Business Context and Reporting Period
Company: BP p.l.c.
Filing Type: Form 6-K (Report of Foreign Issuer)
Filing Date: June 20, 2024
Reporting Period: Year ended December 31, 2023
Subject: Report on Payments to Governments in accordance with the Reports on Payments to Governments Regulations 2014 and DTR 4.3A.
This filing details consolidated payments made by BP and its subsidiaries to governments for extractive activities (exploration, development, and extraction of minerals, oil, and natural gas). It excludes payments related to trading, refining, renewables, and non-extractive activities.
Key Financial Metrics: Payments to Governments
The report aggregates payments on a cash basis for the year ended December 31, 2023. Total payments to governments across all jurisdictions amounted to $27,691.3 million.
| Payment Type | Amount ($ million) | Percentage of Total |
|---|---|---|
| Production Entitlements | 15,386.7 | 55.6% |
| Taxes | 10,391.0 | 37.5% |
| Royalties | 1,264.0 | 4.6% |
| Bonuses | 516.7 | 1.9% |
| Fees | 132.6 | 0.5% |
| Infrastructure Improvements | 0.1 | <0.1% |
| Total | 27,691.3 | 100.0% |
Top Jurisdictions by Total Payments:
- Azerbaijan: $13,981.2 million (Primarily production entitlements and taxes)
- United Arab Emirates: $4,919.2 million (Primarily production entitlements)
- Oman: $3,228.3 million (Primarily production entitlements and taxes)
- United Kingdom: $1,830.1 million (Primarily production entitlements)
- United States: $1,313.8 million (Primarily taxes)
Material Changes and Unusual Items
The filing text does not provide comparative data for the prior period (2022) to calculate year-over-year material changes. However, the following unusual items and specific reporting notes were identified for the 2023 period:
- Refunds: Significant negative amounts (refunds) were recorded in Brazil ($2.5 million), the United Kingdom (Decommissioning and Non-Operated projects totaling approx. $80.8 million net), and the United States (Alaska, $67.6 million). These are attributed to tax loss carry-backs and settlements of prior year overpayments.
- Payments in Kind: A substantial portion of payments, particularly in Azerbaijan, Oman, and Indonesia, were made in kind (crude oil, condensates, and natural gas) rather than cash. These were valued using netback values or market prices per relevant agreements.
- Third-Party Settlements: In several jurisdictions (e.g., Azerbaijan, Egypt, Oman), taxes were paid on BP's behalf by National Oil Companies (NOCs) out of production entitlements.
- Exclusions: Equity-accounted investments such as Pan American Energy Group and Aker bp are excluded from this report as they are not subsidiaries.
Guidance, Outlook, and Risks
Guidance and Outlook: This filing is a retrospective report on payments made during 2023. It does not contain forward-looking financial guidance, revenue forecasts, or management commentary regarding future operational outlooks.
Risks and Contingencies:
- Regulatory Compliance: The report is prepared under strict regulatory frameworks (UK Regulations 2014/3209 and FCA DTR 4.3A). Non-compliance could result in regulatory penalties.
- Valuation of In-Kind Payments: The valuation of production entitlements paid in kind relies on specific pricing mechanisms (e.g., netback value) defined in Production Sharing Agreements (PSAs), which may fluctuate with market conditions.
- Joint Venture Complexity: Reporting relies on BP's role as an operator or direct payer. Payments made by non-operated joint ventures or incorporated joint ventures not controlled by BP are excluded, which may limit the visibility of total industry payments in certain regions.
Key Facts for Investor Verification
- Total Government Payments: Verify the aggregate total of $27.7 billion against BP's full Annual Report (Form 20-F) to understand the proportion of revenue returned to governments.
- Azerbaijan Exposure: Confirm the concentration risk, as Azerbaijan accounted for approximately 50% of all reported government payments ($13.98 billion).
- Cash vs. In-Kind: Review the footnotes for Azerbaijan, Oman, and Indonesia to understand the volume of physical commodities (oil/gas) transferred to governments versus cash payments.
- Tax Refunds: Investigate the specific tax loss carry-back mechanisms in the UK and US that resulted in significant refunds, as these impact net cash flow.
- Scope Limitations: Note that this report excludes payments for non-extractive activities (trading, refining, renewables) and equity-accounted investments, meaning it does not represent BP's total tax or government contribution.