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

Notes on financial statements4. Non-current assets held for saleAs a result of the group’s disposal programme following the Gulf of Mexico oil spill, various assets, and associated liabilities, have been presented asheld for sale in the group balance sheet at 31 December 2011. The carrying amount of the assets held for sale is $8,420 million, with associated liabilitiesof $538 million. Included within these amounts are the following items, all of which relate to the Exploration and Production segment, unless otherwisestated.On 18 October 2010, BP announced that it had reached agreement to sell its upstream and midstream assets in Vietnam, together with itsupstream businesses and associated interests in Venezuela, to TNK-BP for $1.8 billion in cash, subject to post-closing adjustments. The sale of theVenezuelan business and the upstream and certain midstream assets in Vietnam completed during 2011. BP is in ongoing negotiations and expects tocomplete a sale of its equity-accounted investment in the Phu My 3 plant facility in 2012, subject to the satisfaction of regulatory and other approvals andconditions. The investment in the Phu My 3 plant facility has been classified as held for sale in the group balance sheet at 31 December 2011.On 1 December 2011, BP announced that it had agreed to sell its Canadian natural gas liquids (NGL) business to Plains Midstream Canada ULC(Plains Midstream), a wholly-owned subsidiary of Plains All American Pipeline, L.P. Plains Midstream will pay BP a total of $1.67 billion in cash, subjectto post-closing adjustments, for the business. The assets, and associated liabilities, of this business have been classified as held for sale in the groupbalance sheet at 31 December 2011. Completion of the transaction is subject to closing conditions including the receipt of all necessary governmental andregulatory approvals. The sale is expected to be completed in the first half of 2012.Within the Refining and Marketing segment, BP intends to divest the Texas City refinery and related assets, and the southern part of its US WestCoast fuels value chain, including the Carson refinery. The non-current assets, together with the inventories, of these businesses have been classified asheld for sale in the group balance sheet at 31 December 2011. BP intends to complete the sales in 2012.Impairment losses amounting to $398 million (2010 $192 million) have been recognized in relation to certain assets classified as held for sale.See Note 5 for further information.Non-current assets classified as held for sale are not depreciated. It is estimated that the benefit arising from the absence of depreciation for theassets noted above amounted to approximately $166 million (2010 $162 million).Deposits of $30 million ($6,197 million at 31 December 2010) received in advance of completion of certain of these transactions have beenclassified as finance debt on the group balance sheet at 31 December 2011 and of this, none (2010 $4,780 million) has been secured on the assets heldfor sale.The majority of the transactions noted above are subject to post-closing adjustments, which may include adjustments for working capital andadjustments for profits attributable to the purchaser between the agreed effective date and the closing date of the transaction. Such post-closingadjustments may result in the final amounts received by BP from the purchasers differing from the disposal proceeds noted above.The major classes of assets and liabilities reclassified as held for sale as at 31 December are as follows:$ million2011 2010 aAssetsProperty, plant and equipment 4,772 2,971Goodwill 8 87Intangible assets 20 135Investments in jointly controlled entities 122 467Investments in associates 38 333Loans – 12Inventories 3,167 92Cash – 34Other current assets 293 356Assets classified as held for sale 8,420 4,487LiabilitiesTrade and other payables 300 597Provisions 98 383Deferred tax liabilities 140 67Liabilities directly associated with assets classified as held for sale 538 1,047aOn 28 November 2010, BP announced that it had reached agreement to sell its interests in Pan American Energy LLC (PAE) to Bridas Corporation (Bridas) for $7.06 billion in cash. PAE is an Argentina-basedoil and gas company owned by BP (60%) and Bridas (40%). On 5 November 2011, BP received from Bridas a notice of termination of the agreement. As a result of Bridas’s decision and action, the sharepurchase agreement governing this transaction was terminated. BP’s interest in PAE was classified as held for sale in the group balance sheet from the date the sale was originally agreed in 2010, andequity accounting for PAE was discontinued from that date. Following the termination of the sale agreement, BP’s interest in PAE no longer meets the criteria to be classified as held for sale. UnderIFRS, equity accounting is reinstated and prior periods are adjusted when a jointly controlled entity ceases to be classified as held for sale. Consequently, BP’s investment in PAE at 31 December 2010 of$2,641 million has been reclassified in the group balance sheet from assets classified as held for sale to investments in jointly controlled entities. BP’s share of PAE’s profit for 2011 has been recognizedin full in the group income statement; the 2010 income statement has not been adjusted as the amount is insignificant. Comparative financial information for 2010 presented in the table above has beenadjusted to exclude PAE. For further information on the termination of this agreement see page 85.There were no accumulated foreign exchange gains or losses recognized directly in equity relating to the assets held for sale at 31 December 2011 (2010 nil).196 BP Annual Report and Form 20-F 2011