BP Annual Report and Form 20-F 2015

Annual Report and Form 20-F 2015

annualreport

Who we are

We aim to create long-term value for shareholders by helping to meet growing demand for energy in a safe and responsible way. We strive to be a world-class operator, a responsible corporate citizen and a good employer.

BP is one of the world's leading integrated oil and gas companies ? based on market capitalization, proved reserves and production. Through our work we provide customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging.

We believe a mix of fuels and technologies is needed to meet growing energy demand, improve efficiency and support the transition to a lower-carbon economy. These are the reasons why our portfolio includes oil, gas and renewables.

Our projects and operations help to generate employment, investment and tax revenues in countries and communities across the world. We have well-established operations in Europe, North and South America, Australasia, Asia and Africa and employ around 80,000 people.

Our proposition for value growth

For BP good business starts with a relentless focus on safe and reliable operations. Our portfolio enables us to develop high-quality opportunities from a broad set of options. We prioritize value over volume and invest where we can apply our distinctive strengths, capabilities and technologies.

Our objective is to create shareholder value by growing sustainable free cash flow and distributions over the long term through capital and cost discipline.

BP Annual Report and Form 20-F 2015

Front cover images In Oman's remote desert, we use our advanced technology to unlock gas from hot sandstone almost three miles below the earth's surface. Construction work has started on the Khazzan field ? one of the Middle East's largest unconventional gas resources ? and we expect first gas in late 2017.

Your feedback

We welcome your comments and feedback on our reporting. You can provide this at annualreportfeedback or by emailing the corporate reporting team ? details are on the back cover.

Your views are important to us and help shape our reporting for future years.

Strategic report

Corporate governance

BP in 2015

It is a challenging time for our industry but we are making the changes that are needed without compromising our longer-term goals.

Information about this report

1 Strategic report

2 BP at a glance 6 Chairman's letter 8 Group chief executive's letter 10 Our market outlook 12 Our business model and strategy 18 Lower oil and gas prices 20 Our key performance indicators 22 Strategy, performance and pay 24 Our markets in 2015 26 Group performance

28 Upstream 34 Downstream 38 Rosneft 40 Other businesses and corporate 41 Gulf of Mexico oil spill 43 Corporate responsibility 51 Our management of risk 53 Risk factors

55 Corporate governance

56 Board of directors 60 Executive team 62 Introduction from the chairman 63 The board in 2015 64 Board activity 65 Shareholder engagement 66 International advisory board 66H ow the board works 68 Audit committee

71S afety, ethics and environment assurance committee

73 Gulf of Mexico committee 74 Geopolitical committee 74 Chairman's committee 75 Nomination committee 76 Directors' remuneration report 93 Directors' statements

Glossary Words with this symbol are defined in the glossary on page 256.

95 Financial statements

96C onsolidated financial statements of the BP group

107 Notes on financial statements

169Supplementary information on oil and natural gas (unaudited)

196Parent company financial statements of BP p.l.c.

Financial statements

Additional disclosures

Shareholder information

215 Additional disclosures

216 Selected financial information 219 Liquidity and capital resources 221 Upstream analysis by region 225 Downstream plant capacity 227 Oil and gas disclosures for the group 233 Environmental expenditure 233 Regulation of the group's business 237 Legal proceedings 242 International trade sanctions 243 Material contracts

243 Property, plant and equipment 243 Related-party transactions 244 Corporate governance practices 244 Code of ethics 244 Controls and procedures 245 Principal accountants' fees and services 245 Directors' report information 246Disclosures required under Listing

Rule 9.8.4.R 246 Cautionary statement

247 Shareholder information

248 Share prices and listings

254 Fees and charges payable by

248 Dividends

ADSs holders

249 UK foreign exchange controls on dividends 254Fees and payments made by

249 Shareholder taxation information

the Depositary to the issuer

251 Major shareholders

254 Documents on display

251 Annual general meeting

255 Shareholding administration

251 Memorandum and Articles of Association 255 Exhibits

253Purchases of equity securities by the

255 Abbreviations, glossary and trade marks

issuer and affiliated purchasers

259 Signatures 260 Cross reference to Form 20-F

BP Annual Report and Form 20-F 2015

i

Information about this report

Cautionary statement This document should be read in conjunction with the cautionary statement on page 246.

FanredqBuPenatnlydutsheirdd-apbabrrteyvtiraatdioenms,atrekrsmasre described on page 255.

This document constitutes the Annual Report and Accounts in accordance with UK requirements and the Annual Report on Form 20-F in accordance with the US Securities Exchange Act of 1934, for BP p.l.c. for the year ended 31 December 2015. A cross reference to Form 20-F requirements is included on page 260.

This document contains the Strategic report on pages 1-54 and the inside cover (Who we are) and the Directors' report on pages 55-75, 93-94, 169-195 and 215-258. The Strategic report and the Directors' report together include the management report required by DTR 4.1 of the UK Financial Conduct Authority's Disclosure and Transparency Rules. The Directors' remuneration report is on pages 22-23 and 76-92. The consolidated financial statements of the group are on pages 95-168 and the corresponding reports of the auditor are on pages 96-102. The parent company financial statements of BP p.l.c. are on pages 196-213.

The Directors' statements (comprising the Statement of directors' responsibilities; Risk management and internal control; Going concern; Longer-term viability; and Fair balanced and understandable), the independent auditor's report on the annual report and accounts to the members of BP p.l.c. and the parent company financial statements of BP p.l.c. and corresponding auditor's report do not form part of BP's Annual Report on Form 20-F as filed with the SEC.

BP Annual Report and Form 20-F 2015 and BP Strategic Report 2015 (comprising the Strategic report and supplementary information) may be downloaded from annualreport. No material on the BP website, other than the items identified as BP Annual Report and Form 20-F 2015 or BP Strategic Report 2015 (comprising the Strategic report and supplementary information), forms any part of those documents. References in this document to other documents on the BP website, such as BP Energy Outlook, BP Sustainability Report, BP Statistical Review of World Energy and BP Technology Outlook are included as an aid to their location and are not incorporated by reference into this document.

BP p.l.c. is the parent company of the BP group of companies. The company was incorporated in 1909 in England and Wales and changed its name to BP p.l.c. in 2001. Where we refer to the company, we mean BP p.l.c. Unless otherwise stated, the text does not distinguish between the activities and operations of the parent company and those of its subsidiaries, and information in this document reflects 100% of the assets and operations of the company and its subsidiaries that were consolidated at the date or for the periods indicated, including non-controlling interests.

BP's primary share listing is the London Stock Exchange. Ordinary shares are also traded on the Frankfurt Stock Exchange in Germany and, in the US, the company's securities are traded on the New York Stock Exchange (NYSE) in the form of ADSs (see page 248 for more details).

The term `shareholder' in this report means, unless the context otherwise requires, investors in the equity capital of BP p.l.c., both direct and indirect. As BP shares, in the form of ADSs, are listed on the NYSE, an Annual Report on Form 20-F is filed with the SEC. Ordinary shares are ordinary fully paid shares in BP p.l.c. of 25 cents each. Preference shares are cumulative first preference shares and cumulative second preference shares in BP p.l.c. of ?1 each.

Defined on page 256.

ii BP Annual Report and Form 20-F 2015

Registered office and our worldwide headquarters:

BP p.l.c. 1 St James's Square London SW1Y 4PD UK Tel +44 (0)20 7496 4000

Registered in England and Wales No. 102498. London Stock Exchange symbol `BP.'

Our agent in the US:

BP America Inc. 501 Westlake Park Boulevard Houston, Texas 77079 US Tel +1 281 366 2000

Strategic report

Strategic report

An overview of the key activities, events and results in 2015, together with commentary on our performance and priorities as we move forward.

2 BP at a glance

6 Chairman's letter

8 Group chief executive's letter

10 Our market outlook

12 Our business model and strategy

18 Lower oil and gas prices

20 Our key performance indicators

22 Strategy, performance and pay

22 Annual statement by the remuneration committee chair

24 Our markets in 2015

26 Group performance

28 Upstream

34 Downstream

38 Rosneft

40 Other businesses and corporate

40 Renewable energy

41 Gulf of Mexico oil spill

43 Corporate responsibility

43 Safety 46 Environment and society 48 Business ethics and transparency 49 Employees

51 Our management of risk

53 Risk factors

BP Annual Report and Form 20-F 2015 1

BP at a glance

BP delivers energy products and services to people around the world.

Through our two main operating segments, Upstream and Downstream, we find, develop and produce essential sources of energy, turning them into products that people need. We also buy and sell at each stage of the hydrocarbon value chain. In renewable energy, our activities are focused on biofuels and onshore wind.

We also have a 19.75% shareholding in Rosneft, that we report as a separate segment.

Finding

oil and gas

First, we acquire exploration rights, then we search for hydrocarbons beneath the earth's surface.

Business model For more information on our business model see page 12.

Developing and extracting

oil and gas

Once we have found hydrocarbons, we work to bring them to the surface.

Our group key performance indicators (KPIs) are shown on page 20. Some financial KPIs are not recognized GAAP measures, but are provided for investors because they are closely tracked by management to evaluate BP's operating performance and to make financial, strategic and operating decisions.

Group

BP p.l.c. is the parent company of the BP group of companies. Our worldwide headquarters is in London.

Upstream

See KPIs page 20.

See Upstream page 28.

$(6.5)bn

loss attributable to BP shareholders

2014: $3.8bn profit

21.6%

gearing (net debt ratio)

2014: 16.7%

20 tier 1 process safety events 2014: 28

$5.9bn

underlying replacement cost profit

2014: $12.1bn

$19.1bn

operating cash flow

2014: $32.8bn

3.3

million barrels of oil equivalent per daya

2014: 3.2mmboe/d a See footnote a on page 15.

Upstream proved reservesb (mmboe)

41

2 3

Liquids

1. Subsidiaries#

3,982

2. Equity-accounted entities 707

Total

4,689

Natural gas

3. Subsidiaries

5,269

4. Equity-accounted entities 425

Total

5,694

2 BP Annual Report and Form 20-F 2015

Our Upstream segment manages exploration, development and production activities.

$(0.9)bn

replacement cost loss before interest and tax

2014: $8.9bn profit

2.3

million barrels of oil equivalent per dayb

2014: 2.1mmboe/d

3

upstream major project start-ups

2014: 7 major projects

$1.2bn

underlying replacement cost profit before interest and tax

2014: $15.2bn

8,000km2

new exploration access

2014: 47,000km2

b Excludes BP's share of Rosneft. See Rosneft on page 38.

Strategic report

Transporting and trading

oil and gas

We move hydrocarbons using pipelines, ships, trucks and trains and use our trading capability to capture value across the supply chain.

Manufacturing

fuels and products

We refine, process and blend hydrocarbons to make fuels, lubricants and petrochemicals.

Data provided on pages 2-5 is at or for the year ended 31 December 2015, unless otherwise indicated.

Marketing

fuels and products

We supply our customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals required to make a variety of everyday items.

Fuels Lubricants

Petrochemicals

International oil and gas markets

Downstream

Renewables

Our Downstream segment operates hydrocarbon value chains covering three main businesses ? fuels, lubricants and petrochemicals.

Generating

renewable energy

We operate a biofuels business in Brazil and an onshore wind business in the US.

See Downstream page 34.

Operating capital employed c

1 3 2

1. Fuels 2. Lubricants 3. Petrochemicals

$29.2bn $1.3bn $4.4bn

$7.1bn

replacement cost profit before interest and tax

2014: $3.7bn

1.7

million barrels of oil refined per day

2014: 1.7mmb/d

42%

of our lubricants sales were premium grades

2014: 41%

Defined on page 256.

$7.5bn

underlying replacement cost profit before interest and tax

2014: $4.4bn

14.8

million tonnes of petrochemicals produced in the year

2014: 14.0mmte

See Renewable energy page 40.

795

million litres of ethanol equivalent produced at our three mills in Brazil

2014: 542 million litres

4,424

gigawatt hours of electricity generated at our 16 US wind farms

2014: 4,617GWh

c See page 218.

BP Annual Report and Form 20-F 2015 3

BP around the world

BP has operations in more than 70 countries.

Countries where we have operations or interests are shaded green.

Upstream

Gulf of Mexico

Over the past decade, no oil and gas company has invested more in its operations in the deepwater Gulf than BP. We are a leading acreage holder and producer of oil and natural gas in the region. Our production comes from more than 10 fields and includes four BP-operated hubs.

Primarily (>75%) liquids. Primarily (>75%) natural gas. Liquids and natural gas. Exploration site.

Locations are categorized as liquids or natural gas based on 2015 production. Where production is yet to commence, categorization is based on proved reserves. Exploration sites have no significant proved reserves or production as at 31 December 2015.

Upstream see page 28.

Downstream Refinery. Petrochemicals site(s).

Downstream see page 34.

Renewable energy Operational assets. Renewable energy see page 40.

Fuels

Our fuels business is made up of regionally based integrated fuels value chains, that include refineries and fuels marketing businesses, together with global oil supply and trading activities. We supply fuel and related convenience services to consumers at around 17,200 retail sites under a BP brand and market our products in more than 50 countries.

BP group employees by region

561 4 3

2

1. Europe

33,100

2. US and Canada 16,600

3. Asia Pacific

14,700

4. South and Central

America

7,200

5. Middle East and

North Africa

5,900

6. Sub-Saharan

Africa

2,300

Total

79,800

Employee figures include 15,600 service station staff and 4,800 agricultural, operational and seasonal workers in Brazil.

Employees see page 49.

Lower 48

The US Lower 48 onshore business produces natural gas, oil, condensate and NGLs from conventional and unconventional sources including gas, coalbed methane and shale gas assets. It is one of the largest producers of natural gas in the US, with a presence in seven prolific gas basins in the country.

Renewable energy

BP has the largest operated renewables business among our oil and gas peers. Our participation in renewable energies is focused on biofuels and onshore wind. Our operations include three sugar cane mills in Brazil and 16 wind farms in the US.

4 BP Annual Report and Form 20-F 2015

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