BP (BP)

Annual bonus result
Performance measures and targets were set at the beginning of the year and formed the main basis for determining the 2007 bonus. Financial measures accounted for 50% weighting and focused on EBITDA, cash costs and capital expenditure. Non-financial measures carried 30% weight and centred on HSE performance, growth and reputation. Individual performance, including segment deliverables and living the values of the group, made up the final 20%.
     Financially, underlying EBITDA results reflected a favourable price environment but also some performance shortfall, related largely to reduced refining availability at Whiting and Texas City, as well as delays in start-up of some major exploration and production projects. Overall it was below expectation. Cash costs were marginally above plan, largely due to higher expenditures in refining, especially Texas City. Capital expenditure was near plan, despite higher than expected sector inflation.
     On the non-financial side, safety was maintained as the highest priority of the executive top team. Significant progress was made on many aspects of process safety, ranging from development and testing of a process safety index, addressing specific recommendations of the Baker Panel, implementing a holistic operating management system (OMS) and ensuring clear accountability. Personal safety metrics and greenhouse gas emissions were also good.
     Growth was led by upstream, which had the strongest year of resource access since the early 1990s and reserves replacement in excess of 100%. Refinery throughput was below target, due to reduced availability at Texas City and Whiting. BP Alternative Energy met plan targets, achieving some 40% growth compared with 2006.
     External assessments indicate that significant progress has been made to rebuild the company’s reputation.
     In terms of individual performance during a transition year, the committee recognized very high levels of personal and team effort to produce results, resolve past issues and position the company for future success.
     The strong individual performances, combined with above-target non-financial and near-target financial performance, led the committee to award bonuses generally around or just above target, as set out in the summary table on page 64.

2005-2007 share element result
Performance for the 2005-2007 share element was assessed relative to the TSR of the company compared with the other oil majors –ExxonMobil, Shell, Total and Chevron. BP’s TSR result, reflecting past operating problems, was last relative to the other majors. The committee also reviewed the underlying business performance relative to competitors, including financial (ROACE, EPS, cash flow etc.) and non-financial (HSE etc.) indicators. While this showed some areas of strong performance, the committee’s overall assessment, considering both the TSR result and the underlying performance, was that performance failed to meet satisfactory levels and consequently no shares will vest in the Plan for 2005-2007.
     Lord Browne also held an award under the 2005-2007 share element related to long-term leadership measures. These focused on sustaining BP’s financial, strategic and organizational health. Performance relative to the award was assessed by the chairman’s committee and, based

Annual bonus result
The 2006 annual bonus was based on performance relative to measures and targets set at the beginning of the year, as well as other factors the remuneration committee determined were relevant. Financial and operational metrics from the annual plan carried a 50% weighting and focused on earnings before interest, taxes, depreciation and amortization (EBITDA), return on average capital employed (ROACE) and safety, environment and production targets. Strategic milestones, including those relating to technology, operations and business development, accounted for 30%. Individual performance, including both leadership objectives and living the values of the group, accounted for 20%.
     On the financial side, underlying EBITDA was marginally below target. There were negative effects from US operating issues and positive effects from improvements in operating performance. ROACE was marginally above target. Cash costs and capital expenditure came in around target levels. Planned divestments of non-strategic assets achieved premium prices. Targets were met for personal safety, greenhouse gas emissions, oil and gas discovered volumes and proved reserves. Average production rate was below target.
     With respect to milestones, seven of nine major projects were completed as planned. However, the Thunder Horse development was delayed. Good progress was achieved to define and sanction a further 18 major projects. The alternative energy business exceeded its objectives. Good progress was made in developing and implementing a major six-point plan for improving safety and operational integrity.