BP plc · LSE:BP.
BP — Q4 2004 Earnings Presentation
55 slides from BP's earnings presentation, Feb 8, 2005
Slide 1: BP 4Q 2004 Results and Strategy Update
BP 4Q 2004 Results and Strategy Update 8th February 2005
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 BP’s asset portfolio and changes to it, acquisitions, capital expenditure, cash flow, competitive position, divestments, dividend
Slide 3: John Browne, group chief executive
John Browne group chief executive
Slide 4: Agenda
agenda z progress on strategy z 2004 results and 2005 reporting z q&a
Slide 5: Oil demand and economic growth
oil demand and economic growth % 5 4 3 2 1 0 00 01 02 03 04 oil demand GDP source: oil demand, BP estimate; GDP, ’00-’03 Oxford Economic Forecasting and ’04 Consensus Economics
Slide 6: Oil supply
oil supply non-OPEC output growth OPEC surplus capacity million b/d million b/d 6 6 4 4 2 2 0 0 00 01 02 03 04 00 01 02 03 04 year-on-year change; source: BP end year; source: ’00 – ’03 DOE/EIA; ‘04 BP estimate
Slide 7: Oil price
oil price z potential $30/bbl support level for medium term z continue to use prudent $20/bbl for long-term planning and testing projects
Slide 8: Gas prices
gas prices $ per mmbtu 8 US 6 UK 4 2 0 00 01 02 03 04 US Henry Hub; UK national balancing point; first of month index day ahead annual averages
Slide 9: Refining margins
refining margins strong demand growth record throughputs increased heavy/sour crude production low product inventories upgraded refineries favoured continuing but less pronounced in 2005
Slide 10: Strategy unchanged
strategy unchanged z balance between investment and distributions opportunity quality and financial framework z new sources of cash flow cash returns at least as good as existing z appropriate investment for long term growth around $14bn/year capex 2005-06 z e&p renewal position strong deep inventor
Slide 11: Strategy
strategy resources z build production with steadily improving cash returns z invest in the largest, lowest cost basins z manage decline of existing production assets customer facing z expand customer capture z improve quality to grow gross margin z grow cash flow at constant cash returns
Slide 12: Innovation
innovation z technology and know-how deep water development e.g. Thunder Horse drilling seismic imaging z competitive advantage in customer facing businesses right markets right products z business development new relationships of mutual advantage with state/quasi-state enterprises
Slide 13: Long term sustainable performance
long term sustainable performance z portfolio strength in conventional oil and gas resources z participation in olefins and derivatives not required z avoid commoditisation of goods and services z market-based integration
Slide 14: Finding & development costs
finding & development costs $/boe 9 8 7 6 5 4 3 2 1 0 86 88 90 92 94 96 98 00 02 04 super majors industry BP 5yr moving average
Slide 15: Reserves replacement
reserves replacement extensions and discoveries bp reserve replacement ratio % average 99-03 % 140 200 BP 120 Total 150 100 80 100 60 XOM CVX 40 Shell 50 20 0 0 0 1 2 3 4 94 95 96 97 98 99 00 01 02 03 04 finding cost $/boe source: company reports; subsidiaries only
Slide 16: Existing profit centres: update
existing profit centres: update production million boed 2.5 2 1.5 1 0.5 0 02 03 04 05 06 07 08 divestments 02-04 05-08 - BP projection at $20/bbl
Slide 17: New profit centres: project start-ups
new profit centres: project start-ups 2004 2005 2006 Mar 04 current Mar 04 current Mar 04 current view view view view view view Atlas Mad Dog early 05 9 Atlantis 2006 Methanol early 04 9 Azeri 2005 Dalia 2006 In Salah Australia mid 04 9 Cannonball 4Q 05 Thunder Horse 2005 Shah Deniz late 06 LNG Trai
Slide 18: TNK-BP
TNK-BP z production growing: 14% in 2004 z capital spending expanded to develop new prospects z refining system enhancements e.g. Ryazan z organisational capability improving internal controls planning safety / environment application of new technologies
Slide 19: E&P: production and capex
e&p: production and capex million boed capex $bn 6 12 5 10 4 8 3 6 2 4 1 2 0 0 02 03 04 05 06 07 08 existing profit centres new profit centres TNK-BP 05-08 - BP projection at $20/bbl
Slide 20: Reserves and resources
reserves and resources billion boe 60 57bn 50 40 30 24bn 20 17bn 16bn 10 0 EPC NPC TNK-BP Total proved developed proved undeveloped non-proved reported data end 2004
Slide 21: Production by resource type
production by resource type deepwater oil TNK-BP oil other oil pipeline gas LNG 2004 2010 2010 - BP projection
Slide 22: E&P summary
e&p summary z successful exploration track record continues – 12 years of reserves replacement above 100% z decline in existing profit centres in line with prior projections z all major projects on track z trend in production growth to 2008 in line with our expectations z sustainable long-term growt
Slide 23: Refining – portfolio
refining – portfolio US Europe* BP capacity 54% 33% GIM $/bbl ** 7.83 4.43 net cash margin bottom top bottom top quartile quartile quartile quartile return on investment * after divestment of Lavera and Grangemouth **global indicator margin, 2004
Slide 24: Refining – capital expenditure
refining – capital expenditure $bn 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 02 03 04 avg. 05 - 07 base clean fuels commercial
Slide 25: Retail: growth and quality
retail: growth and quality global store sales bp ultimate gross margin index 2002 =100 $bn $k per m2 500 6 10 400 5 8 4 300 6 3 200 4 2 2 100 1 0 0 0 00 01 02 03 04 02 03 04 total sales sales per m2
Slide 26: Lubricants: offer quality
lubricants: offer quality % margin index 2000 = 100 5 160 150 4 140 3 130 2 120 1 110 0 100 01 02 03 04 automotive lubricants sales vs. market unit gross margin *market growth from PFC Energy, BP projection 03, 04
Slide 27: R&M: summary
r&m: summary z strategy is working z growth continues z quality and unit margins improving z cash returns constant
Slide 28: North America gas sales
north america gas sales bcfd 30 w th 25 a l gro a nnu % >20 20 15 10 5 0 00 01 02 03 04 growth rate CAGR 00-04
Slide 29: LNG: markets ahead of supply
LNG: markets ahead of supply BP gas supplied to plants markets secured mmcfd end 2004 mmcfd 3000 new LNG 3000 Egypt new 04 Trinidad China 2500 Indonesia 2500 Australia other 2000 2000 th r ow lg Americas 1500 nua 1500 an % 1000 20 1000 Spain 500 500 Japan 0 0 00 01 02 03 04 05 08 source: BP projecti
Slide 30: Olefins & derivatives
olefins & derivatives z new holding entity being formed O&D interests Lavera and Grangemouth refineries added z plan to divest probably by way of an IPO from the second half of 2005 subject to market conditions
Slide 31: Olefins & derivatives - cash returns and capex
olefins & derivatives - cash returns and capex $ million % 1000 24 750 16 500 8 250 0 0 00 01 02 03 04 capex cash returns note: capex excludes inorganic
Slide 32: Aromatics & acetyls - cash returns and capex
aromatics & acetyls - cash returns and capex $ million % 1000 24 750 16 500 8 250 0 0 00 01 02 03 04 capex cash returns
Slide 33: Patterns of investment
patterns of investment $bn 2004 2005 2006 capital expenditure 14.4 ~14.1 ~14.0 upstream 9.8 9.6 gp&r 0.5 0.4 refining & marketing 2.9 3.2 petrochemicals 0.9 0.8 other 0.3 0.1 acquisitions 2.8 divestments (5.0) (1.3) (1.0) note: TNK-BP consideration (equity) 1.25 1.25 1.25 2004 actuals; 2005 and 2006
Slide 34: Group cash returns: pre-tax
group cash returns: pre-tax $bn % 120 40 100 30 80 60 20 normalised 2004 result 40 10 20 0 0 01 02 03 04 05 06 avg. operating capital employed pre-tax cash returns 2004 actual mar 04 view mar 04 view actuals BP projection 05, 06
Slide 35: Dividend considerations
dividend considerations z circumstances of the Group z future investment patterns and sustainability z trading environment
Slide 36: Dividend increase
dividend increase step change from 7.1 to 8.5 cents / share (3Q 04 to 4Q 04) increase per share ’04 versus ‘03 investors 4th quarter full year dollar 26% 13% sterling 23% 4%
Slide 37: Financial framework
financial framework z dividends z gearing z distribution of excess free cash flow
Slide 38: Shareholder distribution potential
shareholder distribution potential 2001-2003 2004 2005-2006 cases avg. case A B C 26 Brent $/bbl 38 20 30 40 4.3 HH $/mcf 6.1 3.5 5.3 6.0 3.3 refining $/bbl 6.1 2.7 2.7 2.7 $bn 0 10 20 30 40 50 2001- share buybacks 2003 dividends A future shareholder distribution potential 2004- 2006 B C 2004 distri
Slide 39: Targets and indicators
targets and indicators three targets strategic indicators z 5% p.a. average production growth 1. reinvest for long term growth from 2004 to 2008 z pre-tax cash returns improvement of around 2 percentage points by end 2006 versus 2003 z pre-tax operating capital employed growth of around 15% by end 2
Slide 40: Consistent delivery
consistent delivery z sustainability: strong base of material assets and markets z discipline: distributing excess cash to shareholders z momentum: investing for growth whilst delivering returns
Slide 41: Byron Grote, chief financial officer
Byron Grote chief financial officer
Slide 42: Trading environment
trading environment $/bbl $/mcf $/bbl $/te 45 6 9 180 40 oil 8 160 5 petrochemicals 35 7 140 30 4 6 120 25 gas 5 refining 100 3 20 4 80 15 2 3 60 10 2 40 1 5 1 20 0 0 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2003 2004 2003 2004 ∆ % vs 2003 ∆ % vs 2003 average realisations 4Q fy indicator
Slide 43: Financial results
financial results $bn % change z results for the fourth quarter vs 4Q03 pro forma 3.6 +26 replacement cost 3.0 +35 historical cost 2.5 +9 post-tax adjusted operating cash flow* 5.3 +164 z results for the year vs 2003 pro forma 16.2 +26 replacement cost 14.1 +35 historical cost 15.7 +50 post-tax adju
Slide 44: Exceptional & non-operating items
exceptional & non-operating items $bn 2004 post-tax $m 1Q 2Q 3Q 4Q fy 1.5 exceptional items 1,300 (99) 18 (143) 1,076 non-operating items and UPIS (123) (159) (419) (984) (1,685) Total 1,177 (258) (401) (1,127) (609) 1.0 0.5 0.0 (0.5) (1.0) 2002 2003 2004
Slide 45: Return on average capital employed
return on average capital employed % 35 competitor range* 30 BP 25 20 15 10 5 0 (5) (10) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2002 2003 2004 *BP, ExxonMobil, Shell, ChevronTexaco, Total ROACE = (pro forma result + after tax finance interest + MSI) / pro forma average capital employed
Slide 46: Pre-tax cash return
pre-tax cash return % 45 40 35 30 25 20 15 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2002 2003 2004 pre-tax cash return = pro forma RCP before interest & tax – exceptional items – non-operating items + pro forma DD&A / pro forma average operating capital employed
Slide 47: 2004 vs 2003 result
2004 vs 2003 result pro forma basis* base decline inflation $bn post-tax events tax rate 18 16 margins gas 14 e&p start-ups oil volumes 12 commercial performance int. expense 10 8 6 4 2 0 2003 except. prices & forex a&d dd&a other 2004 & NOI margins *a reconciliation to the nearest equivalent UK GAA
Slide 48: Reserves replacement ratios
reserves replacement ratios* equity accounted total subsidiaries entities combined UK GAAP / SORP1 2003 122% 47% 109% 2004 106% 118% 110% US GAAP / SEC2 2003 119% 72% 111% 2004 78% 114% 89% 1 SORP reserves use long term planning prices 2 SEC reserves use year-end prices: 2003 ca.$30/bbl; 2004 ca.$40
Slide 49: TNK-BP
TNK-BP 3Q04 4Q04 $m impact on BP results BP share of TNK-BP net income 521 411 deferred shares consideration accretion (22) (17) impact on BP net income 499 394 production mboed 945 972 • new export duties from 1st August 2004 • negative impact from export duty lag • $23m credit in 4Q relating to pr
Slide 50: Sources and uses of cash
sources and uses of cash $bn post-tax 35 2003 2004 pensions 30 disposals 25 buybacks disposals 20 dividends 15 acquisitions operations operations 24.0* 10 18.5* organic 5 capex 0 sources uses sources uses *post-tax adjusted operating cash flow before discretionary pension contributions of $(0.3)bn i
Slide 51: Gearing
gearing % 40 35 30 25 20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2001 2002 2003 2004 pro forma gearing = net debt/(net debt + equity – acquisition adjustment)
Slide 52: Shareholder distributions
shareholder distributions $bn 14 buybacks dividends paid 12 share issues 10 8 6 4 2 0 (2) 2001 2002 2003 2004
Slide 53: Guidance on 2005 group items
guidance on 2005 group items z other businesses and corporate (ob&c) - $(900)m / year ± $200m excluding addition of olefins and derivatives business z interest expense – will move proportionately to market interest rates z pensions & benefits - 2005 cash contributions and earnings impacts similar to
Slide 54: 2005 estimated rules of thumb
2005 estimated rules of thumb Full year (pre-tax) 2005 oil price Brent +/- $1/bbl $500m gas price HH +/- $0.1/mmbtu $100m refining margin +/- $1/bbl $1100m z rules of thumb are approximate z actual impacts will depend on: volumes / portfolio mix absolute price level
Slide 55: 2005 reporting framework
2005 reporting framework z changes to be implemented International Financial Reporting Standards pro forma re-segmentation z no impact on strategy or economic value z technical briefing March 14th 2005