BP p.l.c. (BP) on Q1 2021 Results - Earnings Call Transcript

Operator: Welcome to the bp Presentation to the Financial Community Webcast and Conference Call. I now hand over to Craig Marshall, Head of Investor Relations. Craig Marshall: Good morning, everyone. And welcome to bp's first quarter 2021 results presentation. I'm here today with Bernard Looney, Chief Executive Officer, and Murray Auchincloss. Chief Financial Officer. Bernard Looney: Thanks, Craig. Good morning and welcome, everyone. It's great to have you join us today. As ever, I hope everyone is staying safe in what continues to be the most challenging of times. Today, we report our first quarter results and it has been a strong quarter. We're making great progress right across the business, underpinned by our continued focus on what we call performing while transforming. And this starts with safety, our core value. As part of our strategy, we have harmonized our safety leadership principles which define our safety culture and how we expect everyone to lead with care and with trust and speak up at its foundation. This has my personal oversight at our group Operating Risk Committee, which I chair. We're seeing good progress. Staff in essential roles are beginning to return to the office in the field. Our maintenance activity levels are broadly back to pre-pandemic levels. And we have focused our assurance activities on our biggest risks during this time of change. And we continue to support our staff, our frontline workers as well as those who continue to work remotely, remaining focused on their health and well-being during this unprecedented period. This supports our operational performance, which continues to be resilient and is an underpin to strong financial delivery. As we like to say, a safe business is a good business. In the first quarter, cash flow was strong, with an inflow of around $11 billion, including the accelerated disposal proceeds. As a result, net debt reduced by $5.6 billion. And we achieved our target of $35 billion during the quarter, around one year earlier than expected. We are commencing share buybacks during the second quarter, starting with the intent to offset the full year dilution from employee share schemes. And Murray will talk more about this shortly. Now at the same time, we continue to make disciplined progress executing on our strategy, including continuing the rollout of our single operating model to drive efficiency throughout our organization, strengthening our position in offshore wind here in the UK, and accelerating the development of our electrification agenda in Europe. Murray Auchincloss: Thanks, Bernard. As usual, let me start with the environment. Oil price rebounded in the quarter with Brent averaging $61, a 38% increase from the fourth quarter. We expect oil prices to remain firm as demand improves, driven by strong growth in the US and China, the ongoing vaccine rollout programs and supported by continued supply intervention by OPEC+. The Henry Hub gas price averaged $3.50, up from $2.50 in the fourth quarter. The increase was due to Storm Uri in the middle of February, which resulted in very high gas demand, combined with a substantial drop in production, pushing prices to record levels. And refining margins improved. bp's RMM averaged $8.70, up from $5.90 in the previous quarter, supported by improved US margins following Storm Uri disruptions and the higher cost of renewable fuel credits in the US. As demand improves, refinery utilization rates are expected to increase. Although with net capacity additions of almost 1 million barrels per day in 2021, we expect industry refining margins to improve compared to 2020, but remain below pre COVID levels. Looking to the second quarter of 2021, realized refining margins are expected to show a smaller improvement due to the slower recovery in diesel and jet demand. In addition, we expect a narrower North American heavy crude differential and a higher level of turnaround activity in our refining portfolio. Before I turn to results, let me remind you that this is the first quarter reporting under our new segmental structure. Further details on this and our new disclosure framework, including restated and resegmented data for 2019 and 2020, can be found on bp.com. I also want to draw your attention to a change in accounting presentation commencing this quarter. As previously disclosed, we have moved to net presentation of certain derivative contracts related to our trading business. While this is a significant change to revenue and costs, it has no impact on replacement cost, profit or cash flow. Moving then to bp's underlying results. In the first quarter, we reported an underlying replacement cost profit of $2.6 billion compared $0.8 billion a year ago and $0.1 billion in the fourth quarter of 2020. Compared to the fourth quarter, the result reflects an exceptional gas marketing and trading performance, notably from LNG, and the impact of Storm Uri in the US. The result also reflects significantly higher oil prices and higher refining margins. Bernard Looney : Great. Thanks, Murray. As I mentioned earlier, in addition to driving performance at a business, we've been making disciplined progress in advancing our strategy. I thought it might be helpful to share some examples with you. Let me start with some highlights from the quarter and then I look at three examples in a bit more depth, and we'll then have time to take your questions. Operator: . Craig Marshall: Let's turn to questions and answers. Usual guidelines from me before we start. Please do limit your questions to no more than two. We've got a lot of people on the phone to get through. And on that note, I think we'll turn firstly to Michele Della Vigna at Goldman Sachs. Michele? Michele Della Vigna: Congratulations on this strong result. I really had a question on dividend and cash return to shareholders. You're about to embark in a major buyback program which, if we take into account the current share price, the current oil price, could effectively reduce the share count by about 20% by the middle of the decade. I was wondering, in this context, why keep the DPS flat? Why keep it static? I can't understand why an oil and gas company wouldn't want to actually grow the commitment to the dividend payout? But on the other side, as the share count shrinks, I was just wondering why not grow the DPS without actually increasing the dividend burden for the company? Perhaps, you need to be more time to start reducing the share count now that you've reduced the level of net debt, but I was thinking, is there an opportunity where the dividend comes back to grow? And my second question is actually simpler, is what are the key macro assumptions you're currently implying into your guidance for the second quarter? Thank you. Bernard Looney: Michele, Murray will dive in and help me here. Look, I think it's important to realize we just laid out our new financial framework on August 4 last year. So, we're six or seven months in. There were two stages to the framework, phase 1 and phase 2. Today, with net debt coming down, in fact, it's now down $18 billion over the pandemic period, we move into phase 2 and we start that buyback program. Just two things that I would say around the choices that we made around the dividend and around the buybacks. Number one, we want people to be able to rely on, trust the dividend. That's why it's the first call on cash in the financial framework. There are five potential calls on cash and the dividend is the first call. And that's why we call it a resilient dividend. So, we want to make sure that people can rely on that and depend on that. And that's what it gives us. And then secondly, we want to give them the upside that they deserve through the buyback program. And with equity prices where they are today, we think that makes a whole lot of sense, buying back our shares at this price. And that's why we're very, very delighted actually to announce the buyback program getting kicked off here in the second quarter. So, no change to our financial framework. The dividend policy is as stated, The buyback program has now kicked in. And we believe and believe quite strongly that, in a moderate price world, as we look out over the next year or two, investors can get back to that pre-pandemic distribution levels, cash distribution levels, and that that's very possible within – certainly as we head into next year. So, that's really where we're at. And I wouldn't say anything beyond that at the moment. Murray, anything you'd add on that? And maybe the second question around the macro assumptions? Murray Auchincloss: I think maybe, Michele, the thing that we have to hold in mind is there still an awful lot of surplus oil that OPEC+ is managing right now and there's still a lot of uncertainty in the environment with the pandemic. So, prudence is on our mind as we think about decisions quarter-on-quarter. As far as your question on 2Q and what our macro assumptions are, obviously, you can take a look at what's been realized to date. I think the March and April pricing is in the 60s for Brent and RMM is starting to move up a bit. We won't realize as much of that in the second quarter, given that a lot of our refineries are focused on jet fuel, and of course, with the WTI/WCS differential in North America is remaining quite narrow. But if you think about, will we have a surplus in the second quarter? The macro assumptions around that, I think it's just best to look at what's happened already through the quarter. And you can look at the markets to understand that for March and April inside the oil business and we publish our RMM on the website. Thanks. Craig Marshall: We'll take the next question from Thomas Adolff at Credit Suisse. Thomas? Thomas Adolff: Just two questions from me as well. The first one, I guess, is just to get a better sense for the discretionary buyback. And you've mentioned you'll give us guidance with the 2Q results looking back at the first half, but also looking forward. So, are you saying, with the 2Q results, we'll get the annual 2021 discretionary buyback announced? That's question one. Question two is on the disposals. You're aiming for five to six this year and you've done almost five in the first quarter and you've got another ten to go over the next few years. So, I guess, the question I have is why not more than five to six since you've done already five and how should we think about the rest between downstream and upstream? Bernard Looney: Why don't I take the one around disposals and I'll let Murray take the one around the forward look on the buybacks? So, the team's done a fantastic job accelerating those proceeds into the first quarter. Things came into place for us in a few places that we hadn't quite thought would go so quickly. So, took a lot of work. And it meant that we did get that almost $5 billion of cash in the door in 1Q, which we're very, very pleased with, obviously. We have upped the target for the year to $5 billion to $6 billion. The key thing going forward around divestments is we're just not in a hurry. We're just not in a rush, particularly now with net debt down $18 billion through the pandemic – down $18 billion through the pandemic, down $5.6 billion in the quarter, $33.3 billion, below our $35 billion target. And with the buyback program, we'll continue to allocate 40% of surplus cash to the balance sheet. So, the main message is there's no real rush, there's no real panic, we've got four to five years to do the next $10 billion. And we'll be driven by value. And if we get great prices for assets as we think we did in Oman and what we did with petchems, that's when we'll execute those transactions. There'll be a whole variety of things. There'll be upstream assets, downstream assets, there'll be infrastructure assets, there'll be things that you would continue to look for. But the main driver is going to be making sure we get value for the good assets that we have in our company, no rush to do so. And as the environment improves and things begin to stabilize over the coming months and years, I also think we'll probably find a healthier M&A environment. So main message is, comfortable with where we're at, continue to focus on the balance sheet, continue to focus on value from the divestments. But importantly, no rush, value-driven. Murray? Thomas's first question. Murray Auchincloss: Just three points around this, really. First of all, we had a surplus of $1.7 billion in the first quarter. Second, we've said we'll have a deficit in the second quarter in aggregate. Our sense is, we'll have a surplus, but let's see how life goes. In the first half, that is. And then, for the second half of the year, the guidance we've given you is that we're breakeven around $45 oil, $13 RMM and $3 Henry Hub. And that's on that glide path down to the 21 to 25 target that we talked of a $40 breakeven, $11 RMM and $3. So, you can see we're making good progress. It's just going to take time to continue to take costs out to continue with capital discipline and obviously get new projects online like Mad Dog phase 2, Tangguh, and growing the C&P business. So, that's a little bit about the guidance points that we've given so far. We feel pretty pleased about that progress. As far as how we'll think about the second quarter, what we've said is, while uncertainties remain, and those uncertainties are the overhang on the oil supply and obviously the pace of vaccinations and COVID, so while that uncertainty remains, we'll only be guiding one quarter ahead. We just think right now that we need to be prudent with the balance sheet. That's our number two priority once we've paid off the dividend. So, we're just going to announce one quarter ahead. So, in 2Q, when it comes to make the decision with the board, we'll think about that first half surplus. We'll be thinking about the 60/40. And we'll have an eye towards the future oil price and environment and refining conditions we see in the second half of the year. Bernard Looney: Thomas and Murray, a question I got from the media this morning is somehow a suggestion that these $500 million of buybacks in the second quarter aren't really buybacks or words to that effect. And, of course, they are real buybacks. We've been issuing shares for employees over the last decade. And in fact, the shares that we'll be buying back in the second quarter were issued in the first quarter. So, I think an equity investor would look at that as a very positive thing. And I just wanted to clarify that. But I know you're all very much aware of that on this call. Craig Marshall: We'll take the next question from Jason Kenney at Santander. Jason? Jason Kenney: Congratulations on the gas marketing and trading result and the delivery of Raven too. Can you remind us about the overall support for cash flow from new project startups including Raven by 2022 versus I think it was 2019 when it was first announced, the upsides thereof because of the stronger oil macro in year-to-date? Second question – and sorry, this is a bit left field – is bp looking at or has it considered turning its access to mature or late life upstream resources into in situ, clean hydrogen production assets? And if not, is there a reason why? Bernard Looney: On the projects, one, I think Murray dive in and help me out. I think we said we'd do 900,000 barrels a day of new production by the end of 2021. We're at about 770,000 barrels per day. Raven has just come online. It's running at about 600 million a day today, on its way to 900 million to a billion through the rest of the year. We got the second project on in India. Satellites project. Reliance has done a very good job there. They're the operator. So, that's come online. That's a good piece of business for us. And I've actually looked out to the end of 2023. We've got 14 more projects to come online, actually through the end of 2023. And some big ones in there, not least Mad Dog phase 2 in the Gulf of Mexico. And you'll have seen the photograph of the Argos facility having made its 16,000 mile trip around the world and ending up in Texas there in the last few weeks. So, a big milestone. All the wells are pre-drilled there. That's kind of 65 mbd net type of business. So, helping the GoM approach that 400,000 barrels a day from the GoM that we talked about some time ago over the coming years. Tangguh expansion. Some great projects to come on in the next couple of years as well, all supporting an increase in cash. And Raven, in particular, quite leveraged there. Mad Dog. Tangguh expansion, obviously, very, very leveraged, as well. You can clarify if that helps you or not, but a good sweep. Murray, anything you'd add on the projects? Bernard Looney: Jason, I don't know if you're thinking about the 35% higher margin that we talked about from our major project suite. You have to go way back in time, back to 2015, where we talk about this 900 mbd of projects coming online as a 35% higher margin than the existing base business. I think we upped that to 2016. And Craig could clarify that after, but the 35% higher margin continues, and particularly this wedge coming through now for Raven, Mad Dog phase 2 and Tangguh train 3. Three very, very large projects with very high margins. Bernard Looney: And on hydrogen, on your left field question as you called it, I don't think it's left field. It's a good question, Jason. Look, we look at all options for all of our assets. And clearly, if we can take advantage of a traditional asset and a late life asset and somehow take advantage of the transition, then we will do that as those opportunities arise. You can certainly see that potentially in the case of carbon capture and storage, where in many ways, we'll be doing in Teesside here in the UK, what I call, taking the carbon back, the carbon that was taken out of those reservoirs, we'll end up putting it back into some of those reservoirs and hydrogen will be part of that solution. So, we continue to look at sort of all options and all uses for the assets that we have and are particularly interested if we can take advantage of the transition. And what you see us doing here with hydrogen and carbon capture in the UK is one such example in the southern North Sea. So, hopefully, that helps, Jason. Craig Marshall: We'll take the next question from Lydia Rainforth at Barclays. Lydia Rainforth: Two questions, if I could. The first one, just on CapEx, as you move into phase 2 and clearly the CapEx numbers were going to move up as well, so that $14 billion to $16 billion. I was just wondering how you're thinking about that and whether you see opportunities that you'd want to accelerate because of where the net debt numbers have got to? And then secondly, just on the US side and the electricity side, I think there were just reports yesterday that bp has applied for a retail license there. And in terms of that, is that a change to you actually wanting to have customers now on the electricity side? Because I think in the past, you've said that it wasn't something that you really thought would be needed. Bernard Looney: Yes, indeed, this FERC application has raised some chatter in the media and amongst people. I guess the first thing to say is there's no change in strategy. We're certainly after customers. But our focus is predominantly on commercial and industrial customers. So, that's where our focus has been and that's where our focus will remain. So zero change in our strategy and our approach. This, you should think of as a local team, taking a local option. I actually wasn't personally aware of the application, if that gives you a sense of the significance of it inside the company, one of many things that I'm sure are happening around the world each and every day. So, just think of it as optionality, but not a change in strategy in any dimension at all. So, we can talk more about that later if you want to. But no change to our strategy, commercial industrial being our focus on customers. Secondly, on capital, we have moved to phase 2. Phase 2 does imply $14 billion to $16 billion of capital guidance. I think the key word that I would draw our attention to is discipline. I think it's desperately important for us that we both exercise internally, and demonstrate to the market, discipline as we go through this transition. And, of course, uncertainties remain, as Murray said, and the world recorded its largest number of COVID cases ever on Sunday. So, while those of us here in the UK and the US may think we're coming out of the pandemic, that does not mean that the world is coming out of the pandemic. So, that's why we made the decision to not change our capital guidance for this year. It remains at around $13 billion. And as we look to next year, we'll assess the situation as we approach the end of the year and make a choice within the framework that's out there. But we are very, very focused. Murray use the word prudent. I use the word disciplined on managing this business carefully and well, taking care of cash returns for the shareholders, taking care of that balance sheet, while at the same time being able to transition the company. And I hope that's what people have taken from this morning's results. So, hopefully that helps, Lydia. Craig Marshall: We'll take the next question from Paul Cheng at Scotia. Paul Cheng: Two questions. First, can you guys discuss a little bit more about the economic of your e-charger business? And also, in the configuration, I think that most of them, including your existing service station, how many e-charging in each station? So that's number one. And second question is on your gas and low carbon business. Obviously, very, very strong. And you indicate that is exceptional trading. So, any kind of maybe – trying to understand, what is the underlying oil and gas operating performance within the context off in the first quarter when you earned $2.3 billion. You said $600 million, $700 million is on the underlying oil and gas operation result? Bernard Looney: I'm going to give the trading question to deftly avoid saying what the trading number was to Murray in a moment. But thank you for your question. On charging, we have an ambitious. Last year, we had about 7,500 charge points in the company. We had an ambition to grow that to 70,000 by 2030. Maybe about 25,000 by 2025. Today, we're at a little over 10,000 charge points in the company. The majority of them are in the UK, around 8,500. We've got a couple of hundred in Germany on our retail sites. And we've got about 1,500 in China, which is around the DiDi joint venture. And reminding you that DiDi is the world's largest mobility provider and the world's largest owner of electric vehicles. And that joint venture is going incredibly well, as we build that out. We hope to add about 500 ultra-fast charging points to our Aral network in Germany by the end of the year. I think we'll get up to about 30,000 in China by the end of the decade. And our focus in the UK is around ultra-fast charging, adding about another 1,000 to 2000 by the end of the decade here in the UK. We're also working with fleets. So, it's not just on-the-go. We're working with fleets here in London with Uber. We're their partner here in London. We're also their partner in Houston. And the economics of this game are obviously in their early days. But what's going to drive this is ultimately its utilization in terms of the economics of the actual transaction itself. And of course, we will add to that the economics of the convenience business that we have around it. Utilization is driven by getting people to your site. That's why we've done a deal with DCS, which is all about the in-car dashboard software for vehicles and we want to be in that dashboard, we want to be pointing people to the BP charge stations. And that's what that does. And the second thing that it relies on is making sure that there are electric vehicles out there. And for there to be electric vehicles out there, you need the infrastructure to be out there, which is why we did a deal with Volkswagen, which is looking at 6,000 to 8,000 charging points across Europe over the coming years, and again, putting us in the dashboard of Volkswagen. So, utilization is key. Building the convenience offer around the charging is going to be key. Obviously, it's key on fleets as well. So that's a little bit of a summary of our charging plan for the next couple of years. Personally, I have to say, very excited about it. Very excited about these partnerships with Daimler, with Volkswagen Group, huge opportunity for us. Murray, trading? Murray Auchincloss: Look, I'm not going to satisfy you because I won't give you a number because we don't disclose numbers on trading, I'll give you the secret key that we use, is average, strong, very strong and exceptional. And I think from memory, we've had three exceptional quarters over the past decade or so. The last exceptional quarter we had was second quarter of last year in oil. And obviously, we've had an exceptional quarter on the gas trading side this quarter. We just don't provide numbers. It's a choice that we've made as a board and a management team. And I think if you just look at the run of quarters on gas and low carbon from the disclosures we've put in place, you'll be able to draw your own conclusions from that. Bernard Looney: In terms of the underlying business, I guess, Murray, a way to look at it is the fact that in a normal trading environment, so we're not relying on exceptional trading going forward, but in a normal trading environment, this business is breaking even at $45 in the second half of the year, $3 Henry Hub and $13 RMM. So that gives you a sense of, we don't rely on exceptional trading to deliver the cash performance that we're delivering. We take that out of the equation when we factor in our breakeven for the second half of the year. Murray Auchincloss: And maybe the last disclosure point we can help you with, Paul, as we talked about on September 16 that our trading business makes about 2% on top of ROCE for the business. So, hopefully, that helps you understand scale. Craig Marshall: We'll take the next question from Biraj Borkhataria, RBC. Biraj? Biraj Borkhataria: Two, please. First one is on the $500 million for the share awards. Can you just highlight whether that's the typical run rate for each year? I recall as an announcement a couple of months ago around the new strategy and offering a kind of special round to the employees. I don't know if this is part of that or whether we should expect some roughly $500 million a year for this. Just wondering how to think about the runway there. And then the second question is on some news flow overnight. Flows for Shah Deniz have been halted according to some reports on future contract issues. I was wondering if you could shed some light on that and what's happening there. Thank you. Bernard Looney: On the share awards, what we are referring to is the ongoing equity that's issued on an annual basis. What you're referring to in the announcement a couple of months back is what we call a reinvent share plan. That will not become equity until 2025, I think, Murray. So, this is not in relation to that. And we've been issuing shares as part of our equity plan every year for the past decade, and this is the point in time where we've chosen to buy back those shares and prevent that dilution. So, it's not associated with the reinvent BP share plan, which will become a factor in 2025 and will depend on the price and so on and so forth on that day. Shah Deniz, Murray, anything you have on that? Murray Auchincloss: Nothing I'm aware of. We'll check back in with you in a minute. Bernard Looney: We'll follow back up with you, Biraj, on that. And I think just on the previous question around gas and low carbon as well, you'll also have seen production growth in the quarter as we've got – coming out of maintenance, but importantly as Raven has ramped up, and you will also see lower costs in gas and low carbon in the quarter as well. So, not just a trading story, an underlying business improvement story, as well as an exceptional trading result in gas and low carbon. Murray, back to you on Shah Deniz. Murray Auchincloss: I don't know exactly what you're referring to, but we do have a contract for Stage 1 of Shah Deniz that ends with Turkey. That might be what it's talking about. And of course, that's being renegotiated and extended. So maybe there was a press article on the contractual situation, but Shah Deniz is flowing as far as we know. Craig Marshall: We'll take the next question from Irene Himona. Irene Himona: Congratulations on reaching or beating your net debt targets nine months too early. But having done that, you say that you now intend to devote 40% of the new definition of surplus cash to the balance sheet. So, how should we think about what you're trying to achieve with the balance sheet going forward? You don't have a gearing target any longer. And I was wondering, how far you intend eventually to de-gear the balance sheet? And the second question, you used to disclose cash flow and working capital, excluding Deepwater Horizon? Is that still available for us to see, please? Thank you. Bernard Looney: Murray, second question. Murray Auchincloss: On Deepwater Horizon, Irene, it's gone to such a level that it's just not material anymore. In the second quarter when we make our annual payment, we'll give you a disclosure on that payment. I think you know that payment cycle of $1.2 billion pretax, but the overall level has just declined to such a level that we don't disclose it. It's probably somewhere around $150 million, would be my guess. So, it was just an attempt to clean up some of our disclosures. Bernard Looney: And, Murray, why don't you take Irene's first question as well around how far to delever? Murray Auchincloss: Irene, I think it starts from a place of prudent and making sure that we protect the balance sheet and protect our ratings. As Bernard talked about, our first priority is that resilient dividend, our second priority is ensuring that we have a strong investment grade credit rating, having reached our $35 billion net debt target. We obviously work with all three ratings agencies, Moody's, Fitch and S&P. They all describe strong investment grade credit rating are the ratings – the mechanisms for calculation are all quite different. So, it's very hard to give a specific calculation that would emulate what they do. So instead, we're just trying to focus the market on maintaining strong investment grade credit rating across those ratings agencies. We believe out of an abundance of caution due to the oil overhang and the unfolding situation with vaccines and COVID that it just makes sense to continue to de-gear the balance sheet. And so, we've stated with the board this week that 40% of surplus cash flow will go towards the balance sheet. And that's the disclosure we can make at this moment in time. We're not guiding on what future targets might be. But we just think given the uncertainty in the world today, it's very, very sensible that 60% of the surplus goes to shareholders and 40% continues to go to the balance sheet, and we'll reevaluate that at year-end and communicate appropriately at year-end. Craig Marshall: We'll take the next question from Jon Rigby at UBS. Jon Rigby: Can I just go back to the gas trading figure – or not the figure, but the occurrence. Can you just talk a little bit about what happened – this is just basically sort of serendipity, just happens to be the way you're positioned structurally benefited from Uri or was there in-the-moment adjustment to capture excess returns? And if there is, and this is probably the crux of my question, is that always going to be asymmetric, i.e. that you can always gain, but you can avoid the same kind of exceptional losses? I guess what I'm really concerned about is how much risk and how you're managing that risk in the gas business. The second question, just on the comments that you made about electrification. Two things, I think. One is the question around the relationship you have with the OEMs. Is that something that's unique to you? Or can they be replicated by competitors? And then, just sort of picking up on that and then the bp pulse comment, it just occurs to me that when you look at those things, if indeed these are some common agreements, how can you differentiate the supply of power to cars and not just see it commoditized, if indeed you have the same relationship with OEMs and you're providing power to cars without the non-fuel side of the business? I'm still struggling with this concept that the electrification of the transportation fleet leads to you being able to expand your margin in the convenience space. Thanks. Bernard Looney: I'll say a few words on Uri and North America and let Murray talk about specifics around risk and so on. On electrification, the deal with Volkswagen places bp in the dashboard, and no one else. So that's very, very clear. That's where you will get directed to a bp charge point in Europe. That is true of Daimler today or Mercedes Benz actually here in the UK today as well. So, these deals are differential in that regard. And the deal with DCS will obviously put us in a prominent position on where you get directed. So, that's number one. How do you differentiate an electron from an electron? On the back of that, you differentiate it by the experience, quite frankly. If you can charge your car to go 100 miles in 10 minutes, I think that's a differentiated experience. That's why we're focused very heavily on ultra-fast charging. If you have a digital solution that is end to end, that is easy to us, that allows easy payment, that will differentiate you. If you have a loyalty mechanism, which we have and we're growing, that will bring you back, that will differentiate you. And if you wrap that around a convenience offer, which is differential as we think we have here in the UK with Marks & Spencer and as we have in Germany with Aral, that will differentiate you and that's what gets you the utilization, which in turn gives you the returns. So, hopefully, that gives you a little bit of a sense. Is it going to become more competitive over time? Absolutely. No question about it in my mind. And the rent will move around from maybe early on. It will be the electrons and over time will shift to the to the total offer. So, it will become more convenient. And we're preparing for that without question. But I absolutely believe that there's an opportunity to provide a differentiated service in this space. So, that's a little bit on the thinking around electrification. On the North America position, I think it is important that people understand that, first and foremost, Texas is not just a market for us, it's our home in America. And we've got thousands of employees, many of whom went without water or power for many, many days, and our first priority was to take care of them as we did, putting some of them up in hotels, providing them with supplies, and so on and so forth. Having done that, we then focused on how we can keep power flowing and gas flowing in North America, or in Texas in particular, during that time. And our teams worked, quite frankly, heroically, 24 hours a day, driving around the city trying to find Wi-Fi at Starbucks stores to keep the machine running, calling tens, if not hundred utility companies, to find if we could offer more ways of getting power and gas to them. So the whole focus was on maintaining as much supply to our customers as we could, operating within the market and obviously doing everything with the utmost of integrity. So that was very much the focus during the period. I have to say I'm incredibly proud of how hard that team worked to do what they did. But your specific question around risk and whether we're taking on too much risk and was it serendipity and so on, I'll leave it to Murray. Murray? Murray Auchincloss: I think the way to think about this is we don't take short and long positions bare or naked. We have offsetting shorts and longs. And the moments in time we're trading, so I'm escaping here to the highest level on oil and gas trading, we make money when we can arbitrage. So, when a price goes up in, say, Asia, we redirect cargoes from one place to the other and we make arbitrage by moving across the different shorts and longs we have. That business' risk managed constantly. You can imagine the complexity of the mathematical models around it. And monitored daily. I get the note that shows us what risk exposure we have and how we're placing risk on and off. So, it's pretty finely managed. We make sure we don't get too short or too long in any particular product for the concern that you just voiced. And I think we have a very, very long history of knowing how to manage these disruptions and doing well. And of course, we had disruptions in the first quarter in Asia and the United States. Bernard Looney: And the only thing I would add, Jon, is that – and very clear delegations from the board in the matter of risk in this space as well, which are actively managed, as you would expect them to be. So, very strong governance in place around things like Empire and so on. So, hopefully that helps, Jon. Craig Marshall: We'll take the next question from Christyan Malek at J.P. Morgan. Christyan Malek: It's going to be back to Q3, 2H buyback calibration. When you look at the variables to calibrate the buyback quantum, I think it's fair to say it's heavily procyclical and the fall prices move just to, say, $70 a barrel, then that suggests you can returns up to sort of two-thirds of your market cap by the middle of the decade. So, while that's clearly a nice scenario to contemplate, I can't help wonder whether, in reality, would you prefer to reallocate excess funds into debt reduction or further debt reduction or acceleration of transition CapEx because I'm just trying to get a sense of how free your free cash flow is against that slide that you've put up on upside around the buyback. The second question on trading. I get that you don't you can't quantify, but given the outsized contribution in Q1, what are the indicators you'd be looking at to get a sense of how the business will perform in future quarters? So, we're contango versus backwardation curve structure, price spreads just to get a sense of the standard deviations given clearly it was outsized in Q1. Thank you. Bernard Looney: Murray, I'll ask you to comment on trading and maybe help me out on the buybacks. Look, I think, guys, it's great that – I think Michele talked about 20% of our share count. I think Christyan is talking about two thirds of our market cap by the middle of the decade. I think it's sort of great that people are thinking like that. And equally, the world is still in the middle of a pandemic. There's a supply overhang. And there's a lot of uncertainty around. So, we are delighted that we have started buybacks today on the back of the hard work of the team over the last 12 months. Been very, very focused on this. And today, we see some of the fruits of that work. But I think we are also very conscious that we just laid our framework out just on August 4, and therefore, it is far too early, in our minds, to be considering any change to any part of that. It's very, very clear. The capital framework, Christyan, within that is very, very clear. And what I am particularly comfortable with is that, even at $13 billion of capital this year, which we will stick to and not increase, we have the ability to do the things that we need to do to transition the business, while generating the surplus cash that enables the buybacks to be, I hope, quite healthy. So, we're taking it day by day. We're taking it quarter by quarter. We've announced $500 million today. We'll check back in at the end of 2Q results. And we'll announce our plan for the third quarter and so on. So, while those uncertainties remain, we remain very focused on taking those decisions on a quarter-to-quarter basis. And secondly, we're not moving or tempted to move from the financial framework that we have just set out. It's a good framework, we think. It gives us what we need. And we're now going to execute on it. Murray, anything you'd add on that? Murray Auchincloss: No, it's very good. Bernard Looney: Anything on trading? Christyan, I'll be careful on what I say here. I don't really want to give up commercial advantage. We have short and long positions when market disruptions occur. We arbitrage between them on a temporal basis as well as a product basis. So, that's the general characteristic of our trading business. I don't think I'm going to go any further in describing what we do commercially. It's just not helpful for the traders if I do that. So, I hope you don't mind. I'll stop there. Bernard Looney: Yeah. And I guess our traders probably wouldn't – would say that there's more to life than serendipity, as Jon said. Craig Marshall: We'll take the next question from Chris Kuplent, Bank of America. Chris Kuplent: I've got two quick questions, please. One, a bit left field. Can you comment on Mexico, which seems to be stepping back a little bit from liberalization of the energy industry? Have you already seen any impact? Are you concerned on your growth expectations and margins in the country downstream? And the second question, I'm afraid goes back to a buyback and your 60% rule. So, just wanted to see whether – okay, you want to be disciplined and cautious for now. Whether still the 60% payout rule I understand correctly, you've highlighted excess free cash flow of $1.7 billion, $500 million of that is going to be allocated to offsetting the employee award scheme, but then you'd still be left with $1.2 billion. So, you could for now already announced a 60% payout of that, which would be quite substantial. So, are you saying you're going to apply that sort of math with a half year under your belt considering your 2Q guidance? Just checking why that rule has not yet been applied? And whether and when it will be? Thank you. Bernard Looney: Let me see if I can have a go. It is 1H. And the reason it's 1H is because we have had a very strong, whatever language you want to call it, first quarter and we have some unusual outgoings in the second quarter, particularly around the Deepwater Horizon. And we have chosen to look at it on 1H basis. And going forward, it will be on a quarter basis, as Murray has indicated. But 1H comes together at the end of 2Q obviously. And we'll announce what surplus there was and what the buyback for the third quarter is there. The $500 million, you can tie it to the $1.7 billion, if you wish, but it is simply a decision that we will no longer dilute our shareholders in this way and that we will repurchase those shares and that's what the basis for that decision is. But the reason for 1H rather than 1Q and 2Q is the unusual nature of strong performance in the first quarter and some unusual outgoing items in the second quarter. Murray? Murray Auchincloss: Just to clarify that, Chris. So, in the second quarter, we will look at the 1H and the outlook for the second half of the year and make a decision, just to be super, super clear. Bernard Looney: And on Mexico. Look, I think there's probably a lot going on in Mexico. I won't get into commenting on the politics and what is happening there. Mexico is important, but it's not like it's the core of our growth strategy in convenience and mobility. The real area of focus really over the coming years is India, where we're going from 1,500 sites to 5,500 sites. And that's not to say that Mexico doesn't matter. Of course, it's a part of the story. But it's not the story. The story in growth markets, in convenience and mobility in particular, is in India, and our plans take account of risks like that in countries in countries like Mexico. And we've drawn up our plans with that risk in mind, Chris. Craig Marshall: We'll take the next question from Peter Low at Redburn. Peter Low: Just one follow-up actually on the phasing of disposal proceeds. Some of the largest outstanding payments relate to Alaska, where at year-end I think you had over $4 billion of assets recognized on the balance sheet relating to loan notes and earn-out provisions. Can you give any additional color on the expected phasing of payments from Hilcorp? Because there's quite a material moving part that your guidance would imply you aren't going to receive much of it this year. Thanks. Bernard Looney: Excellent question, Peter. Murray? Murray Auchincloss: There are two components to it. There's a loan for $2 billion that I think has a five-year duration. So, I think that'll be a choice of does it get paid out early or does it get paid out in five years. And that's obviously a Hilcorp decision. So, that's the first component of it. The rest is through your profit sharing mechanism. I think with the strong prices we're seeing now, you should presume that the balance of payments will occur over the next three, four years. Pretty hard to predict. Depends on the performance of the field, the oil price, and there are ratchets in the sharing mechanism. So, it's pretty hard to predict easily. But you're right to be prudent and assume ratable. Probably over three or four years would be my gut instinct right now. But let's see how it plays out. There are quite a few variables in there, as you can imagine. Production moving up and down. Efficiency moving up and down. Weather moving up and down. Price moving up and down, et cetera, et cetera. So, there's a lot of moving parts in it. Craig Marshall: We'll take the next question from Jason Gabelman at Cowen. Jason Gabelman: I wanted to go back to the EV strategy that you've discussed. You mentioned that utilization-wise economics. And so, I'm just wondering what kind of EV penetration are you assuming in the global market to get utilization up to levels that supports profitability. And given the increase in EV penetration, do you continue to install EV charging points, such that you're kind of frontrunning EV penetration improvement, and so utilization stays low until kind of EV penetration starts to and I was wondering if that's a dynamic that could play out and potentially impact your profitability in that business. Bernard Looney: It's a little hard to hear you. But I think I got your question. And let me see if I can help with the answer. It is this classic chicken and egg. Without the infrastructure, the EVs won't come. Without the EVs, there's no need for the infrastructure, so to speak. But here's what we are seeing. I guess we've got three scenarios in our energy outlook. Business as usual, rapid transition, net zero transition. The rate of EV penetration today is probably one of the few things in the energy outlook that is actually proceeding at a pace that is consistent with somewhere between a rapid and a net zero world. So, it is actually – not the one, but one of the few that is actually proceeding at real pace. And we are seeing that in Europe, in particular. And we're beginning to see it on the coasts in America and we're obviously seeing it very much in China. So, our job is to is to make sure that we build the infrastructure at the pace that is consistent with not having assets that sit there doing nothing and, conversely, that have lines of cars such that nobody is going to buy an EV, and we think we've got that piece about right. It is important that, as we do this, we're directing traffic to our charge stations, which is why these deals with Volkswagen and Daimler and DCS are so important to us because they give us the confidence to invest. They're also why these deals with fleets are so important to us. And that's the deal here with Uber in London. We're looking at Uber in Houston, as well. And we'll continue to build out the fleet offering as well. So, we're trying to get that balance right. It is a growth business. And we need to think of it accordingly. But the world is electrifying light duty transport. I think that is now without question. And we want to make sure that we've got the right infrastructure with the right digital offer with the right convenience offer and that we've got the right partners that allow us to make the most money out of that that we can over the coming years. And so far, so good. I hope that gets to your question, Jason. Craig Marshall: We'll take the next question from Lucas Herrmann at Exane. Lucas Herrmann: Thanks for adding your increasing insight and coherence into integration, the way you're running the business. A couple of quick ones, if I might. In terms of cash flow, working capital clearly worked against you this quarter, but you talk about offsets. Just wondered whether you could indicate whether those offsetting items are likely to reverse through the course of the second quarter. On savings, can you give us any better idea of the profile of savings by division, by business over the course of this year and into next year when you alluded to $1.5 billion of savings in the oil business, but just an idea how things split across the three divisions over time and where we are in terms of capturing those? And, Murray, just a quick one. Sorry, it's a very simple question. I can't see a split at the present time of results by US, rest of the world et cetera, et cetera. Am I waiting for the F&OI or if you decide to withhold those disclosures now? Bernard Looney: No, I think it's coming out tomorrow, to your third question, Lucas. So, I think that'll be out tomorrow. Is that right guys? Yeah. Okay, so that comes tomorrow. On working capital, I'll let Murray talk about it. And he'll probably correct me on the savings question. Just high level, $3 billion to $4 billion of savings by 2023. $2.5 billion by end of this year. $2.5 billion by end of this year is ahead of schedule. So, we'll deliver it this year, in the middle of this year and it won't be an exit run rate. So, that's going well. The program overall is going well. It's focused on the restructuring. It's focused on agile, where we've got 14,000 people now working in agile teams and P&O. And it's focused on digital, which you're familiar with our history in that space. The majority of the savings, as you'll see from the $1.5 billion number, do come from the oil and production operations area because that's where the majority of the workforce is in many regards and where the majority of the cost is. So, it is heavily weighted there. So $1.5 billion of the $2.5 billion is coming from there. And then it's probably – on the remainder, it's probably two-thirds, one-third or maybe two-thirds – 50/50 between gas and low carbon and MS business. So, hopefully, that gives you a little bit of a sense. But the engine room of where the cost is consumed is obviously in the refineries and the production facilities. And that's where the majority of the savings and opportunity quite frankly comes. Murray, on working capital and any offsets? Murray Auchincloss: Lucas, you spotted that little bit. So, working capital did build in the first quarter, $1 billion or so something, I think was the number. Offsetting that was things like variation margin. You remember in 4Q, we had a big variation margin outflow on the gas side. That's come back in in the first quarter as an example. So, the two are largely offsetting. I wouldn't expect too much of a working capital release in 2Q would be my suggestion at this moment in time. And of course, Lucas, you know that it's wickedly volatile, especially with oil price, gas price, refining margins moving around as much as they are right now. So, in a steady state world, between 1Q and 2Q, you wouldn't expect much release. But if there's volatility, then it'll just depend on what happens with pricing. It'll determine which way that goes. Hope that helps, Lucas. Lucas Herrmann: Can I just come back on the cost savings very briefly. The delta between the savings you'll achieve through the course of this year relative to the savings you achieved in 2020, i.e. the benefits you still expect, can you give any insight? Bernard Looney: There are some charges. There are some costs that were deferred from last year because we couldn't get to turn around or something like that. And we're taking those out of that cost saving number because it's a true synergistic cost saving is what we're after, and not simply a deferral of costs. But Murray? Murray Auchincloss: Maybe let me give us a go, Lucas. So, we had $20.9 billion worth of total cash costs in 2019. That's what we're measuring it against. We said originally we'd hit $2.5 billion run rate by the end of 2021. Bernard has just described that probably by 2Q we'll declare victory on that. You can take a look at what our 2020 numbers were. I think there were $18.5 billion. I can't quite – $18.5 billion, yeah. And then, we're saying $3 billion to $4 billion by 2023 relative to 2019. So, hopefully, if you do the math, that will give you the 2019 or 2020. And then we've given you a strong indication of what 2021 is looking like. And just to clean up on allocation between historic upstream, gets about 60% of it, as Bernard talked about, 20% goes to historic downstream and 20% to OB&C, give or take, are the rough numbers I hold in my head for how that will shape up. Hope that helps. You can just take a look at the cost – we can take a look at the cost inside gas and low carbon versus OPO, and that'll give you that historic upstream split. Hope that helped, Lucas. If not, I can follow-up. Craig Marshall: We'll take the third final question from James Hubbard at Deutsche Bank. James Hubbard: Two questions. We've seen peers build solar and wind projects and then sell on stakes in various levels of aggressiveness, some in an almost private equity like manner. And then there's other people that build and keep it. And I'm wondering, when you talk about your 50 gigawatts by 2030, where do you sit on that spectrum? Do you plan to build it and keep all of that because that's your future earnings? It's going to replace oil as it declines. Or will you be open at some level of aggression to taking opportunities to sell down stakes should the market allow you to make a quick return as it were? So, that's one question. And the second one is back to EVs. It seems to me as an electric car owner, the model that works right now is you park, you plug in, you charge for 10, 20, 30 minutes, you get a coffee, sit down, have a donut, whatever, go to the loo. And it doesn't seem that the average BP petrol station, even at the UK service stations, fits that model where even if it's only 10 minutes, either people are going to sit in the car for 10 minutes or wander around the aisles buying chocolate for 10 minutes. But ideally, they have somewhere to sit and have a coffee. And I'm wondering if – you've obviously looked at that. Do you agree? And if so, how will you adapt to that kind of model? Or do you just think that charging will get so fast that will become redundant? Bernard Looney: I don't own an EV yet. So, I need to get with the experience. I think our place is actually pretty well suited to charging, but you're obviously more closer to it than I am. But the Marks & Spencer, the convenience offer that we make, people will want to go and grab a coffee and sit down and have a donut as you say, but they may also want to do a bit of a shop. We're seeing our gross margin in that business up 10% year-on-year, continuing to be a very strong part of the business. And we're seeing the same by the way in Germany, with the REWE with Aral. So, I do think our experiences that our convenience sites are actually well suited to going and getting that coffee. And of course, if there's somewhere to sit, even better. But that is the experience that we have today. And it seems to be working. Murray, add anything on that, if you wish. And then, on the farm downs, which I think is what you're referring to, it's a good question. We're not in this for a quick return, so to speak. Solar is a farm down business. So that model is very much a farm down business. And that's what Lightsource bp does, and I have to say does exceptionally well. The offshore wind business we feel is different. The option exists to farm down and many people suggested that we overpaid for those Elizabeth licenses in the Irish Sea. And as I said to somebody this morning, if I had a pound for everyone who wanted to buy into those leases having won them, we'd be doing quite well. So, there is a very strong market for these assets. But as you suggest, there is the choice between earning a quick buck, so to speak, or actually retaining those for long term earning streams. And in offshore wind, I think we're probably more in the latter category than in the former category. But we have that option. And of course, there are strategic reasons that you may want to bring in a certain partner for a certain reason. That goes beyond the pure financial. So, solar very much in that mode. Offshore wind, I think we've got the assets to have the discussion and the options which is great and more work to do down the road. Murray, anything to add on either? Murray Auchincloss: Maybe just on the electrification. Hammersmith roundabout is a good place to go look at. I travel by it once a day. It seems like EV charging bay is always full. Retail always full. Carwash always full. I think, over time, the EV charging will increase in pace, given technology advancements. And we think that at some moment in time, you'll be doing five or six minute charges, which about equates to what it takes to fill up your tank with gasoline. So, it's a perfect chance to go in and get a sandwich or chocolate bar or coffee. So, we think over time it'll emerge towards that. And as I look at Hammersmith, it's awfully busy. And I think it's a great example for all of us to go feel and touch and see why we believe we can move from fuel and convenience to charging and convenience over the coming decades in the UK and help the Prime Minister and his aspirations to move towards a low carbon economy. Craig Marshall: I think, James, maybe a couple of things from me. We are starting to roll out these ultra-fast charging hubs with convenience as well, which are much more dedicated to ultra-fast charging. So, certainly, I think an evolution in the model there as we think about it. The benefit we have with the access to the customer network as we start to understand customer preferences, needs, et cetera. So, we'd be looking at that. And I think Emma Delaney and the team at the Capital Markets Day laid out a sense of how we see that model developing over time. So, as an EV user yourself, I think you'd recognize this model is going to evolve. So, if you haven't go back, take a look at some of what some of what Emma and the team rolled out at the CMD. And the last thing on – I guess I'll just reiterate this. I'm sure you know. The 50 gigawatts is developed to FID, which basically, as Bernard said, implies that we retain optionality from a value point of view as to what decision we take around farm down depending on the business. But that 50 gigawatts, as I say, is developed to FID. It's not held operating in our hands. We will take the real penultimate question from Oz Clint at Bernstein now. Oswald Clint: Two questions, please. Convenience and mobility, just picking up on some of the stuff you've mentioned. 300 strategic sites up over the last year. 1,400 new retail sites in growth markets. And the convenience margin is up over 10%. But we've also had the lockdowns and I guess a lot of people using the rest of your 19,000 footprint. So, I just wanted to get a sense of how much the new locations, the new strategic centers are really driving that 10% plus margin uplift and how you're feeling about that sustainability at this point going forward? Secondly, just back on UK wind, it's a helpful slide you have this morning and you mentioned people saying you overpaid and you also asked our feedback. But there's a lot of renewable companies out there saying, yes, you overpaid. There's even other chief executives in the press saying you overpaid, which, frankly, isn't helping you convince investors. I see renewable companies announcing returns on projects to one decimal place. So, I'm really asking, why can't you just put some of these comments to rest and say what you think the internal rate of return is on such a project? It's not the trading business. Why do you have to be so secretive? Bernard Looney: On the 10% increase, I think retail fuel volumes are down about 9% year-on-year, aviation is down 45%, actually. But on the 10% gross margin on the convenience, it's the size of the basket, but more importantly, it's the value of the basket. And it's also premium fuels driven during this process. And this is a business that's got track record of growth. And I think we're optimistic. Emma's optimistic that we'll continue to grow it. So, it's not necessarily just about those new sites or those new conversions. It is also about what we are actually giving people in those sites, which is the quality of that basket and also the fuel offering – the premium fuels that we're giving them. So, more on that to come. And on the offshore wind, one, look, it's easy to get dragged into he said, she said, and I'm probably not going to do that other than to say, look, we were successful. We were the winning bidder. We weren't alone. We have a partner who's very experienced in this space, EnBW. So, we didn't do it on our own. We should also point out that we were prepared to bid on leases in the North Sea, same team, same partnership, same methodology, obviously, different environment, and we would not have won those leases on the other side of the British Isles in the North Sea. So, that should give you a sense that we were grounded in reality, so to speak. And as I said, lots of people coming in and wanting to buy. We can publish a return to a decimal point, but it's not going to be right because I think it's simply going to – I hope and I believe actually, Oz, get better over time. And it sort of gives a level of accuracy that isn't consistent with the range of opportunities that we have to create additional returns in that business. And therefore, I worry personally that we'd end up underselling the value of the business. And when I talk about optionality, I'm not just talking about the fact that we're going to bring our decades of experience and pretty strong project management experience to the offshore wind, that we're going to bring our operating experience, both offshore and onshore wind farms and our digital tools, which gives us uptime. And we bring our UK supply chain and we bring our UK relationships. But I'm also talking about, the point we made in the script today, which is about linking it into the charging business. And that could be up to half, if not more. Murray thinks it could be two-thirds of the power demand from pulse could be offset there, and we just announced the hydrogen deal. So, we can take power over to the Teesside place and build hydrogen over there. So, the sort of the optionality in an integrated energy company around an anchor asset like Elizabeth is, or what we call Elizabeth, is absolutely and utterly fantastic. And the more we learn and the more we do, the more it sort of builds and grows. So, other than to say, look, I am supremely confident in our ability to deliver 8% to 10% returns from that project, personally, over time, I think it'll get better than that because of the optionality that we have. And we're just going to crack on and execute on it and give people the steps and the milestones along the way that's saying we can execute and people will judge for themselves what they think is right. But very, very pleased with it, Oz, and people will say what they want to say. And we're different. We leave them to it, so to speak. So, I hope that helps. So, we won't publish a decimal point return. I'm sorry. But I know you're supportive of the transaction. But it's just there's just too much optionality. And quite frankly, there's too much upside. And we'll end up under-selling, undervaluing an asset in my own view. Murray, you disagree? Murray Auchincloss: No, it's right. The way that I relate to this thing, guys, is 100 years ago, people discovered oil fields, built refineries to process it, built service stations to sell it to consumers. All you're seeing with the offshore wind is the rebuilding of that 100 year business. So, the upstream isn't an oilfield anymore. It's a wind farm. It takes it through – we could choose to go through the utility or we can go direct ourself. The plants that we have will be hydrogen plants that are green hydrogen over time, and the service stations are the service stations. So, I think it's the recreation of a business that we've known for the past 100 years on oil and gas. And all you can say about the businesses that we build like that is that the integrated energy companies have made material returns
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BP’s Q4 Profit Plunges, but Shareholder Payouts Stay Intact

BP (NYSE:BP) reported a sharp decline in fourth-quarter profit as weaker refining margins, lower energy prices, and rising costs weighed on earnings. Despite the downturn, the company reaffirmed its commitment to shareholder returns with a dividend payout and a fresh buyback program.

For the final quarter of 2024, BP posted an underlying replacement cost (RC) profit of $1.2 billion, a steep drop from the $3 billion reported in the same period a year ago. The company also recorded a reported net loss of $2.0 billion, a significant swing from the $0.2 billion profit in Q3 2024.

Multiple factors contributed to the weak performance, including lower refining margins, sluggish fuel sales, and scheduled maintenance activity at refineries. While BP’s gas and low-carbon energy division saw an improvement from the prior quarter with $2.0 billion in underlying RC profit, earnings remained below year-ago levels. Meanwhile, the oil production and operations segment reported $2.9 billion in profit, supported by lower exploration write-offs but hampered by weaker realized prices.

Notably, BP’s customers and products division posted a $0.3 billion loss, as lower fuel margins and seasonal demand softness dragged on performance.

Despite the earnings slump, BP maintained its 8-cent-per-share dividend and announced a $1.75 billion share buyback for Q1 2025, underscoring its focus on returning capital to investors even in a challenging environment.

BP's Q4 Earnings Analysis: A Mixed Financial Health Amid Strategic Overhauls

  • BP's earnings per share (EPS) missed estimates, coming in at $0.44 against the expected $0.56, while revenue slightly exceeded expectations.
  • The company's underlying replacement cost profit fell sharply to $1.169 billion, the lowest in four years, due to weak margins in its refining business.
  • Financial ratios such as the price-to-earnings (P/E) ratio and debt-to-equity ratio indicate a mixed financial health, with strategic changes planned to improve future growth.

BP (NYSE:BP), a leading player in the global oil and gas industry, recently reported its earnings for the fourth quarter of 2025. The company, known for its extensive operations in energy production and refining, faces competition from other major oil companies like Shell and ExxonMobil. BP's earnings per share (EPS) came in at $0.44, missing the estimated $0.56, while revenue slightly exceeded expectations at $45.75 billion against the forecasted $45.65 billion.

The company's underlying replacement cost profit, a key measure of net profit, fell sharply to $1.169 billion from $2.99 billion in the same period last year. This decline was slightly below the analyst forecast of $1.2 billion, as highlighted by Reuters. The drop in profit, the lowest in four years, is attributed to weak margins in BP's refining business. This has raised concerns among investors, especially with activist investor Elliott Investment Management reportedly building a stake in the company.

BP's financial health shows a mixed picture. The company's net debt increased by 10% year-on-year, reaching nearly $23 billion. Despite this, BP's capital expenditure for the quarter decreased to $3.7 billion from $4.7 billion the previous year. CEO Murray Auchincloss has announced plans to reset the company's strategy, focusing on cost-cutting and strategic overhauls to improve cash flow and returns.

BP's financial ratios provide further insight into its current standing. The price-to-earnings (P/E) ratio is approximately 34.54, indicating the price investors are willing to pay for each dollar of earnings. The price-to-sales ratio is about 0.46, suggesting investors pay 46 cents for every dollar of BP's sales. The enterprise value to sales ratio stands at around 0.63, reflecting the company's total valuation relative to its sales.

The company's debt-to-equity ratio is approximately 1.06, showing a balanced use of debt and equity to finance its assets. BP's current ratio is around 1.22, indicating its ability to cover short-term liabilities with short-term assets. Despite the challenges, BP's earnings yield of about 2.90% represents a return on investment for shareholders, highlighting the company's potential for future growth amidst strategic changes.

BP p.l.c. (NYSE:BP): A Glimpse into the Future of Global Energy

  • The consensus price target for BP p.l.c. (NYSE:BP) has increased from $46.38 to $50 over the past year, indicating a more optimistic outlook from analysts.
  • Despite a weak Q4 earnings report, BP's investments in renewable energy and digital transformation are seen as key drivers for its future growth.
  • BP trades at 3.1 times EBITDA and offers an approximately 15% free cash flow yield, positioning it as an attractive investment in the energy sector.

BP p.l.c. (NYSE:BP) is a global energy company with a wide-ranging portfolio that spans natural gas production, biofuels, wind and solar power, and de-carbonization solutions. The company also plays a significant role in the convenience and mobility sector, providing fuels, lubricants, and electric vehicle charging facilities. BP's operations cover both upstream and downstream activities, and it is actively investing in alternative energy and digital transformation to stay competitive in the evolving energy landscape.

Over the past year, there has been a noticeable change in the consensus price target for BP's stock. A year ago, the average price target was $46.38, but it has since increased to $50 and remained steady over the past month. This upward trend suggests a more optimistic outlook from analysts regarding BP's stock performance. Despite BP's recent weak quarter, with Q4 earnings being the lowest since late 2020, the company is still seen as a primary value opportunity among global majors.

BP's strategic investments in low carbon and renewable energy solutions, along with its efforts in digital transformation and advanced mobility, may be contributing to the increased confidence reflected in the stock's target price. Despite underperforming compared to its European and US peers since 2021, BP trades at 3.1 times EBITDA and offers an approximately 15% free cash flow yield. This positions BP as an attractive investment option for those seeking value in the energy sector.

The company's upcoming investor day in February is highly anticipated, with expectations that management will maintain a cautiously optimistic outlook, similar to Shell's approach. Analyst John Freeman from Raymond James has reiterated an Overweight rating for BP, with a price target of $36. This indicates that while there is optimism, there are also cautious considerations regarding BP's future performance.

BP's Earnings Beat Sparks Investor Optimism

  • BP (NYSE:BP) announced earnings that exceeded market expectations.
  • The company faces challenges such as weaker refining margins and the impact of lower oil prices.

BP, a leading global energy company, announced earnings that exceeded market expectations. BP operates in a highly competitive sector, facing rivals like ExxonMobil and Chevron, making its earnings beat a significant achievement.

Despite the upbeat news on earnings, BP has expressed concerns over weaker refining margins and the impact of lower oil prices compared to previous years. Refining margins are crucial for energy companies as they measure the profit made from refining crude oil into usable products like gasoline. A decrease in these margins can significantly affect a company's profitability. Similarly, lower oil prices reduce the revenue generated from selling crude oil, which is a primary income source for companies like BP.

The company's caution stems from the volatile nature of the energy market, where prices and margins can fluctuate widely due to geopolitical events, changes in supply and demand, and other economic factors. These challenges underscore the importance of BP's ability to exceed earnings expectations despite facing headwinds that could dampen profitability. This could make investors more optimistic and lead to short-term price gains in the coming days.

BP Soars on Strong Q2 Earnings and Debt Reduction

BP Soars on Strong Q2 Earnings and Debt Reduction 

Great news for BP investors! The stock price surged after the company reported impressive second-quarter results and significant debt reduction. Here's a closer look:

BP's Winning Formula:

  • Strong Financial Performance: BP exceeded analyst expectations with robust operating cash flow and a healthy net income for Q2 2024.
  • Debt Reduction Focus: The company made significant progress in reducing its net debt, further strengthening its financial position.
  • Dividend Increase and Share Buybacks: BP announced a 10% increase in its dividend and confirmed its commitment to ongoing share buybacks, demonstrating confidence in its future.

What Does This Mean for BP Stock?

The positive earnings report and debt reduction efforts are driving investor optimism for BP. While past performance doesn't guarantee future results, this news could be a positive sign for the stock price in the long run.

Should You Invest in BP?

Before making any investment decisions, it's crucial to conduct thorough research:

  • Company Analysis: Deep dive into BP's financial statements, business model, and future growth prospects.
  • Energy Market Outlook: Consider the overall energy market conditions and potential risks or opportunities specific to the oil and gas sector.
  • Portfolio Diversification: Ensure your portfolio is diversified across sectors and asset classes to mitigate risk.

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Enhance your BP investment analysis with FMP's Company Rating API:

  • Data-Driven Insights: Get an objective rating for BP based on its financial statements, discounted cash flow analysis, and key metrics.
  • Beyond the Headlines: Uncover the deeper story behind BP's financial health, growth potential, and risk profile.
  • Informed Investment Strategy: Utilize the API's data to make well-informed investment decisions regarding BP or any other company you're considering.

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While BP's Q2 results are positive, remember that the market is dynamic. By conducting thorough research, utilizing FMP's Company Rating API, and considering your investment goals, you can make informed investment decisions regarding BP or any other company.

BP Shares Gain 5% Following Q4 Beat and Accelerated Share Buyback Announcement

BP (NYSE:BP) shares climbed more than 5% pre-market today as the oil and gas giant exceeded Q4 profit expectations and announced an increase in share buybacks.

The company reported an adjusted EPS of 17.77 cents for the fourth quarter, a decline from 26.44 cents the previous year but above the 16.27 cents consensus estimate. Its adjusted net income fell 38% year-over-year to $2.99 billion, surpassing the anticipated $2.76 billion.

For the entire year, BP's underlying replacement cost profit was $13.8 billion, a sharp drop from the previous year's record $27.7 billion, slightly below the forecasted $13.9 billion.

BP set its total capital expenditure target at around $16 billion for the current fiscal year. The company also increased its quarterly dividend to 7.27 cents per ordinary share for Q4 2023, up 10% from the previous year.

Moreover, BP is speeding up its share repurchase program, planning to buy back $1.75 billion in shares before its Q1 earnings release, with a total of $3.5 billion in buybacks targeted for the first half of the year.