BP » Topics » Note 10 - Depreciation and amounts provided

This excerpt taken from the BP 20-F filed Jun 13, 2006.

Note 10 — Depreciation and amounts provided

        Included in the income statement under the following headings:

 
  Years ended December 31,

 
  2004

  2003

  2002

 
  ($ million)

Depreciation and amortization of goodwill and other intangibles            
  Cost of sales   11,109   9,748   9,346
  Distribution   1,334   1,044   952
  Administration   128   148   90
   
 
 
    12,571   10,940   10,388
Amounts provided against fixed asset investments            
  Cost of sales   12     13
   
 
 
    12,583   10,940   10,401
   
 
 
Depreciation of capitalized leased assets included above   164   46   49
   
 
 

        The charge for depreciation and amortization of goodwill and other intangibles in 2004 includes asset write-downs and impairment charges of $1,743 million in total. Exploration and Production recognized a charge of $621 million for the impairment of certain assets. During the year, as a result of impairment triggers, reviews were conducted which have resulted in impairment charges of $83 million in respect of King's Peak in the Gulf of Mexico, $20 million in respect of two fields in the Gulf of Mexico Shelf Matagorda Island area and $184 million in respect of various US onshore fields. A charge of $88 million was reflected in respect of a gas processing plant in the US and a charge of $60 million following the blowout of the Temsah platform in Egypt. In addition, following the lapse of the sale agreement for DZO and Boqueron in Venezuela, an impairment charge of $186 million was reflected. In connection with the Solvay transactions, the Group has recognized impairment charges of $325 million

F - 23



for goodwill and $306 million for tangible fixed assets in BP Solvay Polyethylene Europe. As part of a restructuring of the North American Olefins and Derivatives businesses, decisions were taken to exit certain businesses and facilities resulting in impairments and write-downs of $291 million. With the formation of Olefins and Derivatives and its planned divestment, certain agreements and assets have been restructured to reflect the arm's-length relationship that will exist in the future. This has resulted in a $188 million impairment of the facilities at Hull, UK. Other businesses and corporate recognized an impairment charge of $12 million for certain investments.

        The 2003 charge for depreciation and amortization of goodwill and other intangibles includes asset write-downs and impairment charges on exploration and production properties of $738 million. This includes a charge of $296 million for four fields in the Gulf of Mexico following technical reassessment and re-evaluation of future investment options; charges of $133 million and $49 million respectively for the Miller and Viscount fields in the UK North Sea as a result of a decision not to proceed with waterflood and gas import options and a reserve write-down respectively; a charge of $105 million for the Yacheng field in China; a charge of $108 million for the Kepodang field in Indonesia; and $47 million for the Eugene Island/West Cameron fields in the US as a result of reserve write-downs following completion of our routine full technical reviews.

        The charge for depreciation and amortization of goodwill and other intangibles in 2002 includes asset write-downs and impairment charges of $1,390 million in total. Exploration and Production recognized a charge of $1,091 million for the impairment of Shearwater in the North Sea, Rhourde El Baguel in Algeria, LL652 and Boqueron in Venezuela, Pagerungan in Indonesia and Badami in Alaska, following full technical reassessments and evaluations of future investment opportunities. In addition, the business took a $94 million write-off in respect of its Gas-to-Liquids plant in Alaska. Petrochemicals wrote down the value of its Indonesian manufacturing assets by $140 million following a review of immediate prospects and opportunities for future growth in a highly competitive regional market. Gas, Power and Renewables incurred an impairment charge of $30 million in respect of a cogeneration power plant in the UK. Refining and Marketing recognized an impairment charge of $35 million for its retail business in Venezuela.

        In assessing the value in use of potentially impaired assets, a nominal discount rate of 9% before tax has been used. Asset values are determined by deriving the net present value of the future cash flows; the cash flows are adjusted for the risks specific to the asset.

This excerpt taken from the BP 20-F filed Jun 30, 2005.

Note 10 — Depreciation and amounts provided

        Included in the income statement under the following headings:

 
  Years ended December 31,

 
  2004

  2003

  2002

 
  ($ million)

Depreciation and amortization of goodwill and other intangibles            
  Cost of sales   11,109   9,748   9,346
  Distribution   1,334   1,044   952
  Administration   128   148   90
   
 
 
    12,571   10,940   10,388
Amounts provided against fixed asset investments            
  Cost of sales   12     13
   
 
 
    12,583   10,940   10,401
   
 
 
Depreciation of capitalized leased assets included above   164   46   49
   
 
 

        The charge for depreciation and amortization of goodwill and other intangibles in 2004 includes asset write-downs and impairment charges of $1,743 million in total. Exploration and Production recognized a charge of $621 million for the impairment of certain assets. During the year, as a result of impairment triggers, reviews were conducted which have resulted in impairment charges of $83 million in respect of King's Peak in the Gulf of Mexico, $20 million in respect of two fields in the Gulf of Mexico Shelf Matagorda Island area and $184 million in respect of various US onshore fields. A charge of $88 million was reflected in respect of a gas processing plant in the US and a charge of $60 million following the blowout of the Temsah platform in Egypt. In addition, following the lapse of the sale agreement for DZO and Boqueron in Venezuela, an impairment charge of $186 million was reflected. In connection with the Solvay transactions, the Group has recognized impairment charges of $325 million

F - 23


for goodwill and $306 million for tangible fixed assets in BP Solvay Polyethylene Europe. As part of a restructuring of the North American Olefins and Derivatives businesses, decisions were taken to exit certain businesses and facilities resulting in impairments and write-downs of $291 million. With the formation of Olefins and Derivatives and its planned divestment, certain agreements and assets have been restructured to reflect the arm's-length relationship that will exist in the future. This has resulted in a $188 million impairment of the facilities at Hull, UK. Other businesses and corporate recognized an impairment charge of $12 million for certain investments.

        The 2003 charge for depreciation and amortization of goodwill and other intangibles includes asset write-downs and impairment charges on exploration and production properties of $738 million. This includes a charge of $296 million for four fields in the Gulf of Mexico following technical reassessment and re-evaluation of future investment options; charges of $133 million and $49 million respectively for the Miller and Viscount fields in the UK North Sea as a result of a decision not to proceed with waterflood and gas import options and a reserve write-down respectively; a charge of $105 million for the Yacheng field in China; a charge of $108 million for the Kepodang field in Indonesia; and $47 million for the Eugene Island/West Cameron fields in the US as a result of reserve write-downs following completion of our routine full technical reviews.

        The charge for depreciation and amortization of goodwill and other intangibles in 2002 includes asset write-downs and impairment charges of $1,390 million in total. Exploration and Production recognized a charge of $1,091 million for the impairment of Shearwater in the North Sea, Rhourde El Baguel in Algeria, LL652 and Boqueron in Venezuela, Pagerungan in Indonesia and Badami in Alaska, following full technical reassessments and evaluations of future investment opportunities. In addition, the business took a $94 million write-off in respect of its Gas-to-Liquids plant in Alaska. Petrochemicals wrote down the value of its Indonesian manufacturing assets by $140 million following a review of immediate prospects and opportunities for future growth in a highly competitive regional market. Gas, Power and Renewables incurred an impairment charge of $30 million in respect of a cogeneration power plant in the UK. Refining and Marketing recognized an impairment charge of $35 million for its retail business in Venezuela.

        In assessing the value in use of potentially impaired assets, a nominal discount rate of 9% before tax has been used. Asset values are determined by deriving the net present value of the future cash flows; the cash flows are adjusted for the risks specific to the asset.

F - 24



EXCERPTS ON THIS PAGE:

20-F
Jun 13, 2006
20-F
Jun 30, 2005
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