Form 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

for the period ended 30 June 2016

Commission File Number 1-06262

 

 

BP p.l.c.

(Translation of registrant’s name into English)

 

 

1 ST JAMES’S SQUARE, LONDON, SW1Y 4PD, ENGLAND

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  x            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NOS. 333-208478 AND 333-208478-01) OF BP CAPITAL MARKETS p.l.c. AND BP p.l.c.; THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-67206) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-79399) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-103924) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-123482) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-123483) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-131583) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-131584) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-132619) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146868) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146870) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-146873) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-173136) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-177423) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-179406) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-186462) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-186463) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-199015) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-200794) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-200795) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-207188) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-207189) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-210316) OF BP p.l.c., THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-210318) OF BP p.l.c., AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

 

 

 


Table of Contents

BP p.l.c. and subsidiaries

Form 6-K for the period ended 30 June 2016(a)

 

 

         Page  

1.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the period January-June 2016(b)

     3-11, 31-36   

2.

 

Consolidated Financial Statements including Notes to Consolidated Financial Statements for the period January-June 2016

     12-30   

3.

 

Principal risks and uncertainties

     37   

4.

 

Legal proceedings

     38-39   

5.

 

Cautionary statement

     40   

6.

 

Computation of Ratio of Earnings to Fixed Charges

     41   

7.

 

Capitalization and Indebtedness

     42   

8.

 

Signatures

     43   

 

(a)  In this Form 6-K, references to the first half 2016 and first half 2015 refer to the six-month periods ended 30 June 2016 and 30 June 2015 respectively. References to second quarter 2016 and second quarter 2015 refer to the three-month periods ended 30 June 2016 and 30 June 2015 respectively.
(b)  This discussion should be read in conjunction with the consolidated financial statements and related notes provided elsewhere in this Form 6-K and with the information, including the consolidated financial statements and related notes, in BP’s Annual Report on Form 20-F for the year ended 31 December 2015.

 

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Table of Contents

Group results second quarter and half year 2016

 

 

Second
quarter
2015

    Second
quarter

2016
    $ million    First
half
2016
    First
half
2015
 
  62,051        46,442     

Sales and other operating revenues

     84,954        117,570   

 

 

   

 

 

      

 

 

   

 

 

 
  (5,823     (1,419  

Profit (loss) for the period(a)

     (2,002     (3,221
  (627     (1,188  

Inventory holding (gains) losses*

     (1,056     (1,383
  184        360     

Taxation charge (credit) on inventory holding gains and losses

     326        441   

 

 

   

 

 

      

 

 

   

 

 

 
  (6,266     (2,247  

Replacement cost profit (loss)*

     (2,732     (4,163
  11,314        5,518     

Net (favourable) unfavourable impact of non-operating items* and fair value accounting effects*, before tax

     6,928        11,971   
  (3,735     (2,551  

Taxation charge (credit) on non-operating items and fair value accounting effects

     (2,944     (3,918

 

 

   

 

 

      

 

 

   

 

 

 
  1,313        720     

Underlying replacement cost profit*

     1,252        3,890   

 

 

   

 

 

      

 

 

   

 

 

 
  (31.83     (7.60  

Profit (loss) per ordinary share (cents)

     (10.78     (17.62
  (1.91     (0.46  

Profit (loss) per ADS (dollars)

     (0.65     (1.06
  (34.25     (12.03  

Replacement cost profit (loss) per ordinary share (cents)

     (14.71     (22.77
  (2.05     (0.72  

Replacement cost profit (loss) per ADS (dollars)

     (0.88     (1.37
  7.17        3.85     

Underlying replacement cost profit per ordinary share (cents)

     6.73        21.27   
  0.43        0.23     

Underlying replacement cost profit per ADS (dollars)

     0.40        1.28   

 

    BP’s loss for the second quarter and half year was $1,419 million and $2,002 million respectively, compared with a loss of $5,823 million and $3,221 million for the same periods a year ago. Replacement cost (RC) loss for the second quarter was $2,247 million, compared with a loss of $6,266 million a year ago. After adjusting for a net charge for non-operating items of $2,819 million and net unfavourable fair value accounting effects of $148 million (both on a post-tax basis), underlying RC profit for the second quarter was $720 million, compared with $1,313 million for the same period in 2015. For the half year, RC loss was $2,732 million, compared with a loss of $4,163 million a year ago. After adjusting for a net charge for non-operating items of $3,597 million and net unfavourable fair value accounting effects of $387 million (both on a post-tax basis), underlying RC profit for the half year was $1,252 million, compared with $3,890 million for the same period in 2015. The lower result arises mainly due to the impact of lower oil and gas realizations on the Upstream result. Non-operating items include a restructuring charge of $68 million for the quarter and $414 million for the half year. Cumulative restructuring charges from the beginning of the fourth quarter 2014 totalled $1.9 billion by the end of the second quarter 2016.

 

    All amounts, including finance costs, relating to the Gulf of Mexico oil spill have been treated as non-operating items, with a net pre-tax charge of $5,229 million for the second quarter and $6,146 million for the half year. As announced on 14 July 2016, following significant progress in resolving outstanding claims arising from the 2010 Deepwater Horizon accident and oil spill, a reliable estimate has now been determined for all remaining material liabilities arising from the incident, and a charge has been recorded this quarter. For further information on the Gulf of Mexico oil spill and its consequences see page 11 and Note 2 on page 17. See also Legal proceedings on page 38.

 

    Net cash provided by operating activities for the second quarter and half year was $3.9 billion and $5.8 billion respectively, compared with $6.3 billion and $8.1 billion for the same periods in 2015.

 

    Gross debt at 30 June 2016 was $55.7 billion compared with $57.1 billion a year ago. The ratio of gross debt to gross debt plus equity at 30 June 2016 was 37.2%, compared with 34.7% a year ago. Net debt* at 30 June 2016 was $30.9 billion, compared with $24.8 billion a year ago. The net debt ratio* at 30 June 2016 was 24.7%, compared with 18.8% a year ago. Net debt and the net debt ratio are non-GAAP measures. See page 24 for more information.

 

    Capital expenditure on an accruals basis* for the second quarter was $4.2 billion, of which organic capital expenditure* was $3.9 billion, compared with $4.7 billion for the same period in 2015, of which organic capital expenditure was $4.5 billion. For the half year, capital expenditure on an accruals basis was $8.1 billion, of which organic capital expenditure was $7.9 billion, compared with $9.1 billion for the same period in 2015, of which organic capital expenditure was $8.9 billion. See page 31 for further information.

 

    Disposal proceeds, as per the cash flow statement, were $0.4 billion for the second quarter and $1.6 billion for the half year, compared with $0.5 billion and $2.3 billion for the same periods in 2015. In addition, $0.3 billion was received in the second quarter in relation to the sale of approximately 11.5% from our shareholding in Castrol India Limited.

 

    BP today announced a quarterly dividend of 10.00 cents per ordinary share ($0.600 per ADS), which is expected to be paid on 16 September 2016. The corresponding amount in sterling will be announced on 6 September 2016. See page 23 for further information.

 

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 35.
(a) Profit attributable to BP shareholders.

 

 

 

The commentaries above and following should be read in conjunction with the cautionary statement on page 40.

 

 

3


Table of Contents

Group headlines (continued)

 

 

    The effective tax rate (ETR) on the loss for the second quarter and half year was 59% and 54% respectively, compared with 33% and 51% for the same periods in 2015. The ETR on RC loss for the second quarter and half year was 51% and 49% respectively, compared with 33% and 47% for the same periods in 2015. Further to recording a charge for all remaining material liabilities relating to the Gulf of Mexico oil spill, the overall tax position was reviewed and the tax credit for the quarter reflects tax on the charge taken and other positive tax adjustments, all of which have been treated as non-operating items. Adjusting for non-operating items, fair value accounting effects and a one-off adjustment as a result of the reduction in the rate of the UK North Sea supplementary charge in the first quarter 2015, the underlying ETR in the second quarter and half year was 21% and 20% respectively, compared with 35% and 28% for the same periods in 2015. The underlying ETR for the half year is lower than a year ago mainly due to changes in the mix of profits and foreign exchange effects.

 

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Table of Contents

Analysis of RC profit (loss) before interest and tax

and reconciliation to profit (loss) for the period

 

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
   

RC profit (loss) before interest and tax*

    
  228        (109  

Upstream

     (1,314     600   
  1,628        1,405     

Downstream

     3,285        3,711   
  510        246     

Rosneft

     312        693   
  (11,202     (5,525  

Other businesses and corporate(a)

     (6,599     (11,833
  (39     (121  

Consolidation adjustment – UPII*

     (81     (168

 

 

   

 

 

      

 

 

   

 

 

 
  (8,875     (4,104  

RC profit (loss) before interest and tax

     (4,397     (6,997
  (364     (460  

Finance costs and net finance expense relating to pensions and other post-retirement benefits

     (900     (722
  3,013        2,346     

Taxation on a RC basis

     2,619        3,645   
  (40     (29  

Non-controlling interests

     (54     (89

 

 

   

 

 

      

 

 

   

 

 

 
  (6,266     (2,247  

RC profit (loss) attributable to BP shareholders

     (2,732     (4,163

 

 

   

 

 

      

 

 

   

 

 

 
  627        1,188     

Inventory holding gains (losses)

     1,056        1,383   
  (184     (360  

Taxation (charge) credit on inventory holding gains and losses

     (326     (441

 

 

   

 

 

      

 

 

   

 

 

 
  (5,823     (1,419  

Profit (loss) for the period attributable to BP shareholders

     (2,002     (3,221

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Includes costs related to the Gulf of Mexico oil spill. See page 11 and also Note 2 on page 17 for further information on the accounting for the Gulf of Mexico oil spill.

Analysis of underlying RC profit before interest and tax

 

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
   

Underlying RC profit before interest and tax*

    
  494        29     

Upstream

     (718     1,098   
  1,867        1,513     

Downstream

     3,326        4,025   
  510        246     

Rosneft

     312        693   
  (401     (376  

Other businesses and corporate

     (554     (691
  (39     (121  

Consolidation adjustment – UPII

     (81     (168

 

 

   

 

 

      

 

 

   

 

 

 
  2,431        1,291     

Underlying RC profit before interest and tax

     2,285        4,957   
  (356     (337  

Finance costs and net finance expense relating to pensions and other post-retirement benefits

     (654     (705
  (722     (205  

Taxation on an underlying RC basis

     (325     (273
  (40     (29  

Non-controlling interests

     (54     (89

 

 

   

 

 

      

 

 

   

 

 

 
  1,313        720     

Underlying RC profit attributable to BP shareholders

     1,252        3,890   

 

 

   

 

 

      

 

 

   

 

 

 

Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 3 for the group and on pages 6-11 for the segments.

 

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Table of Contents

Upstream

 

 

Second
quarter
2015

     Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
  11,036         8,176     

Sales and other operating revenues(a)

     15,607        22,666   

 

 

    

 

 

      

 

 

   

 

 

 
  225         (24  

Profit (loss) before interest and tax

     (1,260     615   
  3         (85  

Inventory holding (gains) losses*

     (54     (15

 

 

    

 

 

      

 

 

   

 

 

 
  228         (109  

RC profit (loss) before interest and tax

     (1,314     600   
  266         138     

Net (favourable) unfavourable impact of non-operating items* and fair value accounting effects*

     596        498   

 

 

    

 

 

      

 

 

   

 

 

 
  494         29     

Underlying RC profit (loss) before interest and tax*(b)

     (718     1,098   

 

 

    

 

 

      

 

 

   

 

 

 

 

(a) Includes sales to other segments.
(b) See page 7 for a reconciliation to segment RC profit before interest and tax by region.

Financial results

Sales and other operating revenues for the second quarter and half year were $8 billion and $16 billion respectively, compared with $11 billion and $23 billion for the corresponding periods in 2015. For the second quarter, revenues were lower mainly due to lower realizations and lower gas marketing and trading revenues. For the half year, the reduction was mainly due to lower realizations and lower gas marketing and trading revenues, partially offset by higher volumes.

The replacement cost loss before interest and tax for the second quarter and half year was $109 million and $1,314 million respectively, compared with a profit of $228 million and $600 million for the same periods in 2015. The second quarter and half year included a net non-operating gain of $7 million and a charge of $348 million respectively, compared with a net non-operating charge of $236 million and $478 million for the same periods a year ago. Fair value accounting effects in the second quarter and half year had an unfavourable impact of $145 million and $248 million respectively, compared with an unfavourable impact of $30 million and $20 million in the same periods of 2015.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost result before interest and tax for the second quarter and half year was a profit of $29 million and a loss of $718 million respectively, compared with a profit of $494 million and $1,098 million for the same periods in 2015. The result for the second quarter and half year reflected lower liquids and gas realizations partly offset by lower costs reflecting the benefits of simplification and efficiency activities, lower rig cancellation costs, lower exploration write-offs, and lower depreciation, depletion and amortization expense.

Production

Production for the quarter was 2,090mboe/d, 1.0% lower than the second quarter of 2015. Underlying production* for the quarter increased by 1.5% mainly due to lower seasonal turnaround activity. For the first half, production was 2,259mboe/d, 2.3% higher than in the same period of 2015. First-half underlying production was broadly flat compared to first half 2015.

Key events

On 16 May BP announced it has doubled its interest in the Culzean development in the UK Central North Sea to 32%, following its acquisition of an additional interest from JX Nippon.

On 24 May BP and the State Oil Company of the Republic of Azerbaijan signed a memorandum of understanding to jointly explore potential prospects in Block D230 in the North Absheron basin in the Azerbaijan sector of the Caspian Sea.

On 25 May BP announced the start-up of a major water injection project at its Thunder Horse platform in the US Gulf of Mexico. The project will increase recovery of oil and natural gas from one of the field’s three main reservoirs.

On 9 June BP announced a gas discovery from the Baltim SW-1 exploration well in the Baltim South Development lease (BP 50% and Eni 50%, operator) in the East Nile Delta.

On 10 June BP and Det norske oljeselskap announced the creation of Aker BP ASA, an independent oil and gas company. Under the terms of the proposed transaction, the BP Norge and Det norske businesses will combine and be renamed Aker BP ASA which will be independently operated and listed on the Oslo Stock Exchange. Aker BP will be owned by current Det norske shareholder Aker (40%), other Det norske shareholders (30%) and BP (30%).

On 17 June BP and Rosneft signed final binding agreements, subject to regulatory approval, to create a new joint venture, Yermak Neftegaz LLC (Rosneft 51% and BP 49%). The joint venture will conduct onshore exploration within two Areas of Mutual Interest (AMIs) in the West Siberian and Yenisey-Khatanga basins in the Russian Federation, which cover a combined area of about 260,000 square kilometres.

On 20 June BP announced that together with the Egyptian Natural Gas Holding Company (EGAS), it has sanctioned development of the Atoll Phase One project, an early production scheme that will bring gas to the Egyptian domestic market, due to start in the first half of 2018. BP has a 100% interest in the concession.

In July BP, on behalf of Tangguh production-sharing agreement* (PSA) partners, announced the final investment decision has been approved for the development of the Tangguh expansion project in the Papua Barat province of Indonesia. The project will add a third LNG process train (Train 3), two offshore platforms, 13 new production wells, an expanded LNG loading facility, and supporting infrastructure.

This builds on the progress announced in our first-quarter results, which comprised the following: BP acquired interests in exploration licences in the Flemish Pass Basin offshore of Newfoundland, Canada; BP was awarded acreage in Norway at Skarv with partners Statoil, PGNiG and E.ON; BP and Oman Oil signed a heads of agreement with the government of the Sultanate of Oman, in relation to block 61; In Salah Gas, a Sonatrach, BP and Statoil joint venture, started up its Southern Fields project in Algeria; an exploration discovery was announced on the Nooros East prospect in Egypt, by the operator Eni who has tied it back for production; BP signed a framework agreement with Kuwait Petroleum Corporation to enhance

 

6


Table of Contents

Upstream

 

 

recovery of existing oil and gas resources and explore possible other joint opportunities; BP and China National Petroleum Corporation signed a PSA for shale gas exploration, development and production in China; BP completed evaluation of the Kepler 3 discovery in the Gulf of Mexico with the aim to start production later this year; the Point Thomson project in Alaska, US, began production.

Outlook

Looking ahead, we expect third-quarter reported production to be lower than the second quarter due to seasonal turnaround and maintenance activities and the impact of the plant outage at the Enterprise Pascagoula gas processing plant in the Gulf of Mexico.

 

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 40.

 

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
   

Underlying RC profit (loss) before interest and tax

    
  (66     (305  

US

     (972     (611
  560        334     

Non-US

     254        1,709   

 

 

   

 

 

      

 

 

   

 

 

 
  494        29           (718     1,098   

 

 

   

 

 

      

 

 

   

 

 

 
   

Non-operating items

    
  (135     (57  

US

     (220     (203
  (101     64     

Non-US

     (128     (275

 

 

   

 

 

      

 

 

   

 

 

 
  (236     7           (348     (478

 

 

   

 

 

      

 

 

   

 

 

 
   

Fair value accounting effects

    
  (55     (57  

US

     (90     (58
  25        (88  

Non-US

     (158     38   

 

 

   

 

 

      

 

 

   

 

 

 
  (30     (145        (248     (20

 

 

   

 

 

      

 

 

   

 

 

 
   

RC profit (loss) before interest and tax

    
  (256     (419  

US

     (1,282     (872
  484        310     

Non-US

     (32     1,472   

 

 

   

 

 

      

 

 

   

 

 

 
  228        (109        (1,314     600   

 

 

   

 

 

      

 

 

   

 

 

 
   

Exploration expense

    
  194        48     

US

     160        272   
  708        302     

Non-US(a)

     444        802   

 

 

   

 

 

      

 

 

   

 

 

 
  902        350           604        1,074   

 

 

   

 

 

      

 

 

   

 

 

 
  806        260     

Of which: Exploration expenditure written off(a)

     421        898   

 

 

   

 

 

      

 

 

   

 

 

 
   

Production (net of royalties)(b)

    
   

Liquids* (mb/d)

    
  334        401     

US

     402        362   
  147        117     

Europe

     122        130   
  631        584     

Rest of World

     731        692   
 

 

 

      

 

 

   

 

 

 
  1,111        1,102           1,255        1,184   

 

 

   

 

 

      

 

 

   

 

 

 
  169        176     

Of which equity-accounted entities

     173        170   

 

 

   

 

 

      

 

 

   

 

 

 
   

Natural gas (mmcf/d)

    
  1,477        1,666     

US

     1,634        1,497   
  281        238     

Europe

     263        273   
  4,046        3,829     

Rest of World

     3,924        4,176   

 

 

   

 

 

      

 

 

   

 

 

 
  5,805        5,733           5,822        5,945   

 

 

   

 

 

      

 

 

   

 

 

 
  460        497     

Of which equity-accounted entities

     482        450   

 

 

   

 

 

      

 

 

   

 

 

 
   

Total hydrocarbons* (mboe/d)

    
  588        688     

US

     684        621   
  196        158     

Europe

     168        177   
  1,328        1,244     

Rest of World

     1,408        1,412   

 

 

   

 

 

      

 

 

   

 

 

 
  2,112        2,090           2,259        2,209   

 

 

   

 

 

      

 

 

   

 

 

 
  249        262     

Of which equity-accounted entities

     256        247   

 

 

   

 

 

      

 

 

   

 

 

 
   

Average realizations*(c)

    
  56.69        44.99     

Total liquids(d) ($/bbl)

     34.63        51.49   
  3.80        2.66     

Natural gas ($/mcf)

     2.75        4.12   
  40.04        30.63     

Total hydrocarbons ($/boe)

     26.24        38.47   

 

(a) Second quarter and first half 2015 include a $432-million write-off in Libya.
(b) Includes BP’s share of production of equity-accounted entities in the Upstream segment.
(c) Realizations are based on sales by consolidated subsidiaries only – this excludes equity-accounted entities.
(d) Includes condensate, natural gas liquids and bitumen.

Because of rounding, some totals may not agree exactly with the sum of their component parts.

 

7


Table of Contents

Downstream

 

 

Second     Second          First     First  
quarter     quarter          half     half  

2015

    2016     $ million    2016     2015  
  56,737        42,809     

Sales and other operating revenues(a)

     77,361        106,185   

 

 

   

 

 

      

 

 

   

 

 

 
  2,234        2,463     

Profit (loss) before interest and tax

     4,246        5,017   
  (606     (1,058  

Inventory holding (gains) losses*

     (961     (1,306

 

 

   

 

 

      

 

 

   

 

 

 
  1,628        1,405     

RC profit before interest and tax

     3,285        3,711   
  239        108     

Net (favourable) unfavourable impact of non-operating items* and fair value accounting effects*

     41        314   

 

 

   

 

 

      

 

 

   

 

 

 
  1,867        1,513     

Underlying RC profit before interest and tax*(b)

     3,326        4,025   

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Includes sales to other segments.
(b) See page 9 for a reconciliation to segment RC profit before interest and tax by region and by business.

Financial results

Sales and other operating revenues for the second quarter and half year were $43 billion and $77 billion respectively, compared with $57 billion and $106 billion for the corresponding periods in 2015. The reduction in the second quarter and half year was mainly due to lower oil prices, partially offset by higher sales volumes.

The replacement cost profit before interest and tax for the second quarter and first half was $1,405 million and $3,285 million respectively, compared with $1,628 million and $3,711 million for the same periods in 2015.

The 2016 results include a net non-operating charge of $37 million for the second quarter and a net non-operating gain of $249 million for the half year, compared with a net non-operating charge of $122 million and $85 million for the same periods in 2015 (see pages 9 and 32 for further information on non-operating items). Fair value accounting effects had unfavourable impacts of $71 million for the second quarter and $290 million for the half year, compared with unfavourable impacts of $117 million and $229 million in the same periods of 2015.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the second quarter and half year was $1,513 million and $3,326 million respectively, compared with $1,867 million and $4,025 million for the same periods in 2015.

Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 9.

Fuels business

The fuels business reported an underlying replacement cost profit before interest and tax of $1,011 million for the second quarter and $2,327 million for the half year, compared with $1,394 million and $3,190 million for the same periods in 2015. The results for the quarter and half year reflect a significantly weaker refining environment, partially offset by lower costs from simplification and efficiency programmes, increased fuels marketing performance and strong refining operations. The half-year result was also impacted by a lower contribution from supply and trading, particularly in the first quarter.

During the first quarter of 2016 we completed the divestment of several non-strategic midstream assets in the US and Europe.

Lubricants business

The lubricants business reported an underlying replacement cost profit before interest and tax of $412 million for the quarter and $796 million for the half year, compared with $397 million and $742 million for the same periods in 2015. The quarter and half-year results reflect continued strong performance in growth markets and premium brands and lower costs from simplification and efficiency programmes. These factors contributed to a growth of more than 10% in the half-year underlying replacement cost profit before interest and tax, which was partially offset by adverse foreign exchange impacts.

During the second quarter of 2016 we sold approximately 11.5% from our 71% shareholding in Castrol India Limited.

Petrochemicals business

The petrochemicals business reported an underlying replacement cost profit before interest and tax of $90 million for the second quarter and $203 million for the half year, compared with $76 million and $93 million for the same periods in 2015. The result for the half year reflects stronger operations and margin optimization in a petrochemicals environment similar to the same period in 2015.

During the first quarter of 2016 we completed the sale of our Decatur petrochemicals complex in Alabama, US.

Outlook

In the third quarter we expect turnaround activity to remain high, at a similar level to the second quarter, and that industry refining margins will continue to be under significant pressure.

 

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 40.

 

 

8


Table of Contents

Downstream

 

 

Second     Second          First     First  
quarter     quarter          half     half  

2015

    2016     $ million    2016     2015  
   

Underlying RC profit before interest and tax - by region

    
  576        386     

US

     926        1,237   
  1,291        1,127     

Non-US

     2,400        2,788   

 

 

   

 

 

      

 

 

   

 

 

 
  1,867        1,513           3,326        4,025   

 

 

   

 

 

      

 

 

   

 

 

 
   

Non-operating items

    
  63        17     

US

     130        59   
  (185     (54  

Non-US

     119        (144

 

 

   

 

 

      

 

 

   

 

 

 
  (122     (37        249        (85

 

 

   

 

 

      

 

 

   

 

 

 
   

Fair value accounting effects

    
  (48     (78  

US

     (165     (175
  (69     7     

Non-US

     (125     (54

 

 

   

 

 

      

 

 

   

 

 

 
  (117     (71        (290     (229

 

 

   

 

 

      

 

 

   

 

 

 
   

RC profit before interest and tax

    
  591        325     

US

     891        1,121   
  1,037        1,080     

Non-US

     2,394        2,590   

 

 

   

 

 

      

 

 

   

 

 

 
  1,628        1,405           3,285        3,711   

 

 

   

 

 

      

 

 

   

 

 

 
   

Underlying RC profit before interest and tax - by business(a)(b)

    
  1,394        1,011     

Fuels

     2,327        3,190   
  397        412     

Lubricants

     796        742   
  76        90     

Petrochemicals

     203        93   

 

 

   

 

 

      

 

 

   

 

 

 
  1,867        1,513           3,326        4,025   

 

 

   

 

 

      

 

 

   

 

 

 
   

Non-operating items and fair value accounting effects(c)

    
  (152     (93  

Fuels

     (38     (212
  (87     (3  

Lubricants

     (4     (101
  —          (12  

Petrochemicals

     1        (1

 

 

   

 

 

      

 

 

   

 

 

 
  (239     (108        (41     (314

 

 

   

 

 

      

 

 

   

 

 

 
   

RC profit before interest and tax(a)(b)

    
  1,242        918     

Fuels

     2,289        2,978   
  310        409     

Lubricants

     792        641   
  76        78     

Petrochemicals

     204        92   

 

 

   

 

 

      

 

 

   

 

 

 
  1,628        1,405           3,285        3,711   

 

 

   

 

 

      

 

 

   

 

 

 
  19.4        13.8     

BP average refining marker margin (RMM)* ($/bbl)

     12.2        17.3   

 

 

   

 

 

      

 

 

   

 

 

 
   

Refinery throughputs (mb/d)

    
  622        668     

US

     683        623   
  810        805     

Europe

     806        807   
  224        231     

Rest of World

     235        274   

 

 

   

 

 

      

 

 

   

 

 

 
  1,656        1,704           1,724        1,704   

 

 

   

 

 

      

 

 

   

 

 

 
  94.0        95.7     

Refining availability* (%)

     95.3        94.1   

 

 

   

 

 

      

 

 

   

 

 

 
   

Marketing sales of refined products (mb/d)

    
  1,145        1,115     

US

     1,093        1,122   
  1,160        1,170     

Europe

     1,157        1,167   
  465        515     

Rest of World(d)

     502        479   

 

 

   

 

 

      

 

 

   

 

 

 
  2,770        2,800           2,752        2,768   
  2,753        2,875     

Trading/supply sales of refined products(d)

     2,843        2,706   

 

 

   

 

 

      

 

 

   

 

 

 
  5,523        5,675     

Total sales volumes of refined products

     5,595        5,474   

 

 

   

 

 

      

 

 

   

 

 

 
   

Petrochemicals production (kte)

    
  946        558     

US

     1,454        1,851   
  852        909     

Europe

     1,901        1,824   
  1,898        1,967     

Rest of World

     3,876        3,561   

 

 

   

 

 

      

 

 

   

 

 

 
  3,696        3,434           7,231        7,236   

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Segment-level overhead expenses are included in the fuels business result.
(b) BP’s share of income from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany is reported in the fuels business.
(c) For Downstream, fair value accounting effects arise solely in the fuels business.
(d) Comparative periods in 2015 include a minor reclassification between Marketing sales in Rest of World and Trading/supply sales of refined products.

 

9


Table of Contents

Rosneft

 

 

Second     Second          First     First  
quarter     quarter          half     half  

2015

   

2016(a)

    $ million   

2016(a)

   

2015

 
  534        291     

Profit before interest and tax(b)

     353        755   
  (24     (45  

Inventory holding (gains) losses*

     (41     (62

 

 

   

 

 

      

 

 

   

 

 

 
  510        246     

RC profit before interest and tax

     312        693   
  —          —       

Net charge (credit) for non-operating items*

     —          —     

 

 

   

 

 

      

 

 

   

 

 

 
  510        246     

Underlying RC profit before interest and tax*

     312        693   

 

 

   

 

 

      

 

 

   

 

 

 

Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the second quarter and half year was $246 million and $312 million respectively, compared with $510 million and $693 million for the same periods in 2015. There were no non-operating items in the second quarter and half year of either year.

Compared with the same period last year, the result for the second quarter was primarily affected by lower oil prices. For the half year, the result was primarily affected by lower oil prices, partially offset by favourable foreign exchange effects.

BP’s two nominees, Bob Dudley and Guillermo Quintero, were re-elected to Rosneft’s board by the annual general meeting (AGM) on 15 June. The AGM also adopted a resolution to pay dividends of 11.75 roubles per ordinary share. BP expects to receive a dividend in relation to the 2015 annual results of approximately $335 million, after the deduction of withholding tax and subject to fluctuations in foreign exchange.

 

Second
quarter
2015

     Second
quarter
2016(a)
          First
half
2016(a)
     First
half
2015
 
     

Production (net of royalties) (BP share)

     
  815         812      

Liquids* (mb/d)

     810         815   
  1,172         1,266      

Natural gas (mmcf/d)

     1,274         1,198   
  1,017         1,030      

Total hydrocarbons* (mboe/d)

     1,029         1,022   

 

(a) The operational and financial information of the Rosneft segment for the second quarter and first half of the year is based on preliminary operational and financial results of Rosneft for the six months ended 30 June 2016. Actual results may differ from these amounts.
(b) The Rosneft segment result includes equity-accounted earnings arising from BP’s 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BP’s purchase of its interest in Rosneft and the amortization of the deferred gain relating to the disposal of BP’s interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the second quarter and first half 2016, as shown in the table above, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own financial statements under IFRS. BP’s share of Rosneft’s profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date. BP’s share of Rosneft’s earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation.

 

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 40.

 

 

10


Table of Contents

Other businesses and corporate

 

 

Second     Second          First     First  
quarter     quarter          half     half  
2015     2016     $ million    2016     2015  
  512        422     

Sales and other operating revenues(a)

     818        940   

 

 

   

 

 

      

 

 

   

 

 

 
   

Profit (loss) before interest and tax

    
  (10,747     (5,106  

Gulf of Mexico oil spill

     (5,900     (11,070
  (455     (419  

Other

     (699     (763

 

 

   

 

 

      

 

 

   

 

 

 
  (11,202     (5,525  

Profit (loss) before interest and tax

     (6,599     (11,833
  —          —       

Inventory holding (gains) losses*

     —          —     

 

 

   

 

 

      

 

 

   

 

 

 
  (11,202     (5,525  

RC profit (loss) before interest and tax

     (6,599     (11,833
   

Net charge (credit) for non-operating items*

    
  10,747        5,106     

Gulf of Mexico oil spill

     5,900        11,070   
  54        43     

Other

     145        72   

 

 

   

 

 

      

 

 

   

 

 

 
  10,801        5,149     

Net charge (credit) for non-operating items

     6,045        11,142   

 

 

   

 

 

      

 

 

   

 

 

 
  (401     (376  

Underlying RC profit (loss) before interest and tax*

     (554     (691

 

 

   

 

 

      

 

 

   

 

 

 
   

Underlying RC profit (loss) before interest and tax

    
  (144     (109  

US

     (219     (206
  (257     (267  

Non-US

     (335     (485

 

 

   

 

 

      

 

 

   

 

 

 
  (401     (376        (554     (691

 

 

   

 

 

      

 

 

   

 

 

 
   

Non-operating items

    
  (10,757     (5,136  

US

     (5,984     (11,081
  (44     (13  

Non-US

     (61     (61

 

 

   

 

 

      

 

 

   

 

 

 
  (10,801     (5,149        (6,045     (11,142

 

 

   

 

 

      

 

 

   

 

 

 
   

RC profit (loss) before interest and tax

    
  (10,901     (5,245  

US

     (6,203     (11,287
  (301     (280  

Non-US

     (396     (546

 

 

   

 

 

      

 

 

   

 

 

 
  (11,202     (5,525        (6,599     (11,833

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Includes sales to other segments.

Other businesses and corporate comprises biofuels and wind businesses, shipping, treasury (which includes interest income on the group’s cash and cash equivalents), corporate activities including centralized functions, and the costs of the Gulf of Mexico oil spill.

Financial results

The replacement cost loss before interest and tax for the second quarter and half year was $5,525 million and $6,599 million respectively, compared with $11,202 million and $11,833 million for the same periods in 2015.

The second-quarter result included a net non-operating charge of $5,149 million, primarily relating to costs for the Gulf of Mexico oil spill, compared with a net charge of $10,801 million a year ago. Following significant progress in resolving outstanding claims, a reliable estimate has now been determined for all remaining material liabilities associated with the incident. The second-quarter charge reflects the recognition of additional provisions for these claims, including the cost of all remaining business economic loss claims under the 2012 Plaintiffs’ Steering Committee (PSC) settlement and the cost of resolving economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement. The second-quarter 2015 charge reflected a $9.8-billion charge associated with the settlement agreements signed in July 2015. For further information see Note 2 on page 17. For the half year, the net non-operating charge was $6,045 million, compared with a net non-operating charge of $11,142 million a year ago.

After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the second quarter and half year was $376 million and $554 million respectively, compared with $401 million and $691 million for the same periods in 2015. The half-year result reflects lower corporate costs and favourable foreign exchange impacts.

Gulf of Mexico oil spill

As previously disclosed, on 4 April 2016 the federal district court approved the Consent Decree between the United States, the Gulf states and BP which resolves all United States and Gulf states’ natural resource damages claims and Clean Water Act penalty claims, and certain other claims.

For further information see Note 2 on page 17 and Legal proceedings on page 38.

Biofuels

The net ethanol-equivalent production (which includes ethanol and sugar) for the second quarter was 283 million litres, compared with 247 million litres for the same period 2015.

Wind

Net wind generation capacity*(a) was 1,477MW at 30 June 2016 compared with 1,588MW at 30 June 2015. BP’s net share of wind generation for the second quarter and half year was 1,060GWh and 2,407GWh respectively, compared with 1,150GWh and 2,277GWh for the same periods in 2015.

 

(a) Capacity figures include 23MW in the Netherlands managed by our Downstream segment at 30 June 2016, and 32MW at 30 June 2015.

 

11


Table of Contents

Financial statements

 

Group income statement

 

Second     Second          First     First  
quarter     quarter          half     half  
2015     2016     $ million    2016     2015  
  62,051        46,442     

Sales and other operating revenues (Note 5)

     84,954        117,570   
  156        274     

Earnings from joint ventures – after interest and tax

     303        260   
  670        380     

Earnings from associates – after interest and tax

     522        1,032   
  195        101     

Interest and other income

     246        315   
  133        79     

Gains on sale of businesses and fixed assets

     417        271   

 

 

   

 

 

      

 

 

   

 

 

 
  63,205        47,276     

Total revenues and other income

     86,442        119,448   
  46,153        32,752     

Purchases

     59,355        85,412   
  17,185        10,446     

Production and manufacturing expenses(a)

     16,965        24,185   
  173        258     

Production and similar taxes (Note 6)

     272        535   
  3,765        3,637     

Depreciation, depletion and amortization

     7,367        7,601   
  286        52     

Impairment and losses on sale of businesses and fixed assets

     65        483   
  902        350     

Exploration expense

     604        1,074   
  2,989        2,697     

Distribution and administration expenses

     5,155        5,772   

 

 

   

 

 

      

 

 

   

 

 

 
  (8,248     (2,916  

Profit (loss) before interest and taxation

     (3,341     (5,614
  289        414     

Finance costs(a)

     808        570   
  75        46     

Net finance expense relating to pensions and other post-retirement benefits

     92        152   

 

 

   

 

 

      

 

 

   

 

 

 
  (8,612     (3,376  

Profit (loss) before taxation

     (4,241     (6,336
  (2,829     (1,986  

Taxation(a)

     (2,293     (3,204

 

 

   

 

 

      

 

 

   

 

 

 
  (5,783     (1,390  

Profit (loss) for the period

     (1,948     (3,132

 

 

   

 

 

      

 

 

   

 

 

 
   

Attributable to

    
  (5,823     (1,419  

BP shareholders

     (2,002     (3,221
  40        29     

Non-controlling interests

     54        89   

 

 

   

 

 

      

 

 

   

 

 

 
  (5,783     (1,390        (1,948     (3,132

 

 

   

 

 

      

 

 

   

 

 

 
   

Earnings per share (Note 7)

    
   

Profit (loss) for the period attributable to

    
   

BP shareholders

    
   

Per ordinary share (cents)

    
  (31.83     (7.60  

Basic

     (10.78     (17.62
  (31.83     (7.60  

Diluted

     (10.78     (17.62
   

Per ADS (dollars)

    
  (1.91     (0.46  

Basic

     (0.65     (1.06
  (1.91     (0.46  

Diluted

     (0.65     (1.06

 

(a) See Note 2 for information on the impact of the Gulf of Mexico oil spill on these income statement line items.

 

12


Table of Contents

Financial statements (continued)

 

 

Group statement of comprehensive income

 

Second     Second          First     First  
quarter     quarter          half     half  
2015     2016     $ million    2016     2015  
  (5,783     (1,390  

Profit (loss) for the period

     (1,948     (3,132

 

 

   

 

 

      

 

 

   

 

 

 
   

Other comprehensive income

    
   

Items that may be reclassified subsequently to profit or loss

    
  698        (35  

Currency translation differences

     839        (914
   

Exchange gains (losses) on translation of foreign operations reclassified to gain or loss on sale of

    
  16        —       

businesses and fixed assets

     6        16   
  1        —       

Available-for-sale investments

     —          1   
  128        (289  

Cash flow hedges marked to market

     (351     (84
  81        16     

Cash flow hedges reclassified to the income statement

     39        155   
  4        6     

Cash flow hedges reclassified to the balance sheet

     19        9   
  329        197     

Share of items relating to equity-accounted entities, net of tax

     487        249   
  (92     80     

Income tax relating to items that may be reclassified

     (6     32   

 

 

   

 

 

      

 

 

   

 

 

 
  1,165        (25        1,033        (536

 

 

   

 

 

      

 

 

   

 

 

 
   

Items that will not be reclassified to profit or loss

    
  2,688        (1,763  

Remeasurements of the net pension and other post-retirement benefit liability or asset

     (2,985     2,120   
  (754     592     

Income tax relating to items that will not be reclassified

     994        (596

 

 

   

 

 

      

 

 

   

 

 

 
  1,934        (1,171        (1,991     1,524   

 

 

   

 

 

      

 

 

   

 

 

 
  3,099        (1,196  

Other comprehensive income

     (958     988   

 

 

   

 

 

      

 

 

   

 

 

 
  (2,684     (2,586  

Total comprehensive income

     (2,906     (2,144

 

 

   

 

 

      

 

 

   

 

 

 
   

Attributable to

    
  (2,732     (2,604  

BP shareholders

     (2,955     (2,219
  48        18     

Non-controlling interests

     49        75   

 

 

   

 

 

      

 

 

   

 

 

 
  (2,684     (2,586        (2,906     (2,144

 

 

   

 

 

      

 

 

   

 

 

 

 

13


Table of Contents

Financial statements (continued)

 

 

Group statement of changes in equity

 

$ million    BP
shareholders’
equity
    Non-controlling
interests
    Total
equity
 

At 1 January 2016

     97,216        1,171        98,387   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     (2,955     49        (2,906

Dividends

     (2,268     (52     (2,320

Share-based payments, net of tax

     447        —          447   

Share of equity-accounted entities’ change in equity, net of tax

     65        —          65   

Transactions involving non-controlling interests

     221        214        435   
  

 

 

   

 

 

   

 

 

 

At 30 June 2016

     92,726        1,382        94,108   
  

 

 

   

 

 

   

 

 

 
$ million    BP
shareholders’
equity
    Non-controlling
interests
    Total
equity
 

At 1 January 2015

     111,441        1,201        112,642   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     (2,219     75        (2,144

Dividends

     (3,400     (42     (3,442

Share-based payments, net of tax

     300        —          300   

Share of equity-accounted entities’ change in equity, net of tax

     (3     —          (3

Transactions involving non-controlling interests

     —          (2     (2
  

 

 

   

 

 

   

 

 

 

At 30 June 2015

     106,119        1,232        107,351   
  

 

 

   

 

 

   

 

 

 

 

14


Table of Contents

Financial statements (continued)

 

 

Group balance sheet

 

     30 June      31 December  
$ million    2016      2015  

Non-current assets

     

Property, plant and equipment

     125,946         129,758   

Goodwill

     11,288         11,627   

Intangible assets

     18,444         18,660   

Investments in joint ventures

     8,324         8,412   

Investments in associates

     11,221         9,422   

Other investments

     1,002         1,002   
  

 

 

    

 

 

 

Fixed assets

     176,225         178,881   

Loans

     500         529   

Trade and other receivables

     2,193         2,216   

Derivative financial instruments

     5,286         4,409   

Prepayments

     1,020         1,003   

Deferred tax assets

     4,573         1,545   

Defined benefit pension plan surpluses

     774         2,647   
  

 

 

    

 

 

 
     190,571         191,230   
  

 

 

    

 

 

 

Current assets

     

Loans

     242         272   

Inventories

     16,398         14,142   

Trade and other receivables

     22,672         22,323   

Derivative financial instruments

     2,934         4,242   

Prepayments

     1,941         1,838   

Current tax receivable

     374         599   

Other investments

     107         219   

Cash and cash equivalents

     23,517         26,389   
  

 

 

    

 

 

 
     68,185         70,024   

Assets classified as held for sale (Note 3)

     4,380         578   
  

 

 

    

 

 

 
     72,565         70,602   
  

 

 

    

 

 

 

Total assets

     263,136         261,832   
  

 

 

    

 

 

 

Current liabilities

     

Trade and other payables

     36,561         31,949   

Derivative financial instruments

     2,139         3,239   

Accruals

     4,918         6,261   

Finance debt

     5,120         6,944   

Current tax payable

     1,310         1,080   

Provisions

     5,637         5,154   
  

 

 

    

 

 

 
     55,685         54,627   

Liabilities directly associated with assets classified as held for sale (Note 3)

     2,525         97   
  

 

 

    

 

 

 
     58,210         54,724   
  

 

 

    

 

 

 

Non-current liabilities

     

Other payables

     13,870         2,910   

Derivative financial instruments

     4,268         4,283   

Accruals

     502         890   

Finance debt

     50,607         46,224   

Deferred tax liabilities

     7,797         9,599   

Provisions

     23,693         35,960   

Defined benefit pension plan and other post-retirement benefit plan deficits

     10,081         8,855   
  

 

 

    

 

 

 
     110,818         108,721   
  

 

 

    

 

 

 

Total liabilities

     169,028         163,445   
  

 

 

    

 

 

 

Net assets

     94,108         98,387   
  

 

 

    

 

 

 

Equity

     

BP shareholders’ equity

     92,726         97,216   

Non-controlling interests

     1,382         1,171   
  

 

 

    

 

 

 

Total equity

     94,108         98,387   
  

 

 

    

 

 

 

 

15


Table of Contents

Financial statements (continued)

 

 

Condensed group cash flow statement

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
    Operating activities     
  (8,612     (3,376  

Profit (loss) before taxation

     (4,241     (6,336
   

Adjustments to reconcile profit (loss) before taxation to net cash provided by operating activities

    
  4,571        3,897     

Depreciation, depletion and amortization and exploration expenditure written off

     7,788        8,499   
  153        (27  

Impairment and (gain) loss on sale of businesses and fixed assets

     (352     212   
  (654     (485  

Earnings from equity-accounted entities, less dividends received

     (509     (930
  13        113     

Net charge for interest and other finance expense less net interest paid

     281        142   
  255        204     

Share-based payments

     463        17   
  (30     (56  

Net operating charge for pensions and other post-retirement benefits, less contributions and benefit payments for unfunded plans

     (24     (87
  10,700        4,565     

Net charge for provisions, less payments

     5,300        11,088   
  492        (863  

Movements in inventories and other current and non-current assets and liabilities

     (2,590     (3,366
  (602     (89  

Income taxes paid

     (361     (1,095

 

 

   

 

 

      

 

 

   

 

 

 
  6,286        3,883     

Net cash provided by operating activities

     5,755        8,144   

 

 

   

 

 

      

 

 

   

 

 

 
   

Investing activities

    
  (4,529     (4,283  

Capital expenditure

     (8,664     (9,165
  (54     (8  

Investment in joint ventures

     (12     (123
  (218     (196  

Investment in associates

     (289     (305
  308        153     

Proceeds from disposal of fixed assets

     391        961   
  224        291     

Proceeds from disposal of businesses, net of cash disposed

     1,202        1,311   
  45        6     

Proceeds from loan repayments

     52        48   

 

 

   

 

 

      

 

 

   

 

 

 
  (4,224     (4,037  

Net cash used in investing activities

     (7,320     (7,273

 

 

   

 

 

      

 

 

   

 

 

 
   

Financing activities

    
  83        2,710     

Proceeds from long-term financing

     5,448        7,871   
  (542     (1,318  

Repayments of long-term financing

     (4,877     (2,849
  (13     300     

Net increase (decrease) in short-term debt

     188        712   
  —          368     

Net increase (decrease) in non-controlling interests

     438        —     
  (1,691     (1,169  

Dividends paid                     – BP shareholders

     (2,268     (3,400
  (30     (43  

         –  non-controlling interests

     (52     (42

 

 

   

 

 

      

 

 

   

 

 

 
  (2,193     848     

Net cash provided by (used in) financing activities

     (1,123     2,292   

 

 

   

 

 

      

 

 

   

 

 

 
  286        (226  

Currency translation differences relating to cash and cash equivalents

     (184     (337

 

 

   

 

 

      

 

 

   

 

 

 
  155        468     

Increase (decrease) in cash and cash equivalents

     (2,872     2,826   

 

 

   

 

 

      

 

 

   

 

 

 
  32,434        23,049     

Cash and cash equivalents at beginning of period

     26,389        29,763   
  32,589        23,517     

Cash and cash equivalents at end of period

     23,517        32,589   

 

 

   

 

 

      

 

 

   

 

 

 

 

16


Table of Contents

Financial statements (continued)

 

 

Notes

 

1. Basis of preparation

The interim financial information included in this report has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’.

The results for the interim periods are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2015 included in the BP Annual Report and Form 20-F 2015.

The directors have made an assessment of the group’s ability to continue as a going concern and consider it appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.

BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. 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 2016, which do not differ significantly from those used in BP Annual Report and Form 20-F 2015.

In BP Annual Report and Form 20-F 2015 we disclosed a significant estimate or judgement relating to provisions arising from the Gulf of Mexico oil spill in 2010. At that time, no reliable estimate could be made of any business economic loss (BEL) claims under the Plaintiffs’ Steering Committee (PSC) settlement that were not yet processed or processed but not yet paid, except where an eligibility notice had been issued and was not subject to appeal by BP within the Deepwater Horizon Court Supervised Settlement Program claims facility (DHCSSP). A reliable estimate could also not be made in relation to securities-related litigation and other litigation, including economic loss and property damage claims from parties excluded from and/or who opted out of the PSC settlement. No amounts were provided for these items and they were disclosed as contingent liabilities.

As a result of developments during the second quarter of 2016 sufficient information now exists in order to make a reliable estimate of the amounts that BP will pay relating to all outstanding BEL claims under the DHCSSP, securities class actions and economic loss and property damage claims from parties who were excluded from and/or opted out of the PSC settlement. Liabilities have therefore been recognized in the financial statements for these items. See Note 2 for further information.

 

2. Gulf of Mexico oil spill

(a) Overview

The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2015 – Financial statements – Note 2 and Legal proceedings on page 237 and on page 38 of this report.

Following significant progress in resolving outstanding claims arising from the 2010 Deepwater Horizon accident and oil spill, a reliable estimate has now been determined for all remaining material liabilities arising from the incident, and an additional charge has been recorded this quarter.

The group income statement includes a pre-tax charge of $5,229 million for the second quarter and $6,146 million for the first half 2016 in relation to the Gulf of Mexico oil spill. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $61,597 million. It is now possible to reliably estimate the cost of resolving all outstanding business economic loss claims under the Plaintiffs’ Steering Committee (PSC) settlement and the cost of resolving economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement. The second-quarter increase in provisions of $4,935 million is primarily attributable to the recognition of additional provisions for these claims. The remainder of the income statement charge for the second quarter relates predominantly to the cost of the securities claims settlement with the certified class of post-explosion ADS purchasers, which was agreed in June 2016 and recognized in Other payables, and finance costs relating to the unwinding of discounting effects. The charge for the half year also includes charges recorded in the first quarter for increases in provisions for certain business economic loss claims under the PSC settlement and the settlement of certain civil claims outside of the PSC settlement and additional finance costs.

 

17


Table of Contents

Financial statements (continued)

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.

 

Second

quarter

2015

     Second
quarter
2016
     $ million    First
half
2016
     First
half
2015
 
      Income statement      
  10,747         5,106       Production and manufacturing expenses      5,900         11,070   

 

 

    

 

 

       

 

 

    

 

 

 
  (10,747)         (5,106    Profit (loss) before interest and taxation      (5,900      (11,070
  8         123       Finance costs      246         17   

 

 

    

 

 

       

 

 

    

 

 

 
  (10,755)         (5,229    Profit (loss) before taxation      (6,146      (11,087
  3,601         2,533       Taxation      2,784         3,713   

 

 

    

 

 

       

 

 

    

 

 

 
  (7,154)         (2,696    Profit (loss) for the period      (3,362      (7,374

Further to recording a charge for all remaining material liabilities relating to the Gulf of Mexico oil spill, the overall tax position was reviewed and the tax credit for the quarter reflects tax on the charge taken and other positive tax adjustments.

 

     30 June      31 December  

$ million

   2016      2015  

Balance sheet

     

Current assets

     

Trade and other receivables

     359         686   

Prepayments

     5         —     

Current liabilities

     

Trade and other payables

     (2,813      (693

Accruals

     —           (40

Provisions

     (3,427      (3,076
  

 

 

    

 

 

 

Net current assets (liabilities)

     (5,876      (3,123
  

 

 

    

 

 

 

Non-current assets

     

Deferred tax assets

     7,771         —     

Non-current liabilities

     

Other payables

     (13,268      (2,057

Accruals

     —           (186

Provisions

     (3,063      (13,431

Deferred tax

     —           5,200   
  

 

 

    

 

 

 

Net non-current assets (liabilities)

     (8,560      (10,474
  

 

 

    

 

 

 

Net assets (liabilities)

     (14,436      (13,597
  

 

 

    

 

 

 

 

18


Table of Contents

Financial statements (continued)

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

 

Second
quarter
2015

     Second
quarter
2016
     $ million    First
half
2016
     First
half
2015
 
      Cash flow statement - Operating activities      
  (10,755)         (5,229    Profit (loss) before taxation      (6,146      (11,087
      Adjustments to reconcile profit (loss) before      
      taxation to net cash provided by      
      operating activities      
  8         123       Net charge for interest and other finance expense, less net interest paid      246         17   
  10,607         4,466       Net charge for provisions, less payments      5,223         10,834   
  34         (971    Movements in inventories and other current and non-current assets and liabilities      (2,059      (561

 

 

    

 

 

       

 

 

    

 

 

 
  (106)         (1,611    Pre-tax cash flows      (2,736      (797

 

 

    

 

 

       

 

 

    

 

 

 

Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $1,398 million and an outflow of $2,523 million in the second quarter and first half of 2016 respectively. For the same periods in 2015, the amounts were an outflow of $106 million and an outflow of $797 million respectively.

Trust fund

During the first half of 2016, the remaining cash in the Deepwater Horizon Oil Spill Trust (the Trust) was exhausted and BP commenced paying claims and other costs previously funded from the Trust. For certain costs, these payments are made by BP into a qualified settlement fund, the fund then distributes the amounts to the claimant; $860 million was paid into a qualified settlement fund during the second quarter ($1,399 million during the first half).

 

19


Table of Contents

Financial statements (continued)

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

(b) Provisions and contingent liabilities

Provisions

BP had recorded provisions relating to the Gulf of Mexico oil spill in relation to environmental expenditure, litigation and claims, and Clean Water Act penalties. Movements in the second quarter, all of which relate to litigation and claims provisions, are presented in the table below.

 

$ million    Total  

At 1 April 2016

     2,869   

Net increase (decrease) in provision

     4,935   

Utilization

   – paid by BP      (469
   – paid by settlement fund or Trust      (845
     

 

 

 

At 30 June 2016

     6,490   
     

 

 

 

Of which

   – current      3,427   
   – non-current      3,063   
     

 

 

 

Movements in each class of provision during the first half are presented in the table below.

 

$ million         Environmental     Litigation
and
claims
    Clean
Water Act
penalties
    Total  

At 1 January 2016

     5,919        6,459        4,129        16,507   

Net increase (decrease) in provision

     —          5,715        —          5,715   

Unwinding of discount

     52        25        38        115   

Reclassified to Other payables

     (5,970     (3,741     (4,167     (13,878

Utilization

   – paid by BP      (1     (491     —          (492
   – paid by settlement fund or         
      Trust      —          (1,477     —          (1,477
     

 

 

   

 

 

   

 

 

   

 

 

 

At 30 June 2016

     —          6,490        —          6,490   
     

 

 

   

 

 

   

 

 

   

 

 

 

Environmental

The environmental provisions relating to natural resource damage costs and the early restoration framework agreement were reclassified to Other payables during the first quarter following approval by the Court in April 2016 of the Consent Decree between the United States, the Gulf states and BP. Remaining amounts related to early restoration were paid during the second quarter.

Litigation and claims

The litigation and claims provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources. Claims administration costs and legal costs have also been provided for.

At 31 December 2015, the litigation and claims provision included amounts provided under the state claims settlement agreement with the Gulf states in relation to state claims that had not yet been paid. These amounts were reclassified to Other payables during the first quarter and are payable over 18 years; $0.9 billion was paid in July 2016.

Litigation and claims – PSC settlement

BP has provided for its best estimate of the cost associated with the 2012 PSC settlement.

Prior to the second quarter of 2016, no reliable estimate could be made of any business economic loss claims not yet processed or processed but not yet paid, except where an eligibility notice had been issued and was not subject to appeal by BP within the DHCSSP.

 

20


Table of Contents

Financial statements (continued)

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

The DHCSSP continues to process business economic loss claims and, for certain lower-value claims, simplified processing procedures have been implemented by the DHCSSP. In recent quarters the pace of processing claims has accelerated and, by the end of the second quarter, over three quarters of the total claims had been determined. Furthermore, the number of claims that had been processed using specialized frameworks for particular industry groups, that include the application of the revised policy for matching revenue and expenses, had increased significantly. Additional insight has also been obtained into the population of undetermined claims, including the industry groupings they fall within, which enhances BP’s understanding of the claims yet to be determined. The combination of these factors provides sufficient information to reliably estimate the liability for the remaining business economic loss claims. Accordingly, a provision has been established for these items as at 30 June 2016. Amounts to settle these claims are expected to be paid by 2019.

The provision has been determined based upon an expected value of the remaining business economic loss claims. Claims are determined by the DHCSSP in accordance with the PSC settlement agreement. The amounts ultimately payable may differ from the amount provided.

Litigation and claims – Other claims

During the second quarter, significant progress was also made in resolving economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement. On 14 July 2016 the federal district court issued an order, details of which are described in Legal proceedings on page 38. Following this court order, the vast majority of these claims have now been either resolved or dismissed. Therefore, an estimate of the cost of the remaining claims, most of which is expected to be paid by the end of 2016, is also recognized in provisions.

Clean Water Act penalties

The provision previously recognized for penalties under Section 311 of the Clean Water Act, as determined by the civil settlement with the United States, was reclassified to Other payables during the first quarter following approval by the Court of the Consent Decree. The amount is payable in instalments over 15 years, commencing April 2017. The unpaid balance of this penalty accrues interest at a fixed rate.

Further information on provisions is provided in BP Annual Report and Form 20-F 2015 – Financial statements – Note 2.

Contingent liabilities

Any further outstanding Deepwater Horizon related claims are not expected to have a material impact on the group’s financial performance.

 

3. Non-current assets held for sale

On 15 January 2016 BP and Rosneft announced that they had signed definitive agreements to dissolve the German refining joint operation Ruhr Oel GmbH (ROG). The restructuring, which is expected to be completed in 2016, will result in Rosneft taking ownership of ROG’s interests in the Bayernoil, MiRO Karlsruhe and PCK Schwedt refineries. In exchange, BP will take sole ownership of the Gelsenkirchen refinery and the solvent production facility DHC Solvent Chemie. Assets and associated liabilities relating to BP’s share of ROG’s interests in the Bayernoil, MiRO Karlsruhe and PCK Schwedt refineries are classified as held for sale in the group balance sheet.

On 10 June 2016 BP and Det norske oljeselskap announced the creation of Aker BP ASA, an independent oil and gas company. Under the terms of the proposed transaction, which is expected to be completed in 2016, the BP Norge AS and Det norske businesses will combine and be renamed Aker BP ASA. The transaction will result in Aker BP ASA being owned by current Det norske shareholder Aker (40%), other Det norske shareholders (30%) and BP (30%). Assets and associated liabilities relating to BP Norge AS are classified as held for sale in the group balance sheet at 30 June 2016.

 

21


Table of Contents

Financial statements (continued)

 

Notes

 

4. Analysis of replacement cost profit (loss) before interest and tax and reconciliation to profit (loss) before taxation

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
  228        (109   Upstream      (1,314     600   
  1,628        1,405      Downstream      3,285        3,711   
  510        246      Rosneft      312        693   
  (11,202     (5,525   Other businesses and corporate(a)      (6,599     (11,833

 

 

   

 

 

      

 

 

   

 

 

 
  (8,836     (3,983        (4,316     (6,829
  (39     (121   Consolidation adjustment – UPII*      (81     (168

 

 

   

 

 

      

 

 

   

 

 

 
  (8,875     (4,104   RC profit (loss) before interest and tax*      (4,397     (6,997
    Inventory holding gains (losses)*     
  (3     85     

Upstream

     54        15   
  606        1,058     

Downstream

     961        1,306   
  24        45     

Rosneft (net of tax)

     41        62   

 

 

   

 

 

      

 

 

   

 

 

 
  (8,248     (2,916   Profit (loss) before interest and tax      (3,341     (5,614
  289        414      Finance costs      808        570   
  75        46      Net finance expense relating to pensions and other post-retirement benefits      92        152   

 

 

   

 

 

      

 

 

   

 

 

 
  (8,612     (3,376   Profit (loss) before taxation      (4,241     (6,336

 

 

   

 

 

      

 

 

   

 

 

 
    RC profit (loss) before interest and tax     
  (10,641     (5,394   US      (6,650     (11,138
  1,766        1,290      Non-US      2,253        4,141   

 

 

   

 

 

      

 

 

   

 

 

 
  (8,875     (4,104        (4,397     (6,997

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.

 

5. Sales and other operating revenues

 

Second
quarter
2015

     Second
quarter
2016
     $ million    First
half
2016
     First
half
2015
 
      By segment      
  11,036         8,176       Upstream      15,607         22,666   
  56,737         42,809       Downstream      77,361         106,185   
  512         422       Other businesses and corporate      818         940   

 

 

    

 

 

       

 

 

    

 

 

 
  68,285         51,407            93,786         129,791   

 

 

    

 

 

       

 

 

    

 

 

 
      Less: sales and other operating revenues between segments      
  5,590         4,301       Upstream      7,934         11,153   
  402         475       Downstream      593         578   
  242         189       Other businesses and corporate      305         490   

 

 

    

 

 

       

 

 

    

 

 

 
  6,234         4,965            8,832         12,221   

 

 

    

 

 

       

 

 

    

 

 

 
      Third party sales and other operating revenues      
  5,446         3,875       Upstream      7,673         11,513   
  56,335         42,334       Downstream      76,768         105,607   
  270         233       Other businesses and corporate      513         450   

 

 

    

 

 

       

 

 

    

 

 

 
  62,051         46,442       Total sales and other operating revenues      84,954         117,570   

 

 

    

 

 

       

 

 

    

 

 

 
      By geographical area      
  21,824         17,701       US      31,277         40,665   
  44,535         32,482       Non-US      59,628         84,546   

 

 

    

 

 

       

 

 

    

 

 

 
  66,359         50,183            90,905         125,211   
  4,308         3,741       Less: sales and other operating revenues between areas      5,951         7,641   

 

 

    

 

 

       

 

 

    

 

 

 
  62,051         46,442            84,954         117,570   

 

 

    

 

 

       

 

 

    

 

 

 

 

22


Table of Contents

Financial statements (continued)

 

Notes

 

6. Production and similar taxes

 

Second
quarter
2015

     Second
quarter
2016
     $ million    First
half
2016
     First
half
2015
 
  33         67       US      85         67   
  140         191       Non-US      187         468   

 

 

    

 

 

       

 

 

    

 

 

 
  173         258            272         535   

 

 

    

 

 

       

 

 

    

 

 

 

 

7. Earnings per share and shares in issue

Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.

For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method.

 

Second
quarter

2015

    Second
quarter

2016
    $ million    First
half
2016
    First
half
2015
 
    Results for the period     
  (5,823)        (1,419   Profit (loss) for the period attributable to BP shareholders      (2,002     (3,221
  1        1      Less: preference dividend      1        1   

 

 

   

 

 

      

 

 

   

 

 

 
  (5,824     (1,420   Profit (loss) attributable to BP ordinary shareholders      (2,003     (3,222

 

 

   

 

 

      

 

 

   

 

 

 
    Number of shares (thousand)(a)(b)     
        
  18,299,877        18,685,199      Basic weighted average number of shares outstanding      18,577,135        18,287,176   
  3,049,979        3,114,200      ADS equivalent      3,096,189        3,047,862   

 

 

   

 

 

      

 

 

   

 

 

 
  18,299,877        18,685,199     

Weighted average number of shares outstanding used to calculate diluted earnings per share

     18,577,135        18,287,176   
  3,049,979        3,114,200      ADS equivalent      3,096,189        3,047,862   

 

 

   

 

 

      

 

 

   

 

 

 
  18,318,924        18,777,156      Shares in issue at period-end      18,777,156        18,318,924   
  3,053,154        3,129,526      ADS equivalent      3,129,526        3,053,154   

 

 

   

 

 

      

 

 

   

 

 

 

 

(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.

 

8. Dividends

Dividends payable

BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 16 September 2016 to shareholders and American Depositary Share (ADS) holders on the register on 5 August 2016. The corresponding amount in sterling is due to be announced on 6 September 2016, calculated based on the average of the market exchange rates for the four dealing days commencing on 31 August 2016. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the second-quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.

 

23


Table of Contents

Financial statements (continued)

 

Notes

 

8. Dividends (continued)

 

Second
quarter
2015

     Second
quarter

2016
          First
half
2016
     First
half
2015
 
      Dividends paid per ordinary share      
  10.000         10.000       cents      20.000         20.000   
  6.530         6.917       pence      13.929         13.200   
  60.00         60.00       Dividends paid per ADS (cents)      120.00         120.00   
      Scrip dividends      
  18.9         134.4       Number of shares issued (millions)      288.8         34.6   
  134         695       Value of shares issued ($ million)      1,434         243   

9. Net debt*

Net debt ratio*

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First half
2015
 
  57,104        55,727      Gross debt      55,727        57,104   
  315        (1,279   Fair value (asset) liability of hedges related to finance debt(a)      (1,279     315   

 

 

   

 

 

      

 

 

   

 

 

 
  57,419        54,448           54,448        57,419   
  32,589        23,517      Less: cash and cash equivalents      23,517        32,589   

 

 

   

 

 

      

 

 

   

 

 

 
  24,830        30,931      Net debt      30,931        24,830   

 

 

   

 

 

      

 

 

   

 

 

 
  107,351        94,108      Equity      94,108        107,351   
  18.8     24.7   Net debt ratio      24.7     18.8

 

 

   

 

 

      

 

 

   

 

 

 

Analysis of changes in net debt

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
    Opening balance     
  57,731        54,012      Finance debt      53,168        52,854   
  (174     (967   Fair value (asset) liability of hedges related to finance debt(a)      379        (445
  32,434        23,049      Less: cash and cash equivalents      26,389        29,763   

 

 

   

 

 

      

 

 

   

 

 

 
  25,123        29,996      Opening net debt      27,158        22,646   

 

 

   

 

 

      

 

 

   

 

 

 
    Closing balance     
  57,104        55,727      Finance debt      55,727        57,104   
  315        (1,279   Fair value (asset) liability of hedges related to finance debt(a)      (1,279     315   
  32,589        23,517      Less: cash and cash equivalents      23,517        32,589   

 

 

   

 

 

      

 

 

   

 

 

 
  24,830        30,931      Closing net debt      30,931        24,830   

 

 

   

 

 

      

 

 

   

 

 

 
  293        (935   Decrease (increase) in net debt      (3,773     (2,184

 

 

   

 

 

      

 

 

   

 

 

 
  (131     694      Movement in cash and cash equivalents (excluding exchange adjustments)      (2,688     3,163   
  472        (1,692   Net cash outflow (inflow) from financing (excluding share capital and dividends)      (759     (5,734
  (1     36      Other movements      395        10   

 

 

   

 

 

      

 

 

   

 

 

 
  340        (962   Movement in net debt before exchange effects      (3,052     (2,561
  (47     27      Exchange adjustments      (721     377   

 

 

   

 

 

      

 

 

   

 

 

 
  293        (935   Decrease (increase) in net debt      (3,773     (2,184

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $1,440 million (second quarter 2015 liability of $1,357 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.

 

24


Table of Contents

Financial statements (continued)

 

Notes

 

10. Inventory valuation

A provision of $689 million was held at 30 June 2016 ($590 million at 30 June 2015) to write inventories down to their net realizable value. The net movement charged to the income statement during the second quarter 2016 was $12 million (second quarter 2015 was a credit of $210 million).

 

11. Statutory accounts

The financial information shown in this publication, which was approved by the Board of Directors on 25 July 2016, is unaudited and does not constitute statutory financial statements.

 

12. Condensed consolidating information on certain US subsidiaries

BP p.l.c. fully and unconditionally guarantees the payment obligations of its 100%-owned subsidiary BP Exploration (Alaska) Inc. under the BP Prudhoe Bay Royalty Trust. The following financial information for BP p.l.c., BP Exploration (Alaska) Inc. and all other subsidiaries on a condensed consolidating basis is intended to provide investors with meaningful and comparable financial information about BP p.l.c. and its subsidiary issuers of registered securities and is provided pursuant to Rule 3-10 of Regulation S-X in lieu of the separate financial statements of each subsidiary issuer of public debt securities. Non-current assets for BP p.l.c. includes investments in subsidiaries recorded under the equity method for the purposes of the condensed consolidating financial information. Equity-accounted income of subsidiaries is the group’s share of profit related to such investments. The eliminations and reclassifications column includes the necessary amounts to eliminate the intercompany balances and transactions between BP p.l.c., BP Exploration (Alaska) Inc. and other subsidiaries. The financial information presented in the following tables for BP Exploration (Alaska) Inc. incorporates subsidiaries of BP Exploration (Alaska) Inc. using the equity method of accounting and excludes the BP group’s midstream operations in Alaska that are reported through different legal entities and that are included within the ‘other subsidiaries’ column in these tables. BP p.l.c. also fully and unconditionally guarantees securities issued by BP Capital Markets p.l.c. and BP Capital Markets America Inc. These companies are 100%-owned finance subsidiaries of BP p.l.c.

 

25


Table of Contents

Financial statements (continued)

 

Notes

 

12. Condensed consolidating information on certain US subsidiaries (continued)

 

     Issuer     Guarantor                    

Income statement

$ million

   BP
Exploration
(Alaska) Inc.
    BP p.l.c.     Other
subsidiaries
    Eliminations
and
reclassifications
    BP
group
 

First half 2016

          

Sales and other operating revenues

     1,215        —          84,950        (1,211     84,954   

Earnings from joint ventures – after interest and tax

     —          —          303        —          303   

Earnings from associates – after interest and tax

     —          —          522        —          522   

Equity-accounted income of subsidiaries – after interest and tax

     —          (1,725     —          1,725        —     

Interest and other income

     40        142        348        (284     246   

Gains on sale of businesses and fixed assets

     —          —          417        —          417   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues and other income

     1,255        (1,583     86,540        230        86,442   

Purchases

     324        —          60,242        (1,211     59,355   

Production and manufacturing expenses

     659        —          16,306        —          16,965   

Production and similar taxes

     67        —          205        —          272   

Depreciation, depletion and amortization

     310        —          7,057        —          7,367   

Impairment and losses on sale of businesses and fixed assets

     —          —          65        —          65   

Exploration expense

     —          —          604        —          604   

Distribution and administration expenses

     (6     459        4,725        (23     5,155   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before interest and taxation

     (99     (2,042     (2,664     1,464        (3,341

Finance costs

     42        69        958        (261     808   

Net finance (income) expense relating to pensions and other post-retirement benefits

     —          (43     135        —          92   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before taxation

     (141     (2,068     (3,757     1,725        (4,241

Taxation

     (70     (66     (2,157     —          (2,293
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

     (71     (2,002     (1,600     1,725        (1,948
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to

          

BP shareholders

     (71     (2,002     (1,654     1,725        (2,002

Non-controlling interests

     —          —          54        —          54   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (71     (2,002     (1,600     1,725        (1,948
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Issuer     Guarantor                    

Statement of comprehensive income

$ million

   BP
Exploration
(Alaska) Inc.
    BP p.l.c.     Other
subsidiaries
    Eliminations
and
reclassifications
    BP
group
 

First half 2016

          

Profit (loss) for the period

     (71     (2,002     (1,600     1,725        (1,948

Other comprehensive income

     —          (1,102     144        —          (958

Equity-accounted other comprehensive income of subsidiaries

     —          149        —          (149     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     (71     (2,955     (1,456     1,576        (2,906
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to

          

BP shareholders

     (71     (2,955     (1,505     1,576        (2,955

Non-controlling interests

     —          —          49        —          49   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (71     (2,955     (1,456     1,576        (2,906
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

Financial statements (continued)

 

Notes

 

12. Condensed consolidating information on certain US subsidiaries (continued)

 

     Issuer      Guarantor                    

Income statement

$ million

   BP
Exploration
(Alaska) Inc.
     BP p.l.c.     Other
subsidiaries
    Eliminations
and
reclassifications
    BP group  

First half 2015

           

Sales and other operating revenues

     1,918         —          114,832        (1,908     114,842   

Earnings from joint ventures – after interest and tax

     —           —          260        —          260   

Earnings from associates – after interest and tax

     —           —          1,032        —          1,032   

Equity-accounted income of subsidiaries – after interest and tax

     —           (2,645     —          2,645        —     

Interest and other income

     11         59        345        (100     315   

Gains on sale of businesses and fixed assets

     —           —          271        —          271   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues and other income

     1,929         (2,586     116,740        637        116,720   

Purchases

     800         —          83,792        (1,908     82,684   

Production and manufacturing expenses

     670         —          23,515        —          24,185   

Production and similar taxes

     28         —          507        —          535   

Depreciation, depletion and amortization

     219         —          7,382        —          7,601   

Impairment and losses on sale of businesses and fixed assets

     12         —          471        —          483   

Exploration expense

     —           —          1,074        —          1,074   

Distribution and administration expenses

     28         632        5,137        (25     5,772   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before interest and taxation

     172         (3,218     (5,138     2,570        (5,614

Finance costs

     16         21        608        (75     570   

Net finance (income) expense relating to pensions and other post-retirement benefits

     —           10        142        —          152   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before taxation

     156         (3,249     (5,888     2,645        (6,336

Taxation

     28         (28     (3,204     —          (3,204
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

     128         (3,221     (2,684     2,645        (3,132
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to

           

BP shareholders

     128         (3,221     (2,773     2,645        (3,221

Non-controlling interests

     —           —          89        —          89   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     128         (3,221     (2,684     2,645        (3,132
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     Issuer      Guarantor                    

Statement of comprehensive income

$ million

   BP
Exploration
(Alaska) Inc.
     BP p.l.c.     Other
subsidiaries
    Eliminations
and
reclassifications
    BP group  

First half 2015

           

Profit (loss) for the period

     128         (3,221     (2,684     2,645        (3,132

Other comprehensive income

     —           1,216        (228     —          988   

Equity-accounted other comprehensive income of subsidiaries

     —           (214     —          214        —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     128         (2,219     (2,912     2,859        (2,144
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to

           

BP shareholders

     128         (2,219     (2,987     2,859        (2,219

Non-controlling interests

     —           —          75        —          75   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     128         (2,219     (2,912     2,859        (2,144
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

27


Table of Contents

Notes

 

 

12. Condensed consolidating information on certain US subsidiaries (continued)

 

     Issuer      Guarantor                      

Balance sheet

$ million

   BP
Exploration
(Alaska) Inc.
     BP p.l.c.      Other
subsidiaries
     Eliminations
And
reclassifications
    BP group  

At 30 June 2016

             

Non-current assets

             

Property, plant and equipment

     8,287         —           117,659         —          125,946   

Goodwill

     —           —           11,288         —          11,288   

Intangible assets

     565         —           17,879         —          18,444   

Investments in joint ventures

     —           —           8,324         —          8,324   

Investments in associates

     —           2         11,219         —          11,221   

Other investments

     —           —           1,002         —          1,002   

Subsidiaries – equity-accounted basis

     —           154,018         —           (154,018     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Fixed assets

     8,852         154,020         167,371         (154,018     176,225   

Loans

     3         —           34,921         (34,424     500   

Trade and other receivables

     —           —           2,193         —          2,193   

Derivative financial instruments

     —           —           5,286         —          5,286   

Prepayments

     2         —           1,018         —          1,020   

Deferred tax assets

     —           —           4,573         —          4,573   

Defined benefit pension plan surpluses

     —           701         73         —          774   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     8,857         154,721         215,435         (188,442     190,571   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Current assets

             

Loans

     —           —           242         —          242   

Inventories

     363         —           16,035         —          16,398   

Trade and other receivables

     9,322         1,158         24,324         (12,132     22,672   

Derivative financial instruments

     —           —           2,934         —          2,934   

Prepayments

     70         —           1,871         —          1,941   

Current tax receivable

     —           —           374         —          374   

Other investments

     —           —           107         —          107   

Cash and cash equivalents

     —           —           23,517         —          23,517   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     9,755         1,158         69,404         (12,132     68,185   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Assets classified as held for sale

     —           —           4,380         —          4,380   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     9,755         1,158         73,784         (12,132     72,565   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     18,612         155,879         289,219         (200,574     263,136   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Current liabilities

             

Trade and other payables

     847         1,599         46,247         (12,132     36,561   

Derivative financial instruments

     —           —           2,139         —          2,139   

Accruals

     117         120         4,681         —          4,918   

Finance debt

     —           —           5,120         —          5,120   

Current tax payable

     35         —           1,275         —          1,310   

Provisions

     1         —           5,636         —          5,637   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     1,000         1,719         65,098         (12,132     55,685   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities directly associated with assets classified as held for sale

     —           —           2,525         —          2,525   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     1,000         1,719         67,623         (12,132     58,210   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Non-current liabilities

             

Other payables

     10         34,412         13,872         (34,424     13,870   

Derivative financial instruments

     —           —           4,268         —          4,268   

Accruals

     —           29         473         —          502   

Finance debt

     —           —           50,607         —          50,607   

Deferred tax liabilities

     1,225         238         6,334         —          7,797   

Provisions

     2,242         —           21,451         —          23,693   

Defined benefit pension plan and other post-retirement benefit plan deficits

     —           214         9,867         —          10,081   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     3,477         34,893         106,872         (34,424     110,818   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     4,477         36,612         174,495         (46,556     169,028   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net assets

     14,135         119,267         114,724         (154,018     94,108   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Equity

             

BP shareholders’ equity

     14,135         119,267         113,342         (154,018     92,726   

Non-controlling interests

     —           —           1,382         —          1,382   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     14,135         119,267         114,724         (154,018     94,108   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

28


Table of Contents

Notes

 

 

12. Condensed consolidating information on certain US subsidiaries (continued)

 

     Issuer     Guarantor                      

Balance sheet

$ million

   BP Exploration
(Alaska) Inc.(a)
    BP p.l.c.      Other
subsidiaries(a)
     Eliminations
and
reclassifications
    BP
group
 

At 31 December 2015

            

Non-current assets

            

Property, plant and equipment

     8,345        —           121,413         —          129,758   

Goodwill

     —          —           11,627         —          11,627   

Intangible assets

     539        —           18,121         —          18,660   

Investments in joint ventures

     —          —           8,412         —          8,412   

Investments in associates

     —          2         9,420         —          9,422   

Other investments

     —          —           1,002         —          1,002   

Subsidiaries – equity-accounted basis

     —          128,234         —           (128,234     —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Fixed assets

     8,884        128,236         169,995         (128,234     178,881   

Loans

     3        —           7,245         (6,719     529   

Trade and other receivables

     —          —           2,216         —          2,216   

Derivative financial instruments

     —          —           4,409         —          4,409   

Prepayments

     4        —           999         —          1,003   

Deferred tax assets

     —          —           1,545         —          1,545   

Defined benefit pension plan surpluses

     —          2,516         131         —          2,647   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     8,891        130,752         186,540         (134,953     191,230   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Current assets

            

Loans

     —          —           272         —          272   

Inventories

     246        —           13,896         —          14,142   

Trade and other receivables

     9,718        1,062         22,393         (10,850     22,323   

Derivative financial instruments

     —          —           4,242         —          4,242   

Prepayments

     7        —           1,831         —          1,838   

Current tax receivable

     —          —           599         —          599   

Other investments

     —          —           219         —          219   

Cash and cash equivalents

     —          —           26,389         —          26,389   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     9,971        1,062         69,841         (10,850     70,024   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Assets classified as held for sale

     —          —           578         —          578   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     9,971        1,062         70,419         (10,850     70,602   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     18,862        131,814         256,959         (145,803     261,832   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Current liabilities

            

Trade and other payables

     961        127         41,711         (10,850     31,949   

Derivative financial instruments

     —          —           3,239         —          3,239   

Accruals

     116        81         6,064         —          6,261   

Finance debt

     —          —           6,944         —          6,944   

Current tax payable

     (21     4         1,097         —          1,080   

Provisions

     1        —           5,153         —          5,154   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     1,057        212         64,208         (10,850     54,627   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities directly associated with assets classified as held for sale

     —          —           97         —          97   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     1,057        212         64,305         (10,850     54,724   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Non-current liabilities

            

Other payables

     8        6,708         2,913         (6,719     2,910   

Derivative financial instruments

     —          —           4,283         —          4,283   

Accruals

     —          33         857         —          890   

Finance debt

     —          —           46,224         —          46,224   

Deferred tax liabilities

     1,255        877         7,467         —          9,599   

Provisions

     2,326        —           33,634         —          35,960   

Defined benefit pension plan and other post-retirement benefit plan deficits

     —          227         8,628         —          8,855   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     3,589        7,845         104,006         (6,719     108,721   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     4,646        8,057         168,311         (17,569     163,445   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net assets

     14,216        123,757         88,648         (128,234     98,387   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Equity

            

BP shareholders’ equity

     14,216        123,757         87,477         (128,234     97,216   

Non-controlling interests

     —          —           1,171         —          1,171   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     14,216        123,757         88,648         (128,234     98,387   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(a) Minor amendments have been made to previously reported amounts.

 

29


Table of Contents

Notes

 

 

12. Condensed consolidating information on certain US subsidiaries (continued)

 

     Issuer     Guarantor              

Cash flow statement

$ million

   BP
Exploration
(Alaska) Inc.
    BP p.l.c.     Other
subsidiaries
    BP
group
 

First half 2016

        

Net cash provided by operating activities

     453        2,268        3,034        5,755   

Net cash used in investing activities

     (453     —          (6,867     (7,320

Net cash provided by (used in) financing activities

     —          (2,268     1,145        (1,123

Currency translation differences relating to cash and cash equivalents

     —          —          (184     (184
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     —          —          (2,872     (2,872

Cash and cash equivalents at beginning of period

     —          —          26,389        26,389   

Cash and cash equivalents at end of period

     —          —          23,517        23,517   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Issuer     Guarantor              

Cash flow statement

$ million

   BP
Exploration
(Alaska) Inc.
    BP p.l.c.     Other
subsidiaries
    BP
group
 

First half 2015

        

Net cash provided by operating activities

     455        3,373        4,316        8,144   

Net cash used in investing activities

     (455     —          (6,818     (7,273

Net cash provided by (used in) financing activities

     —          (3,400     5,692        2,292   

Currency translation differences relating to cash and cash equivalents

     —          —          (337     (337
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     —          (27     2,853        2,826   

Cash and cash equivalents at beginning of period

     —          31        29,732        29,763   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

     —          4        32,585        32,589   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

30


Table of Contents

Additional information

 

 

Capital expenditure on an accruals basis*(a)

 

Second
quarter
2015

     Second
quarter
2016
     $ million    First
half
2016
     First
half
2015
 
      Capital expenditure on an accruals basis      
  4,492         3,919       Organic capital expenditure*      7,863         8,929   
  159         276       Inorganic capital expenditure*      276         159   

 

 

    

 

 

       

 

 

    

 

 

 
  4,651         4,195            8,139         9,088   

 

 

    

 

 

       

 

 

    

 

 

 

 

Second
quarter
2015

     Second
quarter
2016
     $ million    First
half
2016
     First
half
2015
 
      Organic capital expenditure by segment      
      Upstream      
  991         754       US      1,814         2,098   
  2,962         2,699       Non-US      5,282         5,858   

 

 

    

 

 

       

 

 

    

 

 

 
  3,953         3,453            7,096         7,956   

 

 

    

 

 

       

 

 

    

 

 

 
      Downstream      
  190         191       US      301         335   
  290         237       Non-US      392         489   

 

 

    

 

 

       

 

 

    

 

 

 
  480         428            693         824   

 

 

    

 

 

       

 

 

    

 

 

 
      Other businesses and corporate      
  6         12       US      13         22   
  53         26       Non-US      61         127   

 

 

    

 

 

       

 

 

    

 

 

 
  59         38            74         149   

 

 

    

 

 

       

 

 

    

 

 

 
  4,492         3,919            7,863         8,929   

 

 

    

 

 

       

 

 

    

 

 

 
      Organic capital expenditure by geographical area      
  1,187         957       US      2,128         2,455   
  3,305         2,962       Non-US      5,735         6,474   

 

 

    

 

 

       

 

 

    

 

 

 
  4,492         3,919            7,863         8,929   

 

 

    

 

 

       

 

 

    

 

 

 

 

(a) The definitions of Capital expenditure on an accruals basis and Inorganic capital expenditure have been revised to exclude asset exchanges as they are non-cash transactions. Previously reported amounts have been amended with no significant impact on the comparative periods shown. Previously reported amounts for Organic capital expenditure are unchanged.

Reconciliation of additions to non-current assets to capital expenditure on an accruals basis

 

Second
quarter
2015

    Second
quarter
2016
     $ million    First
half
2016
    First
half
2015
 
  5,297        3,993       Additions to non-current assets(a)      7,928        9,566   
  9        12       Additions to other investments      18        11   
  1        —         Element of business combinations not related to non-current assets      —          17   
  (649     190       (Additions to) reductions in decommissioning asset      244        (471
  (7     —         Asset exchanges      (51     (35

 

 

   

 

 

       

 

 

   

 

 

 
  4,651        4,195       Capital expenditure on an accruals basis      8,139        9,088   

 

 

   

 

 

       

 

 

   

 

 

 

 

(a) Includes additions to property, plant and equipment; goodwill; intangible assets; investments in joint ventures; and investments in associates.

 

31


Table of Contents

Additional information (continued)

 

 

Non-operating items*

 

Second
quarter
2015

    Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
    Upstream     
  (194     —        Impairment and gain (loss) on sale of businesses and fixed assets      4        (307
  —          —        Environmental and other provisions      —          11   
  (67     (3   Restructuring, integration and rationalization costs      (266     (248
  21        28      Fair value gain (loss) on embedded derivatives      41        62   
  4        (18   Other(a)      (127     4   

 

 

   

 

 

      

 

 

   

 

 

 
  (236     7           (348     (478

 

 

   

 

 

      

 

 

   

 

 

 
    Downstream     
  68        23      Impairment and gain (loss) on sale of businesses and fixed assets      344        134   
  (7     (3   Environmental and other provisions      (3     (7
  (182     (54   Restructuring, integration and rationalization costs      (89     (210
  —          —        Fair value gain (loss) on embedded derivatives      —          —     
  (1     (3   Other      (3     (2

 

 

   

 

 

      

 

 

   

 

 

 
  (122     (37        249        (85

 

 

   

 

 

      

 

 

   

 

 

 
    Rosneft     
    Impairment and gain (loss) on sale of businesses and     
  —          —        fixed assets      —          —     
  —          —        Environmental and other provisions      —          —     
  —          —        Restructuring, integration and rationalization costs      —          —     
  —          —        Fair value gain (loss) on embedded derivatives      —          —     
  —          —        Other      —          —     

 

 

   

 

 

      

 

 

   

 

 

 
  —          —             —          —     

 

 

   

 

 

      

 

 

   

 

 

 
    Other businesses and corporate     
  (27     4      Impairment and gain (loss) on sale of businesses and fixed assets      4        (39
  (4     (35   Environmental and other provisions      (35     (4
  (23     (11   Restructuring, integration and rationalization costs      (59     (29
  —          —        Fair value gain (loss) on embedded derivatives      —          —     
  (10,747     (5,106   Gulf of Mexico oil spill(b)      (5,900     (11,070
  —          (1   Other      (55     —     

 

 

   

 

 

      

 

 

   

 

 

 
  (10,801     (5,149        (6,045     (11,142

 

 

   

 

 

      

 

 

   

 

 

 
  (11,159     (5,179   Total before interest and taxation      (6,144     (11,705
  (8     (123   Finance costs(b)      (246     (17

 

 

   

 

 

      

 

 

   

 

 

 
  (11,167     (5,302   Total before taxation      (6,390     (11,722
  3,681        2,483      Taxation credit (charge)      2,793        3,823   

 

 

   

 

 

      

 

 

   

 

 

 
  (7,486     (2,819   Total after taxation for period      (3,597     (7,899

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) First half 2016 principally relates to BP’s share of impairment losses recognized by equity-accounted entities.
(b) See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.

 

32


Table of Contents

Additional information (continued)

 

 

Non-GAAP information on fair value accounting effects

 

Second
quarter
2015

     Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
     Favourable (unfavourable) impact relative to management’s measure of performance     
  (30)         (145   Upstream      (248     (20
  (117)         (71   Downstream      (290     (229

 

 

    

 

 

      

 

 

   

 

 

 
  (147)         (216        (538     (249
  54         68      Taxation credit (charge)      151        95   

 

 

    

 

 

      

 

 

   

 

 

 
  (93)         (148        (387     (154

 

 

    

 

 

      

 

 

   

 

 

 

BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in income because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness testing requirements. Therefore, measurement differences in relation to recognition of gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices consistent with the contract maturity.

BP enters into commodity contracts to meet certain business requirements, such as the purchase of crude for a refinery or the sale of BP’s gas production. Under IFRS these contracts are treated as derivatives and are required to be fair valued when they are managed as part of a larger portfolio of similar transactions. Gains and losses arising are recognized in the income statement from the time the derivative commodity contract is entered into.

IFRS requires that inventory held for trading is recorded at its fair value using period-end spot prices whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices resulting in measurement differences.

BP enters into contracts for pipelines and storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments, which are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.

The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management’s internal measure of performance. Under management’s internal measure of performance the inventory and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period, the fair values of certain derivative instruments used to risk manage LNG and oil and gas contracts are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management’s estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to management’s internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.

 

Second
quarter
2015

     Second
quarter
2016
    $ million    First
half
2016
    First
half
2015
 
     Upstream     
     Replacement cost profit (loss) before interest and tax     
  258         36      adjusted for fair value accounting effects      (1,066     620   
  (30)         (145   Impact of fair value accounting effects      (248     (20

 

 

    

 

 

      

 

 

   

 

 

 
  228         (109   Replacement cost profit before interest and tax      (1,314     600   

 

 

    

 

 

      

 

 

   

 

 

 
     Downstream     
     Replacement cost profit before interest and tax     
  1,745         1,476      adjusted for fair value accounting effects      3,575        3,940   
  (117)         (71   Impact of fair value accounting effects      (290     (229

 

 

    

 

 

      

 

 

   

 

 

 
  1,628         1,405      Replacement cost profit before interest and tax      3,285        3,711   

 

 

    

 

 

      

 

 

   

 

 

 
     Total group     
     Profit (loss) before interest and tax adjusted for fair     
  (8,101)         (2,700   value accounting effects      (2,803     (5,365
  (147)         (216   Impact of fair value accounting effects      (538     (249

 

 

    

 

 

      

 

 

   

 

 

 
  (8,248)         (2,916   Profit (loss) before interest and tax      (3,341     (5,614

 

 

    

 

 

      

 

 

   

 

 

 

 

33


Table of Contents

Additional information (continued)

 

 

Realizations and marker prices

 

Second
quarter
2015

     Second
quarter
2016
          First
half
2016
     First
half
2015
 
      Average realizations(a)      
      Liquids* ($/bbl)      
  50.97         34.89       US      31.82         48.53   
  57.42         43.62       Europe      37.46         55.25   
  60.78         55.10       Rest of World      35.97         52.63   
  56.69         44.99       BP Average      34.63         51.49   

 

 

    

 

 

       

 

 

    

 

 

 
      Natural gas ($/mcf)      
  2.15         1.53       US      1.55         2.27   
  9.16         4.64       Europe      4.46         8.27   
  4.05         3.10       Rest of World      3.21         4.57   
  3.80         2.66       BP Average      2.75         4.12   

 

 

    

 

 

       

 

 

    

 

 

 
      Total hydrocarbons* ($/boe)      
  34.93         24.00       US      22.38         34.04   
  56.35         39.25       Europe      34.28         53.28   
  39.93         33.90       Rest of World      27.34         38.58   
  40.04         30.63       BP Average      26.24         38.47   

 

 

    

 

 

       

 

 

    

 

 

 
      Average oil marker prices ($/bbl)      
  61.88         45.59       Brent      39.81         57.84   
  57.85         45.53       West Texas Intermediate      39.64         53.25   
  49.56         33.78       Western Canadian Select      28.09         43.12   
  62.65         45.74       Alaska North Slope      40.00         57.39   
  59.57         42.08       Mars      36.25         54.44   
  61.21         43.37       Urals (NWE – cif)      37.56         56.83   

 

 

    

 

 

       

 

 

    

 

 

 
      Average natural gas marker prices      
  2.65         1.95       Henry Hub gas price ($/mmBtu)(b)      2.02         2.82   
  44.63         31.37       UK Gas – National Balancing Point (p/therm)      30.90         46.29   

 

 

    

 

 

       

 

 

    

 

 

 

 

(a) Based on sales of consolidated subsidiaries only – this excludes equity-accounted entities.
(b) Henry Hub First of Month Index.

Exchange rates

 

Second
quarter
2015

     Second
quarter
2016
          First
half
2016
     First
half
2015
 
  1.53         1.43       $/£ average rate for the period      1.43         1.52   
  1.57         1.34       $/£ period-end rate      1.34         1.57   
  1.11         1.13       $/€ average rate for the period      1.12         1.12   
  1.11         1.11       $/€ period-end rate      1.11         1.11   
  52.68         65.86       Rouble/$ average rate for the period      70.35         57.94   
  55.42         63.64       Rouble/$ period-end rate      63.64         55.42   

 

34


Table of Contents

Glossary

 

Capital expenditure on an accruals basis is a non-GAAP measure. It comprises additions to property, plant and equipment, intangible assets and investments in joint ventures and associates, and reflects consideration payable in business combinations. It does not include additions arising from asset exchanges and certain other non-cash items.

Consolidation adjustment – UPII is unrealized profit in inventory arising on inter-segment transactions.

Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information and a reconciliation to GAAP information is provided on page 33.

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 non-GAAP measure. It comprises consideration in business combinations and certain other significant investments made by the group. Inorganic capital expenditure is reported on an accruals basis.

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.

Joint arrangement is an arrangement in which two or more parties have joint control.

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 debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents. The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders’ equity. All components of equity are included in the denominator of the calculation. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The derivatives are reported on the balance sheet within the headings ‘Derivative financial instruments’.

Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP’s share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.

Non-operating 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 32.

Organic capital expenditure is a non-GAAP measure. It comprises capital expenditure on an accruals basis less inorganic capital expenditure. An analysis of organic capital expenditure by segment and region is shown on page 31.

Production-sharing agreement (PSA) is an arrangement through which an oil company bears the risks and costs of exploration, development and production. In return, if exploration is successful, the oil company receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of the production remaining after such cost recovery.

 

35


Table of Contents

Glossary (continued)

 

 

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, 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.

Replacement cost (RC) profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss. RC profit or loss is the measure of profit or loss that is required to be disclosed for each operating segment under International Financial Reporting Standards (IFRS). RC profit or loss for the group is not a recognized GAAP measure. Management believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP’s management believes it is helpful to disclose this measure.

Underlying production is production after adjusting for divestments and entitlement impacts in our production-sharing agreements.

Underlying RC profit or loss is RC profit or loss after adjusting for non-operating items and fair value accounting effects. Underlying RC profit or loss and fair value accounting effects are not recognized GAAP measures. See pages 32 and 33 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact.

BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by management to evaluate BP’s operating performance and to make financial, strategic and operating decisions and because it may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss for the year attributable to BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and taxation.

 

36


Table of Contents

Principal risks and uncertainties

 

The principal risks and uncertainties affecting BP are described in the Risk factors section of BP Annual Report and Form 20-F 2015 (pages 53-54) and are summarized below. Other than the removal of the Gulf of Mexico oil spill Risk factor (following the announcement on 14 July 2016 of the non-operating charge to be taken associated with the oil spill), there are no material changes in those risk factors for the remaining six months of the financial year.

The risks summarized below, separately or in combination, could have a material adverse effect on the implementation of our strategy, our business, financial performance, results of operations, cash flows, liquidity, prospects, shareholder value and returns and reputation.

Strategic and commercial risks

 

    Prices and markets – our financial performance is subject to fluctuating prices of oil, gas, refined products, technological change, exchange rate fluctuations, and the general macroeconomic outlook.

 

    Access, renewal and reserves progression – our inability to access, renew and progress upstream resources in a timely manner could adversely affect our long-term replacement of reserves.

 

    Major project* delivery – failure to invest in the best opportunities or deliver major projects successfully could adversely affect our financial performance.

 

    Geopolitical – we are exposed to a range of political developments and consequent changes to the operating and regulatory environment.

 

    Liquidity, financial capacity and financial, including credit, exposure – failure to work within our financial framework could impact our ability to operate and result in financial loss.

 

    Joint arrangements* and contractors – we may have limited control over the standards, operations and compliance of our partners, contractors and sub-contractors.

 

    Digital infrastructure and cybersecurity – breach of our digital security or failure of our digital infrastructure could damage our operations and our reputation.

 

    Climate change and carbon pricing – public policies could increase costs and reduce future revenue and strategic growth opportunities.

 

    Competition – inability to remain efficient, innovate and retain an appropriately skilled workforce could negatively impact delivery of our strategy in a highly competitive market.

 

    Crisis management and business continuity – potential disruption to our business and operations could occur if we do not address an incident effectively.

 

    Insurance – our insurance strategy could expose the group to material uninsured losses.

Safety and operational risks

 

    Process safety, personal safety, and environmental risks – we are exposed to a wide range of health, safety, security and environmental risks that could result in regulatory action, legal liability, increased costs, damage to our reputation and potentially denial of our licence to operate.

 

    Drilling and production – challenging operational environments and other uncertainties can impact drilling and production activities.

 

    Security – hostile acts against our staff and activities could cause harm to people and disrupt our operations.

 

    Product quality – supplying customers with off-specification products could damage our reputation, lead to regulatory action and legal liability, and potentially impact our financial performance.

Compliance and control risks

 

    US government settlements – failure to comply with the terms of our settlements with legal and regulatory bodies in the US announced in November 2012 in respect of certain charges related to the Gulf of Mexico oil spill may expose us to further penalties or liabilities or could result in suspension or debarment of certain BP entities.

 

    Regulation – changes in the regulatory and legislative environment could increase the cost of compliance, affect our provisions and limit our access to new exploration opportunities.

 

    Ethical misconduct and non-compliance – ethical misconduct or breaches of applicable laws by our businesses or our employees could be damaging to our reputation, and could result in litigation, regulatory action and penalties.

 

    Treasury and trading activities – ineffective oversight of treasury and trading activities could lead to business disruption, financial loss, regulatory intervention or damage to our reputation.

 

    Reporting – failure to accurately report our data could lead to regulatory action, legal liability and reputational damage.

 

37


Table of Contents

Legal proceedings

 

The following discussion sets out the material developments in the group’s material legal proceedings during the half year 2016. For a full discussion of the group’s material legal proceedings, see pages 237-242 of BP Annual Report and Form 20-F 2015.

Matters relating to the Deepwater Horizon accident and oil spill (the Incident)

Consent Decree and Settlement Agreement On 2 July 2015, BP reached agreements in principle with the United States federal government and five Gulf states to settle all federal and state claims arising from the Incident. On 5 October 2015, the United States lodged a proposed Consent Decree with the federal district court in New Orleans to resolve all United States and Gulf states natural resource damage claims and all Clean Water Act penalty claims and certain other claims. At the same time, BP entered a Settlement Agreement with the Gulf states for economic, property and other losses. On 22 March 2016, the United States filed a motion with the court to enter the Consent Decree as a final settlement. On 4 April 2016, the court entered the Consent Decree and also entered a final judgment on the terms set forth in the Consent Decree, at which time the Consent Decree and Settlement Agreement became effective.

Oil Pollution Act (OPA) Test Case Proceedings Six OPA test cases were before the federal district court to address certain OPA liability questions focusing on, among other issues, whether plaintiffs’ alleged losses tied to the 2010 federal government moratoria on deepwater drilling and federal permit delays are compensable. In December 2015, BP filed a motion to dismiss plaintiffs’ claims arising from the moratoria or permit process, and plaintiffs filed a motion asking the court to prevent BP from arguing that government action and/or inaction following the oil spill is a “superseding” cause with respect to some or all of the damages that plaintiffs claim. On 10 March 2016, the court granted BP’s motion and denied the plaintiffs’ motion, ruling that BP is not, as a “Responsible Party” under OPA, liable for economic losses that resulted from the 2010 deepwater drilling moratoria. The court’s order dismissed the plaintiffs’ claims with prejudice. On 19 March 2016, the plaintiffs appealed the court’s ruling to the Fifth Circuit.

Securities Class Action Since the Incident, shareholders have sued BP and various of its current and former officers and directors asserting class securities fraud claims. On 31 May 2016, the federal district court in Houston issued a decision on the parties’ summary judgment motions in relation to the claims by the class of post-explosion ADS purchasers from 26 April 2010 to 28 May 2010. In that decision, the court denied the plaintiffs’ motion and granted in part and denied in part BP’s motion. Following that decision, on 2 June 2016, BP announced that it agreed with the plaintiffs’ representatives to settle the post-explosion class claims for the amount of $175 million, payable during 2016-2017, subject to approval by the court. The parties are preparing the final settlement agreement and other papers in support of approval for submission to the court.

Other Civil Complaints On 29 March 2016, the federal district court in New Orleans issued an order (the March Order) dismissing in its entirety the master complaint raising claims for economic loss and property damage by private plaintiffs relating to the Incident. The court ordered all private plaintiffs who filed a timely claim for economic loss or property damage and did not release those claims to file and serve on BP by 2 May 2016 a sworn statement disclosing information regarding their claims. In addition, the court required most plaintiffs who had not filed an individual complaint (defined as a complaint not joined in by other plaintiffs) against BP to file a new individual complaint by 2 May 2016. The court further ordered that plaintiffs who failed to comply with the order by 2 May 2016 (later extended by 14 days for many plaintiffs) would have their claims deemed dismissed with prejudice without further notice. On 7 June 2016, the court issued an order requiring private plaintiffs who had not complied with the March Order to show cause in writing by 28 June 2016 why their claims should not be dismissed with prejudice. The court also dismissed all joinders by plaintiffs in the master complaint for private plaintiff economic loss and property damages claims. On 14 July 2016 the federal district court issued an order listing those plaintiffs who complied with the March Order and those plaintiffs whose compliance with the March Order remains to be determined by the court. The court dismissed with prejudice any remaining claims by private plaintiffs for economic loss and property damage. Accordingly the vast majority of economic loss and property damage claims from individuals and businesses that either opted out of the 2012 settlement with the Plaintiffs’ Steering Committee and/or were excluded from that settlement have either been resolved or dismissed.

Non-US Government Lawsuits On 18 October 2012, before a Mexican Federal District Court located in Mexico City, a class action complaint was filed against BP Exploration & Production Inc., BP America Production Company and other BP subsidiaries seeking, among other things, compensatory damages for the class members who allegedly suffered economic losses, as well as an order requiring BP to remediate environmental damage resulting from the Incident, to provide funding for the preservation of the environment and to conduct environmental impact studies in the Gulf of Mexico for the next 10 years. BP has not been formally served with the action. However, after learning that the Mexican Federal District Court issued a resolution in the class action that impacted BP’s rights, BP filed a constitutional challenge in Mexico asserting that BP has never been formally served with process in the class action. This challenge remains pending.

On 3 December 2015 and 29 March 2016, Acciones Colectivas de Sinaloa filed two class actions in the Mexican Federal District Court on behalf of several Mexican States. In these class actions, plaintiffs seek an order requiring the BP defendants to repair the damage to the Gulf of Mexico, to pay penalties, and to compensate plaintiffs for damage to property, to health and for economic loss. BP has not been formally served with either class action.

 

38


Table of Contents

Legal proceedings (continued)

 

 

CSB Investigation On 13 April 2016, the US Chemical Safety and Hazard Investigation Board (CSB) publicly released drafts of the final two volumes of its four-volume report on its investigation into the Incident. The final two volumes primarily concern the role of the regulator in the oversight of the offshore industry and organizational and cultural factors. They include proposed recommendations to the US Department of Interior’s Bureau of Safety and Environmental Enforcement, the American Petroleum Institute, the Ocean Energy Safety Institute and the Sustainability Accounting Standards Board.

Other legal proceedings

FERC and CFTC Matters The US Federal Energy Regulatory Commission (FERC) and the US Commodity Futures Trading Commission (CFTC) investigated several BP entities regarding trading in the next-day natural gas market at Houston Ship Channel in 2008. The FERC Administrative Law Judge ruled on 13 August 2015 that BP manipulated the market by selling next-day, fixed price natural gas at Houston Ship Channel in 2008 in order to suppress the Gas Daily index and benefit its financial position. On 11 July 2016, the FERC issued an order affirming the initial decision and directing BP to pay a civil penalty of $20.2 million and to disgorge $0.2 million in unjust profits. BP intends to seek rehearing before the FERC and ultimately appeal to the US court of appeal if necessary.

CSB Matters In March 2007, the CSB issued a report on the March 2005 explosion and fire at the Texas City refinery incident. The report contained recommendations to the BP Texas City refinery and to the board of directors of BP. On 25 May 2016, the CSB closed its last open recommendation to BP. The CSB has now accepted that all of BP’s responses to its recommendations have been satisfactorily addressed.

Scharfstein v. BP West Coast Products, LLC A purported class action lawsuit was filed against BP West Coast Products, LLC in Oregon State Court under the Oregon Unlawful Trade Practices Act on behalf of customers who used a debit card at ARCO gasoline stations in Oregon during the period 1 January 2011 to 30 August 2013, alleging that ARCO’s Oregon sites failed to provide sufficient notice of the 35 cents per transaction debit card fee. After a jury trial and subsequent hearing, in 2014 the jury rendered a verdict against BP. On 31 May 2016, the court entered a judgment for the amount of $417.3 million. On 1 June 2016, BP filed a notice of appeal. No provision has been made for damages arising out of this class action.

 

39


Table of Contents

Cautionary statement

 

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), 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 – with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. In particular, among other statements, the expected quarterly dividend payment and timing of such payment; plans and expectations regarding Upstream activities in Azerbaijan, the Gulf of Mexico, Norway, the Russian Federation, Egypt, Indonesia, Kuwait and China; expectations regarding the planned restructuring of the German refining joint operation with Rosneft and the combination of BP’s and Det norske’s Norwegian businesses; expectations regarding Upstream third-quarter 2016 reported production and Downstream third-quarter 2016 turnaround activity and industry refining margins; statements regarding the estimate of the amount of dividend payable by Rosneft to BP; expectations with respect to the total amounts that will ultimately be paid by BP in relation to the Gulf of Mexico incident and the timing thereof; and certain statements regarding the legal and trial proceedings, court decisions, claims, penalties, potential investigations and civil actions by regulators, government entities and/or other entities or parties and the risks associated with such proceedings; are all forward looking in nature. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the specific factors identified in the discussions accompanying such forward-looking statements; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report and under “Risk factors” in BP Annual Report and Form 20-F 2015 as filed with the US Securities and Exchange Commission.

 

40


Table of Contents

Computation of ratio of earnings to fixed charges

 

 

$ million except ratio    First
half
2016
 

Earnings available for fixed charges:

  

Pre-tax loss from continuing operations before adjustment for income or loss from joint ventures and associates

     (5,066

Fixed charges

     1,360   

Amortization of capitalized interest

     125   

Distributed income of joint ventures and associates

     316   

Interest capitalized

     (108

Preference dividend requirements, gross of tax

     (2

Non-controlling interest of subsidiaries’ income not incurring fixed charges

     (9
  

 

 

 

Total earnings available for fixed charges

     (3,384
  

 

 

 

Fixed charges:

  

Interest expensed

     459   

Interest capitalized

     108   

Rental expense representative of interest

     791   

Preference dividend requirements, gross of tax

     2   
  

 

 

 

Total fixed charges

     1,360   
  

 

 

 

Deficiency of earnings to fixed charges

     (4,744
  

 

 

 

 

41


Table of Contents

Capitalization and indebtedness

 

The following table shows the unaudited consolidated capitalization and indebtedness of the BP group as of 30 June 2016 in accordance with IFRS:

 

$ million    30 June
2016
 

Share capital and reserves

  

Capital shares (1-2)

     5,121   

Paid-in surplus (3)

     11,575   

Merger reserve (3)

     27,206   

Treasury shares

     (18,570

Available-for-sale investments

     2   

Cash flow hedge reserve

     (1,089

Foreign currency translation reserve

     (6,403

Profit and loss account

     74,884   
  

 

 

 

BP shareholders’ equity

     92,726   
  

 

 

 

Finance debt (4-6)

  

Due within one year

     5,120   

Due after more than one year

     50,607   
  

 

 

 

Total finance debt

     55,727   
  

 

 

 

Total capitalization (7)

     148,453   
  

 

 

 

 

(1) Issued share capital as of 30 June 2016 comprised 18,783,173,523 ordinary shares, par value US$0.25 per share, and 12,706,252 preference shares, par value £1 per share. This excludes 1,614,415,223 ordinary shares which have been bought back and are held in treasury by BP. These shares are not taken into consideration in relation to the payment of dividends and voting at shareholders’ meetings.
(2) Capital shares represent the ordinary and preference shares of BP which have been issued and are fully paid.
(3) Paid-in surplus and merger reserve represent additional paid-in capital of BP which cannot normally be returned to shareholders.
(4) Finance debt recorded in currencies other than US dollars has been translated into US dollars at the relevant exchange rates existing on 30 June 2016.
(5) Obligations under finance leases are included within finance debt in the above table.
(6) As of June 2016, the parent company, BP p.l.c., had outstanding guarantees totalling $53,148 million, of which $53,118 million related to guarantees in respect of liabilities of subsidiary undertakings, including $51,474 million relating to finance debt of subsidiaries. Thus 92% of the Group’s finance debt had been guaranteed by BP p.l.c.

At 30 June 2016, $134 million of finance debt was secured by the pledging of assets. The remainder of finance debt was unsecured.

(7) There has been no material change since 30 June 2016 in the consolidated capitalization and indebtedness of BP.

 

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Table of Contents

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BP p.l.c.

(Registrant)

 

Dated: 26 July 2016    

  /s/ J Bertelsen

   

  J BERTELSEN

  Deputy Secretary

 

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