BP 2014 Annual Report Download - page 22

Our key performance indicators
Operating cash flow ($ billion) Gearing (net debt ratio) (%)
Refining availability (%)
Reported recordable injury frequency
(RIF) measures the number of reported
work-related employee and contractor
incidents that result in a fatality or injury
(apart from minor first aid cases) per
200,000 hours worked.
The measure gives an indication of the
personal safety of our workforce.
2014 performance Our workforce RIF,
which includes employees and
contractors combined, is 0.31, level with
2013. While this is encouraging, we have
seen an increase in our day away from
work case frequency (see page 39).
We are reviewing our personal safety
programmes and continue to focus our
efforts on safety.
Loss of primary containment (LOPC)
is the number of unplanned or
uncontrolled releases of oil, gas or other
hazardous materials from a tank, vessel,
pipe, railcar or other equipment used for
containment or transfer.
By tracking these losses we can monitor
the safety and efficiency of our
operations as well as our progress in
making improvements.
2014 performance The increase in 2014
reporting reflects the introduction of
enhanced automated monitoring for
many remote sites in our Lower 48
business. Using a like-for-like approach
with previous years’ reporting, our 2014
loss of primary containment figure is 246.
Reported recordable injury
frequencya
Loss of primary containmenta
Underlying RC profit
per ordinary share (cents)
Underlying RC profit is a useful measure
for investors because it is one of the
profitability measures BP management
uses to assess performance. It assists
management in understanding the
underlying trends in operational
performance on a comparable
year-on-year basis.
It reflects the replacement cost of
inventories sold in the period and is
arrived at by excluding inventory holding
gains and losses from profit or loss.
Adjustments are also made for
non-operating items and fair value
accounting effects . The IFRS
equivalent can be found on page 208.
2014 performance The decrease in
underlying RC profit per ordinary share
for the year compared with 2013 was
mainly due to a lower profit in Upstream
and lower earnings from Rosneft.
Operating cash flow is net cash flow
provided by operating activities, as
reported in the group cash flow
statement. Operating activities are the
principal revenue-generating activities of
the group and other activities that are
not investing or financing activities.
2014 performance Operating cash flow
was higher in 2014 in line with delivery
of the 10-point plan.
Our gearing (net debt ratio) shows
investors how significant net debt is
relative to equity from shareholders in
funding BP’s operations.
We aim to keep our gearing within the
10-20% range to give us the flexibility to
deal with an uncertain environment.
Gearing is calculated by dividing net
debt by total equity plus net debt. Net
debt is equal to gross finance debt,
plus associated derivative financial
instruments, less cash and cash
equivalents. For the nearest equivalent
measure on an IFRS basis and for further
information see Financial statements –
Note 25.
2014 performance Gearing at the end
of 2014 was 16.7%, up 0.5% on 2013
and within our target band of 10-20%.
We assess the group’s performance
according to a wide range of
measures and indicators. Our key
performance indicators (KPIs)
help the board and executive
management measure performance
against our strategic priorities and
business plans. We periodically
review our metrics and test their
relevance to our strategy. We
believe non-financial measures –
such as safety and an engaged and
diverse workforce – have a useful
role to play as leading indicators of
future performance.
Changes to KPIs
We have replaced the RC profit
per ordinary share KPI to underlying
RC profit per ordinary share. This is
one of the measures used by
management to evaluate BP’s
operational performance and is also
used as a performance measure for
executive directors’ remuneration.
All other KPIs remain the same.
Remuneration
To help align the focus of our board
and executive management with
the interests of our shareholders,
certain measures are reflected in
the variable elements of executive
remuneration.
Overall annual bonuses, deferred
bonuses and performance shares
are all based on performance
against measures and targets linked
directly to strategy and KPIs.
Directors’ remuneration
See how our performance
impacted 2014 pay on
page 72.
Underlying RC profit and gearing
are non-GAAP measures, but
are provided for investors
because they are closely tracked
by management to evaluate
BP’s operating performance and
to make financial, strategic and
operating decisions.
2010 2011 2012 2013 2014
125
100
75
50
25
111. 97
107.39
89.70
66.00
70.92
2010 2011 2012 2013 2014
50
40
30
20
10
13.6
22.2
32.8
20.5 21.1
2010 2011 2012 2013 2014
25
20
15
10
5
18.7
21.2 20.4
16.2 16.7
2010 2011 2012 2013 2014
1.00
0.75
0.50
0.25
Employees Contractors
0.25
0.31
0.41
0.84
0.26
0.43
0.25
0.36
0.27
0.34
418
2010 2011 2012 2013 2014
500
4
00
3
00
200
100
286
292
361
261
95.3
2010 2011 2012 2013 2014
98
96
94
92
90
95.0 94.8 95.3
94.8 94.9
Refining availability represents Solomon
Associates’ operational availability. The
measure shows the percentage of the
year that a unit is available for
processing after deducting the time
spent on turnaround activity and all
mechanical, process and regulatory
downtime.
Refining availability is an important
indicator of the operational performance
of our Downstream businesses.
2014 performance Refining availability
decreased by 0.4% from 2013 to 94.9%
reflecting the completion of the Whiting
refinery modernization project and
ramp-up of operations.
Key
KPIs used to measure
progress against our strategy.
KPIs used to determine 2014
and 2015 remuneration.
BP Annual Report and Form 20-F 2014
18