BP plc · LSE:BP.
BP — Q2 2006 Earnings Presentation
29 slides from BP's earnings presentation, Jul 25, 2006
Slide 1: Presentation to the financial community: First half 2006 update
Presentation to the financial community First half 2006 update 25 July 2006
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 oil and gas prices; US gas consumption; refining margins and global indicator margins; the effect of sector-specific cost inflat
Slide 3: First half 2006 update
First half 2006 update John Browne Group Chief Executive
Slide 4: 1H'06: Financial highlights
1H’06: Financial highlights • Replacement cost profit of $11.4bn up 9% • Replacement cost profit per share 56¢ up 14% • Quarterly dividend per share 9.825¢ up 10% • Post-tax operating cash flow of $18.1bn up 12% • Divestment proceeds of $2.6bn • Share buybacks of $8.5bn • Gearing at 15%
Slide 5: 1H'06: Milestones
1H’06: Milestones • First oil from Baku to Ceyhan pipeline, first gas at In Amenas • Continued exploration success • Texas City re-commissioned • Disposals announced: Shenzi, Gulf of Mexico Shelf, Coryton refinery • Start of LNG operations in Guangdong, China • New biofuels business launched • Furth
Slide 6: 2Q 2006 Results
2Q 2006 Results Byron Grote Chief Financial Officer
Slide 7: Trading environment
Trading environment $/bbl Oil realization $/mcf Gas realization 70 12 60 10 50 8 40 6 30 20 4 10 2 0 0 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 2005 2006 2005 2006 $/bbl Refining indicator margin 14 Change vs. 2005 12 2Q 1H 10 8 Average realizations 6 Crude oil $/bbl 38% 36% 4 Natural gas $/mmbtu 1% 16%
Slide 8: Financial results
Financial results Change vs. 2Q 2005 Results for the second quarter $bn % % per share • Replacement cost profit 6.1 23 29 • Profit including inventory gains/losses 7.3 30 37 • Net cash provided by operating activities 9.1 36 43 ¢/ share • Dividend to be paid next quarter 9.825 +10 % Change vs. 1H 20
Slide 9: Exploration & Production
Exploration & Production $bn pre-tax • Higher oil realisations 9 8 • Volume broadly flat after 7 adjusting for disposals 6 5 • Non-Operating Items (NOI) 4 - Disposal gains 3 - Embedded derivatives 2 1 0 2Q 05 NOI Underlying 2Q 06 6,553 Underlying result $m 7,347 (652) Non-operating items $m 479 5,90
Slide 10: Refining & Marketing
Refining & Marketing $bn pre-tax • Stronger refining margins 2.0 and supply optimization 1.8 1.6 • Weaker overall marketing 1.4 margins 1.2 • Texas City start-up 1.0 0.8 • Texas City Provision 0.6 (NOI) 0.4 0.2 0 2Q 05 NOI Underlying 2Q 06 1,931 Underlying result $m 2,320 (658) Non-operating items $
Slide 11: Gas, Power & Renewables
Gas, Power & Renewables $bn pre-tax • Higher gas marketing and 0.5 trading contribution 0.4 • IFRS fair value accounting effects 0.3 0.2 0.1 0 2Q 05 NOI Underlying 2Q 06 102 Underlying result $m 347 87 Non-operating items $m 106 189 Total result $m 453
Slide 12: Other businesses & corporate
Other businesses & corporate $bn pre-tax • Underlying result 0.0 consistent with expected annual charge of $900m±$200m (0.1) (0.2) (0.3) 2Q 05 NOI Underlying 2Q 06 (173) Underlying result $m (219) 17 Non-operating items $m 26 (156) Total result $m (193)
Slide 13: Effective tax rate
Effective tax rate • 2Q’06 effective tax rate 36% • UK North Sea tax changes enacted in 3Q - Deferred tax charge - Current tax impact retroactive to 1Q • Expected full year effective tax rate 39%
Slide 14: Sources and uses of cash
Sources and uses of cash $bn 1H 05 1H 06 post tax 20 Disposals 18 Disposals 16 Buybacks 14 12 Operations Buybacks Operations 10 16.1 18.1 Dividends 8 Dividends 6 4 Organic Organic 2 capex capex 0 Sources Uses Sources Uses
Slide 15: Net debt ratio
Net debt ratio % 40 35 30 25 20 15 10 1Q 2Q 3Q 4Q 1Q 2Q 2005 2006 Net debt ratio = net debt / (net debt + equity)
Slide 16: Shareholder distributions
Shareholder distributions $bn – full year $bn – first half 28 14 Buybacks 26 13 24 Dividends 12 22 Share issues 11 20 10 18 9 16 8 14 7 12 6 10 5 8 4 6 3 4 2 2 1 0 0 (2) (1) 2002 2003 2004 2005 1H 06
Slide 17: First half 2006 update
First half 2006 update John Browne Group Chief Executive
Slide 18: Crude oil prices
Crude oil prices Dated Brent $ per bbl 80 70 $65.66 60 $54.52 +20% 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 Daily prices Source: USGC Platts quotes
Slide 19: Gas prices
Gas prices US Henry Hub $ per mmbtu 20 18 16 14 12 10 $8.68 8 (18)% 6 $7.08 4 2 0 2000 2001 2002 2003 2004 2005 2006 Daily prices Source: USGC Platts quotes
Slide 20: Refining margins
Refining margins $ per bbl 20 15 $8.50 $9.44 10 +11% 5 0 2000 2001 2002 2003 2004 2005 2006 Daily prices BP Global Indicator Margin
Slide 21: Inflation lags oil price cycle
Inflation lags oil price cycle % Rate of Change, % Rate of Change, PPI for Oil oil prices and Gas Equipment 80 20 60 15 40 10 20 5 0 0 80 85 90 95 00 05 -20 -5 -40 -10 -60 -15 PPI Inflation* Yearly % oil price change** * Source: US Bureau of Labor Statistics. ** Source: EIA annual average Domestic F
Slide 22: Project start-ups – current view
Project start-ups – current view 2005 2006 2007 2008 - 2009 2010 and beyond 9 Valhall Waterflood 9Cannonball Temsah Thunder Horse Atlantis Ursa Expansion Kizomba C Atlantis North Flank Paz Flor Egypt LNG T2 9 Mad Dog 9Redevelopment King Sub-sea ACG Phase 3 Puma Browse 9 Central Azeri 9BTC Pump Angel
Slide 23: Upstream outlook
Upstream outlook • Projects on track • 11 bn boe resources to reserves by 2010 • 10 bn boe yet-to-find potential in existing exploration portfolio • New access • Portfolio
Slide 24: Texas City
Texas City • Phased re-commissioning continues • Current throughput 200,000 bpd • 1H operating loss of $0.6bn • Near cash breakeven at current trading conditions • Accelerated implementation of a six-point safety plan and process safety management upgrades • Plan to increase investment in US refiner
Slide 25: Five point business plan: Feb '06
Five point business plan: Feb ‘06 Objective: Grow sustainable Free Cash Flow 1. Grow production 4% p.a. on average ’05-’10* 2. Control cost increases below inflation 3. Increase ROACE relative to peer group 4. Maintain capital discipline: ~around $15bn ’06 ~$0.5bn/yr increase ’07-’08 5. Divest $3bn
Slide 26: Shareholder distribution potential & delivery
Shareholder distribution potential & delivery 2003 - 2005 2H‘06 - 2008 cases average A B C 41 Brent $/bbl 25 41 60 6.7 HH $/mcf 8.3 4.0 6.7 9.5 6.4 refining $/bbl 11.3 3.5 6.4 6.4 $bn 0 10 20 30 40 50 60 70 ’03-05 $19bn $21bn A $30bn ‘06-’08 B $50bn C $65bn $12.3bn Share buybacks Dividends 1H’06 Fut
Slide 27: Impact of share buyback programme
Impact of share buyback programme Absolute growth Per-share growth 1H’06 versus 1H’05 (%) (%) Replacement Cost 8.7 14.1 Profit Cash from operations 12.2 17.7 Dividend 5.1 10.3 Production (2.0) 2.9
Slide 28: Summary
Summary • Commitment to safety, integrity and the environment • Maintaining financial strength • Divesting non-core assets in a strong market • Strong per share growth • Distributing excess free cash flow to shareholders • Increasing focus on long term opportunities
Slide 29: Q&A
Q&A John Browne Byron Grote Group Chief Executive Chief Financial Officer Tony Hayward Andy Inglis Chief Executive Deputy Chief Executive Exploration & Production Exploration & Production John Manzoni Vivienne Cox Chief Executive Chief Executive Refining & Marketing Gas, Power & Renewables David All