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

Left BP employeesat work in PrudhoeBay, Alaska – thelargest oilfield in NorthAmerica and amongthe 20 largest fieldsever discovered.Right Operations onthe BP-operatedAtlantis PQ, Gulf ofMexico – the deepestmoored semisubmersibleplatform inthe world when it wasinstalled in 2007.Business review: Group overviewExploration and ProductionReplacement cost profitbefore interest & tax aUSNon-USAverage hydrocarbonrealizations ($/boe) b$ billion $/boe40803020102007 2008 2009 2010 2011aSee Financial statements – Note 6 on page 200.bBased on sales of consolidated subsidiariesonly – this excludes equity-accounted entities.Total net proved reserves 2011 a(million barrels of oil equivalent)7,183Liquids bNatural gas c10,565aCombined basis of subsidiaries andequity-accounted entities, on a basisconsistent with general industry practice.b Liquids comprise crude oil, condensate, natural gasliquids and bitumen and include totals of 5,153 millionbarrels for subsidiaries and 5,412 million barrels forequity-accounted entities.cNatural gas is converted to oil equivalent at 5.8 billioncubic feet (bcf) = 1 million barrels and includes6,273 million barrels of oil equivalent for subsidiariesand 910 million barrels of oil equivalent forequity-accounted entities.604020On 3 March 2012, we announced we had reached a settlement with thePlaintiffs’ Steering Committee (PSC), subject to final written agreement andcourt approvals, to resolve the substantial majority of legitimate economic lossand medical claims stemming from the Deepwater Horizon accident and oil spill.The PSC acts on behalf of individual and business plaintiffs in the Multi-DistrictLitigation proceedings pending in New Orleans (MDL 2179). We estimate thatthe cost of the proposed settlement would be approximately $7.8 billion, but withno net impact on either the income or cash flow statements, since the proposedsettlement is expected to be payable from the $20-billion Trust. While this isBP’s reliable best estimate of the cost of the proposed settlement, it is possiblethat the actual cost could be higher or lower than this estimate depending on theoutcomes of the court-supervised claims processes. See Legal proceedings onpage 162 for further information.Exploration and ProductionThe replacement cost profit before interest and tax for 2011 was $30,500 million,compared with $30,886 million for the previous year. See Exploration andProduction on page 80 for further information on the segment’s financial results.Our production was lower than in 2010 due to divestments, the suspensionof drilling in the Gulf of Mexico and the high number of turnarounds andmaintenance projects undertaken during the year. However, production began toincrease from the fourth quarter with the completion of turnarounds in the NorthSea, Angola and the Gulf of Mexico. Also, two new major projects were broughtonstream during the year – the BP-operated Serrette field in Trinidad and thePazflor field in Angola, operated by Total.We had our best year for a decade in terms of access to new upstreamopportunities, with awards for a total of 55 new exploration licences. We alsogained approval for our exploration plan for the Kaskida field in the Gulf of Mexico– our first drilling permit for an exploration well in the US since the DeepwaterHorizon oil spill.In India, we completed a transaction that brings us into a unique relationshipwith Reliance Industries and access to 21 oil and gas blocks which coveredapproximately 83,000 square miles (216,000 square kilometres). In November2011 we formed a 50:50 gas marketing joint venture to source and market gas.In Russia, our plans to form a strategic alliance with Rosneft did not reachfruition. Nonetheless, we remain committed to Russia and the ongoing successof TNK-BP, which comprises 27% of our reserves and 29% of our production.In Brazil, we acquired assets from Devon Energy, giving us a materialposition in one of the great deepwater provinces of the world. We startedupstream operations during the year.BP Annual Report and Form 20-F 2011 49