BP plc · LSE:BP.

BP — Investor Day (February 2017)

60 slides from BP's investor day presentation, February 2017

  1. Slide 1: Getting back to growth

    BP STRATEGY UPDATE FEBRUARY 2017 BP Secret until 28th February Getting back to growth THE BP PROPOSITION Safer Growing sustainable Fit for the future free cash flow and Focused on returns distributions

  2. Slide 2: Strategy update

    BP Secret until 28th February BP STRATEGY UPDATE Strategy update Bob Dudley

  3. Slide 3: Cautionary statement

    CAUTIONARY STATEMENT Forward-looking statements - cautionary statement In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’), BP is providing the following cautionary statement. This presentation and the associated slides

  4. Slide 4: Group overview

    BP Secret until 28th February BP STRATEGY UPDATE Group overview Bob Dudley

  5. Slide 5: Agenda

    BP Secret until 28th February Agenda 1 2 3 Group Upstream Downstream Overview Bob Dudley Bernard Looney Tufan Erginbilgic Group chief executive Chief executive, Upstream Chief executive, Downstream 4 5 6 New Financial Summary business framework models & outlook Lamar McKay Brian Gilvary Bob Dudley D

  6. Slide 6: Changing dynamics of supply and demand

    BP Secret until 28th February Changing dynamics of supply and demand  Global energy demand is Primary energy consumption by fuel1 expected to grow by 30% billion tonnes of oil equivalent to 2035 Oil Gas Coal Nuclear Hydro Renewables  The energy mix is changing 2035 – Oil demand will continue to gr

  7. Slide 7: Strong track record of delivery

    Strong track record of delivery UPSTREAM COSTS REBASED ORGANIC CAPITAL SPEND1 CASH COSTS2 24 Major projects since 2012 $ 16bn in 2016 vs. $24.6bn in 2013 $ 7bn reduction in 2016 vs. 2014 RELIABILITY & EFFICIENCY DOWNSTREAM 95% Plant reliability 95% Refining availability $ 3bn Underlying performance

  8. Slide 8: Looking to the future – disciplined growth

    Looking to the future – disciplined growth  Deepwater Horizon Recent acquisitions and agreements liabilities clarified  Financial frame moving towards balance Aker BP  Culture of cost Fulcrum discipline embedded bioenergy venture ACG extension 10% of Zohr  Portfolio deepened 10% of ADCO for futu

  9. Slide 9: The BP proposition

    The BP proposition Safe, reliable and Safer efficient execution Growing sustainable free Fit for A distinctive portfolio cash flow and the future fit for a changing world distributions to shareholders over the long-term Value based, Focused disciplined investment on returns and cost focus BP STRATEG

  10. Slide 10: Safe, reliable and efficient execution

    Safe, reliable and efficient execution Process Safety Events (PSE) Reliability and availability number of instances % Refining Solomon Upstream operated PSE Tier 1 PSE Tier 2 availability plant reliability 350 98 300 94 250 200 90 150 100 86 50 0 82 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012

  11. Slide 11: A deep resource base

    A deep resource base 2016 Proved Reserves1 2016 Production1 bn boe mboed 25 5000 20 4000 15 3000 10 2000 14.7 5 1000 years 0 0 Reserves to Exxon BP 2 Shell Total Chevron Exxon Shell BP 2 Chevron Total production ratio2 (1) Source: Company reports (2) Includes BP’s share of Rosneft BP STRATEGY UPDATE

  12. Slide 12: A strong platform for growth

    A strong platform for growth  Strong Upstream, strong Downstream – Strong incumbency – Focus on best assets and markets  Unique position in Russia  Integrated value options – IST and LNG  Largest operated renewables portfolio among peers  Strong relationships and innovative partnerships BP STRA

  13. Slide 13: Competitively positioned

    Competitively positioned Balanced Upstream portfolio1 Competitive Downstream net income % of 2020 production $/bbl Oil sands Unconventional LNG/GTL Deepwater Conventional 100% 9 75% 6 50% 3 Competitor range3 25% 0% 0 BP2 Exxon Shell Chevron Total 2013 2014 2015 2016 (1) Wood Mackenzie data (2) BP ad

  14. Slide 14: A distinctive partnership in Russia

    A distinctive partnership in Russia 19.75%  Efficient operations, world-class shareholding 2 Board members projects and resilient financial performance Baikalovskoye discovery  Enhanced value from independent joint ventures Taas exploration Taas joint venture  Mutually strategic partnership Volga

  15. Slide 15: Getting back to disciplined growth

    Getting back to disciplined growth Delivering production growth Growing our marketing businesses mboed pre-tax earnings $bn Managed base Major projects Acquisitions3 Lubricants Fuels marketing 6 >1mmboed from new 4 production by 20211 >$3bn 2 incremental pre-tax earnings from marketing 0 businesses

  16. Slide 16: Clear priorities for a changing world

    Clear priorities for a changing world 1. 2. Shift to gas and Market led advantaged oil growth in the in the Upstream Downstream 3. 4. Venturing and Modernising low carbon across the whole multiple fronts Group BP STRATEGY UPDATE 16

  17. Slide 17: Return focus – making the right choices

    Return focus – making the right choices Value over volume Incumbency and key partnerships Focus on best markets and assets ROACE DELIVERING Price leverage and resilience COMPETITIVE RETURNS > 10% by 2021 Disciplined capital investment Actively managed portfolio BP STRATEGY UPDATE 17

  18. Slide 18: Returns focus – disciplined capital investment

    Returns focus – disciplined capital investment  Proven discipline and Group organic capital expenditure delivery $bn Upstream Downstream OB&C  Rigorous capital allocation process 30  Strict investment returns $8.6bn criteria reduction 20  Optimised decision making 2016 organic capital 10 expendi

  19. Slide 19: Returns focus – sustainable cost efficiency

    Returns focus – sustainable cost efficiency  Working in a simpler Group cash costs1 and standardised way $bn  Focus on continuous improvement $7bn reduction  Transformation and modernisation  ‘Making it stick’ 2016 cash costs1 $ 7bn below 2014 2013 2014 2015 2016 (1) See bp.com for further infor

  20. Slide 20: Returns focus – what makes it different this time?

    Returns focus – what makes it different this time?  Learning from the past  New culture of cost discipline – Operational transformation – Controls embedded in organisational process  Networking and collaboration across our industry  Benchmarking outside our industry  Modernisation and use of te

  21. Slide 21: Upstream

    BP Secret until 28th February BP STRATEGY UPDATE Upstream Bernard Looney

  22. Slide 22: Upstream key messages

    Upstream key messages SAFETY DELIVERY Cost and Base Major project capital savings decline start-ups # 1 $ 9bn < 2.5% 6 Core value 1 year early1 5 years 2 in 2016 MEDIUM TERM GROWTH UPGRADED STRONGER LONG TERM GROWTH 13-14bn 4  5% production growth  Increased growth capacity $  Flat capital $13-14

  23. Slide 23: Upstream strategy

    Upstream strategy SAFETY EXECUTION INCUMBENCY # 1 Greatest Leadership in Core value source of value the best basins GROWTH CAPABILITY From a balanced, Global, modern and actively workforce, digitally managed portfolio enabled BP STRATEGY UPDATE 23

  24. Slide 24: Driving performance

    Driving performance $9bn improvement in cost and Driving down breakeven capital expenditure – delivered early Prudhoe Bay 6 Capital expenditure1 $bn Cash costs $bn Arresting decline Production Improving efficiency Breakeven price 2016 Project start-ups -$5bn -$4bn 40% reduction $ 9bn savings vs 2014

  25. Slide 25: Driving down costs

    Driving down costs Unit production costs Capital efficiency $/boe 14 Drilling Performance % of top quartile offshore wells Days/10k 12 55% > 40% 10 reduction 45% 8 34% 6 25% 4 ~ 75% 2 cost savings 0 sustainable 2013 2014 2015 2016 2017 2013 2014 2015 2016 BP STRATEGY UPDATE 25

  26. Slide 26: Projects on track

    Projects on track 7 major projects to start-up in 2017 Projects production build up mboed  Juniper  Trinidad Onshore Compression 800 mboed  Khazzan  West Nile Delta –  Persephone Taurus/Libra  Quad 204  Zohr 9 start-ups under construction 2018-2021 800 mboed Atoll Phase 1 Clair Ridge Tangguh

  27. Slide 27: Next wave of competitive projects

    Next wave of competitive projects Potential new FIDs Clair South Pike Alligin Aker BP Lower 48 Vorlich Azeri East Atlantis Tortue Atoll Phase 2 Phase 3 Angelin Phase 1 Khazzan Train 3 India Gas Trinidad Projects Offshore Compression Zinia Phase 2 PAE BP STRATEGY UPDATE 27

  28. Slide 28: Upstream medium-term growth upgraded

    Upstream medium-term growth upgraded  5% production CAGR1 to 2021 Free cash flow – pre-tax3 Brent $55/bbl real  Continued decline in unit 15 14 production costs 13 12  Additional $1bn performance 11 improvement2 10 9  Constant organic capital 8 expenditure of $13-14bn 7 6 5 4 $ 13-14bn (1) CAGR

  29. Slide 29: Enhancing portfolio quality

    Enhancing portfolio quality NEW GAS ADVANTAGED OIL  Oman license  Mauritania  Egypt Zohr  ADCO agreement  ACG contract area and Senegal interest extension extension enlarged accessed acquired FOCUSING EXPLORATION Incumbent positions  Azerbaijan, Egypt, North Sea, GoM New opportunities  Lower

  30. Slide 30: Improved long term growth capacity

    Improved long term growth capacity Production potential Progression of E&A  North Sea  Azerbaijan  NWS  Trinidad  Eastern Canada  GoM Miocene  Egypt  Russia  West Africa  China Post 2020 Projects  Mad Dog 2  Greater Clair  Trinidad  Egypt follow on  ACG extension contract phases (WND,

  31. Slide 31: Modernisation and transformation

    Modernisation and transformation Improving capital efficiency AGILITY DIGITAL MINDSET “Improving and simplifying “Digitising and automating our “Margin focus“ the way we operate” operations” Enhancing operating performance Improving capital efficiency BP STRATEGY UPDATE 31

  32. Slide 32: Differentiated value from digital

    Differentiated value from digital CLOUD-BASED PLATFORMS GLOBAL MONITORING CENTRES DIGITALLY SAVVY WORKFORCE Well, field, and cost data BP Well Drilling ARGUS, HAL history and analytics Advisor efficiency  Advanced analytics Production Plant Operations Plant APEX optimisation Advisor reliability  D

  33. Slide 33: Upstream key messages

    Upstream key messages SAFETY DELIVERY Cost and Base Major project capital savings decline start-ups # 1 $ 9bn < 2.5% 6 Core value 1 year early1 5 years 2 in 2016 MEDIUM TERM GROWTH UPGRADED STRONGER LONG TERM GROWTH 13-14bn 4  5% production growth  Increased growth capacity $  Flat capital $13-14

  34. Slide 34: Downstream

    BP STRATEGY UPDATE Downstream Tufan Erginbilgic

  35. Slide 35: Downstream strategy

    Downstream strategy SAFETY ADVANTAGED MANUFACTURING # 1 Core value Profitable MARKETING Transition to GROWTH EFFICIENCY AND LOWER CARBON SIMPLIFICATION AND DIGITALLY ENABLED FUTURE BP STRATEGY UPDATE 35

  36. Slide 36: Execution of Downstream strategy is delivering results

    Execution of Downstream strategy is delivering results Pre-tax returns more than double1 Competitive net income per barrel % rolling four-quarter $/bbl 20 Actual returns 9 Competitor 6 range2 10 Margin adjusted1 Doubling 3 pre-tax returns1 Competitive net 0 0 income per barrel 2013 2014 2015 2016 20

  37. Slide 37: Expanding earnings potential and improving resilience

    Expanding earnings potential and improving resilience Expanding earnings potential Improving resilience pre-tax earnings $bn RMM2 $/bbl 6 25 RMM required to generate $3bn 15% Downstream pre-tax returns underlying 4 improvement 20 2011-2015 RMM range 2 15 3bn 2016 RMM $ underlying 0 10 performance 20

  38. Slide 38: Advantaged manufacturing – refining

    Advantaged manufacturing – refining Significant progress and Refining continued growth more to come pre-tax earnings $bn2  Top quartile refining1 >$2bn  More than $1bn pre-tax earnings improvement in 2016 versus 2014  Improved reliability and efficiency  Advantaged feedstock and optimisation >$

  39. Slide 39: Advantaged manufacturing – petrochemicals

    Advantaged manufacturing – petrochemicals Repositioning the business Petrochemicals cash breakeven1 and growing earnings indexed  Access to a growing market 100  Industry leading proprietary technology >40% reduction 75  Repositioning petrochemicals to improve bottom-of-cycle resilience  Cash br

  40. Slide 40: Marketing - material earnings and attractive returns

    Marketing - material earnings and attractive returns Lubricants continued growth Fuels marketing material growth pre-tax earnings $bn1 pre-tax earnings $bn1 ~$1bn 4 >$2bn 2 2 1 >$ >$ 3bn bn 3.0 marketing growth 0 0 2014-20211 2014 2016 2021 2014 2016 2021 Combined $3.7bn  Strong brands, technology

  41. Slide 41: Australia strategic partnership

    Australia strategic partnership Significant sources of value Competitive site profitability UK M&S convenience partnership model2 Wholesale margin Accretive to Network earnings and EBITDA1 operating cash Strategic 2016 Convenience Midstream 2021 BP M&S Industry comparator convenience partnership & r

  42. Slide 42: Efficiency and simplification

    Efficiency and simplification Headcount: circa 6500 role reduction1 Cash Costs to Gross Margin ratio2 Agency ~6500 Employees $ 3bn lower cash costs delivered Continued focus on efficiencies 2014 2016 2018 2014 2015 2016 2018 2021 and costs (1) Excludes retail site staff (2) Cash costs divided by und

  43. Slide 43: Building on our strengths – mobility and low carbon future

    Building on our strengths – mobility and low carbon future Bio and low carbon Advanced mobility Digital New fuels, lubricants Electric, connected and autonomous vehicles Driver convenience and and plastics new channels to customers BP STRATEGY UPDATE 43

  44. Slide 44: Growing Downstream free cash flow

    Growing Downstream free cash flow Free cash flow – pre-tax1  Continued underlying $bn performance improvement 10  Top quartile refining and repositioning petrochemicals  Capturing growth in marketing businesses 5  Continued focus on efficiencies and costs $ 9-10bn  Pre-tax returns of ~20% in 20

  45. Slide 45: Downstream key messages

    Downstream key messages SAFETY ADVANTAGED MARKETING MANUFACTURING GROWTH # 1 >$ 2.5bn >$ 3bn Core value underlying earnings underlying earnings growth 2014-211 growth 2014-211 EFFICIENCIES & COSTS MEDIUM TERM GROWTH $ 3bn cash costs reduction 2016 versus 2014 $ 9-10bn ~ 20% free cash flow in 20212 p

  46. Slide 46: New business models

    BP STRATEGY UPDATE New business models Lamar McKay

  47. Slide 47: Strategic Horizons

    Strategic Horizons Long term Medium term Near-term Advantaged Shift to gas and resources Safer and more reliable advantaged oil Cash rebalancing 2017+ 2021+ Downstream 2030+ Integrated energy Portfolio resilience marketing growth solutions >1mmboed new production1 Growth in Alternative Energy and ne

  48. Slide 48: Alternative Energy

    Alternative Energy US Wind  Strong safety and operational performance 1,432  Generating operating cash MW capacity  Focus on optimisation and efficiency BP Biofuels  Technology commercialisation  Evaluating growth options 10 Mte/yr capacity BP STRATEGY UPDATE 48

  49. Slide 49: New Business Models

    New Business Models Bio and low carbon products Advanced mobility  New participation models: venturing and low carbon Core  Building on existing core businesses \ business Carbon management Power  Medium to long-term growth and storage opportunities Digital transformation BP STRATEGY UPDATE 49

  50. Slide 50: Advocacy and Actions

    Advocacy and Actions Operational The role Carbon The role of Partnerships and product of gas pricing technology and efficiency and research initiatives BP STRATEGY UPDATE 50

  51. Slide 51: Financial framework and outlook

    BP STRATEGY UPDATE Financial framework and outlook Brian Gilvary

  52. Slide 52: 2017 financial framework

    2017 financial framework 2017 guidance  Driving down the oil price rebalance point including the new portfolio  Group capital frame maintained $ 15-17bn 7 $ bn Group organic capital cash cost reduction  Continued focus on capital and cost expenditure target reached efficiency  2H17 underlying op

  53. Slide 53: Growing sustainable free cash flow to 2021

    Growing sustainable free cash flow to 2021 Organic free cash flow per share1  Delivering growth in operating cash flow Brent price3 – Upstream ramp-up of major projects $55-60/bbl – Downstream marketing growth and increased resilience – Continued modernisation and efficiency improvements 100% – Por

  54. Slide 54: Group organic capital expenditure

    Group organic capital expenditure Group organic capital expenditure $bn 25  $15-17bn in 2017 including impact of new portfolio 20  maintained at $15-17bn per year from 2018-2021 15 10 MAXIMUM 5 $15-17bn per year organic 0 capital expenditure 2013 2014 2015 2016 1 2017 2018-21 (1) Excludes the rene

  55. Slide 55: Capacity to grow distributions

    Capacity to grow distributions Organic free cash flow per share1 Oil price balance point4 $/bbl Brent price3 $55-60/bbl New portfolio Balance point Old portfolio reduces 100% current Current DPS2 cash DPS2 $35-40/bbl 2018 2021 2014 2015 2016 2017 2018 2019 2020 2021+ 2021 (1) Organic free cash flow:

  56. Slide 56: Deepwater Horizon payments and divestments

    Deepwater Horizon payments and divestments Deepwater Horizon cash payments1 Divestments Government payments Other payments Announced In progress Yet to be identified 8 8 6 6 4 4 2 2 0 0 2016 2017 2018 2019+ 2016 2017 2018 2019+ (1) Government payments includes criminal and civil settlements. Other p

  57. Slide 57: Return on average capital employed

    Return on average capital employed ROACE1 to exceed 10% Increasing capital in service2 by 2021 % 85%  Increasing levels of capital in service  Growth in volumes and margins  Strong capital and cost discipline ROACE 10% 65% > 2016 2017 2018 2019 2020 2021 (1) ROACE reflects underlying replacement

  58. Slide 58: Financial framework

    Financial framework 2017 2018 to 2021 Driving towards Material growth, Organic free cash flow1 rebalancing by end 2017 balance point falls steadily Free cash flow Organic capital expenditure $15-17bn $15-17bn Divestments $4.5-5.5bn $2-3bn ~$2bn in 2018, DWH payments $4.5-5.5bn stepping down thereaft

  59. Slide 59: Summary

    BP STRATEGY UPDATE Summary Bob Dudley

  60. Slide 60: The BP proposition

    The BP proposition Safe, reliable and Safer efficient execution Growing sustainable free Fit for A distinctive portfolio cash flow and the future fit for a changing world distributions to shareholders over the long-term Value based, Focused disciplined investment on returns and cost focus BP STRATEG

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