BP plc · LSE:BP.
BP — Q2 2003 Earnings Presentation
27 slides from BP's earnings presentation, Jul 29, 2003
Slide 1: Presentation to the financial community: 2Q results
presentation to the financial community 2Q results tuesday 29th july 2003
Slide 2: Forward Looking Statements Cautionary Statement
Forward Looking Statements Cautionary Statement This presentation and the associated slides and discussion contain forward looking statements particularly those regarding future performance, costs, cash flow, returns, dividends, capital expenditure, investments, divestments, gearing, BP’s asset port
Slide 3: Introduction – John Browne, chief executive
John Browne chief executive introduction
Slide 4: Agenda
agenda ! the year so far ! group results ! strategic progress ! q&a
Slide 5: The year so far
the year so far ! strong environment – especially US gas market ! strategy on track !capex and divestments as planned !five new profit centres on track !TNK-BP completion expected this summer ! strong cash flow and balance sheet ! $ dividend up 8.5%: $2bn in share buybacks
Slide 6: 2Q 2003 performance – Byron Grote, chief financial officer
Byron Grote chief financial officer 2Q 2003 performance
Slide 7: Trading environment
trading environment 2Q02 1Q03 2Q03 1H03 1H02 average realisations 22.81 29.82 24.90 liquids $/bbl 27.47 20.81 2.45 3.87 3.39 natural gas $/mcf 3.64 2.36 19.01 26.39 22.43 total hydrocarbons $/boe 24.49 17.63 indicator margins 2.06 4.52 3.27 refining $/bbl 3.89 1.85 109 96 120* chemicals $/te 108* 95
Slide 8: Return on average capital employed
return on average capital employed % 30 competitor range* 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2000 2001 2002 2003 *BP, XOM, Shell, CVX, TOT roace = (proforma result + after tax finance interest + MSI) / proforma ACE
Slide 9: 1H 2003 vs 1H 2002 result
1H 2003 vs 1H 2002 result proforma basis $bn post-tax $0.6 billion cost 8 impact pensions, ensions, other inflation 7 r&m $0.5 billion 6 revenue gas performance, impact interest, tax 5 oil 4 3 2 1 0 1H02 price/ forex a&d dd&a other 1H03 margin
Slide 10: Production volumes
production volumes mboed 3700 3600 2002 { 1H 2003 average pre-divestments 3500 avg. 2001 3400 avg. divestments 3300 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2001 2002 2003
Slide 11: Special and exceptional items
special and exceptional items $bn pre-tax 1.0 0.5 0 (0.5) (1.0) (1.5) (2.0) 1Q 2Q 3Q 4Q 1Q 2Q 2002 2003
Slide 12: Sources and uses of cash
sources and uses of cash $bn 1H02 1H03 20 18 16 disposals 14 buybacks 12 dividends 10 acquisitions 8 organic capex 6 operations operations 4 8.8 13.3 2 tax, interest & msi 0 sources uses sources uses
Slide 13: Financial results
financial results % change ! results for the second quarter vs 2Q02 !proforma $ 3.1bn 42 !replacement cost $ 2.5bn 87 !historical cost $ 1.6bn (21) !net cash from operating activity $ 7.3bn 43 !dividend 6.5¢/share 8 !ROACE (proforma) 17.0% 29 ! results for the first half vs 1H02 !proforma $ 6.8bn 81
Slide 14: Priorities for free cash flow in 2H03
priorities for free cash flow in 2H03 subject to the trading environment we intend to: ! increase pension plan funding to match 2002 deficit !end 2002 deficit of $2.2bn in funded pension plans !$0.3bn funded 1H03 !up to $2bn additional funding planned ! carry out further share buybacks
Slide 15: Capital spending & divestments
capital spending & divestments $bn 1H03 2003 plan organic capex 6.1 14.0 - 14.5 divestments (4.1) (3.0 - 6.0)
Slide 16: Gearing
gearing % 40 35 30 25 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1999 2000 2001 2002 2003 proforma gearing = net debt/(net debt + equity – acquisition adjustment)
Slide 17: Strategy – John Browne, chief executive
John Browne chief executive strategy
Slide 18: Delivering strategy
delivering strategy ! making choices: ! upstream bias to investment ! divesting to realise value and improve quality ! investing in five new upstream profit centres and TNK-BP ! maintaining financial discipline: ! gearing remaining within target band post TNK-BP ! cash inflows and outflows balanced
Slide 19: Upstream: indicators of strategic progress
upstream: indicators of strategic progress ! create – new discoveries in Angola and Egypt ! build – all new projects on track expected date on-stream 2003 2004 2005 2006 2007 Trinidad T3 Na Kika Mad Dog Atlantis Greater Plutonio Kapok Holstein Thunder Horse Dalia Bombax Kizomba A Azeri & BTC Kizomba
Slide 20: Upstream: indicators of strategic progress – portfolio
upstream: indicators of strategic progress portfolio – improving quality ! $5bn of divestments announced !ROACE accretive !costs/capital requirements reduced ! TNK-BP on track for 3Q close ! potential production capacity impacts: ! divestments: c.140mboed decrease in 2003 c.220mboed decrease in full
Slide 21: Upstream: indicators of strategic progress – costs
upstream: indicators of strategic progress ! costs !on track for 2003 lifting cost objective ! capital spending !on track for lower end of $9.8 - $10.2bn range for 2003
Slide 22: GP&R: indicators of strategic progress
gp&r: indicators of strategic progress ! maximising value through gas marketing !#1 wholesale gas marketer in North America !equity gas to LNG plants up 45% !2 mtpa of LNG diverted to the US !3rd LNG carrier, British Merchant, delivered ! growing NGL !restructuring underpins performance in high gas
Slide 23: Refining & marketing: indicators of strategic progress
refining & marketing: indicators of strategic progress ! margins !continued margin expansion " 96.7% refining availability " 1.7% same site retail volume growth " differentiated fuel offer " 3.5% same store sales growth ! costs !on track to deliver $300m cost reduction
Slide 24: Petrochemicals: indicators of strategic progress
petrochemicals: indicators of strategic progress ! strategy implementation on track !ROACE improvement, portfolio re-focus, unit cost reductions ! focus on core products !acquired increased shares in Asian PTA JVs !Shanghai complex construction gathers pace ! restructuring !completed sale of PT Peni
Slide 25: TNK-BP update
TNK-BP update ! on-track for completion this summer !executive team named !synergies being identified !production growth c.11% 1Q on 1Q !export percentages rising !cash flow strong ! June 26th signing of agreement on all material aspects !$2.4bn cash at close !$1.25bn in BP ordinary shares/annum for
Slide 26: Delivering value
delivering value ! external environment remains positive a balanced framework for value delivery ! growth ! financial prudence ! dividend policy ! stock buy backs !$2bn announced in february now complete: $6bn since mid 2000
Slide 27: Q&A session
q&a session John Browne chief executive Byron Grote chief financial officer Tony Hayward chief executive, e&p Fergus MacLeod investor relations