BP 2013 Annual Report Download - page 31

Strategic report
BP Annual Report and Form 20-F 2013 27
Financial performance
$ million
2013 2012 2011
Sales and other operating revenuese 70,374 72,225 75,754
RC profit before interest and tax 16,657 22,491 26,358
Net (favourable) unfavourable impact
of non-operating items and fair
value accounting effectsf1,608 (3,055) (1,141)
Underlying RC profit before interest
and taxg 18,265 19,436 25,217
Capital expenditure and acquisitions 19,115 18,520 25,821
BP average realizationsh $ per barrel
Crude oil 105.38 108.94 107.91
Natural gas liquids 38.38 42.75 51.18
Liquidsi99.24 102.10 101.29
$ per thousand cubic feet
Natural gas 5.35 4.75 4.69
US natural gas 3.07 2.32 3.34
$ per thousand barrels of oil equivalent
Total hydrocarbonsj63.58 61.86 62.31
e Includes sales to other segments.
f Fair value accounting effects are not a recognized GAAP measure and represent the (favourable)
unfavourable impact relative to management’s measure of performance (see page 238 for further
details).
g Underlying RC profit is not a recognized GAAP measure. See footnote c on page 23 for
information on underlying RC profit.
h Realizations are based on sales of consolidated subsidiaries only, which excludes equity-
accounted entities.
i Liquids comprise crude oil, condensate and natural gas liquids (NGLs).
j Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
Sales and other operating revenues for 2013 were $70 billion (2012 $72
billion, 2011 $76 billion). The decrease in 2013, compared with 2012,
primarily reflected lower volumes due to disposals and lower realizations,
partially offset by higher gas marketing and trading revenues. The decrease
in 2012, compared with 2011, primarily reflected lower production and
persistently low Henry Hub gas prices.
In 2013 replacement cost (RC) profit before interest and tax for the segment
was $16.7 billion (2012 $22.5 billion, 2011 $26.4 billion). The 2013 result
included a net non-operating charge of $1,364 million, primarily related to an
$845-million write-off attributable to block BM-CAL-13 offshore Brazil as a
result of the Pitanga exploration well not encountering commercial quantities
of oil or gas, and impairment and other charges partly offset by fair value
gains on embedded derivatives and disposal gains. In addition, fair value
accounting effects had an unfavourable impact of $244 million relative to
management’s measure of performance. The 2012 result included net
non-operating gains of $3,189 million, primarily as a result of gains on
disposals being partly offset by impairment charges. In addition, fair value
accounting effects had an unfavourable impact of $134 million. The 2011
result included net non-operating gains of $1,130 million, primarily as a result
of gains on disposals being partly offset by impairments, a charge associated
with the termination of our agreement to sell our 60% interest in Pan
American Energy LLC (PAE) to Bridas Corporation and other non-operating
items. In addition, fair value accounting effects had a favourable impact of
$11 million.
After adjusting for non-operating items and fair value accounting effects,
underlying RC profit before interest and tax in 2013 was $18.3 billion (2012
$19.4 billion, 2011 $25.2 billion). Compared with 2012, the decrease in
2013 reflected lower production due to divestments, lower liquids
realizations and higher costs, including exploration write-offs and higher
depreciation, depletion and amortization, partly offset by an increase in
underlying volumes, a benefit from stronger gas marketing and trading
activities, a one-off benefit to production taxes as a result of fiscal relief
allowing immediate deduction of past costs, a one-off benefit, mainly in
respect of prior years, resulting from the US Federal Energy Regulatory
Commission approval of cost pooling settlement agreements between the
owners of the Trans-Alaska Pipeline System (TAPS) and higher gas
realizations. Compared with 2011, the 2012 result reflected higher costs
(primarily higher depreciation, depletion and amortization, as well as
ongoing sector inflation), lower production and lower realizations.
Total capital expenditure including acquisitions and asset exchanges in
2013 was $19.1 billion (2012 $18.5 billion, 2011 $25.8 billion).
Provisions for decommissioning decreased from $17.4 billion at the end of
2012 to $17.2 billion at the end of 2013. The decrease reflects primarily a
reduction due to the change in discount rate and utilization of provisions
largely offset by updated estimates of the cost of future decommissioning
and additions. Decommissioning costs are initially capitalized within fixed
assets and are subsequently depreciated as part of the asset.
Acquisitions and disposals
In total, disposal transactions generated $1.3 billion in proceeds during
2013, with a corresponding reduction in net proved reserves of
200mmboe, all within our subsidiaries. There were no significant
acquisitions in 2013.
Disposals
The major disposal transactions during 2013 were the sale of our
interests in the Harding (BP 70%), Maclure (BP 37.04%), Braes (BP 27.7%),
Preparing for Shah Deniz Stage 2
In 1999 we made one of our largest ever gas discoveries – Shah
Deniz – on the deepwater shelf of the Caspian Sea. The reservoir
is similar in size to Manhattan island and is being developed in
stages. Production from Stage 1 started in 2006.
Stage 2 will open up the Southern Gas Corridor so that gas can be
moved directly from Azerbaijan to Europe for the first time, helping
to increase the energy security of European markets. With a total
investment of more than $28 billion, this project will involve the
construction and integration of activity related to 26 wells, two
new platforms and onshore processing and compression facilities.
In 2013 we concluded 25-year sales agreements for more than
10 billion cubic metres per annum (bcma) to be produced from the
Shah Deniz field as a result of Stage 2 – the largest sales contracts
in Azerbaijan’s history. This adds to existing 2011 agreements to
sell 6bcma of gas, meaning that in total, 16bcma of Shah Deniz
Stage 2 gas is to be sold in Italy, Greece, Bulgaria and Turkey
through some 3,500km of pipelines to Europe. The agreements
came into force following the final investment decision on the
project on 17 December 2013.
We are strengthening our portfolio of high-value and longer
life assets.