BP 2011 Annual Report Download - page 227

Financial statements
BP Annual Report and Form 20-F 2011 225
Notes on financial statements
33. Derivative financial instruments continued
Derivatives held for trading
The group maintains active trading positions in a variety of derivatives. The contracts may be entered into for risk management purposes, to satisfy supply
requirements or for entrepreneurial trading. Certain contracts are classified as held for trading, regardless of their original business objective, and are
recognized at fair value with changes in fair value recognized in the income statement. Trading activities are undertaken by using a range of contract types
in combination to create incremental gains by arbitraging prices between markets, locations and time periods. The net of these exposures is monitored
using market value-at-risk techniques as described in Note 26.
The following tables show further information on the fair value of derivatives and other financial instruments held for trading purposes.
Derivative assets held for trading have the following fair values and maturities.
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$ million
2011
Less than
1 year 1-2 years 2-3 years 3-4 years 4-5 years
Over
5 years Total
Currency derivatives 194 18 5 – – – 217
Oil price derivatives 573 135 77 25 10 3823
Natural gas price derivatives 2,493 1,160 597 346 207 502 5,305
Power price derivatives 498 160 101 54 30 –843
3,758 1,473 780 425 247 505 7,188
$ million
2010
Less than
1 year 1-2 years 2-3 years 3-4 years 4-5 years
Over
5 years Total
Currency derivatives 124 41 18 11 – – 194
Oil price derivatives 797 128 82 64 21 71,099
Natural gas price derivatives 2,591 1,100 652 375 231 401 5,350
Power price derivatives 389 125 35 11 1 – 561
3,901 1,394 787 461 253 408 7,204
Derivative liabilities held for trading have the following fair values and maturities.
$ million
2011
Less than
1 year 1-2 years 2-3 years 3-4 years 4-5 years
Over
5 years Total
Currency derivatives (168) (49) ––––(217)
Oil price derivatives (483) (37) (7) (4) (3) (2) (536)
Natural gas price derivatives (1,696) (876) (347) (197) (102) (385) (3,603)
Power price derivatives (328) (176) (89) (46) (24) –(663)
(2,675) (1,138) (443) (247) (129) (387) (5,019)
$ million
2010
Less than
1 year 1-2 years 2-3 years 3-4 years 4-5 years
Over
5 years Total
Currency derivatives (228) (6) (46) –––(280)
Oil price derivatives (794) (76) (6) (1) – – (877)
Natural gas price derivatives (2,174) (741) (484) (161) (114) (277) (3,951)
Power price derivatives (287) (103) (32) (9) (1) –(432)
(3,483) (926) (568) (171) (115) (277) (5,540)
If at inception of a contract the valuation cannot be supported by observable market data, any gain or loss determined by the valuation methodology is not
recognized in the income statement but is deferred on the balance sheet and is commonly known as ‘day-one profit or loss’. This deferred gain or loss
is recognized in the income statement over the life of the contract until substantially all of the remaining contract term can be valued using observable
market data at which point any remaining deferred gain or loss is recognized in the income statement. Changes in valuation from this initial valuation are
recognized immediately through the income statement.