Blueprint
 
 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549  
Form 6-K 
 
Report of Foreign Issuer 
 
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934 
 
for the period ended February, 2017
 
 
BP p.l.c.
(Translation of registrant's name into English)
 
 
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)

 
Indicate  by check mark  whether the  registrant  files or will file annual
reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F        |X|          Form 40-F
     ---------------               ----------------
 
 
 
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby  furnishing  the  information to the
Commission  pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
     1934.
 
 
 
Yes                            No        |X|
      ---------------           ----------------
 
 
 
 
 
 
 
BP p.l.c.
Group results
Fourth quarter and full year 2016
 
Top of page 1
 
FOR IMMEDIATE RELEASE                                                                            London 7 February 2017
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
 Year
Year
2015
2016
2016
 
$ million
 
2016
2015
(3,307)
1,620
497
 
Profit (loss) for the period(a)
 
115
(6,482)
1,074
41
(425)
 
Inventory holding (gains) losses*, net of tax
 
(1,114)
1,320
(2,233)
1,661
72
 
Replacement cost profit (loss)*
 
(999)
(5,162)
 
 
 
 
Net (favourable) unfavourable impact
 
 
 
 
 
 
 
  of non-operating items* and
 
 
 
2,429
(728)
328
 
  fair value accounting effects*, net of tax
 
3,584
11,067
196
933
400
 
Underlying replacement cost profit*
 
2,585
5,905
 
 
 
 
Replacement cost profit (loss)
 
 
 
(12.16)
8.82
0.38
 
    per ordinary share (cents)*
 
(5.33)
(28.18)
(0.73)
0.53
0.02
 
    per ADS (dollars)
 
(0.32)
(1.69)
 
 
 
 
Underlying replacement cost profit
 
 
 
1.06
4.96
2.11
 
    per ordinary share (cents)*
 
13.79
32.22
0.06
0.30
0.13
 
    per ADS (dollars)
 
0.83
1.93
 
●
BP’s fourth-quarter replacement cost (RC) profit was $72 million, compared with a loss of $2,233 million for the same period in 2015. After adjusting for a net charge for non-operating items of $180 million and net unfavourable fair value accounting effects of $148 million (both on a post-tax basis), underlying RC profit for the fourth quarter was $400 million, compared with $196 million for the same period in 2015. RC profit or loss for the group and underlying RC profit or loss are non-GAAP measures and further information is provided on page 3.
 
●
For the full year of 2016 the RC loss was $999 million, compared with a loss of $5,162 million for the full year of 2015. Both periods were impacted by charges associated with the Deepwater Horizon accident and oil spill following the settlement of federal, state and local government claims in 2015 and additional provisions this year, when a reliable estimate for the remaining material liabilities was determined. After adjusting for a net charge for non-operating items of $2,828 million and net unfavourable fair value accounting effects of $756 million (both on a post-tax basis), underlying RC profit for the full year was $2,585 million, compared with $5,905 million for the same period in 2015, predominantly due to lower results in the Upstream and Downstream segments.
 
●
Non-operating items for the quarter and full year reflect additional provisions recorded in relation to the Gulf of Mexico oil spill. Non-operating items also include a restructuring charge of $195 million for the quarter and $763 million for the full year. Cumulative restructuring charges from the beginning of the fourth quarter 2014 totalled $2.3 billion by the end of the fourth quarter 2016.
 
●
All amounts, including finance costs, relating to the Gulf of Mexico oil spill have been treated as non-operating items, with a pre-tax charge of $799 million for the fourth quarter and $7,134 million for the full year. For further information on the Gulf of Mexico oil spill and its consequences see page 9 and Note 2 on page 16.
 
●
Net cash provided by operating activities for the fourth quarter and full year was $2.4 billion and $10.7 billion respectively, compared with $5.8 billion and $19.1 billion for the same periods in 2015. Excluding post-tax amounts related to the Gulf of Mexico oil spill, net cash provided by operating activities* for the fourth quarter and full year was $4.5 billion and $17.6 billion respectively, compared with $5.9 billion and $20.3 billion for the same periods in 2015.
 
●
Net debt* at 31 December 2016 was $35.5 billion, compared with $27.2 billion a year ago. The net debt ratio* at 31 December 2016 was 26.8%, compared with 21.6% a year ago. We continue to target a net debt ratio in the range of 20-30%. Net debt and the net debt ratio are non-GAAP measures. See page 21 for more information.
 
●
BP today announced a quarterly dividend of 10.00 cents per ordinary share ($0.600 per ADS), which is expected to be paid on 31 March 2017. The corresponding amount in sterling will be announced on 20 March 2017. See page 20 for further information.
 
*
 
For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 27.
(a)
Profit attributable to BP shareholders.
 
The commentaries above and following should be read in conjunction with the cautionary statement on page 30.
 
 
Top of page 2
Group headlines (continued)
 
 
●
Capital expenditure on an accruals basis* for the fourth quarter, excluding amounts relating to the renewal of a 10% interest in the Abu Dhabi onshore oil concession was $5.1 billion, compared with $6.1 billion for the same period in 2015. Of the $5.1 billion, $4.5 billion was organic capital expenditure*, compared with $5.5 billion in 2015. The renewal of a 10% interest in the Abu Dhabi onshore oil concession, for which new ordinary shares in BP were issued, is treated as organic capital expenditure. Capital expenditure on an accruals basis for the fourth quarter was $7.6 billion.
 
●
For the full year, excluding amounts relating to the renewal of an interest in the Abu Dhabi onshore oil concession, capital expenditure on an accruals basis was $17.0 billion, of which organic capital expenditure was $16.0 billion, compared with $19.5 billion for the same period in 2015, of which organic capital expenditure was $18.7 billion. Capital expenditure on an accruals basis for the full year was $19.4 billion. See page 23 for further information. In 2017, we expect organic capital expenditure to be in the range of $16-17 billion.
 
●
Disposal proceeds, as per the cash flow statement, were $0.5 billion for the fourth quarter, compared with $0.2 billion for the same period in 2015. For the full year, disposal proceeds were $2.6 billion, as per the cash flow statement, along with $0.6 billion received in relation to the sale of 20% from our shareholding in Castrol India Limited, giving total proceeds of $3.2 billion for the year, compared with $2.8 billion in 2015. In 2017, divestments are expected to be in the range of $4.5-5.5 billion.
 
●
The effective tax rate (ETR) on RC profit or loss* for the fourth quarter and full year is significantly impacted by the effect of non-operating items, fair value accounting effects and the reduction in the rate of the UK North Sea supplementary charge in the third quarter (and the first quarter 2015), and therefore is not a meaningful measure.
 
●
The adjusted ETR*, which eliminates the effect of these items, for the fourth quarter and full year was 10% and 23% respectively, compared with -20% and 31% for the same periods in 2015. The adjusted ETR for the fourth quarter 2016 was impacted by a high proportion of equity-accounted income (which is reported net of tax in the income statement) within RC profit, and reflects a benefit from the reassessment of the recognition of deferred tax assets and other items, partly offset by charges for foreign exchange impacts. The adjusted ETR for the fourth quarter 2015 reflected tax credits associated with losses in the Upstream segment offsetting tax charges arising elsewhere. The adjusted ETR for the full year is lower than last year predominantly due to changes in the geographical mix of profits and the absence of foreign exchange impacts. In the current environment, and reflecting the recent transaction to renew our interest in the Abu Dhabi onshore oil concession, the adjusted ETR in 2017 is expected to be in the region of 40%.
 
●
The reserves replacement ratio* on a combined basis of subsidiaries and equity-accounted entities including the impact of the Abu Dhabi renewal was estimated at 109%(a) for the year.
 
●
Reported production for the fourth quarter, including BP’s share of Rosneft’s production, was 3,338 thousand barrels of oil equivalent per day (mboe/d), compared with 3,342mboe/d for the same period in 2015 (see Upstream on page 4 and Rosneft on page 8). For the full year, the reported production was 3,268mboe/d, compared with 3,239mboe/d in 2015. Comparative periods have been restated, see page 5 for further information.
 
●
The charge for depreciation, depletion and amortization was $14.5 billion in 2016, compared with $15.2 billion in 2015. In 2017, we expect the charge to be higher than 2016.
 
(a)
Includes estimated reserves data for Rosneft. The reserves replacement ratio will be finalized and reported in BP Annual Report and Form 20-F 2016.
 
 
Top of page 3
Analysis of RC profit (loss) before interest and tax
and reconciliation to profit (loss) for the period
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
RC profit (loss) before interest and tax*
 
 
 
(2,280)
1,196
692
 
    Upstream
 
574
(937)
838
978
899
 
    Downstream
 
5,162
7,111
235
120
158
 
    Rosneft
 
590
1,310
(955)
(441)
(1,117)
 
    Other businesses and corporate(a)
 
(8,157)
(13,477)
65
17
(132)
 
    Consolidation adjustment – UPII*
 
(196)
(36)
(2,097)
1,870
500
 
RC profit (loss) before interest and tax
 
(2,027)
(6,029)
 
 
 
 
Finance costs and net finance expense relating to
 
 
 
(457)
(481)
(484)
 
  pensions and other post-retirement benefits
 
(1,865)
(1,653)
304
229
102
 
Taxation on a RC basis
 
2,950
2,602
17
43
(46)
 
Non-controlling interests
 
(57)
(82)
(2,233)
1,661
72
 
RC profit (loss) attributable to BP shareholders
 
(999)
(5,162)
(1,546)
(60)
601
 
Inventory holding gains (losses)
 
1,597
(1,889)
 
 
 
 
Taxation (charge) credit on inventory holding
 
 
 
472
19
(176)
 
  gains and losses
 
(483)
569
 
 
 
 
Profit (loss) for the period attributable to
 
 
 
(3,307)
1,620
497
 
  BP shareholders
 
115
(6,482)
 
(a)
Includes costs related to the Gulf of Mexico oil spill. See page 9 and also Note 2 on page 16 for further information on the accounting for the Gulf of Mexico oil spill.
 
 
Analysis of underlying RC profit before interest and tax
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Underlying RC profit before interest and tax*
 
 
 
(728)
(224)
400
 
    Upstream
 
(542)
1,193
1,218
1,431
877
 
    Downstream
 
5,634
7,545
235
120
135
 
    Rosneft
 
567
1,310
(299)
(260)
(424)
 
    Other businesses and corporate
 
(1,238)
(1,221)
65
17
(132)
 
    Consolidation adjustment – UPII
 
(196)
(36)
491
1,084
856
 
Underlying RC profit before interest and tax
 
4,225
8,791
 
 
 
 
Finance costs and net finance expense relating to
 
 
 
(342)
(358)
(359)
 
  pensions and other post-retirement benefits
 
(1,371)
(1,406)
30
164
(51)
 
Taxation on an underlying RC basis
 
(212)
(1,398)
17
43
(46)
 
Non-controlling interests
 
(57)
(82)
196
933
400
 
Underlying RC profit attributable to BP shareholders
 
2,585
5,905
 
Reconciliations of underlying RC profit or loss to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 4-9 for the segments.
 
 
Top of page 4
Upstream
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
(2,298)
1,183
711
 
Profit (loss) before interest and tax
 
634
(967)
18
13
(19)
 
Inventory holding (gains) losses*
 
(60)
30
(2,280)
1,196
692
 
RC profit (loss) before interest and tax
 
574
(937)
 
 
 
 
Net (favourable) unfavourable impact
 
 
 
 
 
 
 
  of non-operating items*
 
 
 
1,552
(1,420)
(292)
 
  and fair value accounting effects*
 
(1,116)
2,130
(728)
(224)
400
 
Underlying RC profit (loss) before interest and tax*(a)
 
(542)
1,193
 
(a)
See page 5 for a reconciliation to segment RC profit before interest and tax by region.
 
Financial results
 
The replacement cost profit before interest and tax for the fourth quarter and full year was $692 million and $574 million respectively, compared with a loss of $2,280 million and $937 million for the same periods in 2015. The fourth quarter and full year included a net non-operating gain of $636 million and $1,753 million respectively, compared with a net non-operating charge of $1,639 million and $2,235 million for the same periods in 2015. Fair value accounting effects in the fourth quarter and full year had an unfavourable impact of $344 million and $637 million respectively, compared with a favourable impact of $87 million and $105 million in the same periods of 2015.
 
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost result before interest and tax for the fourth quarter and full year was a profit of $400 million and a loss of $542 million respectively, compared with a loss of $728 million and a profit of $1,193 million for the same periods in 2015. The result for the fourth quarter mainly reflected lower costs including the benefits of simplification and efficiency activities and lower exploration write-offs, and higher liquids realizations. The result for the full year reflected lower liquids and gas realizations, lower gas marketing and trading results, and adverse foreign exchange impacts partly offset by lower costs including the benefits of simplification and efficiency activities, lower exploration write-offs, lower depreciation, depletion and amortization expense and lower rig cancellation charges.
 
Production
 
Production for the quarter was 2,186mboe/d, 5.5% lower than the fourth quarter of 2015. Underlying production* for the quarter increased by 1.8%, largely reflecting major project ramp-ups. For the full year, production was 2,208mboe/d, 0.5% lower than in 2015. Underlying production for the full year was broadly flat versus the same period in 2015.
 
Key events
 
On 8 November, BP and Oman Oil Company Exploration & Production signed an agreement with the government of the Sultanate of Oman amending the Oman Block 61 exploration and production-sharing agreement to extend the licence area adding more than 1,000 square kilometres to the south and west of the original 2,700 square kilometres of Block 61.
 
On 9 November, BP (50%), in partnership with Hess (25%) and Noble Energy (25%), was awarded three parcels in the Eastern Newfoundland region, Canada. BP (60%) was also awarded a fourth parcel in the same region in partnership with Noble Energy (40%).
 
On 25 November, BP announced an agreement to buy a 10% interest from ENI (operator, 60%) in the Shorouk concession offshore Egypt, which contains the Zohr gas field.
 
On 1 December, BP announced the sanction of the Mad Dog Phase 2 project in the Gulf of Mexico (BP operator, 60.5%, BHP 23.9%, and Chevron 15.6%).
 
On 4 December, the In Amenas compression project in Algeria achieved start-up with the introduction of gas into the new inlet compression facilities.
 
On 5 December, BP (33.3%), in partnership with Statoil (33.4%) and Total (33.3%), was awarded two blocks in the Saline Basin in Mexico’s first round of deepwater exploration tenders.
 
On 8 December, BP achieved start-up of the Thunder Horse South Expansion project in the Gulf of Mexico. 
 
On 17 December, BP renewed its onshore concession in the United Arab Emirates by signing an agreement with the Supreme Petroleum Council of the Emirate of Abu Dhabi and the Abu Dhabi National Oil Company that grants BP a 10% interest in the ADCO onshore oil concession, which is valid until the end of 2054. In addition, BP becomes a 10% shareholder in the Abu Dhabi Company for Onshore Petroleum Operations Limited which operates the concession.
 
On 19 December, BP announced the signing of agreements with Kosmos Energy to acquire a 62% working interest, including operatorship, of Kosmos’ exploration blocks in Mauritania and a 32.49% effective working interest in Kosmos’ Senegal exploration blocks. On 29 December, the Mauritanian oil ministry approved BP as development operator in Mauritania, and Kosmos as technical exploration operator.
 
On 23 December, BP-operated Azerbaijan International Operating Company (AIOC) and the State Oil Company of the Republic of Azerbaijan signed a letter of intent for the development until 2050 of the Azeri-Chirag-Gunashli field in the Azerbaijan sector of the Caspian Sea.
 
On 24 January, BP announced it has agreed to sell to EnQuest part of its interests in the Magnus oil field (25% of BP’s 100% stake) and some associated infrastructure in the UK North Sea.
 
Outlook
 
We expect full-year 2017 underlying production to be higher than 2016. The actual reported outcome will depend on the exact timing of project start-ups, acquisition and divestment activities, OPEC quotas and entitlement impacts in our production-sharing agreements*. We expect first-quarter 2017 reported production to be higher than the fourth quarter 2016 reflecting the impact of the Abu Dhabi concession renewal.
 
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 30.
 
 
Top of page 5
Upstream
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Underlying RC profit (loss) before interest and tax
 
 
 
(852)
(151)
(147)
 
US
 
(1,270)
(1,615)
124
(73)
547
 
Non-US
 
728
2,808
(728)
(224)
400
 
 
 
(542)
1,193
 
 
 
 
Non-operating items(a)
 
 
 
(260)
326
21
 
US(b)
 
127
(602)
(1,379)
1,139
615
 
Non-US(c)
 
1,626
(1,633)
(1,639)
1,465
636
 
 
 
1,753
(2,235)
 
 
 
 
Fair value accounting effects
 
 
 
(34)
(15)
(274)
 
US
 
(379)
(66)
121
(30)
(70)
 
Non-US
 
(258)
171
87
(45)
(344)
 
 
 
(637)
105
 
 
 
 
RC profit (loss) before interest and tax
 
 
 
(1,146)
160
(400)
 
US
 
(1,522)
(2,283)
(1,134)
1,036
1,092
 
Non-US
 
2,096
1,346
(2,280)
1,196
692
 
 
 
574
(937)
 
 
 
 
Exploration expense
 
 
 
627
22
511
 
US(b)
 
693
960
296
781
(197)
 
Non-US(c)
 
1,028
1,393
923
803
314
 
 
 
1,721
2,353
697
687
166
 
Of which: Exploration expenditure written off(b)(c)
 
1,274
1,829
 
 
 
 
Production (net of royalties)(d)
 
 
 
 
 
 
 
Liquids*(e)(mb/d)
 
 
 
401
353
406
 
US
 
391
379
131
112
122
 
Europe
 
120
121
740
669
650
 
Rest of World(e)
 
698
694
1,271
1,134
1,178
 
 
 
1,208
1,194
 
 
 
 
Natural gas (mmcf/d)
 
 
 
1,547
1,679
1,675
 
US
 
1,656
1,528
287
262
268
 
Europe
 
264
266
4,214
3,753
3,903
 
Rest of World
 
3,876
4,157
6,048
5,695
5,846
 
 
 
5,796
5,951
 
 
 
 
Total hydrocarbons*(e)(mboe/d)
 
 
 
668
643
694
 
US
 
676
643
180
157
168
 
Europe
 
165
167
1,466
1,316
1,323
 
Rest of World(e)
 
1,366
1,410
2,314
2,116
2,186
 
 
 
2,208
2,220
 
 
 
 
Average realizations*(f)
 
 
 
38.91
40.99
43.89
 
Total liquids(e)(g)($/bbl)
 
38.27
47.32
3.47
2.77
3.08
 
Natural gas ($/mcf)
 
2.84
3.80
30.34
29.37
31.40
 
Total hydrocarbons(e)($/boe)
 
28.24
35.46
 
 
(a)
See Notes 1 and 3 for more information on impairment of fixed assets in the fourth quarter and full year 2016.
(b)
Fourth quarter and full year 2016 include the write-off of $147 million in relation to the value ascribed to licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. The $147-million write-off has been classified within the ‘other’ category of non-operating items.
Fourth quarter and full year 2015 include the write-off of costs relating to the Gila discovery in the deepwater Gulf of Mexico.
(c)
 
Fourth quarter and full year 2016 include a $319-million reversal relating to Block KG D6 in India. This is classified in the ‘other’ category of non-operating items. In addition, an impairment reversal of $234 million was also recorded in relation to this block. Third quarter and full year include a charge of $601 million relating to the BM-C-34 licence in Brazil, of which $334 million relates to the value ascribed to the licence as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. The $334-million write-off has been classified within the ‘other’ category of non-operating items. Full year 2015 includes a $432-million write-off in Libya.
(d)
Includes BP’s share of production of equity-accounted entities in the Upstream segment.
(e)
 
Production volume recognition methodology for our Technical Service Contract arrangement in Iraq has been simplified to exclude the impact of oil price movements on lifting imbalances. The comparative data for prior periods has been restated.
There is no impact on the financial results.
(f)
Realizations are based on sales by consolidated subsidiaries only – this excludes equity-accounted entities.
(g)
Includes condensate, natural gas liquids and bitumen.
 
Because of rounding, some totals may not agree exactly with the sum of their component parts.
 
 
Top of page 6
Downstream
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
(644)
943
1,457
 
Profit (loss) before interest and tax
 
6,646
5,248
1,482
35
(558)
 
Inventory holding (gains) losses*
 
(1,484)
1,863
838
978
899
 
RC profit before interest and tax
 
5,162
7,111
 
 
 
 
Net (favourable) unfavourable
 
 
 
 
 
 
 
  impact of non-operating items*
 
 
 
380
453
(22)
 
  and fair value accounting effects*
 
472
434
1,218
1,431
877
 
Underlying RC profit before interest and tax*(a)
 
5,634
7,545
 
(a)
See page 7 for a reconciliation to segment RC profit before interest and tax by region and by business.
 
Financial results
 
The replacement cost profit before interest and tax for the fourth quarter and full year was $899 million and $5,162 million respectively, compared with $838 million and $7,111 million for the same periods in 2015.
 
The 2016 results include a net non-operating charge of $77 million for the fourth quarter and $24 million for the full year, compared with a net non-operating charge of $548 million and $590 million for the same periods in 2015. Fair value accounting effects had a favourable impact of $99 million in the fourth quarter and an unfavourable impact of $448 million in the full year, compared with a favourable impact of $168 million and $156 million in the same periods of 2015.
 
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the fourth quarter and full year was $877 million and $5,634 million respectively, compared with $1,218 million and $7,545 million for the same periods in 2015.
 
Replacement cost profit before interest and tax for the fuels, lubricants and petrochemicals businesses is set out on page 7.
 
Fuels business
 
The fuels business reported an underlying replacement cost profit before interest and tax of $417 million for the fourth quarter and $3,727 million for the full year, compared with $888 million and $5,995 million for the same periods in 2015. The results for the quarter and full year reflect a significantly weaker refining environment as well as the impact from a particularly large turnaround at the Whiting refinery. These adverse impacts were partly offset by an increased fuels marketing performance driven by retail growth, higher refining margin capture in our operations and lower costs from simplification and efficiency programmes.
 
The result for the fourth quarter was also impacted by a weak supply and trading performance.
 
On 28 December, BP announced that it will be establishing a strategic partnership with Woolworths in Australia.  The agreement includes BP acquiring Woolworths’ fuel and convenience sites for a total consideration of $1.3 billion and entering into a strategic convenience partnership with them. The transaction is subject to regulatory approvals.
 
On 31 December, the previously-announced dissolution of our German refining joint operation with Rosneft was completed, which will simplify and refocus our refining business in the heart of Europe.
 
Lubricants business
 
The lubricants business reported an underlying replacement cost profit before interest and tax of $357 million for the fourth quarter and $1,523 million for the full year, compared with $294 million and $1,384 million for the same periods in 2015. The results for the quarter and full year reflect continued strong performance in our growth markets and premium brands as well as lower costs from simplification and efficiency programmes. This result for the year represents a record performance for lubricants.
 
Petrochemicals business
 
The petrochemicals business reported an underlying replacement cost profit before interest and tax of $103 million for the fourth quarter and $384 million for the full year, compared with $36 million and $166 million for the same periods in 2015. The result for the full year reflects strong operations and margin capture supported by the continued rollout of our latest advanced technology. The results for the quarter and full year also benefited from a slightly improved environment, particularly in olefins and derivatives.
 
Outlook
 
Looking to the first quarter of 2017, we expect a similar level of refining margins and lower turnaround activity versus the fourth quarter.
 
 
 
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 30.
 
 
Top of page 7
Downstream
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Underlying RC profit before interest and tax - 
 
 
 
 
 
 
 
  by region
 
 
 
477
298
(371)
 
US
 
853
2,599
741
1,133
1,248
 
Non-US
 
4,781
4,946
1,218
1,431
877
 
 
 
5,634
7,545
 
 
 
 
Non-operating items
 
 
 
(196)
(56)
(122)
 
US
 
(48)
(86)
(352)
(140)
45
 
Non-US
 
24
(504)
(548)
(196)
(77)
 
 
 
(24)
(590)
 
 
 
 
Fair value accounting effects
 
 
 
124
(178)
22
 
US
 
(321)
102
44
(79)
77
 
Non-US
 
(127)
54
168
(257)
99
 
 
 
(448)
156
 
 
 
 
RC profit before interest and tax
 
 
 
405
64
(471)
 
US
 
484
2,615
433
914
1,370
 
Non-US
 
4,678
4,496
838
978
899
 
 
 
5,162
7,111
 
 
 
 
Underlying RC profit before interest and tax - 
 
 
 
 
 
 
 
  by business(a)(b)
 
 
 
888
983
417
 
Fuels
 
3,727
5,995
294
370
357
 
Lubricants
 
1,523
1,384
36
78
103
 
Petrochemicals
 
384
166
1,218
1,431
877
 
 
 
5,634
7,545
 
 
 
 
Non-operating items and fair value
 
 
 
 
 
 
 
  accounting effects(c)
 
 
 
(220)
(455)
103
 
Fuels
 
(390)
(137)
(17)
1
(81)
 
Lubricants
 
(84)
(143)
(143)
1
–
 
Petrochemicals
 
2
(154)
(380)
(453)
22
 
 
 
(472)
(434)
 
 
 
 
RC profit before interest and tax(a)(b)
 
 
 
668
528
520
 
Fuels
 
3,337
5,858
277
371
276
 
Lubricants
 
1,439
1,241
(107)
79
103
 
Petrochemicals
 
386
12
838
978
899
 
 
 
5,162
7,111
 
 
 
 
 
 
 
 
13.2
11.6
11.4
 
BP average refining marker margin (RMM)* ($/bbl)
 
11.8
17.0
 
 
 
 
Refinery throughputs (mb/d)
 
 
 
700
613
604
 
US
 
646
657
776
795
806
 
Europe
 
803
794
238
242
234
 
Rest of World
 
236
254
1,714
1,650
1,644
 
 
 
1,685
1,705
95.5
95.4
94.9
 
Refining availability* (%)
 
95.3
94.7
 
 
 
 
Marketing sales of refined products (mb/d)
 
 
 
1,267
1,205
1,146
 
US
 
1,134
1,158
1,188
1,236
1,166
 
Europe
 
1,179
1,199
476
503
540
 
Rest of World
 
512
478
2,931
2,944
2,852
 
 
 
2,825
2,835
2,883
2,581
2,836
 
Trading/supply sales of refined products
 
2,775
2,770
5,814
5,525
5,688
 
Total sales volumes of refined products
 
5,600
5,605
 
 
 
 
Petrochemicals production (kte)
 
 
 
938
564
546
 
US
 
2,564
3,666
727
898
930
 
Europe
 
3,729
3,527
2,002
1,987
2,071
 
Rest of World
 
7,934
7,567
3,667
3,449
3,547
 
 
 
14,227
14,760
 
(a)
Segment-level overhead expenses are included in the fuels business result.
(b)
BP’s share of income from petrochemicals at our Gelsenkirchen and Mülheim sites in Germany is reported in the fuels business.
(c)
For Downstream, fair value accounting effects arise solely in the fuels business.
 
 
Top of page 8
Rosneft
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016(a)
 
$ million
 
2016(a)
2015
189
108
182
 
Profit before interest and tax(b)
 
643
1,314
46
12
(24)
 
Inventory holding (gains) losses*
 
(53)
(4)
235
120
158
 
RC profit before interest and tax
 
590
1,310
–
–
(23)
 
Net charge (credit) for non-operating items*
 
(23)
–
235
120
135
 
Underlying RC profit before interest and tax*
 
567
1,310
 
Financial results
 
Replacement cost profit before interest and tax for the fourth quarter and full year was $158 million and $590 million respectively, compared with $235 million and $1,310 million for the same periods in 2015.
 
After adjusting for non-operating items, the underlying replacement cost profit before interest and tax for the fourth quarter and full year was $135 million and $567 million respectively. There were no non-operating items in the fourth quarter and full year of 2015.
 
Compared with the same period in 2015, the result for the fourth quarter was primarily affected by increased government take, partially offset by favourable duty lag effects and higher oil prices. For the full year, the result was primarily affected by lower oil prices and increased government take, partially offset by favourable duty lag effects.
 
In June 2016 Rosneft’s annual general meeting adopted a resolution to pay a dividend of 11.75 Russian roubles per ordinary share in relation to the 2015 annual results. BP received a dividend of $332 million, after the deduction of withholding tax, in July 2016.
 
Key events
 
On 7 December an agreement was signed to sell 19.5% from Rosneftegaz’s 69.5% shareholding in Rosneft to a consortium of international investors, comprising Qatar Investment Authority and Glencore. Following completion of the transaction in December, at the year-end Rosneftegaz’s shareholding in Rosneft was 50% plus one share. Rosneftegaz is Rosneft’s largest shareholder and is wholly owned by the Russian government.
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016(a)
 
 
 
2016(a)
2015
 
 
 
 
Production (net of royalties) (BP share)
 
 
 
811
820
919
 
Liquids* (mb/d)
 
840
813
1,261
1,221
1,347
 
Natural gas (mmcf/d)
 
1,279
1,195
1,028
1,030
1,152
 
Total hydrocarbons* (mboe/d)
 
1,060
1,019
 
(a)
The operational and financial information of the Rosneft segment for the fourth quarter and full year is based on preliminary operational and financial results of Rosneft for the full year ended 31 December 2016. Actual results may differ from these amounts.
(b)
The Rosneft segment result includes equity-accounted earnings arising from BP’s 19.75% shareholding in Rosneft as adjusted for the accounting required under IFRS relating to BP’s purchase of its interest in Rosneft and the amortization of the deferred gain relating to the disposal of BP’s interest in TNK-BP. These adjustments have increased the reported profit before interest and tax for the fourth quarter and full year of 2016, as shown in the table above, compared with the equivalent amount in Russian roubles that we expect Rosneft to report in its own financial statements under IFRS. BP’s share of Rosneft’s profit before interest and tax for each year-to-date period is calculated by translating the amounts reported in Russian roubles into US dollars using the average exchange rate for the year to date. BP's share of Rosneft’s earnings after finance costs, taxation and non-controlling interests, as adjusted, is included in the BP group income statement within profit before interest and taxation.
 
 
Top of page 9
Other businesses and corporate
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Profit (loss) before interest and tax
 
 
 
(328)
(66)
(674)
 
Gulf of Mexico oil spill
 
(6,640)
(11,709)
(627)
(375)
(443)
 
Other
 
(1,517)
(1,768)
(955)
(441)
(1,117)
 
Profit (loss) before interest and tax
 
(8,157)
(13,477)
–
–
–
 
Inventory holding (gains) losses*
 
–
–
(955)
(441)
(1,117)
 
RC profit (loss) before interest and tax
 
(8,157)
(13,477)
 
 
 
 
Net charge (credit) for non-operating items*
 
 
 
328
66
674
 
Gulf of Mexico oil spill
 
6,640
11,709
328
115
19
 
Other
 
279
547
656
181
693
 
Net charge (credit) for non-operating items
 
6,919
12,256
(299)
(260)
(424)
 
Underlying RC profit (loss) before interest and tax*
 
(1,238)
(1,221)
 
 
 
 
Underlying RC profit (loss) before interest and tax
 
 
 
(107)
(107)
50
 
US
 
(276)
(439)
(192)
(153)
(474)
 
Non-US
 
(962)
(782)
(299)
(260)
(424)
 
 
 
(1,238)
(1,221)
 
 
 
 
Non-operating items
 
 
 
(624)
(168)
(672)
 
US
 
(6,824)
(12,143)
(32)
(13)
(21)
 
Non-US
 
(95)
(113)
(656)
(181)
(693)
 
 
 
(6,919)
(12,256)
 
 
 
 
RC profit (loss) before interest and tax
 
 
 
(731)
(275)
(622)
 
US
 
(7,100)
(12,582)
(224)
(166)
(495)
 
Non-US
 
(1,057)
(895)
(955)
(441)
(1,117)
 
 
 
(8,157)
(13,477)
 
Other businesses and corporate comprises biofuels and wind businesses, shipping, treasury (which includes interest income on the group's cash and cash equivalents), corporate activities including centralized functions, and the costs of the Gulf of Mexico oil spill.
 
Financial results
 
The replacement cost loss before interest and tax for the fourth quarter and full year was $1,117 million and $8,157 million respectively, compared with $955 million and $13,477 million for the same periods in 2015.
 
The fourth-quarter result included a net non-operating charge of $693 million, compared with a net non-operating charge of $656 million in 2015. The charge for the quarter primarily relates to the Gulf of Mexico oil spill and reflects the latest estimate for claims and associated costs and other items. For the full year, the net non-operating charge was $6,919 million, compared with a net non-operating charge of $12,256 million a year ago, both primarily relating to costs for the Gulf of Mexico oil spill. For further information see Note 2 on page 16.
 
After adjusting for non-operating items, the underlying replacement cost loss before interest and tax for the fourth quarter and full year was $424 million and $1,238 million respectively, compared with $299 million and $1,221 million for the same periods in 2015. The result for the quarter was impacted by adverse foreign exchange effects.
 
Biofuels
 
The net ethanol-equivalent production (which includes ethanol and sugar) for the fourth quarter and full year was 98 million litres and 733 million litres, compared with 189 million litres and 795 million litres for the same periods in 2015.
 
Wind
 
Net wind generation capacity*(a) was 1,474MW at 31 December 2016 compared with 1,588MW at 31 December 2015. BP’s net share of wind generation for the fourth quarter and full year was 1,154GWh and 4,389GWh respectively, compared with 1,253GWh and 4,424GWh for the same periods in 2015.
 
Outlook
 
In 2017, Other businesses and corporate average quarterly charges, excluding non-operating items, are expected to be around $350 million although this will fluctuate from quarter to quarter.
 
 
(a)
Capacity figures include 22.5MW in the Netherlands managed by our Downstream segment at 31 December 2016, and 32MW at 31 December 2015.
 
 
The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 30.
 
 
Top of page 10
Financial statements
 
 
Group income statement
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
 
 
 
49,172
47,047
51,007
 
Sales and other operating revenues (Note 5)
 
183,008
222,894
(615)
174
489
 
Earnings from joint ventures – after interest and tax
 
966
(28)
303
209
263
 
Earnings from associates – after interest and tax
 
994
1,839
145
146
114
 
Interest and other income
 
506
611
228
467
248
 
Gains on sale of businesses and fixed assets
 
1,132
666
49,233
48,043
52,121
 
Total revenues and other income
 
186,606
225,982
36,893
34,981
37,883
 
Purchases
 
132,219
164,790
6,448
5,517
6,595
 
Production and manufacturing expenses(a)
 
29,077
37,040
263
212
199
 
Production and similar taxes (Note 6)
 
683
1,036
3,881
3,496
3,642
 
Depreciation, depletion and amortization
 
14,505
15,219
 
 
 
 
Impairment and losses on sale of businesses
 
 
 
1,386
(1,424)
(305)
 
  and fixed assets
 
(1,664)
1,909
923
803
314
 
Exploration expense
 
1,721
2,353
3,082
2,648
2,692
 
Distribution and administration expenses
 
10,495
11,553
(3,643)
1,810
1,101
 
Profit (loss) before interest and taxation
 
(430)
(7,918)
379
433
434
 
Finance costs(a)
 
1,675
1,347
 
 
 
 
Net finance expense relating to pensions and
 
 
 
78
48
50
 
  other post-retirement benefits
 
190
306
(4,100)
1,329
617
 
Profit (loss) before taxation
 
(2,295)
(9,571)
(776)
(248)
74
 
Taxation(a)
 
(2,467)
(3,171)
(3,324)
1,577
543
 
Profit (loss) for the period
 
172
(6,400)
 
 
 
 
Attributable to
 
 
 
(3,307)
1,620
497
 
  BP shareholders
 
115
(6,482)
(17)
(43)
46
 
  Non-controlling interests
 
57
82
(3,324)
1,577
543
 
 
 
172
(6,400)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share (Note 7)
 
 
 
 
 
 
 
Profit (loss) for the period attributable to
 
 
 
 
 
 
 
  BP shareholders
 
 
 
 
 
 
 
  Per ordinary share (cents)
 
 
 
(18.01)
8.61
2.62
 
    Basic
 
0.61
(35.39)
(18.01)
8.56
2.60
 
    Diluted
 
0.60
(35.39)
 
 
 
 
  Per ADS (dollars)
 
 
 
(1.08)
0.52
0.16
 
    Basic
 
0.04
(2.12)
(1.08)
0.51
0.16
 
    Diluted
 
0.04
(2.12)
 
(a)
See Note 2 for information on the impact of the Gulf of Mexico oil spill on these income statement line items.
 
 
Top of page 11
Financial statements (continued)
 
 
Group statement of comprehensive income
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
 
 
 
(3,324)
1,577
543
 
Profit (loss) for the period
 
172
(6,400)
 
 
 
 
Other comprehensive income
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit
 
 
 
 
 
 
 
  or loss
 
 
 
(958)
192
(777)
 
  Currency translation differences
 
254
(4,119)
 
 
 
 
  Exchange gains (losses) on translation of foreign
 
 
 
 
 
 
 
    operations reclassified to gain or loss on sale of
 
 
 
–
–
24
 
    businesses and fixed assets
 
30
23
–
1
–
 
  Available-for-sale investments
 
1
1
(24)
(84)
(204)
 
  Cash flow hedges marked to market
 
(639)
(178)
 
 
 
 
  Cash flow hedges reclassified to the income
 
 
 
29
71
86
 
    statement
 
196
249
6
30
32
 
  Cash flow hedges reclassified to the balance sheet
 
81
22
 
 
 
 
  Share of items relating to equity-accounted entities,
 
 
 
(233)
174
172
 
    net of tax
 
833
(814)
(43)
(78)
97
 
  Income tax relating to items that may be reclassified
 
13
257
(1,223)
306
(570)
 
 
 
769
(4,559)
 
 
 
 
Items that will not be reclassified to profit or loss
 
 
 
 
 
 
 
  Remeasurements of the net pension and other
 
 
 
2,570
(2,995)
3,484
 
    post-retirement benefit liability or asset
 
(2,496)
4,139
 
 
 
 
  Share of items relating to equity-accounted
 
 
 
–
–
–
 
    entities, net of tax
 
–
(1)
 
 
 
 
  Income tax relating to items that will not be
 
 
 
(881)
510
(765)
 
    reclassified
 
739
(1,397)
1,689
(2,485)
2,719
 
 
 
(1,757)
2,741
466
(2,179)
2,149
 
Other comprehensive income
 
(988)
(1,818)
(2,858)
(602)
2,692
 
Total comprehensive income
 
(816)
(8,218)
 
 
 
 
Attributable to
 
 
 
(2,836)
(558)
2,667
 
  BP shareholders
 
(846)
(8,259)
(22)
(44)
25
 
  Non-controlling interests
 
30
41
(2,858)
(602)
2,692
 
 
 
(816)
(8,218)
 
 
Top of page 12
Financial statements (continued)
 
 
Group statement of changes in equity
 
 
 
BP
 
 
 
 
shareholders’
Non-controlling
Total
$ million
 
equity
interests
equity
 
 
 
 
 
At 1 January 2016
 
97,216
1,171
98,387
 
 
 
 
 
Total comprehensive income
 
(846)
30
(816)
Dividends
 
(4,611)
(107)
(4,718)
Share-based payments, net of tax(a)
 
2,991
–
2,991
Share of equity-accounted entities’ change in equity, net of tax
 
106
–
106
Transactions involving non-controlling interests
 
430
463
893
At 31 December 2016
 
95,286
1,557
96,843
 
 
 
 
 
 
 
BP
 
 
 
 
shareholders’
Non-controlling
Total
$ million
 
equity
interests
equity
 
 
 
 
 
At 1 January 2015
 
111,441
1,201
112,642
 
 
 
 
 
Total comprehensive income
 
(8,259)
41
(8,218)
Dividends
 
(6,659)
(91)
(6,750)
Share-based payments, net of tax
 
656
–
656
Share of equity-accounted entities’ change in equity, net of tax
 
40
–
40
Transactions involving non-controlling interests
 
(3)
20
17
At 31 December 2015
 
97,216
1,171
98,387
 
(a)
Includes amounts relating to the issue of new ordinary shares in relation to the renewal of a 10% interest in the Abu Dhabi onshore oil concession.
 
 
Top of page 13
Financial statements (continued)
 
 
Group balance sheet
 
 
 
31 December
31 December
$ million
 
2016
2015
Non-current assets
 
 
 
Property, plant and equipment
 
129,757
129,758
Goodwill
 
11,194
11,627
Intangible assets
 
18,183
18,660
Investments in joint ventures
 
8,609
8,412
Investments in associates
 
14,092
9,422
Other investments
 
1,033
1,002
Fixed assets
 
182,868
178,881
Loans
 
532
529
Trade and other receivables
 
1,474
2,216
Derivative financial instruments
 
4,359
4,409
Prepayments
 
945
1,003
Deferred tax assets
 
4,741
1,545
Defined benefit pension plan surpluses
 
584
2,647
 
 
195,503
191,230
Current assets
 
 
 
Loans
 
259
272
Inventories
 
17,655
14,142
Trade and other receivables
 
20,675
22,323
Derivative financial instruments
 
3,016
4,242
Prepayments
 
1,486
1,838
Current tax receivable
 
1,194
599
Other investments
 
44
219
Cash and cash equivalents
 
23,484
26,389
 
 
67,813
70,024
Assets classified as held for sale
 
–
578
 
 
67,813
70,602
Total assets
 
263,316
261,832
Current liabilities
 
 
 
Trade and other payables
 
37,915
31,949
Derivative financial instruments
 
2,991
3,239
Accruals
 
5,136
6,261
Finance debt
 
6,634
6,944
Current tax payable
 
1,666
1,080
Provisions
 
4,012
5,154
 
 
58,354
54,627
Liabilities directly associated with assets classified as held for sale
 
–
97
 
 
58,354
54,724
Non-current liabilities
 
 
 
Other payables
 
13,946
2,910
Derivative financial instruments
 
5,513
4,283
Accruals
 
469
890
Finance debt
 
51,666
46,224
Deferred tax liabilities
 
7,238
9,599
Provisions
 
20,412
35,960
Defined benefit pension plan and other post-retirement benefit plan deficits
 
8,875
8,855
 
 
108,119
108,721
Total liabilities
 
166,473
163,445
Net assets
 
96,843
98,387
Equity
 
 
 
BP shareholders’ equity
 
95,286
97,216
Non-controlling interests
 
1,557
1,171
Total equity
 
96,843
98,387
 
 
Top of page 14
Financial statements (continued)
 
 
Condensed group cash flow statement
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Operating activities
 
 
 
(4,100)
1,329
617
 
Profit (loss) before taxation
 
(2,295)
(9,571)
 
 
 
 
Adjustments to reconcile profit (loss) before taxation
 
 
 
 
 
 
 
  to net cash provided by operating activities
 
 
 
 
 
 
 
  Depreciation, depletion and amortization and
 
 
 
4,578
4,183
3,808
 
    exploration expenditure written off
 
15,779
17,048
 
 
 
 
  Impairment and (gain) loss on sale of businesses
 
 
 
1,158
(1,891)
(553)
 
    and fixed assets
 
(2,796)
1,243
 
 
 
 
  Earnings from equity-accounted entities,
 
 
 
1,028
259
(605)
 
    less dividends received
 
(855)
(197)
 
 
 
 
  Net charge for interest and other finance
 
 
 
164
204
310
 
    expense less net interest paid
 
795
502
167
166
150
 
  Share-based payments
 
779
321
 
 
 
 
  Net operating charge for pensions and other post-
 
 
 
 
 
 
 
    retirement benefits, less contributions and
 
 
 
(464)
(96)
(347)
 
    benefit payments for unfunded plans
 
(467)
(592)
591
(184)
(629)
 
  Net charge for provisions, less payments
 
4,487
11,792
 
 
 
 
  Movements in inventories and other current and
 
 
 
2,978
(1,001)
393
 
    non-current assets and liabilities
 
(3,198)
843
(294)
(461)
(716)
 
  Income taxes paid
 
(1,538)
(2,256)
5,806
2,508
2,428
 
Net cash provided by operating activities
 
10,691
19,133
 
 
 
 
Investing activities
 
 
 
(5,126)
(3,379)
(4,658)
 
Capital expenditure
 
(16,701)
(18,648)
(10)
–
(1)
 
Acquisitions, net of cash acquired
 
(1)
23
(87)
(1)
(37)
 
Investment in joint ventures
 
(50)
(265)
(888)
(185)
(226)
 
Investment in associates
 
(700)
(1,312)
17
590
391
 
Proceeds from disposal of fixed assets
 
1,372
1,066
 
 
 
 
Proceeds from disposal of businesses, net of
 
 
 
215
(21)
78
 
  cash disposed
 
1,259
1,726
1
9
7
 
Proceeds from loan repayments
 
68
110
(5,878)
(2,987)
(4,446)
 
Net cash used in investing activities
 
(14,753)
(17,300)
 
 
 
 
Financing activities
 
 
 
185
3,925
3,069
 
Proceeds from long-term financing
 
12,442
8,173
(3,559)
(75)
(1,733)
 
Repayments of long-term financing
 
(6,685)
(6,426)
(124)
(512)
375
 
Net increase (decrease) in short-term debt
 
51
473
(5)
323
126
 
Net increase (decrease) in non-controlling interests
 
887
(5)
(1,541)
(1,161)
(1,182)
 
Dividends paid
– BP shareholders
 
(4,611)
(6,659)
(20)
(31)
(24)
 
 
– non-controlling interests
 
(107)
(91)
(5,064)
2,469
631
 
Net cash provided by (used in) financing activities
 
1,977
(4,535)
 
 
 
 
Currency translation differences relating to cash
 
 
 
(177)
13
(649)
 
  and cash equivalents
 
(820)
(672)
(5,313)
2,003
(2,036)
 
Increase (decrease) in cash and cash equivalents
 
(2,905)
(3,374)
31,702
23,517
25,520
 
Cash and cash equivalents at beginning of period
 
26,389
29,763
26,389
25,520
23,484
 
Cash and cash equivalents at end of period
 
23,484
26,389
 
 
Top of page 15
Financial statements (continued)
 
 
Notes
 
1.        Basis of preparation
 
The results for the interim periods and for the year ended 31 December 2016 are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for each period. All such adjustments are of a normal recurring nature. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2015 included in BP Annual Report and Form 20-F 2015.
 
BP prepares its consolidated financial statements included within BP Annual Report and Form 20-F on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the group’s consolidated financial statements for the periods presented.
 
The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing BP Annual Report and Form 20-F 2016, which do not differ significantly from those used in BP Annual Report and Form 20-F 2015.
 
In BP Annual Report and Form 20-F 2015 we disclosed a significant estimate or judgement relating to provisions arising from the Gulf of Mexico oil spill in 2010. At that time, no reliable estimate could be made of any business economic loss (BEL) claims under the Plaintiffs’ Steering Committee (PSC) settlement that were not yet processed or processed but not yet paid, except where an eligibility notice had been issued and was not subject to appeal by BP within the Deepwater Horizon Court Supervised Settlement Program claims facility (DHCSSP). A reliable estimate could also not be made in relation to securities-related litigation and other litigation, including economic loss and property damage claims from parties excluded from and/or who opted out of the PSC settlement. No amounts were provided for these items and they were disclosed as contingent liabilities.
 
As a result of developments during the second quarter of 2016 sufficient information existed in order to make a reliable estimate of the amounts that BP will pay relating to all outstanding BEL claims under the DHCSSP, securities class actions and economic loss and property damage claims from parties who were excluded from and/or opted out of the PSC settlement. Liabilities for these items were therefore recognized in the financial statements in the second quarter of 2016. See Note 2 for further information.
 
In BP Annual Report and Form 20-F 2015 – Financial statements – Note 1 we disclosed a significant estimate or judgement relating to the recoverability of asset values, including oil and natural gas price assumptions used to estimate future cash flows and the discount rates applied to determine the recoverable amounts of assets when performing impairment tests. During the third quarter of 2016, the price assumptions and discount rates used in impairment tests were revised.
 
From the third quarter onwards, the long-term price assumptions used to determine recoverable amount based on fair value less costs of disposal from 2022 onwards were derived from $75 per barrel for Brent and $4/mmBtu for Henry Hub (both in 2015 prices) inflated for the remaining life of the asset. To determine the recoverable amount based on value in use, the price assumptions were inflated to 2022 but from 2022 onwards were not inflated.
 
For both value-in-use and fair value less costs of disposal impairment tests performed from the third quarter onwards, the price assumptions used have been set such that there is a gradual transition over a five-year period from current market prices to the long-term price assumptions for 2022, as noted above.
 
The post-tax discount rate applied to Upstream asset cash flows used to calculate fair value less costs of disposal from the third quarter onwards was 6%. For value-in-use calculations from the third quarter onwards the pre-tax discount rate applied was 9%. For both calculations a premium of 2% continues to be added for assets located in higher-risk countries.
 
See Note 3 for further information on impairment charges and reversals.
 
 
Top of page 16
Financial statements (continued)
 
 
Notes
 
2.       Gulf of Mexico oil spill
 
(a) Overview
 
The information presented in this note should be read in conjunction with BP Annual Report and Form 20-F 2015 – Financial statements – Note 2 and Legal proceedings on page 237.
 
During the second quarter, significant progress was made in resolving outstanding claims arising from the 2010 Deepwater Horizon accident and oil spill and a reliable estimate was determined for all remaining material liabilities arising from the incident.
 
The group income statement includes a pre-tax charge of $799 million for the fourth quarter and $7,134 million for the full year in relation to the Gulf of Mexico oil spill. The cumulative pre-tax income statement charge since the incident, in April 2010, amounts to $62,585 million. The charge for the fourth quarter reflects the latest estimate for claims and associated costs, finance costs relating to unwinding of discounting effects and other items. The charge for the full year is primarily attributable to the recognition of additional provisions for claims, as well as the cost of the securities claims settlement with the certified class of post-explosion ADS purchasers which was agreed in June 2016 and functional costs.
 
The amounts set out below reflect the impacts on the financial statements of the Gulf of Mexico oil spill for the periods presented. The income statement, balance sheet and cash flow statement impacts are included within the relevant line items in those statements as set out below.
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
Income statement
 
 
 
 
328
66
674
 
Production and manufacturing expenses
 
6,640
11,709
 
(328)
(66)
(674)
 
Profit (loss) before interest and taxation
 
(6,640)
(11,709)
 
115
123
125
 
Finance costs
 
494
247
 
(443)
(189)
(799)
 
Profit (loss) before taxation
 
(7,134)
(11,956)
 
(134)
53
268
 
Taxation
 
3,105
3,492
 
(577)
(136)
(531)
 
Profit (loss) for the period
 
(4,029)
(8,464)
 
 
 
 
 
31 December
31 December
 
$ million
 
2016
2015
 
Balance sheet
 
 
 
 
Current assets
 
 
 
 
  Trade and other receivables
 
194
686
 
Current liabilities
 
 
 
 
  Trade and other payables
 
(3,056)
(693)
 
  Accruals
 
–
(40)
 
  Provisions
 
(2,330)
(3,076)
 
Net current assets (liabilities)
 
(5,192)
(3,123)
 
Non-current assets
 
 
 
 
  Deferred tax assets
 
2,973
–
 
Non-current liabilities
 
 
 
 
  Other payables
 
(13,522)
(2,057)
 
  Accruals
 
–
(186)
 
  Provisions
 
(112)
(13,431)
 
  Deferred tax liabilities
 
5,119
5,200
 
Net non-current assets (liabilities)
 
(5,542)
(10,474)
 
Net assets (liabilities)
 
(10,734)
(13,597)
 
 
Top of page 17
Financial statements (continued)
 
Notes
 
2.       Gulf of Mexico oil spill (continued)
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
Cash flow statement - Operating activities
 
 
 
 
(443)
(189)
(799)
 
Profit (loss) before taxation
 
(7,134)
(11,956)
 
 
 
 
 
Adjustments to reconcile profit (loss)
 
 
 
 
 
 
 
 
  before taxation to net cash provided
 
 
 
 
 
 
 
 
  by operating activities
 
 
 
 
 
 
 
 
Net charge for interest and other finance
 
 
 
 
115
123
125
 
  expense, less net interest paid
 
494
247
 
227
(494)
(376)
 
Net charge for provisions, less payments
 
4,353
11,296
 
 
 
 
 
Movements in inventories and other current
 
 
 
 
(36)
(1,766)
(993)
 
  and non-current assets and liabilities
 
(4,818)
(732)
 
(137)
(2,326)
(2,043)
 
Pre-tax cash flows
 
(7,105)
(1,145)
 
Net cash from operating activities relating to the Gulf of Mexico oil spill, on a post-tax basis, amounted to an outflow of $2,043 million and an outflow of $6,892 million in the fourth quarter and full year of 2016 respectively. For the same periods in 2015, the amounts were an outflow of $137 million and an outflow of $1,130 million respectively.
 
Trust fund
 
During the first half of 2016, the remaining cash in the Deepwater Horizon Oil Spill Trust (the Trust) was exhausted and BP commenced paying claims and other costs previously funded from the Trust. For certain costs, these payments are made by BP into a qualified settlement fund, the fund then distributes the amounts to claimants; $976 million was paid into a qualified settlement fund during the fourth quarter ($3,210 million during the full year).
 
(b) Provisions and contingent liabilities
 
Provisions
 
BP had recorded provisions relating to the Gulf of Mexico oil spill in relation to environmental expenditure, litigation and claims, and Clean Water Act penalties. Movements in the fourth quarter, all of which relate to litigation and claims provisions, are presented in the table below.
 
 
   
 
 
 
 
   
 
 
 
 
$ million 
 
  Total
 
At 1 October 2016
 
  5,132
 
Net increase in provision
 
  675
 
Reclassified to other payables
 
  (1,202)
 
Utilization
– paid by BP
 
  (1,051)
 
 
– paid by settlement fund
 
  (1,112)
 
At 31 December 2016
 
  2,442
 
Of which
– current
 
  2,330
 
 
– non-current
 
  112
 
Movements in each class of provision during the full year are presented in the table below.
 
 
 
 
 
 
Litigation
Clean
 
 
 
 
 
 
and
Water Act
 
 
 
 
 
Environmental
claims
penalties
Total
 
$ million 
 
 
 
 
 
 
At 1 January 2016
 
5,919
6,459
4,129
16,507
 
Net increase in provision
 
-
6,440
-
6,440
 
Unwinding of discount
 
52
25
38
115
 
Reclassified to other payables
 
(5,970)
(4,943)
(4,167)
(15,080)
 
Utilization
- paid by BP
 
(1)
(2,086)
-
(2,087)
 
 
- paid by settlement fund or Trust
 
-
(3,453)
-
(3,453)
 
At 31 December 2016
 
-
2,442
-
2,442
 
 
 
 
 
 
 
 
 
 
 
 
Top of page 18
Financial statements (continued)
 
 
Notes
 
2.       Gulf of Mexico oil spill (continued)
 
Environmental
The environmental provisions relating to natural resource damage costs and the early restoration framework agreement were reclassified to Other payables during the first quarter following approval by the Court in April 2016 of the Consent Decree between the United States, the Gulf states and BP. Remaining amounts related to early restoration were paid during the second quarter.
 
Litigation and claims
The litigation and claims provision includes amounts for the future cost of resolving claims by individuals and businesses for damage to real or personal property, lost profits or impairment of earning capacity and loss of subsistence use of natural resources. Claims administration costs and legal costs have also been provided for.
 
At 31 December 2015, the litigation and claims provision included amounts provided under the state claims settlement agreement with the Gulf states in relation to state claims that had not yet been paid. These amounts were reclassified to Other payables during the first quarter and are payable over 18 years.
 
Litigation and claims – PSC settlement
The provision for the cost associated with the 2012 PSC settlement has been determined based upon an expected value of the remaining claims, including business economic loss claims. During the fourth quarter, significant progress was made in resolving business economic loss claims. Claims were determined by the DHCSSP in accordance with the PSC settlement agreement and in addition, certain claims were settled by BP. The provision has been increased in the fourth quarter to reflect the estimate of the cost of the remaining claims which are expected to be determined by the DHCSSP or resolved by BP, and associated costs. Amounts to resolve remaining claims are expected to be substantially paid in 2017. However, the amounts ultimately payable may differ from the amount provided and the timing of payment is uncertain.
 
Litigation and claims – Other claims
An estimate of the cost of the remaining economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement, is recognized in provisions.
 
Clean Water Act penalties
The provision previously recognized for penalties under Section 311 of the Clean Water Act, as determined by the civil settlement with the United States, was reclassified to Other payables during the first quarter following approval by the Court of the Consent Decree. The amount is payable in instalments over 15 years, commencing April 2017. The unpaid balance of this penalty accrues interest at a fixed rate.
 
Further information on provisions is provided in BP Annual Report and Form 20-F 2015 – Financial statements –Note 2.
 
Contingent liabilities
 
Any further outstanding Deepwater Horizon related claims are not expected to have a material impact on the group’s financial performance.
 
 
3.        Impairment of fixed assets
 
Included within the line item in the income statement for Impairment and losses on sale of businesses and fixed assets is a net impairment reversal for the fourth quarter of $375 million. The net impairment reversal for the full year is $1,925 million.
 
The net impairment reversal in Upstream in the fourth quarter is $442 million, comprising impairment charges of $339 million offset by impairment reversals of $781 million. The impairment reversals include $234 million relating to assets in India, with the recoverable amount calculated on a fair value basis. In addition $319 million of exploration costs were written back relating to India.
 
The net impairment reversal in Upstream for the full year is $2,003 million, comprising impairment reversals of $3,025 million offset by impairment charges of $1,022 million. The impairment reversals related principally to assets in Angola and the North Sea, for which the recoverable amounts were calculated on a value-in-use basis.
 
See Note 1 for further information on changes in the discount rate and future price assumptions which have been applied since the third quarter.
 
 
Top of page 19
Financial statements (continued)
 
 
Notes
 
4.       Analysis of replacement cost profit (loss) before interest and tax and
          reconciliation to profit (loss) before taxation
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
(2,280)
1,196
692
 
Upstream
 
574
(937)
 
838
978
899
 
Downstream
 
5,162
7,111
 
235
120
158
 
Rosneft
 
590
1,310
 
(955)
(441)
(1,117)
 
Other businesses and corporate(a)
 
(8,157)
(13,477)
 
(2,162)
1,853
632
 
 
 
(1,831)
(5,993)
 
65
17
(132)
 
Consolidation adjustment – UPII*
 
(196)
(36)
 
(2,097)
1,870
500
 
RC profit (loss) before interest and tax*
 
(2,027)
(6,029)
 
 
 
 
 
Inventory holding gains (losses)*
 
 
 
 
(18)
(13)
19
 
  Upstream
 
60
(30)
 
(1,482)
(35)
558
 
  Downstream
 
1,484
(1,863)
 
(46)
(12)
24
 
  Rosneft (net of tax)
 
53
4
 
(3,643)
1,810
1,101
 
Profit (loss) before interest and tax
 
(430)
(7,918)
 
379
433
434
 
Finance costs
 
1,675
1,347
 
 
 
 
 
Net finance expense relating to pensions
 
 
 
 
78
48
50
 
  and other post-retirement benefits
 
190
306
 
(4,100)
1,329
617
 
Profit (loss) before taxation
 
(2,295)
(9,571)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RC profit (loss) before interest and tax
 
 
 
 
(1,429)
(15)
(1,646)
 
US
 
(8,311)
(12,243)
 
(668)
1,885
2,146
 
Non-US
 
6,284
6,214
 
(2,097)
1,870
500
 
 
 
(2,027)
(6,029)
 
(a) 
Includes costs related to the Gulf of Mexico oil spill. See Note 2 for further information.
 
 
5.       Sales and other operating revenues
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
By segment
 
 
 
 
10,212
8,452
9,129
 
Upstream
 
33,188
43,235
 
43,463
43,488
46,834
 
Downstream
 
167,683
200,569
 
556
425
424
 
Other businesses and corporate
 
1,667
2,048
 
54,231
52,365
56,387
 
 
 
202,538
245,852
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: sales and other operating revenues
 
 
 
 
 
 
 
 
  between segments
 
 
 
 
4,987
4,952
4,695
 
Upstream
 
17,581
21,949
 
(133)
175
523
 
Downstream
 
1,291
68
 
205
191
162
 
Other businesses and corporate
 
658
941
 
5,059
5,318
5,380
 
 
 
19,530
22,958
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party sales and other operating revenues
 
 
 
 
5,225
3,500
4,434
 
Upstream
 
15,607
21,286
 
43,596
43,313
46,311
 
Downstream
 
166,392
200,501
 
351
234
262
 
Other businesses and corporate
 
1,009
1,107
 
49,172
47,047
51,007
 
Total sales and other operating revenues
 
183,008
222,894
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By geographical area
 
 
 
 
16,936
18,853
18,642
 
US
 
68,772
78,281
 
34,773
31,762
37,381
 
Non-US
 
128,771
158,519
 
51,709
50,615
56,023
 
 
 
197,543
236,800
 
 
 
 
 
Less: sales and other operating revenues
 
 
 
 
2,537
3,568
5,016
 
  between areas
 
14,535
13,906
 
49,172
47,047
51,007
 
 
 
183,008
222,894
 
 
Top of page 20
Financial statements (continued)
 
 
Notes
 
6.       Production and similar taxes
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
118
32
38
 
US
 
155
215
 
145
180
161
 
Non-US
 
528
821
 
263
212
199
 
 
 
683
1,036
 
 
7.       Earnings per share and shares in issue
 
Basic earnings per ordinary share (EpS) amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
 
The calculation of EpS is performed separately for each discrete quarterly period, and for the year-to-date period. As a result, the sum of the discrete quarterly EpS amounts in any particular year-to-date period may not be equal to the EpS amount for the year-to-date period.
 
For the diluted EpS calculation the weighted average number of shares outstanding during the period is adjusted for the number of shares that are potentially issuable in connection with employee share-based payment plans using the treasury stock method.
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
Results for the period
 
 
 
 
 
 
 
 
Profit (loss) for the period
 
 
 
 
(3,307)
1,620
497
 
  attributable to BP shareholders
 
115
(6,482)
 
1
–
–
 
Less: preference dividend
 
1
2
 
 
 
 
 
Profit (loss) attributable to BP
 
 
 
 
(3,308)
1,620
497
 
  ordinary shareholders
 
114
(6,484)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares (thousand)(a)(b)
 
 
 
 
 
 
 
 
Basic weighted average number of
 
 
 
 
18,369,064
18,824,739
18,995,725
 
  shares outstanding
 
18,744,800
18,323,646
 
3,061,510
3,137,456
3,165,954
 
ADS equivalent
 
3,124,133
3,053,941
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares
 
 
 
 
 
 
 
 
  outstanding used to calculate
 
 
 
 
18,369,064
18,920,920
19,107,599
 
  diluted earnings per share
 
18,855,319
18,323,646
 
3,061,510
3,153,486
3,184,599
 
ADS equivalent
 
3,142,553
3,053,941
 
 
 
 
 
 
 
 
 
 
18,412,392
18,912,989
19,438,990
 
Shares in issue at period-end
 
19,438,990
18,412,392
 
3,068,732
3,152,164
3,239,831
 
ADS equivalent
 
3,239,831
3,068,732
 
(a)
Excludes treasury shares and includes certain shares that will be issued in the future under employee share-based payment plans.
 
(b)
If the inclusion of potentially issuable shares would decrease loss per share, the potentially issuable shares are excluded from the weighted average number of shares outstanding used to calculate diluted earnings per share.
 
 
8.       Dividends
 
Dividends payable
 
BP today announced an interim dividend of 10.00 cents per ordinary share which is expected to be paid on 31 March 2017 to shareholders and American Depositary Share (ADS) holders on the register on 17 February 2017. The corresponding amount in sterling is due to be announced on 20 March 2017, calculated based on the average of the market exchange rates for the four dealing days commencing on 14 March 2017. Holders of ADSs are expected to receive $0.600 per ADS (less applicable fees). A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs. Details of the fourth quarter dividend and timetable are available at bp.com/dividends and details of the scrip dividend programme are available at bp.com/scrip.
 
 
Top of page 21
Financial statements (continued)
 
 
Notes
 
8.       Dividends (continued)
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
 
 
2016
2015
 
 
 
 
 
Dividends paid per ordinary share
 
 
 
 
10.000
10.000
10.000
 
  cents
 
40.000
40.000
 
6.634
7.558
7.931
 
  pence
 
29.418
26.383
 
60.00
60.00
60.00
 
Dividends paid per ADS (cents)
 
240.00
240.00
 
 
 
 
 
Scrip dividends
 
 
 
 
49.7
130.0
129.2
 
Number of shares issued (millions)
 
548.0
102.8
 
289
714
710
 
Value of shares issued ($ million)
 
2,858
642
 
 
9.       Net debt*
 
Net debt ratio*
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
53,168
58,997
58,300
 
Gross debt
 
58,300
53,168
 
 
 
 
 
Fair value (asset) liability of hedges related
 
 
 
 
379
(1,113)
697
 
  to finance debt(a)
 
697
379
 
53,547
57,884
58,997
 
 
 
58,997
53,547
 
26,389
25,520
23,484
 
Less: cash and cash equivalents
 
23,484
26,389
 
27,158
32,364
35,513
 
Net debt
 
35,513
27,158
 
98,387
92,797
96,843
 
Equity
 
96,843
98,387
 
21.6%
25.9%
26.8%
 
Net debt ratio
 
26.8%
21.6%
 
Analysis of changes in net debt
 
 
Fourth
Third
Fourth
 
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
 
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
 
Opening balance
 
 
 
 
57,405
55,727
58,997
 
Finance debt
 
53,168
52,854
 
 
 
 
 
Fair value (asset) liability of hedges
 
 
 
 
(57)
(1,279)
(1,113)
 
  related to finance debt(a)
 
379
(445)
 
31,702
23,517
25,520
 
Less: cash and cash equivalents
 
26,389
29,763
 
25,646
30,931
32,364
 
Opening net debt
 
27,158
22,646
 
 
 
 
 
Closing balance
 
 
 
 
53,168
58,997
58,300
 
Finance debt
 
58,300
53,168
 
 
 
 
 
Fair value (asset) liability of hedges
 
 
 
 
379
(1,113)
697
 
  related to finance debt(a)
 
697
379
 
26,389
25,520
23,484
 
Less: cash and cash equivalents
 
23,484
26,389
 
27,158
32,364
35,513
 
Closing net debt
 
35,513
27,158
 
(1,512)
(1,433)
(3,149)
 
Decrease (increase) in net debt
 
(8,355)
(4,512)
 
 
 
 
 
Movement in cash and cash equivalents
 
 
 
 
(5,136)
1,990
(1,387)
 
  (excluding exchange adjustments)
 
(2,085)
(2,702)
 
 
 
 
 
Net cash outflow (inflow) from financing
 
 
 
 
3,498
(3,338)
(1,711)
 
  (excluding share capital and dividends)
 
(5,808)
(2,220)
 
(33)
29
(146)
 
Other movements
 
278
17
 
(1,671)
(1,319)
(3,244)
 
Movement in net debt before exchange effects
 
(7,615)
(4,905)
 
159
(114)
95
 
Exchange adjustments
 
(740)
393
 
(1,512)
(1,433)
(3,149)
 
Decrease (increase) in net debt
 
(8,355)
(4,512)
 
(a)
 
Derivative financial instruments entered into for the purpose of managing interest rate and foreign currency exchange risk associated with net debt with a fair value liability position of $1,962 million (third quarter 2016 liability of $1,323 million and fourth quarter 2015 liability of $1,617 million) are not included in the calculation of net debt shown above as hedge accounting is not applied for these instruments.
 
 
 
Top of page 22
Financial statements (continued)
 
 
Notes
 
10.      Inventory valuation
 
A provision of $501 million was held at 31 December 2016 ($509 million at 30 September 2016 and $1,295 million at 31 December 2015) to write inventories down to their net realizable value. The net movement charged to the income statement during the fourth quarter 2016 was $13 million (third quarter 2016 was a credit of $178 million and fourth quarter 2015 was a charge of $583 million).
 
 
11.     Statutory accounts
 
The financial information shown in this publication, which was approved by the Board of Directors on 6 February 2017, is unaudited and does not constitute statutory financial statements. Audited financial information will be published in BP Annual Report and Form 20-F 2016. BP Annual Report and Form 20-F 2015 has been filed with the Registrar of Companies in England and Wales. The report of the auditor on those accounts was unqualified and did not contain a statement under section 498(2) or section 498(3) of the UK Companies Act 2006.
 
 
Top of page 23
Additional information
 
 
Capital expenditure on an accruals basis*
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Capital expenditure on an accruals basis
 
 
 
5,531
3,622
6,955
 
Organic capital expenditure*(a)
 
18,440
18,747
585
45
618
 
Inorganic capital expenditure*
 
939
711
6,116
3,667
7,573
 
 
 
19,379
19,458
 
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Organic capital expenditure by segment
 
 
 
 
 
 
 
Upstream
 
 
 
1,313
458
717
 
US
 
2,989
4,518
3,257
2,642
5,135
 
Non-US(a)
 
13,059
11,788
4,570
3,100
5,852
 
 
 
16,048
16,306
 
 
 
 
Downstream
 
 
 
224
166
317
 
US
 
784
702
610
306
659
 
Non-US
 
1,357
1,399
834
472
976
 
 
 
2,141
2,101
 
 
 
 
Other businesses and corporate
 
 
 
37
2
30
 
US
 
45
70
90
48
97
 
Non-US
 
206
270
127
50
127
 
 
 
251
340
5,531
3,622
6,955
 
 
 
18,440
18,747
 
 
 
 
Organic capital expenditure by geographical area
 
 
 
1,574
626
1,064
 
US
 
3,818
5,290
3,957
2,996
5,891
 
Non-US
 
14,622
13,457
5,531
3,622
6,955
 
 
 
18,440
18,747
 
(a)
 
Fourth quarter and full year 2016 include amounts relating to the renewal of a 10% interest in the Abu Dhabi onshore oil concession for which new ordinary shares in BP were issued.
 
 
 
Reconciliation of additions to non-current assets to capital expenditure on an accruals basis
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
6,376
5,773
7,503
 
Additions to non-current assets(a)
 
21,204
20,080
16
7
23
 
  Additions to other investments
 
48
35
 
 
 
 
  Element of business combinations not related
 
 
 
(7)
–
(4)
 
    to non-current assets
 
(4)
(31)
(246)
(565)
977
 
  (Additions to) reductions in decommissioning asset
 
656
(553)
(23)
(1,548)
(926)
 
  Asset exchanges(b)
 
(2,525)
(73)
6,116
3,667
7,573
 
Capital expenditure on an accruals basis
 
19,379
19,458
 
(a)
 
Includes additions to property, plant and equipment; goodwill; intangible assets; investments in joint ventures; and investments in associates.
 
(b)
 
Third quarter 2016 principally relates to the contribution of BP’s Norwegian upstream business into Aker BP ASA in exchange for a 30% interest in Aker BP ASA. Fourth quarter 2016 principally relates to the dissolution of the group’s German refining joint operation with Rosneft. Full year 2016 principally relates to the two aforementioned transactions.
 
 
 
Top of page 24
Additional information (continued)
 
 
Non-operating items*
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Upstream
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
(853)
1,908
479
 
  and fixed assets(a)
 
2,391
(1,204)
–
(8)
–
 
Environmental and other provisions
 
(8)
(24)
(70)
(36)
(71)
 
Restructuring, integration and rationalization costs
 
(373)
(410)
18
8
(17)
 
Fair value gain (loss) on embedded derivatives
 
32
120
(734)
(407)
245
 
Other(b)
 
(289)
(717)
(1,639)
1,465
636
 
 
 
1,753
(2,235)
 
 
 
 
Downstream
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
(185)
(11)
72
 
  and fixed assets
 
405
131
(9)
(72)
2
 
Environmental and other provisions
 
(73)
(108)
(351)
(108)
(103)
 
Restructuring, integration and rationalization costs
 
(300)
(607)
–
–
–
 
Fair value gain (loss) on embedded derivatives
 
–
–
(3)
(5)
(48)
 
Other
 
(56)
(6)
(548)
(196)
(77)
 
 
 
(24)
(590)
 
 
 
 
Rosneft
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
–
–
62
 
  and fixed assets
 
62
–
–
–
–
 
Environmental and other provisions
 
–
–
–
–
–
 
Restructuring, integration and rationalization costs
 
–
–
–
–
–
 
Fair value gain (loss) on embedded derivatives
 
–
–
–
–
(39)
 
Other
 
(39)
–
–
–
23
 
 
 
23
–
 
 
 
 
Other businesses and corporate
 
 
 
 
 
 
 
Impairment and gain (loss) on sale of businesses
 
 
 
(120)
(6)
2
 
  and fixed assets
 
–
(170)
(24)
(99)
–
 
Environmental and other provisions
 
(134)
(151)
(29)
(10)
(21)
 
Restructuring, integration and rationalization costs
 
(90)
(71)
–
–
–
 
Fair value gain (loss) on embedded derivatives
 
–
–
(328)
(66)
(674)
 
Gulf of Mexico oil spill(c)
 
(6,640)
(11,709)
(155)
–
–
 
Other
 
(55)
(155)
(656)
(181)
(693)
 
 
 
(6,919)
(12,256)
(2,843)
1,088
(111)
 
Total before interest and taxation
 
(5,167)
(15,081)
(115)
(123)
(125)
 
Finance costs(c)
 
(494)
(247)
(2,958)
965
(236)
 
Total before taxation
 
(5,661)
(15,328)
341
(16)
56
 
Taxation credit (charge)
 
2,833
4,056
(2,617)
949
(180)
 
Total after taxation for period
 
(2,828)
(11,272)
 
(a)
 
See Notes 1 and 3 for further information on impairment charges and reversals.
 
(b)
 
Fourth quarter and full year 2016 include the write-off of $147 million in relation to the value ascribed to licences in the deepwater Gulf of Mexico as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011. Also included is a $319-million reversal relating to Block KG D6 in India. Third quarter and full year 2016 include the write-off of $334 million in relation to the value ascribed to the BM-C-34 licence in Brazil as part of the accounting for the acquisition of upstream assets from Devon Energy in 2011.
 
(c)
 
See Note 2 for further details regarding costs relating to the Gulf of Mexico oil spill.
 
 
 
Top of page 25
Additional information (continued)
 
 
 
Non-GAAP information on fair value accounting effects
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Favourable (unfavourable) impact relative to
 
 
 
 
 
 
 
  management’s measure of performance
 
 
 
87
(45)
(344)
 
Upstream
 
(637)
105
168
(257)
99
 
Downstream
 
(448)
156
255
(302)
(245)
 
 
 
(1,085)
261
(67)
81
97
 
Taxation credit (charge)
 
329
(56)
188
(221)
(148)
 
 
 
(756)
205
 
BP uses derivative instruments to manage the economic exposure relating to inventories above normal operating requirements of crude oil, natural gas and petroleum products. Under IFRS, these inventories are recorded at historical cost. The related derivative instruments, however, are required to be recorded at fair value with gains and losses recognized in income because hedge accounting is either not permitted or not followed, principally due to the impracticality of effectiveness testing requirements. Therefore, measurement differences in relation to recognition of gains and losses occur. Gains and losses on these inventories are not recognized until the commodity is sold in a subsequent accounting period. Gains and losses on the related derivative commodity contracts are recognized in the income statement, from the time the derivative commodity contract is entered into, on a fair value basis using forward prices consistent with the contract maturity.
 
BP enters into physical commodity contracts to meet certain business requirements, such as the purchase of crude for a refinery or the sale of BP’s gas production. Under IFRS these physical contracts are treated as derivatives and are required to be fair valued when they are managed as part of a larger portfolio of similar transactions. In addition, derivative instruments are used to manage the price risk associated with certain future natural gas sales. Gains and losses arising are recognized in the income statement from the time the derivative commodity contract is entered into.
 
IFRS requires that inventory held for trading is recorded at its fair value using period-end spot prices whereas any related derivative commodity instruments are required to be recorded at values based on forward prices consistent with the contract maturity. Depending on market conditions, these forward prices can be either higher or lower than spot prices resulting in measurement differences.
 
BP enters into contracts for pipelines and storage capacity, oil and gas processing and liquefied natural gas (LNG) that, under IFRS, are recorded on an accruals basis. These contracts are risk-managed using a variety of derivative instruments, which are fair valued under IFRS. This results in measurement differences in relation to recognition of gains and losses.
 
The way that BP manages the economic exposures described above, and measures performance internally, differs from the way these activities are measured under IFRS. BP calculates this difference for consolidated entities by comparing the IFRS result with management’s internal measure of performance. Under management’s internal measure of performance the inventory and capacity contracts in question are valued based on fair value using relevant forward prices prevailing at the end of the period, the fair values of certain derivative instruments used to risk manage LNG and oil and gas prices are deferred to match with the underlying exposure and the commodity contracts for business requirements are accounted for on an accruals basis. We believe that disclosing management’s estimate of this difference provides useful information for investors because it enables investors to see the economic effect of these activities as a whole. The impacts of fair value accounting effects, relative to management’s internal measure of performance, are shown in the table above. A reconciliation to GAAP information is set out below.
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
$ million
 
2016
2015
 
 
 
 
Upstream
 
 
 
 
 
 
 
Replacement cost profit (loss) before interest and
 
 
 
(2,367)
1,241
1,036
 
  tax adjusted for fair value accounting effects
 
1,211
(1,042)
87
(45)
(344)
 
Impact of fair value accounting effects
 
(637)
105
(2,280)
1,196
692
 
Replacement cost profit before interest and tax
 
574
(937)
 
 
 
 
Downstream
 
 
 
 
 
 
 
Replacement cost profit before interest and
 
 
 
670
1,235
800
 
  tax adjusted for fair value accounting effects
 
5,610
6,955
168
(257)
99
 
Impact of fair value accounting effects
 
(448)
156
838
978
899
 
Replacement cost profit before interest and tax
 
5,162
7,111
 
 
 
 
Total group
 
 
 
 
 
 
 
Profit (loss) before interest and tax adjusted for
 
 
 
(3,898)
2,112
1,346
 
  fair value accounting effects
 
655
(8,179)
255
(302)
(245)
 
Impact of fair value accounting effects
 
(1,085)
261
(3,643)
1,810
1,101
 
Profit (loss) before interest and tax
 
(430)
(7,918)
 
 
Top of page 26
Additional information (continued)
 
 
Realizations and marker prices
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
 
 
2016
2015
 
 
 
 
Average realizations(a)
 
 
 
 
 
 
 
Liquids* ($/bbl)
 
 
 
37.42
39.16
41.93
 
US
 
36.25
44.94
40.49
42.87
45.66
 
Europe
 
40.53
49.71
39.62
41.92
45.27
 
Rest of World(b)
 
39.29
48.52
38.91
40.99
43.89
 
BP Average(b)
 
38.27
47.32
 
 
 
 
Natural gas ($/mcf)
 
 
 
1.71
2.19
2.29
 
US
 
1.90
2.10
6.08
3.94
4.81
 
Europe
 
4.40
7.27
4.00
2.98
3.35
 
Rest of World
 
3.19
4.25
3.47
2.77
3.08
 
BP Average
 
2.84
3.80
 
 
 
 
Total hydrocarbons* ($/boe)
 
 
 
26.70
27.71
30.32
 
US
 
25.76
31.80
39.03
37.10
40.48
 
Europe
 
36.31
47.64
31.09
29.24
30.98
 
Rest of World(b)
 
28.62
35.74
30.34
29.37
31.40
 
BP Average(b)
 
28.24
35.46
 
 
 
 
Average oil marker prices ($/bbl)
 
 
 
43.76
45.86
49.33
 
Brent
 
43.73
52.39
42.07
44.88
49.23
 
West Texas Intermediate
 
43.34
48.71
29.11
31.60
35.44
 
Western Canadian Select
 
30.78
36.83
43.62
44.65
50.06
 
Alaska North Slope
 
43.67
52.44
38.79
41.83
46.23
 
Mars
 
40.14
48.19
41.42
43.73
47.73
 
Urals (NWE – cif)
 
41.68
50.97
 
 
 
 
Average natural gas marker prices
 
 
 
2.27
2.81
2.98
 
Henry Hub gas price ($/mmBtu)(c)
 
2.46
2.67
36.64
31.00
45.76
 
UK Gas – National Balancing Point (p/therm)
 
34.63
42.61
 
(a)
 
Based on sales of consolidated subsidiaries only – this excludes equity-accounted entities.
 
(b)
 
Production volume recognition methodology for our Technical Service Contract arrangement in Iraq has been simplified to exclude the impact of oil price movements on lifting imbalances. The comparative data for prior periods has been restated. There is no impact on the financial results.
 
(c)
 
Henry Hub First of Month Index.
 
 
 
Exchange rates
 
Fourth
Third
Fourth
 
 
 
 
 
quarter
quarter
quarter
 
 
 
Year
Year
2015
2016
2016
 
 
 
2016
2015
1.52
1.31
1.24
 
$/£ average rate for the period
 
1.35
1.53
1.48
1.30
1.22
 
$/£ period-end rate
 
1.22
1.48
 
 
 
 
 
 
 
 
1.09
1.12
1.08
 
$/€ average rate for the period
 
1.11
1.11
1.09
1.12
1.05
 
$/€ period-end rate
 
1.05
1.09
 
 
 
 
 
 
 
 
65.88
64.60
63.12
 
Rouble/$ average rate for the period
 
67.06
61.25
73.17
63.14
60.63
 
Rouble/$ period-end rate
 
60.63
73.17
 
 
Top of page 27
Glossary
 
 
Non-GAAP measures 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.
 
Adjusted effective tax rate (ETR) is a non-GAAP measure. The adjusted ETR is calculated by dividing taxation on an underlying RC basis excluding the impact of reductions in the rate of the UK North Sea supplementary charge (in the third quarter 2016 and the first quarter 2015) by underlying RC profit or loss before tax. Taxation on an underlying RC basis is taxation on a RC basis for the period adjusted for taxation on non-operating items and fair value accounting effects. Information on underlying RC profit or loss is provided below. BP believes it is helpful to disclose the adjusted ETR because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.
 
Capital expenditure on an accruals basis is a non-GAAP measure. It comprises additions to property, plant and equipment, intangible assets and investments in joint ventures and associates, and reflects consideration payable in business combinations. It does not include additions arising from asset exchanges and certain other non-cash items. The nearest equivalent measure on an IFRS basis for the group is Additions to non-current assets. BP believes that Capital expenditure on an accruals basis provides useful information for investors as it is the measure used by management to plan and prioritize the group’s investment of its resources and allows investors to understand how the group balances funds between shareholder distributions and investment for the future. Further information and a reconciliation to GAAP information is provided on page 23.
 
Consolidation adjustment – UPII is unrealized profit in inventory arising on inter-segment transactions.
 
Effective tax rate (ETR) on replacement cost (RC) profit or loss is a non-GAAP measure. The ETR on RC profit or loss is calculated by dividing taxation on a RC basis by RC profit or loss before tax. Information on RC profit or loss is provided below. BP believes it is helpful to disclose the ETR on RC profit or loss because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is the ETR on profit or loss for the period.
 
Fair value accounting effects are non-GAAP adjustments to our IFRS profit (loss) relating to certain physical inventories, pipelines and storage capacity. Management uses a fair-value basis to value these items which, under IFRS, are accounted for on an accruals basis with the exception of trading inventories, which are valued using spot prices. The adjustments have the effect of aligning the valuation basis of the physical positions with that of any associated derivative instruments, which are required to be fair valued under IFRS, in order to provide a more representative view of the ultimate economic value. Further information is provided on page 25.
 
Hydrocarbons – Liquids and natural gas. Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
 
Inorganic capital expenditure is a subset of Capital expenditure on an accruals basis, and is a non-GAAP measure. Inorganic capital expenditure comprises consideration in business combinations and certain other significant investments made by the group. It is reported on an accruals basis. BP believes that this measure provides useful information as it allows investors to understand how BP’s management invests funds in projects which expand the group’s activities through acquisition. Further information and a reconciliation to GAAP information is provided on page 23.
 
Inventory holding gains and losses represent the difference between the cost of sales calculated using the replacement cost of inventory and the cost of sales calculated on the first-in first-out (FIFO) method after adjusting for any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting, the cost of inventory charged to the income statement is based on its historical cost of purchase or manufacture, rather than its replacement cost. In volatile energy markets, this can have a significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement for inventory on a FIFO basis (after adjusting for any related movements in net realizable value provisions) and the charge that would have arisen based on the replacement cost of inventory. For this purpose, the replacement cost of inventory is calculated using data from each operation’s production and manufacturing system, either on a monthly basis, or separately for each transaction where the system allows this approach. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions. See Replacement cost (RC) profit or loss definition below.
 
Liquids – Liquids for Upstream and Rosneft comprises crude oil, condensate and natural gas liquids. For Upstream, liquids also includes bitumen.
 
Major projects have a BP net investment of at least $250 million, or are considered to be of strategic importance to BP or of a high degree of complexity.
 
 
Top of page 28
Glossary (continued)
 
 
Net cash provided by operating activities excluding amounts related to the Gulf of Mexico oil spill is a non-GAAP measure calculated by excluding post-tax operating cash flows relating to the Gulf of Mexico oil spill as reported in Note 2 from Net cash provided by operating activities as reported in the Condensed group cash flow statement. BP believes it is helpful to disclose net cash provided by operating activities excluding amounts related to the Gulf of Mexico oil spill because this measure allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is Net cash provided by operating activities.
 
Net debt and net debt ratio are non-GAAP measures. Net debt is calculated as gross finance debt, as shown in the balance sheet, plus the fair value of associated derivative financial instruments that are used to hedge foreign currency exchange and interest rate risks relating to finance debt, for which hedge accounting is applied, less cash and cash equivalents. The net debt ratio is defined as the ratio of net debt to the total of net debt plus shareholders’ equity. All components of equity are included in the denominator of the calculation. BP believes these measures provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders. The derivatives are reported on the balance sheet within the headings ‘Derivative financial instruments’.
 
Net wind generation capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP’s share of equity-accounted entities. The gross data is the equivalent capacity on a gross-JV basis, which includes 100% of the capacity of equity-accounted entities where BP has partial ownership.
 
Non-operating items are charges and credits included in the financial statements that BP discloses separately because it considers such disclosures to be meaningful and relevant to investors. They are items that management considers not to be part of underlying business operations and are disclosed in order to enable investors better to understand and evaluate the group’s reported financial performance. Non-operating items within equity-accounted earnings are reported net of incremental income tax reported by the equity-accounted entity. An analysis of non-operating items by region is shown on pages 5, 7 and 9, and by segment and type is shown on page 24.
 
Organic capital expenditure is a subset of Capital expenditure on an accruals basis, and is a non-GAAP measure. Organic capital expenditure comprises capital expenditure on an accruals basis less inorganic capital expenditure. BP believes that this measure provides useful information as it allows investors to understand how BP’s management invests funds in developing and maintaining the group’s assets. An analysis of organic capital expenditure by segment and region, and a reconciliation to GAAP information is provided on page 23.
 
Production-sharing agreement (PSA) is an arrangement through which an oil company bears the risks and costs of exploration, development and production. In return, if exploration is successful, the oil company receives entitlement to variable physical volumes of hydrocarbons, representing recovery of the costs incurred and a stipulated share of the production remaining after such cost recovery.
 
Realizations are the result of dividing revenue generated from hydrocarbon sales, excluding revenue generated from purchases made for resale and royalty volumes, by revenue generating hydrocarbon production volumes. Revenue generating hydrocarbon production reflects the BP share of production as adjusted for any production which does not generate revenue. Adjustments may include losses due to shrinkage, amounts consumed during processing, and contractual or regulatory host committed volumes such as royalties.
 
Refining availability represents Solomon Associates’ operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory downtime.
 
The Refining marker margin (RMM) is the average of regional indicator margins weighted for BP’s crude refining capacity in each region. Each regional marker margin is based on product yields and a marker crude oil deemed appropriate for the region. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP’s particular refinery configurations and crude and product slate.
 
Replacement cost (RC) profit or loss 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. RC profit or loss is the measure of profit or loss that is required to be disclosed for each operating segment under IFRS. RC profit or loss for the group is not a recognized GAAP measure. BP believes this measure is useful to illustrate to investors the fact that crude oil and product prices can vary significantly from period to period and that the impact on our reported result under IFRS can be significant. Inventory holding gains and losses vary from period to period due to changes in prices as well as changes in underlying inventory levels. In order for investors to understand the operating performance of the group excluding the impact of price changes on the replacement of inventories, and to make comparisons of operating performance between reporting periods, BP’s management believes it is helpful to disclose this measure. The nearest equivalent measure on an IFRS basis is profit or loss attributable to BP shareholders.
 
 
Top of page 29
Glossary (continued)
 
 
RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 7. RC profit or loss per share is calculated using the same denominator. The numerator used is RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the RC profit or loss per share because this measure excludes the impact of price changes on the replacement of inventories and allows for more meaningful comparisons between reporting periods. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders.
 
Reserves replacement ratio is the extent to which the year’s production has been replaced by proved reserves added to our reserve base. The ratio is expressed in oil-equivalent terms and includes changes resulting from discoveries, improved recovery and extensions and revisions to previous estimates, but excludes changes resulting from acquisitions and disposals.
 
Underlying production is production after adjusting for divestments and entitlement impacts in our production-sharing agreements. 2017 underlying production does not include the Abu Dhabi onshore concession renewal.
 
Underlying RC profit or loss is RC profit or loss after adjusting for non-operating items and fair value accounting effects. Underlying RC profit or loss and adjustments for fair value accounting effects are not recognized GAAP measures. See pages 24 and 25 for additional information on the non-operating items and fair value accounting effects that are used to arrive at underlying RC profit or loss in order to enable a full understanding of the events and their financial impact. BP believes that underlying RC profit or loss is a useful measure for investors because it is a measure closely tracked by management to evaluate BP’s operating performance and to make financial, strategic and operating decisions and because it may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period, by adjusting for the effects of these non-operating items and fair value accounting effects. The nearest equivalent measure on an IFRS basis for the group is profit or loss attributable to BP shareholders. The nearest equivalent measure on an IFRS basis for segments is RC profit or loss before interest and taxation.
 
Underlying RC profit or loss per share is a non-GAAP measure. Earnings per share is defined in Note 7. Underlying RC profit or loss per share is calculated using the same denominator. The numerator used is underlying RC profit or loss attributable to BP shareholders rather than profit or loss attributable to BP shareholders. BP believes it is helpful to disclose the underlying RC profit or loss per share because this measure may help investors to understand and evaluate, in the same manner as management, the underlying trends in BP’s operational performance on a comparable basis, period on period. The nearest equivalent measure on an IFRS basis is basic earnings per share based on profit or loss for the period attributable to BP shareholders.
 
 
Top of page 30
Legal proceedings
 
 
For a full discussion of the group’s material legal proceedings, see pages 237-242 of BP Annual Report and Form 20-F 2015, pages 33 to 34 of BP p.l.c. Group results - Second quarter and half year 2016 and page 31 of BP p.l.c. Group results - Third quarter and nine months 2016.
 
 
Cautionary statement
 
 
In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), BP is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements – that is, statements related to future, not past events – with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions. In particular, among other statements, expectations regarding the expected quarterly dividend payment and timing of such payment; expectations regarding 2017 organic capital expenditure, divestment proceeds, adjusted effective tax rate and depreciation, depletion and amortization charges; expectations regarding Upstream 2017 underlying production and first-quarter 2017 reported production, Downstream first-quarter 2017 refining margins and turnaround activity and Other businesses and corporate 2017 average quarterly charges; expectations with respect to the timing and amount of future payments relating to the Gulf of Mexico oil spill; and statements that claims arising under the 2012 PSC settlement are expected to be substantially paid in 2017; are all forward looking in nature. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the specific factors identified in the discussions accompanying such forward-looking statements; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed under “Principal risks and uncertainties” in our Form 6-K for the period ended 30 June 2016 and under “Risk factors” in BP Annual Report and Form 20-F 2015 as filed with the US Securities and Exchange Commission.
 
 
Contacts
 
 
 
London
 
Houston
 
 
 
 
Press Office
 
David Nicholas
 
Brett Clanton
 
 
+44 (0)20 7496 4708
 
+1 281 366 8346
 
 
 
 
Investor Relations
 
Jessica Mitchell
 
Craig Marshall
 
bp.com/investors
 
+44 (0)20 7496 4962
 
+1 281 892 4312
 
 
SIGNATURES
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
BP p.l.c.
(Registrant)
 
 
 
Dated: 07 February 2017
 
/s/ J. BERTELSEN
..............................
J. BERTELSEN
Deputy Company Secretary