BP 2011 Annual Report Download - page 98

96 BP Annual Report and Form 20-F 2011
Business review
Financial and operating performance
$ million
2011 2010 2009
Replacement cost profit (loss)
before interest and taxa
Fuelsb3,003 2,628 (914)
Lubricants 1,350 1,357 1,059
Petrochemicalsc1,121 1,570 598
5,474 5,555 743
Sales and other operating
revenuesd344,116 266,751 213,050
Capital expenditure and acquisitions 4,130 4,029 4,114
thousand barrels per day
Total refinery throughputse2,352 2,426 2,287
%
Refining availabilityf94.8 95.0 93.6
thousand tonnes
Total petrochemicals productiong14,866 15,594 12,660
a Income from petrochemicals produced at our Gelsenkirchen and Mulheim sites is reported within
the fuels business. Segment level overhead expenses are included within the fuels business.
b 2009 includes a $1.6 billion impairment of goodwill in the US West Coast FVC.
c 2010 includes $338 million gain from non-operating items.
d
Includes sales between businesses.
e Refinery throughputs reflect crude oil and other feedstock volumes.
f Refining availability represents Solomon Associates’ operational availability, which is defined as the
percentage of the year that a unit is available for processing after subtracting the annualized time
lost due to turnaround activity and all planned mechanical, process and regulatory maintenance
downtime.
g Petrochemicals production includes 1,699kte of petrochemicals produced at our Gelsenkirchen and
Mulheim sites in Germany for which the income is reported in our fuels business.
Replacement cost profit before interest and tax for the year ended
31 December 2011 was $5,474 million, compared with $5,555 million for
the previous year. The full-year results included a net loss for non-operating
items of $602 million, compared with a gain of $630 million in 2010. The
non-operating items in 2011 mainly related to impairment charges relating
to our disposal programme, partially offset by gains on disposal. (See
page 58 for further information on non-operating items). In addition, fair
value accounting effects had a favourable impact of $63 million, compared
to a favourable impact of $42 million in 2010. (See page 58 for further
information on fair value accounting effects.)
After adjusting for non-operating items and fair value accounting
effects, Refining and Marketing reported record earnings in 2011a.
Strong refinery operations enabled us to capture the benefits
available in 2011 from BP’s location advantage in accessing WTI-based
crude grades. Compared with 2010, the result also benefited from a higher
refining margin environment and a stronger supply and trading contribution.
These benefits were partly offset by a significantly higher level of
turnarounds in 2011 than 2010 and negative impacts from increased
relative sweet crude prices in Europe and Australia and the weather-related
power outages in the second quarter.
In the fuels business, financial performance for the full year was
impacted by the factors noted above. Operational performance was strong
with Solomon refining availability at 94.8% and refinery utilisation at 88%
for the year.
Performance in our lubricants business in 2011 was impacted by
an increasingly difficult marketing environment characterized by significant
base oil price increases and weaker demand. These impacts were partly
offset by supply chain efficiencies, and the strength of our products and
brands, which has allowed the increased cost of goods to be largely
recovered in the market.
In our petrochemicals business, compared with 2010, the 2011
result was negatively impacted by weakening market conditions as the
year progressed, as additional Asian capacity came onstream during the
year at a time of weaker demand. This was somewhat offset by the
strength in aromatics margins and volumes in the first half of the year.
a In 2011, there was a charge of $602 million for non-operating items and a favourable impact of
$63 million for fair value accounting effects. After adjusting for these impacts, replacement cost
profit before interest and tax was $6,013 million. This is a non-GAAP measure, which management
believes is useful to investors because it is viewed and closely tracked by management as an
important indicator of segment performance.
Sales and other operating revenues for 2011, analysed in the table below,
were $344 billion, compared with $267 billion in 2010 and $213 billion in
2009. These increases were primarily due to increasing oil prices.
$ million
Sales and other operating revenuesa2011 2010 2009
Sale of crude oil through spot and
term contracts 57,055 44,290 35,625
Marketing, spot and term sales of
refined products 273,940 209,221 166,088
Other sales and operating revenues 13,121 13,240 11,337
344,116 266,751 213,050
a Includes sales between businesses.
The following table sets out oil sales volumes by type for the past three
years. Marketing sales volumes were 3,311mb/d, slightly lower than
2010, principally reflecting reduced demand in some OECD markets and
simplification of our portfolio.
thousand barrels per day
Refined products volumes 2011 2010 2009
Marketing salesa3,311 3,445 3,560
Trading/supply salesb2,465 2,482 2,327
Total refined product marketing sales 5,776 5,927 5,887
Crude oilc1,532 1,658 1,824
Total oil sales 7,308 7,585 7,711
a Marketing sales include sales to service stations, end-consumers, bulk buyers and jobbers (i.e. third
parties who own networks of a number of service stations and small resellers).
b Trading/supply sales are sales to large unbranded resellers and other oil companies.
c Crude oil sales relate to transactions executed by our integrated supply and trading function,
primarily for optimizing crude oil supplies to our refineries and in other trading. 79 thousand barrels
per day relate to revenues reported by Exploration and Production.
Prior years’ comparative financial information
The replacement cost profit before interest and tax for the year ended
31 December 2010 of $5,555 million included a net gain for non-operating
items of $630 million, mainly relating to gains on disposal, partly offset by
restructuring charges. Almost half of this gain related to our petrochemicals
business, mainly relating to the disposal of our share of BP’s interests in
ethylene and polyethylene production in Malaysia to Petronas. In addition,
fair value accounting effects had a favourable impact of $42 million relative
to management’s measure of performance. The primary additional factors
contributing to the increase in replacement cost profit before interest
and tax compared with 2009 were improved operational performance
in the FVCs, continued strong operational performance in lubricants and
petrochemicals, and further cost efficiencies, as well as a more favourable
refining environment. Against very good operational delivery, the results
were impacted by a significantly lower contribution from supply and trading
compared with 2009.
The replacement cost profit before interest and tax for the year
ended 31 December 2009 of $743 million included a net charge for non-
operating items of $2,603 million. The most significant non-operating items
were restructuring charges and a $1.6 billion one-off non-cash loss to impair
all of the segment’s goodwill in the US West Coast FVC relating to our
2000 ARCO acquisition. This resulted from our annual review of goodwill as
required under IFRS and reflected the prevailing weak refining environment
that, together with a review of future margin expectations in the FVC, led to
a reduction in expected future cash flows.