BP p.l.c. 2020 Form 20-F summary
Reporting period: Year ended 31 December 2020; filed 22 March 2021. This is an annual report, not a standalone fourth-quarter filing. BP reports under IFRS as issued by the IASB. The audited financial statements received an unqualified opinion, and the auditor reported effective internal control over financial reporting.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Sales and other operating revenues | $180.4bn | $278.4bn |
| Loss/profit attributable to BP shareholders | $(20.3)bn | $4.0bn |
| Underlying replacement-cost loss/profit | $(5.7)bn | $10.0bn |
| Operating cash flow | $12.2bn | $25.8bn |
| Total capital expenditure | $14.1bn | $19.4bn |
| Finance debt | $72.7bn | $67.7bn |
| Net debt | $38.9bn | $45.4bn |
| Cash and cash equivalents | $31.1bn | $22.5bn |
| Gearing | 31.3% | 31.1% |
| Dividend paid per ordinary share | 31.5 cents | 41.0 cents |
Revenue fell about 35%, reflecting lower commodity prices, sales volumes and pandemic-related demand. BP’s underlying result moved from profit to loss, driven by lower oil and gas realizations, weaker refining margins and demand, and exploration write-offs. Cash flow declined by $13.6bn; lower realizations and volumes were partly offset by lower tax payments and working-capital effects. Net debt fell despite higher finance debt, supported in part by divestment proceeds and a $11.9bn-equivalent perpetual hybrid bond issue. BP reported approximately $44bn of liquidity at year-end.
Material unusual items included $13.8bn of impairment losses, $10.3bn of exploration expense (including $9.9bn written off), restructuring costs and a $2.3bn gain on the petrochemicals sale. Upstream reported an underlying replacement-cost loss of $5.0bn; Downstream reported a profit of $3.1bn; Rosneft contributed $56m; and Other businesses and corporate reported a $1.0bn loss.
Material changes and operating performance
- BP’s annual dividend fell from 41.0 to 31.5 cents per ordinary share. The board reset the quarterly dividend to 5.25 cents, intended to remain fixed subject to board discretion.
- Upstream production excluding Rosneft was 2.4mmboe/d, down from 2.6mmboe/d. Group production including Rosneft declined 8% to 3.47mmboe/d.
- Global refining marker margin averaged $6.7/bbl, versus $13.2/bbl in 2019. Refining availability improved to 96%; upstream plant reliability was 94%.
- BP completed its sale of the petrochemicals business to INEOS for $5bn, and completed divestments of its Alaska interests. It agreed to sell a 20% interest in Oman’s Block 61 for up to $2.6bn, subject to approvals and adjustments.
- Capital expenditure fell about 28%. Divestment and other proceeds were $6.6bn. BP said it had completed or agreed transactions for more than half of its $25bn proceeds target by 2025.
- BP began reorganizing from an upstream/downstream model to four business groups and announced a workforce reduction of around 10,000 positions by early 2022.
Outlook, strategy and principal risks
BP’s strategy is to transform from an International Oil Company into an Integrated Energy Company, with growth in low-carbon energy and convenience and mobility, alongside a more focused hydrocarbons portfolio. Its ambition is to be a net-zero company by 2050 or sooner and help the world reach net zero. BP plans low-carbon investment of $3–4bn annually by 2025 and around $5bn annually by 2030; it expects hydrocarbon production to be at least 40% lower by 2030 than in 2019.
For 2021, BP guided to total capital expenditure of about $13bn, upstream reported production excluding Rosneft lower than 2020 (with underlying production slightly higher), and Gulf of Mexico oil-spill payments of about $1bn post-tax. It expected the underlying effective tax rate to exceed 40%. Management expected oil demand to recover, but emphasized uncertainty around vaccination, restrictions and OPEC+ decisions. Refining margins were expected to remain weak, with no sustained return to pre-pandemic levels anticipated in 2021.
Key risks include continued pandemic effects, volatile oil and gas prices and refining margins, energy-transition policy and market changes, impairment and reserve uncertainty, project delivery, liquidity and credit exposure, geopolitical developments, cyber threats, operational and environmental incidents, and legal, regulatory and tax proceedings. BP also faces ongoing Gulf of Mexico spill-related obligations and other litigation; the timing and outcomes of some claims remain uncertain. The filing states that contingent liabilities could be significant but does not provide a clear estimate for all potential exposures.
Investor verification priorities
- Track whether operating cash flow, capital spending and divestment proceeds support the $35bn net-debt target and the stated dividend policy.
- Review the assumptions and sensitivity analyses behind the large upstream impairments and exploration write-offs, including commodity prices, discount rates and reserves.
- Assess delivery of 2021 guidance and the execution, returns and funding of low-carbon, convenience and mobility investments.
- Monitor Gulf of Mexico spill payments and provisions, other legal and environmental contingencies, and any changes to credit ratings or liquidity.
- Confirm progress on workforce restructuring, asset disposals and the strategic targets, while distinguishing full-year results from quarterly performance.