Business context and reporting period
BP p.l.c. filed this annual report on Form 20-F for the fiscal year ended 31 December 2021. Although the request refers to 2021 Q4, the filing primarily reports full-year results; the supplied text does not provide a clear standalone fourth-quarter income statement or cash-flow summary. BP reported under a new segment structure in 2021, with 2020 comparatives restated. Its strategy is to “perform while transforming” into an integrated energy company, spanning resilient hydrocarbons, convenience and mobility, and low-carbon energy.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Sales and other operating revenues | $157.7bn | $105.9bn |
| Profit (loss) attributable to BP shareholders | $7.6bn | $(20.3)bn |
| Underlying replacement-cost (RC) profit, non-GAAP | $12.8bn | $(5.7)bn |
| Operating cash flow | $23.6bn | $12.2bn |
| Capital expenditure | $12.8bn | $14.1bn |
| Finance debt at year-end | $61.2bn | $72.7bn |
| Net debt, non-GAAP | $30.6bn | $38.9bn |
| Cash and cash equivalents | $30.7bn | $31.1bn |
Higher oil and gas realizations, stronger refining margins and strong trading results drove the earnings and cash-flow recovery. Reported profit included a net adverse $8.1bn after-tax impact from adjusting items. Major factors included adverse fair-value accounting effects, principally related to the mismatch between mark-to-market accounting for LNG hedges and accrual accounting for the underlying LNG contracts. Net impairment reversals partly offset charges. In 2020, the loss reflected low prices and demand, exploration write-offs and significant impairments.
BP’s return on average capital employed was 13.3% in 2021, versus a 3.8% loss measure in 2020. The global refining marker margin averaged $13.2/bbl, up from $6.8/bbl in 2020, but below the 2015–19 average of $14.1/bbl. Group hydrocarbon production, including Rosneft, fell 4.5%; upstream production excluding Rosneft was 2.2mmboe/d, versus 2.4mmboe/d in 2020. Proved reserves including equity-accounted entities declined 6% to 17.0bnboe.
Liquidity included $30.7bn cash and undrawn committed facilities of $8.0bn, plus $4.0bn of standby facilities. BP’s reported long-term credit ratings were A- (S&P), A2 (Moody’s) and A (Fitch), each with a stable outlook. Net debt fell $8.3bn year over year, reflecting strong cash generation.
Material changes and shareholder distributions
- BP returned to attributable profit after the 2020 loss, while operating cash flow nearly doubled.
- BP paid $4.3bn in dividends in 2021, down from $6.3bn in 2020; the annual dividend was 21.42 cents per ordinary share. The fourth-quarter dividend was 5.46 cents per ordinary share.
- BP repurchased 707 million ordinary shares for cancellation in 2021 at a total cost of $3.2bn. BP separately announced $4.15bn of buybacks from 2021 surplus cash flow; this is not the same as the amount recorded as 2021 share repurchases.
- BP paid $5.4bn in corporate income and production taxes, up from $3.3bn in 2020. The reported effective tax rate was 44%; the underlying rate was 32%.
- BP’s reported segments were gas & low carbon energy, oil production & operations, customers & products, Rosneft, and other businesses & corporate. Customers & products underlying RC profit before interest and tax rose to $3.3bn from $3.1bn, while gas & low carbon energy rose to $7.5bn from $0.7bn, principally reflecting strong gas trading and higher realizations.
Guidance, outlook, risks and unusual items
For 2022, BP expected upstream production excluding Rosneft to be broadly flat versus 2021, capital expenditure of $14–15bn, divestment and other proceeds of $2–3bn, and Gulf of Mexico oil-spill payments of about $1.4bn pre-tax. It expected an underlying effective tax rate of around 40%, subject to price-driven changes in the geographic mix of earnings. BP’s longer-term capital-expenditure range was $14–16bn annually for 2023–25. At around $60/bbl Brent, subject to board discretion and maintaining a strong investment-grade rating, BP expected capacity for annual dividend-per-share increases of about 4% through 2025 and buybacks averaging about $4bn annually.
Management cited the pandemic, supply constraints, elevated energy prices and volatility, and Russia’s invasion of Ukraine as significant uncertainties. BP expected customer demand to remain affected by COVID-19 uncertainty and Castrol additive shortages in the first half of 2022. High energy costs could weigh on refining margins even as demand recovered. Principal risks include commodity prices and market volatility, geopolitical developments and sanctions, liquidity and credit exposure, safety and environmental incidents, cyber security, regulation and litigation, and the pace and economics of the energy transition.
On 27 February 2022, after the reporting date, BP announced it would exit its 19.75% Rosneft shareholding and other Rosneft-related businesses in Russia. BP concluded it no longer had significant influence over Rosneft and would stop equity accounting from that date. The investment’s 31 December carrying value was about $14bn; approximately $11bn of cumulative foreign-exchange losses and other charges in other comprehensive income were also expected to be recognized in the income statement. BP said these matters would materially affect first-quarter 2022 reporting. The exit’s timing, proceeds and ultimate financial impact remained uncertain, including because of Russian counter-sanctions.
Other notable items include the continuing Gulf of Mexico oil-spill obligations, decommissioning provisions of $16.7bn, and legal, environmental and tax contingencies whose ultimate outcomes are uncertain. BP reported two fatalities associated with its operations in 2021, including a contractor death at the Castellón refinery. In February 2022, BP also accelerated certain climate aims: a 50% reduction in operational emissions by 2030 versus 2019, and net zero carbon intensity for energy products sold by 2050 or sooner. These updated aims were announced after year-end and were not yet reflected in the 2021 reporting basis.
Most important facts for investors to verify
- Reconcile reported profit of $7.6bn with underlying RC profit of $12.8bn, focusing on the $8.1bn after-tax adjusting-item impact and LNG fair-value accounting effects.
- Review the Rosneft exit accounting, including the carrying value, accumulated OCI losses, sanctions and counter-sanctions, and the timing and value of any disposal.
- Confirm the distinction between $3.2bn of 2021 share repurchases and the separately announced $4.15bn buyback commitment from surplus cash flow.
- Assess cash generation, working-capital movements, debt reduction, liquidity facilities and the capacity to sustain dividends and planned buybacks under lower-price scenarios.
- Evaluate the assumptions behind impairment reversals, oil and gas prices, reserves, decommissioning costs and contingent liabilities.
- Track delivery against 2022 guidance, low-carbon investment returns, production and emissions targets, and the safety record.