BP 2009 Annual Report Download - page 55

BP Annual Report and Accounts 2009
Business review
Business review
Business review
Financial performance
Group results
The following summarizes the group’s results.
$ million except per share amounts
2009 2008 2007
Sales and other operating revenues 239,272 361,143 284,365
Profit for the year 16,759 21,666 21,169
Profit for the year attributable to BP shareholders 16,578 21,157 20,845
Profit attributable to BP shareholders per ordinary share – cents 88.49 112.59 108.76
Dividends paid per ordinary share – cents 56.00 55.05 42.30
For a discussion of the business environment in 2007-2009, see Group overview on page 12.
Profit attributable to BP shareholders
Profit attributable to BP shareholders for the year ended 31 December
2009 was $16,578 million, including inventory holding gains, net of tax,
of $2,623 million and a net charge for non-operating items, after tax, of
$1,067 million. In addition, fair value accounting effects had a favourable
impact, net of tax, of $445 million relative to management’s measure
of performance. Inventory holding gains and losses, net of tax, are
described in footnote (a) below. Further information on non-operating
items and fair value accounting effects can be found on pages 58-59.
Profit attributable to BP shareholders for the year ended
31 December 2008 was $21,157 million, including inventory holding
losses, net of tax, of $4,436 million and a net charge for non-operating
items, after tax, of $796 million. In addition, fair value accounting effects
had a favourable impact, net of tax, of $146 million relative to
management’s measure of performance. Inventory holdings gains or
losses, net of tax, are described in footnote (a) below.
Profit attributable to BP shareholders for the year ended
31 December 2007 was $20,845 million, including inventory holding
gains, net of tax, of $2,475 million and a net charge for non-operating
items, after tax, of $373 million. In addition, fair value accounting effects
had an unfavourable impact, net of tax, of $198 million relative to
management’s measure of performance. Further information on non-
operating items and fair value accounting effects can be found on
pages 58-59.
The primary additional factors reflected in profit for 2009,
compared with 2008, were lower realizations and refining margins and
higher depreciation, partly offset by higher production, stronger
operational performance and lower costs.
The primary additional factors reflected in profit for 2008,
compared with 2007, were higher realizations, a higher contribution from
the gas marketing and trading business, improved oil supply and trading
performance, improved marketing performance and strong cost
management; however, these positive effects were partly offset by
weaker refining margins, particularly in the US, higher production taxes,
higher depreciation, and adverse foreign exchange impacts.
Profits and margins for the group and for individual business
segments can vary significantly from period to period as a result of
changes in such factors as oil prices, natural gas prices and refining
margins. Accordingly, the results for the current and prior periods do
not necessarily reflect trends, nor do they provide indicators of results
for future periods.
Employee numbers were approximately 80,300 at 31 December 2009,
92,000 at 31 December 2008 and 98,100 at 31 December 2007.
aInventory holding gains and losses represent the difference between the cost of sales calculated
using the average cost to BP of supplies incurred during the year and the cost of sales calculated
on the first-in first-out (FIFO) method including 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 the historic cost of
acquisition or manufacture rather than the current 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 on a FIFO basis (and any related
movements in net realizable value provisions) and the charge that would arise using average cost
of supplies incurred during the period. For this purpose, average cost of supplies incurred during
the period is calculated by dividing the total cost of inventory purchased in the period by the
number of barrels acquired. 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.
Management believes this information 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 principally to changes in oil prices as well as changes to underlying inventory levels.
In order for investors to understand the operating performance of the group excluding the impact
of oil 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
information.
Capital expenditure and acquisitions
$ million
2009 2008 2007
Exploration and Production 14,696 22,026 13,904
Refining and Marketing 4,114 4,710 4,356
Other businesses and corporate 1,191 1,450 934
Capital expenditure 20,001 28,186 19,194
Acquisitions and asset exchanges 308 2,514 1,447
20,309 30,700 20,641
Disposals (2,681) (929) (4,267)
Net investment 17,628 29,771 16,374
Capital expenditure and acquisitions in 2009, 2008 and 2007 amounted
to $20,309 million, $30,700 million and $20,641 million respectively.
In 2008, this included $4,731 million in respect of our transaction with
Husky Energy Inc. and $3,667 million in respect of our purchase of all of
Chesapeake Energy Corporation’s interest in the Arkoma Basin Woodford
Shale assets and the purchase of a 25% interest in Chesapeake’s
Fayetteville Shale assets. Acquisitions in 2007 included the remaining
31% of the Rotterdam (Nerefco) refinery from Chevron’s Netherlands
manufacturing company.
Excluding acquisitions and asset exchanges, capital expenditure
for 2009 was $20,001 million compared with $28,186 million in 2008 and
$19,194 million in 2007.
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