TIDMBP.
RNS Number : 6348N
BP PLC
02 February 2021
FOR IMMEDIATE RELEASE
London 2 February 2021
BP p.l.c. Group results
Fourth quarter and full year 2020
=================================
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Highlights Resilient operations and strategic progress in a challenging
environment
Bernard Looney - chief executive officer:
2020 will forever be remembered for the pain and sadness caused by COVID-19.
Lives were lost - livelihoods destroyed. Our sector was hit hard as well.
Road and air travel are down, as are oil demand, prices and margins.
It was also a pivotal year for the company. We launched a net zero ambition,
set a new strategy to become an integrated energy company and created
an offshore wind business in the US. We began reinventing bp - with nearly
10 thousand people leaving the company. We strengthened our finances
- taking out costs and closing major divestments. And through all of
this, the underlying operations of the company remained safe - one of
our safest years - and reliable, and major new projects were brought
on line. I appreciate our team's commitment to deliver the energy the
world needed and am grateful for the support we received from investors
and the communities where we work. We expect much better days ahead for
all of us in 2021.
Financial results and progress
- Underlying replacement cost profit for the quarter was $0.1
billion, similar to the previous quarter. Performance was
significantly impacted by lower marketing performance in the
Downstream, with volumes remaining under pressure due to COVID-19
and continuing pressure on refining margins and utilization. In
addition, the result was impacted by a significantly weaker result
in gas marketing and trading and higher exploration write-offs,
partially offset by a higher Rosneft contribution and a lower
underlying tax charge. The full-year result was a loss of $5.7
billion compared to $10 billion profit in 2019, driven by lower oil
and gas prices, significant exploration write-offs and refining
margins and depressed demand.
- Reported profit for the quarter was $1.4 billion, compared
with $0.5 billion loss in the previous quarter. The result included
$2.3 billion gain on disposal from the sale of BP's petrochemicals
business. For the full year, the reported loss was $20.3 billion,
including significant impairments and exploration write-offs taken
in the second quarter, compared with a profit of $4.0 billion in
2019.
- Operating cash flow for the quarter, excluding Gulf of Mexico
oil spill payments of $0.1 billion, was $2.4 billion. Compared to
the third quarter, this reflected the significant impact of lower
marketing volumes in the Downstream and a significantly weaker
contribution from gas marketing and trading. There was also the
absence of the working capital release and other working capital
effects, absence of the Rosneft dividend, and severance payments
for reinvent bp, partly offset by lower tax payments.
- Proceeds from divestments and other disposals in the quarter
were $4.2 billion, including $3.5 billion on completion of the
petrochemicals divestment. In February 2021, BP agreed to sell a
20% interest in Oman's Block 61 for $2.6 billion subject to final
adjustments. BP has now 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 toward the second half.
- At year end net debt was $39 billion, down $1.4 billion over
the quarter and $6.5 billion over the full year. Net debt is
expected to increase in the first half of 2021, driven by severance
payments, the annual Gulf of Mexico oil spill payment and payment
following completion of the offshore wind joint venture with
Equinor. It is expected to then fall in the second half with
growing operating cash flow and the receipt of divestment proceeds.
BP continues to expect to reach our $35 billion net debt target
around fourth quarter 2021 and first quarter 2022. This assumes oil
prices in the range of $45-50 a barrel and BP planning assumptions
for RMM and gas prices.
- A dividend of 5.25 cents per share was announced for the
quarter.
Performing while transforming
- Operations were strong in 2020, with full-year BP-operated
refining availability of 96% and Upstream plant reliability of 94%.
Safety performance was also strong with both tier1/tier2 process
safety events and reported recordable injury frequency
significantly lower than in 2019. Upstream unit production costs
for the year were 6.5% lower than 2019. Full-year Upstream
production was 9.9% lower than 2019 primarily due to
divestments.
- BP continues to make strong progress in reinventing its
organization. The new organization was in place at the start of
2021 and over half of the approximately 10,000 people expected to
leave BP as a result of the reinvent programme had left by
year-end. Around $1.4 billion in people-related costs are expected
associated with the reinvent programme, with the majority of the
cash outflow incurred in the first half of 2021.
- Four new Upstream major projects began production in the year,
including three in the fourth quarter - Ghazeer in Oman, Vorlich in
the UK and KG D6 R-cluster in India. In the quarter, the Trans
Adriatic Pipeline began gas deliveries, completing the Southern Gas
Corridor pipeline system.
- Demonstrating the resilience of BP's convenience offer, while
retail fuel volumes were 14% lower for the full year, BP's
convenience gross margin grew by 6%. Through the year, around 300
strategic convenience sites were added to the network.
- BP had developed 3.3GW net renewable generating capacity to
FID by end-2020, 0.7GW more than a year earlier. In January 2021 BP
completed formation of its strategic US offshore wind partnership
with Equinor, including the purchase of 50% in the Empire Wind and
Beacon Wind projects. The projects were also selected to supply
2.5GW of power to the State of New York, adding to an existing
commitment to supply 0.8GW.
- Working in partnership with other companies, BP has announced:
plans to develop a 'green' hydrogen project at its Lingen refinery
in Germany with Ørsted; a BP-operated multi-company partnership to
develop offshore infrastructure to support planned UK carbon
capture, use and storage projects; and agreements to provide
additional supplies of renewable energy to Amazon.
Financial summary Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
================================================= ======= ======= ======= ======== =======
Profit (loss) for the period attributable
to BP shareholders 1,358 (450) 19 (20,305) 4,026
Inventory holding (gains) losses, net
of tax (533) (194) (23) 2,201 (511)
================================================== ======= ======= ======= ======== =====
RC profit (loss) 825 (644) (4) (18,104) 3,515
Net (favourable) adverse impact of non-operating
items and fair value accounting effects,
net of tax (710) 730 2,571 12,414 6,475
================================================== ======= ======= ======= ======== =====
Underlying RC profit (loss) 115 86 2,567 (5,690) 9,990
================================================== ======= ======= ======= ======== =====
RC profit (loss) per ordinary share (cents) 4.08 (3.18) (0.02) (89.53) 17.32
RC profit (loss) per ADS (dollars) 0.24 (0.19) 0.00 (5.37) 1.04
Underlying RC profit (loss) per ordinary
share (cents) 0.57 0.42 12.67 (28.14) 49.24
Underlying RC profit (loss) per ADS (dollars) 0.03 0.03 0.76 (1.69) 2.95
================================================== ======= ======= ======= ======== =====
RC profit (loss), underlying RC profit, operating cash flow
excluding Gulf of Mexico oil spill payments, working capital,
organic capital expenditure and net debt are non-GAAP measures.
These measures and inventory holding gains and losses,
non-operating items, fair value accounting effects, divestment
proceeds, RMM, major project, convenience gross margin, Upstream
plant reliability, refining availability and divestment proceeds
are defined in the Glossary on page 32.
Top of page 2
BP p.l.c. Group results
Fourth quarter and full year 2020
Murray Auchincloss - chief financial officer :
These results reflect a truly tough quarter, with a challenging price
environment and COVID-19 related demand impacts. Nonetheless, we made
strong progress in reducing net debt again, to $39 billion in the quarter.
We remain on track to meet our target of $35 billion between the fourth
quarter of 2021 and first quarter of 2022, which will trigger the start
of share buybacks, subject to maintaining a strong investment grade credit
rating.
COVID-19 Update
Strengthening finances:
- BP's future financial performance, including cash flows and
net debt, will be impacted by the extent and duration of the
current market conditions and the effectiveness of the actions that
it and others take, including its financial interventions. It is
difficult to predict when current supply and demand imbalances will
be resolved and what the ultimate impact of COVID-19 will be.
- BP has continued to progress its divestment programme towards
delivery of $25 billion of proceeds by 2025. The petrochemicals and
Alaska midstream disposals both completed in the fourth quarter.
Divestment proceeds for the full year were $5.5 billion.
- Organic capital expenditure in 2020 was $12.0 billion, in line
with the guidance given in April and compared with $15.2 billion in
2019.
- Costs that are directly attributable to COVID-19 were around
$0.1 billion for the quarter (full year 2020 around $0.4
billion).
- At year end net debt was $39 billion, and BP continues to
actively manage the profile of its debt portfolio. During the third
quarter and January 2021, the group bought back an aggregate of $6
billion of debt. At year-end BP had around $44 billion of
liquidity, including cash and undrawn revolving credit
facilities.
- Net debt is expected to increase in the first half of 2021
before reducing in the second half of the year supported by growing
operating cash flow and the receipt of divestment proceeds. BP
continues to expect to reach our $35 billion net debt target around
fourth quarter 2021 and first quarter 2022. This assumes oil prices
in the range of $45-50 a barrel and BP planning assumptions for RMM
and gas prices.
Protecting our people and operations:
- BP continues to take steps to protect and support its staff
through the pandemic. The great majority of BP staff who are able
to work from home continue to do so. Precautions in operations and
offices include: reduced manning levels, changing working patterns,
deploying appropriate personal protective equipment (PPE) and
enhanced cleaning and social distancing measures at plants and
retail sites. Decisions on working practices are being taken with
caution and in compliance with local and national guidelines and
regulations.
- BP is providing enhanced support and guidance to staff on
safety, health and hygiene, homeworking and mental health.
- While the pandemic did not result in significant outages in
our ongoing operations, it resulted in delays to in-year major
projects in the North Sea and India and has impacted development of
the Mad Dog 2, Tangguh Expansion, Trinidad Cassia Compression and
Greater Tortue Ahmeyin Phase 1 major projects. However production
from four major projects commenced during the year.
- Refinery utilization for the full year was around 6% lower
than 2019 due to the impact of COVID-19 on demand, with refining
margins remaining extremely weak. Year on year, demand for retail
fuels was lower by 14% and for aviation by 50%. Despite this,
convenience gross margin grew by 6% at BP retail sites for the full
year.
- Despite the challenges of the environment, BP's operations
have performed safely and reliably over the course of the year.
BP-operated Upstream plant reliability was 94% and BP-operated
refining availability was 96% for the year.
Outlook:
- 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.
- 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 the first quarter of 2021 we expect material impacts in
Downstream as a result of the pandemic, with increased COVID-19
restrictions resulting in lower product demand. We expect industry
refining margins and utilization to remain under pressure. In our
marketing businesses we expect renewed COVID-19 restrictions to
have a greater impact on product demand, with January retail
volumes down by around 20% year on year, compared with a decline of
11% in the fourth quarter.
- BP will continue to review all actions and respond to any
further changes in prevailing market conditions.
The commentary above and following should be read in conjunction with
the cautionary statement on page 36.
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Group headlines
Results
For the full year, underlying replacement Operating cash flow*
cost (RC) loss* was $5,690 million, Operating cash flow excluding Gulf
compared with a profit of $9,990 million of Mexico oil spill payments* was
in 2019. Underlying RC loss is after $2.4 billion for the fourth quarter
adjusting RC loss* for a net charge and $13.8 billion for the full year.
for non-operating items* of $12,191 These amounts include a working capital*
million and net adverse fair value build of $4.0 million in the fourth
accounting effects* of $223 million quarter and $1.3 billion in the full
(both on a post-tax basis). year, after adjusting for net inventory
RC loss was $18,104 million for the holding gains or losses* and working
full year, compared with a profit capital effects of the Gulf of Mexico
of $3,515 million in 2019. oil spill. The comparable amount for
For the fourth quarter, underlying the same periods in 2019 was $7.6
RC profit was $115 million, compared billion and $28.2 billion.
with $2,567 million in 2019. Underlying Operating cash flow as reported in
RC profit is after adjusting RC profit the group cash flow statement was
for a net gain for non-operating items $2.3 billion for the fourth quarter
of $1,166 million and net adverse and $12.2 billion for the full year,
fair value accounting effects of $456 including a working capital build
million (both on a post-tax basis). of $0.7 billion and $0.1 billion respectively,
RC profit was $825 million for the compared with $7.6 billion and $25.8
fourth quarter, compared with a loss billion for the same periods in 2019.
of $4 million in 2019. See page 30 and Glossary for further
Profit or loss for the fourth quarter information on Gulf of Mexico oil
and full year attributable to BP shareholders spill cash flows and on working capital.
was a profit of $1,358 million and Capital expenditure*
a loss of $20,305 million respectively, Organic capital expenditure* for the
compared with a profit of $19 million fourth quarter and full year was $2.9
and $4,026 million for the same periods billion and $12.0 billion respectively,
in 2019. compared with $4.0 billion and $15.2
See further information on pages 4, billion for the same periods in 2019.
27 and 28. Inorganic capital expenditure* for
Depreciation, depletion and amortization the fourth quarter and full year was
The charge for depreciation, depletion $0.5 billion and $2.0 billion respectively,
and amortization was $3.4 billion compared with $0.2 billion and $4.2
in the quarter and $14.9 billion in billion for the same periods in 2019.
the full year, compared with $4.4 Organic capital expenditure and inorganic
billion and $17.8 billion for the capital expenditure are non-GAAP measures.
same periods in 2019. In 2021, we See page 26 for further information.
expect the full-year charge to be Divestment and other proceeds
similar to the 2020 level. Divestment proceeds* for the fourth
Effective tax rate quarter and full year were $4.0 billion
The effective tax rate (ETR) on RC and $5.5 billion respectively, including
profit or loss* for the fourth quarter $3.5 billion and $3.9 billion of proceeds
and full year was -141% and 16% respectively, from the petrochemicals divestment
compared with 102% and 51% for the respectively. For the same periods
same periods in 2019. Adjusting for in 2019 divestment proceeds were $0.8
non-operating items and fair value billion and $2.2 billion respectively.
accounting effects, the underlying In addition, $0.2 billion was received
ETR* for the fourth quarter and full in the fourth quarter in relation
year was 40% and -14% respectively, to the sale of an interest in BP's
compared with 27% and 36% for the New Zealand retail property portfolio.
same periods a year ago. The higher For the full year, $1.1 billion in
underlying ETR for the fourth quarter other proceeds were received including
reflects changes in the mix of profits from the TANAP pipeline refinancing
and losses. The lower underlying ETR and the sale of an interest in BP's
for the full year mainly reflects UK retail property portfolio. Other
the exploration write-offs with a proceeds for the fourth quarter and
limited deferred tax benefit and the full year in 2019 were $0.6 billion.
reassessment of deferred tax asset Total divestment and other proceeds
recognition in the second quarter. for the quarter and full year in 2020
The underlying ETR for 2021 is expected were $4.2 billion and $6.6 billion
to be higher than 40% but is sensitive respectively. Total divestment and
to the impact that volatility in the other proceeds for the fourth quarter
current environment may have on the and full year in 2019 were $1.4 billion
geographical mix of the group's profits and $2.8 billion respectively.
and losses. ETR on RC profit or loss Net debt* and gearing*
and underlying ETR are non-GAAP measures. Net debt at 31 December 2020 was $38.9
Dividend billion, compared with $45.4 billion
BP today announced a quarterly dividend a year ago. Gearing at 31 December
of 5.25 cents per ordinary share ($0.315 2020 was 31.3%, compared with 31.1%
per ADS), which is expected to be a year ago. Gearing including leases*
paid on 26 March 2021. The corresponding at 31 December 2020 was 36.0%, compared
amount in sterling is due to be announced with 35.3% a year ago. Net debt, gearing
on 15 March 2021, calculated based and gearing including leases are non-GAAP
on the average of the market exchange measures. See pages 25 and 29 for
rates for the four dealing days commencing more information.
on 9 March 2021. See page 24 for more Reserves replacement ratio*
information. The organic reserves replacement ratio
Share buybacks on a combined basis of subsidiaries
BP repurchased 120 million ordinary and equity-accounted entities was
shares at a cost of $776 million (including 78% for the year. Including acquisitions
fees and stamp duty) in the full year and divestments, the total reserves
2020, all of which was completed in replacement ratio was -5%.
the first quarter of 2020. In January
2020, the share dilution buyback programme
had fully offset the impact of scrip
dilution since the third quarter 2017.
* For items marked with an asterisk throughout this document,
definitions are provided in the Glossary on page 32.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
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Top of page 4
Analysis of underlying RC profit (loss)* before interest and
tax
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
================================================ ======= ======= ======= ======= =========
Underlying RC profit (loss) before interest
and tax
Upstream 697 878 2,678 (5,041) 11,158
Downstream 126 636 1,438 3,088 6,419
Rosneft 311 (177) 412 56 2,419
Other businesses and corporate (89) (130) (250) (1,040) (1,280)
Consolidation adjustment - UPII* (77) 34 24 89 75
================================================= ======= ======= ======= ======= =======
Underlying RC profit (loss) before interest
and tax 968 1,241 4,302 (2,848) 18,791
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (568) (610) (781) (2,523) (3,041)
Taxation on an underlying RC basis (158) (402) (955) (743) (5,596)
Non-controlling interests (127) (143) 1 424 (164)
================================================= ======= ======= ======= ======= =======
Underlying RC profit (loss) attributable
to BP shareholders 115 86 2,567 (5,690) 9,990
================================================= ======= ======= ======= ======= =======
Reconciliations of underlying RC profit or loss attributable to
BP shareholders to the nearest equivalent IFRS measure are provided
on page 1 for the group and on pages 6-11 for the segments.
Analysis of RC profit (loss)* before interest and tax and
reconciliation to profit (loss) for the period
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
================================================= ======= ======= ======= ======== =========
RC profit (loss) before interest and
tax
Upstream (592) 30 614 (21,547) 4,917
Downstream 1,245 915 1,433 3,418 6,502
Rosneft 270 (278) 503 (149) 2,316
Other businesses and corporate 308 24 (1,432) (683) (2,771)
Consolidation adjustment - UPII (77) 34 24 89 75
================================================== ======= ======= ======= ======== =======
RC profit (loss) before interest and
tax 1,154 725 1,142 (18,872) 11,039
Finance costs and net finance expense
relating to pensions and other post-retirement
benefits (759) (808) (903) (3,148) (3,552)
Taxation on a RC basis 557 (418) (244) 3,492 (3,808)
Non-controlling interests (127) (143) 1 424 (164)
================================================== ======= ======= ======= ======== =======
RC profit (loss) attributable to BP shareholders 825 (644) (4) (18,104) 3,515
Inventory holding gains (losses)* 695 233 10 (2,868) 667
Taxation (charge) credit on inventory
holding gains and losses (162) (39) 13 667 (156)
================================================== ======= ======= ======= ======== =======
Profit (loss) for the period attributable
to BP shareholders 1,358 (450) 19 (20,305) 4,026
================================================== ======= ======= ======= ======== =======
Top of page 5
Operational updates
Upstream Strategic progress
Upstream production, which excludes At the end of 2020, BP had developed
Rosneft, for the full year averaged 3.3GW net renewable generating capacity
2,375mboe/d, 9.9% lower than for 2019, to FID, compared with 2.6GW a year
driven primarily by divestments in earlier.
BPX Energy and Alaska. Underlying The formation of BP's strategic partnership
production* for the full year was with Equinor for offshore wind opportunities
3.5% lower than 2019. in the US was completed in January
For the full year of 2020, BP-operated 2021, including BP's purchase of a
Upstream plant reliability* was 94.0% 50% interest in the Empire Wind and
and Upstream unit production costs* Beacon Wind projects. Empire Wind
of $6.39/boe were 6.5% lower than 2 and Beacon Wind 1 were selected
in 2019. to provide New York state with additional
Production from three Upstream major offshore wind power which, subject
projects started in the quarter - to negotiation of a purchase and sale
the Ghazeer project in Oman, Vorlich agreement, will bring the total secured
in the UK North Sea and the KG D6 by the projects to 3.3GW, 75% of the
R Cluster project offshore India. maximum potential installed capacity
This follows the Gulf of Mexico Atlantis across the projects.
Phase 3 project in the previous quarter. In the quarter BP also acquired a
The Raven project in Egypt is currently majority stake in Finite Carbon, the
undergoing commissioning. The Trans biggest developer of forest carbon
Adriatic Pipeline began gas deliveries, offsets in the US. BP's investment
completing the Southern Gas Corridor is expected to support the accelerated
pipeline system. growth of the business, including
BP reached agreement to sell its interests international expansion.
in the Wamsutter asset in Wyoming Financial framework
to Williams Field Services LLC. In Operating cash flow excluding Gulf
February 2021 BP also agreed to sell of Mexico oil spill payments* was
a 20% participating interest in Oman's $13.8 billion for the full year of
Block 61 to PTT Exploration and Production 2020, compared with $28.2 billion
Public Company Limited. for the same period in 2019.
Downstream Organic capital expenditure * for
BP-operated refining availability the full year of 2020 was $12.0 billion.
for the full year was 96.0%. In the BP expects total capital expenditure,
quarter BP announced plans to cease including inorganic capital expenditure,
production at the Kwinana refinery to be around $13 billion in 2021.
and convert it to an import terminal, Divestment and other proceeds were
helping to secure ongoing fuel supply $6.6 billion for the full year of
for Western Australia. 2020. BP has now completed or agreed
BP continued to make progress in fuels transactions for over half of its
marketing in 2020, expanding its retail target of $25 billion in proceeds
network by more than 1,400 to over by 2025. BP expects proceeds from
20,300 sites worldwide. This includes divestments and other disposals of
more than 1,900 strategic convenience $4-6 billion in 2021, weighted toward
sites, around 300 more than a year the second half.
earlier. Gulf of Mexico oil spill payments
The $5-billion sale of BP's petrochemicals on a post-tax basis were $1.6 billion
business to INEOS completed on 31 in the full year of 2020. Payments
December and BP received the second for 2021 are expected to be around
payment of $3.6 billion, less $0.1 $1 billion on a post-tax basis.
billion of third-party indebtedness. Gearing * at 31 December 2020 was
Final payments totalling $1 billion 31.3%, in part reflecting the hybrid
are expected in the first half of bond issue in the second quarter of
2021. 2020. See page 25 for more information.
Through 2020, the number of BP and
joint venture operated electric vehicle
charging points increased to more
than 10,000 worldwide, with growth
in the UK, Germany and through the
DiDi joint venture in China.
Operating metrics Year 2020 Financial metrics Year 2020
========================== ===========================
(vs. Year 2019) (vs. Year 2019)
========================== =============== =========================== ===============
Tier 1 and tier 2 Underlying RC profit
process safety events 70 (loss)* $(5.7)bn
========================== ===========================
(-28) (-$15.7bn)
========================== =============== =========================== ===============
Reported recordable Operating cash flow
injury frequency* excluding Gulf of
Mexico oil spill payments
0.132 (post-tax) $13.8bn
========================== ===========================
(-20.7%) (-$14.4bn)
========================== =============== =========================== ===============
Group production 3,473mboe/d Organic capital expenditure $12.0bn
========================== ===========================
(-8.1%) (-$3.2bn)
========================== =============== =========================== ===============
Upstream production Gulf of Mexico oil
(excludes Rosneft spill payments (post-tax)
segment) 2,375mboe/d $1.6bn
========================== ===========================
(-9.9%) (-$0.8bn)
========================== =============== =========================== ===============
Upstream unit production Divestment proceeds*
costs (a) $6.39
6.39/boe $5.5bn
========================== ===========================
(-6.5%) (+$3.3bn)
========================== =============== =========================== ===============
BP-operated Upstream
plant reliability 94.0% Gearing 31.3%
=============================== ===========================
(-0.4) (+0.2)
=============== =========================== ===============
BP-operated refining Dividend per ordinary
availability* 96.0% share (b) 5.25 cents
(+1.1) (-50.0%)
Return on average
capital employed* (3.8)%
===========================
(-12.7)
=========================== ===============
(a) Reflecting lower costs and divestment impacts.
(b) Represents dividend announced in the quarter (vs. prior year quarter).
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
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Top of page 6
Upstream
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
================================================= ======= ======= ======= ======== ========
Profit (loss) before interest and tax (572) 38 614 (21,530) 4,909
Inventory holding (gains) losses* (20) (8) - (17) 8
================================================== ======= ======= ======= ======== ======
RC profit (loss) before interest and
tax (592) 30 614 (21,547) 4,917
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* 1,289 848 2,064 16,506 6,241
================================================== ======= ======= ======= ======== ======
Underlying RC profit (loss) before interest
and tax*(a) 697 878 2,678 (5,041) 11,158
================================================== ======= ======= ======= ======== ======
(a) See page 7 for a reconciliation to segment RC profit before interest and tax by region.
Financial results
The replacement cost loss before interest and tax for the fourth
quarter and full year was $592 million and $21,547 million
respectively, compared with a profit of $614 million and $4,917
million for the same periods in 2019. The fourth quarter and full
year included a net non-operating charge of $612 million and
$15,768 million respectively, compared with a net charge of $2,723
million and $6,947 million for the same periods in 2019. The net
non-operating charge for the quarter primarily reflects a net
impairment charge and a provision for restructuring costs partly
offset by disposal gains. The charge for the full year is
principally related to impairments associated with revisions to
long-term price assumptions. Fair value accounting effects in the
fourth quarter and full year had an adverse impact of $677 million
and $738 million respectively, compared with a favourable impact of
$659 million and $706 million in the same periods of 2019.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost result before
interest and tax for the fourth quarter and full year was a profit
of $697 million and a loss of $5,041 million respectively, compared
with a profit of $2,678 million and $11,158 million for the same
periods in 2019. The result for the fourth quarter mainly reflects
lower liquids and gas realizations, lower production including the
impact of divestments, and a significantly weaker gas marketing and
trading contribution, partly offset by lower depreciation,
depletion and amortization. The result for the full year mainly
reflects lower liquids and gas realizations and the impact of
writing down certain exploration intangible carrying values.
Production
Production for the quarter was 2,155mboe/d, 20.1% lower than the
fourth quarter of 2019. This includes the impact of divestments
mainly in BPX Energy and Alaska. Underlying production* for the
quarter decreased by 11.1% mainly due to impacts from reduced
capital investment levels and decline, significant weather impacts
from hurricanes in the higher-margin US Gulf of Mexico and
maintenance activity.
For the full year, production was 2,375mboe/d, 9.9% lower than
the full year of 2019 mainly due to the impact of divestments in
BPX Energy and Alaska. Underlying production for the full year
decreased by 3.5% mainly due to impacts from reduced capital
investment levels and decline, and significant weather impacts from
hurricanes in the US Gulf of Mexico.
Key events
On 26 October, BP announced the start of production from the
Qattameya field in the North Damietta concession, located offshore
Egypt (BP operator 100%).
On 29 October, BP confirmed oil discoveries at the Cappahayden
and Cambriol prospects in the Flemish Pass basin, offshore
Newfoundland, Canada (Equinor operator 60%, BP 40%).
On 15 November, the Trans Adriatic Pipeline (TAP), an 878-km gas
transportation system crossing Greece, Albania, the Adriatic Sea
and Italy, became operational (BP 20%, SOCAR 20%, Snam 20%, Fluxys
19%, Enagás 16% and Axpo 5%), with first gas exports from
Azerbaijan to Europe commencing in December.
On 26 November, BP announced the start of production from the
Vorlich field in the UK North Sea (BP 66%, Ithaca Energy operator
34%).
On 15 December, BP signed an agreement to sell its interest in
the Wamsutter asset, located in the Greater Green River Basin,
Wyoming, US, to Williams Field Services LLC. Subject to approvals,
the transaction is expected to complete in first quarter 2021.
On 18 December, BP and Reliance Industries Limited (RIL)
announced the start of production from the R Cluster
ultra-deep-water gas field in block KG D6 off the east coast of
India. (RIL operator 66.67%, BP 33.33%).
On 1 February 2021, BP announced it has agreed to sell a 20%
participating interest in Oman's Block 61 to PTT Exploration and
Production Public Company Limited (PTTEP). Subject to approvals,
the transaction is expected to complete in 2021 and following which
the participating interests in Block 61 will be: BP operator 40%,
OQ 30%, PTTEP 20%, and PETRONAS 10%.
Outlook
We expect full-year 2021 underlying production 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. We expect
reported production to be lower due to the impact of the ongoing
divestment programme.
We expect first-quarter 2021 reported production to be slightly
higher than fourth-quarter 2020.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
----------------------------------------------------------------------
Top of page 7
Upstream (continued)
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
============================================ ======= ======= ======= ======== =========
Underlying RC profit (loss) before interest
and tax
US (100) 125 645 (2,396) 2,670
Non-US 797 753 2,033 (2,645) 8,488
============================================= ======= ======= ======= ======== =======
697 878 2,678 (5,041) 11,158
======= ======= ======= ======== =======
Non-operating items (a)(b)
US (101) (114) (2,451) (2,969) (6,265)
Non-US (511) (517) (272) (12,799) (682)
============================================= ======= ======= ======= ======== =======
(612) (631) (2,723) (15,768) (6,947)
======= ======= ======= ======== =======
Fair value accounting effects
US 104 57 120 198 (179)
Non-US (781) (274) 539 (936) 885
============================================= ======= ======= ======= ======== =======
(677) (217) 659 (738) 706
======= ======= ======= ======== =======
RC profit (loss) before interest and
tax
US (97) 68 (1,686) (5,167) (3,774)
Non-US (495) (38) 2,300 (16,380) 8,691
============================================= ======= ======= ======= ======== =======
(592) 30 614 (21,547) 4,917
======= ======= ======= ======== =======
Exploration expense
US 104 40 86 2,724 233
Non-US 110 150 180 7,556 731
============================================= ======= ======= ======= ======== =======
214 190 266 10,280 964
======= ======= ======= ======== =======
Of which: Exploration expenditure written
off(b) 154 50 155 9,920 631
============================================= ======= ======= ======= ======== =======
Production (net of royalties)(c)(d)
Liquids* (mb/d)
US 359 363 517 424 482
Europe 160 143 149 154 141
Rest of World 600 623 662 651 666
============================================= ======= ======= ======= ======== =======
1,119 1,129 1,328 1,229 1,288
======= ======= ======= ======== =======
Natural gas (mmcf/d)
US 1,232 1,419 2,317 1,561 2,358
Europe 320 265 275 282 185
Rest of World 4,459 4,774 5,354 4,800 5,279
============================================= ======= ======= ======= ======== =======
6,011 6,457 7,945 6,643 7,823
======= ======= ======= ======== =======
Total hydrocarbons* (mboe/d)
US 571 608 916 694 888
Europe 215 188 196 202 173
Rest of World 1,369 1,446 1,585 1,479 1,576
============================================= ======= ======= ======= ======== =======
2,155 2,243 2,698 2,375 2,637
======= ======= ======= ======== =======
Average realizations* (e)
Total liquids(f) ($/bbl) 38.42 38.17 55.90 36.16 57.73
Natural gas ($/mcf) 3.10 2.56 3.12 2.75 3.39
Total hydrocarbons ($/boe) 28.48 26.42 36.42 26.31 38.00
============================================= ======= ======= ======= ======== =======
(a) Full year 2020 principally relates to impairments in a
number of our businesses resulting from the revisions to BP's
long-term price assumptions. Full year 2020 also includes
impairment charges related to the disposal of our Alaska business.
Fourth quarter and full year 2019 include impairment charges
related to the disposal of heritage BPX Energy assets, Alaska and
GUPCO divestment. See Note 3 for further information.
(b) Full year 2020 includes the write-off of $1,974 million
relating to value ascribed to certain licences as part of the
accounting for the acquisition of upstream assets in Brazil, India
and the Gulf of Mexico and the impairment of certain intangible
assets in Mauritania and Senegal. This has been classified within
the 'other' category of non-operating items. See Note 4 for further
information.
(c) Includes BP's share of production of equity-accounted entities in the Upstream segment.
(d) Because of rounding, some totals may not agree exactly with the sum of their component parts.
(e) Realizations are based on sales by consolidated subsidiaries
only - this excludes equity-accounted entities.
(f) Includes condensate, natural gas liquids and bitumen.
Top of page 8
Downstream
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
================================================= ======= ======= ======= ===== =======
Profit before interest and tax 1,895 1,106 1,412 622 7,187
Inventory holding (gains) losses* (650) (191) 21 2,796 (685)
================================================== ======= ======= ======= ===== =====
RC profit before interest and tax 1,245 915 1,433 3,418 6,502
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* (1,119) (279) 5 (330) (83)
================================================== ======= ======= ======= ===== =====
Underlying RC profit before interest
and tax*(a) 126 636 1,438 3,088 6,419
================================================== ======= ======= ======= ===== =====
(a) See page 9 for a reconciliation to segment RC profit before
interest and tax by region and by business.
Financial results
The replacement cost profit before interest and tax for the
fourth quarter and full year was $1,245 million and $3,418 million
respectively, compared with $1,433 million and $6,502 million for
the same periods in 2019.
The fourth quarter and full year include a net non-operating
gain of $1,403 million and $479 million respectively, compared with
a charge of $28 million and $77 million for the same periods in
2019. The gain for the quarter and full year reflects a profit of
$2.3 billion on the sale of our petrochemicals business, which is
partially offset by restructuring costs and impairments. Fair value
accounting effects in the fourth quarter and full year had an
adverse impact of $284 million and $149 million respectively,
compared with a favourable impact of $23 million and $160 million
in the same periods in 2019.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost profit before
interest and tax for the fourth quarter and full year was $126
million and $3,088 million respectively, compared with $1,438
million and $6,419 million for the same periods in 2019.
Replacement cost profit before interest and tax for the fuels,
lubricants and petrochemicals businesses is set out on page 9.
Fuels
The fuels business reported an underlying replacement cost loss
before interest and tax of $169 million for the fourth quarter and
a profit of $2,037 million for the full year, compared with a
profit of $1,068 million and $4,759 million for the same periods in
2019.
The result for the quarter and full year reflected an
exceptionally weak refining environment, with COVID-19 restrictions
impacting refining utilization and fuel volumes. The result for the
full year also reflected a higher contribution from supply and
trading.
Fuels marketing demonstrated continued resilience, delivering
significant profit for the quarter and full year, despite COVID-19
which adversely impacted retail fuel and aviation volumes by 14%
and 50% respectively for the full year.
The refining loss for the quarter and full year reflects the
continued impact of historically low industry margins. For the full
year, although 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. The result for the quarter was also
impacted by narrower heavy crude oil discounts compared with the
same period in 2019.
In the quarter we announced our plans to cease production at our
Kwinana refinery and convert it to an import terminal, helping to
secure ongoing fuel supply for Western Australia.
During the year we continued to progress our agenda to redefine
convenience, delivering a 6% growth in convenience gross margin*
for the full year, and we expanded our retail network by over 1,400
sites, to a total of 20,300, which now includes more than 1,900
strategic convenience sites.
We also progressed our electrification agenda, growing our
network to more than 10,000 BP and joint venture operated EV
charging points. This included rolling out ultra-fast chargers at
retail sites in the UK and Germany, and the continued expansion of
our electrification joint venture with DiDi in China.
Lubricants
The lubricants business reported an underlying replacement cost
profit before interest and tax of $262 million for the fourth
quarter and $818 million for the full year, compared with $333
million and $1,258 million for the same periods in 2019. The result
for the quarter and full year reflects significant demand impacts,
with volumes lower than the prior quarter and 15% lower for the
full year. In the second half of the year we have seen volumes in
growth markets recover to 2019 levels as COVID-19 restrictions
eased during that period.
In 2020 we continued to expand our service offer, growing the
number of Castrol branded independent workshops by more than 4,000
to over 28,000 globally. We also continued to establish strong
partnerships with OEMs, with BMW selecting Castrol to be its
exclusive supplier of lubricants to all BMW and MINI authorized
dealers across the US, Canada and Mexico.
Petrochemicals
The petrochemicals business reported an underlying replacement
cost profit before interest and tax of $33 million for the fourth
quarter and $233 million for the full year, compared with $37
million and $402 million for the same periods in 2019. The result
for the full year reflects 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 are expected to be received in the
first half of 2021.
Outlook
Looking to the first quarter of 2021, we expect industry
refining margins and utilization to remain under pressure. In our
marketing businesses we expect renewed COVID-19 restrictions to
have a greater impact on product demand, with January retail
volumes down by around 20% year on year, compared with a decline of
11% in the fourth quarter.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
----------------------------------------------------------------------
Top of page 9
Downstream (continued)
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
============================================== ======= ======= ======= ======= ========
Underlying RC profit before interest
and tax - by region
US (231) 96 556 1,141 2,190
Non-US 357 540 882 1,947 4,229
=============================================== ======= ======= ======= ======= ======
126 636 1,438 3,088 6,419
======= ======= ======= ======= ======
Non-operating items
US 890 (27) (40) 800 (42)
Non-US 513 (119) 12 (321) (35)
=============================================== ======= ======= ======= ======= ======
1,403 (146) (28) 479 (77)
======= ======= ======= ======= ======
Fair value accounting effects(a)
US (125) 78 (37) 27 148
Non-US (159) 347 60 (176) 12
=============================================== ======= ======= ======= ======= ======
(284) 425 23 (149) 160
======= ======= ======= ======= ======
RC profit before interest and tax
US 534 147 479 1,968 2,296
Non-US 711 768 954 1,450 4,206
=============================================== ======= ======= ======= ======= ======
1,245 915 1,433 3,418 6,502
======= ======= ======= ======= ======
Underlying RC profit before interest
and tax - by business (b)(c)
Fuels (169) 222 1,068 2,037 4,759
Lubricants 262 326 333 818 1,258
Petrochemicals 33 88 37 233 402
=============================================== ======= ======= ======= ======= ======
126 636 1,438 3,088 6,419
======= ======= ======= ======= ======
Non-operating items and fair value accounting
effects (a)
Fuels (1,037) 288 (41) (1,754) 32
Lubricants (121) (7) 39 (179) 57
Petrochemicals 2,277 (2) (3) 2,263 (6)
=============================================== ======= ======= ======= ======= ======
1,119 279 (5) 330 83
======= ======= ======= ======= ======
RC profit before interest and tax (b)(c)
Fuels (1,206) 510 1,027 283 4,791
Lubricants 141 319 372 639 1,315
Petrochemicals 2,310 86 34 2,496 396
=============================================== ======= ======= ======= ======= ======
1,245 915 1,433 3,418 6,502
======= ======= ======= ======= ======
BP average refining marker margin (RMM)*
($/bbl) 5.9 6.2 12.4 6.7 13.2
=============================================== ======= ======= ======= ======= ======
Refinery throughputs (mb/d)
US 708 701 761 693 737
Europe 720 699 848 742 787
Rest of World 200 187 238 192 225
=============================================== ======= ======= ======= ======= ======
1,628 1,587 1,847 1,627 1,749
======= ======= ======= ======= ======
BP-operated refining availability* (%) 96.1 96.2 95.7 96.0 94.9
=============================================== ======= ======= ======= ======= ======
Marketing sales of refined products
(mb/d)
US 1,055 1,083 1,156 1,011 1,145
Europe 801 849 1,051 823 1,073
Rest of World 457 422 537 441 509
=============================================== ======= ======= ======= ======= ======
2,313 2,354 2,744 2,275 2,727
Trading/supply sales of refined products 2,942 2,618 3,519 3,026 3,268
=============================================== ======= ======= ======= ======= ======
Total sales volumes of refined products 5,255 4,972 6,263 5,301 5,995
=============================================== ======= ======= ======= ======= ======
Petrochemicals production (kte)
US 640 541 518 2,201 2,267
Europe 1,241 1,325 1,141 5,183 4,714
Rest of World 1,261 1,211 1,353 4,896 5,133
=============================================== ======= ======= ======= ======= ======
3,142 3,077 3,012 12,280 12,114
======= ======= ======= ======= ======
(a) For Downstream, fair value accounting effects arise solely
in the fuels business. See page 28 for further information.
(b) Segment-level overhead expenses are included in the fuels business result.
(c) Results from petrochemicals at our Gelsenkirchen and Mülheim
sites in Germany are reported in the fuels business.
Top of page 10
Rosneft
Fourth Third Fourth
quarter quarter quarter Year Year
2020 2020
$ million (a) 2020 2019 (a) 2019
============================================= ======= ======= ======= ===== =======
Profit (loss) before interest and tax(b)(c) 295 (244) 534 (238) 2,306
Inventory holding (gains) losses* (25) (34) (31) 89 10
============================================= ======= ======= ======= ===== =====
RC profit (loss) before interest and
tax 270 (278) 503 (149) 2,316
Net charge (credit) for non-operating
items* 41 101 (91) 205 103
============================================= ======= ======= ======= ===== =====
Underlying RC profit (loss) before interest
and tax* 311 (177) 412 56 2,419
============================================= ======= ======= ======= ===== =====
Financial results
Replacement cost (RC) profit before interest and tax for the
fourth quarter was $270 million and RC loss for the full year was
$149 million, compared with a profit of $503 million and $2,316
million for the same periods in 2019.
After adjusting for non-operating items, the underlying RC
profit before interest and tax for the fourth quarter and full year
was $311 million and $56 million respectively, compared with a
profit of $412 million and $2,419 million for the same periods in
2019.
Compared with the same period in 2019, the result for the fourth
quarter primarily reflects lower oil prices partially offset by
favourable foreign exchange effects. Compared with the same period
in 2019, the result for the full year primarily reflects lower oil
prices, unfavourable foreign exchange and adverse duty lag
effects.
Key events
On 28 December, Rosneft announced completion of the acquisition
of 100% stakes in JSC Taimyrneftegaz and LLC Taimyrburservis, and
the sale of a 10% interest in LLC Vostok Oil.
Fourth Third Fourth
quarter quarter quarter Year Year
2020 2020
(a) 2020 2019 (a) 2019
======= ======= ======= ===== =======
Production (net of royalties) (BP share)
Liquids* (mb/d) 876 858 923 877 923
Natural gas (mmcf/d) 1,360 1,260 1,306 1,286 1,279
Total hydrocarbons* (mboe/d) 1,111 1,075 1,148 1,098 1,144
========================================== ======= ======= ======= ===== =====
(a) The operational and financial information of the Rosneft
segment for the fourth quarter and full year is based on
preliminary operational and financial results of Rosneft for the
three months and full year ended 31 December 2020. Actual results
may differ from these amounts. Amounts reported for the fourth
quarter are based on BP's 22.01% average economic interest for the
quarter (third quarter 2020 21.96% and fourth quarter 2019 19.75%).
A preliminary assessment of the fair values of the assets and
liabilities acquired and the consideration transferred in respect
of the acquisitions announced by Rosneft on 28 December is being
undertaken and the impact, if any, on BP's accounting for its
equity-accounted investment in Rosneft will be updated once this
has been completed.
(b) The Rosneft segment result includes equity-accounted
earnings arising from BP's economic interest in Rosneft as adjusted
for accounting required under IFRS relating to BP's purchase of its
interest in Rosneft, and the amortization of the deferred gain
relating to the divestment of BP's interest in TNK-BP.
(c) BP's adjusted share of Rosneft's earnings after Rosneft's
own finance costs, taxation and non-controlling interests is
included in the BP group income statement within profit before
interest and taxation. For each year-to-date period it is
calculated by translating the amounts reported in Russian roubles
into US dollars using the average exchange rate for the year to
date.
Top of page 11
Other businesses and corporate
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
Profit (loss) before interest and tax 308 24 (1,432) (683) (2,771)
Inventory holding (gains) losses* - - - - -
================================================= ======= ======= ======= ======= =======
RC profit (loss) before interest and
tax 308 24 (1,432) (683) (2,771)
Net (favourable) adverse impact of non-operating
items* and fair value accounting effects* (397) (154) 1,182 (357) 1,491
================================================== ======= ======= ======= ======= =======
Underlying RC profit (loss) before interest
and tax* (89) (130) (250) (1,040) (1,280)
================================================== ======= ======= ======= ======= =======
Underlying RC profit (loss) before interest
and tax
US (135) (65) (85) (453) (713)
Non-US 46 (65) (165) (587) (567)
================================================== ======= ======= ======= ======= =======
(89) (130) (250) (1,040) (1,280)
======= ======= ======= ======= =======
Non-operating items
US (303) (62) (268) (475) (559)
Non-US 250 (50) (914) 157 (932)
================================================== ======= ======= ======= ======= =======
(53) (112) (1,182) (318) (1,491)
======= ======= ======= ======= =======
Fair value accounting effects
US - - - - -
Non-US 450 266 - 675 -
================================================== ======= ======= ======= ======= =======
450 266 - 675 -
======= ======= ======= ======= =======
RC profit (loss) before interest and
tax
US (438) (127) (353) (928) (1,272)
Non-US 746 151 (1,079) 245 (1,499)
================================================== ======= ======= ======= ======= =======
308 24 (1,432) (683) (2,771)
======= ======= ======= ======= =======
Other businesses and corporate comprises our alternative energy
business, shipping, treasury, BP ventures and corporate activities
including centralized functions, and any residual costs of the Gulf
of Mexico oil spill.
Financial results
The replacement cost result before interest and tax for the
fourth quarter and full year was a profit of $308 million and a
loss of $683 million respectively, compared with a loss of $1,432
million and $2,771 million for the same periods in 2019.
The results include a net non-operating charge of $53 million
for the fourth quarter and $318 million for the full year, compared
with a charge of $1,182 million and $1,491 million for the same
periods in 2019. Fair value accounting effects in the fourth
quarter and full year had a favourable impact of $450 million and
$675 million respectively. See page 28 for further information.
After adjusting for non-operating items and fair value
accounting effects, the underlying replacement cost loss before
interest and tax for the fourth quarter and full year was $89
million and $1,040 million respectively, compared with $250 million
and $1,280 million for the same periods in 2019. The results
include an uplift in valuation of a venture investment of $229
million for the fourth quarter and $284 million for the full
year.
Alternative Energy
BP's net ethanol-equivalent production* for the fourth quarter
and full year averaged 14.9kb/d and 20.3kb/d respectively, compared
with 11.6kb/d and 13.7kb/d for the 100% BP-owned business for the
same periods in 2019.
Net wind generation capacity* was 1,071MW at 31 December 2020,
compared with 926MW at 31 December 2019. BP's net share of wind
generation for the fourth quarter and full year was 902GWh and
2,806GWh respectively, compared with 785GWh and 2,752GWh for the
same periods in 2019.
In December Lightsource BP developed to FID the 163MW Elm Branch
and 153MW Briar Creek projects in the US, 50MW South Lowfield and
21MW Thornham projects in the UK, taking their overall total
capacity developed to FID to 1,403MW for the full year.
In January 2021 BP and Equinor formed a strategic partnership to
initially develop four projects in two existing leases located
offshore New York and Massachusetts which together are expected to
have a total generating capacity of 4.4GW. Early in January Empire
Wind 2 and Beacon Wind 1 projects were selected to provide New York
State with an additional 2.5GW of power and subject to negotiation
of a purchase and sale agreement will take total secured power
offtake agreements on the projects to 3.3GW which represents a
material de-risking of the overall project. Beyond these initial
projects, the strategic partnership expects to participate in
future offshore wind developments in the US.
In December, BP finalized its investment in India's Green Growth
Equity Fund (GGEF) with an initial investment of $30 million and a
total commitment of $70 million to the fund. The fund itself was
established in 2018 and is focused on identifying, investing in and
supporting growth in clean energy projects in India and is managed
by Lightsource BP and Everstone Capital.
We continue to progress our aim to build material renewable
energy businesses by having developed 20GW of net renewable
generating capacity to FID by 2025. Overall we have developed a
total of 3.3GW of net renewable generating capacity to FID by 31
December 2020 across our businesses and are progressing a
development pipeline with projects across nine countries totalling
11GW net BP. In addition our development teams are further
evaluating potential options totalling over 20GW.
Outlook
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.
The commentary above contains forward-looking statements and should be
read in conjunction with the cautionary statement on page 36.
----------------------------------------------------------------------
Top of page 12
Financial statements
Group income statement
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
============================================ ======= ======= ======= ======== =========
Sales and other operating revenues (Note
6) 44,789 44,251 71,109 180,366 278,397
Earnings from joint ventures - after
interest and tax 214 73 163 (302) 576
Earnings from associates - after interest
and tax 575 (332) 640 (101) 2,681
Interest and other income 233 183 210 663 769
Gains on sale of businesses and fixed
assets 2,757 27 48 2,874 193
============================================= ======= ======= ======= ======== =======
Total revenues and other income 48,568 44,202 72,170 183,500 282,616
Purchases 32,803 31,645 53,444 132,104 209,672
Production and manufacturing expenses 6,111 5,073 5,809 22,494 21,815
Production and similar taxes (Note 8) 228 140 412 695 1,547
Depreciation, depletion and amortization
(Note 7) 3,426 3,467 4,434 14,889 17,780
Impairment and losses on sale of businesses
and fixed assets (Note 3) 1,168 294 3,657 14,381 8,075
Exploration expense (Note 4) 214 190 266 10,280 964
Distribution and administration expenses 2,769 2,435 2,996 10,397 11,057
============================================= ======= ======= ======= ======== =======
Profit (loss) before interest and taxation 1,849 958 1,152 (21,740) 11,706
Finance costs 749 800 886 3,115 3,489
Net finance expense relating to pensions
and other post-retirement benefits 10 8 17 33 63
============================================= ======= ======= ======= ======== =======
Profit (loss) before taxation 1,090 150 249 (24,888) 8,154
Taxation (395) 457 231 (4,159) 3,964
============================================= ======= ======= ======= ======== =======
Profit (loss) for the period 1,485 (307) 18 (20,729) 4,190
============================================= ======= ======= ======= ======== =======
Attributable to
BP shareholders 1,358 (450) 19 (20,305) 4,026
Non-controlling interests 127 143 (1) (424) 164
============================================= ======= ======= ======= ======== =======
1,485 (307) 18 (20,729) 4,190
======= ======= ======= ======== =======
Earnings per share (Note 9)
Profit (loss) for the period attributable
to BP shareholders
Per ordinary share (cents)
Basic 6.71 (2.22) 0.09 (100.42) 19.84
Diluted 6.68 (2.22) 0.09 (100.42) 19.73
Per ADS (dollars)
Basic 0.40 (0.13) 0.01 (6.03) 1.19
Diluted 0.40 (0.13) 0.01 (6.03) 1.18
============================================= ======= ======= ======= ======== =======
Top of page 13
Condensed group statement of comprehensive income
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
============================================== ======= ======= ======= ======== =======
Profit (loss) for the period 1,485 (307) 18 (20,729) 4,190
=============================================== ======= ======= ======= ======== =====
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Currency translation differences 1,594 (166) 1,404 (1,843) 1,538
Exchange (gains) losses on translation
of foreign operations reclassified to
gain or loss on sale of businesses and
fixed assets (357) - 880 (353) 880
Cash flow hedges and costs of hedging 42 (90) (76) 105 59
Share of items relating to equity-accounted
entities, net of tax (105) 308 43 312 82
Income tax relating to items that may
be reclassified 2 (16) (39) 66 (70)
=============================================== ======= ======= ======= ======== =====
1,176 36 2,212 (1,713) 2,489
======= ======= ======= ======== =====
Items that will not be reclassified to
profit or loss
Remeasurements of the net pension and
other post-retirement benefit liability
or asset(a) 333 78 1,480 170 328
Cash flow hedges that will subsequently
be transferred to the balance sheet 9 8 6 7 (3)
Income tax relating to items that will
not be reclassified (89) (16) (459) (105) (157)
=============================================== ======= ======= ======= ======== =====
253 70 1,027 72 168
======= ======= ======= ======== =====
Other comprehensive income 1,429 106 3,239 (1,641) 2,657
=============================================== ======= ======= ======= ======== =====
Total comprehensive income 2,914 (201) 3,257 (22,370) 6,847
=============================================== ======= ======= ======= ======== =====
Attributable to
BP shareholders 2,740 (364) 3,240 (21,983) 6,674
Non-controlling interests 174 163 17 (387) 173
=============================================== ======= ======= ======= ======== =====
2,914 (201) 3,257 (22,370) 6,847
======= ======= ======= ======== =====
(a) See Note 1 - Pensions and other post retirement benefits for further information.
Top of page 14
Condensed group statement of changes in equity
BP shareholders' Non-controlling interests Total
$ million equity Hybrid bonds Other interest equity
At 1 January 2020 98,412 - 2,296 100,708
======================================== ================ ================== ============== ========
Total comprehensive income (21,983) 256 (643) (22,370)
Dividends (6,367) - (238) (6,605)
Cash flow hedges transferred
to the balance sheet, net of
tax 6 - - 6
Repurchase of ordinary share
capital (776) - - (776)
Share-based payments, net of
tax 726 - - 726
Share of equity-accounted entities'
changes in equity, net of tax(a) 1,341 - - 1,341
Issue of perpetual hybrid bonds (48) 11,909 - 11,861
Payments on perpetual hybrid
bonds - (89) - (89)
Tax on issue of perpetual hybrid
bonds 3 - - 3
Transactions involving non-controlling
interests, net of tax (64) - 827 763
======================================== ================ ================== ============== ========
At 31 December 2020 71,250 12,076 2,242 85,568
======================================== ================ ================== ============== ========
BP shareholders' Non-controlling interests Total
$ million equity Hybrid bonds Other interest equity
======================================= ================ ================== ============== ==========
At 31 December 2018 99,444 - 2,104 101,548
Adjustment on adoption of IFRS
16, net of tax(b) (329) - (1) (330)
======================================== ================ ================== ============== ========
At 1 January 2019 99,115 - 2,103 101,218
======================================== ================ ================== ============== ========
Total comprehensive income 6,674 - 173 6,847
Dividends (6,929) - (213) (7,142)
Cash flow hedges transferred
to the balance sheet, net of
tax 23 - - 23
Repurchase of ordinary share
capital (1,511) - - (1,511)
Share-based payments, net of
tax 719 - - 719
Share of equity-accounted entities'
changes in equity, net of tax 5 - - 5
Transactions involving non-controlling
interests, net of tax 316 233 549
======================================== ================ ================== ============== ========
At 31 December 2019 98,412 - 2,296 100,708
======================================== ================ ================== ============== ========
(a) Principally relates to a non-controlling interest
transaction entered into by Rosneft.
(b) See Note 1 in BP Annual Report and Form 20-F 2019 for further information.
Top of page 15
Group balance sheet
31 December 31 December
$ million 2020 2019
======================================================= =========== =============
Non-current assets
Property, plant and equipment 114,836 132,642
Goodwill 12,480 11,868
Intangible assets 6,093 15,539
Investments in joint ventures 8,362 9,991
Investments in associates 18,975 20,334
Other investments 2,746 1,276
======================================================== =========== ===========
Fixed assets 163,492 191,650
Loans 840 630
Trade and other receivables 4,351 2,147
Derivative financial instruments 9,755 6,314
Prepayments 533 781
Deferred tax assets 7,744 4,560
Defined benefit pension plan surpluses 7,957 7,053
======================================================== =========== ===========
194,672 213,135
=========== ===========
Current assets
Loans 458 339
Inventories 16,873 20,880
Trade and other receivables 17,948 24,442
Derivative financial instruments 2,992 4,153
Prepayments 1,269 857
Current tax receivable 672 1,282
Other investments 333 169
Cash and cash equivalents 31,111 22,472
======================================================== =========== ===========
71,656 74,594
Assets classified as held for sale (Note 2) 1,326 7,465
======================================================== =========== ===========
72,982 82,059
=========== ===========
Total assets 267,654 295,194
======================================================== =========== ===========
Current liabilities
Trade and other payables 36,014 46,829
Derivative financial instruments 2,998 3,261
Accruals 4,650 5,066
Lease liabilities 1,933 2,067
Finance debt 9,359 10,487
Current tax payable 1,038 2,039
Provisions 3,761 2,453
======================================================== =========== ===========
59,753 72,202
Liabilities directly associated with assets classified
as held for sale (Note 2) 46 1,393
======================================================== =========== ===========
59,799 73,595
=========== ===========
Non-current liabilities
Other payables 12,112 12,626
Derivative financial instruments 5,404 5,537
Accruals 852 996
Lease liabilities 7,329 7,655
Finance debt 63,305 57,237
Deferred tax liabilities 6,831 9,750
Provisions 17,200 18,498
Defined benefit pension plan and other post-retirement
benefit plan deficits 9,254 8,592
======================================================== =========== ===========
122,287 120,891
=========== ===========
Total liabilities 182,086 194,486
======================================================== =========== ===========
Net assets 85,568 100,708
======================================================== =========== ===========
Equity
BP shareholders' equity 71,250 98,412
Non-controlling interests 14,318 2,296
======================================================== =========== ===========
Total equity 85,568 100,708
======================================================== =========== ===========
Top of page 16
Condensed group cash flow statement
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
==================================================== ======= ======= ======= ======== ==========
Operating activities
Profit (loss) before taxation 1,090 150 249 (24,888) 8,154
Adjustments to reconcile profit (loss) before
taxation to net cash provided by operating
activities
Depreciation, depletion and amortization
and exploration expenditure written off 3,580 3,517 4,589 24,809 18,411
Impairment and (gain) loss on sale of businesses
and fixed assets (1,589) 267 3,609 11,507 7,882
Earnings from equity-accounted entities,
less dividends received (538) 1,018 (75) 1,845 (1,295)
Net charge for interest and other finance
expense, less net interest paid 22 60 250 236 657
Share-based payments 179 199 167 723 730
Net operating charge for pensions and other
post-retirement benefits, less contributions
and benefit payments for unfunded plans (182) (46) (43) (282) (238)
Net charge for provisions, less payments 866 293 270 735 (176)
Movements in inventories and other current
and non-current assets and liabilities (715) 556 (306) (85) (2,918)
Income taxes paid (444) (810) (1,107) (2,438) (5,437)
===================================================== ======= ======= ======= ======== ========
Net cash provided by operating activities 2,269 5,204 7,603 12,162 25,770
===================================================== ======= ======= ======= ======== ========
Investing activities
Expenditure on property, plant and equipment,
intangible and other assets (2,922) (2,577) (3,936) (12,306) (15,418)
Acquisitions, net of cash acquired (17) (10) (33) (44) (3,562)
Investment in joint ventures (529) (12) (57) (567) (137)
Investment in associates (23) (1,037) (83) (1,138) (304)
===================================================== ======= ======= ======= ======== ========
Total cash capital expenditure (3,491) (3,636) (4,109) (14,055) (19,421)
Proceeds from disposal of fixed assets 439 32 24 491 500
Proceeds from disposal of businesses, net
of cash disposed 3,564 84 792 4,989 1,701
Proceeds from loan repayments 61 50 64 717 246
===================================================== ======= ======= ======= ======== ========
Net cash used in investing activities 573 (3,470) (3,229) (7,858) (16,974)
===================================================== ======= ======= ======= ======== ========
Financing activities
Net issue (repurchase) of shares (Note 9) - - (1,171) (776) (1,511)
Lease liability payments (631) (578) (566) (2,442) (2,372)
Proceeds from long-term financing 2,619 2,587 1,879 14,736 8,597
Repayments of long-term financing (3,191) (4,307) (360) (12,179) (7,118)
Net increase (decrease) in short-term debt (906) (2,630) 62 (1,234) 180
Issue of perpetual hybrid bonds - - - 11,861 -
Payments on perpetual hybrid bonds (62) (27) - (89) -
Payments relating to transactions involving
non-controlling interests (other) - - - (8) -
Receipts relating to transactions involving
non-controlling interests (other) 173 483 566 665 566
Dividends paid - BP shareholders (1,059) (1,060) (2,076) (6,340) (6,946)
- non-controlling interests (75) (58) (47) (238) (213)
===================================================== ======= ======= ======= ======== ========
Net cash provided by (used in) financing
activities (3,132) (5,590) (1,713) 3,956 (8,817)
===================================================== ======= ======= ======= ======== ========
Currency translation differences relating
to cash and cash equivalents 336 268 119 379 25
===================================================== ======= ======= ======= ======== ========
Increase (decrease) in cash and cash equivalents 46 (3,588) 2,780 8,639 4
===================================================== ======= ======= ======= ======== ========
Cash and cash equivalents at beginning of
period 31,065 34,653 19,692 22,472 22,468
Cash and cash equivalents at end of period(a) 31,111 31,065 22,472 31,111 22,472
===================================================== ======= ======= ======= ======== ========
(a) Third quarter 2020 includes $316 million of cash and cash
equivalents classified as assets held for sale in the group balance
sheet.
Top of page 17
Notes
Note 1. Basis of preparation
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 2019 included in BP Annual
Report and Form 20-F 2019.
The directors consider it appropriate to adopt the going concern
basis of accounting in preparing the annual financial statements.
The impact of COVID-19 and the current economic environment has
been considered as part of the going concern assessment. Forecast
liquidity has been assessed under a number of stressed scenarios
performed to support this assertion. Reverse stress tests performed
indicated that the group will continue to operate as a going
concern for at least 12 months from the balance sheet date even if
the Brent price fell to zero.
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 adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
(EU) and in accordance with the provisions of the UK Companies Act
2006 as applicable to companies reporting under international
accounting standards. 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 2020 which are the same as
those used in preparing BP Annual Report and Form 20-F 2019 with
the exception of the changes described in the 'Updates to
significant accounting policies' section below. There are no other
new or amended standards or interpretations adopted from 1 January
2020 onwards that have a significant impact on the financial
information.
Considerations in respect of COVID-19 and the current economic
environment
BP's significant accounting judgements and estimates were
disclosed in BP Annual Report and Form 20-F 2019. These have been
subsequently reviewed at the end of each quarter to determine if
any changes were required to those judgements and estimates as a
result of current market conditions. The valuation of certain
assets and liabilities is subject to a greater level of uncertainty
than when reported in BP Annual Report and Form 20-F 2019,
including those set out below.
Impairment testing assumptions
BP sees the prospect of an enduring impact on the global economy
as a result of the COVID-19 pandemic, with the potential for weaker
demand for energy for a sustained period. BP's management also
expects that the aftermath of the pandemic will accelerate the pace
of transition to a lower carbon economy and energy system as
countries seek to 'build back better' so that their economies will
be more resilient in the future. As a result of all the above,
during the second quarter, BP revised its price assumptions for
value-in-use impairment testing, lowering them and extending the
period covered to 2050. A summary of the group's revised price
assumptions, in real 2020 terms, is provided below:
2021 2025 2030 2040 2050
======================== ==== ==== ==== ==== ====
Brent oil ($/bbl) 50 50 60 60 50
Henry Hub gas ($/mmBtu) 3.00 3.00 3.00 3.00 2.75
========================== ==== ==== ==== ==== ====
As disclosed in BP Annual Report and Form 20-F 2019 - Note 1,
the majority of BP's reserves and resources that support the
carrying amount of the group's Upstream oil and gas properties are
expected to be produced over the next ten years. The revised
assumptions for Brent oil and Henry Hub gas for the next 10 years
are lower by approximately 29% and 17%, respectively, than the
average prices used to estimate cash flows over this period as
disclosed in BP Annual Report and Form 20-F 2019 - Note 1. The
revised impairment testing price assumptions are lower, on average,
by approximately 27% and 31% respectively for the period from 2021
to 2050, than the prices referenced in BP Annual Report and Form
20-F 2019 - Note 1.
The group has identified Upstream oil and gas properties with
carrying amounts totalling approximately $45 billion where the
headroom, based on the most recent impairment tests performed, was
less than or equal to 20% of the carrying value. A change in price
or other assumptions within the next financial year may result in a
recoverable amount of one or more of these assets above or below
the current carrying amount and therefore there is a significant
risk of impairment reversals or charges in that period.
The discount rates used in value-in-use impairment testing were
also formally reassessed in the fourth quarter. Despite changing
economic and geopolitical outlooks, as the discount rates are set
using a number of parameters that are applicable to longer-term
assets, the post-tax discount rate, as disclosed in BP Annual
Report and Form 20-F 2019, remains unchanged. Pre-tax discount
rates typically ranged from 7% to 15% (2019 7% to 13%). Post-tax
premiums for certain higher-risk countries are 1% to 3% (2019 1% to
4%). The revisions to these rates did not have a material
impact.
Provisions
The nominal risk-free discount rate applied to provisions is
reviewed on a quarterly basis. Recent changes in long-dated US
government bond yields have not affected the group's overall
assessment of the discount rate applied to the group's provisions
and therefore the rate, as disclosed in BP Annual Report and Form
20-F 2019, remains unchanged. The timing and amount of cash flows
relating to the group's existing provisions were reviewed during
the fourth quarter and did not change significantly compared to the
provisions balance reported as at 31 December 2019.
Top of page 18
Note 1. Basis of preparation (continued)
Pensions and other post-retirement benefits
The group's defined benefit pension plans are reviewed quarterly
to determine any changes to the fair value of the plan assets or
present value of the defined benefit obligations. As a result of
the review during the fourth quarter of 2020, the group's total net
defined benefit pension plan deficit as at 31 December 2020 is $1.3
billion, a reduction in the deficit of $0.6 billion and $0.2
billion from 30 September 2020 and 31 December 2019 respectively.
This reduction in deficit and the overall actuarial gains of $0.3
billion during 4Q were predominantly driven by the adoption of
approved assumption changes. The impact of further decreases in the
UK, US and Eurozone discount rates were largely offset by asset
performance and reduction in inflation rates. The current
environment is likely to continue to affect the values of the plan
assets and obligations resulting in potential volatility in the
amount of the net defined benefit pension plan surplus/deficit
recognized.
Impairment of financial assets measured at amortized cost
The estimate of the loss allowance recognized on financial
assets measured at amortized cost using an expected credit loss
approach was determined not to be a significant accounting estimate
in preparing BP Annual Report and Form 20-F 2019. Expected credit
loss allowances are, however, reviewed and updated quarterly.
Allowances are recognized on assets where there is evidence that
the asset is credit-impaired and on a forward-looking expected
credit loss basis for assets that are not credit-impaired. The
current economic environment and future credit risk outlook have
been considered in updating the estimate of loss allowances
although the full economic impact of COVID-19 on the
forward-looking expected credit loss is subject to significant
uncertainty due to the limited forward-looking information
currently available.
Whilst credit risk has increased since 31 December 2019, there
has also been a significant reduction in the group's trade and
other receivables balance. Therefore, the total expected credit
loss allowances recognized as at 31 December 2020 have not
significantly increased from the amounts disclosed in BP Annual
Report and Form 20-F 2019 - Financial statements - Note 21
Valuation and qualifying accounts.
The group continues to believe that the calculation of expected
credit loss allowances is not a significant accounting estimate.
The group continues to apply its credit policy as disclosed in BP
Annual Report and Form 20-F 2019 - Financial statements - Note 29
Financial instruments and financial risk factors - credit risk.
Income taxes
None of the group's deferred tax assets in BP Annual Report and
Form 20-F 2019 were determined to be a significant accounting
estimate. The carrying amounts are, however, reviewed and updated
quarterly to the extent that there are changes in the probability
of sufficient taxable profits being available to utilize the
reported deferred tax assets. The group has recognized deferred tax
assets as at 31 December 2020 of $7.7 billion, an increase of $3.1
billion from 31 December 2019. The group continues to believe that
the measurement of its deferred tax assets is not a significant
accounting estimate.
Other accounting judgements and estimates
All other significant accounting judgements and estimates
disclosed in BP Annual Report and Form 20-F 2019 remain applicable
and no new significant accounting judgements or estimates have been
identified specifically arising from the impact of COVID-19.
Updates to significant accounting policies
Hybrid bond issuance
On 17 June 2020, a group subsidiary issued perpetual
subordinated hybrid bonds in EUR, GBP and USD for a US dollar
equivalent amount of $11.9 billion. As the group has the
unconditional right to avoid transferring cash or another financial
asset in relation to these hybrid bonds, they are classified as
equity instruments and reported within non-controlling interests in
the condensed consolidated financial statements. The contractual
terms of these instruments allow the group to defer coupon payments
and the repayment of principal indefinitely, however their terms
and conditions stipulate that any deferred payments must be made in
the event of an announcement of an ordinary share or parity equity
dividend distribution or certain share repurchases or
redemptions.
Change in accounting policy - Interest Rate Benchmark Reform:
Amendments to IFRS 9 'Financial instruments'
Financial authorities in the US, UK, EU and other territories
are currently undertaking reviews of key interest rate benchmarks
such as the London Inter-bank Offered Rate (LIBOR) with a view to
replacing them with alternative benchmarks. Uncertainty around the
method and timing of transition from Inter-bank Offered Rates
(IBORs) to alternative risk-free rates (RfRs) may impact the
assessment of whether hedge accounting can be applied to certain
hedging relationships.
BP is significantly exposed to benchmark interest rate
components e.g. USD LIBOR, GBP LIBOR, EURIBOR and CHF LIBOR. All of
the group's existing fair value hedge relationships are directly
affected by interest rate benchmark reform as they all manage
interest rate risk. Further information about the group's fair
value hedges is included in BP Annual Report and Form 20-F 2019 -
Financial statements - Note 30 Derivative financial instruments -
Fair value hedges.
BP adopted the amendments to IFRS 9 and IFRS 7 'Financial
Instruments: Disclosures' relating to interest rate benchmark
reform with effect from 1 January 2020. This first phase of
amendments provides temporary relief from applying specific hedge
accounting requirements to hedging relationships directly affected
by interest rate benchmark reforms.
The reliefs provided by the amendments allow BP, in the event
that significant uncertainty around the reforms arises, to assume
that:
- the interest rate benchmark component of fair value hedges
only needs to be assessed as separately identifiable at initial
designation; and
- the interest rate benchmark is not altered for the purposes of
assessing the economic relationship between the hedged item and the
hedging instrument for fair value hedges.
In accordance with the transition provisions, the amendments
have been adopted retrospectively to hedging relationships that
existed at the start of the current reporting period and will be
applied to new hedging relationships designated after that
date.
Top of page 19
Note 1. Basis of preparation (continued)
The reliefs have meant that the uncertainty over the interest
rate benchmark reforms has not resulted in discontinuation of hedge
accounting for any of BP's fair value hedges.
The second phase of IFRS amendments were issued by the IASB in
August 2020 to address the financial reporting impacts of
transitioning from IBORs to RfRs. These amendments will be
effective for BP from 1 January 2021.The amendments have been
endorsed by the EU and the UK. BP has an internal working group to
monitor and manage the transition to alternative benchmark rates
and are currently assessing the impact on contracts and
arrangements that are linked to existing interest rate benchmarks,
for example, borrowings, leases and derivative contracts. BP is
also participating on external committees and task forces dedicated
to interest rate benchmark reform.
Change in accounting policy - physically settled derivative
contracts
In March 2019, the IFRS Interpretations Committee ("IFRIC")
issued an agenda decision on the application of IFRS 9 to the
physical settlement of contracts to buy or sell a non-financial
item, such as commodities, that are not accounted for as 'own-use'
contracts. IFRIC concluded that such contracts are settled by the
delivery or receipt of a non-financial item in exchange for both
cash and the settlement of the derivative asset or liability.
BP routinely enters into forward sale and purchase contracts. As
described in the group's accounting policy for revenue in BP Annual
Report and Form 20-F 2019, revenue recognized at the time such
contracts were physically settled was measured at the contractual
transaction price and was presented together with revenue from
contracts with customers in those financial statements.
BP changed its accounting policy for these contracts, in
accordance with the conclusions included in the agenda decision,
with effect from 1 April 2020, as follows:
- Revenues and purchases from such contracts are measured at the
contractual transaction price plus the carrying amount of the
related derivative at the date of settlement. Realized derivative
gains and losses on physically settled derivative contracts are
included in other revenues.
- There is no significant effect on current period or
comparative information for 'Sales and other operating revenues'
and 'Purchases' as presented in the group income statement,
therefore no comparative information has been restated.
- There is no significant effect on net assets or on comparative
information for 'Profit before taxation' or 'Profit after taxation'
as presented in the group income statement, therefore no
comparative information has been restated.
In addition, BP chose to change its presentation of revenues
from physically settled derivative sales contracts from 1 January
2020. Revenues from physically settled derivative sales contracts
are no longer presented together with revenue from contracts with
customers. They are now presented as other revenues. Comparative
information in Note 6 for revenue from contracts with customers and
other revenues have been re-presented to align with the current
period.
Voluntary changes to significant accounting policies - not yet
adopted
Net presentation of revenues and purchases relating to
physically settled derivative contracts from 1 January 2021
As described above, BP routinely enters into transactions for
the sale and purchase of commodities that are physically settled
and meet the definition of a derivative financial instrument. These
contracts are within the scope of IFRS 9 and as such, prior to
settlement, changes in the fair value of these derivative contracts
are presented as gains and losses within other operating revenues.
The group has presented revenues and purchases for such contracts
on a gross basis in the income statement upon physical settlement.
These transactions have historically represented a substantial
portion of the revenues and purchases reported in the group's
financial statements.
The group has determined that revenues and purchases relating to
such transactions should, in future, be presented as a net gain or
loss within other operating revenues. This will provide reliable
and more relevant information for users of the accounts as the
group's revenue recognition will be more closely aligned with its
assessment of 'Scope 3' emissions from its products, its 'Net Zero'
ambition and how management monitors and manages performance of
such contracts. In the group's 2021 financial statements,
comparative information for Sales and other operating revenues and
Purchases in the consolidated income statements for 2019 and 2020
will be restated.
Change in segmentation for 2021 financial reporting
The group's reportable segments are expected to change for 2021
financial reporting consistent with a change in the way that
resources will be allocated and performance assessed by the chief
operating decision maker, who for BP is the chief executive
officer. The group's reportable segments are expected to be
Customers and products, Gas and low carbon energy, Oil production
and operations and Rosneft. These are also expected to be the
group's operating segments. At 31 December 2020, the group's
reportable segments were Upstream, Downstream and Rosneft.
Customers and products is expected to comprise the group's
convenience and mobility business, which manages the sale of fuels
to wholesale and retail customers, convenience products, aviation
fuels, and Castrol lubricants; and refining, supply and trading.
The petrochemicals business will also be reported in restated
comparative information as part of the customers and products
segment up to its sale in December 2020. The customers and products
segment is expected, therefore, to be substantially unchanged from
the former Downstream segment with the exception of the
Petrochemicals disposal.
Gas and low carbon energy is expected to comprise regions with
upstream businesses that predominantly produce natural gas, gas
trading activities and the group's renewables businesses, including
biofuels, solar and wind. In the group's financial reporting for
2020, gas producing regions are part of the Upstream segment and
the group's renewables businesses are part of 'Other businesses and
corporate'.
Oil production and operations is expected to comprise regions
with upstream activities that predominantly produce crude oil. In
the group's financial reporting for 2020, these activities are part
of the Upstream segment.
Top of page 20
Note 1. Basis of preparation (continued)
The Rosneft segment is expected to continue to include
equity-accounted earnings from the group's investment in
Rosneft.
Segmental information presented in these financial statements is
based on the segment structure as at 31 December 2020.
In the group's financial reporting for 2021, comparative
information for 2019 and 2020 will be restated to reflect the
changes in reportable segments. It is expected that reporting under
the new segment structure will begin with the first quarter 2021
interim financial statements.
Note 2. Non-current assets held for sale
The carrying amount of assets classified as held for sale at 31
December 2020 is $1,326 million, with associated liabilities of $46
million.
The balance consists primarily of a 20% participating interest
from BP's 60% participating interest in Block 61 in Oman. As
announced on 1 February 2021, BP has agreed to sell this interest
to PTT Exploration and Production Public Company Limited of
Thailand for a total consideration of up to $2.6 billion, subject
to final adjustments. Under the terms of the agreement, BP will
receive $2,450 million on completion, with up to an additional $140
million receivable contingent on pre-agreed future conditions.
Subject to approvals, the transaction is expected to complete
during 2021. Assets of $1,298 million and associated liabilities of
$10 million have been classified as held for sale in the group
balance sheet at 31 December 2020.
Transactions that have been classified as held for sale during
2020, but have now completed, are described below.
Upstream segment
On 27 August 2019, BP announced that it had agreed to sell its
Alaska operations and interests to Hilcorp Energy for up to $5.6
billion, subject to customary closing adjustments. The sale
included BP's upstream and midstream business in the state,
including BP Exploration (Alaska) Inc., which owned BP's upstream
oil and gas interests in Alaska, and BP Pipelines (Alaska) Inc.'s
49% interest in the Trans Alaska Pipeline System (TAPS). These
assets and associated liabilities were classified as held for sale
in the 31 December 2019 group balance sheet. The disposal of BP
Exploration (Alaska) Inc. completed on 30 June 2020. The disposal
of BP's interest in TAPS and other midstream assets completed on 18
December 2020. BP retained the decommissioning liability relating
to its interest in TAPS, which will be partially offset by a 30%
cost reimbursement from Hilcorp.
Downstream segment
On 29 June 2020 BP announced that it had agreed to sell its
global petrochemicals business to INEOS for a total consideration
of $5 billion, subject to customary closing adjustments. The assets
and liabilities of the business were classified as held for sale
from that date until the disposal completed on 31 December 2020.
Under the terms of the agreement, INEOS paid BP a deposit of $400
million and a further $3.6 billion on completion, less $0.1 billion
of third-party indebtedness remaining in petrochemicals on
completion. The remaining $1 billion is payable in instalments of
$100 million in each of March, April and May 2021, and $700 million
by the end of June 2021 at the latest. The business had interests
in manufacturing plants in Asia, Europe and the US, including
interests held in equity-accounted entities. A gain on disposal of
$2,270 million was recognised in the fourth quarter 2020, which
included a $340 million gain relating to the reclassification of
accumulated foreign exchange from reserves.
Note 3. Impairment and losses on sale of businesses and fixed
assets
Impairment and losses on sale of businesses and fixed assets for
the fourth quarter and full year 2020 were $1,168 million and
$14,381 million and include net impairment charges of $777 million
and $13,700 million respectively. Impairment charges also arose in
certain equity-accounted entities in the full year. The BP shares
of these charges, amounting to $847 million for the full year, are
reported in the line items 'Earnings from joint ventures' and
'Earnings from associates' in the group income statement.
Upstream segment
Net impairment charges in the Upstream segment were $674 million
and $12,831 million for the fourth quarter and full year
respectively.
Impairment charges for the full year mainly relate to producing
assets and principally arose as a result of changes to the group's
oil and gas price assumptions. They include amounts in Azerbaijan,
BPX Energy, Canada, India, Mauritania & Senegal, the North Sea,
and Trinidad. The recoverable amounts of the cash generating units
within these businesses were based on value-in-use
calculations.
Impairment charges for the full year also include amounts
relating to the disposal of the group's interests in its Alaska
business.
The BP share of impairment charges arising in equity-accounted
entities reported in the Upstream segment in the full year was $545
million.
Downstream segment
Net impairment charges in the Downstream segment were $104
million and $840 million for the fourth quarter and full year
respectively. These principally relate to portfolio changes in the
fuels business, including the conversion of Kwinana refinery to an
import terminal.
Top of page 21
Note 4. Exploration expense
Exploration expense in the fourth quarter and full year was $214
million and $10,280 million and includes exploration expenditure
write-offs of $154 million and $9,920 million respectively. All
exploration expenditure is recorded within the Upstream
segment.
The exploration write-offs principally arose following
management's re-assessment of expectations to extract value from
certain exploration prospects as a result of a review of the
group's long-term strategic plan and changes in the group's price
assumptions. The exploration write-offs for the full year
principally arose in Angola, Brazil, Canada, Egypt, the Gulf of
Mexico and India.
Note 5. Analysis of replacement cost profit (loss) before
interest and tax and reconciliation to profit (loss) before
taxation
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
========================================= ======= ======= ======= ======== =========
Upstream (592) 30 614 (21,547) 4,917
Downstream 1,245 915 1,433 3,418 6,502
Rosneft 270 (278) 503 (149) 2,316
Other businesses and corporate 308 24 (1,432) (683) (2,771)
========================================== ======= ======= ======= ======== =======
1,231 691 1,118 (18,961) 10,964
Consolidation adjustment - UPII* (77) 34 24 89 75
========================================== ======= ======= ======= ======== =======
RC profit (loss) before interest and
tax* 1,154 725 1,142 (18,872) 11,039
Inventory holding gains (losses)*
Upstream 20 8 - 17 (8)
Downstream 650 191 (21) (2,796) 685
Rosneft (net of tax) 25 34 31 (89) (10)
========================================== ======= ======= ======= ======== =======
Profit (loss) before interest and tax 1,849 958 1,152 (21,740) 11,706
Finance costs 749 800 886 3,115 3,489
Net finance expense relating to pensions
and other post-retirement benefits 10 8 17 33 63
========================================== ======= ======= ======= ======== =======
Profit (loss) before taxation 1,090 150 249 (24,888) 8,154
========================================== ======= ======= ======= ======== =======
RC profit (loss) before interest and
tax*
US (21) 105 (1,603) (4,016) (2,759)
Non-US 1,175 620 2,745 (14,856) 13,798
========================================== ======= ======= ======= ======== =======
1,154 725 1,142 (18,872) 11,039
======= ======= ======= ======== =======
Top of page 22
Note 6. Sales and other operating revenues
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
=========================================== ======= ======= ======= ======= =========
By segment
Upstream 7,742 7,797 13,955 34,197 54,501
Downstream 41,513 40,256 64,251 162,974 250,897
Other businesses and corporate 422 391 538 1,716 1,788
============================================ ======= ======= ======= ======= =======
49,677 48,444 78,744 198,887 307,186
======= ======= ======= ======= =======
Less: sales and other operating revenues
between segments
Upstream 3,963 3,647 6,823 17,130 27,034
Downstream 486 124 384 158 973
Other businesses and corporate 439 422 428 1,233 782
============================================ ======= ======= ======= ======= =======
4,888 4,193 7,635 18,521 28,789
======= ======= ======= ======= =======
Third party sales and other operating
revenues
Upstream 3,779 4,150 7,132 17,067 27,467
Downstream 41,027 40,132 63,867 162,816 249,924
Other businesses and corporate (17) (31) 110 483 1,006
============================================ ======= ======= ======= ======= =======
Total sales and other operating revenues 44,789 44,251 71,109 180,366 278,397
============================================ ======= ======= ======= ======= =======
By geographical area
US 15,980 16,513 24,148 63,829 95,495
Non-US 33,886 32,328 54,450 134,945 208,031
============================================ ======= ======= ======= ======= =======
49,866 48,841 78,598 198,774 303,526
Less: sales and other operating revenues
between areas 5,077 4,590 7,489 18,408 25,129
============================================ ======= ======= ======= ======= =======
44,789 44,251 71,109 180,366 278,397
======= ======= ======= ======= =======
Revenues from contracts with customers(a)
Sales and other operating revenues include
the following in relation to revenues
from contracts with customers:
Crude oil 1,185 1,366 1,880 5,048 9,141
Oil products(b) 16,216 16,642 25,946 63,564 102,408
Natural gas, LNG and NGLs 3,252 2,844 4,871 12,726 18,909
Non-oil products and other revenues from
contracts with customers(b) 2,608 2,624 2,878 9,840 12,169
============================================ ======= ======= ======= ======= =======
Revenue from contracts with customers 23,261 23,476 35,575 91,178 142,627
============================================ ======= ======= ======= ======= =======
Other operating revenues(c) 21,528 20,775 35,534 89,188 135,770
============================================ ======= ======= ======= ======= =======
Total sales and other operating revenues 44,789 44,251 71,109 180,366 278,397
============================================ ======= ======= ======= ======= =======
(a) Amounts shown for revenue from contracts with customers and
other operating revenues for fourth quarter and full year 2019 have
been represented to align with the current period. See Note 1
Change in accounting policy - physically settled derivative
contracts for further information.
(b) An amendment of $341 million has been made to amounts
presented for oil products and non-oil products and other revenues
from contracts with customers for the third quarter 2020 with no
overall effect on revenue from contracts with customers.
(c) Principally relates to physically settled derivative sales contracts.
Top of page 23
Note 7. Depreciation, depletion and amortization
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
=============================== ======= ======= ======= ====== ========
Upstream
US 818 842 1,150 3,772 4,672
Non-US 1,679 1,713 2,371 7,447 9,560
================================ ======= ======= ======= ====== ======
2,497 2,555 3,521 11,219 14,232
======= ======= ======= ====== ======
Downstream
US 337 336 343 1,359 1,335
Non-US 411 407 417 1,631 1,586
================================ ======= ======= ======= ====== ======
748 743 760 2,990 2,921
======= ======= ======= ====== ======
Other businesses and corporate
US 19 13 14 63 55
Non-US 162 156 139 617 572
================================ ======= ======= ======= ====== ======
181 169 153 680 627
======= ======= ======= ====== ======
Total group 3,426 3,467 4,434 14,889 17,780
================================ ======= ======= ======= ====== ======
Note 8. Production and similar taxes
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
========== ======= ======= ======= ==== =======
US 17 14 89 57 315
Non-US 211 126 323 638 1,232
=========== ======= ======= ======= ==== =====
228 140 412 695 1,547
======= ======= ======= ==== =====
Note 9. 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. No share buybacks were
carried out during the quarter. A total of 120 million ordinary
shares were repurchased for cancellation in the full year, as part
of the share buyback programme announced on 31 October 2017. The
shares had a total cost of $776 million, including transaction
costs of $4 million. The number of shares in issue is reduced when
shares are repurchased.
The calculation of EpS is performed separately for each discrete
quarterly period, and for the year-to-date period. As a result, the
sum of the discrete quarterly EpS amounts in any particular
year-to-date period may not be equal to the EpS amount for the
year-to-date period.
For the diluted EpS calculation the weighted average number of
shares outstanding during the period is adjusted for the number of
shares that are potentially issuable in connection with employee
share-based payment plans using the treasury stock method.
Top of page 24
Note 9. Earnings per share and shares in issue (continued)
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
========================================== ========== ========== ========== ========== ============
Results for the period
Profit (loss) for the period attributable
to BP shareholders 1,358 (450) 19 (20,305) 4,026
Less: preference dividend - - - 1 1
=========================================== ========== ========== ========== ========== ==========
Profit (loss) attributable to
BP ordinary shareholders 1,358 (450) 19 (20,306) 4,025
=========================================== ========== ========== ========== ========== ==========
Number of shares (thousand) (a)(b)
Basic weighted average number
of shares outstanding 20,233,240 20,251,199 20,254,234 20,221,514 20,284,859
ADS equivalent 3,372,206 3,375,199 3,375,705 3,370,252 3,380,809
=========================================== ========== ========== ========== ========== ==========
Weighted average number of shares
outstanding used to calculate
diluted earnings per share 20,329,326 20,251,199 20,351,808 20,221,514 20,399,670
ADS equivalent 3,388,221 3,375,199 3,391,968 3,370,252 3,399,945
=========================================== ========== ========== ========== ========== ==========
Shares in issue at period-end 20,264,027 20,254,417 20,241,170 20,264,027 20,241,170
ADS equivalent 3,377,337 3,375,736 3,373,528 3,377,337 3,373,528
=========================================== ========== ========== ========== ========== ==========
(a) Excludes treasury shares and includes certain shares that
will be issued in the future under employee share-based payment
plans.
(b) If the inclusion of potentially issuable shares would
decrease loss per share, the potentially issuable shares are
excluded from the weighted average number of shares outstanding
used to calculate diluted earnings per share. The numbers of
potentially issuable shares that have been excluded from the
calculation for the third quarter 2020 and full year 2020 are
81,097 thousand (ADS equivalent 13,516 thousand) and 101,450
thousand (ADS equivalent 16,908 thousand) respectively.
Note 10. Dividends
Dividends payable
BP today announced an interim dividend of 5.25 cents per
ordinary share which is expected to be paid on 26 March 2021 to
ordinary shareholders and American Depositary Share (ADS) holders
on the register on 19 February 2021. The ex-dividend date will be
18 February 2021. The corresponding amount in sterling is due to be
announced on 15 March 2021, calculated based on the average of the
market exchange rates for the four dealing days commencing on 9
March 2021. Holders of ADSs are expected to receive $0.315 per ADS
(less applicable fees). The board has decided not to offer a scrip
dividend alternative in respect of the fourth quarter 2020
dividend. Ordinary shareholders and ADS holders (subject to certain
exceptions) will be able to participate in a dividend reinvestment
programme. Details of the fourth quarter dividend and timetable are
available at bp.com/dividends and further details of the dividend
reinvestment programmes are available at bp.com/drip.
Fourth Third Fourth
quarter quarter quarter Year Year
2020 2020 2019 2020 2019
=================================== ======= ======= ======= ====== ========
Dividends paid per ordinary share
cents 5.250 5.250 10.250 31.500 41.000
pence 3.917 4.043 7.825 24.458 31.977
Dividends paid per ADS (cents) 31.50 31.50 61.50 189.00 246.00
==================================== ======= ======= ======= ====== ======
Scrip dividends
Number of shares issued (millions) - - - - 208.9
Value of shares issued ($ million) - - - - 1,387
==================================== ======= ======= ======= ====== ======
Top of page 25
Note 11. Net debt
Net debt* Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
======================================= ======== ======== ======== ======== ==========
Finance debt(a)(b) 72,664 72,828 67,724 72,664 67,724
Fair value (asset) liability of hedges
related to finance debt(c) (2,612) (1,384) 190 (2,612) 190
======================================== ======== ======== ======== ======== ========
70,052 71,444 67,914 70,052 67,914
Less: cash and cash equivalents(b) 31,111 31,065 22,472 31,111 22,472
======================================== ======== ======== ======== ======== ========
Net debt 38,941 40,379 45,442 38,941 45,442
======================================== ======== ======== ======== ======== ========
Total equity 85,568 82,155 100,708 85,568 100,708
Gearing* 31.3% 33.0% 31.1% 31.3% 31.1%
======================================== ======== ======== ======== ======== ==========
(a) The fair value of finance debt at 31 December 2020 was
$76,092 million (31 December 2019 $69,376 million).
(b) Third quarter 2020 includes $316 million of cash and $19
million of finance debt included in assets and liabilities held for
sale in the group balance sheet.
(c) 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 $236 million (third quarter 2020 liability of $372 million and
fourth quarter 2019 liability of $601 million) are not included in
the calculation of net debt shown above as hedge accounting is not
applied for these instruments.
As part of actively managing its debt portfolio, on 18 December
2020 BP exercised its option to redeem finance debt with an
outstanding aggregate principal amount of $2.0 billion on 22
January 2021. In addition, in the third quarter, the group bought
back $4.0 billion equivalent of euro and sterling bonds and
terminated derivatives associated with the debt bought back. These
transactions have no significant impact on net debt or gearing.
On 17 June 2020 the group issued perpetual hybrid bonds with a
US dollar equivalent value of $11.9 billion. See Note 1 for further
information.
Note 12. Inventory valuation
A provision of $216 million was held against hydrocarbon
inventories at 31 December 2020 ($544 million at 30 September 2020
and $290 million at 31 December 2019) to write them down to their
net realizable value.
Note 13. Statutory accounts
The financial information shown in this publication, which was
approved by the Board of Directors on 1 February 2021, is unaudited
and does not constitute statutory financial statements. Audited
financial information will be published in BP Annual Report and
Form 20-F 2020. BP Annual Report and Form 20-F 2019 has been filed
with the Registrar of Companies in England and Wales. The report of
the auditor on those accounts was unqualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain a
statement under section 498(2) or section 498(3) of the UK
Companies Act 2006.
Top of page 26
Additional information
Capital expenditure*
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
===================================== ======= ======= ======= ====== ========
Capital expenditure on a cash basis
Organic capital expenditure* 2,949 2,512 3,958 12,034 15,238
Inorganic capital expenditure*(a)(b) 542 1,124 151 2,021 4,183
====================================== ======= ======= ======= ====== ======
3,491 3,636 4,109 14,055 19,421
======= ======= ======= ====== ======
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
============================================ ======= ======= ======= ====== ========
Organic capital expenditure by segment
Upstream
US 566 589 1,029 3,341 4,019
Non-US 1,463 1,367 2,029 6,009 7,885
============================================= ======= ======= ======= ====== ======
2,029 1,956 3,058 9,350 11,904
======= ======= ======= ====== ======
Downstream
US 237 139 258 632 913
Non-US 527 345 522 1,698 2,084
============================================= ======= ======= ======= ====== ======
764 484 780 2,330 2,997
======= ======= ======= ====== ======
Other businesses and corporate
US 14 13 15 80 47
Non-US 142 59 105 274 290
============================================= ======= ======= ======= ====== ======
156 72 120 354 337
======= ======= ======= ====== ======
2,949 2,512 3,958 12,034 15,238
======= ======= ======= ====== ======
Organic capital expenditure by geographical
area
US 817 741 1,302 4,053 4,979
Non-US 2,132 1,771 2,656 7,981 10,259
============================================= ======= ======= ======= ====== ======
2,949 2,512 3,958 12,034 15,238
======= ======= ======= ====== ======
(a) On 31 October 2018, BP acquired from BHP Billiton Petroleum
(North America) Inc. 100% of the issued share capital of Petrohawk
Energy Corporation, a wholly owned subsidiary of BHP that holds a
portfolio of unconventional onshore US oil and gas assets. The
entire consideration payable of $10,268 million, after customary
closing adjustments, was paid in instalments between July 2018 and
April 2019. The amounts presented as inorganic capital expenditure
include $3,480 million for the full year 2019 relating to this
transaction.
(b) Fourth quarter and full year 2020 includes a $500 million
deposit in respect of the strategic partnership with Equinor. Third
quarter and full year 2020 include $1 billion relating to an
investment in a 49% interest in the group's Indian fuels and
mobility venture with Reliance industries. Full year 2020 and 2019
also include amounts relating to the 25-year extension to our ACG
production-sharing agreement* in Azerbaijan.
Top of page 27
Non-operating items*
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
=============================================== ======= ======= ======= ======== =========
Upstream
Gains on sale of businesses and fixed
assets 256 10 38 360 143
Impairment and losses on sale of businesses
and fixed assets(a) (856) (274) (2,718) (13,214) (7,036)
Environmental and other provisions 20 (9) (32) (2) (32)
Restructuring, integration and rationalization
costs(b) (209) (164) (13) (401) (89)
Other(c)(d) 177 (194) 2 (2,511) 67
================================================ ======= ======= ======= ======== =======
(612) (631) (2,723) (15,768) (6,947)
======= ======= ======= ======== =======
Downstream
Gains on sale of businesses and fixed
assets(e) 2,310 16 7 2,320 51
Impairment and losses on sale of businesses
and fixed assets(a) (313) (20) (23) (1,136) (123)
Environmental and other provisions (33) - (77) (33) (78)
Restructuring, integration and rationalization
costs(b) (522) (142) 71 (633) 85
Other (39) - (6) (39) (12)
================================================ ======= ======= ======= ======== =======
1,403 (146) (28) 479 (77)
======= ======= ======= ======== =======
Rosneft
Other (41) (101) 91 (205) (103)
(41) (101) 91 (205) (103)
======= ======= ======= ======== =======
Other businesses and corporate
Gains on sale of businesses and fixed
assets 191 1 3 194 (1)
Impairment and losses on sale of businesses
and fixed assets 2 - (916) (19) (916)
Environmental and other provisions (122) (32) (203) (177) (231)
Restructuring, integration and rationalization
costs(b) (60) (156) (1) (262) 6
Gulf of Mexico oil spill (140) (63) (63) (255) (319)
Other(f) 76 138 (2) 201 (30)
================================================ ======= ======= ======= ======== =======
(53) (112) (1,182) (318) (1,491)
======= ======= ======= ======== =======
Total before interest and taxation 697 (990) (3,842) (15,812) (8,618)
Finance costs(g) (191) (198) (122) (625) (511)
================================================ ======= ======= ======= ======== =======
Total before taxation 506 (1,188) (3,964) (16,437) (9,129)
Taxation credit (charge) on non-operating
items 593 (6) 822 4,345 1,943
Taxation - impact of foreign exchange(h) 67 85 - (99) -
================================================ ======= ======= ======= ======== =======
Total after taxation for period 1,166 (1,109) (3,142) (12,191) (7,186)
================================================ ======= ======= ======= ======== =======
(a) See Note 3 for further information. Also included in
impairment charges in the fourth quarter and full year 2020 for
Upstream is $156 million in relation to the likely disposal of an
exploration asset.
(b) Fourth quarter and third quarter 2020 include recognized
provisions for restructuring costs for plans that were formalized
during the quarters.
(c) Full year 2020 includes exploration write-offs of $1,974
million relating to fair value ascribed to certain licences as part
of the accounting at the time of acquisition of upstream assets in
Brazil, India and the Gulf of Mexico and the impairment of certain
intangible assets in Mauritania and Senegal.
(d) Full year 2020 includes $545 million net impairments reported by equity-accounted entities.
(e) Fourth quarter and full year 2020 include a gain of $2.3
billion on the sale of our petrochemicals business.
(f) From first quarter 2020, BP is presenting temporary
valuation differences associated with the group's interest rate and
foreign currency exchange risk management of finance debt as
non-operating items. These amounts represent: (i) the impact of
ineffectiveness and the amortisation of cross currency basis
resulting from the application of fair value hedge accounting; and
(ii) the net impact of foreign currency exchange movements on
finance debt and associated derivatives where hedge accounting is
not applied. Relevant amounts in the comparative periods presented
were not material.
(g) All periods presented include the unwinding of discounting
effects relating to Gulf of Mexico oil spill payables. Fourth
quarter, third quarter and full year 2020 also include the income
statement impact associated with the buyback of finance debt. See
Note 11 for further information.
(h) From first quarter 2020, BP is presenting certain foreign
exchange effects on tax as non-operating items. These amounts
represent the impact of: (i) foreign exchange on deferred tax
balances arising from the conversion of local currency tax base
amounts into functional currency, and (ii) taxable gains and losses
from the retranslation of US dollar-denominated intra-group loans
to local currency. Relevant amounts in the comparative periods
presented were not material.
Top of page 28
Non-GAAP information on fair value accounting effects
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
======================================== ======= ======= ======= ===== =======
Favourable (adverse) impact relative to
management's measure of performance
Upstream (677) (217) 659 (738) 706
Downstream (284) 425 23 (149) 160
Other businesses and corporate 450 266 - 675 -
========================================= ======= ======= ======= ===== =====
(511) 474 682 (212) 866
Taxation credit (charge) 55 (95) (111) (11) (155)
========================================= ======= ======= ======= ===== =====
(456) 379 571 (223) 711
======= ======= ======= ===== =====
Fair value accounting effects reflect differences in the way
that BP manages the economic exposure and measures performance
relating to certain activities and the way these activities are
measured under IFRS. They relate to certain of the group's
commodity, interest rate and currency risk exposures as detailed
below.
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 the income statement. This is
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, other than net realizable value provisions, 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 physical 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 physical
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 require 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 other transportation,
storage capacity, oil and gas processing, liquefied natural gas
(LNG) and certain gas and power contracts that, under IFRS, are
recorded on an accruals basis. These contracts are risk-managed
using a variety of derivative instruments that 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, transportation 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 derivative instruments used to risk manage certain
oil, gas, power and other 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.
Fair value accounting effects also include changes in the fair
value of the near-term portions of LNG contracts that fall within
BP's risk management framework. LNG contracts are not considered
derivatives, because there is insufficient market liquidity, and
they are therefore accrual accounted under IFRS. However, oil and
natural gas derivative financial instruments (used to risk manage
the near-term portions of the LNG contracts) are fair valued under
IFRS. The fair value accounting effect reduces timing differences
between recognition of the derivative financial instruments used to
risk manage the LNG contracts and the recognition of the LNG
contracts themselves, which therefore gives a better representation
of performance in each period.
In addition, from the second quarter 2020 fair value accounting
effects include changes in the fair value of derivatives entered
into by the group to manage currency exposure and interest rate
risks relating to hybrid bonds to their respective first call
periods. The hybrid bonds which were issued on 17 June 2020 are
classified as equity instruments and were recorded in the balance
sheet at that date at their USD equivalent issued value. Under IFRS
these equity instruments are not remeasured from period to period,
and do not qualify for application of hedge accounting. The
derivative instruments relating to the hybrid bonds, however, are
required to be recorded at fair value with mark to market gains and
losses recognized in the income statement. Therefore, measurement
differences in relation to the recognition of gains and losses
occur. The fair value accounting effect, which is reported in the
Other businesses and corporate segment in the table above,
eliminates the fair value gains and losses of these derivative
financial instruments that are recognized in the income statement.
We believe that this gives a better representation of performance,
by more appropriately reflecting the economic effect of these risk
management activities, in each period.
Top of page 29
Net debt including leases
Net debt including leases* Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
======================================== ======== ======== ======== ======== ==========
Net debt 38,941 40,379 45,442 38,941 45,442
Lease liabilities 9,262 9,282 9,722 9,262 9,722
Net partner (receivable) payable for
leases entered into on behalf of joint
operations (7) (41) (158) (7) (158)
Net debt including leases 48,196 49,620 55,006 48,196 55,006
========================================= ======== ======== ======== ======== ========
Total equity 85,568 82,155 100,708 85,568 100,708
Gearing including leases* 36.0% 37.7% 35.3% 36.0% 35.3%
========================================= ======== ======== ======== ======== ==========
Readily marketable inventory* (RMI)
31 December 31 December
$ million 2020 2019
=================== =========== =============
RMI at fair value* 6,528 6,837
Paid-up RMI* 3,365 3,217
==================== =========== ===========
Readily marketable inventory (RMI) is oil and oil products
inventory held and price risk-managed by BP's integrated supply and
trading function (IST) which could be sold to generate funds if
required. Paid-up RMI is RMI that BP has paid for.
We believe that disclosing the amounts of RMI and paid-up RMI is
useful to investors as it enables them to better understand and
evaluate the group's inventories and liquidity position by enabling
them to see the level of discretionary inventory held by IST and to
see builds or releases of liquid trading inventory.
See the Glossary on page 32 for a more detailed definition of
RMI. RMI at fair value, paid-up RMI and unpaid RMI are non-GAAP
measures. A reconciliation of total inventory as reported on the
group balance sheet to paid-up RMI is provided below.
31 December 31 December
$ million 2020 2019
=================================================== =========== =============
Reconciliation of total inventory to paid-up RMI
Inventories as reported on the group balance sheet
under IFRS 16,873 20,880
Less: (a) inventories that are not oil and oil
products and (b) oil and oil product inventories
that are not risk-managed by IST (10,810) (14,280)
==================================================== =========== ===========
6,063 6,600
Plus: difference between RMI at fair value and
RMI on an IFRS basis 465 237
==================================================== =========== ===========
RMI at fair value 6,528 6,837
Less: unpaid RMI* at fair value (3,163) (3,620)
==================================================== =========== ===========
Paid-up RMI 3,365 3,217
==================================================== =========== ===========
Top of page 30
Gulf of Mexico oil spill
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
============================================== ======= ======= ======= ====== ========
Net cash provided by operating activities
as per condensed group cash flow statement 2,269 5,204 7,603 12,162 25,770
Exclude net cash from operating activities
relating to the Gulf of Mexico oil spill
on a post-tax basis 88 142 (42) 1,608 2,429
=============================================== ======= ======= ======= ====== ======
Operating cash flow, excluding Gulf of Mexico
oil spill payments* 2,357 5,346 7,561 13,770 28,199
=============================================== ======= ======= ======= ====== ======
Net cash from operating activities relating to the Gulf of
Mexico oil spill on a pre-tax basis amounted to an outflow of $116
million and $1,786 million in the fourth quarter and full year of
2020 respectively. For the same periods in 2019, the amount was an
outflow of $125 million and $2,694 million respectively. Net cash
outflows relating to the Gulf of Mexico oil spill in 2020 and 2019
include payments made under the 2016 consent decree and settlement
agreement with the United States and the five Gulf coast
states.
31 December 31 December
$ million 2020 2019
================================================= =========== =============
Trade and other payables (11,387) (12,480)
Provisions (49) (189)
================================================== =========== ===========
Gulf of Mexico oil spill payables and provisions (11,436) (12,669)
================================================== =========== ===========
Of which - current (1,444) (1,800)
Deferred tax asset 5,471 5,526
================================================== =========== ===========
On 22 January 2021, the United States District Court for the
Eastern District of Louisiana issued an order determining the
completion of all claims processing operations of the Deepwater
Horizon Court Supervised Settlement Programme (DHCSSP). The DHCSSP
was established in 2012 to administer claims pursuant to the
Economic and Property Damages Settlement Agreement (EPD Settlement
Agreement). The Court also concluded that future issues concerning
EPD Settlement Agreement claims would be time barred under the
DHCSSP and the claim administrator would proceed to complete
post-closure administrative wind down activities. The provision
presented in the table above reflects the latest estimate for the
remaining costs associated with the Gulf of Mexico oil spill. The
amounts ultimately payable may differ from the amount provided and
the timing of payments is uncertain. Further information relating
to the Gulf of Mexico oil spill, including the DHCSSP and
information on the nature and expected timing of payments relating
to provisions and other payables, is provided in BP Annual Report
and Form 20-F 2019 - Financial statements - Notes 7, 9, 20, 22, 23,
29, 33 and pages 319 to 320 of Legal proceedings.
Working capital* reconciliation
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2020 2020 2019 2020 2019
================================================ ======= ======= ======= ======= =========
Movements in inventories and other current
and non-current assets and liabilities
as per condensed group cash flow statement (715) 556 (306) (85) (2,918)
Adjustments to exclude movements in inventories
and other current and non-current assets
and liabilities for the Gulf of Mexico
oil spill 41 165 91 1,580 2,586
Adjusted for Inventory holding gains
(losses)* (Note 5)
Upstream 20 8 - 17 (8)
Downstream 650 191 (21) (2,796) 685
================================================= ======= ======= ======= ======= =======
Working capital release (build) (4) 920 (236) (1,284) 345
================================================= ======= ======= ======= ======= =======
Top of page 31
Realizations* and marker prices
Fourth Third Fourth
quarter quarter quarter Year Year
2020 2020 2019 2020 2019
============================================ ======= ======= ======= ===== =======
Average realizations (a)
Liquids* ($/bbl)
US 32.40 31.74 49.34 33.06 51.88
Europe 43.39 43.52 63.01 41.79 63.95
Rest of World 41.60 41.46 60.34 37.42 61.50
BP Average 38.42 38.17 55.90 36.16 57.73
============================================= ======= ======= ======= ===== =====
Natural gas ($/mcf)
US 1.76 1.29 1.65 1.30 1.93
Europe 5.37 2.34 4.06 3.13 4.01
Rest of World 3.37 2.99 3.77 3.25 4.10
BP Average 3.10 2.56 3.12 2.75 3.39
============================================= ======= ======= ======= ===== =====
Total hydrocarbons* ($/boe)
US 24.20 22.04 31.84 23.25 33.30
Europe 39.39 36.14 51.91 35.52 56.87
Rest of World 29.28 27.40 37.91 26.91 39.23
BP Average 28.48 26.42 36.42 26.31 38.00
============================================= ======= ======= ======= ===== =====
Average oil marker prices ($/bbl)
Brent 44.16 42.94 63.08 41.84 64.21
West Texas Intermediate 42.63 40.91 56.88 39.25 57.03
Western Canadian Select 31.57 31.62 37.70 28.53 43.42
Alaska North Slope 44.82 42.75 64.32 42.20 65.00
Mars 43.26 42.01 57.85 40.20 60.84
Urals (NWE - cif) 44.29 42.83 60.74 41.71 62.96
============================================= ======= ======= ======= ===== =====
Average natural gas marker prices
Henry Hub gas price(b) ($/mmBtu) 2.67 1.98 2.50 2.08 2.63
UK Gas - National Balancing Point (p/therm) 40.46 21.06 31.77 24.93 34.70
============================================= ======= ======= ======= ===== =====
(a) Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
(b) Henry Hub First of Month Index.
Exchange rates
Fourth Third Fourth
quarter quarter quarter Year Year
2020 2020 2019 2020 2019
===================================== ======= ======= ======= ===== =======
$/GBP average rate for the period 1.32 1.29 1.29 1.28 1.28
$/GBP period-end rate 1.36 1.28 1.31 1.36 1.31
$/EUR average rate for the period 1.19 1.17 1.11 1.14 1.12
$/EUR period-end rate 1.23 1.17 1.12 1.23 1.12
$/AUD average rate for the period 0.73 0.71 0.68 0.69 0.69
$/AUD period-end rate 0.77 0.71 0.70 0.77 0.70
Rouble/$ average rate for the period 76.16 73.74 63.74 72.32 64.73
Rouble/$ period-end rate 74.44 77.57 61.98 74.44 61.98
====================================== ======= ======= ======= ===== =====
Top of page 32
Legal proceedings
For a full discussion of the group's material legal proceedings,
see pages 319-320 of BP Annual Report and Form 20-F 2019.
Glossary
Non-GAAP measures are provided for investors because they are
closely tracked by management to evaluate BP's operating
performance and to make financial, strategic and operating
decisions. Non-GAAP measures are sometimes referred to as
alternative performance measures.
Capital expenditure is total cash capital expenditure as stated
in the condensed group cash flow statement.
Consolidation adjustment - UPII is unrealized profit in
inventory arising on inter-segment transactions.
Convenience gross margin comprises store gross margin as well as
other merchandise and service contribution, not considered as
retail fuels or store gross margin, received from the retail
service stations operated under a BP brand.
Divestment proceeds are disposal proceeds as per the condensed
group cash flow statement.
Effective tax rate (ETR) on replacement cost (RC) profit or loss
is a non-GAAP measure. The ETR on RC profit or loss is calculated
by dividing taxation on a RC basis by RC profit or loss before tax.
Information on RC profit or loss is provided below. BP believes it
is helpful to disclose the ETR on RC profit or loss because this
measure excludes the impact of price changes on the replacement of
inventories and allows for more meaningful comparisons between
reporting periods. The nearest equivalent measure on an IFRS basis
is the ETR on profit or loss for the period.
Ethanol-equivalent production (which includes ethanol and sugar)
is converted to thousands of barrels a day at 6.289 million litres
= 1 thousand barrels divided by the total number of days in the
period reported.
Fair value accounting effects are non-GAAP adjustments to our
IFRS profit (loss). They reflect the difference between the way BP
manages the economic exposure and internally measures performance
of certain activities and the way those activities are measured
under IFRS. Further information on fair value accounting effects is
provided on page 28.
Gearing and net debt are non-GAAP measures. Net debt is
calculated as 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. Gearing is defined as the ratio of
net debt to the total of net debt plus total equity. BP believes
these measures provide useful information to investors. Net debt
enables investors to see the economic effect of finance debt,
related hedges and cash and cash equivalents in total. Gearing
enables investors to see how significant net debt is relative to
total equity. The derivatives are reported on the balance sheet
within the headings 'Derivative financial instruments'. The nearest
equivalent GAAP measures on an IFRS basis are finance debt and
finance debt ratio. A reconciliation of finance debt to net debt is
provided on page 25.
We are unable to present reconciliations of forward-looking
information for gearing to finance debt and total equity, because
without unreasonable efforts, we are unable to forecast accurately
certain adjusting items required to present a meaningful comparable
GAAP forward-looking financial measure. These items include fair
value asset (liability) of hedges related to finance debt and cash
and cash equivalents, that are difficult to predict in advance in
order to include in a GAAP estimate.
Gearing including leases and net debt including leases are
non-GAAP measures. Net debt including leases is calculated as net
debt plus lease liabilities, less the net amount of partner
receivables and payables relating to leases entered into on behalf
of joint operations. Gearing including leases is defined as the
ratio of net debt including leases to the total of net debt
including leases plus total equity. BP believes these measures
provide useful information to investors as they enable investors to
understand the impact of the group's lease portfolio on net debt
and gearing. The nearest equivalent GAAP measures on an IFRS basis
are finance debt and finance debt ratio. A reconciliation of
finance debt to net debt including leases is provided on page
29.
Hydrocarbons - Liquids and natural gas. Natural gas is converted
to oil equivalent at 5.8 billion cubic feet = 1 million
barrels.
Inorganic capital expenditure is a subset of capital expenditure
and is a non-GAAP measure. Inorganic capital expenditure comprises
consideration in business combinations and certain other
significant investments made by the group. It is reported on a cash
basis. BP believes that this measure provides useful information as
it allows investors to understand how BP's management invests funds
in projects which expand the group's activities through
acquisition. Further information and a reconciliation to GAAP
information is provided on page 26.
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.
Top of page 33
Glossary (continued)
Liquids - Liquids for Upstream and Rosneft comprises crude oil,
condensate and natural gas liquids. For Upstream, liquids also
includes bitumen.
Major projects have a BP net investment of at least $250
million, or are considered to be of strategic importance to BP or
of a high degree of complexity.
Net 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.
Non-operating items are 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 7, 9 and 11, and by
segment and type is shown on page 27.
Operating cash flow is net cash provided by (used in) operating
activities as stated in the condensed group cash flow statement.
When used in the context of a segment rather than the group, the
terms refer to the segment's share thereof.
Operating cash flow excluding Gulf of Mexico oil spill payments
is a non-GAAP measure. It is calculated by excluding post-tax
operating cash flows relating to the Gulf of Mexico oil spill from
net cash provided by operating activities as reported in the
condensed group cash flow statement. BP believes net cash provided
by operating activities excluding amounts related to the Gulf of
Mexico oil spill is a useful measure as it allows for more
meaningful comparisons between reporting periods. The nearest
equivalent measure on an IFRS basis is net cash provided by
operating activities.
Organic capital expenditure is a subset of capital expenditure
and is a non-GAAP measure. Organic capital expenditure comprises
capital expenditure less inorganic capital expenditure. BP believes
that this measure provides useful information as it allows
investors to understand how BP's management invests funds in
developing and maintaining the group's assets. An analysis of
organic capital expenditure by segment and region, and a
reconciliation to GAAP information is provided on page 26.
We are unable to present reconciliations of forward-looking
information for organic capital expenditure to total cash capital
expenditure, because without unreasonable efforts, we are unable to
forecast accurately the adjusting item, inorganic capital
expenditure, that is difficult to predict in advance in order to
derive the nearest GAAP estimate.
Production-sharing agreement/contract (PSA/PSC) is an
arrangement through which an oil and gas 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.
Readily marketable inventory (RMI) is inventory held and price
risk-managed by our integrated supply and trading function (IST)
which could be sold to generate funds if required. It comprises oil
and oil products for which liquid markets are available and
excludes inventory which is required to meet operational
requirements and other inventory which is not price risk-managed.
RMI is reported at fair value. Inventory held by the Downstream
fuels business for the purpose of sales and marketing, and all
inventories relating to the lubricants and petrochemicals
businesses, are not included in RMI.
Paid-up RMI excludes RMI which has not yet been paid for. For
inventory that is held in storage, a first-in first-out (FIFO)
approach is used to determine whether inventory has been paid for
or not. Unpaid RMI is RMI which has not yet been paid for by BP.
RMI at fair value, Paid-up RMI and Unpaid RMI are non-GAAP
measures. Further information is provided on page 29.
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 availability represents Solomon Associates' operational
availability for BP-operated refineries, 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 34
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 for the group is not a recognized GAAP measure.
BP 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. The nearest equivalent measure on an IFRS basis is profit
or loss attributable to BP shareholders. A reconciliation to GAAP
information is provided on page 1. RC profit or loss before
interest and tax is the measure of profit or loss that is required
to be disclosed for each operating segment under IFRS.
RC profit or loss per share is a non-GAAP measure. Earnings per
share is defined in Note 9. RC profit or loss per share is
calculated using the same denominator. The numerator used is RC
profit or loss attributable to BP shareholders rather than profit
or loss attributable to BP shareholders. BP believes it is helpful
to disclose the RC profit or loss per share because this measure
excludes the impact of price changes on the replacement of
inventories and allows for more meaningful comparisons between
reporting periods. The nearest equivalent measure on an IFRS basis
is basic earnings per share based on profit or loss for the period
attributable to BP shareholders.
Reported recordable injury frequency measures the number of
reported work-related employee and contractor incidents that result
in a fatality or injury per 200,000 hours worked. This represents
reported incidents occurring within BP's operational HSSE reporting
boundary. That boundary includes BP's own operated facilities and
certain other locations or situations.
Reserves replacement ratio is the extent to which the year's
production has been replaced by proved reserves added to our
reserve base. The ratio is expressed in oil-equivalent terms and
includes changes resulting from discoveries, improved recovery and
extensions and revisions to previous estimates, but excludes
changes resulting from acquisitions and disposals. The reserves
replacement ratio will be reported in BP Annual Report and Form
20-F 2020 .
Return on average capital employed (ROACE) is a non-GAAP measure
and is underlying replacement cost profit, after adding back
non-controlling interest and interest expense net of tax, divided
by average capital employed (total equity plus finance debt),
excluding cash and cash equivalents and goodwill. Interest expense
is finance costs excluding lease interest and the unwinding of the
discount on provisions and other payables, and for full year 2020
interest expense was $1,808 million (2019 $2,032 million) before
tax. BP believes it is helpful to disclose the ROACE because this
measure gives an indication of the company's capital efficiency.
The nearest GAAP measures of the numerator and denominator are
profit or loss for the period attributable to BP shareholders and
average capital employed respectively.
Solomon availability - See Refining availability definition.
Technical service contract (TSC) - Technical service contract is
an arrangement through which an oil and gas company bears the risks
and costs of exploration, development and production. In return,
the oil and gas company receives entitlement to variable physical
volumes of hydrocarbons, representing recovery of the costs
incurred and a profit margin which reflects incremental production
added to the oilfield.
Tier 1 and tier 2 process safety events - Tier 1 events are
losses of primary containment from a process of greatest
consequence - causing harm to a member of the workforce, damage to
equipment from a fire or explosion, a community impact or exceeding
defined quantities. Tier 2 events are those of lesser consequence.
These represent reported incidents occurring within BP's
operational HSSE reporting boundary. That boundary includes BP's
own operated facilities and certain other locations or
situations.
Underlying effective tax rate (ETR) is a non-GAAP measure. The
underlying ETR is calculated by dividing taxation on an underlying
replacement cost (RC) basis by underlying RC profit or loss before
tax. Taxation on an underlying RC basis is taxation on a RC basis
for the period adjusted for taxation on non-operating items and
fair value accounting effects. Information on underlying RC profit
or loss is provided below. BP believes it is helpful to disclose
the underlying ETR because this measure 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. The nearest equivalent measure on an IFRS
basis is the ETR on profit or loss for the period.
We are unable to present reconciliations of forward-looking
information for underlying ETR to ETR on profit or loss for the
period, because without unreasonable efforts, we are unable to
forecast accurately certain adjusting items required to present a
meaningful comparable GAAP forward-looking financial measure. These
items include the taxation on inventory holding gains and losses,
non-operating items and fair value accounting effects, that are
difficult to predict in advance in order to include in a GAAP
estimate.
Underlying production - 2020 underlying production, when
compared with 2019, is production after adjusting for acquisitions
and divestments, curtailments, and entitlement impacts in our
production-sharing agreements/contracts and technical service
contract.
Top of page 35
Glossary (continued)
Underlying RC profit or loss is RC profit or loss after
adjusting for non-operating items and fair value accounting
effects. Underlying RC profit or loss and adjustments for fair
value accounting effects are not recognized GAAP measures. See
pages 27 and 28 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
attributable to BP shareholders. The nearest equivalent measure on
an IFRS basis for segments is RC profit or loss before interest and
taxation. A reconciliation to GAAP information is provided on page
1.
Underlying RC profit or loss per share is a non-GAAP measure.
Earnings per share is defined in Note 9. Underlying RC profit or
loss per share is calculated using the same denominator. The
numerator used is underlying RC profit or loss attributable to BP
shareholders rather than profit or loss attributable to BP
shareholders. BP believes it is helpful to disclose the underlying
RC profit or loss per share because this measure 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. The nearest equivalent measure on an IFRS
basis is basic earnings per share based on profit or loss for the
period attributable to BP shareholders.
Upstream plant reliability (BP-operated) is calculated taking
100% less the ratio of total unplanned plant deferrals divided by
installed production capacity. Unplanned plant deferrals are
associated with the topside plant and where applicable the subsea
equipment (excluding wells and reservoir). Unplanned plant
deferrals include breakdowns, which does not include Gulf of Mexico
weather related downtime.
Upstream unit production cost is calculated as production cost
divided by units of production. Production cost does not include ad
valorem and severance taxes. Units of production are barrels for
liquids and thousands of cubic feet for gas. Amounts disclosed are
for BP subsidiaries only and do not include BP's share of
equity-accounted entities.
Working capital - Change in working capital is movements in
inventories and other current and non-current assets and
liabilities as reported in the condensed group cash flow statement.
Change in working capital adjusted for inventory holding
gains/losses is a non-GAAP measure. It is calculated by adjusting
for inventory holding gains/losses reported in the period and this
therefore represents what would have been reported as movements in
inventories and other current and non-current assets and
liabilities, if the starting point in determining net cash provided
by operating activities had been replacement cost profit rather
than profit for the period. The nearest equivalent measure on an
IFRS basis for this is movements in inventories and other current
and non-current assets and liabilities. In the context of
describing operating cash flow excluding Gulf of Mexico oil spill
payments, change in working capital also excludes movements in
inventories and other current and non-current assets and
liabilities relating to the Gulf of Mexico oil spill. See page 30
for further details.
BP utilizes various arrangements in order to manage its working
capital including discounting of receivables and, in the supply and
trading business, the active management of supplier payment terms,
inventory and collateral.
Top of page 36
Cautionary statement
In order to utilize the 'safe harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995 (the
'PSLRA') and the general doctrine of cautionary statements, BP is
providing the following cautionary statement: The discussion in
this results announcement contains 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. In particular, the following, among other statements,
are all forward looking in nature: expectations regarding the
COVID-19 pandemic, including its risks, impacts, consequences and
challenges and BP's response, the impact on BP's financial
performance
(including cash flows and net debt), operations and credit
losses, and the impact on the trading environment, oil and gas
prices, and global GDP; expectations regarding the shape of the
COVID-19 recovery and the pace of transition to a lower-carbon
economy and energy system; plans, expectations and assumptions
regarding oil and gas demand, supply or prices, the timing of
production of reserves; plans and expectations regarding the
divestment programme, including the amount and timing of proceeds
in 2021 and reaching $25 billion of proceeds by 2025; expectations
with respect to completion of transactions and the timing and
amount of proceeds of agreed disposals, including further payments
from INEOS in respect of the completed sale of BP's petrochemicals
business and the completion of the sale of BP's interest in the
Wamsutter asset; plans and expectations with respect to the total
amount of organic capital expenditure and the DD&A charge in
2021; plans and expectations with respect to the total capital
expenditure for 2021; plans and expectations regarding net debt,
including delivery of the target of $35 billion; plans and
expectations regarding new joint ventures and other agreements,
including partnerships with Equinor, Ørsted, Amazon and BP's
multi-company partnership to develop offshore infrastructure to
support planned UK carbon capture, use and storage projects, as
well as plans and expectations related to BP's stake in Finite
Carbon; plans and expectations regarding BP's strategic priorities;
expectations regarding quarterly dividends and share buybacks;
expectations regarding demand for BP's products in the Upstream and
Downstream; expectations regarding Downstream refining margins,
utilization, marketing volumes and product demand; expectations
regarding BP's future financial performance and cash flows; plans
and expectations with respect to the implementation and impact of
BP's strategic reinvention and redesign of its organization,
including the ongoing reduction of approximately 10,000 jobs, and
the amount and timing of associated costs; expectations regarding
the underlying effective tax rate for 2021; plans and expectations
regarding BP's renewable energy and alternative energy businesses,
including BP's ambition to reach 20GW of net renewable generating
capacity to FID by the end of 2025; plans and expectations
regarding Upstream and Downstream projects, including the
conversion of the Kwinana refinery; expectations regarding Upstream
first-quarter and full-year 2021 reported and underlying production
and related major project ramp-up, capital investments, divestment
and maintenance activity; expectations regarding the timing of
implementation of new accounting policies; expectations regarding
price assumptions used in accounting estimates; expectations
regarding the Other businesses and corporate charges for 2021;
expectations regarding the timing and amount of future payments
relating to the Gulf of Mexico oil spill, including expectations
regarding the completion of the claims processing operations of the
Deepwater Horizon Court Supervised Settlement Programme; and
expectations regarding operational and financial results or
acquisitions or divestments by Rosneft, including expectations
regarding the ongoing assessment of the fair values of the assets
and liabilities acquired and the consideration paid in respect of
the acquisitions announced by Rosneft on 28 December 2020 and the
impact, if any, on BP's accounting for its equity-accounted
investment in Rosneft of such acquisitions. 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
extent and duration of the impact of current market conditions
including the volatility of oil prices, the impact of COVID-19,
overall global economic and business conditions impacting our
business and demand for our products as well as the specific
factors identified in the discussions accompanying such
forward-looking statements; changes in consumer preferences and
societal expectations; the pace of development and adoption of
alternative energy solutions; 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 acquisitions and
divestments; future levels of industry product supply, demand and
pricing, including supply growth in North America; OPEC quota
restrictions; PSA and TSC 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; delays in the processes for
resolving claims; amounts ultimately payable and timing of 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, as well those factors discussed
under "Principal risks and uncertainties" in our results
announcement for the period ended 30 June 2020 and under "Risk
factors" in BP Annual Report and Form 20-F 2019 as filed with the
US Securities and Exchange Commission.
Contacts
London Houston
Press Office David Nicholas Brett Clanton
+44 (0)20 7496 4708 +1 281 366 8346
Investor Relations Craig Marshall Geoff Carr
bp.com/investors +44 (0)20 7496 4962 +1 281 892 3065
BP p.l.c.'s LEI Code 213800LH1BZH3D16G760
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END
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