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

Our performanceOur upstream business is now reorganized into three divisions – exploration,developments and production. We have also reorganized our drilling operationsinto a single global wells organization (GWO), which forms part of thedevelopments division and takes a consistent, global approach to managing risk.GWO has implemented a number of standard processes since its formation,covering activities such as rig start-up and well cementing.In detailFor more informationon the Gulf of Mexicooil spill, see BP inmore depth.Page 76TrustReleased in January 2011, the report of the National Commission on the BPDeepwater Horizon Oil Spill and Offshore Drilling identified certain failures ofmanagement and decision-making within BP and its contractors, as well asregulatory failures, to be contributing factors to the accident. See Safety onpage 65 and Legal proceedings on pages 160-166 for information on otherinvestigations and reports. We are committed to working with governmentofficials and other operators and contractors to identify and implement operationaland regulatory changes that will enhance safety practices throughout the oil andgas industry. BP teams have travelled to 25 countries to share the lessons learnedfrom events in the Gulf of Mexico with our industry, regulators and governments.We also shared equipment and technology developed during the response withthe Marine Well Containment Company in the US.On the ground, the focus of our work in the Gulf of Mexico shifted fromresponse to recovery. The majority of the clean-up work required along theshoreline has now been completed. We are encouraged by local and state reportsthat indicate tourism in many areas of the region is rebounding. And all federalcommercial fishing areas had been reopened by April 2011. We are still at work onthe recovery and remain committed to meeting our responsibilities in the region.By the end of 2011, we had paid $15.1 billion into the $20-billion DeepwaterHorizon Oil Spill Trust fund (Trust) set up to meet the costs of the spill. In total, theTrust and BP had paid a total of $7.8 billion in claims, advances and other paymentsby the end of 2011.ValueOur profit in 2011 was $25.7 billion compared with a loss of $3.7 billion in 2010.After adjusting for inventory holding gains, our replacement cost profit a in 2011was $23.9 billion compared with a loss of $4.9 billion in 2010. Cash and cashequivalents at the end of 2011 totalled $14.1 billion and our net debt ratio b was20.5%. See Financial review on pages 56-58 for further information on the group’sfinancial results.During 2010 and 2011 combined, we strengthened the group’s financialposition by completing asset sales totalling almost $20 billion and we haveannounced our intention to make further disposals that would bring the total to$38 billion by the end of 2013. Previously this disposal target had been set at$45 billion, however it was reduced in November 2011 when we received noticeof termination from Bridas Corporation of the agreement for their purchase ofBP’s 60% interest in Pan American Energy LLC. We intend to reduce our netdebt ratio to the lower half of the 10-20% range over time. During 2011 wereached settlements with MOEX USA Corporation (MOEX), Weatherford U.S.,L.P. (Weatherford), Anadarko Petroleum Corporation (Anadarko) and CameronInternational Corporation (Cameron) totalling $5.5 billion related to the DeepwaterHorizon oil spill. All cash received has been paid to the Trust.48 BP Annual Report and Form 20-F 2011aReplacement cost profit or loss for the group is not a recognized GAAP measure. The equivalent measureon an IFRS basis is ‘Profit (loss) for the year attributable to BP shareholders’. See footnote b on page 56 andpage 110 for further information.b Net debt ratio is a non-GAAP measure. See Note 35 on page 230 for the equivalent measure on anIFRS basis.