BP p.l.c. (BP) on Q3 2021 Results - Earnings Call Transcript

Craig Marshall: Good morning, everyone, and welcome to bp's Third Quarter 2021 results presentation. I'm here today with Bernard Looney, Chief Executive Officer, and Murray Auchincloss, Chief Financial Officer. Before we begin today, let me draw your attention to our cautionary statement. During today's presentation, we will make forward-looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to factors we note on this slide and in our UK and SEC filings. Please refer to our Annual Report, Stock Exchange announcement and SEC filings for more details. These documents are available on our website. I'll now hand over to Bernard. Bernard Looney: Thanks, Craig and welcome everyone. It is great to have you join us. I'm going to start with a summary of our results before Murray takes you through the detail. I'll then share some operational and strategic highlights and we will then take your questions. Today, we are reporting another quarter of strong, strategic delivery and underlying financial progress. Our businesses are running well, maintaining their focus on safe and reliable operations. Our portfolio is capturing the benefit of the strong commodity environment. And our overall results show how our continued focus on performing while transforming is delivering value for our shareholders today, strengthening our balance sheet, growing distributions, while at the same time investing with discipline in our strategic transformation. For the quarter, underlying replacement cost profits was $3.3 billion. Operating cash flow was $6 billion, which includes a working capital build of $1.8 billion and net debt fell for the sixth consecutive quarter to reach $32 billion. Next, to distributions, where we continue to deliver on our commitment to shareholders. A resilient dividend is our first priority within this financial frame. And for the third quarter, BP has declared a dividend of $0.0546 per ordinary share unchanged following the 4% increase announced with our second quarter results. We have completed the $1.4 billion share buyback from first half 2021 surplus cash flow and have today announced plans to buyback $1.25 billion of shares, which we expect to complete by the time of our fourth quarter results. We've also seen continued momentum across each of our strategic focus areas. And I'll come back to talk about these and other highlights later in the presentation. But, for now, let me hand you over to Murray. Murray Auchincloss: Thanks, Bernard. Let's begin with the macro environment. Oil prices have continued to increase, with Brent rising 7% to average $74 in the third quarter, moving above $80 in recent weeks. This reflects a strong rebound in oil demand as the impact of COVID eases as well as the measured increases in OPEC+ supply. As a result, inventories have reduced back towards pre-pandemic levels. As we look ahead to the end of the year, we expect oil prices to be supported by continued inventory drawdown with the potential for additional demand from gas to oil switching. Gas markets were very strong in the quarter as well. Henry Hub averaged $4.30 up from $2.90 in the second quarter, as capital discipline continued to limit US gas production growth and Hurricane Ida led to production curtailments. In international markets average NBP and JKM prices rose by around 85% compared to the second quarter. This reflects a tight LNG market, driven by strong Asian demand growth, LNG supply outages, depleted European gas storage and uncertainty of Russian pipeline imports. We expect gas markets will remain tight during the period of peak winter demand. Looking to refining, the increase in industry refining margins was supported by Hurricane Ida related disruptions in early September. In the third quarter, bp's average RMM rose by 11% to $15.20. This is mainly due to seasonal demand rebound. Realized margins also benefited from wider North American heavy crude oil differentials. In the fourth quarter, industry refining margins are expected to be lower compared to the third quarter driven by seasonal demand. Moving to results. In the third quarter, we reported an IFRS loss of $2.5 billion. After adjusting items of $6.3 billion, we reported an underlying replacement cost profit of $3.3 billion, compared to $2.8 billion last quarter. Adjusting items included fair value accounting effects of $6.1 billion, primarily due to the exceptional increase in forward gas prices towards the end of the quarter. Under IFRS, reported earnings include the mark-to-market of hedges used to risk manage LNG contracts, but not the physical LNG contracts themselves. This mismatch at the end of the third quarter is expected to unwind if prices decline and as cargoes are delivered. The underlying result removes this mismatch consistent with how bp risk manages its LNG portfolio. Turning to business group performance compared to the second quarter. In gas and low carbon energy, the result benefited from higher gas realizations, and a strong gas marketing and trading result. In oil production and operations, the result reflects higher liquids and gas realizations, but was impacted by the effect of Hurricane Ida on our Gulf of Mexico production in the quarter. And in customers and products, the products business returned to profit driven by a higher refining availability and throughput, enabling the capture of the stronger refining environment, partly offset by increased energy prices. The result also benefited from a higher contribution from oil trading. And the customers result was supported by higher retail and aviation volumes, strong convenience and fuel margin management, offset by higher wage costs and increased digital marketing investment. For the third quarter, bp has announced a dividend of $0.0546 per ordinary share payable in the fourth quarter. Turn into cash flow and the balance sheet. Operating cash flow was $6 billion in the third quarter. This included a working capital build of $1.8 billion after adjusting for inventory holding gains and fair value accounting effects. Capital expenditure was $2.9 billion, and disposal proceeds were $300 million, bringing year-to-date receipts to $5.4 billion by the end of the third quarter. We now expect to realize disposal proceeds of around $6 billion to $7 billion by the end of 2021. Reflecting the strong underlying cash flow delivery, and after working capital movements, third quarter surplus cash flow was $900 million. With second quarter results, bp announced the intention to buy back $1.4 billion of shares from surplus cash flow generated in the first half of 2021. This program has been completed with $900 million executed during the third quarter. Recognizing these factors, net debt fell for the sixth consecutive quarter to reach $32 billion at the end of the third quarter, and has now been reduced by $7 billion since the start of this year. Our financial frame has established a clear set of principles and priorities for our uses of capital. These remain unchanged with a resilient dividend our first priority. Our second priority is to maintain a strong investment grade credit rating. I'm pleased with the progress we've made on debt reduction. And we continue to plan to allocate 40% of 2021 surplus cash flow to further strengthen the balance sheet. Despite the backdrop of higher commodity prices, we remain focused on capital discipline, and our third and fourth priorities for capital expenditure remained unchanged. We continue to expect to spend around $13 billion in 2021. Finally, subject to maintaining a strong investment grade credit rating and considering the cumulative level of an outlook for surplus cash flow, the Board remains committed to using 60% of 2021 surplus cash flow for share buybacks. Recognizing third quarter surplus cash flow of $900 million and reflecting our confidence in the outlook, bp intends to execute a further buyback of $1.25 billion prior to fourth quarter results. And we expect to outline plans for the final tranche of buybacks from 2021 surplus cash flow with our fourth quarter results. Based on bp's current forecasts at around $60 per barrel, Brent and subject to the Board's discretion each quarter, we continue to expect to be able to deliver a buyback of around $1 billion per quarter on average, with upside at higher prices and to have capacity for an annual dividend increase of around 4% through 2025. Taken together, we remain focused on delivering strong per share growth consistent with our proposition to shareholders. Thanks very much for listening, Bernard, back to you. Bernard Looney: Thanks, Murray. So turning now to look at operational and strategic highlights, and we continue to make disciplined progress underpinning our confidence in the targets we laid out last year. Looking first at hydrocarbons, we're building a higher quality and more resilient business, growing EBITDA from a smaller, higher margin and price leveraged portfolio, whilst at the same time reducing emissions. In 2016, we first outlined an ambitious plan to grow production from new high margin major projects. And with two major projects coming online in the third quarter Thunder Horse South Expansion Phase 2 and Matapal, we have now hit our target of delivering 900,000 barrels of oil equivalent per day by 2021. This, I hope you will agree, is a fantastic achievement and a great example of us doing, as we say. Executing our strategy and building real momentum, 34 projects in 11 countries over 250 million hours with more than $36 billion of capital expenditure net to bp and all executed on average, on schedule and importantly, around 15% below budget. Why is this so important? First, these high margin barrels will help drive EBITDA growth as we high grade our portfolio. And there is more to come. In 2022, we plan to start up the high margin Mad Dog Phase 2 Project in the Gulf of Mexico, further expanding our footprint in one of our core regions with substantial price leverage, and we expect to further drive margin and returns by prioritizing projects around existing infrastructure. Second, as we've discussed before, our single operating model is allowing us to leverage these world class project execution capabilities across our existing business and into new areas. And it is also helping drive resilience across our operating assets, improving reliability, lowering emissions, and maximizing value. Compared to the second quarter, upstream plant reliability improved by around 1% to reach 95.4% underpinned by strong performance in some newer major projects such as Raven in Egypt. Refining availability was also higher, up 2%. We continue to expect further improvement towards our 2025 target of 96% for both reliability and availability, and we are in action reducing emissions. Take BPX as an example. Through focused investments since acquiring the assets, the team has cut Permian methane flaring intensity by over 90% to less than 1% by the end of the third quarter 2021. These actions are key to our BPX strategy, helping improve the sustainability of our operations, while also yielding attractive returns. In convenience and mobility, we aim to nearly double EBITDA by 2030 from around $5 billion in 2019 and generate returns of 15% to 20%. And we continue to make strong progress across our three focus areas. First, we are redefining our convenience offer. Compared to the same quarter last year, we have increased the number of strategic convenience sites by 8%. Our BPme customers, who typically spend twice as much as non-app users, have increased by around 50%. And since 2019, our basket value is higher in key markets. For example in the UK, and in the US at Thorntons, it has grown by more than 20%. Together these factors have underpinned our record year-to-date convenience gross margin delivery. Next in next-gen mobility, nearly half of our EV charging points are now either rapid or ultra-fast. Our utilization rates are increasing with electron sales 45% higher than last quarter. And our Digital Charging Solutions partnership with Daimler and BMW Group completed in October. This is expected to connect EV drivers across Europe to our network of charging points, drive up utilization rates and increase footfall at our convenience stores. And finally, we continue to expand in growth markets. In the last few weeks, Jio-bp, our Indian fuels and mobility joint venture with Reliance open their first mobility station providing a fully integrated customer offer including high quality fuels, EV charging points, tailored convenience offers, including our Wild Bean Cafe and Castrol products and services. The Jio-bp Brand builds on a well-established partnership in India, further combining the knowledge, expertise and experience of BP and Reliance Industries to create an unmatched and distinctive customer experience. The existing network of 1400 Reliance fuel stations will be rebranded to Jio-bp in the coming months. And in China, our record year-to-date underlying earnings were driven by the strength of our Castrol brand, and our convenience and mobility businesses. Finally, low carbon, where we continue to build capability and scale with capital discipline and a focus on returns. In renewables, we have growing confidence in our ability to develop 20 gigawatts to FID net to bp by 2025. First, compared to the second quarter, our pipeline has grown by 2 gigawatts to 23 gigawatts driven by continued growth in Lightsource bp's projects portfolio. And second, Lightsource bp has increased its growth target by 25%, now planning 25 gigawatts developed to FID by 2025. In hydrogen and CCUS, we are taking early steps to create a distinctive position, aiming for a 10% share in core hydrogen markets by 2030. Alongside projects in Australia and Europe, we have made several recent announcements in the UK. Last week, bp was selected by Aberdeen City Council to develop, build and operate the first scalable green hydrogen production hub in Scotland. And earlier in October, the UK Government selected the East Coast Cluster as one of the first two CCUS projects in the country. The successful bid was managed by the bp-lead Northern Endurance Partnership, which will also develop the CCUS infrastructure. bp also operates two further projects H2 Teesside and Net Zero Teesside power that are integrated with the East Coast Cluster and key to our hydrogen strategy. And we were in action elsewhere. In September, we announced a strategic partnership with Masdar and ADNOC in the UAE, where BP has a substantial business and a long standing relationship. Together, we plan to develop a range of low carbon energy projects for the UK and the UAE, with a particular focus on hydrogen and CCUS. These examples demonstrate how we are leveraging mutually beneficial partnerships, deep project experience, and global reach across the energy sector to build scale and presence in low carbon. So to briefly summarize, I hope you'll agree that today's results tell a story of continued strong underlying financial performance and strategic progress. We are driving value from a more resilient and focused hydrocarbons portfolio leveraged to the stronger price environment. We continue to grow our established convenience and mobility businesses and we are investing with discipline and low carbon, laying the foundation for a material business that can generate stable long term returns. It is still early days, of course, but the team is doing a great job. And we believe the combination of financial delivery and strategic momentum presents a compelling investor proposition. One that is purpose led and performance driven, is resilient to market cycles in the near term, and is expected to grow sustainable value in the long term. And that delivers returns for shareholders today and transforms bp for tomorrow. This is what we mean by performing while transforming and this is what we are laser focused on. And with that Murray, Craig and I will be pleased to take any questions that you have. Operator: Craig Marshall: Well, thanks again, everybody for joining us this quarter. As usual, please, if I can remind you just to restrict your questions to two so we get everybody to ask their questions over the next coming few minutes. And IR is obviously available after the call to follow up on any more detail. So on that note, let me turn to Jason Kenney of Santander for the first question. Jason? Jason Kenney: Thanks very much. Hey, Bernard, Murray. So I am struck by the number of strategic collaborations the bp developed particularly in the last couple of years. I mean, there are some smaller ones like Blueprint and BluSmart. You've got the obvious ones like Jio-bp and DiDi and then the big one Lightsource bp. And then there's things like the Mazda and ADNOC, I mean, everything's all coming in. So I'm just kind of just wondering what the BP of the future will look like and how much of the new energy business is being directly driven by BP and how much is dependent on the correct alignment with the right players and the right technologies, or the best scalable new value chains? So any thoughts on that would be much appreciated. And then specifically on the hydrocarbon positions like Angola and Iraq, which you're looking to move outside of BP, could you maybe comment on other hydrocarbon positions that may be right for being positioned in an independent supportive operations? Thanks. Bernard Looney: Very good, Jason. Good morning and good to hear your voice. Maybe I'll take a little stab at the partnerships and Murray can add if he wishes, and I'll let Murray talk a little bit about the hydrocarbons and what we're doing there. Look, I think it's really a couple of things in terms of partnerships and joint ventures and so on. The first is that the energy system of the future is more diversified. It's more complex, it's more local. And it lends itself to the need for different skills to come together to help solve those problems. And it sometimes needs local partners like we have with DiDi in China, like we have with Reliance with Jio-bp in India. So I think one is the energy system of the future will encourage us to partner. And the second thing I would say is that partnership, and relationships are part of our DNA. I think we are a company that have long seen partnerships as a strength, as a sign of strength not necessarily a sign of weakness. And the encouraging thing for us, Jason, is that not only do we want to partner and in some cases need to partner but it is that other companies wish to partner with bp. And you mentioned some of them but I think it's incredible to see our investment in Digital Charging Solutions in this quarter in Europe opens up hundreds of 1000s of customers to bp. And that's the joint venture with Daimler and with BMW, getting us in that software so that customers can be pointed to our charging stations as we build them out here. In the UK and in Germany, we wouldn't be able to do what we're doing. In China, we opened our 100th site in China, in EV charging in the quarter. We're up eight-fold year-on-year in terms of the number of charge points in China. And I would just let you know that China took 11 years to go to 5% of EVs in the marketplace, and it took seven months to go from 5% to 10%. So DiDi is an excellent partner for us there. Reliance in India, what we're doing with Mukesh Ambani and his team, on the natural gas side, we hope to be providing between 15% and 20% of India's natural gas over the next several years. Something that's massively important to that country's transition, and at the same time opening our first Jio-bp station. So partnerships are something that we love. We have a great relationship and track record in them. PAE in Argentina, Aker BP in Norway, and I just think it's part of the future. It's just part of what the energy system is going to need. And it's something that we are leaning into. And I guess, as I said, not alone do we want a need partners, but it's encouraging to see that people want to partner with us. Murray, anything to add on hydrocarbons? Murray Auchincloss: Yeah. Thanks, good morning Jason. I guess the only thing I'd add is, if you look back in the 1970s and 1980s, the historic upstream and downstream, you'd have been seeing a similar type of announcements of bp working together with other companies to develop both the upstream and the downstream. I just think we're back in that phase of building. And so that is that is the nature of the cycle we're in. As far as transactions, etc., I suppose. Bernard and I over the past decade, we've done a couple transactions with partners to create value. They're always very value driven. If I think back to Alaska, what we did was Hilcorp, NorthStar and Endicott and created a partnership. I think it's five years ago, we created the partnership with Aker BP and the share price on Aker BP is up quite substantially over that time period. Bernard Looney: Fourfold. Murray Auchincloss: Fourfold, so that's not bad is it? So, you know, I think every 10 years, it looks like we can do two of these things. And the next, the next one's obviously, Angola. Working with our partner, Eni, we see a great industrial synergy opportunity there that we think can create a lot of value for partnerships. We're constantly looking for these things, they're just very difficult to do and they're very difficult to align. So I'm not going to forecast any future ones. But we're always looking for ways to create value here for shareholders. And it looks like our hit rates - hit rate is about two every 10 years. So let's see, Jason Jason Kenney: It is all about unlocking value, isn't it? Murray Auchincloss: It is all about unlocking value and that's what we're trying to do with the portfolio. And you should expect us to continue to be laser focused on it. And I think we can do a bit better than two every 10 years but let's see. So day-by-day. Thanks, Jason. Bernard Looney: I think I just got my performance contract, Jason. Murray Auchincloss: That was a little bit of feedback. Jason Kenney: Yeah. Craig Marshall: That's great, thanks, Jason. We'll take the next question from Christyan Malek at JPMorgan. Christyan? Christyan Malek: Hi, good morning. Thanks, Craig and hi, Bernard and Murray, it's good to hear voices too. Two questions, if I may. First, activism in the space regarding sort of the breakup logic appears to be on the rise, be it in the US or Europe now. I want to know your thoughts on the case for carve out of the gas, low carbon and renewables business. And so I understand partnership, and JV and industrial logic of that following Jason's question, but I just wonder to what extent can that sit within a separate business and you continue to sort of partner, in the sort of bp in UK? So love to hear your thoughts on that. The second question is on your TSR guide. It's interesting, you benchmark the TSR guide on your future outlook of . To what extent is that based on the operational execution outlook, versus your belief in firmer macro prices? It'd be worth just hearing your thoughts on the latter point as well, in terms of how you see the oil price in the next few years if that is ultimately what's driving your increased confidence? Thank you. Bernard Looney: Very good. I let Murray, Christyan take the second question around TSR. And I'll see if I can tackle your first question. And good also to hear your voice, thanks for being on the call. Look, I think the first thing that I would say in the matter of this question around breakup and so on, is that we're not hearing that call from our investors. So I think that's the first and foremost thing. We're not hearing that from investors today. Why? I think, our strategy, I think is clear. I think it's increasingly clear. As we - as people get more comfortable with it, I think our financial framework is clear. I think our investor proposition is clear. And I actually think, if I may say, I think it's working. Third quarter in a row of good strong results, the balance sheet strengthening, six quarter in a row of net debt coming down, we're generating cash. I think, I hope you'll have seen, I think we're a cash machine at these types of prices. And we're investing in the transition with discipline, step-by-step and from what we see, Christyan, shareholders increasingly like what we're doing. So we're encouraged. We chose the name of our strategy last year before these conversations, for a reason, and it's called an integrated energy company. And we chose that name, because we believe deeply in the premise of being an integrated energy company being the way to not alone help the world transition, but importantly, to create value from that transition. And the reason we say that, Christyan, is twofold. Number one, we need cash flow to invest into the transition. And our existing businesses generate enormous cash flow, as you guys have done the math better than I do. Adjusting for working capital, we're close to $8 billion of operating cash in this quarter. When I look at some renewable companies out there, I see some of them struggling to fund their growth. That's not a problem that a company that is an integrated energy company will have and it's not a problem that we have. And the second thing that I would say is if I take a country like the United Kingdom, what other company can take natural gas, build a power station, capture the carbon, take it offshore, store it underground. What other company can take and build offshore wind, build a hydrogen facility on the back of it, take that electricity and put it into the largest charging network in Britain at the same time sign a deal with Daimler to explore the potential for hydrogen trucking infrastructure in the UK, sign a deal in Aberdeen to look at hydrogen for public transport, and at the same time, have a trading business that can help customers hedge and plan and have predictable and reliable sources of energy. So as the energy transition becomes clearly more complex, I think in people's minds, I think the roles for a company like bp becomes clearer and clearer by the day. So we believe, Christyan, long story short, that we are better together. And I think as we deliver each and every day and as we deliver each and every quarter, and we want to be pretty boring, and predictable and reliable performing while transforming, is what you'll continue to hear from us. I think that proposition will continue to strengthen. So let me just leave it at that. Murray? Murray Auchincloss: Yeah, on the TSR question, Christyan, I think you're asking about our financial frame. So what we've said, dividend first priority, has the capacity to grow by 4% per annum, assuming $60 through 2025. Second priority is to reduce our net debt. Third priority, invest in the transition and sustaining CapEx on our historic hydrocarbons business. And then surplus cash, at least 60% through share buybacks. And obviously, for 2021, we've said 60% buybacks, 40% debt reduction to protect the balance sheet. As we guided on the share buybacks, we just said at $60, that's not a forecast of the future oil price. That's just an assumption of what the oil price was. And we said that we could do around $1 billion a quarter more to 2025 at $60 oil. So it's not our belief on what the oil price will be. It's just a helpful guideline for you, the sell-side and for our shareholders, to understand what our capacity is. Of course, if oil prices higher or lower than that, those - that buyback potential can increase, obviously, if oil prices higher. And that's what you're seeing happen with our third quarter results and the announcement of the $1.25 billion of buybacks. On oil price itself, I think we've got a constructive outlook on oil price. Demand's up above $100 million a day. Again, we're not back to pre-COVID levels. We think we'll be there somewhere around - somewhere next year, we think we'll be back to pre-COVID levels. And of course, OPEC+ is doing a good job managing the balance. So we remain constructive on oil price. And it doesn't really relate to the $60, that's just a useful assumption for you to model our business. Thank you. Craig Marshall: Thanks, Christyan. We'll take the next question from Michele Della Vigna at Goldman Sachs. Michele? Michele Della Vigna: Thank you very much for your time. Two questions, if I may. The first one is about cost inflation and delays in offshore wind. The oil and gas industry has tremendous experience on delays, bottlenecks, cost overruns, and you carry it with you into a new business. I was wondering what can you do there differently from your competitors to be able to manage better this risk, which seems to be rising in offshore wind, effectively for the first time in the last decade? And then my second question is about electric mobility. And I was wondering if there are some key metrics you're looking at in terms of percentage of EV penetration or utilization of your charging points that really are key to achieve profitability in this rising and growing business? Thank you. Bernard Looney: Thank you, Michele. Thank you, and good morning. I might ask Murray to talk a little bit about cost inflation, and he has the supply chain function within his remit, but also capability and things that we have. But Murray will talk about that. On electric vehicles, I have to say it's one of the areas that, I think both Murray and I are most excited about. I think, Emma and Richard Bartlett and the team, are doing a fantastic job in this space for us. And what are the things that we look at? I mean, the real driver here is utilization rates. And utilization rates are going up and up and up. We sold 45% more electrons in the third quarter than we did in the second quarter. And that's because, yes, we're growing infrastructure. And importantly, we're growing fast, our rapid and ultra-fast infrastructure, which is our focus. 50% of bp pulse now is rapid, are ultra-fast. And that means that we're getting more electrons through the system, more kilowatt hours through the system. So that's the key, 45% increase in electrons. People talk a lot about the number of charges points. Quite frankly, we need to talk about the number of electrons sold. And I think we fell - we sold 40 gigawatt hours of electricity, or electrons in the third quarter. So that's the key. We're seeing this happen right around the world. I think it's really, really encouraging. In China, as I said, we've opened our 100th site. That's an eightfold increase now, year-on-year, so that's going very, very well. In Germany, we signed a deal with Burger King to put charging points in their sites that will drive utilization. In Europe, we signed a deal with Digital Charging Solutions to drive utilization. In India, we've opened our first Jio-bp retail site, which has EV charging on it. We've bought into BluSmart with which is India's all electric ride hailer. So you can see here a system that is coming together. And I haven't talked about fleets and our deal with Uber here in London and if you have time to ever visit our Park Lane charging station where we have dedicated Uber charging points. So the key in all of this is utilization. The key here is electricity sales. And of course, to do that, we got to have the right locations, which we do 90% of people in Germany and the UK, live within 20 minutes of a BP retail site, that's number one. Number two, we got to have fast charging, because people do want to make sure that they can get a charge quickly. Number three, we got to have a good digital offer, which we have and we will continue to improve. Number four, we got to have a safe and secure location for people to charge, which we do at our sites. And number five, we got to have a strong convenience offer so that people can grab that cup of coffee, or that sandwich while they're charging up. And that's what we're doing. Hammersmith is the busiest charging site in Britain. 7400 transactions in the third quarter alone, that shows us the future, that shows us what's possible. Ever drive by to Hammersmith site here in London, and you will see our charging points pretty much full. So it's a pretty cool business. We're excited about it. It's the one part of the transition that I think is going faster than predicted. And you can expect us to be all-in on making that a very significant part of the company's future. Murray? Murray Auchincloss: Great, and I think on offshore wind and supply chain, yeah, I think the sector is starting to see some inflation inside steel. No surprise, given what happened with COVID. And about every two months, I sit down with our team on offshore wind to continue to learn and see what's happening. So the last time I did that was a month ago. And the big choke point actually is offshore installation and offshore logistics. Now, the funny bit is that's the exact same thing that that I talk about other teams with on the oil and gas side. So the way that we'll manage this, it looks to me like about 60% to 70% of the supply chain overlaps between offshore wind and offshore oil and gas. It's a rough estimate. And the typical way we've managed these things is big long term frame agreements on steel. So, so far, despite input prices rising, we've been able to use our frame agreements to offset that inflation in the oil and gas. And I'd expect as we move through offshore wind, we'll bring those two things together and manage that inflation. And the other things we do is, we have big programs of activity. So in the offshore UK, we have subsea teams, we have subsea programs, we have pipeline programs in the upstream. And we'll be sharing the logistics and lift vessels across both the offshore wind and the historical oil and gas positions. So there's quite a bit of overlap. We know all the things that we do to manage this inflation. We're pretty decent at managing capital in this space. I think you heard Bernard talk about our project delivery over the past five years. We targeted to spend $42 billion and we spent 15% less than that across 35 major projects across a very busy time period. And that exact same team has now moved into offshore wind, will move into onshore CCUS and onshore hydrogen. And we look forward to taking all those lessons that we built up over time in the upstream into the downstream and into low carbon. So I think yes, we're seeing a little bit of inflation in that space. But I think we'll be able to use everything we've learned from upstream oil and gas in our leverage with the supply chain to manage this risk. Bernard Looney: Thanks, Murray. Just one fact on electrification before we let Michele go. It took China 11 years to go from zero to 5% EV penetration. It took them seven months to go from 5% to 10% EV penetration, it's incredible. And someone just said that we doubled the electrons sold in Germany, quarter-on-quarter. So this is a fast moving business. And we're well positioned. Murray Auchincloss: And if you wanted to measure returns, the general stat we hold is, if we get 10% utilization on a fast charger, you'll make a 10% return, that's just the pure electrons themselves. Of course, this is not just about the electrons, it's about the convenience as well. And when somebody goes to charge their car, they spend probably eight minutes as opposed to four minutes. And hopefully they come in and they get a nice cup of Wild Bean coffee and a sandwich and that will certainly enhance those returns. Bernard Looney: And utilization at Hammersmith is definitely above 10%. Now, we don't have Hammersmith's everywhere, but it is a sign of the future, I think. Great, thanks, Michele. Craig Marshall: Super, thanks, Michele. We'll take the next question from Oz Clint at Bernstein. Oz? Oswald Clint: Hi, good morning. Thank you very much, everyone. India Jio-bp, the new station, which you mentioned a couple of times this morning. I have to admit, when I read that, I saw a lot of the word free, I saw, free active fuel within the standard fuel, I saw free oil change, etc., etc. So I just wanted to, tell me please what's the revenue model or what's the - or actually where is the margin? Is it - I'm not sure what retail margins are in India, but is it bulk standard fuel? Is it the EV charging? You just talked about the refreshments or things like battery charging. It'd be great to flesh out how this all comes together? Is there any cross subsidization that's taking place? And secondly, please. I mean, there's still some concern out in the markets about your shrinking upstream. And it's pretty amazing to see just how low your exploration write-offs are this year, basically zero. But could you just talk about your base decline rate at this point in the year and how it's comparing to your expectations, please? Thank you. Bernard Looney: Oz, great and Murray will maybe help me on decline rates, I'll say something on the 40%. And then India, look, I think, we're at the very early days. This is our first Jio-bp site. The existing 1400 Reliance sites will be rebranded over the coming months. The margin here is a margin that crosses all the way from margin on fuel to margin on convenience to margin on charging. I mean, it is a complete customer capture strategy, so to speak. And I think the numbers here in the UK now are climbing and climbing. And we're seeing in the UK, that I think we used to say over 50% of customers that visit a bp retail site in the UK buy fuel only, or don't buy any fuel, sorry. That number has risen to I think between 60% and 70%, so consumer habits are changing. Basket sizes are increasing here in the UK. We see basket sizes have risen 20% with pre-pandemic. So it is an integrated offer, if I may use that word. And in terms of free, think of it as customer capture. People made a lot of Jio issuing free mobile phones. Today, I think they have 400 million users on their platform. So customers matter, we invest in customers, we want to attract and secure customers. And we'll do that in India as Jio did incredibly successfully with their mobile network. And it's fantastic, actually, for this venture to be called Jio-bp, given the footprint and reputation that that mobile network has. In terms of the 40%, I think a couple of things I would say and we'll talk more about this at our 4Q results in February, a 40% reduction in production does not equate, as you know, to a 40% reduction in cash flow or anything. But this is all about a high grading of our portfolio. This is a value optimization strategy, pure and pure. We intend to grow earnings through the middle of this decade, despite shrinking our volumes by 20%. We take cost out, we make sure that we're focused on the highest margin barrels, we drive the unit margin per barrel up, and you'll see us continue to do that through the decade. I think this is increasingly understood as a strategy that's focused on optimizing value that's focused on value and I think, is absolutely the thing that we need to be doing. It allows us to really focus our capital. It allows us to make sure that our exploration strategy, as you pointed out, is focused on infrastructure near existing assets. It's all of those things that I think is 100% focused on how do we create the maximum value from these hydrocarbon assets that we have. So, Murray, anything to add? Murray Auchincloss: Just on base decline and that type of stuff, So plant reliability, Gordon and the team had a very good quarter. 95.4%, I think, is the year-to-date reliability, so very good performance on the facilities themselves, which forms a part of the base. We guide, Oz, as you know, to 3% to 5% decline. We don't have an annual number, yet, we've still got another 60 days to go. But I suspect, as usual, we'll do better than that, is my guess. The places where we have base decline is gas basins, you can see BPX because of the lack of capital investment last year, create some base decline and then Trinidad, we've had some base decline as well. The rest of the business is holding up super well. And I suspect at year end, when we report back to you, we'll be at the lower end of that range, if not slightly below it. So 3% to 5% remains good Oz. Oswald Clint: Super, thank you. Craig Marshall: Thank you, Oz. We'll take the next question from Irene Himona at Societe Generale. Irene Himona: Thank you, very much. Good morning. My first question, well Bernard, congratulations on delivering the 900K b/d of new projects, new barrels, which you set five years ago. At that time, you had said that at $50 or $55 Brent, these barrels had 1/3 higher margin. In today's environment, $80, $85 Brent, give us a sense of how superior the margins on those new barrels are compared with legacy, please? And my second question on gas trading, which this quarter you described as strong. The press had mentioned recently figure of $500 million. Is that realistic or how should we think about it? Is the 2% enhancement to Group ROCE from trading which you provided before, still valid in this environment? Thank you. Bernard Looney: Irene, good morning. And I let Murray take the gas trading question and I will take the question on the 900,000. Thank you for acknowledging that. Thanks, the congratulations don't go to me, it goes to our organization who I hope some of them are listening and they have done an extraordinary job. And I hope you don't mind me boasting about them for a moment. But this has really been an incredible achievement. This is 34 major projects across 11 separate countries delivered for $36 billion net to bp that's 15% under budget and on schedule, it is a pretty extraordinary set of outcomes. And of course, it speaks to a couple of things, one, that we like to do what we say. So when we tell you something, we intend to deliver on it. And secondly, project management. And project management is a capability that doesn't know oil and gas as a boundary. And what I mean by that is project management is as applicable to building a hydrogen facility or building an offshore wind facility, as it is to building an oil and gas facility. So thanks for acknowledging it in terms of margins. I think Irene, I would say that the 30% to 35% higher margin than the existing portfolio. And I think today, we would say that at these prices, that 35% margin delta is about what it would be at these prices as well. So that margin uplift remains intact. And of course, is one of the reasons why we can grow cash flow, grow EBITDA while reducing production as we focus on those high quality barrels. So that 900,000, much of it is on - much of it is coming on, Mad Dog phase 2 comes on next year in the Gulf of Mexico, quite frankly, coming online into an incredibly strong oil price environment. And you will see that in the cash flows of the company. Murray, gas trading? Murray Auchincloss: Yeah. Hi Irene, nice to hear your voice. And so just thinking back to last year when we guided on trading, we said that trading enhances the returns of bp by around 2% to 3%. No change to that guidance, we'll update you in the New Year with any different thoughts on that perspective, but no change so far. In the third quarter, yes, there was some press speculation around a number. We don't talk about speculation and we don't disclose those numbers. It was a strong quarter for gas trading. You can see that in gas and low carbon. But I must say the realizations were very strong as well in the quarter and production was very strong as well. So I think the team inside gas and low carbon had a great quarter for production, a great quarter for realizations, it was a strong quarter for gas trading as well. But we don't provide numbers obviously. And the numbers in the press we're not going to comment on. Irene Himona: Thanks so much. Bernard Looney: Thanks, Irene. Craig Marshall: Thanks, Irene. We'll tend to the US for the next couple of questions, I think. First one from Paul Cheng at Scotia. Paul Cheng: Thank you. Good morning. Bernard, you mentioned about in the EV charging business is all about utilization. Can you share with us what is the utilization rate in the major operating region for you at this point? And what is your target over the next couple of years? And also, do you have a number of what is that business, the EBITDA contribution in the quarter you can share? The second question, question one, do you have an estimate, what is the either production in Gulf of Mexico and the earning impact related to that? And also that, in your - one of your peers that sold their Permian asset and say that's because lack of economies of scale, or at least one of the reason, so want to see how you guys view your BPX business? Thank you. Bernard Looney: Paul, thank you. I think on - and I'll ask Murray to comment on the GoM and BPX, his favorite, probably favorite two subjects amongst many. And in terms of utilization rates, we're not giving utilization rates per - by region yet. I think the reality is that they're sitting today probably on average below 10%. And there's - we're concentrating on probably three key markets with two markets today and one to come over time, the three key markets being China, Europe and the US. US will probably be more of a fleet story. The EU, it is on-the-go charging, which where we think the majority of the gross margin pool exists. And China will be a combination of fleet and on-the-go. Utilization rates today are below 10% on average, I would say. But they're only going one direction. There is no doubt about that, in our mind. And some of the numbers that I have just given about the pace of growth of EV penetration in China is just one example. But you see it all throughout the world. So they're going to go up and as they go up, the business becomes more profitable. We're not providing EBITDA on a charging basis just yet. I think we're providing a lot of transparency. Some people would say too many metrics. But no doubt as that material - as that business becomes more material over time, you can expect us to start talking about that but that's not for today. Murray, the GoM, Hurricanes and BPX? Murray Auchincloss: Yeah, great. Hey, Paul, bright and early in the morning for you, apologies for that. On the GoM, the impact in the quarter was about 60 mbd, I'll let you do your calculations on what that is. I think there's about a 15% royalty rates in the in the US offshore and operating costs are pretty low sub-$6 a barrel. So I'll let you do the calculations on what that gets to, rather than provide a number. And then on the Permian and BPX, we're very happy with our BPX position. It's doing much better than we hoped when we acquired it. Costs are well ahead of what we expected. Drilling efficiency is well ahead of what we expected, reservoirs are showing up in the Bone Springs that we hadn't anticipated at that time. So I think operationally, all things we're very, very happy with. As you can see from our disclosure on the website, they're back to growth now as we invest more capital into them, and we're gradually ramping up from about $1 billion this year. We'll probably ramp up to $1.5 billion next year. The program inside the Permian will focus on building out the infrastructure to make sure that there's no flaring or methane going into the atmosphere as we go into the next leg of drilling in the Permian. We think that's extremely important for not only the environment but also for profitability. And obviously, we're drilling in the Haynesville and Eagle Ford as well. We'll take a big dividend out of the business this year and we anticipate continuing to take dividends out of it on a growing basis, probably by the time we get through the ramp up and CapEx, we'll probably take at least $1 billion a year in dividend from that business. And that's what's super important to us is making sure that we gradually grow this but at the same time we can get a dividend back that pays back the price we paid for the assets. So very happy with it, remains a core bit of the portfolio, both from reducing emissions, reducing flaring, reducing methane, and driving profitability and driving cash flow for shareholders. Bernard Looney: Thanks Paul. Paul Cheng: Thank you. Craig Marshall: Thanks, Paul. We'll take the next question from Jason Gabelman at Cowen. Jason Gabelman: Hey, good afternoon. Thanks for taking my questions. I want to ask the first one on the convenience and mobility business. You've highlighted a lot of growth and kind of strategic initiatives within that business that are going as planned. I can't help but notice that adjusted EBITDA was kind of down quarter-over-quarter and year-over-year, despite all this progress and seemingly moving forward on your EV/convenience store strategy. So can you just help us understand what's going on versus those other periods? And then my second question, just on CapEx, moving forward, given the rise in oil and gas prices, you mentioned, you're going to ramp up BPX spend a little bit next year. Could you just talk about if there's other opportunities within the portfolio to ramp up short cycle spend? Is that something you're looking to do and what that does for your CapEx outlook in 2022? Thanks, Bernard Looney: Jason, thanks very much. Good to hear your voice as well. And I'll just hit the two of them quickly and Murray jump in and help me. On capital, we'll update our capital guidance to the market for 2022 in February at our fourth quarter results. You know that we're running around $13 billion for this year. And you'll know that our guidance over this period is $14 billion to $16 billion. What I can tell you about February is that we will not be changing our capital guidance of $14 billion to $16 billion but quite exactly where will come in within that, we will update you on that in February. We remain disciplined, we won't be overreacting to particular prices on the day. This will be very, very disciplined capital framework. And as I said, it will be unchanged from the guidance that we have issued. On convenience and mobility, you're quite right to point that out on the third quarter. I would remind people that that business has had a record year-to-date. So the nine months year-to-date have been a record. Castrol, obviously has been hit by a couple of things. Base oil price has being much higher. There's usually a lag there. And that will flow through over time as we pass some of those prices onto consumers. And there's one thing that covers both Castrol and the convenience business. So that's Castrol and the convenience business. We're investing a little bit more in advertising, we've seen a few increases in staff costs and the thing that's common across Castrol and convenience is, some of the lockdowns in Asia have clearly had a bit of an impact. So nothing structural there and just draw people's attention to the record nine months year-to-date and that's what we're focused on. Murray, anything to add on either subject? Murray Auchincloss: No, perfect. Thanks. Bernard Looney: Okay. Thank you. That was feedback for me, from Murray, which I will take. Thanks. Murray. Thanks, very much, Jason. Craig Marshall: Okay, thanks, Jason. We'll take the next question from Jon Rigby at UBS, please. Jon Rigby: Thanks, Craig. Hi, guys. And so two questions. First is, are you able just to speak a little more about the structure of the gas hedges? What it is you're doing there and are you hedging just your merchant gas volumes or also your produce of equity production volumes? Because I guess that has an impact on whether you see price leverage or not in the underlying? The second question, I guess, is just to step back a second, is it conventional wisdom of this sort of transition is that you move from, I don't know if you've talked about this point, the sort of peaks and troughs on returns, but your supposedly higher return oil and gas activity to slightly lower return renewable and power activity but that the renewable and power activity is low risk. But if you sort of measure risk as volatility and is that strictly true or is it likely to be true for the next four or five years as we go through this sort of transition phase? Because it seems to me, if you look at power markets, energy markets, gas markets, witness that the hedging movements you're seeing in your gas activity, is that it doesn't look to me, like a particularly low risk or stable market at the moment, so just interested in your comments around that? Thanks. Bernard Looney: Very good, Jon. So let me have a little go at your second question. And Murray will more intelligently speak to gas hedging and so on and he'll probably also pile in on the transition question that you asked. That's a very good question. On that one, I mean, I'd just say a couple of things. Number one, and probably most importantly, I see the characterization in some media of bp is moving from oil to renewables. And that's not actually the case. Yes, we are focusing our oil and gas portfolio over the next decade in a volume sense, we actually believe will create more value, but we're doing that in a volume sense. Yes, we are building a renewables business but we've always said, we're not building a renewables business just for renewable. We're building a renewables business to be part of an integrated energy value chain that goes all the way from the production of energy into, in some cases, people's cars in terms of electrons, or into hydrogen or into whatever it is that you wish to do with it. So, the first point is important, which is this is not an oil to renewables story. It's focusing of oil, it's a doubling of convenience, including EV charging $5 billion to $10 billion and it's an investment in renewable but not just renewables for renewables sake, investing into the low carbon energy value chain. In terms of your characterization of returns, I would think that I would say a couple of things. One is, of course, traditionally, some of our investments in hydrocarbons have been very profitable. And just like others in industry, not all of them are exactly high return. So I would just say that. Two, they are volatile and open to the vagaries of the environment, as we saw with negative prices last year. And three, are investors valuing the cash flows from those businesses in the way that they used to. And of course, that's happening less and less. And therefore, the - as we transition and this will happen over this decade, as we transition from a hydrocarbon only company to a more diversified company, I do think some of those cash flows, while still having some volatility, you're correct, but I think they are in some ways less volatile. I think that they are in many ways more valued by investors. And therefore I think it creates a better investor proposition. So two big points. It is not an oil to renewable story. It is a focusing of hydrocarbons. It's a doubling of convenience and mobility. And it's a renewables as part of a low carbon energy chain, number one, and we believe we can amplify returns in that latter part. And number two, some of what you characterize is correct. But I think there are attributes that cash flows from this new business, these new businesses that make for a compelling investor proposition. Murray, anything you'd add on that and gas hedging? Murray Auchincloss: I think the only thing to add Bernard on the, on the volatility of returns. If you invest in a wind program or hydrogen plant, etc. and you're underpinned by a PPA or a contract for difference by a nation, that's a fairly stable set of cash flows. If you're merchant, and you're taking merchant risk on power, obviously, that's much more volatile than natural gas. You know all about the trading windows Jon. I think the companies that win in the future are the people who can manage risk really well inside that system, and that can counterbalance natural gas and electricity. They generally tend to be priced off the same basis. So as we saw in the first quarter in the United States, as we're seeing in the third quarter here in Europe, companies that can manage gas, electricity interchange can do really well. And of course, that's what we do really well with our 20 years of history in this particular business. So it is more volatile, but we risk manage well, and you can see that in our results day-by-day this year. I think on gas hedging, you've got it Jon, we don't hedge our equity gas. That's something that our shareholders on LNG etc., enjoy the upsides and downsides. We don't hedge that as a principle. On the merchant equity margins, yes, we do hedge those sales contracts. Remember what we're trying to do is buy a cargo, lock that price in and sell the cargo, lock that price in and make a margin on that. And then we'll make superior margins when disruptions occur and we can redirect cargoes. That's really the principle of our LNG business, it's very ratable and growing over time, from 15 to 20 to 25 mtpa. So it's a very ratable business and we do risk and hedge those sales contracts which is what you're saying showing up in . Hope that helps, Jon? Jon Rigby: Yeah, and just to confirm, you'd expect that to reverse over the next two to three quarters? One to two quarters? Murray Auchincloss: It's - sorry, Bernard and I were looking who wants to answer it. Yeah, it is the FEA will reverse as cargoes get delivered. And of course, a lot of those get delivered over the next 3 months, 6 months, 9 months. And it could reverse if gas prices fall as well. So it's dependent on price and dependent on timing of delivery of cargoes, but nothing on towards - we're happy with direction of travel right now. And we're happy with the direction of business. Jon Rigby: Thank you. Bernard Looney: I favored accuracy. So I thought I'd go with Murray on this point. Thanks Jon. Jon Rigby: Thanks. Craig Marshall: Thank you, Jon. We'll take the next question from Chris Kuplent at Bank of America. Chris? ChrisKuplent: Yeah, thank you. Murray, one for you. I just wanted to better understand the “formula” you're applying in terms of paying out buybacks. You've published nine months and 3Q results for your definition of surplus free cash flow. And I'm not sure I can square the circle here to put the $1.25 billion announcement into context. So it would be helpful, how much of your, let's say, confidence or outlook towards Q4 is embedded here or whether you're thinking about this as a year-to-date call with or without the $500 million that you've bought back during the first half? So please help me, I'm a little confused. And if I may, a second question to Bernard. Bernard, you've referred to the Aker BP share price performance earlier on. And I just wanted to understand, obviously dividends there are growing as well but the dividend return you're getting from there is still below your own dividend yield. At what stage does Aker BP become a purely financial investment rather than a strategic one? Thank you. Bernard Looney: Very good, Chris. Good morning. I will let Murray take the former question which you may be confused, but I hope positively surprised. On Aker BP, it's - it is a strategic investment as well as being a financial investment. I think both Aker and bp would argue that we are a strong partnership, we are very much involved. Murray sits on the Board as does Kate and are very actively involved in helping to make that company better and stronger, bringing capability in from bp as and when we can, that might be helpful. And quite frankly, learning from what Aker BP is doing as well, because they're doing some fantastic stuff, particularly on the digital front. So it is more than a financial investment. We like that investment very much. We see strong future in that investment and that's what you should expect from that business going forward. Chris's question on the buyback formula? Murray Auchincloss: Yep. Good morning, Chris. So just a few grounding principles here. We've said that when we set the level of buybacks, we will not only look at surplus we've accumulated to-date, but we will also look at the outlook for the future. Additionally, we've guided that at $60, we should be able to do around $1 billion a quarter out to 2025. So those are the two principal guiding principles you should think about as we do these things. It's not just a formula. If you go to the formula inside the third quarter, you saw our surplus cash flow, if you applied 60% to the $900 million of surplus cash flow, that would be a $540 million buyback versus maybe the math that you're thinking about, and we've obviously done $1.25 billion. The reason that we've done more is confidence, confidence in plants operating efficiently. We're up to 95%, new projects ramping up, we've got a lot more projects coming in, they've accelerated from '22 into '21 and we've got more coming in '22, especially Argos, the Mad Dog 2 facility in the Gulf of Mexico. We have much higher earnings from Rosneft coming through that has a much higher dividend in the future than it has had in the past. The oil environment and the natural gas pricing environment is very strong. And of course, we had a big build in working capital that will reverse over time. So overall, we feel a lot of confidence in the underlying performance of the business. The macro is strong and supportive and we've also signaled additional divestments through the rest of the year. So we think all of those things mean that we should lean in a little bit, do $ 1.25 billion of additional buybacks. And we'll update you in the fourth quarter results with what we'll do for the final installment for 2021 where we have said that 60% will be for share buybacks and 40% will be for debt reduction. I hope that helps, Chris. Chris Kuplent: Great, thank you. So, less confused. Cheers. Murray Auchincloss: Very good, great. And I think we've always said that we would like it to be within reason, a relatively ratable buyback program. And that's what we're trying to achieve here. And I think there are also questions, Chris, from some people that said, well, why shouldn't it be a little bit bigger? And of course, we're also making sure that we continue to focus on our balance sheet which is hugely important to us. And the sixth quarter in a row of driving net debt down. So, it's a pretty strong place, I think for us to be. But thanks for your question. Chris Kuplent: Thank you. Cheers. Craig Marshall: Thanks, Chris. We'll take the next question from Lydia Rainforth at Barclays. Lydia? Lydia Rainforth: Thanks, great. And good morning. And Bernard, I liked what you said about the investment case being clearer, day-by-day. And two questions if I could. And I am going to come back to this carbon management, energy as a service, strategic partnership side. How do we think about the - how you make returns on those? And maybe it's just me, but it does seem very different as a way to looking at it as opposed to just being asset based analysis. So the idea of valuing customers, and what sort of returns you might make on that? I still think isn't particularly clear to me at this stage. And then on the second one on the idea of the CapEx and it normalizes that $14 billion to $16 billion level. At this point, have you thought about whether that goes into a short cycle upstream or into the renewable, the low carbon business? But it does seem that you've got quite a lot of opportunities there and so it's really effectively how do we judge if it's good CapEx? Thanks. Bernard Looney: Lydia. Thanks. And thanks for the question. I'll let Murray have a go at the sort of value chain question. And I think he's done a good job in the past of describing how, in many ways we're recreating a value chain here, which is a low carbon, almost electron based value chain, as opposed to a hydrocarbon molecule based value chain and have return shift around. But he'll answer that in his own way. I think on CapEx, I'm afraid I'll just leave it as a relatively short answer without wanting to be evasive, because I don't want to do that with you. But I think, let's just wait until February, and it's only a few months away. We just got Christmas to get through in the meantime but we'll give you an update early Feb on that. But we're not short of opportunity both on the hydrocarbon side and on the low carbon and indeed on the convenience and mobility side. As you have seen, will continue to see in electrification, as you saw with our Thorntons acquisitions, so, it's great to have options, it's great to have choice. And it's great to be disciplined, because it means that we should only be doing the very best stuff. But rather than speculate right now and mislead you, I'll leave it to February to give you an update, if that's okay. And Murray? Murray Auchincloss: Yeah. So Lydia, the way that I think about this is we're trying to create these integrated energy chains for the future like we did with natural gas in the past. So if you just went to the UK, and painted the picture of that, we're saying that in offshore, wind will make an 8% to 10% return levered. That offshore wind electrons will be put into probably a mixture of a contract for difference with the government and then merchant positions that we will take risk on ourselves, those electrons will go
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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.

FMP Company Rating API: Empower Your Investment Decisions

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.