REG - BP PLC - 3Q14 Part 1 of 1 <Origin Href="QuoteRef">BP.L</Origin> - Part 2
30/10/2014 06:14
- Part 2: For the preceding part double click ID:nRSb4169Va
Cash flow hedges reclassified to the income statement (90) 1
10 (2) (8) Cash flow hedges reclassified to the balance sheet (11) 25
Share of items relating to equity-accounted entities,
31 51 (144) net of tax (166) (24)
(25) 9 (13) Income tax relating to items that may be reclassified (4) 170
793 1,094 (3,767) (3,660) (4,007)
Items that will not be reclassified to profit or loss
Remeasurements of the net pension and other post-
310 222 (1,051) retirement benefit liability or asset (1,765) 2,466
Share of items relating to equity-accounted entities,
- - - net of tax 5 -
(114) (73) 257 Income tax relating to items that will not be reclassified 478 (845)
196 149 (794) (1,282) 1,621
989 1,243 (4,561) Other comprehensive income (4,942) (2,386)
4,581 4,676 (3,237) Total comprehensive income 3,434 20,274
Attributable to
4,485 4,606 (3,257) BP shareholders 3,252 20,041
96 70 20 Non-controlling interests 182 233
4,581 4,676 (3,237) 3,434 20,274
(a) Nine months 2013 includes $2,061 million loss relating to the contracts to acquire Rosneft shares.
Top of page 13
Financial statements (continued)
Group statement of changes in equity
BP
shareholders' Non-controlling Total
$ million equity interests equity
At 1 January 2014 129,302 1,105 130,407
Total comprehensive income 3,252 182 3,434
Dividends (4,121) (215) (4,336)
Repurchases of ordinary share capital (3,147) - (3,147)
Share-based payments, net of tax 452 - 452
Share of equity-accounted entities' changes in equity 80 - 80
Transactions involving non-controlling interests - 4 4
At 30 September 2014 125,818 1,076 126,894
BP
shareholders' Non-controlling Total
$ million equity interests equity
At 1 January 2013 118,546 1,206 119,752
Total comprehensive income 20,041 233 20,274
Dividends (4,266) (331) (4,597)
Repurchases of ordinary share capital (3,963) - (3,963)
Share-based payments, net of tax 477 - 477
Share of equity-accounted entities' changes in equity (761) - (761)
Transactions involving non-controlling interests - 69 69
At 30 September 2013 130,074 1,177 131,251
Top of page 14
Financial statements (continued)
Group balance sheet
30 September 31 December
$ million 2014 2013
Non-current assets
Property, plant and equipment 134,726 133,690
Goodwill 11,971 12,181
Intangible assets 21,483 22,039
Investments in joint ventures 9,091 9,199
Investments in associates 15,460 16,636
Other investments 1,169 1,565
Fixed assets 193,900 195,310
Loans 668 763
Trade and other receivables 6,414 5,985
Derivative financial instruments 3,536 3,509
Prepayments 997 922
Deferred tax assets 1,583 985
Defined benefit pension plan surpluses 77 1,376
207,175 208,850
Current assets
Loans 421 216
Inventories 26,581 29,231
Trade and other receivables 38,011 39,831
Derivative financial instruments 2,551 2,675
Prepayments 1,614 1,388
Current tax receivable 930 512
Other investments 296 467
Cash and cash equivalents 30,729 22,520
101,133 96,840
Assets classified as held for sale (Note 3) 1,384 -
102,517 96,840
Total assets 309,692 305,690
Current liabilities
Trade and other payables 49,394 47,159
Derivative financial instruments 2,140 2,322
Accruals 7,223 8,960
Finance debt 6,453 7,381
Current tax payable 2,413 1,945
Provisions 4,122 5,045
71,745 72,812
Liabilities directly associated with assets classified as held for sale (Note 3) 431 -
72,176 72,812
Non-current liabilities
Other payables 3,668 4,756
Derivative financial instruments 2,480 2,225
Accruals 871 547
Finance debt 47,157 40,811
Deferred tax liabilities 18,366 17,439
Provisions 28,415 26,915
Defined benefit pension plan and other post-retirement benefit plan deficits 9,665 9,778
110,622 102,471
Total liabilities 182,798 175,283
Net assets 126,894 130,407
Equity
BP shareholders' equity 125,818 129,302
Non-controlling interests 1,076 1,105
126,894 130,407
Top of page 15
Financial statements (continued)
Condensed group cash flow statement
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
Operating activities
5,172 5,147 2,611 Profit before taxation 13,028 29,022
Adjustments to reconcile profit before taxation to net
cash provided by operating activities
Depreciation, depletion and amortization and
3,765 3,953 4,602 exploration expenditure written off 12,977 10,587
Impairment and (gain) loss on sale of businesses and
472 444 642 fixed assets 1,463 (11,585)
Earnings from equity-accounted entities, less
(489) (1,080) 527 dividends received (1,237) (943)
Net charge for interest and other finance expense,
170 (3) 114 less net interest paid 281 363
153 178 153 Share-based payments 437 374
Net operating charge for pensions and other post-
retirement benefits, less contributions and benefit
(67) (105) (92) payments for unfunded plans (299) (437)
(360) 56 705 Net charge for provisions, less payments 568 1,145
Movements in inventories and other current and
(812) 654 1,744 non-current assets and liabilities(a) 2,083 (7,953)
(1,672) (1,367) (1,607) Income taxes paid (3,794) (4,887)
6,332 7,877 9,399 Net cash provided by operating activities 25,507 15,686
Investing activities
(5,882) (5,499) (5,256) Capital expenditure (16,646) (17,722)
- - (3) Acquisitions, net of cash acquired (13) -
(54) (3) (78) Investment in joint ventures (114) (152)
(64) (47) (73) Investment in associates (208) (4,955)
307 227 391 Proceeds from disposal of fixed assets 1,596 17,743
Proceeds from disposal of businesses, net of
94 571 194 cash disposed 791 3,879
36 53 9 Proceeds from loan repayments 79 126
(5,563) (4,698) (4,816) Net cash provided by (used in) investing activities (14,515) (1,081)
Financing activities
(1,258) (447) (1,623) Net issue (repurchase) of shares (3,796) (3,093)
3,245 856 2,780 Proceeds from long-term financing 9,615 6,347
(568) (1,720) (388) Repayments of long-term financing (3,345) (1,747)
122 (57) (527) Net increase (decrease) in short-term debt (507) (1,751)
29 - - Net increase (decrease) in non-controlling interests - 29
(1,247) (1,572) (1,122) Dividends paid - BP shareholders (4,121) (4,267)
(140) (140) (62) - non-controllinginterests (215) (256)
183 (3,080) (942) Net cash provided by (used in) financing activities (2,369) (4,738)
Currency translation differences relating to cash and
234 49 (418) cash equivalents (414) (3)
1,186 148 3,223 Increase (decrease) in cash and cash equivalents 8,209 9,864
28,313 27,358 27,506 Cash and cash equivalents at beginning of period 22,520 19,635
29,499 27,506 30,729 Cash and cash equivalents at end of period 30,729 29,499
(a) Includes
(394) (233) 1,560 Inventory holding (gains) losses 1,253 (292)
(238) (32) (113) Fair value gain on embedded derivatives (243) (404)
192 (33) (846) Movements related to the Gulf of Mexico oil spill response (1,457) (2,066)
Inventory holding gains and losses and fair value gains on embedded derivatives are also included within profit before taxation. See Note 2 for further information on the cash flow impacts of the Gulf of Mexico oil spill.
Top of page 16
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
2013 included in the BP Annual Report and Form 20-F 2013.
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; however, 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 2014, which do not differ significantly from those used in BP Annual Report and
Form 20-F 2013.
In BP Annual Report and Form 20-F 2013 we disclosed a significant estimate or judgement in relation to the provision for
penalties under the US Clean Water Act arising from the Gulf of Mexico oil spill, which had been estimated based on the
assumption that BP did not act with gross negligence or engage in wilful misconduct. However, in September 2014 the
district court ruled that the discharge of oil was the result of BP's gross negligence and wilful misconduct. No adjustment
has been made to the provision and a contingent liability has been disclosed in relation to the potential for a higher
penalty due to the recent ruling. See Note 2 for further information.
In BP Annual Report and Form 20-F 2013 we disclosed a significant estimate or judgement in relation to exploration and
appraisal expenditure which is capitalized and is subject to regular technical, commercial and management review on at
least an annual basis to confirm the continued intent to develop, or otherwise extract value from, the discovery. Under
IFRS 6 'Exploration for and Evaluation of Mineral Resources', one of the facts and circumstances which indicates that an
entity should test such assets for impairment is that the period for which the entity has a right to explore in the
specific area has expired during the period or will expire in the near future, and is not expected to be renewed.
BP has leases in the Gulf of Mexico making up a prospect, some with terms which were scheduled to expire at the end of last
year and some with terms which are scheduled to expire in the near future. A significant proportion of our capitalized
exploration and appraisal costs in the Gulf of Mexico relate to this prospect. This prospect requires the development of
subsea technology to ensure that the hydrocarbons can be extracted safely. BP is in negotiation with the US Bureau of
Safety and Environmental Enforcement in relation to seeking extension of these leases so that the discovered hydrocarbons
can be developed. BP remains committed to developing this prospect and expects that the leases will be renewed and,
therefore, continues to carry the capitalized costs on its balance sheet. See also Notes 10 and 16 in BP Annual Report and
Form 20-F 2013 - Financial Statements.
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
2013 - Financial statements - Note 2 and Legal proceedings on page 257 and on page 33 of this report.
The group income statement includes a pre-tax charge of $43 million for the third quarter and $342 million for the nine
months of 2014 in relation to the Gulf of Mexico oil spill. The third-quarter charge reflects the ongoing costs of the Gulf
Coast Restoration Organization and adjustments to provisions. This includes $25 million for costs eligible to be paid from
the Trust that have been charged to the income statement because the $20-billion fund has now been exceeded. See Trust fund
below for further details. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to
$43,018 million.
The cumulative income statement charge does not include amounts for obligations that BP currently considers are not
possible to measure reliably. For further information, including developments in relation to the interpretation of business
economic loss claims under the Plaintiffs' Steering Committee (PSC) settlement, see Provisions below.
Top of page 17
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The total amounts that will ultimately be paid by BP in relation to all the obligations relating to the incident are
subject to significant uncertainty and the ultimate exposure and cost to BP will be dependent on many factors, as discussed
under Provisionsand contingent liabilities below, including in relation to any new information or future developments.
These could have a material impact on our consolidated financial position, results and cash flows.
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.
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
Income statement
30 251 33 Production and manufacturing expenses 313 251
(30) (251) (33) Profit (loss) before interest and taxation (313) (251)
9 9 10 Finance costs 29 29
(39) (260) (43) Profit (loss) before taxation (342) (280)
(44) 44 45 Taxation 99 (7)
(83) (216) 2 Profit (loss) for the period (243) (287)
$ million 30 September 2014 31 December 2013
Balance sheet
Current assets
Trade and other receivables 1,566 2,457
Current liabilities
Trade and other payables (653) (1,030)
Provisions (1,942) (2,951)
Net current assets (liabilities) (1,029) (1,524)
Non-current assets
Other receivables 3,289 2,442
Non-current liabilities
Other payables (2,406) (2,986)
Accruals (166) -
Provisions (7,328) (6,395)
Deferred tax 1,995 2,748
Net non-current assets (liabilities) (4,616) (4,191)
Net assets (liabilities) (5,645) (5,715)
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
Cashflow statement - Operating activities
(39) (260) (43) Profit (loss) before taxation (342) (280)
Adjustments to reconcile profit (loss) before
taxation to net cash provided by
operating activities
Net charge for interest and other finance
9 9 10 expense, less net interest paid 29 29
(576) 116 586 Net charge for provisions, less payments 605 1,118
Movements in inventories and other current
192 (33) (846) and non-current assets and liabilities (1,457) (2,066)
(414) (168) (293) Pre-tax cash flows (1,165) (1,199)
Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an inflow of
$42 million and outflow of $313 million in the third quarter and nine months of 2014 respectively. For the same periods in
2013, the amounts were an outflow of $4 million and an outflow of $193 million respectively.
Top of page 18
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 the fourth quarter of 2012. The obligation to fund the $20-billion trust fund,
adjusted to take account of the time value of money, was recognized in full in 2010 and charged to the income statement. An
asset has been recognized representing BP's right to receive reimbursement from the trust fund. This is the portion of the
estimated future expenditure provided for that will be settled by payments from the trust fund.
The table below shows movements in the reimbursement asset during the period to 30 September 2014. At 30 September 2014,
$4,855 million of the provisions and payables are eligible to be paid from the Trust. The reimbursement asset is recorded
within other receivables on the balance sheet apportioned between current and non-current elements.
Third Nine
quarter months
$ million 2014 2014
Opening balance 4,513 4,899
Net increase in provision for items covered by the trust fund 656 662
Amounts paid directly by the trust fund (314) (706)
At 30 September 2014 4,855 4,855
Of which - current 1,566 1,566
- non-current 3,289 3,289
During the third quarter, cumulative charges to be paid by the Trust exceeded the remaining headroom within the Trust by
$25 million. Subsequent additional costs, over and above those provided within the $20 billion, will be expensed to the
income statement.
As at 30 September 2014, the aggregate cash balances in the Trust and the associated qualifying settlement funds amounted
to $6.0 billion, including $1.1 billion remaining in the seafood compensation fund which has yet to be distributed and $0.9
billion held for natural resource damage early restoration. Should the cash balances in the trust fund not be sufficient,
payments in respect of legitimate claims and other costs will be made directly by BP.
(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 2013 - Financial statements - Note
2.
Provisions
BP has 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 third quarter and nine months
are presented in the tables below.
Litigation Clean
and Water Act
$ million Environmental claims penalties Total
At 1 July 2014 1,593 3,895 3,510 8,998
Net increase in provision 190 472 - 662
Utilization - paid by BP (18) (58) - (76)
- paid by the trust fund (25) (289) - (314)
At 30 September 2014 1,740 4,020 3,510 9,270
Of which - current 780 1,162 - 1,942
- non-current 960 2,858 3,510 7,328
Top of page 19
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Litigation Clean
and Water Act
Environmental claims penalties Total
$ million
At 1 January 2014 1,679 4,157 3,510 9,346
Net increase in provision 190 702 - 892
Utilization - paid by BP (62) (225) - (287)
- paid by the trust fund (67) (614) - (681)
At 30 September 2014 1,740 4,020 3,510 9,270
Environmental
The environmental provision includes amounts for BP's commitment to fund the Gulf of Mexico Research Initiative, estimated
natural resource damage assessment costs and early natural resource damage restoration projects under the $1-billion
framework agreement with natural resource trustees for the US and five Gulf coast states. In October 2014, phase three of
the natural resource damage early restoration projects was formally approved (comprising $627 million of approved project
spend) under the framework agreement. Until the size, location and duration of the impact is assessed, it is not possible
to estimate reliably the amounts or timing of any further natural resource damages claims, therefore no additional amounts
have been provided for these items and they are disclosed as a contingent liability.
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), and claims by state and local government
entities for removal costs, damage to real or personal property, loss of government revenue and increased public services
costs (State and Local Claims) under the Oil Pollution Act of 1990 and other legislation, except as described under
Contingent liabilities below. Claims administration costs and legal costs have also been provided for.
BP has provided for its best estimate of the cost associated with the 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 further
appeal by BP within the claims facility. As disclosed in BP Annual Report and Form 20-F 2013, as part of its monitoring of
payments made by the DHCSSP, BP identified multiple business economic loss claim determinations that appeared to result
from an interpretation of the Economic and Property Damages Settlement Agreement (EPD Settlement Agreement) by the claims
administrator that BP believes was incorrect. See Legal proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013
and page 33 of this report for further details on the settlements with the PSC and related matters.
Until the uncertainties described below are resolved, management is unable to estimate reliably the value and volume of
future business economic loss claims and whether, and to what extent, received or processed but unpaid business economic
loss claims will be paid, except where an eligibility notice has been issued and is not subject to further appeal by BP
within the claims facility. Firstly, the inherent uncertainty as to the interpretation of the EPD Settlement Agreement in
respect of causation issues will continue until the issue of causation and the requirements for class membership under the
EPD Settlement Agreement are resolved on appeal, if an appeal to the Supreme Court is allowed, and until the impact of any
new policies and procedures implemented in response to these issues and of the revised policy for the matching of revenue
and expenses for business economic loss claims on the value and volume of business economic loss claims becomes clear.
Secondly, uncertainty arises from the lack of sufficient claims data under the DHCSSP from which to extrapolate any
reliable trends - the number of business economic loss claims received and the average amounts paid in respect of such
claims prior to the district court's injunction were higher than previously assumed by BP. This inability to extrapolate
any reliable trends will continue until a sufficient number of relevant claims have been assessed against the revised
policy for the matching of revenue and expenses for business economic loss claims (implemented in May 2014) and
uncertainties concerning interpretation of the EPD Settlement Agreement described above have been resolved. Assessment of
existing claims by the DHCSSP under the revised policy is ongoing. The PSC has filed a motion seeking to amend the revised
policy. Thirdly, there is uncertainty as to the ultimate deadline for filing business economic loss claims, which is
dependent on the date on which all relevant appeals are concluded. Management believes, therefore, that no reliable
estimate can currently be made of any business economic loss claims not yet received, processed or paid by the DHCSSP,
except where an eligibility notice has been issued and is not subject to further appeal by BP within the claims facility. A
provision for such business economic loss claims will be established when a reliable estimate can be made of the
liability.
Top of page 20
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The current estimate for the total cost of those elements of the PSC settlement that BP considers can be reliably estimated
is $9.7 billion. The DHCSSP has issued eligibility notices, most of which are disputed by BP, in respect of business
economic loss claims of $906 million which have not been provided for. The majority of these claims are being re-assessed
using the new matching policy. Furthermore, a significant number of business economic loss claims have been received but
have not yet been processed, and further claims are likely to be received. The total cost of the PSC settlement is likely
to be significantly higher than the amount recognized to date of $9.7 billion because the current estimate does not reflect
business economic loss claims not yet received, processed or paid, except where an eligibility notice has been issued and
is not subject to further appeal by BP within the claims facility.
The provision recognized for litigation and claims includes an estimate for State and Local Claims. Although the provision
recognized is BP's current reliable best estimate of the amount required to settle these obligations, significant
uncertainty exists in relation to the outcome of any litigation proceedings and the amount of claims that will become
payable by BP. See Legal proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013 and Contingent liabilities
below for further details.
Significant uncertainties exist in relation to the amount of claims that are to be paid and will become payable, including
claims payable under the DHCSSP and State and Local Claims. There is significant uncertainty in relation to the amounts
that ultimately will be paid in relation to current claims, and the number, type and amounts payable for claims not yet
reported as described above and in Legal proceedings on page 33 and the outcomes of any further litigation including in
relation to potential opt-outs from the PSC settlement or otherwise. There is also uncertainty as to the cost of
administering the claims process under the DHCSSP.
Clean Water Act penalties
A provision of $3,510 million was recognized in 2010 for estimated civil penalties under Section 311 of the Clean Water
Act, which was determined by using the mid-point in the range of estimates for the number of barrels of oil spilled (3.2
million barrels). A penalty rate of $1,100 per barrel was applied, the statutory maximum penalty in the absence of gross
negligence or wilful misconduct.
In September 2014, the district court issued its decision in the Phase 1 trial that the discharge of oil was the result of
the gross negligence and wilful misconduct of BP Exploration & Production Inc. (BPXP) and that BPXP is therefore subject to
enhanced civil penalties. The statutory maximum penalty is up to $4,300 per barrel of oil discharged where gross negligence
or wilful misconduct is proven.
BP does not believe that the evidence at trial supports a finding of gross negligence and wilful misconduct and intends to
appeal the Phase 1 ruling. In the meantime BP has filed a motion with the district court to amend the findings in the Phase
1 ruling, to alter or amend the judgment, or for a new trial.
BP continues to believe that a provision of $3,510 million represents a reliable estimate of the amount of the liability if
the appeal is successful and this provision, calculated on the basis of the previous assumptions, has been maintained in
the accounts.
If BP is unsuccessful in its appeal, and the ruling of gross negligence and wilful misconduct is upheld, the maximum
penalty that could be imposed is up to $4,300 per barrel. Based upon this penalty rate and the US government's current
estimate of the number of barrels spilled, the maximum penalty could be up to $18 billion.
However, in assessing the amount of the penalty, the court is directed to consider a number of statutory penalty factors,
including 'the seriousness of the violation or violations, the economic benefit to the violator, if any, resulting from the
violation, the degree of culpability involved, any other penalty for the same incident, any history of prior violations,
the nature, extent, and degree of success of any efforts of the violator to minimize or mitigate the effects of the
discharge, the economic impact of the penalty on the violator, and any other matters as justice may require'. The court has
wide discretion in deciding how to apply these factors to determine the penalty and what weighting to ascribe to different
factors. BP is therefore unable to ascribe probabilities to possible outcomes within the range of potential penalties and
cannot determine a reliable estimate for any additional penalty which might apply should the gross negligence finding be
upheld.
Top of page 21
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
Any amount that may become payable by BP is subject to a very high level of uncertainty since it will depend on the outcome
of BP's appeal as well as what is determined by the court in the federal multi-district litigation proceedings in New
Orleans (MDL 2179) with respect to the volume of oil spilled and the application of statutory penalty factors as noted
above. Furthermore, in the second phase of the trial the court will also rule on whether BP's conduct involved negligence
or gross negligence with respect to source control and although this does not affect the maximum penalty following a
finding of gross negligence in the first phase of the trial, it could bear on the court's consideration of the statutory
penalty factors. The district court could issue its decision on the second phase of the trial, relating to source control
and the volume of oil spilled, at any time, and has scheduled a trial on the subsequent phase to determine the amount of
the Clean Water Act penalty to start on 20 January 2015.
The court has wide discretion in its determination as to whether a defendant's conduct involved negligence or gross
negligence as well as in its determinations on the volume of oil spilled and the application of statutory penalty factors.
Given the significant uncertainty, the very wide range of possible outcomes if BP is unsuccessful in its appeal of the
recent ruling, and the inability to ascribe probabilities to possible outcomes within the range, management is not able to
estimate reliably any further liability for the Clean Water Act penalty arising in the event that BP is not successful in
its appeal. A contingent liability is therefore disclosed. See Contingent liabilities below for further information.
See BP Annual Report and Form 20-F 2013 - Financial statements - Note 2 for further details and Legal proceedings on pages
257-265 and on page 33 of this report.
Provision movements and analysis of income statement charge
A net increase in provisions of $662 million for the third quarter ($892 million for the nine months) arises due to
increases in the provisions for natural resource damage assessment, claims administration costs and business economic loss
claims, offset by adjustments to other claims provisions. The increase in provisions for the nine months also includes an
increase in estimated legal costs. Expenses incurred that are eligible to be paid from the Trust exceeded the Trust
headroom by $25 million.
Third Nine Cumulative
quarter months since the
$ million 2014 2014 incident
Environmental costs 190 190 3,221
Spill response costs - - 14,304
Litigation and claims costs 472 702 26,345
Clean Water Act penalties - amount provided - - 3,510
Other costs charged directly to the income statement 27 83 1,226
Recoveries credited to the income statement - - (5,681)
Charge (credit) related to the trust fund (656) (662) (137)
Other costs of the trust fund - - 8
Loss before interest and taxation 33 313 42,796
Finance costs - related to the trust funds - - 137
- not related to the trust funds 10 29 85
Loss before taxation 43 342 43,018
Further information on provisions is provided in BP Annual Report and Form 20-F 2013 - Financial statements - Note 2.
Contingent liabilities
BP considers that it is not currently possible to measure reliably other obligations arising from the incident, namely any
obligation in relation to natural resource damages claims or associated legal costs (except for the estimated costs of the
assessment phase and the costs relating to early restoration agreements referred to above), claims asserted in civil
litigation including any further litigation through excluded parties from the PSC settlement including as set out in Legal
proceedings on pages 257-265 of BP Annual Report and Form 20-F 2013 and page 33 of this report, the cost of business
economic loss claims under the PSC settlement not yet received, processed or paid by the claims facility (except where an
eligibility notice has been issued and is not subject to further appeal by BP within the claims facility), any further
obligation that may arise from state and local government submissions under OPA 90, any obligation that may arise from
securities-related litigation, and any obligation in relation to other potential private or governmental litigation, fines
or penalties (except for State and Local Claims, and Clean Water Act penalties provided for as a reliable estimate of the
liability in the event of a final determination of negligence rather than gross negligence or wilful misconduct, as
described above under Provisions), nor is it practicable to estimate their magnitude or possible timing of payment.
Top of page 22
Financial statements (continued)
Notes
2. Gulf of Mexico oil spill (continued)
The magnitude and timing of all possible obligations in relation to the Gulf of Mexico oil spill continue to be subject to
a very high degree of uncertainty.
See also BP Annual Report and Form 20-F 2013 - Financial statements - Note 2.
3. Non-current assets held for sale
On 22 April 2014, BP announced that it had reached agreement to sell its interests in the Northstar and Endicott oilfields
and 50% of its interests in each of the Milne Point and Liberty oilfields on the North Slope of Alaska to Hilcorp Alaska
LLC, a subsidiary of Hilcorp Energy for $1.25 billion, subject to closing adjustments, plus an additional carry of up to
$250 million if the Liberty field is developed. The sale also includes BP's interests in the oil and gas pipelines
associated with these fields. These assets, amounting to $1,384 million, and associated liabilities of $431 million, have
been classified as held for sale in the group balance sheet at 30 September 2014. The sale is expected to be complete by
the end of the year, subject to state and federal regulatory approval.
4. Analysis of replacement cost profit before interest and tax and reconciliation to
profit before taxation
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
4,158 4,049 3,311 Upstream 12,019 14,120
616 933 1,231 Downstream 2,958 3,279
- - - TNK-BP(a) - 12,500
792 1,024 107 Rosneft(b) 1,649 1,095
(674) (434) (432) Other businesses and corporate (1,363) (1,714)
4,892 5,572 4,217 15,263 29,280
(30) (251) (33) Gulf of Mexico oil spill response (313) (251)
263 (76) 370 Consolidation adjustment - UPII* 384 819
5,125 5,245 4,554 RC profit before interest and tax 15,334 29,848
Inventory holding gains (losses)*
7 (1) 1 Upstream (6) 1
393 233 (1,566) Downstream (1,256) 286
44 26 (20) Rosneft (net of tax) 37 57
5,569 5,503 2,969 Profit before interest and tax 14,109 30,192
279 277 285 Finance costs 849 813
Net finance expense relating to pensions
118 79 73 and other post-retirement benefits 232 357
5,172 5,147 2,611 Profit before taxation 13,028 29,022
RC profit before interest and tax*(c)
530 1,643 1,800 US 4,568 3,413
4,595 3,602 2,754 Non-US 10,766 26,435
5,125 5,245 4,554 15,334 29,848
(a) BP ceased equity accounting for its share of TNK-BP's earnings from 22 October 2012. Nine months 2013 includes the gain arising on disposal of BP's interest in TNK-BP.
(b) BP's investment in Rosneft is accounted under the equity method from 21 March 2013. See Rosneft on page 8 for further information.
(c) A minor amendment has been made to the analysis by region for the comparative periods in 2013.
Top of page 23
Financial statements (continued)
Notes
5. Sales and other operating revenues
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
By segment
16,810 16,739 15,879 Upstream 49,624 51,446
90,481 86,871 87,068 Downstream 258,237 265,613
454 412 530 Other businesses and corporate 1,373 1,288
107,745 104,022 103,477 309,234 318,347
Less: sales and other operating revenues
between segments
10,512 9,729 9,427 Upstream 28,373 31,489
440 152 (73) Downstream 641 789
192 184 219 Other businesses and corporate 649 650
11,144 10,065 9,573 29,663 32,928
Third party sales and other operating revenues
6,298 7,010 6,452 Upstream 21,251 19,957
90,041 86,719 87,141 Downstream 257,596 264,824
262 228 311 Other businesses and corporate 724 638
Total third party sales and other operating
96,601 93,957 93,904 revenues 279,571 285,419
By geographical area(a)
35,541 35,507 34,678 US 105,010 105,272
71,892 67,303 66,402 Non-US 200,010 210,178
107,433 102,810 101,080 305,020 315,450
Less: sales and other operating revenues
10,832 8,853 7,176 between areas 25,449 30,031
96,601 93,957 93,904 279,571 285,419
(a) A minor amendment has been made to the analysis by region for the comparative periods in 2013.
6. Production and similar taxes
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
223 215 140 US 634 813
1,666 601 604 Non-US 1,912 4,743
1,889 816 744 2,546 5,556
Top of page 24
Financial statements (continued)
Notes
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. During the quarter
the company repurchased 209 million ordinary shares at a cost of $1,637 million - 12 million ordinary shares at a cost of
$100 million completed the share repurchase programme announced on 22 March 2013. The remaining repurchases continue the
share buybacks as announced on 29 April 2014. The number of shares in issue is reduced when shares are repurchased, but is
not reduced in respect of the period-end commitment to repurchase shares subsequent to the end of 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.
Third Second Third Nine Nine
quarter quarter quarter months months
2013 2014 2014 $ million 2014 2013
- More to follow, for following part double click ID:nRSb4169VcRecent news on BP
See all newsREG - BP PLC - Director/PDMR Shareholding
AnnouncementREG - BP PLC - Total Voting Rights
AnnouncementREG - BP PLC - Director/PDMR Shareholding
AnnouncementREG - BP PLC - Director/PDMR Shareholding
AnnouncementREG - BP PLC - Director/PDMR Shareholding
Announcement