BP Annual Report and Form 20-F 2011 - Company Reporting

Additional information for shareholdersContingent liabilities relating to the Gulf of Mexico oil spillBP has provided for its best estimate of certain claims under the OilPollution Act 1990 (OPA 90) that will be paid through the $20-billiontrust fund, including the increased estimate of the cost of individual andbusiness claims as a result of the proposed settlement announced on3 March 2012 as described in Note 2 and Note 36. It is not possible, atthis time, to measure reliably any other items that will be paid from thetrust fund, namely any obligation in relation to Natural Resource Damagesclaims (except for the estimated costs of the assessment phase and thecosts relating to emergency and early restoration agreements) and claimsasserted in civil litigation, including any further litigation through potentialopt-outs from the proposed settlement agreement with the Plaintiffs’Steering Committee announced on 3 March 2012 (see page 76 for furtherinformation), nor is it practicable to estimate their magnitude or possibletiming of payment. Although these items, which will be paid through thetrust fund, have not been provided for at this time, BP’s full obligationunder the $20-billion trust fund was expensed in the income statement in2010, taking account of the time value of money.For those items not covered by the trust fund it is not possible tomeasure reliably any obligation in relation to other litigation or potentialfines and penalties except, subject to certain assumptions, for thoserelating to the Clean Water Act. Therefore no amounts have been providedfor these items as at 31 December 2011. There are a number of federaland state environmental and other provisions of law, other than the CleanWater Act, under which one or more governmental agencies could seekcivil fines and penalties from BP. Given the large number of claims thatmay be asserted, it is not possible at this time to determine whether andto what extent any such claims would be successful or what penalties orfines would be assessed.Pensions and other post-retirement benefitsAccounting for pensions and other post-retirement benefits involvesjudgement about uncertain events, including estimated retirementdates, salary levels at retirement, mortality rates, rates of return on planassets, determination of discount rates for measuring plan obligations,assumptions for inflation rates, US healthcare cost trend rates and rates ofutilization of healthcare services by US retirees.These assumptions are based on the environment in each country.Determination of the projected benefit obligations for the group’s definedbenefit pension and post-retirement plans is important to the recordedamounts for such obligations on the balance sheet and to the amount ofbenefit expense in the income statement. The assumptions used mayvary from year to year, which will affect future results of operations. Anydifferences between these assumptions and the actual outcome alsoaffect future results of operations.Pension and other post-retirement benefit assumptions arereviewed by management at the end of each year. These assumptionsare used to determine the projected benefit obligation at the year-end andhence the surpluses and deficits recorded on the group’s balance sheet,and pension and other post-retirement benefit expense for the followingyear.The pension and other post-retirement benefit assumptions atDecember 2011, 2010 and 2009 are provided in Financial statements –Note 37 on page 234.The assumed rate of investment return, discount rate, inflationrate and the US healthcare cost trend rate have a significant effect on theamounts reported. A sensitivity analysis of the impact of changes in theseassumptions on the benefit expense and obligation is provided in Financialstatements – Note 37 on page 234.In addition to the financial assumptions, we regularly review thedemographic and mortality assumptions. Mortality assumptions reflectbest practice in the countries in which we provide pensions and have beenchosen with regard to the latest available published tables adjusted whereappropriate to reflect the experience of the group and an extrapolation ofpast longevity improvements into the future. A sensitivity analysis of theimpact of changes in the mortality assumptions on the benefit expenseand obligation is provided in Financial statements – Note 37 on page 234.Actuarial gains and losses are recognized in full within othercomprehensive income in the year in which they occur.Property, plant and equipmentBP has freehold and leasehold interests in real estate in numerouscountries, but no individual property is significant to the group as a whole.See Exploration and Production on page 80 for a description of the group’ssignificant reserves and sources of crude oil and natural gas. Significantplans to construct, expand or improve specific facilities are described undereach of the business headings within this section.Share ownershipDirectors and senior managementAs at 1 March 2012, the following directors of BP p.l.c. held interests in BPordinary shares of 25 cents each or their calculated equivalent as set outbelow:OrdinarysharesPerformanceshares aRestrictedshares bDirectorC-H Svanberg 933,971 – –R W Dudley 337,301 c 1,911,414 c –P M Anderson 6,000 c – –F L Bowman 12,720 c – –A Burgmans 10,156 – –C B Carroll 10,500 c – –Sir William Castell 82,500 – –I C Conn 497,501 d 1,322,606 133,452 bG David 579,000 c – –I E L Davis 10,391 – –Professor Dame Ann Dowling – – –Dr B Gilvary 331,088 45,000 269,145 eDr B E Grote 1,484,603 f 1,693,704 c –B R Nelson 11,040 – –F P Nhleko – – –A Shilston – – –aPerformance shares awarded under the BP Executive Directors’ Incentive Plan. These figuresrepresent the maximum possible vesting levels. The actual number of shares/ADSs that vestwill depend on the extent to which performance conditions have been satisfied over a three-yearperiod.bRestricted share award under the BP Executive Directors’ Incentive Plan. These shares will vest in2013, subject to the director’s continued service and satisfactory performance.cHeld as ADSs.dIncludes 48,024 shares held as ADSs.eHeld as restricted share units under the BP Deferred Annual Bonus Plan and the BP ExecutivePerformance Plan.fHeld as ADSs, except for 94 shares held as ordinary shares.As at 1 March 2012, the following directors of BP p.l.c. held options underthe BP group share option schemes for ordinary shares or their calculatedequivalent as set out below:DirectorOptionsR W Dudley a 107,010I C Conn 3,622Dr B Gilvary 504,191Dr B E Grote a –a Held as ADSs.There are no directors or members of senior management who own morethan 1% of the ordinary shares outstanding. At 1 March 2012, all directorsand senior management as a group held interests in 10,760,373 ordinaryshares or their calculated equivalent, 5,536,676 performance shares ortheir calculated equivalent and 7,575,135 options for ordinary shares ortheir calculated equivalent under the BP group share options schemes.Additional details regarding the options granted and performanceshares awarded can be found in the Directors’ remuneration report onpages 139-151.Additional information for shareholdersBP Annual Report and Form 20-F 2011 157