BP CAPITAL MA~tIC_F.TS P.L.C. (Registered No ) REPORT OF THE DIRECTORS REPORT OF THE DIRECTORS

Transcription

1 BP CAPITAL MA~tIC_F.TS P.L.C. (Registered No ) REPORT OF THE DIRECTORS INTERIM REPORT AND ACCOUNTS JUNE 2012 Board of Directors: N M H Bamfield D J Bucknall B Gilvaiy R C Harrington REPORT OF THE DIRECTORS The directors present their report and financial statements for the half year ending 30 June Results and dividends The loss for the half year after taxation was $1 million which, when added to the retained deficit brought forward at 1 January 2012 of $166 million, gives a total retained deficit carried foi~vvard at 30 June 2012 of $167 million. The loss for the half year relates primarily to interest expense on Euro Commercial Paper ("CP") which is not matched by interest income from the corresponding deposit of funds with another BP group company. This loss arises due to a timing difference in how the interest income and expense is recognised over the lifetime of the debt. The directors do not propose the payment of a final dividend (2011: nil). Principal activity and review of the business The company acts as a finance company issuing debt security and commercial paper. The development of the company is largely determined by the financing requirements of BP group companies in the UK and abroad. To meet the additional cash funding requirements of the group, BP Capital Markets p.l.c. has issued in the year new bonds with a total nominal value of $6.8 billion, whilst existing bonds reaching maturity have been repaid with a total nominal value of $2.3 billion. There has been a net issuance of commercial paper in the year with a nominal value of $177 million and foreign exchange and fair value gain of $504 million less deferred issue fees of $6 million. These events have increased the total debt balance to $38.7 billion. No applicable key financial and other performance indicators have been identified for this company. Principal risks and uncertainties The company aims to deliver sustainable value by identifying and responding successfully to risks. Risk management is integt ated into the process of planning and performance management at a group level. Monitoring and accountability for the management of these risks occur through quarterly performance reviews at a group level. Consider carefully the risks described below, the potential impact of their occurrence on the business, financial condition and results of operations on the company. Company level risks have been categorised against the following areas: compliance and control; financial risk management and capital management. In addition, we have also set out a further category of risk for your attention those resulting from the Gulf of Mexico oil spill (the Incident).

2 BP COMPANY PRO-FORMA STATUTORY ACCOUNTS REPORT OF THE DIRECTORS Principal risks and uncertainties (continued) Gulf of Mexico oil spill The Gulf of Mexico oil spill has had and could continue to have a material adverse impact on BP as a group, and consequently may also have an adverse impact on BP Capital Markets p.l.c. There is significant uncertainty in the extent and tuning of costs and liabilities relating to the Incident, the impact of the Incident on the reputation of the BP group and the resulting possible impact on the company's ability to access new opportunities. There is also significant uncertainty regarding potential changes in applicable regulations and the operating environment that may result from the Incident. These increase the risks to which the group and therefore the company are exposed to. These uncertainties are likely to continue for a significant period. Thus, the Incident has had, and could continue to have, a material adverse impact on the group's business, competitive position, financial performance, cash flows, prospects, liquidity, shareholder returns and/or implementation of its strategic agenda, particularly in the US. The BP Group recognised charges totalling $40.9 billion in 2010 and a credit of $3.7 billion in 2011 as a result of the Incident. The total amounts that will ultimately be paid by BP in relation to all obligations relating to the Incident are subject to significant uncertainty and the ultimate exposure and cost to BP will be dependent on many factors. Furthermore, the amount of claims that become payable by BP, the amount of fines ultimately levied on BP (inchzding any potential determination of BP's negligence or gross negligence), the outcome of litigation, and any costs arising from any longer-term environmental consequences of the oil spill, will also impact upon the ultimate cost for BP. Although the provision recognised is the current best estimate of expenditures required to settle certain present obligations at the end of the reporting period, there are future expenditures for which it is not possible to measure the obligation reliably. The risks associated with the Incident could also heighten the impact of the other risks to which the group is exposed as further described below. Further information on the Incident, is included within the BP group Annual Report and Form 20-F for the year ended 31 December Compliance and control risks Reporting External reporting of financial and non-financial data is reliant on the integrity of systems and people. Failure to report data accurately and in compliance with external standards could result in regulatory action, legal liability and damage to the company's reputation. Financial risk management The main financial risks faced by the company through its normal business activities are foreign currency exchange Y isk, interest rate risk, credit risk and liquidity risk. The management of these financial risks is performed at BP group level. The company seeks to maintain a financial framework to ensure that it is able to maintain an appropriate level of liquidity and financial capacity. This framework constrains the level of assessed capital at risk for the purposes of positions taken in financial instruments. Failure to accurately forecast or maintain stiifficient liquidity and credit to meet these needs could impact the company's ability to operate and result in a financial loss. The financial risk management objectives and policies of the company are shown in note 7 of the financial statements. 2

3 BP COMPANY PRO-FORMA STATUTORY ACCOUNTS REPORT OF THE DIRECTORS Going concern The directors consider that, despite the uncertainties deriving from the current economic environment and the loss reported for the year to date, the company has adequate resources to continue in operational existence for the foreseeable future. Directors The present directors are listed on page 1. N M H Bamfield and R C Harrington served as directors throughout ty~e financial year. Changes since 1 January 2012 are as follows: Appointed D Sanyal B E Grote D Bucknall 1 Jamiary 2012 B Gilvaiy 1 January 2012 Resi named 1 January January 2012 Directors' indemnity The company indemnifies the directors in its Articles of Association to the extent allowed under section 232 of the Companies Act Policy and practice on payment of creditors It is the company's policy to follow the CBI's prompt payment code of practice for all suppliers to the company with payments made in accordance with the relevant contractual payment terms. A copy of the code of practice may be obtained from the CBI. The number of days' purchases represented by trade creditors at the year-end was nil. Events since the balance sheet date The directors are not aware of any events subsequent to the year end that would materially affect the financial statements. Auditors In the absence of a notice proposing that the appointment be terminated, Ernst &Young LLP will be deemed to be re-appointed as the company's auditor for the next year. 3

4 BP COMPANY PRO-FORMA STATUTORY ACCOUNTS REPORT OF THE DIRECTORS The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss for that period. In preparing these accounts, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable United Kingdom accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will contimie in business. The directors at e responsible for keeping proper accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors confirm that they have complied with these requirements and, having a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future, continue to adopt the going concern basis in preparing the accounts. 4

5 BP CAPITAL MARKETS P.L.C. ACCOUNTING POLICIES Accounting standards These accounts are prepared in accordance with applicable UK accounting standards. Accounting convention The accounts are prepared under the historical cost convention. Basis of preparation The company is claiming exemption under Financial Reporting Standard 29: "Financial Instruments: Disclosures" paragraph 2D as the company is a subsidiary of a group where gy eater than 90% of voting rights are controlled within the group and the parent company's financial statements are publicly available which include disclosures that comply with FRS 29. Statement of cash flows The group accounts of the ultimate parent undertaking contain a consolidated cash flow statement. The company has taken advantage of the exemption gt anted by the Financial Reporting Standard No. 1 (Revised), whereby it is not required to publish its own cash flow statement. Foreign currency transactions Foreign currency transactions are initially recorded in dollars by applying the exchange rate ruling on the date of transaction. Foreign currency monetary assets and liabilities are translated into dollars at the rate of exchange ruling at the balance sheet date. Exchange differences are inchided in the profit and loss account. Foreign currency non-monetary liabilities are hanslated into dollars at the rate of exchange ruling on the date of transaction. US dollar is the functional (and presentational) currency Interest Income/Expense Interest is recognised on an accruals basis using the effective interest rate method. Financial Assets Debtors amounts owed by group undertakings are loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method if the time value of money is significant Financial Liabilities Financial liabilities are measured at amortised cost. Financial liabilities measured at amortised cost are initially recognised at fair value. For interest-bearing loans and borrowings, this is the fair vahie of the proceeds received net of issue costs associated with the borrowing. After initial recognition, financial liabilities are subsequently measured at amortised cost Lasing the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

6 BP CAPITAL MARKETS P.L.C. PROFIT AND LOSS ACCOUNT FOR THE HALF YEAR ENDED 30 JUNE 2012 Half year ended 30/06/2012 Half year ended 30/06/2011 Note $m $m Interest receivable Interest payable and similar charges Loss before taxation (678) (569) ~1) ~2) Taxation Loss for the period (1) (2) The loss of $lm for the half year ended 30 June 2012 has derived in its entirety from continuing operations. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE HALF YEAR ENDED 30 JUNE 2012 There are no recognised gains or losses attributable to the shareholders of the company other than the loss of $1 million for the half year ended 30 June 2012 (half year to June 201 l: loss of $2 million).

7 BP CAPITAL MARKETS P.L.C. (Registered No ) BALANCE SHEET AS AT 30 JUNE 2012 Note 31/12/2011 $m Assets Debtors amount falling due within one year 5 5,959 7,397 after one year 5 33,866 28,615 Creditors: amounts falling due within one year 6 (6,261) (7,690) Net current assets 33,564 28,322 Creditors: amounts falling due after more than 6 one year (32,830) (27,857) NET ASSETS Represented by Capital and reserves Called up share capital Share premium account Profit and loss account 9 (167) (166) SHAR~HOLD~RS'FUNDS EQUITY INTERESTS The financial statements were approved by the Board of Directors on 30ti' August 2012 and signed on their behalf by: " ~J" '.. N.M.H. Bamfield Director ~, -~t~~"

8 BP CAPITAL MARKETS P.L.C. NOTES TO THE ACCOUNTS 1. Interest payable and similar charges Interest expense on other loans Half year ended 30/06/2012 Half year ended 30/06/2011 $m $m (678) (569) 2. Interest receivable Interest income from fellow subsidiary under~talcings Half year ended 30/06/2012 Half year ended 30/06/2011 $m $m Taxation The company is a member of a group for the pm~poses of relief under Section 402 of the Income & Corporation Taxes Act No corporation tax has been provided because another group company, BP International Limited, has undertaken to procure the claim or surrender of grolip relief to the extent it is required and to provide for any current or deferred tax that arises without charge. The following table provides a reconciliation of the UK statutory corporation tax rate to the effective current tax rate on the loss before taxation. Loss before taxation Current taxation Effective current tax rate UK statutory corporation tax rate: Decrease resulting from: Free group relief Effective current tax rate Half year ended 3 0/06/2012 $m (1) 0% 3 0/06/ (24) Half year ended 30/06/2011 $m ~2) 0% 30/06/ (26)

9 BP CAPITAL MA~tKT.TS P.L.C. NOTES TO THE ACCOUNTS 4. Directors and employees (a) Remuneration of directors None of the directors received any fees or remuneration for services as a director of the company during the financial year (2011: $nil). (b) Employee costs The company had no employees during the year (2011: nil). 5. Debtors rr i~aaiaa 1 ii~vi.r a~iii+i < >i~v+ 1 year 1 year 1 year 1 year $m $m $m $m Amounts owed by group undertakings 5,959 33,866 7,397 28,615 All debtors are neither passed due nor impaired. 6. Creditors 30/06/ /06/ /12/ /12/2011 Within After Within After 1 year 1 year 1 year 1 year $m $m $m $m Accruals and deferred income Financialliabilities 5,821 32,830 7,278 27,587 6,261 32,830 7,690 27,587 Analysis of financial liabilities by year of repayment: Amount repayable: Within 1 year or on demand Between 1 and 2 years Between 2 and 5 years Thereafter Total 30/06/ /12/2011 $m $m 5,821 7,278 6,989 5,946 14,461 13,297 11,381 8,344 38,651 34,865

10 BP CAPITAL MA~2I~TS P.L.C. NOTES TO THE ACCOUNTS 7. Financial Instruments The main financial risks faced by the company through its normal business activities are market risk, credit risk, foreign currency exchange risk, liquidity risk and interest rate risk. The management of these financial risks is performed at BP Group level. Credit risk Credit risk is the risk that a customer or colinterparty to a financial instrument will fail to perform or fail to pay amounts due causing financial loss to the company. It arises from cash and cash equivalents, derivative financial instruments and principally from credit exposures to customers relating to outstanding receivables. The management of such risks is performed at BP group level. The group has a credit policy that is designed to ensure that consistent processes are in place throughout the group to measure and control credit risk. Credit risk is considered part of the riskreward balance of doing business. On entering into any business contract, the extent to which the arrangement exposes the group to credit risk is considered. Before trading with a new counterparty, its creditworthiness is assessed and a credit rating allocated that indicates the probability of default, along with a credit exposure limit. Creditworthiness contimies to be evaluated after hansactions have been initiated and a watchlist of higher-risk counterparties is maintained. Commercial credit risk is measured and controlled to determine the company's total credit risk. Inability to determine adequately the company's credit exposure could lead to financial loss. A credit crisis affecting banks and other sectors of the economy could impact the ability of counterparties to meet their financial obligations to the company. It could also affect the company's ability to raise capital to fund growth and to meet its obligations. The amount that best represents the maximum credit exposure of the company's financial assets is the carrying value of the financial assets at the balance sheet date. The company's financial assets represent deposits held by a fellow subsidiary of the tiiltimate parent undey taking, BP International Limited. Foreign currency exchange risk Fluctuations in foreign exchange rates can have significant effects on the company's reported results. The company's financial assets and liabilities give rise to transactional currency exposures. Such exposures arise from transactions in a currency other than the company's filnctional currency. The management of such risks is performed at BP group level. BP's foreign exchange management policy is to minimise economic and significant transactional exposures arising from currency movements against the US dollar. The group co-ordinates the handling of foreign exchange risks centrally, by netting off naturally occurring opposite exposures wherever possible and then dealing with any material residual foreign exchange risks. For highly probable forecast capital expenditures the group locks in the US dollar cost of non US dollar supplies by using currency forwards and fiittues. Liquidity risk Liquidity risk is the risk that suitable sources of funding far the company's business activities may not be available. This risk is managed by the BP group on the company's behalf and as such the company has access to the resources of the group. The group has long-tei~rn debt ratings of A2 (stable outlook) assigned by Moody's and A (stable outlook) assigned by Standard & Poor's, a downgrading from Aal (stable outlook) and AA (stable outlook), respectively assigned prior to the Gulf of Mexico oil spill. 10

11 BP CAPITAL MARKETS P.L.C. NOTES TO THE ACCOUNTS ~~ Financial instruments (continued) Interest rate risk The company is exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows or the fair values of its financial instruments, principally finance debt. Where the company enters into money market contracts for entrepreneurial trading purposes, the activity is controlled at BP Group level using value-at-risk techniques. All long-term fixed rate borrowings are offset by deposits with BP International Limited, a fellow subsidiary of the parent company, on matching terms which reduces any material fair value interest rate risk on these items. Funds raised from short-term borrowing, which comprise commercial paper, are placed on deposit with BP International Limited. These deposits earn interest at various floating rates which are set with respect to LIBOR. The interest rate, currency and mahirity profiles of the financial liabilities of the company at 30 June 2012 are set out in note 7. Material accounting policies for financial instruments The effective interest rate stated includes the effect of any premium or discount. Interest rate and currency of financial liabilities: The interest rate and currency profile of the financial liabilities, at 30 June is set out below. Stet ling US dollar Other currencies 30/06/ /12/2011 Fixed rate Fixed rate Weighted Weighted Amount Weighted Weighted Amount average interest average time $m average average time $m rate rate fixed intet~est rate rate fixed Years % Years 4 5 1, , , , , ,984 32,827 28,849 30/06/ /12/2011 Floating rate Floating rate Weighted Amount Weighted Amount average $m average $m interest rate interest rate Sterling US dollar Other currencies Total , ,824 38, , ,016 34,865 11

12 BP CAPITAL M_.AFtKFTS P.L.C. NOTES TO THE ACCOUNTS 7. Financial instruments (continued) Interest rate and currency of financial asset The interest rate and currency profile of the financial assets, at 30 June is set out below. Sterling US dollar Other currencies 30/06/2012 Fixed rate Weighted Weighted Amount average interest average time $m rate rate fixed Years 4 6 1, , ,076 33,389 31/12/2011 Fixed rate Weigtrted Weighted Amount average average time $m interest rate rate fixed Years 4 5 1, , ,002 28,902 30/06/ /12/2011 Floating rate Floating rate Weighted Amount Weighted Amount average $m average $in interest rate interest rate Sterling US dollar Other currencies Total , , ,036 6,436 7,110 39,825 36,012 12

13 BP CAPITAL MARKETS P.L.C. NOTES TO THE ACCOUNTS 7. Financial instruments (continued) Fair value of financial assets and liabilities The estimated fair value of the financial instrtunents is shown in the table below. The table also shows the "net carrying amount" of the financial assets and liabilities. This amount represents the net book value. The fair values of financial instruments at 30 June are set out below: Primary financial instruments Current assets Debtors amounts falling due within one year and after one year Financial liabilities Borrowings amounts falling due within one year and after one year Fair value asset $m 46,680 30/06/2012 Net Fair Net carrying value carrying amount liability amount $m $m $m 39, (45,506) (38,651) Primary financial inst~ uments Fair value Net Fair asset carrying value amount liability $m $m $m 31/12/2011 Net carrying amount $m Current assets Debtors amounts falling due within one 37,621 36,012 year and after one year Financial liabilities Borrowings amounts falling due within - - one year and after one year (36,474) (34,865) The following methods and assumptions were used to estimate the above fair value disclosures. Current assets The carrying amounts of the company's current assets comprise deposits with BP International Limited and current accounts in various currencies. The fair value of fixed rate current assets carried at amortised cost are estimated based on discounted cash flows using prevailing market interest rates for debts with similar credit risk and maturity. For current assets that are liquid or having short term maturity (less than one year), it is assumed that the carrying amounts approximate to their fair value. 13

14 BP CAPITAL MARKETS P.L.C. NOTES TO THE ACCOUNTS 7. Financial instruments (continued) The group assesses at each balance sheet date whether a financial asset or a group of financial assets are impaired. If there is objective evidence that an impairment loss ari loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present vahie of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the assets is reduced, with the amount of the loss recognised in the profit and loss. Financial liabilities The carrying amount of the company's short term borrowings, which comprise coimnercial paper, approximates their fair value. The fair value of the company's long term borrowings is estimated using quoted prices or, where these are not available, discounted cash flow analysis, based on the company's current incremental borrowing rates for similar types and maturities of borrowings. 8. Called up share capital 30/06! /12/2011 $m $m Allotted, called up and fully paid: 99,999,990 Ordinary shares of 1 each for a total nominal value of ,999, ,000,000 Ordinary shares of $1 each for a total nominal value of $500,000, Capital and reserves Equity Share Profit and share premium loss capital account account Total $m $m $m $m At 1 January (166) 735 Loss for the half year (1) (1) At 30 June (167) Related party transactions The company has taken advantage of the exemption contained within Financial Reporting Standard No 8 "Related Party Disclosm es", and has not disclosed transactions with group companies. There were no other related party transactions in the year. 11. Immediate parent company, ultimate parent undertaking and controlling party The immediate parent undertaking of this company is BP International limited, a company registered in England and Wales. The ultimate parent undertaking and controlling party of the group of undertakings for which group financial statements are drawn up, and of which the company is a member, is BP p.l.c., a company registered in England and Wales. Copies of BP p1.c.'s financial statements can be obtained from 1St James's Square, London, SW1Y 4PD. 14