RC information in HC accounts
BP Amoco, a large Anglo-American oil company, is the result of a merger between BP and Amoco that took effect at the end of 1998. Financial statements for 1997 and prior years were restated as if the two companies had been united then. In 2000, the group acquired ARCO, a US oil company. This was accounted for as an acquisition and prior years' accounts were not restated.
BP Amoco provides replacement cost information in its historical cost accounts. Exhibit 9.17 contains summary income statement and operating data that have been taken from the notes to the company's 2001 consolidated accounts.
Required
(a) What can we learn about BP Amoco's operations between 1997 and 2001 from the stock holding gains and losses it reports in those years?
(b) BP Amoco is not the only major oil company to publish RC data in its accounts. Oil companies are not required to do so by law or accounting standards. Why do you think they voluntarily provide this information?
Exhibit 9.17: BP Amoco Plc Group income statement and operating data for calender years 1997-2001
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1997
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1998
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1999
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2000
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2001
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Income statement (condensed) (in $m)
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Group turnover
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91,760
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68,304
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83,566
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148,062
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174,218
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Replacement cost operating profit
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10,683
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6,521
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8,894
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17,756
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16,135
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Exceptional items
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128
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850
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(2,280)
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220
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535
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RC profit before interest and tax
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10,811
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7,371
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6,614
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17,976
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16,670
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Stockholding gains (losses)
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(939)
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(1,391)
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1,728
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728
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(1,900)
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HC profit before interest and tax
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9,872
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5,980
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8,342
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18,704
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14,770
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Interest expense
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1,035
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1,177
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1,316
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1,770
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1,670
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Profit before taxation
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8,837
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4,803
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7,026
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16,934
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13,100
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Taxation
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3,013
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1,520
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1,880
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4,972
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5,017
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Profit after taxation
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5,824
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3,283
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5,146
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11,962
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8,083
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Minority shareholders' interest
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151
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63
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138
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92
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73
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Profit for the year
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5,673
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3,220
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5,008
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11,870
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8,010
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Operating data
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Crude oil and liquids production (000 bbl/day)
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1,930
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2,049
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2,061
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1,928
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1,931
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Natural gas production (m ft3/day)
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5,858
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5,808
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6,067
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7,609
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8,632
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Total production (000 boe*/day)
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2,940
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3,050
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3,107
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3,240
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3,419
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* boe = barrel (bbl) of oil equivalent
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Average realisations
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1996
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BP crude oil and liquids price ($/bbl)
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19.5
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18.3
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12.1
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16.7
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26.6
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22.5
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Henry Hub gas price ($/000 ft3)
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2.6
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2.6
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2.2
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2.3
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3.9
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4.3
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