BP 2014 Annual Report Download - page 29

Committing to the future
The Gulf of Mexico is one of four key areas where we believe further growth in higher-margin
barrels is possible. As the region’s leading acreage holder and largest investor for the last 10 years,
BP has focused its activities on this important location for many years. Our four deepwater
production platforms – Thunder Horse, Atlantis, Mad Dog and Na Kika – are all in the early stages of
their life cycles. These major hubs offer long-term growth opportunities for BP and we aim to
optimize production from them, as well as from our non-operated hubs.
In 2014 we made significant progress on a multi-billion dollar investment programme by starting up
three major projects in the region. Na Kika Phase 3 began oil production from our first well in
February; our Atlantis North Expansion Phase 2 development started up in April with the first of four
planned production wells; and with technical input and support from our experts, Shell-operated
Mars B started up in February. We also entered a strategic partnership with Chevron in January
2015 to explore and develop Paleogene assets, combining our subsurface expertise with Chevron’s
Paleogene development design and build experience.
Our progress highlights the potential of our portfolio to unlock value for investors while also
delivering vital energy resources to the US.
We are strengthening our portfolio of higher-value and longer-life assets.
BP Annual Report and Form 20-F 2014 25
Strategic report
Financial performance
$ million
2014 2013 2012
Sales and other operating revenuesa 65,424 70,374 72,225
RC profit before interest and tax 8,934 16,657 22,491
Net (favourable) unfavourable impact
of non-operating items★ and fair
value accounting effects★6,267 1,608 (3,055)
Underlying RC profit before interest
and tax 15,201 18,265 19,436
Capital expenditure and acquisitions 19,772 19,115 18,520
BP average realizationsb $ per barrel
Crude oil 93.65 105.38 108.94
Natural gas liquids 36.15 38.38 42.75
Liquids★87.96 99.24 102.10
$ per thousand cubic feet
Natural gas 5.70 5.35 4.75
US natural gas 3.80 3.07 2.32
$ per barrel of oil equivalent
Total hydrocarbons★60.85 63.58 61.86
Average oil marker pricesc $ per barrel
Brent 98.95 108.66 111.67
West Texas Intermediate 93.28 97.99 94.13
Average natural gas marker prices $ per million British thermal units
Average Henry Hub gas priced 4.43 3.65 2.79
pence per therm
Average UK National Balancing Point
gas pricec50.01 67.99 59.74
a
Includes sales to other segments.
b
Realizations are based on sales by consolidated subsidiaries only, which excludes
equity-accounted entities.
c
All traded days average.
d
Henry Hub First of Month Index.
Market prices
Brent remains an integral marker to the production portfolio, from which a
significant proportion of production is priced directly or indirectly. Certain
regions use other local markers, which are derived using differentials or a
lagged impact from the Brent crude oil price.
The dated Brent price in 2014 averaged $98.95 per barrel, after three
consecutive years of prices above $100. Prices averaged about $109
during the first half of 2014, but fell sharply during the second half in the
face of continued strong growth of light, sweet oil production in the US and
weak global consumption growth. Brent prices ended the year near $55.
The Henry Hub First of Month Index price was up by 21%, year on year, in
2014 (2013, up by 31%).
An extremely cold start to 2014 in North America increased heating
demand and drained storage levels. US gas supply continued to expand in
2014, reaching yet another record production level, in particular supported
by rising liquids-rich gas production.
The UK National Balancing Point gas price in 2014 fell by 26% compared
with 2013 (2013 an increase of 14% on 2012). This reflected milder
weather and weak demand in Europe. Lower LNG prices in Asia led to a
reduction in the price of spot LNG available for Europe, which contributed
to the weakness of European spot prices. For more information on the
global energy market in 2014, see page 20.
Financial results
Sales and other operating revenues for 2014 decreased compared with
2013, primarily reflecting lower liquids realizations partially offset by higher
production in higher-margin areas, higher gas realizations and higher gas
marketing and trading revenues. The decrease in 2013 compared with
2012 primarily reflected lower volumes due to disposals and lower liquids
realizations, partially offset by higher gas marketing and trading revenues.
Replacement cost (RC) profit before interest and tax for the segment
included a net non-operating charge of $6,298 million. This is primarily
related to impairments associated with several assets, mainly in the North
Henry Hub ($/mmBtu)
2013
5-year range 2014
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
3
6
9
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013
Brent ($/bbl)
120
150
60
90
30
5-year range 2014
★ Defined on page 252.