Annual Report and Accounts beyond petroleum® 2009 bp.com/annualreport BP Annual Report and Accounts Accounts Annual Report and BP What’s inside? 3 Business review 93 Additional information for 4 Chairman’s letter shareholders 6 Group chief executive’s review 94 Critical accounting policies 2009 8 Our performance 96 Property, plants and equipment 10 Group overview 96 Share ownership 22 Exploration and Production 98 Major shareholders and related party transactions 36 Refi ning and Marketing 98 Dividends 42 Other businesses and corporate 99 Legal proceedings 44 Research and technology 100 Share prices and listings 46 Corporate responsibility 101 Memorandum and Articles of Association 52 Relationships with suppliers and contractors 103 Exchange controls 52 Regulation of the group’s business 103 Taxation 52 Organizational structure 105 Documents on display 53 Financial performance 105 Controls and procedures 61 Liquidity and capital resources 106 Code of ethics 106 Principal accountants’ fees and services 65 Board performance and biographies 106 Corporate governance practices 107 Purchases of equity securities by the issuer 66 Directors and senior management and affi liated purchasers 69 Board performance report 107 Fees and charges payable by a holder of ADSs 108 Fees and payments made by the Depositary 81 Directors’ remuneration report to the issuer 82 Part 1 Summary 108 Called-up share capital 84 Part 2 Executive directors’ remuneration 108 Administration 91 Part 3 Non-executive directors’ remuneration 108 Annual general meeting 109 Financial statements 110 Consolidated fi nancial statements of the BP group 116 Notes on fi nancial statements 179 S upplementary information on oil and natural gas (unaudited) 193 Parent company fi nancial statements of BP p.l.c. BP Annual Report and Accounts 2009 Information for shareholders Reports and publications You can order BP’s printed publications, free of charge, from: US and Canada Precision IR Toll-free +1 888 301 2505 Fax +1 804 327 7549 [email protected] UK and Rest of World BP Distribution Services Tel +44 (0)870 241 3269 Fax +44 (0)870 240 5753 BP’s reports and publications are available to view online [email protected] or download from www.bp.com/annualreport. Annual Review Sustainability Review Read a summary of our fi nancial Read the summary and operating performance in BP Sustainability Review BP Annual Review 2009 in print 2009 in print or read more or online. online from April 2010. www.bp.com/annualreview www.bp.com/sustainability Acknowledgements Paper Design sasdesign.co.uk This Annual Report and Accounts is Typesetting Bowne, London printed on FSC-certifi ed Revive Pure Printing St Ives Westerham Press Ltd, UK, White Uncoated (cover) and Revive ISO 14001, FSC-certifi ed and CarbonNeutral® Pure White Offset (text pages). Photography Stuart Conway, Graham Trott This paper has been independently certifi ed according to the rules of the Forest Stewardship Council (FSC) and was manufactured at a mill that holds ISO 14001 accreditation. The inks used are all vegetable oil based. © BP p.l.c. 2010 209 BP Annual Report and Accounts 2009 Information about this report This document constitutes the Annual Report and Accounts of BP p.l.c. for the year ended 31 December 2009 in accordance with UK requirements and is dated 26 February 2010. This document also contains information that will be included in the company’s Annual Report on Form 20-F 2009 in accordance with the requirements of the US Securities and Exchange Commission (SEC). Such information will be supplemented and may be updated at the time of filing that document with the SEC, or later amended, if necessary. The Annual Report and Accounts for the year ended 31 December 2009 contains the Directors’ Report, including the Business Review and Management Report, on pages 3-80 and 93-108, 110 and 193. The Directors’ Remuneration Report is on pages 81-92. The consolidated financial statements are on pages 109-192. The report of the auditor is on page 111 for the group and page 194 for the company. BP Annual Report and Accounts 2009 and BP Annual Review 2009 may be downloaded from www.bp.com/annualreport. No material on the BP website, other than the items identified as BP Annual Report and Accounts 2009 and BP Annual Review 2009, forms any part of those documents. Reconciliation of profit for the year to replacement cost profit For the year ended 31 December $ million 2009 2008 2007 Profit before interest and taxation 26,426 35,239 32,352 Finance costs and net finance expense/income relating to pensions and other post-retirement benefits (1,302) (956) (741) Taxation (8,365) (12,617) (10,442) Minority interest (181) (509) (324) Profit for the year attributable to BP shareholders 16,578 21,157 20,845 Inventory holding (gains) losses, net of tax (2,623) 4,436 (2,475) Replacement cost profita 13,955 25,593 18,370 Exploration and Production 24,800 38,308 27,602 Refining and Marketing 743 4,176 2,621 Other businesses and corporate (2,322) (1,223) (1,209) Consolidation adjustment – unrealized profit in inventory (717) 466 (220) Replacement cost profit before interest and taxation 22,504 41,727 28,794 Finance costs and net finance expense/income relating to pensions and other post-retirement benefits (1,302) (956) (741) Taxation on a replacement cost basis (7,066) (14,669) (9,359) Minority interest (181) (509) (324) Replacement cost profit attributable to BP shareholders 13,955 25,593 18,370 Per ordinary share – cents Profit for the year attributable to BP shareholders 88.49 112.59 108.76 Replacement cost profit 74.49 136.20 95.85 Dividends paid per ordinary share – cents 56.00 55.05 42.30 – pence 36.417 29.387 20.995 Dividends paid per American depositary share (ADS) – dollars 3.360 3.303 2.538 a Replacement cost profit reflects the replacement cost of supplies. The replacement cost profit for the year is arrived at by excluding from profit inventory holding gains and losses and their associated tax effect. Inventory holding gains and losses represent the difference between the cost of sales calculated using the average cost to BP of supplies incurred during the year and the cost of sales calculated on the first-in first-out method, including any changes in provisions where the net realizable value of the inventory is lower than its cost. Inventory holding gains and losses, for this purpose, are calculated for all inventories except for those that are held as part of a trading position and certain other temporary inventory positions. BP uses this measure to assist investors in assessing BP’s performance from period to period. Replacement cost profit for the group is a non-GAAP measure. On pages 4-9, references within BP Annual Report and Accounts 2009 to ‘profits’, ‘results’ and ‘return on average capital employed’ are to those measures on a replacement cost basis unless otherwise indicated. BP p.l.c. is the parent company of the BP group of companies. Unless otherwise stated, the text does not distinguish between the activities and operations of the parent company and those of its subsidiaries. The term ‘shareholder’ in this Annual Report and Accounts means, unless the context otherwise requires, investors in the equity capital of BP p.l.c., both direct and/or indirect. As BP shares, in the form of ADSs, are listed on the New York Stock Exchange (NYSE), an Annual Report on Form 20-F will be filed with the SEC in accordance with the US Securities Exchange Act of 1934. When filed, copies may be obtained free of charge (see page 108). Cautionary statement BP Annual Report and Accounts 2009 contains certain forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of BP and certain of the plans and objectives of BP with respect to these items. For more details, please see Forward-looking statements on page 21. The registered office of BP p.l.c. is 1 St James’s Square, London SW1Y 4PD, UK. Tel +44 (0)20 7496 4000. Registered in England and Wales No. 102498. Stock exchange symbol ‘BP’. 1 BP Annual Report and Accounts 2009 Miscellaneous terms In this document, unless the context Joint control MW otherwise requires, the following terms Joint control is the contractually agreed Megawatt. shall have the meaning set out below. sharing of control over an economic NGLs ADR activity, and exists only when the Natural gas liquids. American depositary receipt. strategic financial and operating decisions relating to the activity require OPEC ADS the unanimous consent of the parties Organization of Petroleum Exporting American depositary share. sharing control (the venturers). Countries. AGM Joint venture Ordinary shares Annual general meeting. A contractual arrangement whereby Ordinary fully paid shares in BP p.l.c. of Amoco two or more parties undertake an 25c each. The former Amoco Corporation economic activity that is subject to Pence or p and its subsidiaries. joint control. One-hundredth of a pound sterling. Atlantic Richfield Jointly controlled asset Pound, sterling or £ Atlantic Richfield Company A joint venture where the venturers The pound sterling. and its subsidiaries. jointly control, and often have a direct ownership interest in the assets of the Preference shares Associate venture. The assets are used to obtain Cumulative First Preference Shares and An entity, including an unincorporated benefits for the venturers. Each Cumulative Second Preference Shares entity such as a partnership, over which venturer may take a share of the output in BP p.l.c. of £1 each. the group has significant influence and from the assets and each bears an that is neither a subsidiary nor a joint PSA agreed share of the expenses incurred.