BP 2011 Annual Report Download - page 107

BP Annual Report and Form 20-F 2011 105
Business review: BP in more depth
Business review
The group expects its total capital expenditure, excluding acquisitions and asset exchanges, to be around $22 billion in 2012. The following table
summarizes the group’s capital expenditure commitments for property, plant and equipment at 31 December 2011 and the proportion of that expenditure
for which contracts have been placed. Capital expenditure is considered to be committed when the project has received the appropriate level of internal
management approval. For jointly controlled assets, the net BP share is included in the amounts shown. Where operating lease costs are incurred in
connection with a capital project, some or all of the cost may be capitalized as part of the capital cost of the project. Such costs are included in the
amounts shown.
$ million
Capital expenditure commitments Total 2012 2013 2014 2015 2016
2017 and
thereafter
Committed on major projects 32,951 15,113 7,443 4,268 2,828 1,535 1,764
Amounts for which contracts have been placed 12,517 7,689 2,789 1,094 511 315 119
In addition, at 31 December 2011, the group had committed to capital expenditure relating to investments in equity-accounted entities amounting to $610
million. Contracts were in place for $332 million of this total.
Cash flow
The following table summarizes the group’s cash flows.
$ million
2011 2010 2009
Net cash provided by operating activities 22,154 13,616 27,716
Net cash (used in) investing activities (26,633) (3,960) (18,133)
Net cash provided by (used in) financing
activities 482 840 (9,551)
Currency translation differences relating
to cash and cash equivalents (492) (279) 110
Increase (decrease) in cash and cash
equivalents (4,489) 10,217 142
Cash and cash equivalents at beginning
of year 18,556 8,339 8,197
Cash and cash equivalents at end of year 14,067 18,556 8,339
Net cash provided by operating activities for the year ended 31 December
2011 was $22,154 million compared with $13,616 million for 2010, the
increase primarily reflecting a reduction in the cash outflow in respect of
the Gulf of Mexico oil spill from $16,019 million in 2010 to $6,813 million
in 2011. Excluding the impacts of the Gulf of Mexico oil spill, net cash
provided by operating activities was $28,967 million for 2011, compared to
$29,635 million for 2010, a decrease of $668 million. Profit before taxation
decreased by $1,018 million, working capital requirements increased by
$1,509 million and income taxes paid increased by $1,879 million. These
impacts were partially offset by a decrease of $2,622 million in the net
impairment, gains and losses on sale of businesses and fixed assets,
and an increase in dividends received from jointly controlled entities and
associates of $2,104 million.
Net cash provided by operating activities for the year ended
31 December 2010 was $13,616 million compared with $27,716 million
for 2009, the reduction primarily reflecting a net cash outflow of $16,019
million in respect of the Gulf of Mexico oil spill. Excluding the impacts of
the Gulf of Mexico oil spill, profit before taxation increased by $10,986
million and a decrease in working capital requirements contributed $842
million. This higher profit before tax did not result in an equivalent net
increase in operating cash flow because it included $4,854 million in
net gains on disposals, net of impairments, a decrease of $1,160 million
in depreciation, depletion, amortization and exploration expense, and a
decrease of $787 million in the net charge for provisions, less payments, all
of which are non-cash items.
Net cash used in investing activities was $26,633 million in 2011,
compared with $3,960 million and $18,133 million in 2010 and 2009
respectively. The increase in cash used in 2011 reflected a decrease
of $14,222 million in disposal proceeds, including the impact of the
repayment in 2011 of a $3,530 million disposal deposit received in 2010,
following the termination of the Pan American Energy LLC sale agreement,
and an increase of $8,441 million in acquisitions, net of cash acquired; of
which $7.0 billion was for the Reliance transaction. The decrease in 2010
compared with 2009 reflected an increase of $14,273 million in disposal
proceeds and a decrease in capital expenditure and investments of $2,445
million, partly offset by an increase in acquisitions of $2,469 million.
Net cash provided by financing activities was $482 million in 2011
compared with $840 million net cash provided in 2010 and $9,551 million
net cash used in 2009. The decrease in net cash provided in 2011 primarily
reflected a decrease in net proceeds from long-term financing of $4,734
million, and an increase in dividends paid of $1,445 million partly offset by a
net increase in short-term debt of $5,846 million. The net increase in cash
provided in 2010 compared with 2009 reflected a decrease in dividends
paid of $7,957 million, an increase in net proceeds from long-term financing
of $1,686 million and a decrease in net repayments of short-term debt of
$786 million.
The group has had significant levels of capital investment for many
years. Cash flow in respect of capital investment, excluding acquisitions,
was $18.8 billion in 2011, $18.9 billion in 2010 and $21.4 billion in 2009.
Sources of funding are completely fungible, but the majority of the group’s
funding requirements for new investment come from cash generated by
existing operations. The group’s level of net debt, that is debt less cash and
cash equivalents, was $29.0 billion at the end of 2011, $25.9 billion at the
end of 2010 and $26.2 billion at the end of 2009.
During the period 2009 to 2011, our total sources of cash amounted
to $87 billion, while our total uses of cash amounted to $90 billion. The net
cash usage of $3 billion, and the increase in cash and cash equivalents held
of $6 billion, were financed by an increase in finance debt of $9 billion over
the three-year period. During this period, the price of Brent crude oil has
averaged $84.14 per barrel. The following table summarizes the three-year
sources and uses of cash.
$ billion
Sources of cash
Net cash provided by operating activities 63
Disposals 24
87
Uses of cash
Capital expenditure 59
Acquisitions 13
Net repurchase of shares –
Dividends paid to BP shareholders 17
Dividends paid to minority interests 1
90
Net use of cash (3)
Increase in finance debt 9
Increase in cash and cash equivalents 6
Disposal proceeds received during the three-year period exceeded cash
used for acquisitions, as a result in particular of our ongoing disposal
programme started in 2010. Net investment (capital expenditure and
acquisitions less disposal proceeds) during this period averaged $16 billion
per year. Dividends paid to BP shareholders totalled $17 billion during the
three-year period, with no ordinary share dividends being paid in respect
of the first three quarters of 2010. In the past three years, $4 billion has
been contributed to funded pension plans. This is reflected in net cash
provided by operating activities in the table above. The balance of cash and
cash equivalents held has been increased in light of the group’s current
circumstances, as noted above.