BP p.l.c. — 2022 Form 20-F summary
Reporting period: Fiscal year ended 31 December 2022. This is an annual report, not a standalone fourth-quarter filing; fourth-quarter financial results are not presented clearly in the supplied filing text. Financial amounts below are in US dollars unless stated otherwise. BP reports under IFRS as issued by the IASB.
Business context and performance
BP operates an integrated energy business across oil and gas, refining, customer products and lower-carbon activities. Management describes its strategy as performing while transforming: investing in oil and gas as well as transition growth engines including bioenergy, convenience, EV charging, hydrogen, and renewables and power. Russia’s invasion of Ukraine drove significant energy-market volatility and BP’s decision to exit its Rosneft investment.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Sales and other operating revenues | $241.4 billion | $157.7 billion |
| Profit (loss) attributable to BP shareholders, IFRS | $(2.5) billion | $7.6 billion |
| Underlying replacement-cost profit, non-GAAP | $27.7 billion | $12.8 billion |
| Operating cash flow | $40.9 billion | $23.6 billion |
| Capital expenditure | $16.3 billion | $12.8 billion |
| Net debt, non-GAAP | $21.4 billion | $30.6 billion |
| Finance debt | $46.9 billion | $61.2 billion |
| Cash and cash equivalents | $29.2 billion | $30.7 billion |
| ROACE, non-GAAP | 30.5% | 13.3% |
Revenue rose with higher commodity prices and product prices. Underlying replacement-cost profit increased on stronger oil and gas realizations, higher refining margins and exceptional gas trading results. The statutory loss reflects substantial adjusting items, especially charges relating to Rosneft; underlying profit is a non-GAAP measure and is not equivalent to IFRS earnings.
Operating cash flow benefited from higher operating profits, partly offset by working-capital movements and higher taxes. Working capital reduced 2022 operating cash flow by $6.3 billion. BP paid $10.1 billion in income taxes and reported a 109% statutory effective tax rate, affected by Rosneft-related charges and the UK Energy Profits Levy; its underlying effective tax rate was 34%.
Liquidity included $29.2 billion of cash and undrawn committed facilities of $8 billion, plus $4 billion of standby facilities. Net debt fell by $9.2 billion year over year. The balance sheet reported total equity of $83.0 billion, down from $90.4 billion.
Material changes and shareholder returns
- BP recorded a $24.0 billion pre-tax adjusting charge associated with its decision to exit its 19.75% Rosneft shareholding. The carrying value of the Rosneft interest was assessed as nil at year-end amid sanctions and restrictions on disposal and dividend transfers.
- Net cash used in financing activities was $28.0 billion. BP repurchased 1.9 billion shares for $10.0 billion during 2022; it announced $11.25 billion of buybacks from 2022 surplus cash flow. These figures represent different measures and should not be treated as interchangeable.
- Cash dividends paid to BP shareholders totaled $4.4 billion. The 2022 dividend paid per ordinary share was 22.932 cents; the fourth-quarter dividend announced was 6.61 cents, 21% above the fourth-quarter 2021 level.
- BP acquired Archaea Energy, a US renewable natural gas producer, for cash consideration of approximately $3.1 billion, and acquired EDF Energy Services. It formed Azule Energy with Eni, contributing its Angolan business.
- Reported total hydrocarbon production was 2.438 million barrels of oil equivalent per day, down 26.5% from 2021, principally reflecting the absence of Rosneft production after February. Excluding Rosneft, production increased 1.6%. Proved reserves fell 58%, largely due to the Russia exit.
Outlook, risks and unusual items
For 2023, BP guided to broadly flat reported and underlying upstream production, capital expenditure of $16–18 billion, divestment and other proceeds of $2–3 billion, and an underlying effective tax rate of about 40%. Management expected oil and gas prices and refining margins to remain elevated, while noting uncertainty around energy markets and implementation of restrictions on Russian products. Gulf of Mexico oil-spill payments were forecast at approximately $1.3 billion pre-tax for 2023.
In February 2023, after the reporting year, BP announced revised investment plans: up to $8 billion more cumulative investment in transition growth engines and up to $8 billion more in oil and gas by 2030 than under prior plans. It set a 2030 production aim of about 2 million barrels of oil equivalent per day and revised its 2030 aim for emissions associated with the carbon in its upstream production to a 20–30% reduction from 2019, from a previous 35–40% aim.
Key risks include commodity-price and margin volatility, geopolitical developments and sanctions, climate-transition impacts on demand and asset values, major-project execution, operational and personal safety, cyber threats, regulation and tax changes, and litigation. BP reported four work-related fatalities in 2022, despite combined tier 1 and tier 2 process safety events declining to 50 from 62. The reported recordable injury frequency increased 14% year over year.
Notable estimates and contingencies include a $12.3 billion decommissioning provision, the Gulf of Mexico oil-spill obligations, and material impairment judgments dependent on commodity-price, discount-rate and reserve assumptions. The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; its internal-control audit excluded the recently acquired Archaea Energy and EDF Energy Services.
Important facts for investors to verify
- Reconcile statutory loss to underlying replacement-cost profit and review the nature, tax effects and cash implications of adjusting items, particularly Rosneft-related charges and impairments.
- Check the status and accounting value of BP’s Rosneft interests, including legal restrictions, potential exit routes and any dividend entitlements.
- Compare actual share repurchases with buybacks announced from surplus cash flow, and assess the effects of buybacks, dividends and investment on net debt and liquidity.
- Review working-capital changes, tax payments, and the sustainability of operating cash flow relative to planned capital expenditure and shareholder distributions.
- Test reserve and production trends excluding Russia, and assess the assumptions behind impairment testing, decommissioning provisions and BP’s revised transition and production aims.
- Monitor safety performance, Gulf of Mexico claims and payments, and integration and returns from Archaea Energy, EDF Energy Services and other major investments.