1-5 CashFlowStatBPplc AdvFinAcc MI2013

1. THE FINANCIAL INFORMATION SYSTEM AND ITS BASIC PRINCIPLES: AN APPLIED OVERVIEW

1.5. The Statement of Cash Flows: an application(analysis of BP p.l.c. Group Results - Half Year 2010)

Prof. Alberto Marchesi – Advanced Financial Accounting School of Banking, Finance and Insurance Graduate program in Banking and Finance/Trading and risk management Università Cattolica del Sacro Cuore - Milano - Italy - Year 2013-2014

References:- BP p.l.c. Group results - 2nd Quarter and Half Year 2010, pages: 7; 15 to 18; 25(available from professor's webpage, 1-d; or from: www.bp.com > Investors)

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1.5 - Statement of Cash Flow: an application - Advanced Financial Accounting

Table 1 - BP p.l.c. - Analysis of Group Income Statement

2010 2009Total revenues and other income 150.288 104.646 100,0% 100,0%Sales and other operating revenues 146.796 102.073 97,7% 97,5%Earnings from associates and jointly controlled entities and other income 2.483 1.970 1,7% 1,9%Gains on sale of businesses and fixed assets 1.009 603 0,7% 0,6%

Operating costs (159.035) (87.140) -105,8% -83,3%Purchases (106.177) (66.784) -70,6% -63,8%Ordinary production and manufacturing expenses & production taxes (14.041) (13.238) -9,3% -12,7%Extraordinary production&manufact. expenses for Gulf of Mexico oil spill(*) (32.192) 0 -21,4% 0,0%Distribution and administration expenses (5.959) (6.639) -4,0% -6,3%Exploration expense (252) (466) -0,2% -0,4%Other expenses, impairments and fair value gains/losses (414) (13) -0,3% 0,0%

Profit (Loss) before interest, tax, depreciation, and amortiz. (EBITDA) (8.747) 17.506 -5,8% 16,7%Depreciation, depletion and amortization (5.776) (5.915) -3,8% -5,7%Profit (Loss) before interest and tax (EBIT) (14.523) 11.591 -9,7% 11,1%Net finance costs (442) (689) -0,3% -0,7%Profit (Loss) before tax (14.965) 10.902 -10,0% 10,4%Tax 4.105 (3.876) 2,7% -3,7%Tax on ordinary income (5.898) (3.876) -3,9% -3,7%Tax credit on extraordinary expenses for Gulf of Mexico oil spill (*) 10.003 0 6,7% 0,0%

Profit (Loss) for the period (10.860) 7.026 -7,2% 6,7%

(*) See Tables 5 and 6 for impact analysis on Half Year 2010 Group performance.

(USD/Million) (% on total revenues)

First Half ofFirst Half 2010 First Half 2009

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Table 2 - BP p.l.c. - Analysis of Group Cash Flow Statement (USD/Million)

Profit (Loss) before tax (14.965) 10.902

Adjustments to reconcile profit before tax to net cash provided by operating activities 29.411 1.427Depreciation, depletion and amortization, and exploration expenditure written off 5.850 6.164Impairment and gain/loss on sale of businesses and fixed assets (901) (250)Earnings from equity-accounted entities, less dividends received (761) (502)Net charge for interest and other finance, less net interest paid (15) 127Share-based payments 4 187Net operating charge for pensions&other post-retirement benefits, less contrib.&benefit payments (661) (20)Net charge for provisions, less payments 17.691 232Movements in inventories and other current and non-current assets and liabilities 11.524 (1.061)Income taxes paid (3.320) (3.450)

Net cash provided by operating activities 14.446 12.329

Net cash used in investing activities (8.947) (9.068)Capital expenditure (8.562) (10.028)Acquisitions, net of cash acquired (1.268) (8)Investment in jointly controlled entities and in associates (207) (300)Proceeds from disposal of fixed assets 744 671Proceeds from disposal of businesses, net of cash disposed 87 337Proceeds from loan repayments and other proceeds 259 260

Net cash used in financing activities (6.289) (2.521)Net issue of shares 159 62Proceeds from long-term financing 1.098 9.060Repayments of long-term financing (2.687) (4.177)Net decrease in short-term debt (2.102) (2.042)Dividends paid (to BP shareholders + Minority interest) (2.757) (5.424)

Currency translation differences relating to cash and cash equivalents (239) 22

Increase (decrease) in cash and cash equivalents (1.029) 762Cash and cash equivalents at the beginning of period 8.339 8.197Cash and cash equivalents at the end of period 7.310 8.959

First Half 2010 First Half 2009

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Table 3 - BP p.l.c. - Synthesis of Group Cash Flow Statement % Dynamics1stHalf2010 /

2010 2009 2010 2009 1stHalf2009Net cash provided by operating activities 14.446 12.329 100,0% 100,0% 17,2%Net cash used in investing activities (8.947) (9.068) -61,9% -73,6% -1,3%Net cash used in financing activities (6.289) (2.521) -43,5% -20,4% 149,5%Currency translation differences relating to cash and cash equivalents (239) 22 -1,7% 0,2% -1186,4%Increase (decrease) in cash and cash equivalents (1.029) 762 -7,1% 6,2% -235,0%

Table 4 - BP p.l.c. - Comparison of Group Income and Cash Flow PerformancesDifference

(USD/Million) 1stH2010 (-)2010 2009 1stH2009

Profit (Loss) for the period (10.860) 7.026 (17.886)Net cash provided by operating activities 14.446 12.329 2.117Difference [Net Cash - Profit (Loss)]]]] 25.306 5.303

First Half of First Half of (USD/Million)

First

(% on operat.act.net cash)

Half

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Table 5 - BP p.l.c. - Impact of Gulf of Mexico oil spill on Group Income Statement

Extraordinary production and manufacturing expenses (32.192)Profit (Loss) before tax due to oil spill (32.192)Tax credit effect (*) 10.003Profit (Loss) for the period due to oil spill (22.189)

(*) Positive effect on income of deferred tax assets due to income tax recoverable in the future (because of unused tax loss carryforward).For recognition requirements and measurement of deferred tax assets, see IAS 12 - Income Taxes.

Table 6 - BP p.l.c. - Impact of Gulf of Mexico oil spill on Group Cash Flow from operating activities

Profit (Loss) before tax due to oil spill (32.192)Total Adjustments to reconcile to net cash 30.076Adjustments for Extraordinary charge for provisions 17.646Adjustments for Movements in inventories and other current & non-current assets and liabilities 12.430

Extraordinary cash payments due to oil spill (2.116)

First Half 2010(USD/Million)

First Half 2010(USD/Million)

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Table 7 - BP p.l.c. - Group financial ratios related to Cash Flow (*)(USD/Million)

Net cash provided by operating activities (= Cash Flow from Operations) 14.446 12.329

Cash Flow on salesSales and other operating revenues 146.796 102.073Cash Flow from Operations / Sales 9,8% 12,1%

Cash Flow on Net Financial PositionCurrent Finance Debt 8.321 not availableNon-current Finance Debt 22.259 not availableTotal Gross Current and Non-current Finance Debt 30.580 36.240(less) Fair value of hedges related to Finance Debt (53) (179)(less) Cash and cash equivalents (7.310) (8.959)= Net Financial Debt 23.217 27.102Cash Flow from Operations / Net Financial Debt 62,2% 45,5%

Cash Flow on Current Finance DebtCash Flow from Operations / Current Finance Debt 173,6% not available

Cash Flow on Total AssetsTotal Assets 248.615 not availableCash Flow from Operations / Total Assets 5,8% not available

Cash Flow on Total LiabilitiesTotal Liabilities 162.253 not availableCash Flow from Operations / Total Liabilities 8,9% not available

Cash Flow on Non-Financial Current LiabilitiesCurrent liabilities 80.306 not availableCash Flow from Operations / Current Liabilities 18,0% not available

(*) End of the period assets and liabilities. A more precise analysis would use average of the period assets and liabilities.

First half 2009First Half 2010

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Table 8 - BP p.l.c. - Group Capital Structure ratios (USD/Million) 30th June 31st Dec. 30th June

2010 2009 2009Equity (Including Minority interest) 86.362 102.113 96.949

Financial Leverage: Finance Debt to Equity ratio, or Net Debt ratioNet Financial Debt / Equity (*) 26,9% 25,7% 28,0%

Total Leverage: Total Debt to Equity ratioTotal Liabilities / Equity 1,88 1,31 not available

Total Leverage: Total Debt to Total Assets Total Liabilities / Total Assets 65,3% 56,7% not available

(*) Values are considerably different from BP p.lc. Group report, page 7, due to presumable differences in details used for calculation.

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1-5 CashFlowStatBPplc AdvFinAcc MI2013

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