BP plc · LSE:BP.
BP — Q3 2015 Earnings Presentation
46 slides from BP's earnings presentation, Oct 27, 2015
Slide 1: 3Q 2015 Results and Investor Update
3Q 2015 Results and Investor Update 27 October 2015 Thunder Horse, Gulf of Mexico
Slide 2: Jess Mitchell, Head of Group Investor Relations
Jess Mitchell Head of Group Investor Relations PSVM, Angola
Slide 3: Cautionary statement
Cautionary statement Forward-looking statements - cautionary statement This presentation and the associated slides and discussion contain forward-looking statements – that is, statements related to future, not past events – with respect to the financial condition, results of operations and business
Slide 4: Bob Dudley, Group Chief Executive
Bob Dudley Group Chief Executive Deepsea Aberdeen drilling rig
Slide 5: Agenda
Agenda 3Q 2015 results Our proposition for value growth – A set of enduring principles – A medium-term financial frame Our future Q&A 5
Slide 6: Brian Gilvary, Chief Financial Officer
Brian Gilvary Chief Financial Officer Whiting refinery, Indiana
Slide 7: Environment
Environment Brent(1) Henry Hub(1) Refining Marker Margin(2) 120 8 35 7 30 100 6 25 $/mmbtu 80 5 $/bbl $/bbl 20 4 60 15 3 40 10 2 20 1 5 2013 2014 2015 2013 2014 2015 2013 2014 2015 (1) Source: Thomson Reuters Datastream (2) Refining Marker Margin based on BP’s portfolio 7
Slide 8: 3Q 2015 Summary
3Q 2015 Summary Underlying earnings figures are adjusted for the costs associated with the Gulf of Mexico oil spill, other non-operating items and fair value accounting effects $bn (1) Replacement cost profit before 3Q14 2Q15 3Q15 % Y-o-Y % Q-o-Q interest and tax (RCPBIT) Upstream 3.9 0.5 0.8 (2) 3Q
Slide 9: Upstream (excluding Russia)
Upstream (excluding Russia) Realisations(1) Volume Underlying RCPBIT(2) 120 20 3,000 5 100 2,750 4 3.9 16 80 2,500 3 12 2.2 mboed $/mcf 2,250 $/bbl 60 2 $bn 8 40 2,000 1 0.8 0.6 0.5 4 20 1,750 0 0 0 1,500 -1 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 Total production
Slide 10: Downstream
Downstream Refining environment Refining availability Underlying RCPBIT(1) 24 98 2.5 2.3 2.2 20 96 2.0 1.9 1.5 16 94 1.5 1.2 $/bbl $bn 12 % 92 1.0 8 90 0.5 4 88 0.0 0 86 -0.5 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 RMM WTI - WCS spread Fuels Lubricants Petrochemica
Slide 11: Rosneft
Rosneft Average Urals price BP share of underlying net income(1) BP share of Rosneft dividend 120 0.6 1.2 100 0.5 1.0 80 0.4 0.8 $/bbl $bn $bn 60 0.3 0.6 40 0.2 0.4 20 0.1 0.2 0 0.0 0.0 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 (1) On a replacement cost basis and adj
Slide 12: Other items
Other items OB&C underlying RCPBIT(1) Underlying effective tax rate(2) 3Q14 4Q14 1Q15 2Q15 3Q15 45 0.0 40 35 (0.1) (0.1) 30 (0.2) 25 $bn % (0.2) 20 (0.3) (0.3) (0.3) 15 10 (0.4) (0.4) 5 0 (0.5) 3Q14 4Q14 1Q15 2Q15 3Q15 (1) Other businesses and corporate replacement cost profit before interest and ta
Slide 13: Gulf of Mexico oil spill costs and provisions
Gulf of Mexico oil spill costs and provisions pre-tax(1) $bn To end 1H 2015 3Q 2015 Cumulative 2014 to date Income statement Charge / (credit) for the period 43.5 11.1 0.4 55.0 Balance sheet(2) Brought forward 8.0 18.3 Charge / (credit) to income statement 43.5 11.1 0.4 55.0 Payments into Trust Fund
Slide 14: Sources and uses of cash
Sources and uses of cash YTD 2014 YTD 2015 30 30 Disposals Gulf of Mexico oil spill 25 25 Share buybacks - 20 20 Gulf of Mexico oil spill Dividends Underlying Inorganic capex Dividends Disposals $bn $bn 15 cash flow(1) 15 Inorganic capex 10 Organic 10 capex Underlying Organic cash flow(1) capex 5 5
Slide 15: Bob Dudley, Group Chief Executive
Bob Dudley Group Chief Executive Cassia, Trinidad
Slide 16: A new price environment
A new price environment 130 120 110 Forward strip June 2014 100 Dated Brent 90 Forward strip $/bbl February 2015 80 70 60 Forward strip October 2015 50 40 2011 2013 2015 2017 2019 2021 Source: Platts; forward strip prices represent Intercontinental Exchange Brent Crude Oil futures 16
Slide 17: Our proposition for value growth: a clear set of enduring principles
Our proposition for value growth A clear set of enduring principles • Relentless focus on safety and reliability • A balanced portfolio with distinctive capabilities • Portfolio actively managed for value over volume • Continued capital and cost discipline • Growing sustainable free cash flow and di
Slide 18: Relentless focus on safety and reliability
Relentless focus on safety and reliability Upstream(1) Downstream BP operated Solomon Tier 1 events plant reliability availability Tier 1 events % % 15 95 50 95 12 40 90 9 30 90 6 20 85 85 3 10 0 80 0 80 2011 2012 2013 2014 1H 2015 YTD 2011 2012 2013 2014 YTD 2015 (1) Excluding Lower 48 18
Slide 19: A balanced portfolio
A balanced portfolio Contribution to 2020 pre-tax operating cash flow(2) Resilient to the environment Upstream • Integrated business model Pre-FID(2) • ~1/3 of Upstream production from Production Post-FID(2) Gas value chains major Other Sharing Agreements projects • ~80% of pre-FID(1) major projects
Slide 20: Actively managing our portfolio for value over volume
Actively managing our portfolio for value over volume • Optimising the portfolio for shareholder value Divestments Acquisitions – Divesting assets that no longer compete – Selective acquisition to add value Portfolio of opportunities – Creating innovative new business models RISK RETURNS • Disciplin
Slide 21: Upstream: a resilient base and disciplined growth
Upstream: a resilient base and disciplined growth • Improving safety and reliability • Maximising production from existing assets • High-quality project pipeline underpinning growth • Disciplined investment for growth • Resetting the cost base 21
Slide 22: Resilient base performance
Resilient base performance Non-productive time Managing field decline(1) NPT and wells completed(3) Wells 35% 150 Managed FY est. decline trend(1) ~2% 100 mmboed 30% 50 25% 0 2014 2015 2016 2012 2013 2014 2015 2015/16 Project PSA(2) Non-productive time (NPT) Base Wells completed start-ups impacts 20
Slide 23: Upstream capital optimisation
Upstream capital optimisation Expected capital spend 2015 to 2018 • Disciplined investment approach Projects • Capital allocation process aligned with strategy Exploration • Competitive returns New wells & wellwork • Uncommitted spend provides flexibility Base integrity & other 23
Slide 24: Improving quality of future investments
Improving quality of future investments Break-even price for BP’s pre-FID major projects(1) • Progression only when value thresholds 120 are met 100 October 2015 estimate • Delivering value improvements 80 October 2014 estimate – Renegotiate supply chain contracts Brent $/boe – Standardisation 60 In
Slide 25: Improving quality of future investments - examples
Improving quality of future investments - examples Phasing optimisation Scope and cost optimisation West Nile Delta – Capital Expenditure Thunder Horse South Expansion Capex reduced; -21% +10% first gas delivery unchanged Capex Production 3Q 2014 plan 3Q 2015 plan Source: BP internal data 25
Slide 26: Our robust growth option hopper
Our robust growth option hopper Net production from new major projects(1) 1,000 By resource type 1,000 By project stage Conventional oil Appraise 750 Deepwater oil 750 Design Heavy oil mboed 500 Conventional 500 mboed gas Tight gas Construction 250 250 LNG 2015 start- 2015 start-ups ups 2014 start-
Slide 27: Our project pipeline
Our project pipeline Operating and construction 2014 to 2018 Design and appraise 2017 to 2020 Start-up Project Location Type WI % Plateau(1) Operator Devt stage Start-up Project Location Type 2014 Chirag Oil Azerbaijan Conventional oil 36 103 BP Operating 2017-20 Angelin Trinidad LNG Mars B GoM Deep
Slide 28: Growth beyond 2020
Growth beyond 2020 Alaska • Drill out 3 hubs North Sea • Alaska LNG • Drill out 10 Hubs Russia Canada • Greater Clair • Taas JV (Srednebotuobinskoye) • Sunrise later phases • Exploration drill out • Yenisey-Khatanga development • Pike, multiple phases and exploration • Terre de Grace • West Siberian
Slide 29: Upstream focus on costs
Upstream focus on costs • Right-size the organisation Production Cost 14 • Reduce third party spend – Deflation across contracts 12 $/boe – Efficiency of scope and delivery 10 • Influence partner operated spend • No compromise on safety 8 2013 2014 2015 est. 29
Slide 30: New Lower 48 model starting to deliver
New Lower 48 model starting to deliver • Material resource base - 7.5 bn boe • Focus on safety, innovation and performance • Improvements in cost and capital efficiency – Unit cash costs down ~18% – Innovative well design and execution • Competitive and improving returns Contingent • Active evaluati
Slide 31: New Lower 48 model: improving capital efficiency
New Lower 48 model: improving capital efficiency Well development costs versus peers by play North West MidCon MidCon (Granite Wash) East (Woodford) 10 6 35 10 50 5 8 28 8 40 4 6 21 30 $/boe 6 3 4 14 4 20 2 2 7 2 10 1 0 0 0 0 0 2015 BP operated Previous BP operated wells Indicative competitor range
Slide 32: Downstream: focused on performance and growth
Downstream: focused on performance and growth Pre-tax returns % Actual returns • Strong underlying performance improvement with attractive returns • Resilient and growing delivery Margin Margin(1) adjusted adjusted(1) returns – Quality portfolio 2013 2014 3Q 2015(2) – Advantaged manufacturing Net in
Slide 33: Downstream strategy
Downstream strategy Advantaged manufacturing • Top quartile refining • Competitively advantaged portfolio • Improved petrochemicals profit potential Marketing growth • Reliable profit and cash generation • Growth markets access • Differentiated products and customer focus • Leading technology 33
Slide 34: Downstream focus on costs
Downstream focus on costs • Continued year-on-year cash cost reduction Cash costs-to-gross margin ratio(1) • Right-sizing the organisation – Simplified business model and portfolio – Streamlining head office activities and functions • Manufacturing efficiency • Reduction in third party spend 2008 20
Slide 35: A unique position in Russia
A unique position in Russia 25 years experience in Russia BP projects in Russia • 20% share of Taas-Yuriakh development Strong relationships • Word-class exploration Areas of Mutual Strategic partnership with Rosneft Interest (AMI) in Eastern and Western Siberia • Volga-Urals exploration Joint Ventu
Slide 36: Our proposition for value growth: a clear set of enduring principles
Our proposition for value growth A clear set of enduring principles • Relentless focus on safety and reliability • A balanced portfolio with distinctive capabilities • Portfolio actively managed for value over volume • Continued capital and cost discipline • Growing sustainable free cash flow and di
Slide 37: Brian Gilvary, Chief Financial Officer
Brian Gilvary Chief Financial Officer Arboles, US Lower 48
Slide 38: A medium-term financial frame
A medium-term financial frame 1. Capex of $17-19bn per annum over 2015-17 2. Cash costs reduced by over $6bn by 2017 versus 2014 3. Balance organic sources and uses of cash(1) at ~$60/bbl by 2017; organic free cash flow growth thereafter 4. Divestments of $9-10bn 2014-15; $3-5bn 2016; $2-3bn 2017+ 5
Slide 39: Capital discipline
Capital discipline Capital framework $bn • Phasing and optimising activity 25 – Disciplined Upstream investment – Selective growth investments in 20 Downstream and other businesses • Capturing deflation and driving capital 15 efficiency • Capex of $17-19bn per annum over 0 10 2015-17 2011 2012 2013
Slide 40: Resetting cash costs
Resetting cash costs Group cash costs(1) $bn • Right-sizing of cost base to smaller footprint • Group-wide simplification and >$6bn efficiency • Restructuring charge to approach $2.5bn by end-2016 • Cash costs reduced by over $6bn by 2017 versus 2014(1) 2010 2011 2012 2013 2014 2015 2016 2017 (1) Ca
Slide 41: Organic free cash flow growth
Organic free cash flow growth • Cost reset creates a more US cents Organic free cash flow per share(1) per share efficient platform 70 • Leveraged to 60 50 – Continuous Upstream Current organic growth and price 40 dividend per share upside 30 – Downstream efficiency and 20 growth 10 • Capacity to re
Slide 42: Divestments
Divestments Divestments since 2010 Targeted divestments $bn $bn • Now approaching $75bn since 80 12 2010 including the sale of BP’s interest in TNK-BP TNK-BP 60 $27.5 8 $9-10bn • $9-10bn over 2014-2015 40 4 • $3-5bn expected in 2016 20 $3-5bn $2-3bn • Ongoing $2-3bn per annum 0 0 2010 2014-15 2016 2
Slide 43: Balance sheet resilience
Balance sheet resilience 40 Gearing • 10-20% gearing band put in place in 2010 to manage 30 uncertainty 20-30% • Greater clarity on % 20 Deepwater Horizon 10-20% commitments 10 • Gearing managed with flexibility around the 20% level going forward 0 43
Slide 44: Bob Dudley, Group Chief Executive
Bob Dudley Group Chief Executive
Slide 45: Our future
Our future A clear set of enduring principles A medium-term financial frame • Capex of $17-19bn per annum over 2015-17 • Relentless focus on safety and reliability • Cash costs reduced by over $6bn by 2017 versus 2014 • A balanced portfolio with distinctive • Balance organic sources and uses of cash
Slide 46: Q&A
Q&A Bob Dudley Brian Gilvary Group Chief Executive Chief Financial Officer Lamar McKay Tufan Erginbilgic Chief Executive, Chief Executive, Upstream Downstream Jess Mitchell Head of Group Investor Relations 46