BP 2006 Annual Report Download - page 204

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Supplementary information on oil and natural gas continued
Standardized measure of discounted future net cash flows and changes therein relating to proved oil and gas reserves
The following tables set out the standardized measures of discounted future net cash flows, and changes therein, relating to crude oil and natural gas
production from the group’s estimated proved reserves. This information is prepared in compliance with the requirements of FASB Statement of
Financial Accounting Standards No. 69 – ‘Disclosures about Oil and Gas Producing Activities’.
Future net cash flows have been prepared on the basis of certain assumptions which may or may not be realized. These include the timing of future
production, the estimation of crude oil and natural gas reserves and the application of year-end crude oil and natural gas prices and exchange rates.
Furthermore, both reserves estimates and production forecasts are subject to revision as further technical information becomes available and economic
conditions change. BP cautions against relying on the information presented because of the highly arbitrary nature of assumptions on which it is based
and its lack of comparability with the historical cost information presented in the financial statements.
$ million
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UK
Rest of
Europe USA
Rest of
Americas
Asia
Pacific Africa Russia Other Total
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At 31 December 2006
Future cash inflowsa45,300 18,200 218,900 46,800 36,800 47,700 – 36,200 449,900
Future production costb20,700 4,700 71,300 14,900 9,400 8,700 – 7,200 136,900
Future development costb3,300 1,500 18,600 4,900 3,800 6,600 – 3,900 42,600
Future taxationc10,300 9,400 43,100 12,900 7,000 10,600 – 5,800 99,100
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Future net cash flows 11,000 2,600 85,900 14,100 16,600 21,800 – 19,300 171,300
10% annual discountd3,200 1,000 45,600 6,200 9,000 8,400 – 7,300 80,700
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Standardized measure of discounted future
net cash flowse7,800 1,600 40,300 7,900 7,600 13,400 – 12,000 90,600
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At 31 December 2005
Future cash inflowsa68,200 18,600 261,800 75,600 34,600 46,300 – 38,200 543,300
Future production costb21,700 3,900 55,800 15,200 6,900 7,800 – 7,400 118,700
Future development costb2,200 1,000 16,300 4,300 3,500 6,100 – 4,600 38,000
Future taxationc17,600 10,200 65,300 28,800 7,300 10,600 – 6,000 145,800
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Future net cash flows 26,700 3,500 124,400 27,300 16,900 21,800 – 20,200 240,800
10% annual discountd8,500 1,400 63,700 12,600 9,600 8,700 – 8,100 112,600
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Standardized measure of discounted future
net cash flowse18,200 2,100 60,700 14,700 7,300 13,100 – 12,100 128,200
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At 31 December 2004
Future cash inflowsa47,400 21,700 169,500 52,600 27,200 35,000 – 34,200 387,600
Future production costb19,200 4,500 37,800 14,300 6,700 5,800 – 6,900 95,200
Future development costb2,200 1,900 10,800 4,400 3,500 4,700 – 5,100 32,600
Future taxationc9,900 11,200 41,800 16,300 5,200 6,900 – 5,000 96,300
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Future net cash flows 16,100 4,100 79,100 17,600 11,800 17,600 – 17,200 163,500
10% annual discountd4,700 2,000 38,100 8,000 6,900 7,500 – 7,800 75,000
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Standardized measure of discounted future
net cash flowse11,400 2,100 41,000 9,600 4,900 10,100 – 9,400 88,500
The following are the principal sources of change in the standardized measure of discounted future net cash flows:
$ million
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2006 2005 2004
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Sales and transfers of oil and gas produced, net of production costs (35,800) (24,300) (24,100)
Development costs incurred during the year 8,200 7,100 6,300
Extensions, discoveries and improved recovery, less related costs 7,900 10,100 3,100
Net changes in prices and production costf(43,900) 84,200 27,600
Revisions of previous reserves estimates (9,500) (17,400) (10,700)
Net change in taxation 32,200 (20,500) 1,900
Future development costs (7,000) (5,800) (3,200)
Net change in purchase and sales of reserves-in-place (2,500) (2,500) (1,000)
Addition of 10% annual discount 12,800 8,800 8,100
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Total change in the standardized measure during the year (37,600) 39,700 8,000
aThe year end marker prices used were Brent $58.93/bbl, Henry Hub $5.52/mmBtu (2005 Brent $58.21/bbl, Henry Hub $9.52/mmBtu; 2004 Brent $40.24/bbl, Henry Hub
$6.01/mmBtu).
bProduction costs, which include production taxes, and development costs relating to future production of proved reserves are based on year-end cost levels and assume
continuation of existing economic conditions. Future decommissioning costs are included.
cTaxation is computed using appropriate year-end statutory corporate income tax rates.
dFuture net cash flows from oil and natural gas production are discounted at 10% regardless of the group assessment of the risk associated with its producing activities.
eMinority interest in BP Trinidad and Tobago LLC amounted to $1,300 million at 31 December 2006 ($2,700 million at 31 December 2005 and $1,600 million at 31 December
2004).
fNet changes in prices and production costs includes the effect of exchange rate movements.