REG - BP PLC - 4Q17 part 1 of 1 <Origin Href="QuoteRef">BP.L</Origin> - Part 3
06/02/2018 07:05
- Part 3: For the preceding part double click ID:nRSF9787Db
129,757
Goodwill 11,551 11,194
Intangible assets 18,355 18,183
Investments in joint ventures 7,994 8,609
Investments in associates 16,991 14,092
Other investments 1,245 1,033
Fixed assets 185,607 182,868
Loans 646 532
Trade and other receivables 1,434 1,474
Derivative financial instruments 4,110 4,359
Prepayments 1,112 945
Deferred tax assets 4,469 4,741
Defined benefit pension plan surpluses 4,169 584
201,547 195,503
Current assets
Loans 190 259
Inventories 19,011 17,655
Trade and other receivables 24,849 20,675
Derivative financial instruments 3,032 3,016
Prepayments 1,414 1,486
Current tax receivable 761 1,194
Other investments 125 44
Cash and cash equivalents 25,586 23,484
74,968 67,813
Total assets 276,515 263,316
Current liabilities
Trade and other payables 44,209 37,915
Derivative financial instruments 2,808 2,991
Accruals 4,960 5,136
Finance debt 7,739 6,634
Current tax payable 1,686 1,666
Provisions 3,324 4,012
64,726 58,354
Non-current liabilities
Other payables 13,889 13,946
Derivative financial instruments 3,761 5,513
Accruals 505 469
Finance debt 55,491 51,666
Deferred tax liabilities 7,982 7,238
Provisions 20,620 20,412
Defined benefit pension plan and other post-retirement benefit plan deficits 9,137 8,875
111,385 108,119
Total liabilities 176,111 166,473
Net assets 100,404 96,843
Equity
BP shareholders' equity 98,491 95,286
Non-controlling interests 1,913 1,557
Total equity 100,404 96,843
Top of page 16
BP p.l.c. Group results
Fourth quarter and full year 2017
Condensed group cash flow statement
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Operating activities
Profit (loss) before taxation 1,182 2,955 617 7,180 (2,295)
Adjustments to reconcile profit (loss) before taxation
taxation to net cash provided by operating
activities
Depreciation, depletion and amortization and
exploration expenditure written off 4,417 4,121 3,808 17,187 15,779
Impairment and (gain) loss on sale of
businesses and fixed assets (272) 16 (553) 6 (2,796)
Earnings from equity-accounted entities,
less dividends received (820) (111) (605) (1,254) (855)
Net charge for interest and other finance
expense, less net interest paid 294 163 310 793 795
Share-based payments 166 177 150 661 779
Net operating charge for pensions and other
post-retirement benefits, less contributions
and benefit payments for unfunded plans (215) (160) (347) (394) (467)
Net charge for provisions, less payments 2,244 (144) (629) 2,106 4,487
Movements in inventories and other current
and non-current assets and liabilities (60) 305 393 (3,352) (3,198)
Income taxes paid (1,033) (1,298) (716) (4,002) (1,538)
Net cash provided by operating activities 5,903 6,024 2,428 18,931 10,691
Investing activities
Expenditure on property, plant and equipment,
intangible and other assets (4,422) (4,136) (4,658) (16,562) (16,701)
Acquisitions, net of cash acquired (16) (146) (1) (327) (1)
Investment in joint ventures (15) (5) (37) (50) (50)
Investment in associates (368) (176) (226) (901) (700)
Total cash capital expenditure (4,821) (4,463) (4,922) (17,840) (17,452)
Proceeds from disposal of fixed assets 2,287 149 391 2,936 1,372
Proceeds from disposal of businesses, net of
cash disposed 173 92 78 478 1,259
Proceeds from loan repayments 8 308 7 349 68
Net cash used in investing activities (2,353) (3,914) (4,446) (14,077) (14,753)
Financing activities
Net issue (repurchase) of shares (343) - - (343) -
Proceeds from long-term financing 201 3,078 3,069 8,712 12,442
Repayments of long-term financing (2,657) (1,239) (1,733) (6,276) (6,685)
Net increase (decrease) in short-term debt (297) 123 375 (158) 51
Net increase (decrease) in non-controlling interests 982 - 126 1,063 887
Dividends paid - BP shareholders (1,627) (1,676) (1,182) (6,153) (4,611)
- non-controlling interests (32) (32) (24) (141) (107)
Net cash provided by (used in) financing activities (3,773) 254 631 (3,296) 1,977
Currency translation differences relating to
cash and cash equivalents 29 146 (649) 544 (820)
Increase (decrease) in cash and cash equivalents (194) 2,510 (2,036) 2,102 (2,905)
Cash and cash equivalents at beginning of period 25,780 23,270 25,520 23,484 26,389
Cash and cash equivalents at end of period 25,586 25,780 23,484 25,586 23,484
Top of page 17
BP p.l.c. Group results
Fourth quarter and full year 2017
Notes
Note 1. Basis of preparation
The results for the interim periods and for the year ended 31 December 2017 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 2016 included in BP Annual Report and Form 20-F 2016.
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 2017, which do not differ significantly from those used in BP Annual Report and
Form 20-F 2016.
Note 2. Gulf of Mexico oil spill
(a) Overview
The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2016 - Financial
statements - Note 2 and Legal proceedings on page 261.
The group income statement includes a post-tax charge for the fourth quarter of $1,693 million due to an increase in the
provision relating to business economic loss (BEL) and other claims associated with the Deepwater Horizon Court Supervised
Settlement Program (DHCSSP). The increase in the provision is primarily a result of significantly higher average claims
determinations issued by the DHCSSP in the fourth quarter and the continuing effect of the Fifth Circuit's May 2017 opinion
on the matching of revenues with expenses when evaluating BEL claims.
The group income statement for the fourth quarter also includes finance costs relating to the unwinding of discounting
effects and a tax charge of $3,012 million in respect of the revaluation of US deferred tax assets related to the Gulf of
Mexico oil spill following the reduction in the US federal corporate income tax rate from 35% to 21% enacted in December
2017.
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.
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Income statement
Production and manufacturing expenses 2,221 84 674 2,687 6,640
Profit (loss) before interest and taxation (2,221) (84) (674) (2,687) (6,640)
Finance costs 124 122 125 493 494
Profit (loss) before taxation (2,345) (206) (799) (3,180) (7,134)
Taxation (2,495) 71 268 (2,222) 3,105
Profit (loss) for the period (4,840) (135) (531) (5,402) (4,029)
The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $65,765 million.
Top of page 18
BP p.l.c. Group results
Fourth quarter and full year 2017
Note 2. Gulf of Mexico oil spill (continued)
31 December 31 December
$ million 2017 2016
Balance sheet
Current assets
Trade and other receivables 252 194
Current liabilities
Trade and other payables (2,089) (3,056)
Provisions (1,439) (2,330)
Net current assets (liabilities) (3,276) (5,192)
Non-current assets
Deferred tax assets 2,067 2,973
Non-current liabilities
Other payables (12,253) (13,522)
Provisions (1,141) (112)
Deferred tax liabilities 3,634 5,119
Net non-current assets (liabilities) (7,693) (5,542)
Net assets (liabilities) (10,969) (10,734)
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Cashflow statement - Operating activities
Profit (loss) before taxation (2,345) (206) (799) (3,180) (7,134)
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 124 122 125 493 494
Net charge for provisions, less payments 2,181 68 (376) 2,542 4,353
Movements in inventories and other current
and non-current assets and liabilities (413) (548) (993) (5,191) (4,818)
Pre-tax cash flows (453) (564) (2,043) (5,336) (7,105)
Cash outflows in 2016 and 2017 include payments made under the 2012 agreement with the US government to resolve all federal
criminal claims arising from the incident and the 2016 consent decree and settlement agreement with the United States and
the five Gulf coast states. Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax
basis, amounted to an outflow of $284 million and $5,167 million in the fourth quarter and full year of 2017 respectively.
For the same periods in 2016, the amount was an outflow of $2,043 million and $6,892 million respectively.
Top of page 19
BP p.l.c. Group results
Fourth quarter and full year 2017
Note 2. Gulf of Mexico oil spill (continued)
(b) Provisions and other payables
Provisions
Movements in the remaining provision, which relates to litigation and claims, are shown in the table below.
$ million
At 1 October 2017 726
Increase in provision 2,210
Reclassified to other payables (50)
Utilization (306)
At 31 December 2017 2,580
Movements in the remaining provision for the full year are shown in the table below.
$ million
At 1 January 2017 2,442
Increase in provision 2,647
Reclassified to other payables (759)
Utilization (1,750)
At 31 December 2017 2,580
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.
PSC settlement
The provision for the cost associated with the 2012 Plaintiffs' Steering Committee (PSC) settlement reflects the latest
estimate for claims, including business economic loss claims and associated administration costs. However, the amounts
ultimately payable may differ from the amount provided and the timing of payments is uncertain.
The increase in the provision in the quarter is primarily a result of significantly higher average claims determinations
issued by the Deepwater Horizon Court Supervised Settlement Program (settlement programme) during the fourth quarter and
the continuing effect of the May 2017 Fifth Circuit opinion on the policy addressing the matching of revenue with expenses
in relation to business economic loss claims. See Legal proceedings on page 29 for further details on the May 2017 Fifth
Circuit opinion and related appeals.
The settlement programme's determination of business economic loss claims was substantially completed by the end of 2017.
Nevertheless, a significant number of business economic loss claims determined by the settlement programme have been and
continue to be appealed by BP and/or the claimants, with the total value of claims under appeal or eligible for appeal
approximately doubling during the fourth quarter. The provision at the end of the year reflects the latest estimate of the
amounts that are expected ultimately to be paid to resolve these claims. Depending upon the resolution of these claims
(including how such resolution may be impacted by the May 2017 Fifth Circuit opinion), the amounts payable may differ from
those currently provided.
The settlement programme is expected to issue determinations with respect to the remaining business economic loss claims in
the first half of 2018. Whilst BP has a better understanding of the total population of remaining claims, there is
uncertainty around how these claims will ultimately be determined, including in relation to the impact of the May 2017
Fifth Circuit opinion on the determination of the business economic claims.
Payments to resolve outstanding claims under the PSC settlement are now expected to be made over a number of years. The
timing of payments, however, is uncertain, and, in particular, will be impacted by how long it takes to resolve claims that
have been appealed and may be appealed in the future.
Other payables
Other payables include amounts payable under the 2012 agreement with the US government to resolve all federal criminal
claims arising from the incident, amounts payable under the consent decree and settlement agreement with the United States
and the five Gulf coast states for natural resource damages, state claims and Clean Water Act penalties, 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.
Top of page 20
BP p.l.c. Group results
Fourth quarter and full year 2017
Note 3. Analysis of replacement cost profit (loss) before interest and tax and
reconciliation to profit (loss) before taxation
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Upstream 1,928 1,242 692 5,221 574
Downstream 1,773 2,175 899 7,221 5,162
Rosneft 321 137 158 836 590
Other businesses and corporate(a) (2,833) (460) (1,117) (4,445) (8,157)
1,189 3,094 632 8,833 (1,831)
Consolidation adjustment - UPII* (149) (130) (132) (212) (196)
RC profit (loss) before interest and tax* 1,040 2,964 500 8,621 (2,027)
Inventory holding gains (losses)*
Upstream - 13 19 8 60
Downstream 719 520 558 758 1,484
Rosneft (net of tax) 97 24 24 87 53
Profit (loss) before interest and tax 1,856 3,521 1,101 9,474 (430)
Finance costs 616 511 434 2,074 1,675
Net finance expense relating to pensions and
other post-retirement benefits 58 55 50 220 190
Profit (loss) before taxation 1,182 2,955 617 7,180 (2,295)
RC profit (loss) before interest and tax*
US (1,509) 428 (1,646) (266) (8,311)
Non-US 2,549 2,536 2,146 8,887 6,284
1,040 2,964 500 8,621 (2,027)
(a) Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.
Top of page 21
BP p.l.c. Group results
Fourth quarter and full year 2017
Note 4. Segmental analysis
Sales and other operating revenues Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
By segment
Upstream 12,651 10,969 9,129 45,440 33,188
Downstream 62,697 54,881 46,834 219,853 167,683
Other businesses and corporate 480 378 424 1,469 1,667
75,828 66,228 56,387 266,762 202,538
Less: sales and other operating revenues
between segments
Upstream 6,929 5,312 4,695 24,179 17,581
Downstream 913 765 523 1,800 1,291
Other businesses and corporate 170 133 162 575 658
8,012 6,210 5,380 26,554 19,530
Third party sales and other operating revenues
Upstream 5,722 5,657 4,434 21,261 15,607
Downstream 61,784 54,116 46,311 218,053 166,392
Other businesses and corporate 310 245 262 894 1,009
Total sales and other operating revenues 67,816 60,018 51,007 240,208 183,008
By geographical area
US 24,127 21,853 18,642 88,709 68,772
Non-US 50,778 44,212 37,381 176,113 128,771
74,905 66,065 56,023 264,822 197,543
Less: sales and other operating revenues
between areas 7,089 6,047 5,016 24,614 14,535
67,816 60,018 51,007 240,208 183,008
Depreciation, depletion and amortization Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Upstream
US 1,107 1,154 1,216 4,631 4,396
Non-US 2,339 2,154 1,859 8,637 7,835
3,446 3,308 3,075 13,268 12,231
Downstream
US 218 222 219 875 856
Non-US 301 287 273 1,141 1,094
519 509 492 2,016 1,950
Other businesses and corporate
US 16 17 20 65 71
Non-US 64 70 55 235 253
80 87 75 300 324
Total group 4,045 3,904 3,642 15,584 14,505
Note 5. Production and similar taxes
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
US 44 (69) 38 52 155
Non-US(a) 467 518 161 1,723 528
511 449 199 1,775 683
(a) Amounts reported in prior quarters of 2017 have been amended as certain charges are better presented as Production and similar taxes rather than the previous presentation which showed the amounts as royalties within the Purchases line; there is no impact
upon 2016. Amended total Production and similar taxes are $468 million for the first quarter, $347 million for the second quarter and $449 million for the third quarter. The previously reported amounts were $306 million, $189 million and $278 million
respectively. Amended non-US Production and similar taxes are $432 million for the first quarter, $306 million for the second quarter and $518 million for the third quarter. The previously reported amounts were $270 million, $148 million and $347 million
respectively. Purchases have been amended by the same amounts and there is, therefore, no impact on reported profit.
Top of page 22
BP p.l.c. Group results
Fourth quarter and full year 2017
Note 6. Earnings per share and shares in issue
Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit (loss) for the period attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. During the quarter
the company repurchased 51 million ordinary shares for a total consideration of $343 million, including transaction costs
of $2 million, as part of the share buyback programme as announced on 31 October 2017. The number of shares in issue is
reduced when shares are repurchased.
The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a
result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS
amount for the year-to-date period.
For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the
number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury
stock method.
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Results for the period
Profit (loss) for the period attributable to
BP shareholders 27 1,769 497 3,389 115
Less: preference dividend - - - 1 1
Profit (loss) attributable to BP ordinary
shareholders 27 1,769 497 3,388 114
Number of shares (thousand)(a)
Basic weighted average number of
shares outstanding 19,804,932 19,756,117 18,995,725 19,692,613 18,744,800
ADS equivalent 3,300,822 3,292,686 3,165,954 3,282,102 3,124,133
Weighted average number of shares
outstanding used to calculate
diluted earnings per share 19,929,655 19,866,745 19,107,599 19,816,442 18,855,319
ADS equivalent 3,321,609 3,311,124 3,184,599 3,302,740 3,142,553
Shares in issue at period-end 19,817,325 19,797,657 19,438,990 19,817,325 19,438,990
ADS equivalent 3,302,887 3,299,609 3,239,831 3,302,887 3,239,831
(a) Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans.
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 29 March 2018 to
shareholders and American Depositary Share (ADS) holders on the register on 16 February 2018. The corresponding amount in
sterling is due to be announced on 19 March 2018, calculated based on the average of the market exchange rates for the four
dealing days commencing on 13 March 2018. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A
scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new
ordinary shares and ADS holders in the form of new ADSs. Details of the fourth quarter dividend and timetable are available
at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
Fourth Third Fourth
quarter quarter quarter Year Year
2017 2017 2016 2017 2016
Dividends paid per ordinary share
cents 10.000 10.000 10.000 40.000 40.000
pence 7.443 7.621 7.931 30.979 29.418
Dividends paid per ADS (cents) 60.00 60.00 60.00 240.00 240.00
Scrip dividends
Number of shares issued (millions) 53.3 51.3 129.2 289.8 548.0
Value of shares issued ($ million) 354 298 710 1,714 2,858
Top of page 23
BP p.l.c. Group results
Fourth quarter and full year 2017
Note 8. Net Debt*
Net debt ratio * Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Gross debt 63,230 65,784 58,300 63,230 58,300
Fair value (asset) liability of hedges related
to finance debt(a) 175 (227) 697 175 697
63,405 65,557 58,997 63,405 58,997
Less: cash and cash equivalents 25,586 25,780 23,484 25,586 23,484
Net debt 37,819 39,777 35,513 37,819 35,513
Equity 100,404 100,138 96,843 100,404 96,843
Net debt ratio 27.4% 28.4% 26.8% 27.4% 26.8%
Analysis of changes in net debt Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Opening balance
Finance debt 65,784 63,004 58,997 58,300 53,168
Fair value (asset) liability of hedges related
to finance debt(a) (227) 60 (1,113) 697 379
Less: cash and cash equivalents 25,780 23,270 25,520 23,484 26,389
Opening net debt 39,777 39,794 32,364 35,513 27,158
Closing balance
Finance debt 63,230 65,784 58,300 63,230 58,300
Fair value (asset) liability of hedges related
to finance debt(a) 175 (227) 697 175 697
Less: cash and cash equivalents 25,586 25,780 23,484 25,586 23,484
Closing net debt 37,819 39,777 35,513 37,819 35,513
Decrease (increase) in net debt 1,958 17 (3,149) (2,306) (8,355)
Movement in cash and cash equivalents
(excluding exchange adjustments) (223) 2,364 (1,387) 1,558 (2,085)
Net cash outflow (inflow) from financing(b) 2,753 (1,962) (1,711) (2,278) (5,808)
Other movements (299) (186) (146) (564) 278
Movement in net debt before exchange effects 2,231 216 (3,244) (1,284) (7,615)
Exchange adjustments (273) (199) 95 (1,022) (740)
Decrease (increase) in net debt 1,958 17 (3,149) (2,306) (8,355)
(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 $634 million (third quarter 2017 liability of $883 million and fourth quarter 2016 liability of $1,962 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.
(b) Comprises proceeds and repayments of long-term financing and net (increase) decrease in short-term debt.
Note 9. Inventory valuation
A provision of $474 million was held at 31 December 2017 ($501 million at 30 September 2017 and $501 million at 31 December
2016) to write inventories down to their net realizable value. The net movement credited to the income statement during the
fourth quarter 2017 was $24 million (third quarter 2017 was a credit of $131 million and fourth quarter 2016 was a charge
of $13 million).
Note 10. Statutory accounts
The financial information shown in this publication, which was approved by the Board of Directors on 5 February 2018, 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 24
BP p.l.c. Group results
Fourth quarter and full year 2017
Additional information
Capital expenditure*
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Capital expenditure on a cash basis
Organic capital expenditure* 4,622 3,993 4,473 16,501 16,675
Inorganic capital expenditure*(a) 199 470 449 1,339 777
4,821 4,463 4,922 17,840 17,452
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Organic capital expenditure by segment
Upstream
US 726 827 602 2,999 3,415
Non-US 2,819 2,601 2,918 10,764 10,929
3,545 3,428 3,520 13,763 14,344
Downstream
US 349 159 303 809 774
Non-US 598 356 530 1,590 1,328
947 515 833 2,399 2,102
Other businesses and corporate
US 30 10 25 64 32
Non-US 100 40 95 275 197
130 50 120 339 229
4,622 3,993 4,473 16,501 16,675
Organic capital expenditure by geographical area
US 1,105 996 930 3,872 4,221
Non-US 3,517 2,997 3,543 12,629 12,454
4,622 3,993 4,473 16,501 16,675
(a) Third quarter and full year 2017 include amounts paid to acquire interests in Mauritania and Senegal and other items. Full year 2017 also includes amounts paid to purchase an interest in the Zohr gas field in Egypt and in exploration blocks in Senegal.
Top of page 25
BP p.l.c. Group results
Fourth quarter and full year 2017
Non-operating items*
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Upstream
Impairment and gain (loss) on sale of
businesses and fixed assets(a)(b) (181) 18 479 (563) 2,391
Environmental and other provisions 1 - - 1 (8)
Restructuring, integration and rationalization costs (4) (3) (71) (24) (373)
Fair value gain (loss) on embedded derivatives 2 1 (17) 33 32
Other(b)(c) 38 (162) 245 (118) (289)
(144) (146) 636 (671) 1,753
Downstream
Impairment and gain (loss) on sale of businesses
and fixed assets(d) 469 (35) 72 579 405
Environmental and other provisions (19) - 2 (19) (73)
Restructuring, integration and rationalization costs (69) (19) (103) (171) (300)
Fair value gain (loss) on embedded derivatives - - - - -
Other 1 (1) (48) - (56)
382 (55) (77) 389 (24)
Rosneft
Impairment and gain (loss) on sale of businesses
and fixed assets - - 62 - 62
Environmental and other provisions - - - - -
Restructuring, integration and rationalization costs - - - - -
Fair value gain (loss) on embedded derivatives - - - - -
Other - - (39) - (39)
- - 23 - 23
Other businesses and corporate
Impairment and gain (loss) on sale of businesses
and fixed assets (16) 1 2 (22) -
Environmental and other provisions (153) - - (156) (134)
Restructuring, integration and rationalization costs (35) (6) (21) (72) (90)
Fair value gain (loss) on embedded derivatives - - - - -
Gulf of Mexico oil spill(e) (2,221) (84) (674) (2,687) (6,640)
Other (14) 27 - 90 (55)
(2,439) (62) (693) (2,847) (6,919)
Total before interest and taxation (2,201) (263) (111) (3,129) (5,167)
Finance costs(e) (124) (122) (125) (493) (494)
Total before taxation (2,325) (385) (236) (3,622) (5,661)
Taxation credit (charge) on non-operating items(f) 669 111 56 1,172 2,833
Taxation - impact of US tax reform(g) (859) - - (859) -
Total after taxation for period (2,515) (274) (180) (3,309) (2,828)
(a) Fourth quarter and full year 2017 include an impairment charge relating to the US Lower 48 business, partially offset by gains associated with asset divestments. In addition, full year 2017 includes an impairment charge arising following the announcement
of the agreement to sell the Forties Pipeline System business to INEOS. Fourth quarter and full year 2016 principally relate to impairment reversals.
(b) Fourth quarter and full year 2016 include a $319-million exploration write-back relating to Block KG D6 in India. In addition, an impairment reversal of $234 million was also recorded in relation to this block.
(c) Fourth quarter and full year 2017 include BP's share of an impairment reversal recognized by the Angola LNG equity-accounted entity, partially offset by other items. Third quarter and full year 2017 include the write-off of $145 million in relation to the
value ascribed to certain licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. Full year 2016 includes the write-off of $334 million in relation to the value ascribed to the
licence in Brazil as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011.
(d) Fourth quarter and full year 2017 gain primarily reflects the disposal of our shareholding in the SECCO joint venture.
(e) See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.
(f) Fourth quarter and full year 2017 include the tax effect of the increase in the provision in the fourth quarter for business economic loss and other claims associated with the Deepwater Horizon Court Supervised Settlement Program (DHCSSP) at the new US tax
rate.
(g) Fourth quarter and full year 2017 include the impact of US tax reform, which reduced the US federal corporate income tax rate from 35% to 21% effective from 1 January 2018. The impact disclosed has been calculated as the change in deferred tax balances at
31 December 2017, excluding the increase in the provision in the fourth quarter for business economic loss and other claims associated with the DHCSSP, which arises following the reduction in the tax rate. The impact of the US tax reform has been treated
as a non-operating item because it is not considered to be part of underlying business operations, has a material impact upon the reported result and is substantially impacted by Gulf of Mexico oil spill charges, which are also treated as non-operating
items. Separate disclosure is considered meaningful and relevant to investors.
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BP p.l.c. Group results
Fourth quarter and full year 2017
Non-GAAP information on fair value accounting effects
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Favourable (adverse) impact relative to
management's measure of performance
Upstream (151) (174) (344) 27 (637)
Downstream (83) (108) 99 (135) (448)
(234) (282) (245) (108) (1,085)
Taxation credit (charge) 59 70 97 12 329
(175) (212) (148) (96) (756)
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.
Fourth Third Fourth
quarter quarter quarter Year Year
$ million 2017 2017 2016 2017 2016
Upstream
Replacement cost profit before interest and
tax adjusted for fair value accounting effects 2,079 1,416 1,036 5,194 1,211
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