underlying RC profit (loss) before interest and tax
Upstream (5,041) 11,158 14,550
Downstream 3,088 6,419 7,561
Rosneft 56 2,419 2,316
Other businesses and corporate (1,040) (1,280) (1,558)
Consolidation adjustment - UPII 89 75 211
----------------------------------------------------------- -------- --------- ----------
(2,848) 18,791 23,080
-------- --------- ----------
bp average realizations(a) $ per
barrel
---------------------------------------------------------- -------- --------- ------------
Crude oil(b) 38.46 61.56 67.81
Natural gas liquids 12.91 18.23 29.42
Liquids 36.16 57.73 64.98
----------------------------------------------------------- -------- --------- ----------
$ per thousand
cubic feet
---------------------------------------------------------- --------
Natural gas 2.75 3.39 3.92
US natural gas 1.30 1.93 2.43
----------------------------------------------------------- -------- --------- ------------
$ per barrel
of oil equivalent
---------------------------------------------------------- --------
Total hydrocarbons 26.31 38.00 43.47
----------------------------------------------------------- -------- --------- ------------
Average oil marker prices(c)
---------------------------------------------------------- -------- --------- ------------
Brent 41.84 64.21 71.31
West Texas Intermediate 39.25 57.03 65.20
----------------------------------------------------------- -------- --------- ----------
Average natural gas marker prices $ per million
British thermal
units
---------------------------------------------------------- --------
Average Henry Hub gas price(d) 2.08 2.63 3.09
----------------------------------------------------------- -------- --------- ----------
pence
per therm
---------------------------------------------------------- -------- --------- ------------
Average UK National Balancing Point gas price 24.93 34.70 60.38
----------------------------------------------------------- -------- --------- ----------
$/bbl
---------------------------------------------------------- -------- --------- ------------
bp average refining marker margin (RMM) 6.7 13.2 13.1
----------------------------------------------------------- -------- --------- ----------
a Realizations are based on sales by consolidated
subsidiaries<< only, which excludes equity-accounted
entities.
b Includes condensate.
c All traded days average.
d Henry Hub First of Month Index.
Upstream
Sales and other operating revenues for 2020 were lower due to
lower liquids and gas realizations, lower gas marketing and trading
revenues and were further impacted by lower sales volumes.
RC loss before interest and tax for the segment included a net
non-operating charge of $15,768 million. This primarily relates to
impairments associated with revisions to the long-term price
assumptions. See Financial statements - Note 5 for further
information. Fair value accounting effects had an adverse impact of
$738 million relative to management's view of performance.
The 2019 result included a net non-operating charge of $6,947
million, primarily related to impairment charges arising from
disposal transactions. Fair value accounting effects had a
favourable impact of $706 million relative to management's view of
performance.
After adjusting for non-operating items and fair value
accounting effects, the underlying RC result before interest and
tax was lower in 2020 compared with 2019. This primarily reflected
lower liquids and gas realizations and the impact of writing down
certain exploration intangible carrying values.
Downstream
Sales and other operating revenues in 2020 were lower than in
2019, mainly due to lower crude and product prices and the demand
impact of COVID-19.
RC profit before interest and tax for 2020 included a net
non-operating gain of $479 million. The gain reflected a profit of
$2.3 billion on the sale of our petrochemicals business, which was
partially offset by restructuring costs and impairments. In
addition, fair value accounting effects for 2020 had an adverse
impact of $149 million, compared with a favourable impact of $160
million in 2019.
After adjusting for non-operating items and fair value
accounting effects, underlying RC profit before interest and tax
for the year was $3,088 million.
The fuels business reported a lower underlying RC profit before
interest and tax compared with 2019, due to an exceptionally weak
refining environment, with COVID-19 restrictions impacting refining
utilization and fuel volumes. The 2020 result also reflects a
higher contribution from supply and trading.
Our fuels marketing business demonstrated continued resilience,
delivering significant profit in 2020, despite COVID-19 - which
adversely impacted retail fuel and aviation volumes by 14% and 50%
respectively.
Refining loss in 2020 reflects the continued impact of
historically low industry margins. Although refining availability
was strong at 96%, utilization was around 6% lower than 2019, due
to the impact of COVID-19 on demand. These factors were partially
offset by a lower level of turnaround activity and lower costs.
In the fourth quarter of 2020, we announced plans to cease
production at our Kwinana refinery and convert it to an import
terminal, helping secure ongoing fuel supply for Western
Australia.
We continued to redefine convenience in 2020, delivering a 6%
growth in convenience gross margin. We also expanded our retail
network by more than 1,400 sites, to a total of 20,300, including
more than 1,900 strategic convenience sites. And we completed the
formation of Jio-bp, our Indian joint venture with Reliance,
helping more than double the number of retail sites in growth
markets, see page 24.
We also progressed our electrification agenda, growing our
network to 10,100 bp and joint venture operated electric vehicle
charge points,see Our strategy on page 15.
The lubricants business reported a lower underlying RC profit
before interest and tax compared with 2019 and this reflected
significant COVID-19 demand impacts, with volumes 15% lower for the
year. We continued to expand our service offer in 2020, growing the
number of Castrol branded independent workshops by more than 4,000
to over 28,000 globally.
The petrochemicals business reported a lower underlying RC
profit before interest and tax compared with 2019, reflecting the
impact of COVID-19 on demand and a significantly weaker margin
environment. In December we completed the divestment of bp's
petrochemicals business to INEOS for a total consideration of $5
billion. Final payments, totalling $1 billion, were received in
February 2021.
For more information see Additional information for Downstream
on page 318.
Rosneft
RC loss before interest and tax for 2020 and RC profit before
interest and tax for 2019 for the segment included a non-operating
charge of $205 million for 2020 and $103 million for 2019.
After adjusting for non-operating items, the underlying RC
profit before interest and tax in 2020 primarily reflected lower
oil prices and unfavourable foreign exchange and adverse duty lag
effects compared with 2019 underlying profit.
Financial and operating performance for 2020 also reflected the
increased average economic interest that bp holds in Rosneft as a
result of Rosneft's share buyback programme and the transaction to
sell Rosneft's business in Venezuela in exchange for its own
shares, which completed in April 2020.
For more information see Additional information for Rosneft on
page 320.
Other businesses and corporate
RC loss before interest and tax for the year ended 31 December
2020 was $683 million (2019 $2,771 million). The 2020 result
included a net charge for non-operating items of $318 million,
primarily relating to Gulf of Mexico oil spill related costs of
$255 million and restructuring costs, partly offset by a gain on
disposal (non-operating items in 2019 $1,491 million). In addition,
fair value accounting effects had a favourable impact of $675
million.
After adjusting for non-operating items and fair value
accounting effects, the underlying RC loss before interest and tax
for the year ended 31 December 2020 was $1,040 million (2019 $1,280
million). This result mainly reflected an uplift in valuation of a
venture investment of $284 million.
Outlook for 2021
-- From the oil supply side, limited growth from non-OPEC+
countries coupled with active market management from OPEC+ means
that for 2021 we anticipate a normalization of the currently high
inventory levels.
-- Oil demand is anticipated to recover in 2021. The speed and
degree of the rebound depends on governments' policies and
individuals' self-imposed actions as vaccine distribution proceeds.
46 bp Annual Report and Form 20-F 2020
-- Oil prices have risen since the end of October, supported by
vaccine rollout programmes and continued active supply management
by OPEC+ countries. Prices are expected to remain subject to the
decisions of OPEC+, confidence in efforts to manage the rollout of
vaccination and further virus control measures.
-- We expect the US gas market to tighten in 2021 as supply
declines and demand for LNG exports recovers. The current tightness
on global LNG markets and higher US gas prices will lift other
regional gas prices.
-- US gas markets are likely to benefit from lower production
and a recovery in international LNG demand driven by demand in
Asia.
-- In Downstream we expect the outlook for the first part of the
year to remain challenged due to COVID-19, but to improve. While
COVID-19 has had material impacts at the start of the year, with
increased restrictions resulting in lower product demand, we expect
this uncertainty to improve subject to the successful rollout of
vaccination and virus control measures. Industry refining margins
and utilization continue to remain restrained by uncertainty about
the pace of demand recovery. The weak margin environment combined
with continued capacity additions in developing markets has
prompted a raft of third-party closure announcements. However,
these closures are unlikely to be sufficient to see a sustained
rebound in margins to pre-COVID levels in 2021.
-- Full-year 2021 underlying production is expected to be
slightly higher than 2020 due to the ramp-up of major projects,
primarily in gas regions, partly offset by the impacts of reduced
capital investment and decline in lower-margin gas assets. Reported
production is expected to be lower due to the impact of the ongoing
divestment programme.
-- Other businesses and corporate charges for 2021, excluding
non-operating items, fair value accounting effects and foreign
exchange volatility impact, are expected to be $1.2-1.4 billion
although the quarterly charge may vary quarter to quarter.
Cash flow and net debt information
$ million
----------- ----------- -------------
2020 2019 2018
------------------------------------------------- ----------- ----------- -------------
Operating cash flow excluding Gulf of Mexico oil
spill payments(a) 13,770 28,199 26,091
Operating cash flow 12,162 25,770 22,873
Net cash used in investing activities (7,858) (16,974) (21,571)
Net cash used in financing activities 3,956 (8,817) (4,079)
Cash and cash equivalents at end of year 31,111 22,472 22,468
-------------------------------------------------- ----------- ----------- -----------
Capital expenditure
Organic capital expenditure (12,034) (15,238) (15,140)
Inorganic capital expenditure (2,021) (4,183) (9,948)
-------------------------------------------------- ----------- ----------- -----------
(14,055) (19,421) (25,088)
----------- ----------- -----------
Divestment and other proceeds
Divestment proceeds 5,480 2,201 2,851
Other proceeds 1,106 566 666
-------------------------------------------------- ----------- ----------- -----------
6,586 2,767 3,517
----------- ----------- -----------
Debt
Finance debt 72,664 67,724 65,132
Net debt 38,941 45,442 43,477
Finance debt ratio (%) 45.9% 40.2% 39.3%
Gearing (%) 31.3% 31.1% 30.0%
Gearing including leases (%) 36.0% 35.3% N/A
-------------------------------------------------- ----------- ----------- -------------
(a) This does not form part of bp's Annual Report on Form 20-F
as filed with the SEC.
Operating cash flow
Operating cash flow for the year ended 31 December 2020 was
$12.2 billion, $13.6 billion lower than 2019. Operating cash flow
in 2020 reflects $1.8 billion of pre-tax cash outflows related to
the Gulf of Mexico oil spill. Compared with 2019, operating cash
flows in 2020 reflected lower oil and gas realizations, lower
refining margins and lower fuels volumes partly offset by lower tax
payments and lower working capital build.
Movements in working capital adversely impacted cash flow in the
year by $0.1 billion, including an adverse impact on working
capital from the Gulf of Mexico oil spill of $1.6 billion. Other
working capital effects, principally a decrease in inventory and
other current and non-current assets partially offset by a decrease
in other current and non-current liabilities, had a favourable
effect of $1.5 billion. bp actively manages its working capital
balances to optimize and reduce volatility in cash flow.
Operating cash flow for the year ended 31 December 2019 was
$25.8 billion, $2.9 billion higher than 2018. Operating cash flow
in 2019 reflected $2.7 billion of pre-tax cash outflows related to
the Gulf of Mexico oil spill. Compared with 2018, operating cash
flows in 2019 also reflected the favourable effect of an estimated
$2.0 billion of lease payments being classified as financing cash
flows from 1 January 2019 following the implementation of IFRS
16.
Movements in working capital adversely impacted cash flow in the
year by $2.9 billion, including an adverse impact on working
capital from the Gulf of Mexico oil spill of $2.6 billion.
Net cash used in investing activities
Net cash used in investing activities for the year ended 31
December 2020 decreased by $9.1 billion compared with 2019.
The decrease mainly reflected lower capital expenditure,
particularly due to payments of $3.5 billion in 2019 for the
acquisition of unconventional onshore US oil and gas assets from
BHP, and $3.9 billion of disposal proceeds from the petrochemicals
divestment.
Total capital expenditure for 2020 was $14.1 billion (2019 $19.4
billion), of which organic capital expenditure was $12.0 billion
(2019 $15.2 billion) in line with the guidance given in April.
Sources of funding are fungible, but the majority of the group's
funding requirements for new investment comes from cash generated
by existing operations. We expect 2021 total capital expenditure,
including organic capital expenditure, to be around $13
billion.
Total divestment and other proceeds for 2020 amounted to $6.6
billion, including $3.9 billion of proceeds from the petrochemicals
divestment and $1.1 billion other proceeds. Other proceeds
represented a loan repayment relating to the TANAP pipeline
refinancing; and proceeds in relation to the sale of interests in
bp's retail property portfolio in the UK and New Zealand.
Total divestment and other proceeds for 2019 amounted to $2.8
billion, including $0.6 billion received in relation to the sale of
an interest in bp's retail property portfolio in Australia. The
proceeds from the UK, New Zealand and Australia property
transactions are reported within financing activities in the group
cash flow statement.
bp has completed or agreed transactions for over half of its
target of $25 billion in proceeds by 2025. bp expects proceeds from
divestments and other disposals of $4-6 billion in 2021, weighted
towards the second half.
Net cash provided by (used in) financing activities
Net cash provided by financing activities for the year ended 31
December 2020 was $4.0 billion, compared with net cash used of $8.8
billion in 2019. This was mainly due to the issue of perpetual
hybrid bonds with a US$ equivalent value of $11.9 billion.
Total dividends distributed to shareholders in 2020 were 31.5
cents per share, 9.5 cents lower than 2019. This amounted to a
total distribution to shareholders of $6.3 billion in 2020. In 2019
the total distribution to shareholders was $8.3 billion, of which
shareholders elected to receive $1.4 billion in shares under the
scrip dividend programme. The board decided not to offer a scrip
dividend alternative in respect of the 2020 dividends.
Debt
Finance debt at the end of 2020 increased by $4.9 billion from
the end of 2019. The finance debt ratio at the end of 2020
increased to 45.9% from 40.2% at the end of 2019. Net debt at the
end of 2020 decreased by $6.5 billion from the 2019 year-end
position. Gearing at the end of 2020 increased to 31.3% from 31.1%,
reflecting significant impairments and exploration write-offs,
offset by the hybrid bond issue in June 2020. Net debt and gearing
are non-GAAP measures. See Financial statements - Notes 26 and 27
for further information on finance debt and net debt.
For information on financing the group's activities, see
Financial statements - Note 29 and Liquidity and
capital resources on page 306.
Group reserves and production
Total hydrocarbon proved reserves at 31 December 2020, on an oil
equivalent basis including equity-accounted entities, decreased by
7% compared with 31 December 2019. Natural gas represented about
41% (47% for subsidiaries and 36% for equity-accounted entities) of
these reserves. The change includes a net decrease from
acquisitions and disposals of 1,069mmboe (decrease of 1,072mmboe
within our subsidiaries and increase of 3mmboe within our
equity-accounted entities). Acquisition and divestment activity
occurred in our equity-accounted entities in Russia, and divestment
activity in our subsidiaries in the US including Alaska.
Total hydrocarbon production for the group was 8% lower compared
with 2019. The decrease comprised an 11% decrease (6% decrease for
liquids and 16% decrease for gas) for subsidiaries and a 2%
decrease (4% decrease for liquids and 2% increase for gas) for
equity-accounted entities.
Group reserves and production (including Rosneft
segment)(a)
2020 2019 2018
------------------------------------------------- ------ ------ --------
Estimated net proved reserves (net of royalties)
Liquids (mmb) 10,661 11,478 11,456
Natural gas (bcf) 42,467 45,601 49,239
Total hydrocarbons (mmboe) 17,982 19,341 19,945
Of which:
Equity-accounted entities(b) 10,100 9,965 9,757
-------------------------------------------------- ------ ------ ------
Production (net of royalties)
Liquids (mmb) 2,106 2,211 2,191
Natural gas (bcf) 7,929 9,102 8,659
Total hydrocarbons (mmboe) 3,473 3,781 3,683
Of which:
Subsidiaries 2,146 2,420 2,328
Equity-accounted entities(c) 1,326 1,360 1,355
-------------------------------------------------- ------ ------ ------
a Because of rounding, some totals may not agree exactly with
the sum of their component parts.
b Includes BP's share of Rosneft. See Supplementary information
on oil and natural gas on page 231 for further information.
c Includes BP's share of Rosneft. See Oil and gas disclosures
for the group on page 312 for further information.
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