BP 2013 Annual Report Download - page 273

Exhibits
The following documents are filed in the Securities and Exchange
Commission (SEC) EDGAR system, as part of this Annual Report on
Form 20-F, and can be viewed on the SEC’s website.
Exhibit 1 Memorandum and Articles of Association of BP
p.l.c.*†
Exhibit 4.1 The BP Executive Directors’ Incentive Plan*†
Exhibit 4.2 Amended BP Deferred Annual Bonus Plan 2005**†
Exhibit 4.3 Amended Director’s Secondment Agreement for
R W Dudley†
Exhibit 4.4 Amended Director’s Service Contract and Secondment
Agreement for R W Dudley*†
Exhibit 4.6 Director’s Service Contract for I C Conn***†
Exhibit 4.7 Director’s Service Contract for Dr B Gilvary****†
Exhibit 7 Computation of Ratio of Earnings to Fixed Charges
(Unaudited)†
Exhibit 8 Subsidiaries (included as Note 38 to the Financial
Statements)
Exhibit 10.1 Trust Agreement dated as of 6 August 2010 among BP
Exploration & Production Inc., John S Martin, Jr and
Kent D Syverud, as individual trustees, and Citigroup
Trust- Delaware, N.A., as corporate trustee, as
amended by an Addendum, dated 6 August 2010*†
Exhibit 11 Code of Ethics*****†
Exhibit 12 Rule 13a – 14(a) Certifications†
Exhibit 13 Rule 13a – 14(b) Certifications#†
Exhibit 15.1 Consent of DeGolyer and MacNaughton†
Exhibit 15.2 Report of DeGolyer and MacNaughton†
* Incorporated by reference to the company’s Annual Report on Form 20-F for the year
ended 31 December 2010.
** Incorporated by reference to the company’s Annual Report on Form 20-F for the year
ended 31 December 2012.
*** Incorporated by reference to the company’s Annual Report on Form 20-F for the year
ended 31 December 2004.
**** Incorporated by reference to the company’s Annual Report on Form 20-F for the year
ended 31 December 2011.
***** Incorporated by reference to the company’s Annual Report on Form 20-F for the year
ended 31 December 2009.
# Furnished only.
† Included only in the annual report filed in the Securities and Exchange Commission
EDGAR system.
The total amount of long-term securities of the Registrant and its
subsidiaries authorized under any one instrument does not exceed 10%
of the total assets of BP p.l.c. and its subsidiaries on a consolidated basis.
The company agrees to furnish copies of any or all such instruments to
the SEC on request.
Certain definitions
Unless the context indicates otherwise, the following terms have the
meaning provided below:
Replacement cost profit
Replacement cost (RC) profit or loss reflects the replacement cost of
supplies and is arrived at by excluding inventory holding gains and losses
from profit or loss. IFRS requires that the measure of profit or loss
disclosed for each operating segment is the measure that is provided
regularly to the chief operating decision maker for the purposes of
performance assessment and resource allocation. For BP, both RC profit
or loss before interest and tax and underlying RC profit or loss before
interest and tax are provided regularly to the chief operating decision
maker. In such cases IFRS requires that the measure of profit disclosed
for each operating segment is the measure that is closest to IFRS, which
for BP is RC profit or loss before interest and tax. RC profit or loss for the
group is not a recognized GAAP measure. The nearest equivalent GAAP
measure is profit or loss for the year attributable to BP shareholders. BP
believes that replacement cost profit before interest and taxation for the
group is a useful measure for investors because it is a profitability
measure used by management. A reconciliation is provided between the
total of the operating segments’ measures of profit or loss and the group
profit or loss before taxation, as required under IFRS. See Financial
statements – Note 7.
Inventory holding gains and losses
Inventory holding gains and losses represent the difference between the
cost of sales calculated using the average cost to BP of supplies acquired
during the period and the cost of sales calculated on the first-in first-out
(FIFO) method after adjusting for 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 its historic cost of purchase, or
manufacture, rather than its 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) for inventory on a FIFO basis (after adjusting for any
related movements in net realizable value provisions) and the charge that
would have arisen if an average cost of supplies was used for the period.
For this purpose, the average cost of supplies during the period is
principally calculated on a monthly basis by dividing the total cost of
inventory acquired 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.
Underlying replacement cost profit
Underlying RC profit or loss is RC profit or loss after adjusting for non-
operating items and fair value accounting effects. Underlying RC profit or
loss and fair value accounting effects are not recognized GAAP
measures. On pages 237 and 238 we provide additional information on
the non-operating items and fair value accounting effects that are used to
arrive at underlying RC profit or loss in order to enable a full
understanding of the events and their financial impact.
BP believes that underlying RC profit or loss before interest and taxation
is a useful measure for investors because it is a measure closely tracked
by management to evaluate BP’s operating performance and to make
financial, strategic and operating decisions and because it may help
investors to understand and evaluate, in the same manner as
management, the underlying trends in BP’s operational performance on a
comparable basis, year on year, by adjusting for the effects of these non-
operating items and fair value accounting effects. The nearest equivalent
measure on an IFRS basis for the group is profit or loss for the year
attributable to BP shareholders. The nearest equivalent measure on an
IFRS basis for segments is RC profit or loss before interest and taxation.
Non-GAAP information on fair value accounting effects
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 historic cost. The related derivative instruments, however,
are required to be recorded at fair value with gains and losses recognized
in income 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 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 contracts are treated as
derivatives and are required to be fair valued when they are managed as
Additional disclosures
BP Annual Report and Form 20-F 2013 269