Energy with purpose means transforming while performing. Energy with purpose BPX Energy: Delivering synergies We have been transforming BPX Energy, our US onshore oil and gas business, with the purchase of world-class unconventional assets from BHP. • The acquisition gave us access to some of the best basins in the onshore US, with 487,000 acres of leasehold across a new position in the liquids-rich Permian-Delaware basin, and two positions in the Eagle Ford and Haynesville basins. • It positions BP as a top producer in the region. Good progress Since we began operating the assets, we have delivered synergies of $240 million in 2019, above our planned target of $90 million. 130 BP Annual Report and Form 20-F 2019 Financial statements Consolidated financial statements of the BP group Independent auditor’s reports 132 Group statement of changes in equity 154 Group income statement 152 Group balance sheet 155 Group statement of comprehensive income 153 Group cash flow statement 156 Notes on financial statements 1. Significant accounting policies 157 22. Trade and other payables 193 2. Non-current assets held for sale 173 23. Provisions 193 3. Business combinations and other 24. Pensions and other post-retirement benefits 194 significant transactions 174 25. Cash and cash equivalents 200 4. Disposals and impairment 175 26. Finance debt 200 5. Segmental analysis 177 27. Capital disclosures and net debt 201 6. Revenue from contracts with customers 180 28. Leases 202 7. Income statement analysis 180 29. Financial instruments and financial 202 8. Exploration expenditure 181 risk factors 9. Taxation 181 30. Derivative financial instruments 207 10. Dividends 184 31. Called-up share capital 215 11. Earnings per share 184 32. Capital and reserves 216 12. Property, plant and equipment 186 33. Contingent liabilities 219 13. Capital commitments 187 34. Remuneration of senior management 220 14. Goodwill 187 and non-executive directors 15. Intangible assets 188 35. Employee costs and numbers 221 16. Investments in joint ventures 189 36. Auditor’s remuneration 221 17. Investments in associates 189 37. Subsidiaries, joint arrangements 222 and associates 18. Other investments 191 38. Condensed consolidating information 223 19. Inventories 191 on certain US subsidiaries 20. Trade and other receivables 192 21. Valuation and qualifying accounts 192 Supplementary information on oil and natural gas (unaudited) Oil and natural gas exploration 233 Standardized measure of discounted future 254 and production activities net cash flows and changes therein relating Movements in estimated net proved reserves 239 to proved oil and gas reserves Operational and statistical information 257 Parent company financial statements of BP p.l.c. Company balance sheet 260 7. Called-up share capital 270 Company statement of changes in equity 261 8. Capital and reserves 270 Notes on financial statements 262 9. Financial guarantees 271 1. Significant accounting policies 262 10. Share-based payments 271 2. Investments 265 11. Auditor’s remuneration 271 3. Receivables 265 12. Directors’ remuneration 271 4. Pensions 265 13. Employee costs and numbers 272 5. Payables 269 14. Related undertakings 273 6. Taxation 269 BP Annual Report and Form 20-F 2019 131 Consolidated financial statements of the BP group Independent auditor’s report on the Annual Report and Accounts to the members of BP p.l.c. Report on the audit of the financial statements Opinion In our opinion: • The financial statements of BP p.l.c. (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2019 and of the group’s profit for the year then ended. • The group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and IFRSs as issued by the International Accounting Standards Board (IASB). • The parent company financial statements have been properly prepared in accordance with United Kingdom generally accepted accounting practice including Financial Reporting Standard (FRS) 101 ‘Reduced Disclosure Framework'. • The financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. We have audited the financial statements of BP p.l.c. which comprise the: • Group income statement; • Group statement of comprehensive income; • Group and parent company statements of changes in equity; • Group and parent company balance sheets; • Group cash flow statement; • Group related Notes 1 to 38 to the financial statements, including a summary of significant accounting policies; and • Parent company related Notes 1 to 14 to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and IFRSs as adopted by the European Union and as issued by the IASB. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the group and parent company for the year are disclosed in note 36 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Summary of our audit approach Key audit matters The key audit matters that we identified in the current year are as follows: • Potential impact of climate change and the energy transition (impacting PP&E, goodwill, intangible assets and provisions); • Impairment of upstream oil and gas property, plant and equipment (PP&E) assets; • Impairment of exploration and appraisal assets (included within 'intangible assets' in the Group balance sheet); • Accounting for structured commodity transactions (SCTs) within the integrated supply and trading (IST) function, and the valuation of other level 3 financial instruments (potentially impacting all financial statement accounts, in particular finance debt); • IT controls relating to financial systems (potentially impacting all financial statement accounts); and • Management override of controls (potentially impacting all financial statement accounts). Changes in our key These key audit matters are consistent with those we identified in the prior year except that: audit matters since the prior year • This year we identified the potential impact of climate change and the energy transition as a key audit matter, given the significant increase in focus on this issue by management and by external stakeholders, and the potential impact on the financial statements as a consequence. • In our report for the year ended 31 December 2018 we identified the accounting for acquisitions and disposals within the upstream segment as a key audit matter, in large part as a consequence of the accounting complexities surrounding the $10.3 billion acquisition of BHP Billiton assets in the US. During the current year, there were no material acquisitions and there were fewer significant accounting complexities and judgements in the disposal transactions undertaken by BP. Accordingly, we did not identify this as a key audit matter for 2019. Materiality We have set materiality for the current year at $850 million (2018 $750 million) based on profit before tax, profit before impairment charges and tax, and underlying replacement cost profit before interest and tax. Scoping Our scope covered 263 components. Of these, 179 were full-scope audits and the remaining 84 were subject to specific procedures on certain account balances by component audit teams or the group audit team. These covered 81% of group revenue and 75% of PP&E. This page does not form part of BP's Annual Report on Form 20-F as filed with the SEC. 132 BP Annual Report and Form 20-F 2019 Conclusions relating to going concern, principal risks and viability statement Going concern We have reviewed the directors’ statement on page 157 to the financial statements about whether they Going concern is the basis of considered it appropriate to adopt the going concern basis of accounting in preparing them and their preparation of the financial identification of any material uncertainties to the group’s and company’s ability to continue to do so over a statements that assumes an period of at least 12 months from the date of approval of the financial statements. entity will remain in operation for a period of at least 12 We considered as part of our risk assessment the nature of the group, its business model and related months from the date of risks including where relevant the impact of Brexit, the requirements of the applicable financial reporting approval of the financial framework and the system of internal control. We evaluated the directors’ assessment of the group’s statements. ability to continue as a going concern, including challenging the underlying data and key assumptions used to make the assessment, and evaluated the directors’ plans for future actions in relation to their We confirm that we have nothing going concern assessment.