Title of each class

Name of each exchange on which registered

Ordinary Shares of 25c each

Cumulative First Preference Shares of £1 each

Cumulative Second Preference Shares of £1 each

BP in 2013    

Our actions continue to make
BP stronger and safer. We are
growing shareholder returns
through operational efficiency
and financial discipline. We
report on our progress here.

Information about this report

1

Strategic report

59

Corporate governance

115

Financial statements

Consolidated financial statements of the BP group

126

Notes on financial statements

235

Additional disclosures

273

Shareholder information

282

Cross reference to Form 20-F

Frequent abbreviations

ADR

American depositary receipt.

ADS

American depositary share.

Barrel (bbl)

159 litres, 42 US gallons.

bcf

Billion cubic feet.

bcf/d

Billion cubic feet per day.

bcfe

Billion cubic feet equivalent.

bcma

Billion cubic metres per annum.

b/d

Barrels per day.

boe

Barrels of oil equivalent.

GAAP

Generally accepted accounting practice.

Gas

Natural gas.

Hydrocarbons

Liquids and natural gas.

IFRS

International Financial Reporting Standards.

Liquids

Crude oil, condensate and natural gas liquids.

LNG

Liquefied natural gas.

LPG

Liquefied petroleum gas.

mb/d

Thousand barrels per day.

mboe/d

Thousand barrels of oil equivalent per day.

mmboe

Million barrels of oil equivalent.

mmBtu

Million British thermal units.

mmcf

Million cubic feet.

mmcf/d

Million cubic feet per day.

MW

Megawatt.

NGLs

Natural gas liquids.

PSA

Production-sharing agreement.

RC

Replacement cost.

SEC

The United States Securities and

Exchange Commission.

Therm

100,000 British thermal units.

Tonne

2,204.6 pounds.

This document constitutes the Annual Report and Accounts in accordance with UK requirements and the Annual Report on Form 20-F in accordance with the US Securities Exchange Act of 1934, for BP p.l.c. for the year ended 31 December 2013. A cross reference to Form 20-F requirements is included on page 282.

The BP Annual Report and 20-F 2013 reflects a number of significant changes in regulations in the UK. The most significant change is the requirement to produce a new strategic report that replaces the previous business review. The regulations require certain new disclosure to be included in the strategic report including a description of company’s strategy and business model – we have included a more focused and graphical presentation of BP’s strategy and business model in this report, compared with the 2012 report.

This document contains the Strategic report on pages 1-58 and the inside cover (Who we are section) and the Directors’ report on pages 59-80, 109-114, 116, 200-223 and 235-280. The Strategic report and the Directors’ report together include the management report required by DTR 4.1 of the UK Financial Conduct Authority’s Disclosure and Transparency Rules. The Directors’ remuneration report is on pages 81-108. The consolidated financial statements of the group are on pages 115-199 and the corresponding reports of the auditor are on pages 120-121.

BP Annual Report and Form 20-F 2013 and BP Strategic Report 2013 (comprising the Strategic report and supplementary information) may be downloaded from bp.com/annualreport. No material on the BP website, other than the items identified as BP Annual Report and Form 20-F 2013 or BP Strategic Report 2013 (comprising the Strategic report and supplementary information), forms any part of those documents. References in this document to other documents on the BP website, such as the BP Energy Outlook, are included as an aid to their location and are not incorporated by reference into this document.

BP p.l.c. is the parent company of the BP group of companies. The company was incorporated in 1909 in England and Wales and changed its name to BP p.l.c. in 2001. Where we refer to the company, we mean BP p.l.c. Unless otherwise stated, the text does not distinguish between the activities and operations of the parent company and those of its subsidiaries, and information in this document reflects 100% of the assets and operations of the company and its subsidiaries that were consolidated at the date or for the periods indicated, including non-controlling interests.

BP’s primary share listing is the London Stock Exchange. Ordinary shares are also traded on the Frankfurt Stock Exchange in Germany and, in the US, the company’s securities are traded on the New York Stock Exchange (NYSE) in the form of ADSs (see page 274 for more details).

The term ‘shareholder’ in this report means, unless the context otherwise requires, investors in the equity capital of BP p.l.c., both direct and indirect. As BP shares, in the form of ADSs, are listed on the NYSE, an Annual Report on Form 20-F is filed with the US Securities and Exchange Commission (SEC). Ordinary shares are ordinary fully paid shares in BP p.l.c. of 25 cents each. Preference shares are cumulative first preference shares and cumulative second preference shares in BP p.l.c. of £1 each.

Trade marks of the BP group appear throughout this Annual Report and Form 20-F in italics.

They include:

Aral

ARCO

BP

Castrol

Castrol EDGE

Field of the Future

Fluid Strength Technology

Hummingbird

LoSal

Project 20K

SaaBre

Veba Combi-Cracking (VCC)

Permasense is a trade mark of Permasense Limited.

Pick n Pay is a registered trademark of
Pick n Pay Stores Limited.

Registered office and our worldwide

headquarters:

Our agent in the US:

BP p.l.c.

1 St James’s Square

London SW1Y 4PD

UK

Tel +44 (0)20 7496 4000

BP America Inc.

501 Westlake Park Boulevard

Houston, Texas 77079

US

Tel +1 281 366 2000

Registered in England and Wales No. 102498.

Stock exchange symbol ‘BP’.

10-year dividend history

UK (pence per ordinary share)

US (cents per ADS)

One ADS represents six 25 cent ordinary shares.

Dear fellow shareholder,

In 2013 BP continued the programme of renewal we began following the crisis of 2010. The measures taken to secure and reshape the group are taking hold. As this report shows, BP is stronger and safer as a result.

Change within the group has taken place against the backdrop of a rapidly evolving world. The energy landscape is developing at pace, for example, the growth of shale gas in the US. But the long-term supply challenge has not gone away. More energy is required to meet the needs and aspirations of a rising global population. The BP Energy Outlook projects an average increase in energy demand of 1.5% per year through to 2035. That’s like adding the needs of a country twice the size of the US over the next twenty years.

We are also seeing that society has ever higher expectations of business. This is reflected in the increasing scrutiny placed on the commercial sector, particularly by politicians and the media. Companies must work hard to maintain people’s trust and respect.

Shareholders’ expectations are shifting too, particularly in the extractive industries sector. Some investors feel that international oil companies have spent too much for too little return. A decade of mergers and acquisitions in our industry has generated little production growth. Capital expenditure has increased but profit margins have been squeezed. Rightly, shareholders expect better returns.

The board recognizes this changing world and the importance of our response. Throughout 2013 we gave close attention to strategy, project appraisal and capital discipline, working with Bob Dudley and his team to ensure the group spends its money wisely. BP’s strategy is rooted in three imperatives: clear priorities, a quality portfolio and distinctive capabilities.

Our first clear priority is to run safe and reliable operations. We must also make disciplined financial choices, selecting the smart options that can help meet demand and generate value. Furthermore, we must be competitive in how we execute our projects.

Our quality portfolio, which is at the core of our strategy, is the result of the choices we make. It contains assets that enable us to play to our areas of greatest strength, from exploration to high-value upstream projects – particularly deepwater operations, giant fields and gas value chains – and high-quality downstream businesses.

To these assets and activities we apply our distinctive capabilities – the expertise of our people, advanced technology and the ability to build the strong relationships required to access resources and deliver complex projects.

In all of this, we are focused on value before volume. In other words we don’t simply chase production for the sake of it, rather we choose projects where we can generate the most value through our production.

We know we must be disciplined, sticking to clear limits on capital expenditure, and balancing rewards for shareholders today with the long-term capital investment required for tomorrow. Safety and strong governance must underpin everything we do.

2013 was a busy and successful year for BP, with progress in our underlying operations. Our growing confidence was reflected in the dividend increase announced in October

   Board performance

         For information about the board and its

         committees see page 71.

  Remuneration

         For information about our approach to

         executive directors’ remuneration see

         page 20.

€

Top: Members of BP’s safety, ethics and environment assurance committee (SEEAC) visited Canada to see the oil sands operations at the Sunrise project site and meet local community leaders and staff.

€

Bottom: Members of SEEAC travelled to the Gelsenkirchen refinery in Germany to speak with apprentices and control room operators about risk management and processes.

2013 – the third increase in two years. We also returned value to shareholders through the $8-billion share repurchase programme announced in March 2013. Additional distributions are planned as we make further divestments to reshape our portfolio. The milestones set for 2014 will be an important measure of progress and your board is monitoring this closely.

I am particularly pleased that in 2013 we completed our transaction with Rosneft, closing one chapter in Russia and opening another. This is an important investment with the potential to create substantial value for BP over the years to come.

2013 also saw the shocking attack at the In Amenas facility in Algeria. Our thoughts remain with the families and friends of those who died. The response of management to this tragedy was strong and the board acted positively and promptly.

We continue to address uncertainty in the US. In 2013, we once again met our responsibilities to the region by paying legitimate claims arising from the 2010 accident and oil spill in the Gulf of Mexico. And we met our responsibilities to shareholders by challenging and resisting any attempt to take advantage of BP with claims that are not legitimate. We will fight through the courts until matters are resolved properly, however long that takes. In the meantime, the board is working to ensure that BP is not distracted from growing the business and creating shareholder value.

Boards set the tone and values that shape performance and behaviour over the long term. An effective board creates an enduring framework within which management can lead. Having been through challenging times, the BP board has grown into a strong team with experienced non-executives drawn from relevant industries. This year, more than ever, they have been out to see BP’s operations for themselves, from India to Indiana. We continue to be assisted on geopolitical matters by the international advisory board.

Our approach to governance has enabled us to focus on critical strategic issues, with our board committees taking on the many oversight and compliance matters that require attention.

Remuneration continues to be a board matter of particular importance to shareholders, with executive pay policy now subject to a vote at the annual general meeting. BP has a record of ensuring there are clear links between strategy, performance and remuneration. This will continue.

I believe diversity helps to strengthen the effectiveness of a board. We plan succession well ahead and are developing a pipeline of potential board candidates. We are committed to progress and finding the right people for our board.

I would like to end by thanking you, our shareholders, for your continued support. I also want to acknowledge the people who drive your company forward every working day. From Bob Dudley and his management team to employees across the business; our people are doing a great job of transforming BP. Their hard work has moved us forward, with the promise of more to come.

Carl-Henric Svanberg

Chairman

6 March 2014

95.3^%

2013 refining availability.

129^%

Reserves replacement ratio, excluding the impact of acquisitions and divestments.

See footnote b on page 14.

Dear fellow shareholder,

For BP, 2013 was a year of good progress in building a safer, stronger and better performing company. We made new discoveries, started up new operations, strengthened our portfolio and secured a new future in Russia. We also maintained our investment in the US while standing up for what we believe to be right.

Within BP, sadly, 2013 will also be remembered for the terrorist attack in Algeria in January, when four staff members and 36 colleagues from other companies were killed. Those who died had many friends in BP and our thoughts remain with their loved ones, and with those who survived that terrible ordeal. I was proud of the way people in BP responded – with great compassion, but also with great fortitude.

This report contains a wealth of information on our performance. I would like to draw out a few of the year’s highlights, all of which demonstrate how we are implementing our strategy, with its emphasis on clear priorities, a quality portfolio and distinctive capabilities.

Clear priorities: safety, capital discipline, project execution

The first of our priorities is to run safe and reliable operations. In 2013 we made good progress overall, but unfortunately we also suffered two driving-related fatalities as well as the loss of the four employees murdered at In Amenas. Our thoughts are with those who have been bereaved. We will implement the lessons learned.

In terms of general safety performance, however, we saw some encouraging progress. The number of tier 1 process safety events – the most significant incidents – fell to 20 from 43 in 2012 and 74 in 2011. We are definitely heading in the right direction, but there is always more to do and we remain vigilant.

We also saw improvements in measures that reflect the underlying health of our business. For example, in upstream BP-operated plant efficiency^a reached 88%, and refining availability in downstream averaged 95.3% – the highest level for 10 years. These numbers reinforce my view that safety and value have the same roots: systematic, disciplined operations, undertaken by people who respect each other and work as one team.

In terms of capital discipline, in 2013 we invested $24.6 billion^b, which kept us within our $25-billion limit, and we expect to keep capital expenditure broadly the same in 2014. We know we have to invest wisely so we maintain our shareholders’ trust.

Turning to project execution, we saw three upstream major projects start up in 2013 – in the Gulf of Mexico, Angola and Australia. Three more followed closely in the first months of 2014 – the Chirag oil project in Azerbaijan and the Mars B and Na Kika Phase 3 projects in the Gulf of Mexico.

Quality portfolio

Beyond these start-ups, we extended our portfolio as a platform for growth in several other ways.

For example, we grew our exploration position by participating in seven potentially commercial discoveries, in Angola, Brazil, Egypt, India and the Gulf of Mexico. We also drilled 17 exploration wells, more than in the previous two years put together. BP has built up great skills in finding oil and gas and we are seeing the results of investing in our explorers.

And in the US lower 48 – which excludes Alaska and Hawaii – we intend to create a separate BP business to manage our onshore oil and gas assets, which we believe will help to unlock the significant value associated with our extensive resource position there.

  Our strategy

         For more on our strategic priorities and

         longer-term objectives see page 13.

€

Top: Bob Dudley and Iraq Oil Minister Abdul Karim Al Luaibi (right) being shown the first meter to be installed on one of the wells in Kirkuk. In October BP signed an agreement with the government of Iraq on providing technical assistance relating to the Kirkuk oil field.

€

Bottom: Investors see how BP manages the risks of deepwater drilling at a field trip in Houston. They tested our well simulator which gives rig operators a better understanding of both prevention and response techniques.

^a See footnote a on page 25.

^b Excludes acquisitions and Rosneft transaction.

^c  See page 247 for further information.

^d See footnote c on page 56.

^e See footnote b on page 56.

Our reserves replacement ratio was 129% of production. When we include the net growth in our Russian portfolio as a result of the change of our holdings, the reserves replacement ratio on a combined basis was 199%.^c

In the Downstream, we completed the commissioning of all major units for the Whiting refinery. This landmark modernization programme, our fourth major project start-up in 2013, is turning what began as a 19th century plant into a truly 21st century one. It is now able to compete strongly by processing a wide range of crudes, including heavy oil from Canada.

More generally, our Downstream business has transformed its shape over the last five years. In the US, we have sold two facilities and we now have three modern refineries that are well configured and well connected to important markets. In lubricants, 40% of revenue now comes from our premium brands. In petrochemicals, we are also focusing on high-growth regions and new technologies.

Distinctive capabilities

New acetic acid and ethylene technologies announced by the petrochemical team in 2013 are among a series of innovations we have developed in support of our exploration, production, refining and marketing activities. These include advanced seismic imaging capacity – using one of the world’s largest civilian supercomputers – enhanced oil recovery techniques and leading lubricant processes.

Our technologies are complemented by the capabilities of our people, which we continue to deepen through training and development, and our experience in building and maintaining relationships.

New future in Russia

Relationships have been vital in securing a new future for BP in Russia as a 19.75% shareholder in Rosneft. Rosneft is implementing its strategy for growth across a promising portfolio and paid us a dividend of $456 million in 2013. We look forward to exploring opportunities for BP to work with Rosneft in the years ahead.

Making our case in the US

BP has continued to meet its commitment to environmental and economic restoration in the Gulf of Mexico. We have also been swift to counter illegitimate claims and to argue for a fair resolution to compensation matters. By the end of the year the total cumulative cost to the company had reached $42.7 billion, the scale of that amount underlining once again that BP is living up to its responsibilities in the region and to the US as a whole. The US remains vitally important to today’s BP, with around 20,000 employees across the country and we estimate that our economic activity supports a further 240,000 additional jobs. Nearly 40% of our shares are held in the US, and we invest more there than in any other country.

Looking ahead

We are a smaller but stronger company, having divested $38 billion of assets over three years. In October we announced that we would divest around a further $10 billion of assets before the end of 2015 – a decision that reflects our commitment to balancing reinvestment with rewards for our shareholders. We expect to use the proceeds predominantly for distributions to shareholders, with a bias to share buybacks.

Our unrelenting focus on capital discipline and systematic operating is increasing the free cash flow^d we have available. We are on track to meet our goal of generating more than $30 billion of operating cash flow in 2014, an increase of more than 50% on 2011.^e

I’m looking forward to 2014 with great confidence. I think you will see a re-energized and refocused BP – a company that is set to become stronger and safer in every way, as we fulfil our mission of delivering energy to customers and value to shareholders.

Bob Dudley

Group Chief Executive

6 March 2014

We believe that a diverse mix of fuels and technologies will
be essential to meet the growing demand for energy
and the challenges facing our industry.



Our third PTA plant in Zhuhai, China, is planned to begin production in late 2014. It is expected to bring total capacity at the site to more than 2.7 million tonnes per year.

{

Thunder Horse in the Gulf of Mexico is one of the largest integrated offshore drilling and production platforms in the world.

Population and economic growth are the main drivers of global energy demand. The world’s population is projected to increase by 1.7 billion from 2012 to 2035, with real income likely to more than double over the same period.

Therefore, the overall trend is likely to be one of increased energy demand, even with energy and climate policies and a shift towards less energy-intense activities in fast-growing economies. We expect demand for energy to increase by as much as 41% between 2012 and 2035.

Challenges and opportunities

We seek energy sources that have the following attributes:

Affordability – meeting growing demand for secure and sustainable energy presents an affordability challenge. Fossil fuels will become increasingly difficult to access and many lower-carbon resources will remain costly to produce at scale.

Security – each country knowing where its supplies will come from. More than 60% of the world’s known reserves of natural gas are in just five countries and at least 80% of global oil reserves are located in nine countries, most of which are distant from the hubs of energy consumption. This represents a security challenge in its own right.

Sustainability – avoiding an unacceptable environmental and social impact that ultimately negates the economic benefits. While energy is available to meet growing demand, action is needed to limit carbon dioxide (CO₂) and other greenhouse gases emitted through fossil fuel use.

A diverse mix

We believe a diverse mix of fuels and technologies can enhance national and global energy security while supporting the transition to a lower-carbon economy. These are reasons why BP’s portfolio includes oil sands, shale gas, deepwater oil and gas, and biofuels.

Oil and natural gas

Oil and natural gas are likely to play a significant part in meeting demand for several decades.

We believe these energy sources will represent about 54% of total energy consumption in 2035. Even under the International Energy Agency’s most ambitious climate policy scenario (the 450 scenario), oil and gas would still make up 47% of the energy mix in 2035.^a The 450 scenario assumes governments adopt commitments to limit the long-term concentration of greenhouse gases in the atmosphere to 450 parts-per-million of CO₂ equivalent.

We expect oil to remain the dominant source for transport fuels, accounting for as much as 87% of demand in 2035.

Natural gas, in particular, is likely to play an increasingly strategic role. Shale gas is expected to contribute 47% of the growth in global natural gas supplies between 2012 and 2035. The shale gas revolution has already had a significant impact on gas prices and demand in the US and may encourage similar developments elsewhere although the scale and speed of the roll out of shale gas technology will vary between countries. When used in place of coal for power, natural gas can reduce CO₂ emissions by half.

^a From World Energy Outlook 2013. © OECD/International
 Energy Agency 2013, page 573.

2013 pricing

       See Upstream on page 26 and

       Downstream on page 32.

BP Energy Outlook contains our projections of future energy trends and factors that could affect them, based on our views of likely economic and population growth and developments in policy and technology. Available in PDF, Excel and video format.

See bp.com/energyoutlook.

Energy consumption by region

(billion tonnes of oil equivalent)

Source: BP Energy Outlook 2035.

Energy consumption by fuel

(billion tonnes of oil equivalent)

* Includes biofuels.

Source: BP Energy Outlook 2035.

New sources of hydrocarbons are more difficult to reach, extract and process. BP and others in our industry are working to improve techniques for maximizing recovery from existing and currently inaccessible or undeveloped fields. In many cases, the extraction of these resources might be more energy intensive, which means operating costs and greenhouse gas emissions from operations may also increase.

Renewable energy

Renewables will play an increasingly important role in addressing the challenges of energy security and climate change over the long term. Renewables are already the fastest-growing energy source, but they are starting from a low base.

By 2035, we estimate renewable energy, excluding large-scale hydro electricity, is likely to meet around 7% of total global energy demand.

Energy efficiency and innovation

Greater efficiency addresses several aspects of the energy challenge. It helps with affordability – because less energy is needed. It helps with security – because it reduces dependence on imports. And it helps with sustainability – because it reduces emissions.

Innovation can play a key role in improving technology design, process and use of materials, bringing down cost and increasing efficiency. In transport, for example, we believe that efficient technologies and combustion engines that use biofuels could offer the most cost-effective pathway to a secure, lower-carbon future.

Policy, prices and access

If the world’s growing demand for energy is to be met in a sustainable way, we believe that governments must set a stable and enduring framework for the private sector to invest and for consumers to choose wisely. This includes secure access for exploration and development

of energy resources, mutual benefits for resource owners and development partners, and an appropriate legal and regulatory environment.

We believe open and competitive markets are the most effective way to encourage companies to find, produce and distribute diverse forms of energy sustainably. The US experience with shale gas shows how an open and competitive environment can drive technological innovation and unlock resources.

We also believe that putting a price on carbon – one that treats all carbon equally, whether it comes out of a smokestack or a car exhaust – will make energy efficiency and conservation more attractive to businesses and individuals and lower-carbon energy sources more cost competitive. A global carbon price should be the long-term goal, but regional and national approaches are a good first step, provided temporary financial relief is given to sectors that are exposed to international competition.

Beyond 2035

We expect that growing population and per capita incomes will continue to drive growing demand for energy. These dynamics will be shaped by future technology developments, changes in tastes, and future policy choices – all of which are inherently uncertain. Concerns about energy security, affordability and environmental impacts are all likely to be important considerations. These factors may accelerate the trend towards more diverse sources of energy supply, a lower average carbon footprint, increased efficiency and demand management.

Strategy

        Find out how BP can help meet energy

        demand for years to come on

        page 13.



Air BP is one of the world’s largest aviation fuels suppliers, marketing aviation fuels and specialist products in more than 45 countries. It sells over seven billion gallons of fuel per year.

We aim to create shareholder value across the

hydrocarbon value chain.



Toledo refinery in Ohio has been in constant operation since 1919. The facility has the capacity to process up to 160,000 barrels of crude per day.

{

The redevelopment project at Valhall was one of
BP’s most complex field expansion
developments and gives the field a further
40-year design life.

A rising global population and increasing levels of prosperity are set to create growing demand for energy for years to come. We can help to meet that demand by producing oil and gas safely and reliably.

We believe that the best way to achieve sustainable success as a group is to act in the long-term interests of our shareholders, our partners and society. We aim to create value for our investors and benefits for the communities and societies in which we operate, with the responsible supply of energy playing a vital role in economic development.

Every stage of the hydrocarbon value chain offers opportunities for us to create value – both through the successful execution of activities that are core to our industry, and through the application of our own distinctive strengths and capabilities in performing those activities. In renewable energy our focus is on integrating biofuels into the hydrocarbon value chain, and on wind operations in the US.

Our approach spans everything from exploration to marketing. Integration across the group allows us to share functional excellence more efficiently across areas such as safety and operational risk, environmental and social practices, procurement, technology and treasury management.

A relentless focus on safety remains the top priority for everyone at BP. Rigorous management of risk helps to protect the people at the front line, the places in which we operate and the value we create. We understand that operating in politically complex regions and technically demanding geographies requires particular sensitivity to local environments.

Our businesses

        For more information on our upstream,

        downstream and alternative energy

        businesses, see pages 25, 31 and 37

        respectively.

Finding oil

and gas

Transporting

and trading

First, we acquire the rights to explore for oil and gas. Through our exploration activities we are able to renew our portfolio, discover new resources and replenish our development options.

Our goal is to be a focused oil and gas company that

delivers value over volume.

^a  See footnote a on page 56.

^b  Equivalent to net cash used in investing activities.

^c  See footnote c on page 56.

^d  See footnote h on page 24.

^e  Excludes acquisitions and asset exchanges.

^f   Unit cash margin is net cash provided by operating activities

    by the relevant projects in our Upstream segment, divided

    by the total number of barrels of oil equivalent produced

    for the relevant projects.

^g  Assuming a constant oil price of $100 per barrel.

^h  See footnote b on page 56.

ⁱ   See footnote d on page 56.

We are pursuing our strategy by setting clear priorities, actively managing a quality portfolio and employing our distinctive capabilities. Our financial objective is to create shareholder value by generating sustainable free cash flow (operating cash flow less net investment). This disciplined approach enables us to invest for the future while aiming to increase distributions to our investors.

Clear priorities

First, we aim to run safe, reliable and compliant operations – leading to better operational efficiency and safety performance. We also aim to achieve competitive project execution, which is about delivering projects efficiently so they are on time and on budget. And we aim to make disciplined financial choices, so we can achieve continued growth in operating cash from our underlying businesses and disciplined allocation of capital.

Quality portfolio

We undertake active portfolio management to concentrate on areas where we can play to our strengths. This means we continue to grow our exploration position, reloading our upstream pipeline. We focus on high-value upstream assets in deepwater, giant fields and selected gas value chains. And, with our downstream businesses, we plan to leverage our newly upgraded assets, customer relationships and technology to grow free cash flow.

Our portfolio of projects and operations is focused where we can generate the most value, and not necessarily the most volume, through our production.

Distinctive capabilities

Our ability to deliver against our priorities and build the right portfolio depends on our distinctive capabilities. We apply advanced technology across the hydrocarbon value chain, from finding resources to developing energy-efficient and high-performance products for customers. We rely on our strong relationships – with governments, partners, civil society and others – to enable our operations in around 80 countries across the globe. And, the proven expertise of our employees comes to the fore in a wide range of disciplines.

Our strategy in action

        See page 14 for more information

        on how we are going to measure our

        progress.

10-point plan 2011-2014

In 2011 we laid out a 10-point plan designed to stabilize the company and restore trust and value in response to the tragic Deepwater Horizon accident. Our priority was to make BP a safer, more risk-aware business. The plan included a series of milestones by which our progress could be tracked, from 2012 through to 2014. Information on our progress during 2013 can be found in Group performance on page 22.

1    A relentless focus on safety and managing risk through the systematic application of global standards.

2    We will play to our strengths in exploration, deep water, giant fields and gas value chains.

3    Stronger and more focused with an asset base that is high graded and higher performing.

4    Simpler and more standardized with fewer assets and operations in fewer countries; more streamlined internal reward and performance management processes.

5    Improved transparency through reporting TNK-BP as a separate segment and breaking out the numbers for the three downstream businesses.

6    Active portfolio management to continue by completing $38 billion of disposals over the four years to the end of 2013, in order to focus on our strengths.

7    We expect to bring new upstream projects onstream with unit operating cash margins^f around double the 2011 average by 2014.^g

8    We are aiming to generate an increase of around 50% in net cash provided by operating activities by 2014 compared with 2011.^h

9    We intend to use half our incremental operating cash for reinvestment, half for other purposes.

10  Strong balance sheet with intention to target our level of gearingⁱ in the lower half of the 10-20% range over time.

A commitment to

safe operations

Toledo refinery sets

a safety record.

See page 42.

31

fewer reported losses

of primary containment

than 2012.

Operating cash flow,

gearing^a, total shareholder

return, replacement cost

profit (loss) per ordinary

share.

Maximizing value

at Mad Dog

Changing plans to make the best financial choices.

See page 29.

$21.1bn

operating cash flow.

Increasing oil production

in Azerbaijan

Local construction of BP’s heaviest platform in the Caspian Sea.

See page 48.

4

major project start-ups

in Upstream and

Downstream.

Reserves replacement

ratio.^b

Discovering gas in India

Two significant discoveries with Reliance Industries.

See page 30.

129^%

reserves replacement

ratio.

Production.^c

Preparing for Shah Deniz Stage 2

Largest gas sales contracts in Azerbaijan’s history.

See page 27.

3.2

million barrels of oil

equivalent per day.

Creating our North American advantaged refinery

Modernization project improves utilization and margin capture at Whiting.

See page 33.

95.3^%

refining availability.

Creating shareholder value by generating

sustainable free cash flow

We attract and develop the talented people
required to drive our business forward.

They apply their diverse skills and expertise
to deliver complex projects across all areas
of our business.

BP Annual Report and Form 20-F 2013

We use technology to find and produce more hydrocarbons, improve our processes for converting raw materials and develop lower-carbon products.

The development of technology from research and development through to wide-scale deployment can take several years. For example, to reach the next generation of deepwater oil reserves, where rock pressures can reach 20,000 pounds per square inch, we are developing new subsea technologies through our Project 20K.

Technology programmes in our upstream business include advanced seismic imaging to help us find more oil and gas and enhanced oil recovery to get more from existing fields. New techniques are making recovery of unconventional oil and gas, like shale, economically viable.

See bp.com/technology.

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The Pangbourne technology centre is home to chemists and liquid engineers dedicated to providing products and services for Castrol’s customers.

We focus our downstream technology programmes on the safety, integrity and performance of our refineries and petrochemical plants and on creating high quality, energy efficient, cleaner fuels, lubricants and petrochemicals.

BP employs more than 2,000 scientists and technologists.

Our long-term research programmes with universities and research institutions around the world are exploring areas from reservoir fluid flow to energy biosciences. We have a strategic approach to university relationships across our portfolio for the purposes of research, recruitment, policy insights and education.

In 2013 we invested $707 million in research and development (2012 $674 million). See Financial statements – Note 8.

Seismic imaging

We use our imaging expertise to increase the productivity and quality of the data we capture on land and offshore. With 80% of future offshore oil and gas reserves thought to be under salt canopies up to 7 kilometres high, our new supercomputer in Houston helps to reduce the completion times for imaging jobs from several months to a matter of days.

Enhanced oil recovery (EOR)

Our LoSal EOR technology can help develop previously unexploited resources from existing oil fields. LoSal uses water with a low salt content to release more molecules of oil from the sandstone rock where they are held.

Production optimization

Our Field of the Future technologies provide real-time information to help manage operational risk, improve plant equipment reliability and optimize production. We use these technologies to monitor more than 600 wells.

Shipping efficiency

Our ‘virtual arrival’ system can reduce fuel consumption and emissions by allowing vessels, ports and other parties to work together and agree an optimum arrival time for each vessel.

Our employees enable BP to deliver our strategy and meet our commitments to investors, partners and the wider world.

Our people are talented in a wide range of disciplines, from geoscience, mechanical engineering and research technology to government affairs, trading, marketing, legal and others. And our approach to professional development programmes and training helps build individual capabilities, reducing a potential skills gap. This is vital in a world where oil and gas companies face an increasing challenge to find and retain skilled and experienced people.

We aim to achieve a balance between building internal expertise and recruiting external professionals and graduates. We have a strong, experienced leadership team and a pipeline of talent for the future.

Improved conversion

Our Veba Combi-Cracking technology converts a wide variety of raw materials, ranging from crude oil residue to mixtures of coal and oil, into fuels. Using this technology we can convert 95% or more of our hydrocarbon resources to marketable products.

Fuels and lubricants

We focus on providing energy-efficient and high-performance products to customers. Castrol EDGE, which is underpinned by our proprietary Fluid Strength Technology, reduces contact between engine surfaces to improve performance and reduce wear from friction.

Biofuels

Conversion technology allows us to produce cellulosic ethanol using alternative raw materials such as agricultural waste and fast-growing energy grasses. At our biofuels technology centre in San Diego around 120 scientists are researching and advancing new biofuels technologies.

Corrosion prevention

Wireless Permasense^® systems, developed in collaboration with Imperial College, London, are used across all our refineries to monitor the integrity of critical oil and gas assets.

Petrochemicals

Our SaaBre technology converts synthesis gas (carbon monoxide and hydrogen derived from hydrocarbons) into acetic acid. The process avoids the need to purify carbon monoxide or purchase methanol, reducing manufacturing costs and environmental impacts.

Our relationships are crucial to the success of our business. We work closely with governments, national oil companies and other resource holders. By acting responsibly and meeting our obligations we build long-lasting relationships.

From experience we know that trust can be lost, so we place enormous importance on meeting people’s expectations. We work in partnership on big and complex projects with everyone from other oil companies through to suppliers and

contractors. Our activity creates value that benefits governments, customers, local communities and other partners.

Internally we put together collaborative teams of people with the skills and experience needed to address complex issues, work effectively with our partners and help create shared value.

We assess the group’s performance according to a wide range of measures and indicators. Our key performance indicators (KPIs) help the board and executive management measure performance against our strategic priorities and business plans. We keep these metrics under periodic review and test their relevance to our strategy regularly. We believe non-financial measures – such as safety and an engaged and diverse workforce – have a useful role to play as leading indicators of future performance.

Changes to KPIs

This year, we introduced two new KPIs: tier 1 process safety events and major project delivery. These demonstrate two of our strategic objectives and are used as measures for executive remuneration.

We have removed the number of oil spills as a group KPI as this is reflected within the loss of primary containment and tier 1 process safety events KPIs. We continue to report on oil spills, see Safety on page 41.

Remuneration

To help align the focus of our board and executive management with the interests of our shareholders, certain measures are reflected in the variable elements of executive remuneration.

Overall annual bonuses, deferred bonuses and performance shares are all based on performance against measures and targets linked directly to strategy and KPIs. For details of our remuneration policy see page 96.

KPIs used to measure

       progress against our

       strategy.

KPIs used to determine 2013

and 2014 remuneration.

Replacement cost profit (loss) per ordinary share (cents)

Replacement cost profit (loss) is a useful measure for investors because it is a profitability measure BP management use to assess performance and allocate resources.

It reflects the replacement cost of supplies and is calculated by removing inventory holding gains and losses and their associated tax effect from profit. This is a non-GAAP measure for the group. The IFRS equivalent can be found on page 236.

2013 performance The increase in replacement cost profit per ordinary share for the year compared with 2012 reflected the gain on disposal of our interest in TNK-BP.

Operating cash flow ($ billion)

Operating cash flow is net cash flow provided by operating activities, from the group cash flow statement. Operating activities are the principal revenue-generating activities of the group and other activities that are not investing or financing activities.

2013 performance Higher operating cash flow in 2013 reflected a lower cash outflow relating to the Gulf of Mexico oil spill, partly offset by higher cash outflows as a result of working capital build.

Gearing (net debt ratio) (%)

Our gearing (net debt ratio) shows investors how significant net debt is relative to equity from shareholders in funding BP’s operations.

We aim to keep our gearing within the 10-20% range to give us the flexibility to deal with an uncertain environment.

Gearing is calculated by dividing net debt by total equity plus net debt. Net debt is equal to gross finance debt, plus associated derivative financial instruments, less cash and cash equivalents. Net debt and net debt ratio are non-GAAP measures. See Financial statements – Note 28 for the nearest equivalent measure on an IFRS basis and for further information.

2013 performance Gearing at the end of 2013 was 16.2%, down 2.5% on 2012 and within our target band of 10-20%.

Refining availability (%)

Refining availability represents Solomon Associates’ operational availability. The measure shows the percentage of the year that a unit is available for processing after deducting the time spent on turnaround activity and all mechanical, process and regulatory maintenance downtime.

Refining availability is an important indicator of the operational performance of our Downstream businesses.

2013 performance Refining availability increased by 0.5% from 2012 to 95.3% reflecting strong operations around our global refining portfolio.

Reported recordable injury

frequency^a

Reported recordable injury frequency (RIF) measures the number of reported work-related employee and contractor incidents that result in a fatality or injury (apart from minor first aid cases) per 200,000 hours worked.

The measure gives an indication of the personal safety of our workforce.

2013 performance Our workforce RIF, which includes employees and contractors combined, was 0.31, compared with 0.35 in 2012 and 0.36 in 2011. These successive reductions are encouraging and we continue pursuing improvement in personal safety.

Loss of primary containment^a

Loss of primary containment (LOPC) is the number of unplanned or uncontrolled releases of oil, gas or other hazardous materials from a tank, vessel, pipe, railcar or other equipment used for containment or transfer.

By tracking these losses we can monitor the safety and efficiency of our operations as well as our progress in making improvements.

2013 performance Our reported LOPC shows 31 fewer reported incidents in 2013 than in 2012, with divestments accounting for a significant part of the reduction. We remain committed to using our operating management system to further improve our operations.

Total shareholder return (%)

Total shareholder return (TSR) represents the change in value of a BP shareholding over a calendar year. It assumes that dividends are re-invested to purchase additional shares at the closing price on the ex-dividend date.

We are committed to maintaining a progressive and sustainable dividend policy.

2013 performance TSR grew as a result of increases in both the BP share price and in the dividend, with the improvement for ordinary shares slightly offset by exchange rate effects.

Reserves replacement ratio (%)

Proved reserves replacement ratio is the extent to which the year’s production has been replaced by proved reserves added to our reserve base.

The ratio is expressed in oil-equivalent terms and includes changes resulting from discoveries, improved recovery and extensions and revisions to previous estimates, but excludes changes resulting from acquisitions and disposals. The ratio reflects both subsidiaries and equity-accounted entities.

The measure helps to demonstrate our success in accessing, exploring and extracting resources.

2013 performance The increase in our reserves replacement ratio included the impact of final investment decisions on two significant upstream projects in Oman and Azerbaijan.

Major project delivery

Major projects are defined as large-scale projects with a high degree of complexity and a BP net investment of at least $250 million.

We monitor the progress of our major projects to gauge whether we are delivering our core pipeline of activity. Projects take many years to complete, requiring differing amounts of resource, so a smooth or increasing trend should not be anticipated.

2013 performance In total we delivered four major projects. Three started up in Upstream – Atlantis North expansion Phase 1 in the Gulf of Mexico; Angola LNG; and North Rankin Phase 2 in Australia, and one in Downstream – the Whiting refinery modernization project.

Production (mboe/d)

We report the volume of crude oil, condensate, natural gas liquids (NGLs) and natural gas produced by subsidiaries and equity-accounted entities. These are converted to barrels of oil equivalent (boe) at 1 barrel of NGL = 1boe and 5,800 standard cubic feet of natural gas = 1boe.

2013 performance BP’s total reported production including our Upstream segment, and our share of TNK-BP (from 1 January to 20 March) and Rosneft (from 21 March to 31 December), was 3% lower than in 2012. This was mainly due to the effect of divestments in Upstream.

Tier 1 process safety events^a

We report tier 1 process safety events (PSE), which are the losses of primary containment of greatest consequence – causing harm to a member of the workforce, costly damage to equipment or exceeding defined quantities.

2013 performance Our reduction in reported tier 1 PSEs is supported by our efforts to drive improvement in process safety. Divestments also account for part of the reduction. We are aware there is always more to do to improve.

^a   This represents reported incidents occurring

    within BP’s operational HSSE reporting

    boundary. That boundary includes BP’s

    own operated facilities and certain other

    locations or situations.

Greenhouse gas emissions

(million tonnes of CO₂ equivalent)

We report greenhouse gas (GHG) emissions material to our business on a carbon dioxide-equivalent basis. This includes CO₂ and methane for direct emissions.^b Our GHG reporting encompasses all BP’s consolidated entities as well as our share of equity-accounted entities other than BP’s share of TNK-BP and Rosneft. Rosneft’s emissions data can be found on its website.

2013 performance Our total greenhouse gas emissions decreased by 18%, primarily due to the divestment of our Texas City and Carson refineries.

^b For indirect emissions data see page 45.

Group priorities engagement^c (%)

We track how engaged our employees are with our strategic priorities for building long-term value. The measure is derived from answers to 12 questions about BP as a company and how it is managed in terms of leadership and standards.

2013 performance We saw continued improvement in 2013, and there was an increase in understanding of our operating management system, an area of focus identified the previous year. While the survey showed an increase in employee confidence in BP’s leadership, work is needed to further strengthen this.

^c  Relates to BP employees.

Diversity and inclusion^{c d} (%)

Each year we report the percentage of women and individuals from countries other than the UK and US among BP’s group leaders.

This means we can track progress in building a diverse and well-balanced leadership team, helping to create a sustainable pipeline of diverse talent for the future.

2013 performance We have increased the percentage of female leaders again this year and have extended our focus on diversity and inclusion beyond the board and group leaders to include other levels of management.

^d Minor amendments have been made to

  2012.

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In May we completed the successful commissioning of a state-of-the-art diesel hydrotreater and hydrogen plant at the Cherry Point refinery in Washington state.

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The Mad Dog field in the Gulf of Mexico was discovered in 1998 and is one of BP’s largest discoveries in the Gulf of Mexico to date.

2013-2014 milestones set out in our 10-point plan

We completed 17 exploration wells and made seven potentially commercial discoveries in 2013. It was our most successful year for exploration drilling in almost a decade.

Three major projects were started up in 2013 and another three in January and February 2014. We expect a further four major upstream projects to start up in 2014.

We continued to bring on major projects in key regions such as Angola and the Gulf of Mexico.

We completed the commissioning of all major units for the refinery upgrade, transforming it into one of our advantaged downstream assets in our portfolio.

We completed our $38-billion divestment programme in 2012 – effectively a year early. In October 2013, we announced our plan to divest a further $10 billion before the end of 2015.

 Segment performance

For Upstream and Downstream performance see pages 25 and 31 respectively.

Our divestments have removed complexity, strengthened the balance sheet and left us with a more distinctive set of assets that play to our strengths – deep water, gas value chains, giant fields and high-quality downstream businesses.

We are on track to meet our goal of generating more than $30 billion of operating cash flow in 2014.

^a Organic capital expenditure excludes acquisitions, asset

  exchanges, and other inorganic capital expenditure.

^b See footnote a on page 25.

^c  See footnote f on page 13.

^d See footnote g on page 13.

^e See footnote a on page 56.

^f  See footnote b on page 56.