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

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Notes on financial statements6. Segmental analysisThe group’s organizational structure reflects the various activities in which BP is engaged. In 2011, BP had two reportable segments: Exploration andProduction and Refining and Marketing. BP’s activities in low-carbon energy are managed through our Alternative Energy business, which is reported inOther businesses and corporate. The group is managed on an integrated basis.Exploration and Production’s activities include oil and natural gas exploration, field development and production; midstream transportation, storageand processing; and the marketing and trading of natural gas, including liquefied natural gas (LNG), together with power and natural gas liquids (NGLs).At the end of 2010, BP announced its decision to reorganize its Exploration and Production segment to create three functional divisions –Exploration, Developments and Production, integrated through a Strategy and Integration organization. This structure was established in March 2011 butthis has not affected the group’s reportable segments and Exploration and Production continues to be reported as a single operating segment.From 1 January 2012, the group’s investment in TNK-BP will be reported as a separate operating segment, rather than within the Exploration andProduction segment, reflecting the way in which the investment is now managed.Refining and Marketing’s activities include the refining, manufacturing, marketing, transportation, and supply and trading of crude oil, petroleum,petrochemicals products and related services to wholesale and retail customers.Other businesses and corporate comprises the Alternative Energy business, Shipping, Treasury (which in the segmental analysis includes all ofthe group’s cash, cash equivalents and associated interest income), and corporate activities worldwide. It also included the group’s aluminium businessuntil its disposal during 2011. The Alternative Energy business is an operating segment that has been aggregated with the other activities within Otherbusinesses and corporate as it does not meet the materiality thresholds for separate segment reporting.In 2010, following the Gulf of Mexico incident, we established the Gulf Coast Restoration Organization (GCRO) and equipped it with dedicatedresources and capabilities to manage all aspects of our response to the incident. This organization reports directly to the group chief executive and isoverseen by a board committee, however it is not an operating segment.The accounting policies of the operating segments are the same as the group’s accounting policies described in Note 1. However, IFRS requiresthat the measure of profit or loss disclosed for each operating segment is the measure that is provided regularly to the chief operating decision maker forthe purposes of performance assessment and resource allocation. For BP, this measure of profit or loss is replacement cost profit or loss before interestand tax which reflects the replacement cost of supplies by excluding from profit or loss inventory holding gains and losses a . Replacement cost profit orloss for the group is not a recognized GAAP measure.Sales between segments are made at prices that approximate market prices, taking into account the volumes involved. Segment revenuesand segment results include transactions between business segments. These transactions and any unrealized profits and losses are eliminated onconsolidation, unless unrealized losses provide evidence of an impairment of the asset transferred. Sales to external customers by region are based onthe location of the seller. The UK region includes the UK-based international activities of Refining and Marketing.All surpluses and deficits recognized on the group balance sheet in respect of pension and other post-retirement benefit plans are allocated toOther businesses and corporate. However, the periodic expense relating to these plans is allocated to the other operating segments based upon thebusiness in which the employees work.Certain financial information is provided separately for the US as this is an individually material country for BP, and for the UK as this is BP’scountry of domicile.aInventory holding gains and losses represent the difference between the cost of sales calculated using the average cost to BP of supplies acquired during the period and the cost of sales calculatedon 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 IFRSreporting, the cost of inventory charged to the income statement is based on its historic cost of purchase, or manufacture, rather than its replacement cost. In volatile energy markets, this can havea 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 anyrelated movements in net realizable value provisions) and the charge that would have arisen if an average cost of supplies was used for the period. For this purpose, the average cost of supplies duringthe period is principally calculated on a monthly basis by dividing the total cost of inventory acquired in the period by the number of barrels acquired. The amounts disclosed are not separately reflected inthe 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.200 BP Annual Report and Form 20-F 2011
Notes on financial statementshttp://www.bp.com/downloads/segmentalanalysis6. Segmental analysis continuedExplorationandProductionRefiningandMarketingOtherbusinessesandcorporateGulf ofMexicooil spillresponseConsolidationadjustmentandeliminationsBy businessSegment revenuesSales and other operating revenues 75,475 344,116 2,957 – (47,031) 375,517Less: sales between businesses (44,766) (1,396) (869) – 47,031 –Third party sales and other operating revenues 30,709 342,720 2,088 – – 375,517Equity-accounted earnings 5,466 787 (33) – – 6,220Interest revenues (4) 25 146 – – 167Segment resultsReplacement cost profit (loss) before interest and taxation 30,500 5,474 (2,478) 3,800 (113) 37,183Inventory holding gains a 132 2,487 15 – – 2,634Profit (loss) before interest and taxation 30,632 7,961 (2,463) 3,800 (113) 39,817Finance costs (1,246)Net finance income relating to pensions andother post-retirement benefits 263Profit before taxation 38,834Other income statement itemsDepreciation, depletion and amortization 8,693 2,117 325 – – 11,135Impairment losses 1,443 599 58 – – 2,100Impairment reversals (146) – – – – (146)Fair value (gain) loss on embedded derivatives (191) – 123 – – (68)Charges for provisions, net of write-back of unused provisions,including change in discount rate 213 371 942 5,200 – 6,726Segment assetsEquity-accounted investments 21,054 6,731 1,024 – – 28,809Additions to non-current assets 34,527 4,128 1,864 – – 40,519Additions to other investments 25Element of acquisitions not related to non-current assets (1,089)Additions to decommissioning asset (7,937)Capital expenditure and acquisitions 25,535 4,130 1,853 – – 31,518aSee explanation of inventory holding gains and losses on page 200.$ million2011TotalgroupFinancial statementsBP Annual Report and Form 20-F 2011 201
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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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Directors and senior managementDire
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Directors and senior managementH L
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Corporate governanceCorporate gover
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Corporate governanceAntony Burgmans
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Corporate governanceBoard oversight
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Corporate governanceBoard and commi
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Corporate governancefinancial repor
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Corporate governancechairs and secr
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Corporate governance• Oversee GCR
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Corporate governanceCommittee’s r
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Corporate governanceControls and pr
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Corporate governanceThe Act require
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Directors’ remuneration reportRem
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Directors’ remuneration reportSum
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Directors’ remuneration reportRem
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Directors’ remuneration reportThe
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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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