BP 2008 Annual Report Download - page 134

Financial statements
BP Annual Report and Accounts 2008
Notes on financial statements
16. Operating leases continued
The following additional disclosures represent the net operating lease expense and net future minimum lease payments, after deducting amounts
reimbursed, or to be reimbursed, by joint venture partners.
Where BP is not the operator of a jointly controlled asset, and has not co-signed the lease, operating lease costs and future minimum lease
payments are excluded from the information given below. However, where BP has co-signed the lease, BP’s share of the lease costs and future
minimum lease payments are included.
$ million
2008 2007 2006
Minimum lease payments 3,693 3,100 2,924
Contingent rentals 97 80 13
Sub-lease rentals (197) (183) (131)
3,593 2,997 2,806
$ million
Future minimum lease payments 2008 2007
Payable within
1 year 3,165 2,826
2 to 5 years 7,135 6,519
Thereafter 4,820 5,050
15,120 14,395
Of which, future minimum operating lease commitments relating to drilling rigs are $4,660 million (2007 $3,736 million).
The group enters into operating leases of ships, plant and machinery, commercial vehicles and land and buildings. Typical durations of the
leases are as follows:
Ye a r s
Ships up to 15
Plant and machinery up to 10
Commercial vehicles up to 15
Land and buildings up to 40
The group has entered into a number of structured operating leases for ships and in most cases the lease rental payments vary with market interest
rates. The variable portion of the lease payments above or below the amount based on the market interest rate prevailing at inception of the lease is
treated as contingent rental expense. The group also routinely enters into bareboat charters, time-charters and spot-charters for ships on standard
industry terms.
The most significant items of plant and machinery hired under operating leases are drilling rigs used in the Exploration and Production
segment. In some cases, drilling rig lease rental rates are adjusted periodically to market rates that are influenced by oil prices and may be significantly
different from the rates at the inception of the lease. Differences between the rate paid and the rate at inception of the lease are treated as contingent
rental expense.
Commercial vehicles hired under operating leases are primarily railcars. Retail service station sites and office accommodation are the main
items in the land and buildings category.
The terms and conditions of these operating leases do not impose any significant financial restrictions on the group. Some of the leases
of ships and buildings allow for renewals at BP’s option.
17. Exploration for and evaluation of oil and natural gas resources
The following financial information represents the amounts included within the group totals relating to activity associated with the exploration
for and evaluation of oil and natural gas resources. All such activity is recorded within the Exploration and Production segment.
$ million
2008 2007 2006
Exploration and evaluation costs
Exploration expenditure written off 385 347 624
Other exploration costs 497 409 421
Exploration expense for the yeara882 756 1,045
Intangible assets – exploration expenditure 9,031 5,252 4,110
Net assets 9,031 5,252 4,110
Capital expenditure and acquisitions 4,780 2,000 1,537
Net cash used in operating activities 497 409 421
Net cash used in investing activities 4,163 2,000 1,498
aIn addition to these amounts, an impairment charge of $210 million was recognized in 2008 relating to exploration assets in Vietnam following BP’s decision to withdraw from activities in the area
concerned.
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