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

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Notes on financial statements32. Trade and other payables$ million2011 2010Current Non-current Current Non-currentFinancial liabilitiesTrade payables 29,830 – 27,510 –Amounts payable to jointly controlled entities 1,578 1,047 1,361 1,905Amounts payable to associates 876 159 712 220Gulf of Mexico oil spill trust fund liability a 4,872 – 5,002 9,899Other payables 10,510 1,779 8,100 1,79047,666 2,985 42,685 13,814Non-financial liabilitiesOther payables 4,739 452 3,644 471aSee Note 2 for further information.52,405 3,437 46,329 14,285Trade and other payables are predominantly interest free, however the Gulf of Mexico oil spill trust fund liability is recorded on a discounted basis. SeeNote 26 for further information.http://www.bp.com/downloads/dfi33. Derivative financial instrumentsAn outline of the group’s financial risks and the objectives and policies pursued in relation to those risks is set out in Note 26.In the normal course of business the group enters into derivative financial instruments (derivatives) to manage its normal business exposures inrelation to commodity prices, foreign currency exchange rates and interest rates, including management of the balance between floating rate and fixedrate debt, consistent with risk management policies and objectives. Additionally, the group has a well-established entrepreneurial trading operation that isundertaken in conjunction with these activities using a similar range of contracts.IAS 39 prescribes strict criteria for hedge accounting, whether as a cash flow or fair value hedge or a hedge of a net investment in a foreignoperation, and requires that any derivative that does not meet these criteria should be classified as held for trading and fair valued, with gains and lossesrecognized in the income statement.The fair values of derivative financial instruments at 31 December are set out below.Fairvalueasset$ million2011 2010FairFairFairvaluevaluevalueliabilityasset liabilityDerivatives held for tradingCurrency derivatives 217 (217) 194 (280)Oil price derivatives 823 (536) 1,099 (877)Natural gas price derivatives 5,305 (3,603) 5,350 (3,951)Power price derivatives 843 (663) 561 (432)7,188 (5,019) 7,204 (5,540)Embedded derivativesCommodity price contracts – (1,417) 18 (1,625)Other embedded derivatives – – – (89)– (1,417) 18 (1,714)Cash flow hedgesCurrency forwards, futures and cylinders 25 (159) 134 (124)Cross-currency interest rate swaps – – 101 (1)25 (159) 235 (125)Fair value hedgesCurrency forwards, futures and swaps 842 (398) 772 (80)Interest rate swaps 840 – 337 (74)1,682 (398) 1,109 (154)8,895 (6,993) 8,566 (7,533)Of which – current 3,857 (3,220) 4,356 (3,856)– non-current 5,038 (3,773) 4,210 (3,677)224 BP Annual Report and Form 20-F 2011
Notes on financial statements33. Derivative financial instruments continuedDerivatives held for tradingThe group maintains active trading positions in a variety of derivatives. The contracts may be entered into for risk management purposes, to satisfy supplyrequirements or for entrepreneurial trading. Certain contracts are classified as held for trading, regardless of their original business objective, and arerecognized at fair value with changes in fair value recognized in the income statement. Trading activities are undertaken by using a range of contract typesin combination to create incremental gains by arbitraging prices between markets, locations and time periods. The net of these exposures is monitoredusing market value-at-risk techniques as described in Note 26.The following tables show further information on the fair value of derivatives and other financial instruments held for trading purposes.Derivative assets held for trading have the following fair values and maturities.http://www.bp.com/downloads/dfiLess than1 year 1-2 years 2-3 years 3-4 years 4-5 years$ million2011Over5 years TotalCurrency derivatives 194 18 5 – – – 217Oil price derivatives 573 135 77 25 10 3 823Natural gas price derivatives 2,493 1,160 597 346 207 502 5,305Power price derivatives 498 160 101 54 30 – 8433,758 1,473 780 425 247 505 7,188Less than1 year 1-2 years 2-3 years 3-4 years 4-5 years$ million2010Over5 years TotalCurrency derivatives 124 41 18 11 – – 194Oil price derivatives 797 128 82 64 21 7 1,099Natural gas price derivatives 2,591 1,100 652 375 231 401 5,350Power price derivatives 389 125 35 11 1 – 5613,901 1,394 787 461 253 408 7,204Derivative liabilities held for trading have the following fair values and maturities.Less than1 year 1-2 years 2-3 years 3-4 years 4-5 years$ million2011Over5 years TotalCurrency derivatives (168) (49) – – – – (217)Oil price derivatives (483) (37) (7) (4) (3) (2) (536)Natural gas price derivatives (1,696) (876) (347) (197) (102) (385) (3,603)Power price derivatives (328) (176) (89) (46) (24) – (663)(2,675) (1,138) (443) (247) (129) (387) (5,019)Less than1 year 1-2 years 2-3 years 3-4 years 4-5 years$ million2010Over5 years TotalCurrency derivatives (228) (6) (46) – – – (280)Oil price derivatives (794) (76) (6) (1) – – (877)Natural gas price derivatives (2,174) (741) (484) (161) (114) (277) (3,951)Power price derivatives (287) (103) (32) (9) (1) – (432)(3,483) (926) (568) (171) (115) (277) (5,540)If at inception of a contract the valuation cannot be supported by observable market data, any gain or loss determined by the valuation methodology is notrecognized in the income statement but is deferred on the balance sheet and is commonly known as ‘day-one profit or loss’. This deferred gain or lossis recognized in the income statement over the life of the contract until substantially all of the remaining contract term can be valued using observablemarket data at which point any remaining deferred gain or loss is recognized in the income statement. Changes in valuation from this initial valuation arerecognized immediately through the income statement.Financial statementsBP Annual Report and Form 20-F 2011 225
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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 reviewour review of all th
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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 reviewBP’s vice presiden
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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 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 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 reportNon
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Additional informationfor sharehold
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SignaturesThe registrant hereby cer
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Parent company financial statements
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