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
Universit 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

(USD/Million)
First Half 2010
Total revenues and other income
Sales and other operating revenues
Earnings from associates and jointly controlled entities and other income
Gains on sale of businesses and fixed assets
Operating costs
Purchases
Ordinary production and manufacturing expenses & production taxes
Extraordinary production&manufact. expenses for Gulf of Mexico oil spill(*)
Distribution and administration expenses
Exploration expense
Other expenses, impairments and fair value gains/losses
Profit (Loss) before interest, tax, depreciation, and amortiz. (EBITDA)
Depreciation, depletion and amortization
Profit (Loss) before interest and tax (EBIT)
Net finance costs
Profit (Loss) before tax
Tax
Tax on ordinary income
Tax credit on extraordinary expenses for Gulf of Mexico oil spill (*)
Profit (Loss) for the period

(159.035)
(106.177)
(14.041)
(32.192)
(5.959)
(252)
(414)

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100,0%
97,7%
1,7%
0,7%

100,0%
97,5%
1,9%
0,6%

(87.140)

-105,8%
-70,6%
-9,3%
-21,4%
-4,0%
-0,2%
-0,3%
-5,8%
-3,8%
-9,7%
-0,3%
-10,0%
2,7%
-3,9%
6,7%

-83,3%
-63,8%
-12,7%
0,0%
-6,3%
-0,4%
0,0%
16,7%
-5,7%
11,1%
-0,7%
10,4%
-3,7%
-3,7%
0,0%

-7,2%

6,7%

(66.784)
(13.238)
0
(6.639)
(466)
(13)
(8.747)
(5.776)
(14.523)
(442)
(14.965)
4.105

(5.898)
10.003

First Half of
2010
2009

104.646
102.073
1.970
603

17.506
(5.915)
11.591
(689)
10.902
(3.876)
(3.876)
0

(10.860)

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

First Half 2009

150.288
146.796
2.483
1.009

(% on total revenues)

7.026

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

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

First Half 2010
Profit (Loss) before tax
Adjustments to reconcile profit before tax to net cash provided by operating activities
Depreciation, depletion and amortization, and exploration expenditure written off
Impairment and gain/loss on sale of businesses and fixed assets
Earnings from equity-accounted entities, less dividends received
Net charge for interest and other finance, less net interest paid
Share-based payments
Net operating charge for pensions&other post-retirement benefits, less contrib.&benefit payments
Net charge for provisions, less payments
Movements in inventories and other current and non-current assets and liabilities
Income taxes paid

First Half 2009

(14.965)

10.902

29.411

1.427

5.850
(901)
(761)
(15)
4
(661)
17.691
11.524
(3.320)

6.164
(250)
(502)
127
187
(20)
232
(1.061)
(3.450)

Net cash provided by operating activities

14.446

12.329

Net cash used in investing activities

Capital expenditure
Acquisitions, net of cash acquired
Investment in jointly controlled entities and in associates
Proceeds from disposal of fixed assets
Proceeds from disposal of businesses, net of cash disposed
Proceeds from loan repayments and other proceeds

(8.947)

(9.068)

(8.562)
(1.268)
(207)
744
87
259

Net cash used in financing activities

Net issue of shares
Proceeds from long-term financing
Repayments of long-term financing
Net decrease in short-term debt
Dividends paid (to BP shareholders + Minority interest)

(10.028)
(8)
(300)
671
337
260
(6.289)

159
1.098
(2.687)
(2.102)
(2.757)

Currency translation differences relating to cash and cash equivalents

Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period
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(2.521)
62
9.060
(4.177)
(2.042)
(5.424)

(239)

22

(1.029)
8.339
7.310

762
8.197
8.959

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

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

(USD/Million)
First Half of
2010
2009
14.446
12.329
(8.947)
(9.068)
(6.289)
(2.521)
(239)
22
(1.029)
762

Net cash provided by operating activities

Net cash used in investing activities
Net cash used in financing activities
Currency translation differences relating to cash and cash equivalents
Increase (decrease) in cash and cash equivalents

(% on operat.act.net cash) % Dynamics

First Half of
1stHalf2010 /
2010
2009
1stHalf2009
100,0%
100,0%
17,2%
-61,9%
-73,6%
-1,3%
-43,5%
-20,4%
149,5%
-1,7%
0,2%
-1186,4%
-7,1%
6,2%
-235,0%

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

First
Half

(USD/Million)
2010
Profit (Loss) for the period
Net cash provided by operating activities
Difference [Net Cash - Profit (Loss)]]

(10.860)
14.446
25.306

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2009
7.026
12.329
5.303

Difference
1stH2010 (-)
1stH2009
(17.886)
2.117

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

Table 5 - BP p.l.c. - Impact of Gulf of Mexico oil spill on Group Income Statement
(USD/Million)

First Half 2010

Extraordinary production and manufacturing expenses

Profit (Loss) before tax due to oil spill
Tax credit effect (*)
Profit (Loss) for the period due to oil spill

(32.192)
(32.192)
10.003
(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
(USD/Million)

First Half 2010

Profit (Loss) before tax due to oil spill

Total Adjustments to reconcile to net cash
Adjustments for Extraordinary charge for provisions
Adjustments for Movements in inventories and other current & non-current assets and liabilities
Extraordinary cash payments due to oil spill

(32.192)
30.076
17.646
12.430
(2.116)

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

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

(USD/Million)

First Half 2010

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

Cash Flow on sales
Sales and other operating revenues
Cash Flow from Operations / Sales

First half 2009

14.446

12.329

146.796
9,8%

102.073
12,1%

Cash Flow on Net Financial Position

Current Finance Debt
Non-current Finance Debt
Total Gross Current and Non-current Finance Debt
(less) Fair value of hedges related to Finance Debt
(less) Cash and cash equivalents
= Net Financial Debt
Cash Flow from Operations / Net Financial Debt

8.321
22.259
30.580
(53)
(7.310)
23.217
62,2%

not available
not available

Cash Flow on Current Finance Debt

Cash Flow from Operations / Current Finance Debt

173,6%

not available

Total Assets
Cash Flow from Operations / Total Assets

248.615
5,8%

not available
not available

Cash Flow on Total Liabilities

Total Liabilities
Cash Flow from Operations / Total Liabilities

162.253
8,9%

not available
not available

80.306
18,0%

not available
not available

36.240
(179)
(8.959)
27.102
45,5%

Cash Flow on Total Assets

Cash Flow on Non-Financial Current Liabilities

Current liabilities
Cash Flow from Operations / Current Liabilities

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

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

Table 8 - BP p.l.c. - Group Capital Structure ratios

(USD/Million)

30th June
2010

Equity (Including Minority interest)

86.362

Financial Leverage: Finance Debt to Equity ratio, or Net Debt ratio

Net Financial Debt / Equity (*)

31st Dec.
2009
102.113

26,9%

25,7%

Total Leverage: Total Debt to Equity ratio

Total Liabilities / Equity

1,88

1,31

Total Leverage: Total Debt to Total Assets

Total Liabilities / Total Assets

65,3%

30th June
2009
96.949
28,0%
not available

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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