REG - BP PLC - 1Q17 Part 1 of 1 <Origin Href="QuoteRef">BP.L</Origin> - Part 3
02/05/2017 07:07
- Part 3: For the preceding part double click ID:nRSB7975Db
126 125 123
Profit (loss) before taxation (161) (799) (917)
Taxation 48 268 251
Profit (loss) for the period (113) (531) (666)
Top of page 18
BP p.l.c. Group results
First quarter 2017
Note 2. Gulf of Mexico oil spill (continued)
31 March 31 December
$ million 2017 2016
Balance sheet
Current assets
Trade and other receivables 264 194
Current liabilities
Trade and other payables (2,945) (3,056)
Provisions (1,296) (2,330)
Net current assets (liabilities) (3,977) (5,192)
Non-current assets
Deferred tax assets 2,915 2,973
Non-current liabilities
Other payables (12,663) (13,522)
Provisions (54) (112)
Deferred tax liabilities 5,226 5,119
Net non-current assets (liabilities) (4,576) (5,542)
Net assets (liabilities) (8,553) (10,734)
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Cashflow statement - Operatingactivities
Profit (loss) before taxation (161) (799) (917)
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 126 125 123
Net charge for provisions, less payments (5) (376) 757
Movements in inventories and other current and non-current
assets and liabilities (2,254) (993) (1,088)
Pre-tax cash flows (2,294) (2,043) (1,125)
Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of
$2,294 million in the first quarter including a $740 million Department of Justice plea agreement payment. For the same
period in 2016, the amount was an outflow of $1,125 million.
(b) Provisions and other payables
Provisions
Movements in the remaining provisions, all of which relate to litigation and claims, are presented in the table below.
$ million
At 1 January 2017 2,442
Net increase in provision 25
Reclassified to other payables (596)
Utilization (521)
At 31 March 2017 1,350
The provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or
personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources.
Top of page 19
BP p.l.c. Group results
First quarter 2017
Note 2. Gulf of Mexico oil spill (continued)
PSC settlement
The provision for the cost associated with the 2012 Plaintiffs' Steering Committee (PSC) settlement has been determined
based upon an expected value of the remaining claims, including business economic loss claims. Amounts to resolve remaining
claims are expected to be substantially paid in 2017. However, the amounts ultimately payable may differ from the amount
provided and the timing of payment is uncertain. A significant number of claims determined by the court-supervised
settlement programme have been and may be appealed by BP and/or the claimants. Depending upon the resolution of these
claims, the amount payable may differ from what is currently provided for.
Other payables
Other payables include amounts payable under the 2016 agreements with the United States and five Gulf coast states for
natural resource damages, state claims and Clean Water Act penalties, amounts payable under the 2012 agreement with the US
government to resolve all federal criminal claims arising from the incident, BP's remaining commitment to fund the Gulf of
Mexico Research Initiative, and amounts payable for certain economic loss and property damage claims.
Further information on provisions, other payables, and contingent liabilities is provided in BP Annual Report and Form
20-F 2016 - Financial statements - Note 2.
Note 3. Analysis of replacement cost profit (loss) before interest and tax and
reconciliation to profit (loss) before taxation
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Upstream 1,256 692 (1,205)
Downstream 1,706 899 1,880
Rosneft 99 158 66
Other businesses and corporate(a) (431) (1,117) (1,074)
2,630 632 (333)
Consolidation adjustment - UPII* (68) (132) 40
RC profit (loss) before interest and tax 2,562 500 (293)
Inventory holding gains (losses)*
Upstream (6) 19 (31)
Downstream 98 558 (97)
Rosneft (net of tax) (26) 24 (4)
Profit (loss) before interest and tax 2,628 1,101 (425)
Finance costs 460 434 394
Net finance expense relating to pensions and other
post-retirement benefits 53 50 46
Profit (loss) before taxation 2,115 617 (865)
RC profit (loss) before interest and tax*
US 513 (1,646) (1,256)
Non-US 2,049 2,146 963
2,562 500 (293)
(a) Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.
Top of page 20
BP p.l.c. Group results
First quarter 2017
Note 4. Segmental analysis
Sales and other operating revenues First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
By segment
Upstream 11,327 9,129 7,431
Downstream 50,080 46,834 34,552
Other businesses and corporate 285 424 396
61,692 56,387 42,379
Less: sales and other operating revenues between segments
Upstream 5,777 4,695 3,633
Downstream (86) 523 118
Other businesses and corporate 138 162 116
5,829 5,380 3,867
Third party sales and other operating revenues
Upstream 5,550 4,434 3,798
Downstream 50,166 46,311 34,434
Other businesses and corporate 147 262 280
Total sales and other operating revenues 55,863 51,007 38,512
By geographical area
US 21,152 18,642 13,576
Non-US 40,020 37,381 27,146
61,172 56,023 40,722
Less: sales and other operating revenues between areas 5,309 5,016 2,210
55,863 51,007 38,512
Depreciation, depletion and amortization First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Upstream
US 1,237 1,216 1,089
Non-US 2,054 1,859 2,104
3,291 3,075 3,193
Downstream
US 216 219 210
Non-US 279 273 267
495 492 477
Other businesses and corporate
US 16 20 15
Non-US 40 55 45
56 75 60
Total group 3,842 3,642 3,730
Note 5. Production and similar taxes
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
US 36 38 18
Non-US 270 161 (4)
306 199 14
Top of page 21
BP p.l.c. Group results
First quarter 2017
Note 6. 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.
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Results for the period
Profit (loss) for the period attributable to BP shareholders 1,449 497 (583)
Less: preference dividend - - -
Profit (loss) attributable to BP ordinary shareholders 1,449 497 (583)
Number of shares (thousand)(a)(b)
Basic weighted average number of shares outstanding 19,518,500 18,995,725 18,468,632
ADS equivalent 3,253,083 3,165,954 3,078,105
Weighted average number of shares outstanding used
to calculate diluted earnings per share 19,621,566 19,107,599 18,468,632
ADS equivalent 3,270,261 3,184,599 3,078,105
Shares in issue at period-end 19,664,528 19,438,990 18,635,861
ADS equivalent 3,277,421 3,239,831 3,105,976
(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.
Note 7. Dividends
Dividends payable
BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 23 June 2017 to
shareholders and American Depositary Share (ADS) holders on the register on 12 May 2017. The corresponding amount in
sterling is due to be announced on 12 June 2017, calculated based on the average of the market exchange rates for the four
dealing days commencing on 6 June 2017. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A
scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new
ordinary shares and ADS holders in the form of new ADSs. Details of the first quarter dividend and timetable are available
at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
First Fourth First
quarter quarter quarter
2017 2016 2016
Dividends paid per ordinary share
cents 10.000 10.000 10.000
pence 8.159 7.931 7.012
Dividends paid per ADS (cents) 60.00 60.00 60.00
Scrip dividends
Number of shares issued (millions) 115.1 129.2 154.4
Value of shares issued ($ million) 642 710 739
Top of page 22
BP p.l.c. Group results
First quarter 2017
Note 8. Net Debt*
Net debt ratio* First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Gross debt 61,832 58,300 54,012
Fair value (asset) liability of hedges related to finance debt(a) 597 697 (967)
62,429 58,997 53,045
Less: cash and cash equivalents 23,794 23,484 23,049
Net debt 38,635 35,513 29,996
Equity 99,282 96,843 97,289
Net debt ratio 28.0% 26.8% 23.6%
Analysis of changes in net debt First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Opening balance
Finance debt 58,300 58,997 53,168
Fair value (asset) liability of hedges related to finance debt(a) 697 (1,113) 379
Less: cash and cash equivalents 23,484 25,520 26,389
Opening net debt 35,513 32,364 27,158
Closing balance
Finance debt 61,832 58,300 54,012
Fair value (asset) liability of hedges related to finance debt(a) 597 697 (967)
Less: cash and cash equivalents 23,794 23,484 23,049
Closing net debt 38,635 35,513 29,996
Decrease (increase) in net debt (3,122) (3,149) (2,838)
Movement in cash and cash equivalents
(excluding exchange adjustments) 143 (1,387) (3,382)
Net cash outflow (inflow) from financing
(excluding share capital and dividends) (3,111) (1,711) 933
Other movements (66) (146) 359
Movement in net debt before exchange effects (3,034) (3,244) (2,090)
Exchange adjustments (88) 95 (748)
Decrease (increase) in net debt (3,122) (3,149) (2,838)
(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 $1,746 million (fourth quarter 2016 liability of $1,962 million and first quarter 2016 liability of $1,225 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.
Note 9. Inventory valuation
A provision of $499 million was held at 31 March 2017 ($501 million at 31 December 2016 and $677 million at 31 March 2016)
to write inventories down to their net realizable value. The net movement credited to the income statement during the first
quarter 2017 was $4 million (fourth quarter 2016 was a charge of $13 million and first quarter 2016 was a credit of $616
million).
Note 10. Statutory accounts
The financial information shown in this publication, which was approved by the Board of Directors on 1 May 2017, is
unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP
Annual Report and Form 20-F2017. BP Annual Report and Form 20-F 2016 has been filed with the Registrar of Companies in
England and Wales. The report of the auditor on those accounts was unqualified and did not contain a statement under
section 498(2) or section 498(3) of the UK Companies Act 2006.
Top of page 23
BP p.l.c. Group results
First quarter 2017
Additional information
Capital expenditure*
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Capital expenditure on a cash basis
Organic capital expenditure*(a) 3,538 4,473 4,478
Inorganic capital expenditure*(b) 530 449 -
4,068 4,922 4,478
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Organic capital expenditure by segment
Upstream
US 641 602 1,247
Non-US(a) 2,339 2,918 2,809
2,980 3,520 4,056
Downstream
US 152 303 119
Non-US 320 530 269
472 833 388
Other businesses and corporate
US 21 25 -
Non-US 65 95 34
86 120 34
3,538 4,473 4,478
Organic capital expenditure by geographical area
US 814 930 1,366
Non-US(a) 2,724 3,543 3,112
3,538 4,473 4,478
(a) Fourth quarter 2016 excludes the renewal of the Abu Dhabi ADCO concession for which no cash flow arises in the quarter because BP shares were issued as consideration.
(b) First quarter 2017 includes amounts paid to purchase an interest in the Zohr gas field in Egypt and in exploration blocks in Senegal.
Top of page 24
BP p.l.c. Group results
First quarter 2017
Non-operating items*
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Upstream
Impairment and gain (loss) on sale of businesses and fixed assets(a) (382) 479 4
Environmental and other provisions - - -
Restructuring, integration and rationalization costs 2 (71) (263)
Fair value gain (loss) on embedded derivatives 25 (17) 13
Other(b) (5) 245 (109)
(360) 636 (355)
Downstream
Impairment and gain (loss) on sale of businesses and fixed assets (11) 72 321
Environmental and other provisions - 2 -
Restructuring, integration and rationalization costs (65) (103) (35)
Fair value gain (loss) on embedded derivatives - - -
Other - (48) -
(76) (77) 286
Rosneft
Impairment and gain (loss) on sale of businesses and fixed assets - 62 -
Environmental and other provisions - - -
Restructuring, integration and rationalization costs - - -
Fair value gain (loss) on embedded derivatives - - -
Other - (39) -
- 23 -
Other businesses and corporate
Impairment and gain (loss) on sale of businesses and fixed assets (15) 2 -
Environmental and other provisions - - -
Restructuring, integration and rationalization costs (8) (21) (48)
Fair value gain (loss) on embedded derivatives - - -
Gulf of Mexico oil spill(c) (35) (674) (794)
Other 67 - (54)
9 (693) (896)
Total before interest and taxation (427) (111) (965)
Finance costs(c) (126) (125) (123)
Total before taxation (553) (236) (1,088)
Taxation credit (charge) 248 56 310
Total after taxation for period (305) (180) (778)
(a) First quarter 2017 relates primarily to an impairment charge arising following the announcement on 3 April 2017 of the agreement to sell the Forties Pipeline System business to INEOS. An impairment reversal of $30 million was also recorded in the quarter in relation to Block KG D6 in India ($234-million impairment reversal in fourth quarter 2016).
(b) First quarter 2017 includes a $56-million write-back relating to Block KG D6 in India ($319-million write-back in fourth quarter 2016). Fourth quarter 2016 also includes the write-off of $147 million in relation to the value ascribed to licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011.
(c) See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.
Top of page 25
BP p.l.c. Group results
First quarter 2017
Non-GAAP information on fair value accounting effects
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Favourable (unfavourable) impact relative to management's
measure of performance
Upstream 246 (344) (103)
Downstream 40 99 (219)
286 (245) (322)
Taxation credit (charge) (79) 97 83
207 (148) (239)
BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements
of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The
related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in the
income statement. This is because hedge accounting is either not permitted or not followed, principally due to the
impracticality of effectiveness-testing requirements. Therefore, measurement differences in relation to recognition of
gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a
subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income
statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices
consistent with the contract maturity.
BP enters into physical commodity contracts to meet certain business requirements, such as the purchase of crude for a
refinery or the sale of BP's gas production. Under IFRS these physical contracts are treated as derivatives and are
required to be fair valued when they are managed as part of a larger portfolio of similar transactions. In addition,
derivative instruments are used to manage the price risk associated with certain future natural gas sales. Gains and losses
arising are recognized in the income statement from the time the derivative commodity contract is entered into.
IFRS require that inventory held for trading is recorded at its fair value using period-end spot prices, whereas any
related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the
contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices,
resulting in measurement differences.
BP enters into contracts for pipelines and 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
that are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.
The way that BP manages the economic exposures described above, and measures performance internally, differs from the way
these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS
result with management's internal measure of performance. Under management's internal measure of performance the inventory
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 certain LNG and oil and gas contracts and
gas sales contracts, are deferred to match with the underlying exposure and the commodity contracts for business
requirements are accounted for on an accruals basis. We believe that disclosing management's estimate of this difference
provides useful information for investors because it enables investors to see the economic effect of these activities as a
whole. The impacts of fair value accounting effects, relative to management's internal measure of performance, are shown in
the table above. A reconciliation to GAAP information is set out below.
First Fourth First
quarter quarter quarter
$ million 2017 2016 2016
Upstream
Replacement cost profit (loss) before interest and tax adjusted for
fair value accounting effects 1,010 1,036 (1,102)
Impact of fair value accounting effects 246 (344) (103)
Replacement cost profit (loss) before interest and tax 1,256 692 (1,205)
Downstream
Replacement cost profit before interest and tax adjusted for
fair value accounting effects 1,666 800 2,099
Impact of fair value accounting effects 40 99 (219)
Replacement cost profit before interest and tax 1,706 899 1,880
Total group
Profit (loss) before interest and tax adjusted for
fair value accounting effects 2,342 1,346 (103)
Impact of fair value accounting effects 286 (245) (322)
Profit (loss) before interest and tax 2,628 1,101 (425)
Top of page 26
BP p.l.c. Group results
First quarter 2017
Readily marketable inventory* (RMI)
31 March 31 December
$ million 2017 2016
RMI at fair value 5,495 5,952
Paid-up RMI* 2,802 2,705
Readily marketable inventory (RMI) is oil and oil products inventory held and price risk-managed by BP's integrated supply
and trading function (IST) which could be sold to generate funds if required. Paid-up RMI is RMI that BP has paid for.
We believe that disclosing the amounts of RMI and paid-up RMI is useful to investors as it enables them to better
understand and evaluate the group's inventories and liquidity position by enabling them to see the level of discretionary
inventory held by IST and to see builds or releases of liquid trading inventory.
See the Glossary on page 28 for a more detailed definition of RMI. A reconciliation of total inventory as reported on the
group balance sheet to paid-up RMI is provided below.
31 March 31 December
$ million 2017 2016
Reconciliation of total inventory to paid-up RMI
Inventories as reported on the group balance sheet 17,236 17,655
Less: (a) inventories which are not oil and oil products and (b) oil and oil
product inventories which are not risk-managed by IST (12,228) (12,131)
RMI on an IFRS basis 5,008 5,524
Plus: difference between RMI at fair value and RMI on an IFRS basis 487 428
RMI at fair value 5,495 5,952
Less: unpaid RMI* at fair value (2,693) (3,247)
Paid-up RMI 2,802 2,705
Top of page 27
BP p.l.c. Group results
First quarter 2017
Realizations* and marker prices
First Fourth First
quarter quarter quarter
2017 2016 2016
Average realizations(a)
Liquids* ($/bbl)
US 46.34 41.93 28.75
Europe 53.28 45.66 31.73
Rest of World(b) 51.79 45.27 29.72
BP Average(b) 49.87 43.89 29.61
Natural gas ($/mcf)
US 2.50 2.29 1.57
Europe 5.40 4.81 4.30
Rest of World 3.85 3.35 3.31
BP Average 3.50 3.08 2.84
Total hydrocarbons* ($/boe)
US 34.29 30.32 20.73
Europe 46.69 40.48 29.81
Rest of World(b) 37.93 30.98 24.64
BP Average(b) 37.19 31.40 23.81
Average oil marker prices ($/bbl)
Brent 53.69 49.33 33.94
West Texas Intermediate 51.70 49.23 33.45
Western Canadian Select 38.77 35.44 22.11
Alaska North Slope 53.82 50.06 33.98
Mars 49.59 46.23 30.14
Urals (NWE - cif) 51.88 47.73 31.66
Average natural gas marker prices
Henry Hub gas price(c) ($/mmBtu) 3.32 2.98 2.09
UK Gas - National Balancing Point (p/therm) 48.19 45.76 30.42
(a) Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
(b) Production volume recognition methodology for our Technical Service Contract arrangement in Iraq has been simplified to exclude the impact of oil price movements on lifting imbalances. A minor adjustment has been made to first quarter 2016. There is no impact on the financial results.
(c) Henry Hub First of Month Index.
Exchange rates
First Fourth First
quarter quarter quarter
2017 2016 2016
$/£ average rate for the period 1.24 1.24 1.43
$/£ period-end rate 1.25 1.22 1.44
$/E average rate for the period 1.07 1.08 1.10
$/E period-end rate 1.07 1.05 1.14
Rouble/$ average rate for the period 58.72 63.12 74.97
Rouble/$ period-end rate 56.01 60.63 67.31
Top of page 28
BP p.l.c. Group results
First quarter 2017
Glossary
Non-GAAP measures are provided for investors because they are closely tracked by management to evaluate BP's operating
performance and to make financial, strategic and operating decisions.
Adjusted effective tax rate (ETR) is a non-GAAP measure. The adjusted ETR is calculated by dividing taxation on an
underlying RC basis excluding the impact of the reduction in the rate of the UK North Sea supplementary charge in the third
quarter 2016 by underlying RC profit or loss before tax.Taxation on an underlying RC basis is taxation on a RC basis for
the period adjusted for taxation on non-operating items and fair value accounting effects. Information on underlying RC
profit or loss is provided below. BP believes it is helpful to disclose the adjusted ETR because this measure may help
investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational
performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is the ETR on profit
or loss for the period.
Capital expenditure is the summation of expenditure on property, plant and equipment, intangible and other assets,
acquisitions (net of cash acquired), investment in joint ventures and investment in associates as stated in the condensed
group cash flow statement.
Consolidation adjustment - UPII is unrealized profit in inventory arising on inter-segment transactions.
Effective tax rate (ETR) on replacement cost (RC) profit or loss is a non-GAAP measure. The ETR on RC profit or loss is
calculated by dividing taxation on a RC basis by RC profit or loss before tax.Information on RC profit or loss is provided
below. BP believes it is helpful to disclose the ETR on RC profit or loss because this measure excludes the impact of price
changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest
equivalent measure on an IFRS basis is the ETR on profit or loss for the period.
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 is provided on page 25.
Gearing - See Net debt and net debt ratio definition.
Hydrocarbons - Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million
barrels.
Inorganic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Inorganic capital expenditure
comprises consideration in business combinations and certain other significant investments made by the group. It is
reported on a cash basis. BP believes that this measure provides useful information as it allows investors to understand
how BP's management invests funds in projects which expand the group's activities through acquisition. Further information
and a reconciliation to GAAP information is provided on page 23.
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.
Major projects have a BP net investment of at least $250 million, or are considered to be of strategic importance to BP or
of a high degree of complexity.
Top of page 29
BP p.l.c. Group results
First quarter 2017
Glossary (continued)
Net debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross finance debt, as shown in the balance
sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange
and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents.
The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders' equity. All components
of equity are included in the denominator of the calculation. BP believes these measures provide useful information to
investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash
equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from
shareholders. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'.
Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial
operation, including BP's share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV
basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
Non-operating items are charges and credits included in the financial statements that BP discloses separately because it
considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be
part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the
group's reported financial performance. Non-operating items within equity-accounted earnings are reported net of
incremental income tax reported by the equity-accounted entity. An analysis of non-operating items by region is shown on
pages 7, 9 and 11, and by segment and type is shown on page 24.
Operating cash flow is net cash provided by (used in) operating activities as stated in the condensed group cash flow
statement. When used in the context of a segment rather than the group, the terms refer to the segment's share thereof.
Operating cash flow excluding amounts related to the Gulf of Mexico oil spill / Gulf of Mexico oil spill payments is a
non-GAAP measure calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill as reported
in Note 2 from Net cash provided by operating activities as reported in the condensed group cash flow statement. BP
believes it is helpful to disclose net cash provided by operating activities excluding amounts related to the Gulf of
Mexico oil spill because this measure allows for more meaningful comparisons between reporting periods. The nearest
equivalent measure on an IFRS basis is Net cash provided by operating activities.
Organic capital expenditure is a subset of capital expenditure and is a non-GAAP measure. Organic capital expenditure
comprises capital expenditure less inorganic capital expenditure. BP believes that this measure provides useful information
as it allows investors to understand how BP's management invests funds in developing and maintaining the group's assets. An
analysis of organic capital expenditure by segment and region, and a reconciliation to GAAP information is provided on page
23.
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.
Readily marketable inventory (RMI) is inventory held and price risk-managed by our integrated supply and trading function
(IST) which could be sold to generate funds if required. It comprises oil and oil products for which liquid markets are
available and excludes inventory which is required to meet operational requirements and other inventory which is not price
risk-managed. RMI is reported at fair value. Inventory held by the Downstream fuels business for the purpose of sales and
marketing, and all inventories relating to the lubricants and petrochemicals businesses, are not included in RMI.
Paid-up RMI excludes RMI which has not yet been paid for. For inventory that is held in storage, a first-in first-out
(FIFO) approach is used to determine whether inventory has been paid for or not. Unpaid RMI is RMI which has not yet been
paid for by BP. RMI, Paid-up RMI and Unpaid RMI are non-GAAP measures. Further information is provided on page 26.
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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BP p.l.c. Group results
First quarter 2017
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 IFRS. RC profit or loss for the group is not a recognized GAAP
measure. BP believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary
significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory
holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory
levels. In order for investors to understand the operating performance of the group excluding the impact of price changes
on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP's
management believes it is helpful to disclose this measure. The nearest equivalent measure on an IFRS basis is profit or
loss attributable to BP shareholders.
RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 6. RC profit or loss per share is
calculated using the same denominator. The numerator used is RC profit or loss attributable to BP shareholders rather than
profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the RC profit or loss per share
because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful
comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is basic earnings per share based on
profit or loss for the period attributable to BP shareholders.
Reported recordable injury frequency measures the number of reported work-related employee and contractor incidents that
result in a fatality or injury per 200,000 hours worked. This represents reported incidents occurring within BP's
operational HSSE reporting boundary. That boundary includes BP's own operated facilities and certain other locations or
situations.
Tier 1 process safety events are losses of primary containment from a process of greatest consequence - causing harm to a
member of the workforce, costly damage to equipment or exceeding defined quantities. This represents reported incidents
occurring within BP's operational HSSE reporting boundary. That boundary includes BP's own operated facilities and certain
other locations or situations.
Underlying production is production after adjusting for divestments and entitlement impacts in our production-sharing
agreements. 2017 underlying production does not include the Abu Dhabi onshore concession renewal.
Underlying RC profit or loss is RC profit or loss after adjusting for non-operating items and fair value accounting
effects. Underlying RC profit or loss and adjustments for fair value accounting effects are not recognized GAAP measures.
See pages 24 and 25 for additional information on the non-operating items and fair value accounting effects that are used
to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact.
BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by
management to evaluate BP's operating performance and to make financial, strategic and operating decisions and because it
may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP's operational
performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair
value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss attributable to
BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and
taxation.
Top of page 31
BP p.l.c. Group results
First quarter 2017
Glossary (continued)
Underlying RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 6. Underlying RC profit
or loss per share is calculated using the same denominator. The numerator used is underlying RC profit or loss attributable
to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the
underlying RC profit or loss per share because this measure may help investors to understand and evaluate, in the same
manner as management, the underlying trends in BP's operational performance on a comparable basis, period on period. The
nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable
to BP shareholders.
Upstream operating efficiency is calculated as production divided by installed production capacity for BP operated sites,
excluding US Lower 48. Installed production capacity is the agreed rate achievable (measured at the export end of the
system) when the installed production system (reservoir, wells, plant and export) is fully optimized and operated at full
rate with no planned or unplanned deferrals.
Upstream unit production cost is calculated as production cost divided by units of production. Production cost does not
include ad valorem and severance taxes. Units of production are barrels for liquids and thousands of cubic feet for gas.
Amounts disclosed are for BP subsidiaries only and do not include BP's share of equity-accounted entities.
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BP p.l.c. Group results
First quarter 2017
Legal proceedings
For a full discussion of the group's material legal proceedings, see pages 261-265 of BP Annual Report and Form 20-F 2016.
Cautionary statement
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