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 31 March 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 31 March 2016(a)

 

 

 

         Page  

1.

 

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

     3-10, 25-30   

2.

 

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

     11-24   

3.

 

Legal proceedings

     31   

4.

 

Cautionary statement

     32   

5.

 

Computation of Ratio of Earnings to Fixed Charges

     33   

6.

 

Capitalization and Indebtedness

     34   

7.

 

Recent credit ratings update

     35   

8.

 

Signatures

     36   

 

(a) In this Form 6-K, references to the first quarter 2016 and first quarter 2015 refer to three-month periods ended 31 March 2016 and 31 March 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.

 

 

 

2


Table of Contents

Group results first quarter 2016

 

 

 

$ million    First
quarter
2016
    First
quarter
2015
 

Profit (loss) for the period(a)

     (583     2,602   

Inventory holding (gains) losses*, net of tax

     98        (499
  

 

 

   

 

 

 

Replacement cost profit (loss)*

     (485     2,103   

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

     1,017        474   
  

 

 

   

 

 

 

Underlying replacement cost profit*

     532        2,577   
  

 

 

   

 

 

 

Profit (loss) per ordinary share (cents)

     (3.16     14.28   

Profit (loss) per ADS (dollars)

     (0.19     0.86   

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

     (2.63     11.54   

Replacement cost profit (loss) per ADS (dollars)

     (0.16     0.69   

Underlying replacement cost profit per ordinary share (cents)

     2.88        14.14   

Underlying replacement cost profit per ADS (dollars)

     0.17        0.85   
  

 

 

   

 

 

 

 

 

BP’s loss for the first quarter was $583 million, compared with a profit of $2,602 million a year ago. BP’s first-quarter replacement cost (RC) loss was $485 million, compared with a profit of $2,103 million a year ago. After adjusting for a net charge for non-operating items of $778 million and net unfavourable fair value accounting effects of $239 million (both on a post-tax basis), underlying RC profit for the first quarter was $532 million, compared with $2,577 million for the same period in 2015. Cumulative restructuring charges from the beginning of the fourth quarter 2014 totalled $1.9 billion by the end of the first 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 $917 million for the first quarter. The charge before interest and tax relating to the Gulf of Mexico oil spill is now reported in Other businesses and corporate, comparative amounts are also shown on this basis. For further information on the Gulf of Mexico oil spill and its consequences see page 10 and Note 2 on page 16. See also Legal proceedings on page 31.

 

 

On 22 March, a motion to approve the Consent Decree relating to the agreements in principle to settle all outstanding federal and state claims arising from the 2010 Deepwater Horizon oil spill was filed by the US government with the district court. On 4 April, the district court approved the Consent Decree

 

 

Net cash provided by operating activities for the first quarter was $1.9 billion, the same as the equivalent period in 2015. Excluding amounts related to the Gulf of Mexico oil spill, net cash provided by operating activities for the first quarter was $3.0 billion, compared with $2.5 billion for the same period in 2015.

 

 

Gross debt at 31 March 2016 was $54.0 billion compared with $57.7 billion a year ago. The ratio of gross debt to gross debt plus equity at 31 March 2016 was 35.7%, compared with 35.1% at 31 December 2015 and 34.1% a year ago. Net debt* at 31 March 2016 was $30.0 billion, compared with $25.1 billion a year ago. The net debt ratio* at 31 March 2016 was 23.6%, compared with 21.6% at 31 December 2015 and 18.4% a year ago. Net debt and the net debt ratio are non-GAAP measures. See page 23 for more information. Following approval of the Consent Decree and finalization of the agreements described above, and to allow more flexibility in the current volatile price environment, we will revert to targeting a net debt ratio of 20-30%.

 

 

Total capital expenditure on an accruals basis for the first quarter was $4.0 billion, of which organic capital expenditure* was $3.9 billion, compared with $4.5 billion for the same period in 2015, of which organic capital expenditure was $4.4 billion. See page 25 for further information. We expect organic capital expenditure to be around $17 billion for 2016.

 

 

Disposal proceeds were $1.1 billion for the first quarter, compared with $1.7 billion for the same period in 2015.

 

 

The effective tax rate (ETR) on the profit or loss for the first quarter was 35%, compared with -16% for the same period in 2015. The ETR on RC profit or loss for the first quarter was 37%, compared with -42% for the same period in 2015. Adjusting for non-operating items and 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 2015, the underlying ETR for the first quarter was 18%, compared with 21% for the same period in 2015. The underlying ETR for the first quarter was lower than a year ago mainly due to changes in the mix of profits and foreign exchange effects from a weaker US dollar.

 

 

BP today announced a quarterly dividend of 10.00 cents per ordinary share ($0.600 per ADS), which is expected to be paid on 17 June 2016. The corresponding amount in sterling will be announced on 7 June 2016. See page 23 for further information.

 

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 29.
(a) Profit attributable to BP shareholders.

 

 

The commentaries above should be read in conjunction with the cautionary statement on page 32.

 

 

 

 

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Table of Contents

Analysis of RC profit (loss) before interest and tax

and reconciliation to profit (loss) for the period

 

 

 

$ million    First
quarter
2016
    First
quarter
2015
 
RC profit (loss) before interest and tax*     

Upstream

     (1,205     372   

Downstream

     1,880        2,083   

Rosneft

     66        183   

Other businesses and corporate(a)

     (1,074     (631

Consolidation adjustment – UPII*

     40        (129
  

 

 

   

 

 

 

RC profit (loss) before interest and tax

     (293     1,878   

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

     (440     (358

Taxation on a RC basis

     273        632   

Non-controlling interests

     (25     (49
  

 

 

   

 

 

 

RC profit (loss) attributable to BP shareholders

     (485     2,103   
  

 

 

   

 

 

 

Inventory holding gains (losses)

     (132     756   

Taxation (charge) credit on inventory holding gains and losses

     34        (257
  

 

 

   

 

 

 

Profit (loss) for the period attributable to BP shareholders

     (583     2,602   
  

 

 

   

 

 

 

 

(a) Includes costs related to the Gulf of Mexico oil spill. See page 10 and also Note 2 on page 16 for further information on the accounting for the Gulf of Mexico oil spill.

Analysis of underlying RC profit before interest and tax

 

 

 

$ million    First
quarter
2016
    First
quarter
2015
 
Underlying RC profit before interest and tax*     

Upstream

     (747     604   

Downstream

     1,813        2,158   

Rosneft

     66        183   

Other businesses and corporate

     (178     (290

Consolidation adjustment – UPII

     40        (129
  

 

 

   

 

 

 

Underlying RC profit before interest and tax

     994        2,526   

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

     (317     (349

Taxation on an underlying RC basis

     (120     449   

Non-controlling interests

     (25     (49
  

 

 

   

 

 

 

Underlying RC profit attributable to BP shareholders

     532        2,577   
  

 

 

   

 

 

 

Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 3 for the group and on pages 5-10 for the segments.

 

 

 

4


Table of Contents

Upstream

 

 

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Profit (loss) before interest and tax

     (1,236     390   

Inventory holding (gains) losses*

     31        (18
  

 

 

   

 

 

 

RC profit (loss) before interest and tax

     (1,205     372   

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

     458        232   
  

 

 

   

 

 

 

Underlying RC profit before interest and tax*(a)

     (747     604   
  

 

 

   

 

 

 

 

(a) See page 6 for a reconciliation to segment RC profit before interest and tax by region.

Financial results

The replacement cost loss before interest and tax for the first quarter was $1,205 million, compared with a profit of $372 million for the same period in 2015. The first quarter included a net non-operating charge of $355 million, compared with a net non-operating charge of $242 million for the same period a year ago. The net non-operating charge for the quarter relates mainly to restructuring charges. Fair value accounting effects in the first quarter had an unfavourable impact of $103 million, compared with a favourable impact of $10 million in the same period of 2015.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost loss before interest and tax for the first quarter was $747 million, compared with a profit of $604 million for the same period in 2015. The result for the first quarter reflected significantly lower liquids and gas realizations partly offset by lower costs including the benefits from simplification and efficiency activities, lower rig cancellation costs, and lower depreciation, depletion and amortization expense.

Production

Production for the quarter was 2,428mboe/d, 5.2% higher than the first quarter of 2015. Underlying production* for the quarter decreased by 1.1%.

Key events

In January, BP was awarded three exploration licences in partnership with Statoil and ExxonMobil in the Flemish Pass Basin offshore of Newfoundland, Canada. Additionally, BP acquired interests from Statoil in two exploration licences in the same basin. Statoil will be the operator. In Norway, BP was also awarded acreage at Skarv with partners Statoil, PGNiG and E.ON via ratification of the 2015 open licence round. BP will be the operator. In aggregate, this provides acreage access of approximately 12,000 square kilometres.

On 14 February BP and Oman Oil signed a heads of agreement with the government of the Sultanate of Oman, committing to amend the Oman block 61 exploration and production-sharing agreement* (PSA), extend the licence area of the block and enable further development of the major Khazzan tight gas field. BP is the operator of block 61 (60%) and Oman Oil holds the other 40%.

On 16 February In Salah Gas, a joint venture between Sonatrach (35%), BP (33%) and Statoil (32%), announced the start-up of its Southern Fields project in Algeria.

On 26 February an exploration discovery was announced on the Nooros East prospect in Egypt, by the operator Eni who has now tied it back for production. Eni holds a 75% stake in the Abu Madi West concession, while BP holds a 25% stake.

On 30 March BP announced a signed framework agreement with Kuwait Petroleum Corporation to enhance recovery of existing oil and gas resources and explore possible joint opportunities for investment and co-operation in future oil, gas, trading and petrochemicals ventures both in Kuwait and globally.

On 31 March BP and China National Petroleum Corporation (CNPC) signed a PSA for shale gas exploration, development and production in the Neijiang-Dazu block in the Sichuan Basin, China. The contract is BP’s first shale gas PSA in China and covers an area of approximately 1,500 square kilometres. CNPC will be the operator for this project.

In the Gulf of Mexico, BP has completed evaluation of the Kepler 3 discovery, drilled in late fourth quarter 2015, and is in the process of tying this well into the Na Kika platform with the aim of starting production later this year. BP is the operator (50%) and Shell holds the other 50%.

In April, the Point Thomson project (BP 32%) in Alaska, US, began production. The project is operated by Exxon.

Outlook

We expect second-quarter 2016 reported production to be lower than the first quarter, reflecting PSA entitlement impacts and seasonal turnaround and maintenance activity.

 

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 32.

 

 

 

 

5


Table of Contents

Upstream

 

 

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Underlying RC profit (loss) before interest and tax

    

US

     (667     (545

Non-US

     (80     1,149   
  

 

 

   

 

 

 
     (747     604   
  

 

 

   

 

 

 

Non-operating items

    

US

     (163     (68

Non-US

     (192     (174
  

 

 

   

 

 

 
     (355     (242
  

 

 

   

 

 

 

Fair value accounting effects

    

US

     (33     (3

Non-US

     (70     13   
  

 

 

   

 

 

 
     (103     10   
  

 

 

   

 

 

 

RC profit (loss) before interest and tax

    

US

     (863     (616

Non-US

     (342     988   
  

 

 

   

 

 

 
     (1,205     372   
  

 

 

   

 

 

 

Exploration expense

    

US

     112        78   

Non-US

     142        94   
  

 

 

   

 

 

 
     254        172   
  

 

 

   

 

 

 

Of which: Exploration expenditure written off

     161        92   
  

 

 

   

 

 

 

Production (net of royalties)(a)

    

Liquids* (mb/d)

    

US

     403        392   

Europe

     128        112   

Rest of World

     878        754   
  

 

 

   

 

 

 
     1,409        1,258   
  

 

 

   

 

 

 

Of which equity-accounted entities

     171        170   
  

 

 

   

 

 

 

Natural gas (mmcf/d)

    

US

     1,603        1,517   

Europe

     289        264   

Rest of World

     4,019        4,307   
  

 

 

   

 

 

 
     5,910        6,088   
  

 

 

   

 

 

 

Of which equity-accounted entities

     467        440   
  

 

 

   

 

 

 

Total hydrocarbons* (mboe/d)

    

US

     679        653   

Europe

     178        158   

Rest of World

     1,571        1,496   
  

 

 

   

 

 

 
     2,428        2,307   
  

 

 

   

 

 

 

Of which equity-accounted entities

     251        246   
  

 

 

   

 

 

 

Average realizations*(b)

    

Total liquids(c) ($/bbl)

     26.97        46.79   

Natural gas ($/mcf)

     2.84        4.44   

Total hydrocarbons ($/boe)

     22.57        37.00   
  

 

 

   

 

 

 

 

(a) Includes BP’s share of production of equity-accounted entities in the Upstream segment.
(b) Realizations are based on sales by consolidated subsidiaries only – this excludes equity-accounted entities.
(c) Includes condensate, natural gas liquids and bitumen.

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

 

 

 

6


Table of Contents

Downstream

 

 

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Profit (loss) before interest and tax

     1,783        2,783   

Inventory holding (gains) losses*

     97        (700
  

 

 

   

 

 

 

RC profit before interest and tax

     1,880        2,083   

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

     (67     75   
  

 

 

   

 

 

 

Underlying RC profit before interest and tax*(a)

     1,813        2,158   
  

 

 

   

 

 

 

 

(a) See page 8 for a reconciliation to segment RC profit before interest and tax by region and by business.

Financial results

The replacement cost profit before interest and tax for the first quarter was $1,880 million, compared with $2,083 million for the same period in 2015.

The first-quarter result includes a net non-operating gain of $286 million compared with a net non-operating gain of $37 million for the same period in 2015 (see pages 8 and 26 for further information on non-operating items). Fair value accounting effects had unfavourable impacts of $219 million for the first quarter, compared with unfavourable impacts of $112 million in the same period of 2015.

After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the first quarter was $1,813 million, compared with $2,158 million for the same period in 2015.

Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 8.

Fuels business

The fuels business reported an underlying replacement cost profit before interest and tax of $1,316 million for the first quarter compared with $1,796 million for the same period in 2015. The result reflects the impacts of the weakest refining margins since 2010 and a lower contribution from supply and trading compared with a very strong contribution in the same period in 2015. These adverse impacts were partially offset by lower costs from our simplification and efficiency programmes, strong refining operations, and a higher retail result supported by volume growth.

During the quarter 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 $384 million in the first quarter compared with $345 million for the same period in 2015. The result reflects strong premium brand performance and margin growth despite adverse foreign exchange impacts.

Petrochemicals business

The petrochemicals business reported an underlying replacement cost profit before interest and tax of $113 million in the first quarter compared with $17 million for the same period in 2015. The result for the quarter reflects improved operations, lower costs and a slightly improved margin environment.

In line with our strategy to improve the resilience of the petrochemicals business to a bottom-of-cycle environment, on 31 March 2016 we completed the sale of our Decatur complex in Alabama, US.

Outlook

In the second quarter, we expect a significantly higher level of turnaround activity, particularly in the US, and some seasonal improvement in industry refining margins.

 

 

The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 32.

 

 

 

 

7


Table of Contents

Downstream

 

 

 

$ million    First
quarter
2016
    First
quarter
2015
 

Underlying RC profit before interest and tax - by region

    

US

     540        661   

Non-US

     1,273        1,497   
  

 

 

   

 

 

 
     1,813        2,158   
  

 

 

   

 

 

 

Non-operating items

    

US

     113        (4

Non-US

     173        41   
  

 

 

   

 

 

 
     286        37   
  

 

 

   

 

 

 

Fair value accounting effects

    

US

     (87     (127

Non-US

     (132     15   
  

 

 

   

 

 

 
     (219     (112
  

 

 

   

 

 

 

RC profit before interest and tax

    

US

     566        530   

Non-US

     1,314        1,553   
  

 

 

   

 

 

 
     1,880        2,083   
  

 

 

   

 

 

 

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

    

Fuels

     1,316        1,796   

Lubricants

     384        345   

Petrochemicals

     113        17   
  

 

 

   

 

 

 
     1,813        2,158   
  

 

 

   

 

 

 

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

    

Fuels

     55        (60

Lubricants

     (1     (14

Petrochemicals

     13        (1
  

 

 

   

 

 

 
     67        (75
  

 

 

   

 

 

 

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

    

Fuels

     1,371        1,736   

Lubricants

     383        331   

Petrochemicals

     126        16   
  

 

 

   

 

 

 
     1,880        2,083   
  

 

 

   

 

 

 

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

     10.5        15.2   
  

 

 

   

 

 

 

Refinery throughputs (mb/d)

    

US

     699        623   

Europe

     807        805   

Rest of World

     238        324   
  

 

 

   

 

 

 
     1,744        1,752   
  

 

 

   

 

 

 

Refining availability* (%)

     95.0        94.3   
  

 

 

   

 

 

 

Marketing sales of refined products (mb/d)

    

US

     1,071        1,098   

Europe

     1,144        1,174   

Rest of World(d)

     488        493   
  

 

 

   

 

 

 
     2,703        2,765   

Trading/supply sales of refined products(d)

     2,810        2,658   
  

 

 

   

 

 

 

Total sales volumes of refined products

     5,513        5,423   
  

 

 

   

 

 

 

Petrochemicals production (kte)

    

US

     896        905   

Europe

     992        972   

Rest of World

     1,909        1,663   
  

 

 

   

 

 

 
     3,797        3,540   
  

 

 

   

 

 

 

 

(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) First quarter 2015 includes a minor reclassification between Marketing sales in Rest of World and Trading/supply sales of refined products.

 

 

 

8


Table of Contents

Rosneft

 

 

 

$ million    First
quarter
2016(a)
     First
quarter
2015
 

Profit before interest and tax(b)

     62         221   

Inventory holding (gains) losses*

     4         (38
  

 

 

    

 

 

 

RC profit before interest and tax

     66         183   

Net charge (credit) for non-operating items*

     —           —     
  

 

 

    

 

 

 

Underlying RC profit before interest and tax*

     66         183   
  

 

 

    

 

 

 

Replacement cost profit before interest and tax and underlying replacement cost profit before interest and tax for the first quarter was $66 million, compared with $183 million for the same period in 2015. There were no non-operating items in the first quarter of either year.

Compared with the same period last year, the result for the first quarter was primarily affected by lower oil prices partly offset by favourable foreign exchange and duty lag effects.

On 22 April 2016 Rosneft announced that the board of directors had given their preliminary approval of the company’s 2015 annual report and recommended that the annual general meeting (AGM) adopts a resolution to pay dividends of 11.75 roubles per one ordinary share which constitutes 35% of the company’s IFRS net profit. Previously paid dividends constituted 25% of the IFRS net profit. BP expects to receive a dividend in relation to the 2015 annual results of 22.1 billion roubles, after the deduction of withholding tax, subject to approval at the AGM.

 

     First
quarter
2016(a)
     First
quarter
2015
 

Production (net of royalties) (BP share)

     

Liquids* (mb/d)

     808         816   

Natural gas (mmcf/d)

     1,282         1,225   

Total hydrocarbons* (mboe/d)

     1,029         1,027   
  

 

 

    

 

 

 

 

(a) The operational and financial information of the Rosneft segment for the first quarter is based on preliminary operational and financial results of Rosneft for the three months ended 31 March 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 first quarter in 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.

 

 

 

9


Table of Contents

Other businesses and corporate

 

 

 

$ million    First
quarter
2016
    First
quarter
2015
 

Profit (loss) before interest and tax

    

Gulf of Mexico oil spill

     (794     (323

Other

     (280     (308
  

 

 

   

 

 

 

Profit (loss) before interest and tax

     (1,074     (631

Inventory holding (gains) losses*

     —          —     
  

 

 

   

 

 

 

RC profit (loss) before interest and tax

     (1,074     (631

Net charge (credit) for non-operating items

    

Gulf of Mexico oil spill

     794        323   

Other

     102        18   
  

 

 

   

 

 

 

Net charge (credit) for non-operating items*

     896        341   
  

 

 

   

 

 

 

Underlying RC profit (loss) before interest and tax*

     (178     (290
  

 

 

   

 

 

 

Underlying RC profit (loss) before interest and tax

    

US

     (110     (62

Non-US

     (68     (228
  

 

 

   

 

 

 
     (178     (290
  

 

 

   

 

 

 

Non-operating items

    

US

     (848     (324

Non-US

     (48     (17
  

 

 

   

 

 

 
     (896     (341
  

 

 

   

 

 

 

RC profit (loss) before interest and tax

    

US

     (958     (386

Non-US

     (116     (245
  

 

 

   

 

 

 
     (1,074     (631
  

 

 

   

 

 

 

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 first quarter was $1,074 million, compared with $631 million for the same period in 2015.

The first-quarter result included a net non-operating charge of $896 million, primarily relating to costs for the Gulf of Mexico oil spill, compared with a net charge of $341 million a year ago. The first-quarter charge reflects additional business economic loss claims under the Plaintiffs’ Steering Committee (PSC) settlement and costs relating to the settlement of certain civil claims outside of the PSC settlement, as well as ongoing functional costs in relation to the oil spill. For further information see Note 2 on page 16.

After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the first quarter was $178 million, compared with $290 million for the same period in 2015. The underlying charge in the first quarter benefited from favourable foreign exchange effects and lower corporate costs.

Gulf of Mexico oil spill

On 4 April 2016 the 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 details see Note 2 on page 16.

Wind

Net wind generation capacity*(a) was 1,578MW at 31 March 2016 compared with 1,588MW at 31 March 2015. BP’s net share of wind generation for the first quarter was 1,347GWh compared with 1,128GWh for the same period in 2015.

 

(a) Capacity figures include 23MW in the Netherlands managed by our Downstream segment at 31 March 2016, down from 32MW at 31 March 2015.

 

 

 

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Table of Contents

Financial statements

 

 

Group income statement

 

$ million    First
quarter
2016
    First
quarter
2015
 

Sales and other operating revenues (Note 5)

     38,512        55,519   

Earnings from joint ventures – after interest and tax

     29        104   

Earnings from associates – after interest and tax

     142        362   

Interest and other income

     145        120   

Gains on sale of businesses and fixed assets

     338        138   
  

 

 

   

 

 

 

Total revenues and other income

     39,166        56,243   

Purchases

     26,603        39,259   

Production and manufacturing expenses(a)

     6,519        7,000   

Production and similar taxes (Note 6)

     14        362   

Depreciation, depletion and amortization

     3,730        3,836   

Impairment and losses on sale of businesses and fixed assets

     13        197   

Exploration expense

     254        172   

Distribution and administration expenses

     2,458        2,783   
  

 

 

   

 

 

 

Profit (loss) before interest and taxation

     (425     2,634   

Finance costs(a)

     394        281   

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

     46        77   
  

 

 

   

 

 

 

Profit (loss) before taxation

     (865     2,276   

Taxation(a)

     (307     (375
  

 

 

   

 

 

 

Profit (loss) for the period

     (558     2,651   
  

 

 

   

 

 

 

Attributable to

    

BP shareholders

     (583     2,602   

Non-controlling interests

     25        49   
  

 

 

   

 

 

 
     (558     2,651   
  

 

 

   

 

 

 

Earnings per share (Note 7)

    

Profit (loss) for the period attributable to BP shareholders

    

Per ordinary share (cents)

    

Basic

     (3.16     14.28   

Diluted

     (3.16     14.21   

Per ADS (dollars)

    

Basic

     (0.19     0.86   

Diluted

     (0.19     0.85   
  

 

 

   

 

 

 

 

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

 

 

 

11


Table of Contents

Financial statements (continued)

 

 

 

Group statement of comprehensive income

 

$ million    First
quarter
2016
    First
quarter
2015
 

Profit (loss) for the period

     (558     2,651   
  

 

 

   

 

 

 

Other comprehensive income

    

Items that may be reclassified subsequently to profit or loss

    

Currency translation differences

     874        (1,612

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

     6        —     

Cash flow hedges marked to market

     (62     (212

Cash flow hedges reclassified to the income statement

     23        74   

Cash flow hedges reclassified to the balance sheet

     13        5   

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

     290        (80

Income tax relating to items that may be reclassified

     (86     124   
  

 

 

   

 

 

 
     1,058        (1,701
  

 

 

   

 

 

 

Items that will not be reclassified to profit or loss

    

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

     (1,222     (568

Income tax relating to items that will not be reclassified

     402        158   
  

 

 

   

 

 

 
     (820     (410
  

 

 

   

 

 

 

Other comprehensive income

     238        (2,111
  

 

 

   

 

 

 

Total comprehensive income

     (320     540   
  

 

 

   

 

 

 

Attributable to

    

BP shareholders

     (351     513   

Non-controlling interests

     31        27   
  

 

 

   

 

 

 
     (320     540   
  

 

 

   

 

 

 

 

 

 

12


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

     (351     31        (320

Dividends

     (1,099     (9     (1,108

Share-based payments, net of tax

     265        —          265   

Transactions involving non-controlling interests

     (1     66        65   
  

 

 

   

 

 

   

 

 

 

At 31 March 2016

     96,030        1,259        97,289   
  

 

 

   

 

 

   

 

 

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

At 1 January 2015

     111,441        1,201        112,642   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     513        27        540   

Dividends

     (1,709     (12     (1,721

Share-based payments, net of tax

     51        —          51   

Transactions involving non-controlling interests

     —          (3     (3
  

 

 

   

 

 

   

 

 

 

At 31 March 2015

     110,296        1,213        111,509   
  

 

 

   

 

 

   

 

 

 

 

 

 

13


Table of Contents

Financial statements (continued)

 

 

 

Group balance sheet

 

$ million    31 March
2016
     31 December
2015
 

Non-current assets

     

Property, plant and equipment

     129,253         129,758   

Goodwill

     11,575         11,627   

Intangible assets

     18,848         18,660   

Investments in joint ventures

     8,289         8,412   

Investments in associates

     10,450         9,422   

Other investments

     1,014         1,002   
  

 

 

    

 

 

 

Fixed assets

     179,429         178,881   

Loans

     505         529   

Trade and other receivables

     2,241         2,216   

Derivative financial instruments

     5,195         4,409   

Prepayments

     1,037         1,003   

Deferred tax assets

     1,820         1,545   

Defined benefit pension plan surpluses

     1,850         2,647   
  

 

 

    

 

 

 
     192,077         191,230   
  

 

 

    

 

 

 

Current assets

     

Loans

     259         272   

Inventories

     14,277         14,142   

Trade and other receivables

     22,251         22,323   

Derivative financial instruments

     3,962         4,242   

Prepayments

     1,719         1,838   

Current tax receivable

     465         599   

Other investments

     148         219   

Cash and cash equivalents

     23,049         26,389   
  

 

 

    

 

 

 
     66,130         70,024   

Assets classified as held for sale (Note 3)

     641         578   
  

 

 

    

 

 

 
     66,771         70,602   
  

 

 

    

 

 

 

Total assets

     258,848         261,832   
  

 

 

    

 

 

 

Current liabilities

     

Trade and other payables

     33,530         31,949   

Derivative financial instruments

     2,891         3,239   

Accruals

     5,128         6,261   

Finance debt

     4,440         6,944   

Current tax payable

     1,200         1,080   

Provisions

     4,271         5,154   
  

 

 

    

 

 

 
     51,460         54,627   

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

     153         97   
  

 

 

    

 

 

 
     51,613         54,724   
  

 

 

    

 

 

 

Non-current liabilities

     

Other payables

     14,772         2,910   

Derivative financial instruments

     3,506         4,283   

Accruals

     683         890   

Finance debt

     49,572         46,224   

Deferred tax liabilities

     8,685         9,599   

Provisions

     23,085         35,960   

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

     9,643         8,855   
  

 

 

    

 

 

 
     109,946         108,721   
  

 

 

    

 

 

 

Total liabilities

     161,559         163,445   
  

 

 

    

 

 

 

Net assets

     97,289         98,387   
  

 

 

    

 

 

 

Equity

     

BP shareholders’ equity

     96,030         97,216   

Non-controlling interests

     1,259         1,171   
  

 

 

    

 

 

 

Total equity

     97,289         98,387   
  

 

 

    

 

 

 

 

 

 

14


Table of Contents

Financial statements (continued)

 

 

 

Condensed group cash flow statement

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Operating activities

    

Profit (loss) before taxation

     (865     2,276   

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

    

Depreciation, depletion and amortization and exploration expenditure written off

     3,891        3,928   

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

     (325     59   

Earnings from equity-accounted entities, less dividends received

     (24     (276

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

     168        129   

Share-based payments

     259        (238

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

     32        (57

Net charge for provisions, less payments

     735        388   

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

     (1,727     (3,858

Income taxes paid

     (272     (493
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,872        1,858   
  

 

 

   

 

 

 

Investing activities

    

Capital expenditure

     (4,381     (4,636

Acquisitions, net of cash acquired

     —          —     

Investment in joint ventures

     (4     (69

Investment in associates

     (93     (87

Proceeds from disposal of fixed assets

     238        653   

Proceeds from disposal of businesses, net of cash disposed

     911        1,087   

Proceeds from loan repayments

     46        3   
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,283     (3,049
  

 

 

   

 

 

 

Financing activities

    

Proceeds from long-term financing

     2,738        7,788   

Repayments of long-term financing

     (3,559     (2,307

Net increase (decrease) in short-term debt

     (112     725   

Net increase (decrease) in non-controlling interests

     70        —     

Dividends paid – BP shareholders

     (1,099     (1,709

                          – non-controlling interests

     (9     (12
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (1,971     4,485   
  

 

 

   

 

 

 

Currency translation differences relating to cash and cash equivalents

     42        (623
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (3,340     2,671   
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     26,389        29,763   

Cash and cash equivalents at end of period

     23,049        32,434   
  

 

 

   

 

 

 

 

 

 

15


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 BP Annual Report and Form 20-F 2015.

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.

As indicated in BP Annual Report and Form 20-F 2015, the costs of the Gulf Coast Restoration Organization, which were previously presented as a reconciling item between the sum of the results of the reportable segments and the group results, are now reported as part of Other businesses and corporate. Amounts reported for comparative periods are presented on the same basis.

 

2. Gulf of Mexico oil spill

(a) Overview

As a consequence of the Gulf of Mexico oil spill, BP continues to incur various costs and has also recognized liabilities for future costs. The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2015 – Financial statements – Note 2 and Legal proceedings on page 237 and on page 31 of this report.

The group income statement includes a pre-tax charge of $917 million for the first quarter in relation to the Gulf of Mexico oil spill. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $56,368 million.

The cumulative income statement charge does not include amounts for obligations that BP considers are not possible, at this time, to measure reliably. For further information, see Provisions and contingent liabilities below.

The Consent Decree between the United States, the Gulf states and BP with respect to the Clean Water Act penalty, natural resource damages and certain other claims and the Settlement Agreement with the five Gulf states that was signed in 2015 with respect to state claims for economic loss, property damage and other claims were conditional upon each other and both became effective upon approval by the court of the Consent Decree on 4 April 2016. BP also accepted releases received from the vast majority of local government entities of their economic loss, property damage and other claims, and payments required under those releases were made in 2015.

The agreements described above (the Agreements) significantly reduce the uncertainties faced by BP following the Gulf of Mexico oil spill. There continues to be uncertainty regarding the outcome or resolution of current or future litigation and the extent and timing of costs relating to the incident not covered by the Agreements. The total amounts that will ultimately be paid by BP in relation to the incident will be dependent on many factors, as discussed under Provisions and contingent liabilities below, including in relation to any new information or future developments. These uncertainties could have a material impact on our consolidated financial position, results and cash flows.

 

 

 

16


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.

 

     First      First  
     quarter      quarter  
$ million    2016      2015  

Income statement

     

Production and manufacturing expenses

     794         323   
  

 

 

    

 

 

 

Profit (loss) before interest and taxation

     (794      (323

Finance costs

     123         9   
  

 

 

    

 

 

 

Profit (loss) before taxation

     (917      (332

Taxation

     251         112   
  

 

 

    

 

 

 

Profit (loss) for the period

     (666      (220
  

 

 

    

 

 

 
$ million    31 March 2016      31 December 2015  

Balance sheet

     

Current assets

     

Trade and other receivables

     508         686   

Prepayments

     5         —     

Current liabilities

     

Trade and other payables

     (2,137      (693

Accruals

     —           (40

Provisions

     (1,980      (3,076
  

 

 

    

 

 

 

Net current assets (liabilities)

     (3,604      (3,123
  

 

 

    

 

 

 

Non-current liabilities

     

Other payables

     (14,096      (2,057

Accruals

     —           (186

Provisions

     (889      (13,431

Deferred tax

     5,451         5,200   
  

 

 

    

 

 

 

Net non-current assets (liabilities)

     (9,534      (10,474
  

 

 

    

 

 

 

Net assets (liabilities)

     (13,138      (13,597
  

 

 

    

 

 

 
     First      First  
     quarter      quarter  
$ million    2016      2015  

Cash flow statement - Operating activities

     

Profit (loss) before taxation

     (917      (332

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

     

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

     123         9   

Net charge for provisions, less payments

     757         227   

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

     (1,088      (595
  

 

 

    

 

 

 

Pre-tax cash flows

     (1,125      (691
  

 

 

    

 

 

 

Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $1,125 million in the first quarter. For the same period in 2015, the amount was an outflow of $691 million.

 

 

 

17


Table of Contents

Financial statements (continued)

 

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

Trust fund

BP established the Deepwater Horizon Oil Spill Trust (the Trust), funded in the amount of $20 billion, to satisfy legitimate individual and business claims, state and local government claims resolved by BP, final judgments and settlements, state and local response costs, and natural resource damages and related costs. Fines and penalties are not covered by the trust fund.

The funding of the Trust was completed in 2012. During the first quarter of 2016, the remaining cash in the Trust and associated qualified settlement funds, not allocated for specific purposes, was exhausted and BP commenced paying claims and other costs not covered by the specific-purpose cash balances. For certain costs, these payments are made by BP into a qualified settlement fund, the fund then distributes the amounts to the claimant; $539 million was paid into a qualified settlement fund during the first quarter.

At 31 March 2016, $508 million of the provisions and payables are eligible to be paid from the Trust and associated qualified settlement funds. A reimbursement asset is recorded within Trade and other receivables on the balance sheet, all of which is classified as current, as payment of all amounts covered by the remaining Trust reimbursement asset may be requested over the next twelve months. During the first quarter of 2016, $632 million of provisions and $85 million of payables were paid from the Trust.

(b) Provisions and contingent liabilities

BP has recorded certain provisions and disclosed certain contingent liabilities as a consequence of the Gulf of Mexico oil spill. These are described below and in more detail in BP Annual Report and Form 20-F 2015 – Financial statements – Note 2.

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 each class of provision during the first quarter 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

     —          780        —          780   

Unwinding of discount

     52        25        38        115   

Reclassified to Other payables

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

Utilization

   – paid by BP      (1     (22     —          (23
   – paid by the trust fund      —          (632     —          (632
     

 

 

   

 

 

   

 

 

   

 

 

 

At 31 March 2016

     —          2,869        —          2,869   
     

 

 

   

 

 

   

 

 

   

 

 

 

Of which

   – current      —          1,980        —          1,980   
   – non-current      —          889        —          889   
     

 

 

   

 

 

   

 

 

   

 

 

 

Environmental

The environmental provision at 31 December 2015 included amounts payable for natural resource damage costs under the Consent Decree. These amounts are payable in instalments over 16 years commencing April 2017; the majority of the unpaid balance of this natural resource damages settlement accrues interest at a fixed rate. Amounts payable under the $1-billion early restoration framework agreement with natural resource trustees for the US and five Gulf states, that were not yet allocated to specific projects, were also included in environmental provisions at 31 December 2015. The provisions relating to these natural resource damage costs and the early restoration framework agreement were reclassified to Other payables during the first quarter.

Litigation and claims

The litigation and claims provision includes amounts that can be estimated reliably for the future cost of settling claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources (Individual and Business Claims). Claims administration costs and legal costs have also been provided for. Amounts that cannot be measured reliably and which have therefore not been provided for are described under Contingent liabilities below.

 

 

 

18


Table of Contents

Financial statements (continued)

 

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

At 31 December 2015, the litigation and claims provision included amounts provided under the Agreements 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 is payable in July 2016.

Litigation and claims – PSC settlement

BP has provided for its best estimate of the cost associated with the 2012 PSC settlement agreements with the exception of the cost of business economic loss claims, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility. See BP Annual Report and Form 20-F 2015 – Financial statements – Note 2 for further details on the settlements with the PSC and related matters.

Management believes that no reliable estimate can currently be made of any business economic loss claims not yet processed or processed but not yet paid, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility.

A significant number of business economic loss claims have been received but have not yet been processed and it is not possible to quantify the total value of the claims. There are continuing uncertainties regarding the application of the revised policy for matching of revenue and expenses, introduced in May 2014, including uncertainties relating to the application of specialized frameworks to particular industries and the limited availability of detailed pre-determination claims data. Further detail on these uncertainties is provided in BP Annual Report and Form 20-F 2015 – Financial statements – Note 2.

There is consequently insufficient data available to build up a track record of claims determinations under the policies and protocols that are now being applied following resolution of the matching and causation issues. We are unable to reliably estimate future trends of the number and proportion of claims that will be determined to be eligible, nor can we reliably estimate the value of such claims. A provision for such business economic loss claims will be established when these uncertainties are sufficiently reduced and a reliable estimate can be made of the liability.

The current estimate for the total cost of those elements of the PSC settlement that BP considers can be reliably estimated, including amounts already paid, is $12.9 billion. The Deepwater Horizon Court Supervised Settlement Program (DHCSSP) has issued eligibility notices, many of which are disputed by BP, in respect of business economic loss claims of approximately $340 million which have not been provided for. The total cost of the PSC settlement is likely to be significantly higher than the amount recognized to date of $12.9 billion because the current estimate does not reflect business economic loss claims not yet processed or processed but not yet paid, except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility.

There continues to be a high level of uncertainty with regards to the amounts that ultimately will be paid in relation to current claims as described above and the outcomes of any further litigation including by parties excluded from, or parties who opted out of, the PSC settlement. There is also uncertainty as to the cost of administering the claims process under the DHCSSP and in relation to future legal costs. The timing of payment of provisions related to the PSC settlement is dependent upon ongoing claims facility activity and is therefore also uncertain.

Clean Water Act penalties

The provision previously recognized for penalties under Section 311 of the Clean Water Act, as determined in the Agreements, was reclassified to Other payables during the first quarter. This amount is payable in instalments over 15 years, commencing April 2017. The unpaid balance of this penalty accrues interest at a fixed rate.

Provision movements and analysis of income statement charge

A net increase in provisions of $780 million was recognized for the first quarter. The net increase arises primarily due to an increase in the litigation and claims provision for business economic loss claims under the PSC settlement and costs relating to the settlement of certain civil claims outside of the PSC settlement. The remainder of the income statement charge mainly relates to finance costs and ongoing functional costs in relation to the incident.

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

 

 

 

19


Table of Contents

Financial statements (continued)

 

 

Notes

 

2. Gulf of Mexico oil spill (continued)

 

Contingent liabilities

BP currently considers that it is not possible to measure reliably other obligations arising from the incident, including:

 

   

The cost of business economic loss claims under the PSC settlement not yet processed or processed but not yet paid (except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility).

 

   

Any obligation that may arise from securities-related litigation.

 

   

Any obligation in relation to other potential private or non-US government litigation or claims (except for those items provided for as described above under Provisions).

 

   

Claims asserted in civil litigation, including any further litigation by parties excluded from, or parties who opted out of, the PSC settlement, including as set out in Legal proceedings on pages 237-241 of BP Annual Report and Form 20-F 2015, except for claims covered by settlement agreements.

It is not practicable to estimate the magnitude or possible timing of payment of these contingent liabilities.

The magnitude and timing of all possible obligations in relation to the Gulf of Mexico oil spill continue to be subject to uncertainty.

See also BP Annual Report and Form 20-F 2015 – Financial statements – Note 2.

 

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.

 

 

 

20


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

 

$ million    First
quarter
2016
     First
quarter
2015
 

Upstream

     (1,205      372   

Downstream

     1,880         2,083   

Rosneft

     66         183   

Other businesses and corporate(a)

     (1,074      (631
  

 

 

    

 

 

 
     (333      2,007   

Consolidation adjustment – UPII*

     40         (129
  

 

 

    

 

 

 

RC profit (loss) before interest and tax

     (293      1,878   

Inventory holding gains (losses)*

     

Upstream

     (31      18   

Downstream

     (97      700   

Rosneft (net of tax)

     (4      38   
  

 

 

    

 

 

 

Profit (loss) before interest and tax

     (425      2,634   

Finance costs

     394         281   

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

     46         77   
  

 

 

    

 

 

 

Profit (loss) before taxation

     (865      2,276   
  

 

 

    

 

 

 

RC profit (loss) before interest and tax*

     

US

     (1,256      (497

Non-US

     963         2,375   
  

 

 

    

 

 

 
     (293      1,878   
  

 

 

    

 

 

 

 

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

 

5. Sales and other operating revenues

 

$ million    First
quarter
2016
     First
quarter
2015
 

By segment

     

Upstream

     7,431         11,630   

Downstream

     34,552         49,448   

Other businesses and corporate

     396         428   
  

 

 

    

 

 

 
     42,379         61,506   
  

 

 

    

 

 

 

Less: sales and other operating revenues between segments

     

Upstream

     3,633         5,563   

Downstream

     118         176   

Other businesses and corporate

     116         248   
  

 

 

    

 

 

 
     3,867         5,987   
  

 

 

    

 

 

 

Third party sales and other operating revenues

     

Upstream

     3,798         6,067   

Downstream

     34,434         49,272   

Other businesses and corporate

     280         180   
  

 

 

    

 

 

 

Total sales and other operating revenues

     38,512         55,519   
  

 

 

    

 

 

 

By geographical area

     

US

     13,576         18,841   

Non-US

     27,146         40,011   
  

 

 

    

 

 

 
     40,722         58,852   

Less: sales and other operating revenues between areas

     2,210         3,333   
  

 

 

    

 

 

 
     38,512         55,519   
  

 

 

    

 

 

 

 

 

 

21


Table of Contents

Financial statements (continued)

 

 

Notes

 

 

6. Production and similar taxes

 

$ million    First
quarter
2016
     First
quarter
2015
 

US

     18         34   

Non-US

     (4      328   
  

 

 

    

 

 

 
     14         362   
  

 

 

    

 

 

 

 

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.

 

$ million    First
quarter
2016
     First
quarter
2015
 

Results for the period

     

Profit (loss) for the period attributable to BP shareholders

     (583      2,602   

Less: preference dividend

     —           —     
  

 

 

    

 

 

 

Profit (loss) attributable to BP ordinary shareholders

     (583      2,602   
  

 

 

    

 

 

 

Number of shares (thousand)(a)(b)

     

Basic weighted average number of shares outstanding

     18,468,632         18,220,486   

ADS equivalent

     3,078,105         3,036,747   
  

 

 

    

 

 

 

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

     18,468,632         18,309,730   

ADS equivalent

     3,078,105         3,051,621   
  

 

 

    

 

 

 

Shares in issue at period-end

     18,635,861         18,249,422   

ADS equivalent

     3,105,976         3,041,570   
  

 

 

    

 

 

 

 

(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.

 

 

 

22


Table of Contents

Financial statements (continued)

 

 

Notes

 

 

8. Dividends

Dividends payable

BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 17 June 2016 to shareholders and American Depositary Share (ADS) holders on the register on 6 May 2016. The corresponding amount in sterling is due to be announced on 7 June 2016, calculated based on the average of the market exchange rates for the four dealing days commencing on 1 June 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 first-quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.

 

     First      First  
     quarter      quarter  
     2016      2015  

Dividends paid per ordinary share

     

cents

     10.000         10.000   

pence

     7.012         6.670   

Dividends paid per ADS (cents)

     60.00         60.00   
  

 

 

    

 

 

 

Scrip dividends

     

Number of shares issued (millions)

     154.4         15.7   

Value of shares issued ($ million)

     739         109   
  

 

 

    

 

 

 

 

9. Net debt*

Net debt ratio*

 

    First     Fourth     First  
    quarter     quarter     quarter  
$ million   2016     2015     2015  

Gross debt

    54,012        53,168        57,731   

Fair value (asset) liability of hedges related to finance debt(a)

    (967     379        (174
 

 

 

   

 

 

   

 

 

 
    53,045        53,547        57,557   

Less: cash and cash equivalents

    23,049        26,389        32,434   
 

 

 

   

 

 

   

 

 

 

Net debt

    29,996        27,158        25,123   
 

 

 

   

 

 

   

 

 

 

Equity

    97,289        98,387        111,509   

Net debt ratio

    23.6     21.6     18.4
 

 

 

   

 

 

   

 

 

 

 

 

 

23


Table of Contents

Financial statements (continued)

 

 

Notes

 

 

9. Net debt* (continued)

Analysis of changes in net debt

 

     First     Fourth     First  
     quarter     quarter     quarter  
$ million    2016     2015     2015  

Opening balance

      

Finance debt

     53,168        57,405        52,854   

Fair value (asset) liability of hedges related to finance debt(a)

     379        (57     (445

Less: cash and cash equivalents

     26,389        31,702        29,763   
  

 

 

   

 

 

   

 

 

 

Opening net debt

     27,158        25,646        22,646   
  

 

 

   

 

 

   

 

 

 

Closing balance

      

Finance debt

     54,012        53,168        57,731   

Fair value (asset) liability of hedges related to finance debt(a)

     (967     379        (174

Less: cash and cash equivalents

     23,049        26,389        32,434   
  

 

 

   

 

 

   

 

 

 

Closing net debt

     29,996        27,158        25,123   
  

 

 

   

 

 

   

 

 

 

Decrease (increase) in net debt

     (2,838     (1,512     (2,477
  

 

 

   

 

 

   

 

 

 

Movement in cash and cash equivalents

      

(excluding exchange adjustments)

     (3,382     (5,136     3,294   

Net cash outflow (inflow) from financing

      

(excluding share capital and dividends)

     933        3,498        (6,206

Other movements

     359        (33     11   
  

 

 

   

 

 

   

 

 

 

Movement in net debt before exchange effects

     (2,090     (1,671     (2,901

Exchange adjustments

     (748     159        424   
  

 

 

   

 

 

   

 

 

 

Decrease (increase) in net debt

     (2,838     (1,512     (2,477
  

 

 

   

 

 

   

 

 

 

 

(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 $1,225 million (fourth quarter 2015 liability of $1,617 million and first quarter 2015 liability of $1,650 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.

 

10. Inventory valuation

A provision of $677 million was held at 31 March 2016 ($797 million at 31 March 2015) to write inventories down to their net realizable value. The net movement credited to the income statement during the first quarter 2016 was $616 million (first quarter 2015 was a credit of $2,024 million).

 

11. Statutory accounts

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

 

 

 

24


Table of Contents

Additional information

 

 

Capital expenditure and acquisitions, on an accruals basis

 

     First      First  
     quarter      quarter  
$ million    2016      2015  

By segment

     

Upstream

     

US

     1,060         1,135   

Non-US

     2,583         2,896   
  

 

 

    

 

 

 
     3,643         4,031   
  

 

 

    

 

 

 

Downstream

     

US

     161         145   

Non-US

     155         199   
  

 

 

    

 

 

 
     316         344   
  

 

 

    

 

 

 

Other businesses and corporate

     

US

     1         16   

Non-US

     35         74   
  

 

 

    

 

 

 
     36         90   
  

 

 

    

 

 

 
     3,995         4,465   
  

 

 

    

 

 

 

By geographical area

     

US

     1,222         1,296   

Non-US

     2,773         3,169   
  

 

 

    

 

 

 
     3,995         4,465   
  

 

 

    

 

 

 

Included above:

     

Acquisitions and asset exchanges

     51         28   

Other inorganic capital expenditure

     —           —     
  

 

 

    

 

 

 

 

 

 

25


Table of Contents

Additional information (continued)

 

 

 

Non-operating items*

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Upstream

    

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

     4        (113

Environmental and other provisions

     —          11   

Restructuring, integration and rationalization costs

     (263     (181

Fair value gain (loss) on embedded derivatives

     13        41   

Other(a)

     (109     —     
  

 

 

   

 

 

 
     (355     (242
  

 

 

   

 

 

 

Downstream

    

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

     321        66   

Environmental and other provisions

     —          —     

Restructuring, integration and rationalization costs

     (35     (28

Fair value gain (loss) on embedded derivatives

     —          —     

Other

     —          (1
  

 

 

   

 

 

 
     286        37   
  

 

 

   

 

 

 

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

    

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

     —          (12

Environmental and other provisions

     —          —     

Restructuring, integration and rationalization costs

     (48     (6

Fair value gain (loss) on embedded derivatives

     —          —     

Gulf of Mexico oil spill(b)

     (794     (323

Other

     (54     —     
  

 

 

   

 

 

 
     (896     (341
  

 

 

   

 

 

 

Total before interest and taxation

     (965     (546

Finance costs(b)

     (123     (9
  

 

 

   

 

 

 

Total before taxation

     (1,088     (555

Taxation credit (charge)

     310        142   
  

 

 

   

 

 

 

Total after taxation for period

     (778     (413
  

 

 

   

 

 

 

 

(a) First quarter 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.

 

 

 

26


Table of Contents

Additional information (continued)

 

 

 

Non-GAAP information on fair value accounting effects

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Favourable (unfavourable) impact relative to management’s measure of performance

    

Upstream

     (103     10   

Downstream

     (219     (112
  

 

 

   

 

 

 
     (322     (102

Taxation credit (charge)

     83        41   
  

 

 

   

 

 

 
     (239     (61
  

 

 

   

 

 

 

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

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

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

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

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

 

     First     First  
     quarter     quarter  
$ million    2016     2015  

Upstream

    

Replacement cost profit (loss) before interest and tax adjusted for fair value accounting effects

     (1,102     362   

Impact of fair value accounting effects

     (103     10   
  

 

 

   

 

 

 

Replacement cost profit (loss) before interest and tax

     (1,205     372   
  

 

 

   

 

 

 

Downstream

    

Replacement cost profit before interest and tax adjusted for fair value accounting effects

     2,099        2,195   

Impact of fair value accounting effects

     (219     (112
  

 

 

   

 

 

 

Replacement cost profit before interest and tax

     1,880        2,083   
  

 

 

   

 

 

 

Total group

    

Profit (loss) before interest and tax adjusted for fair value accounting effects

     (103     2,736   

Impact of fair value accounting effects

     (322     (102
  

 

 

   

 

 

 

Profit (loss) before interest and tax

     (425     2,634   
  

 

 

   

 

 

 

 

 

 

27


Table of Contents

Additional information (continued)

 

 

 

Realizations* and marker prices

 

     First      First  
     quarter      quarter  
     2016      2015  

Average realizations(a)

     

Liquids* ($/bbl)

     

US

     28.75         46.24   

Europe

     31.73         52.28   

Rest of World

     25.16         46.13   

BP Average

     26.97         46.79   
  

 

 

    

 

 

 

Natural gas ($/mcf)

     

US

     1.57         2.39   

Europe

     4.30         7.32   

Rest of World

     3.31         5.05   

BP Average

     2.84         4.44   
  

 

 

    

 

 

 

Total hydrocarbons* ($/boe)

     

US

     20.73         33.20   

Europe

     29.81         49.35   

Rest of World

     22.53         37.41   

BP Average

     22.57         37.00   
  

 

 

    

 

 

 

Average oil marker prices ($/bbl)

     

Brent

     33.94         53.94   

West Texas Intermediate

     33.45         48.49   

Western Canadian Select

     22.11         36.69   

Alaska North Slope

     33.98         51.95   

Mars

     30.14         49.15   

Urals (NWE – cif)

     31.66         52.59   
  

 

 

    

 

 

 

Average natural gas marker prices

     

Henry Hub gas price ($/mmBtu)(b)

     2.09         2.99   

UK Gas – National Balancing Point (p/therm)

     30.42         47.90   
  

 

 

    

 

 

 

 

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

Exchange rates

 

     First      First  
     quarter      quarter  
     2016      2015  

$/£ average rate for the period

     1.43         1.51   

$/£ period-end rate

     1.44         1.48   

$/€ average rate for the period

     1.10         1.12   

$/€ period-end rate

     1.14         1.08   

Rouble/$ average rate for the period

     74.97         63.03   

Rouble/$ period-end rate

     67.31         57.79   
  

 

 

    

 

 

 

 

 

 

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Glossary

 

 

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

Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information and a reconciliation to GAAP information is provided on page 27.

Hydrocarbons – Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.

Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation’s production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.

Liquids – Liquids for Upstream and Rosneft comprises crude oil, condensate and natural gas liquids. For Upstream, liquids also includes bitumen.

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 6, 8 and 10, and by segment and type is shown on page 26.

Organic capital expenditure excludes acquisitions, asset exchanges, and other inorganic capital expenditure. An analysis of capital expenditure by segment and region is shown on page 25.

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

Realizations are the result of dividing revenue generated from hydrocarbon sales, excluding revenue generated from purchases made for resale and royalty volumes, by revenue generating hydrocarbon production volumes. Revenue generating hydrocarbon production reflects the BP share of production as adjusted for any production which does not generate revenue. Adjustments may include losses due to shrinkage, amounts consumed during processing, and contractual or regulatory host committed volumes such as royalties.

Refining 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.

 

 

 

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Glossary (continued)

 

 

 

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 26 and 27 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact.

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

 

 

 

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Legal proceedings

 

 

The following discussion sets out the material developments in the group’s material legal proceedings during the recent period. For a full discussion of the group’s material legal proceedings, see pages 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. At the same time, BP entered into 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 in New Orleans to address certain OPA liability questions focusing on, among other issues, whether the 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 the plaintiffs’ claims arising from the moratoria or permit process, and the 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.

Other Civil Complaints On 29 March 2016, the federal district court in New Orleans issued an 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 that all private plaintiffs who have filed a timely claim for economic loss or property damage against BP with the court and have not released those claims to date must file and serve on BP by 2 May 2016 a sworn statement disclosing information regarding their claims. In addition, the court required 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. Per the court’s order, plaintiffs who fail to comply with the sworn statement requirement or the new individual complaint requirement by 2 May 2016 will have their claims deemed dismissed with prejudice without further notice. The deadline has been extended by 14 days for some of the plaintiffs following various extension requests. The court denied all requests seeking extensions of more than 14 days and indicated no further extensions will be granted. The court issued a supplemental order confirming that all new complaints filed will be stayed until further direction by the court.

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.

 

 

 

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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, net debt ratio targets, expected organic capital expenditure, the expected quarterly dividend payment and timing of such payment; plans and expectations regarding Upstream activities in Canada, Norway, Oman, Kuwait, China and the Gulf of Mexico; expectations regarding the planned restructuring of the German refining joint operation with Rosneft; expectations regarding Upstream second-quarter 2016 reported production and Downstream second-quarter 2016 turnaround activity and industry refining margins; statements regarding Rosneft’s intention to increase its dividend and the estimate of the amount of dividend payable 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; the timing and amount of future payments relating to the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report and under “Risk factors” in BP Annual Report and Form 20-F 2015 as filed with the US Securities and Exchange Commission.

 

 

 

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Computation of ratio of earnings to fixed charges

 

 

 

$ million except ratio    First
quarter
2016
 

Earnings available for fixed charges:

  

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

     (1,036

Fixed charges

     690   

Amortization of capitalized interest

     82   

Distributed income of joint ventures and associates

     148   

Interest capitalized

     (54

Preference dividend requirements, gross of tax

     (1

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

     (3
  

 

 

 

Total earnings available for fixed charges

     (174
  

 

 

 

Fixed charges:

  

Interest expensed

     218   

Interest capitalized

     54   

Rental expense representative of interest

     417   

Preference dividend requirements, gross of tax

     1   
  

 

 

 

Total fixed charges

     690   
  

 

 

 

Deficiency of earnings to fixed charges

     (864
  

 

 

 

 

 

 

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Capitalization and indebtedness

 

 

The following table shows the unaudited consolidated capitalization and indebtedness of the BP group as of 31 March 2016 in accordance with IFRS:

 

$ million    31 March 2016  

Share capital and reserves

  

Capital shares (1-2)

     5,088   

Paid-in surplus (3)

     11,608   

Merger reserve (3)

     27,206   

Treasury shares

     (18,635

Available-for-sale investments

     2   

Cash flow hedge reserve

     (845

Foreign currency translation reserve

     (6,455

Profit and loss account

     78,061   
  

 

 

 

BP shareholders’ equity

     96,030   
  

 

 

 

Finance debt (4-6)

  

Due within one year

     4,440   

Due after more than one year

     49,572   
  

 

 

 

Total finance debt

     54,012   
  

 

 

 

Total capitalization (7)

     150,042   
  

 

 

 

 

(1) Issued share capital as of 31 March 2016 comprised 18,642,562,597 ordinary shares, par value US$0.25 per share, and 12,706,252 preference shares, par value £1 per share. This excludes 1,620,571,092 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 31 March 2016.
(5) Obligations under finance leases are included within finance debt in the above table.
(6) As of 31 March 2016, the parent company, BP p.l.c., had outstanding guarantees totalling $51,731 million, of which $51,701 million related to guarantees in respect of liabilities of subsidiary undertakings, including $50,057 million relating to finance debt of subsidiaries. Thus 93% of the Group’s finance debt had been guaranteed by BP p.l.c.

At 31 March 2016, $133 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 31 March 2016 in the consolidated capitalization and indebtedness of BP.

 

 

 

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Recent credit ratings update

 

 

As previously announced, on 22 January 2016, Moody’s Investors Service Ltd placed on review for downgrade the ratings of 32 integrated oil, exploration and production (E&P), and oilfield services companies in the EMEA region, including BP p.l.c. and certain subsidiaries. On 8 April 2016, Moody’s announced no change to BP p.l.c.’s long-term rating, confirming its A2 long-term debt rating and assigned a positive rating outlook.

 

 

 

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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 April 2016      

/s/ J Bertelsen

     

J BERTELSEN

Deputy Secretary

 

 

 

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