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

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Additional information for shareholderscomplaint in the False Claims Act lawsuit seeking an injunction shuttingdown the Atlantis platform. The court denied BP’s motion to dismissthe complaint in March 2011. Separately, also in March 2011, BOEMREissued its investigation report of the Abbott Atlantis allegations, whichconcluded that Mr Abbott’s allegations that Atlantis operations personnellacked access to critical, engineer-approved drawings were without meritand that his allegations about false submissions by BP to BOEMRE wereunfounded. Trial is scheduled to begin on 10 April 2012.BP Products’ US refineries are subject to a 2001 consentdecree with the EPA that resolved alleged violations of the CAA,and implementation of the decree’s requirements continues. A 2009amendment to the decree resolves remaining alleged air violations atthe Texas City refinery through the payment of a $12-million civil fine,a $6-million supplemental environmental project and enhanced CAAcompliance measures estimated to cost approximately $150 million. Thefine has been paid, and BP Products is implementing the other provisions.On 30 September 2010, the EPA and BP Products lodged acivil consent decree with the federal court in Houston. Following apublic comment period, the federal court approved the settlement on30 December 2010. The decree resolves allegations of civil violations ofthe risk management planning regulations promulgated under the CAA thatare alleged to have occurred in 2004 and 2005 at the Texas City refinery.BP Products has paid the $15-million civil penalty and the Texas Cityrefinery is implementing requirements to enhance reporting tothe EPA regarding employee training, equipment inspection andincident investigation.Various environmental groups and the EPA have challengedcertain aspects of the air permits issued by the Indiana Department ofEnvironmental Management (IDEM) for upgrades to the Whiting refinery.In response to these challenges, the IDEM has reviewed the permits andresponded formally to the EPA. BP is in discussions with the EPA, theIDEM and certain environmental groups over these and other CAA issuesrelating to the Whiting refinery. BP has also been in settlement discussionswith EPA to resolve alleged CAA violations at the Toledo, Carson andCherry Point refineries.An application was brought in the English High Court on 1 February2011 by Alfa Petroleum Holdings Limited and OGIP Ventures Limitedagainst BP International Limited and BP Russian Investments Limitedalleging breach of a Shareholders Agreement on the part of BP andseeking an interim injunction restraining BP from taking steps to conclude,implement or perform the transactions with Rosneft Oil Company,originally announced on 14 January 2011, relating to oil and gas exploration,production, refining and marketing in Russia (the Arctic Opportunity).Those transactions included the issue or transfer of shares betweenRosneft Oil Company and any BP group company (pursuant to the RosneftShare Swap Agreement). The court granted an interim order restrainingBP from taking any further steps in relation to the Rosneft transactionspending an expedited UNCITRAL arbitration procedure in accordance withthe Shareholders Agreement between the parties. The arbitration hascommenced and the interim injunction was continued by the arbitrationpanel.On 17 May 2011, BP announced that both the Rosneft Share SwapAgreement and the Arctic Opportunity, originally announced on 14 January2011, had terminated. This termination was as a result of the deadlinefor the satisfaction of conditions precedent having expired followingdelays resulting from the interim orders referred to above. These interimorders did not address the question of whether or not BP breached theShareholders Agreement. The arbitration proceedings, which are subject tostrict confidentiality obligations, are ongoing.Five minority shareholders of OAO TNK-BP Holding (TBH) havefiled two civil actions in Tyumen, Siberia, against BP Russia InvestmentsLimited and BP p.l.c. and against two of the BP nominated directorsof TBH. These two actions sought to recover alleged losses to TBHof $13 billion and $2.7 billion respectively. On 11 November 2011,the Tyumen Court dismissed both claims fully on their merits. Theshareholders appealed both of these decisions to the Omsk Appellatecourt. On 26 January 2012, the Appellate court upheld the Tyumen Court’sdismissal of the claim in relation to the BP nominated directors of TBH. TheOmsk Appellate court subsequently confirmed the Tyumen court of firstinstance’s dismissal of the minority suits against BP Russia InvestmentsLimited and BP p.l.c. BP believes the allegations made are wholly withoutmerit. No losses have been incurred and BP believes the likelihood of theclaims being ultimately successful is remote. Consequently no amountshave been provided and the claim is not disclosed as a contingent liability.On 9 February 2011, Apache Canada Ltd (Apache) commencedan arbitration against BP Canada Energy. Apache alleges that variousproperties/sites in respect of which it acquired interests from BP CanadaEnergy pursuant to the parties’ Purchase and Sale Agreement signed inJuly 2010 will require work to bring the properties/sites into compliancewith applicable environmental laws, and Apache claims that the purchaseprice should be adjusted for its estimated possible costs. BP CanadaEnergy denies such costs will arise or require any adjustment to thepurchase price. The parties have appointed the arbitrator, and currentlythe hearing on the merits is scheduled to commence during the secondquarter of 2012.On 24 January 2012, the Republic of Bolivia issued a pressstatement declaring its intent to nationalize Pan American Energy’sinterests in the Caipipendi Operations Contract. No formal nationalizationprocess has yet commenced. Pan American Energy and its shareholdersBP and Bridas intend to vigorously defend their legal interests under theCaipipendi Operations Contract and available Bilateral Investment Treaties.166 BP Annual Report and Form 20-F 2011
Additional information for shareholdersRelationships with suppliersand contractorsEssential contractsBP has contractual and other arrangements with numerous third parties insupport of its business activities. This report does not contain informationabout any of these third parties as none of our arrangements with them areconsidered to be essential to the business of BP.Suppliers and contractorsOur processes are designed to enable us to choose suppliers carefullyon merit, avoiding conflicts of interest and inappropriate gifts andentertainment. We expect suppliers to comply with legal requirementsand we seek to do business with suppliers who act in line with BP’scommitments to compliance and ethics, as outlined in our code of conduct.We engage with suppliers in a variety of ways, including performancereview meetings to identify mutually advantageous ways to improveperformance.Creditor payment policy and practiceStatutory regulations issued under the UK Companies Act 2006 requirecompanies to make a statement of their policy and practice in respectof the payment of trade creditors. In view of the international nature ofthe group’s operations there is no specific group-wide policy in respectof payments to suppliers. Relationships with suppliers are, however,governed by the group’s policy commitment to long-term relationshipsfounded on trust and mutual advantage. Within this overall policy, individualoperating companies are responsible for agreeing terms and conditions fortheir business transactions and ensuring that suppliers are aware of theterms of payment.Share prices and listingsMarkets and market pricesThe primary market for BP’s ordinary shares is the London Stock Exchange(LSE). BP’s ordinary shares are a constituent element of the FinancialTimes Stock Exchange 100 Index. BP’s ordinary shares are also traded onthe Frankfurt Stock Exchange in Germany.Trading of BP’s shares on the LSE is primarily through the use ofthe Stock Exchange Electronic Trading Service (SETS), introduced in 1997for the largest companies in terms of market capitalization whose primarylisting is the LSE. Under SETS, buy and sell orders at specific prices maybe sent electronically to the exchange by any firm that is a member of theLSE, on behalf of a client or on behalf of itself acting as a principal. Theorders are then anonymously displayed in the order book. When there isa match on a buy and a sell order, the trade is executed and automaticallyreported to the LSE. Trading is continuous from 8.00 a.m. to 4.30 p.m. UKtime but, in the event of a 20% movement in the share price either way,the LSE may impose a temporary halt in the trading of that company’sshares in the order book to allow the market to re-establish equilibrium.Dealings in ordinary shares may also take place between an investor and amarket-maker, via a member firm, outside the electronic order book.In the US, the company’s securities are traded on the New YorkStock Exchange (NYSE) in the form of ADSs, for which JPMorgan ChaseBank, N.A. is the depositary (the Depositary) and transfer agent. TheDepositary’s principal office is 1 Chase Manhattan Plaza, N.A., Floor 21,New York, NY 10005-1401, US. Each ADS represents six ordinary shares.ADSs are listed on the New York Stock Exchange. ADSs are evidencedby American depositary receipts (ADRs), which may be issued in eithercertificated or book entry form.The following table sets forth for the periods indicated the highestand lowest middle market quotations for BP’s ordinary shares and ADSsfor the periods shown. These are derived from the highest and lowestsales prices as reported on the LSE and NYSE, respectively.PenceDollarsOrdinary shares American depositary shares aHigh Low High LowYear ended 31 December2007 640.00 504.50 79.77 58.622008 657.25 370.00 77.69 37.572009 613.40 400.00 60.00 33.712010 658.20 296.00 62.38 26.752011 514.90 361.25 49.50 33.63Year ended 31 December2010: First quarter 640.10 555.00 62.38 52.00Second quarter 658.20 296.00 60.98 26.75Third quarter 438.25 312.65 41.59 28.79Fourth quarter 479.00 418.25 44.83 39.582011: First quarter 514.90 431.00 49.50 42.51Second quarter 480.23 425.00 47.45 41.26Third quarter 483.04 361.25 47.09 35.10Fourth quarter 477.54 363.95 45.83 33.632012: First quarter (to 17 February) 501.37 455.05 47.67 42.85Month ofSeptember 2011 426.04 361.25 39.72 35.10October 2011 477.54 363.95 45.83 33.63November 2011 466.05 416.99 44.89 39.41December 2011 471.45 433.00 44.26 40.40January 2012 487.60 455.05 46.03 42.85February 2012 (to 17 February) 501.37 473.05 47.67 45.23Additional information for shareholdersaOne ADS is equivalent to six 25 cent ordinary shares.BP Annual Report and Form 20-F 2011 167
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Cover imagePhotograph of DeepseaSta
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Cross reference to Form 20-FPageIte
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Miscellaneous termsIn this document
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6 BP Annual Report and Form 20-F 20
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Chairman’s letterCarl-Henric Svan
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During the year, the remuneration c
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Business review: Group overviewBP A
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SafetyDuring the year, we reorganiz
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In Refining and Marketing, our worl
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Crude oil and gas prices,and refini
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In detailFor more information, seeR
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Our market: Longer-term outlookThe
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BP’s distinctive capabilities and
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Technology will continue to play a
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In detailFor more information,see C
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In detailFind out more online.bp.co
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BP Annual Report and Form 20-F 2011
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Below BP has asignificant presencei
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What you can measure6 Active portfo
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Business review: Group overview2012
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Our risk management systemOur enhan
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Our current strategic priorities ar
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Our performance2011 was a year of f
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Left BP employeesat work in Prudhoe
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We continued to sell non-core asset
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Reported recordableinjury frequency
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Business reviewBP in more depth56 F
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Business reviewThe primary addition
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Business reviewRisk factorsWe urge
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Business review2010. Similar action
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Business reviewBusiness continuity
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Business reviewSafetyOver the past
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Business reviewour review of all th
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Business reviewGreenhouse gas regul
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Business reviewExploration and Prod
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Business reviewCompleting the respo
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Business reviewOur performanceKey s
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Business reviewwere in Russia (Oren
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Business reviewCanadaIn Canada, BP
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Business review• In March 2011, T
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Business reviewaccess advantageous
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Business reviewBP’s vice presiden
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Business reviewhttp://www.bp.com/do
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Business reviewbalance of participa
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Business reviewAcquisitions and dis
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Business reviewLPGOur global LPG ma
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Business reviewOther businesses and
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Business reviewLiquidity and capita
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Business reviewThe group expects it
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Business reviewFrequently, work (in
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Business reviewHazardous and Noxiou
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Business reviewpart of a larger por
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Directors andsenior management114 D
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Notes on financial statementsTotal
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Supplementary information on oil an
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SignaturesThe registrant hereby cer
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Parent company financial statements
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