BP plc · LSE:BP.
BP — Investor Day (March 2010)
69 slides from BP's investor day presentation, Mar 2, 2010
Slide 1: BP Strategy Presentation
BP Strategy Presentation London 2 March 2010
Slide 2: Tony Hayward, Group Chief Executive
Tony Hayward Group Chief Executive
Slide 3: Cautionary Statement
Cautionary Statement Forward Looking Statements - Cautionary Statement This presentation and the associated slides and discussion contain forward-looking statements, particularly those regarding expected future global consumption of energy; expected future energy mix; global economic recovery; expec
Slide 4: Today's agenda
Today’s agenda Introduction Tony Hayward • Environment • Progress so far • What’s next? Exploration & Production Andy Inglis Refining & Marketing Iain Conn Conclusions Tony Hayward Q&A 4
Slide 5: Long-term energy outlook
Long-term energy outlook Energy consumption to 2030 400 Demand 300 Non-OECD Mboed • Growth resumes post 200 recession • Driven by non-OECD 100 OECD • Evolution to lower-carbon 0 2000 2010 2020 2030 economy 400 Supply 300 Renewables Hydro • Diverse energy mix required Mboed Nuclear 200 Coal • Leverag
Slide 6: BP's approach to a lower-carbon future
BP’s approach to a lower-carbon future • Energy efficiency within BP operations • Including the price of carbon in investment decisions • Promoting lowest-cost energy pathways e.g. gas for power generation • Continued investment in Alternative Energy − biofuels − wind − solar − carbon capture and se
Slide 7: Upstream: uncertain price environment
Upstream: uncertain price environment 160 28 140 24 Natural Gas-Henry Hub $/mmbtu 120 20 100 Brent $/bbl 16 80 12 60 8 40 20 4 0 0 2004 2005 2006 2007 2008 2009 2010 7
Slide 8: Downstream: refining margins and utilization
Downstream: refining margins and utilization 12 87 $9.9 10 86 Global Indicator Margin $/bbl $8.6 $8.5 85 Global Utilization(1) % 8 $6.4 $6.5 84 6 $4.5 $4.4 83 $4.1 $4.0 4 82 $2.2 $2.2 2 81 0 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD (1) Global refinery throughput / Global refiner
Slide 9: Forward Agenda
Forward Agenda Safe and reliable operations • Continue journey in personal safety • Implement Operating Management System • Compliance People • Building capability • Leadership and behaviours Performance • Restore revenues • Reduce complexity and cost 9
Slide 10: Safe, reliable and efficient operations
Safe, reliable and efficient operations Recordable Injury Frequency Integrity Management Major Incidents(1) 1.5 35 30 Industry range 1.0 - six majors 25 20 15 0.5 10 5 0.0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Loss of Primary Containment Incidents 200 150
Slide 11: People and organization
People and organization • Leadership and culture • Restructuring and delayering • Skills and capability • Diversity and inclusion • Reward for performance Changing the culture 11
Slide 12: Restoring revenues
Restoring revenues Production Rolling 4-quarters to 4Q09 Refining availability(1) 100% 4500 95% BP 4000 ExxonMobil 90% 3500 mboed 85% Shell 3000 80% Chevron 2500 75% Total 2000 70% 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 2004 2005 2006 2007 2008 2009 Note: Chevron includes Texaco, prior to
Slide 13: Controlling cash costs
Controlling cash costs Cash costs - indexed (Total BP Group) 150 140 130 120 110 100 90 80 2004 2005 2006 2007 2008 2009 A definition of cash costs can be found on our website at www.bp.com 13
Slide 14: 2009 momentum versus peers
2009 momentum versus peers Underlying Net Income $bn(1) 14.6 19.2 11.6 9.5 10.9 Year on Year % -44% -56% -59% -58% -47% Cash from Operations $bn 27.7 28.4 21.0 19.4 17.2 Year on Year % -27% -52% -52% -35% -37% Reported Volumes mboed 3998 3932 3152 2704 2281 Year on Year % 4% 0% -3% 7% -3% Market Cap
Slide 15: Strategic progress in 2009
Strategic progress in 2009 E&P • New access: Iraq, Indonesia, Jordan, new acreage in US Gulf of Mexico and Egypt • Exploration and appraisal success: Tiber, Mad Dog South, Angola Block 31 • Major projects: 7 start-ups and 2 sanctioned developments • Resource replacement: over 250% • Reserves replace
Slide 16: Portfolio quality
Portfolio quality Efficient and successful explorer Strong reserve replacement Robust medium-term growth track record (1) (excluding oil sands, using year-end pricing) 5 Majors' relative performance 2004 - 2008 120% 5-Year Average Organic RRR ’04-’08 5,000 Discovered resource bnboe 100% 4 BP TNK-BP
Slide 17: The opportunity
The opportunity Earnings vs Peers ROACE vs Peers Refining efficiency Underlying net income gap $bn Underlying ROACE Refining performance 5 100 40% 2012 95 2004 0 35% 2009 Solomon Availability % 90 30% Other (5) Supermajors 85 25% 80 (10) 20% BP 75 2007 (15) 15% BP gap to Shell 70 140 130 120 110 100
Slide 18: Realising the opportunity
Realising the opportunity • Capital efficiency • Cost efficiency • Technology • Culture 18
Slide 19: Andy Inglis, Chief Executive, Exploration & Production
Andy Inglis Chief Executive, Exploration & Production
Slide 20: Leadership positions in the world's most prolific hydrocarbon basins
Leadership positions in the world’s most prolific hydrocarbon basins 320mboed 940mboed 680mboed North Sea TNK-BP North America Onshore 570mboed N. Africa, Middle East 460mboed and Caspian 440mboed Gulf of Mexico Trinidad & Tobago 180mboed Asia Pacific 210mboed Angola 200mboed South America 2009 prod
Slide 21: 2009 exploration and access
2009 exploration and access CANADA EGYPT Ellice J-27 Nile Delta BP (25%) 2,900km2 net in two blocks JORDAN Risha 7,000km2 block US SHALE GAS Eagle Ford IRAQ New ~5tcf position Rumaila Redevelopment of supergiant PAKISTAN Onshore US GULF OF MEXICO 5,000km2 in two blocks Tiber BP (62%) and operator Gi
Slide 22: Sustaining a leading track record
Sustaining a leading track record BP net resource additions as Majors' relative performance discovered / accessed 2004–2008 4 5 Resource play* Extensions BP net resource additions bnboe New discoveries BP 4 Discovered resource bnboe 3 3 CVX RDS TOT 2 2 XOM 1 1 COP 0 0 2005 2006 2007 2008 2009 0 5 10
Slide 23: Resources to reserves to production
Resources to reserves to production Exploration and Access Prospect Inventory Exploration Discovered Field Extensions and Start 2005 Discoveries Resource Access Improved Recovery End 2009 38.9 bn boe Non-proved Resources 45.3 bn boe 18.3 bn boe Proved Reserves 18.3 bn boe 1.5 bn boe PRODUCTION 1.5 b
Slide 24: Diverse resource base and reserves additions
Diverse resource base and reserves additions 2009 Resource Base 2009 Reserves Additions % Conventional oil Proved: 18.3 bn boe TNK-BP Asia Pacific Deepwater oil 12 years Angola Water-flood Gulf of Mexico viscous and heavy oil South America Conventional gas N. Africa, Middle East and Caspian LNG gas
Slide 25: Growth to 2015
Growth to 2015 mboed 5,000 TNK-BP Angola 4,000 Gulf of Mexico Asia Pacific 3,000 South America 2,000 N. Africa, Middle East and Caspian Trinidad & Tobago 1,000 North Sea 0 North America Onshore 2008 2009 2010 2011 2012 2013 2014 2015 2010-2015 BP projections at $60/bbl 25
Slide 26: Planned Final Investment Decisions 2010–11
Planned Final Investment Decisions 2010–11 2010 Project FIDs 2011 Project FIDs Tubular Bells Gulf of Mexico Block 18 West Angola Mars B Gulf of Mexico Block 31 SE Angola Atlantis Phase 2 Gulf of Mexico Shah Deniz FFD* Azerbaijan Galapagos Gulf of Mexico Mad Dog Phase 2 Gulf of Mexico Na Kika Phase 3
Slide 27: Project start-ups 2010–2015
Project start-ups 2010–2015 North Sea Skarv * Russia (TNK-BP) Valhall Redevelopment * Russkoye Alaska Devenick * Suzun Liberty * Canada Kinnoull * Verkhnechonskoye FFD Canada Noel * Clair Ridge * Sunrise WoS Q204 * Azerbaijan Gulf of Mexico Chirag Oil * Great White Galapagos * Egypt Na Kika Phase 3
Slide 28: Capital investment 2005–2010
Capital investment 2005–2010 Organic capital expenditure $bn 20 15 Pan American Energy 10 TNK-BP 5 BP 0 2005 2006 2007 2008 2009 2010 Organic Capital Expenditure above excludes: 2006 – Rosneft; 2007 – asset exchanges with Occidental 2008 – accounting treatment related to our transactions with Husky
Slide 29: Growth beyond 2015
Growth beyond 2015 Deepwater Gas Giant Fields (Unconventional) 29
Slide 30: Leading deepwater company
Leading deepwater company 700 600 500 400 mboed 300 200 100 0 2009 net production. Source: Wood MacKenzie Deepwater refers to all fields in >500m water depth 30
Slide 31: Gulf of Mexico – further growth potential
Gulf of Mexico – further growth potential New Orleans Gulf of Mexico Production to 2020 500 Ram Houston New Hubs Powell Production mboed Horn Mtn. Subsea Nile Tiebacks Marlin Thunder Horse Thunder Horseand and Atlantis Pompano Dorado Base & Wedge King NaKika 0 Tubular Bells Santa Cruz 2000 2005 2010
Slide 32: Global gas
Global gas Alaska Gas Skarv Devenick Rospan Harding Area Gas Noel Culzean Wamsutter San Juan WND Shah Deniz FFD Fayetteville Libya Gas Coal Bed Methane Woodford Bourarhat Jordan China Eagle Ford Haynesville Satis Oman Serrette Juniper Colombia Sanga Sanga Tangguh Coal Bed Methane Expansion Angola LN
Slide 33: North America Gas
North America Gas Increase in Well Productivity – Noel Tight Gas Woodford Shale Initial Production Rate 60% 20% Pre-BP BP BP 1st 10 wells latest 10 wells Greater Green River Wamsutter Tight Gas San Juan Coal Bed Methane San Juan Anadarko Hugoton Fayetteville Shale Arkoma Woodford Shale Haynesville S
Slide 34: Managing the world's giant oilfields
Managing the world’s giant oilfields • Track record in giant oilfield development − Prudhoe Bay − ACG − Samotlor − Thunder Horse • Rumaila* − 66bn bbls oil in place − 12bn bbls produced − 17bn+ bbls further potential * Resource in place, produced and potential figures represent BP estimates 34
Slide 35: TNK-BP update
TNK-BP update 2009: continued success story • Governance and shareholder alignment • Safer operations • Volume growth • Solid financial performance 2010: expected performance • Investment $4bn • Production growth 1-2% • Continued focus on cost efficiency • Focus on development of Greenfield projects
Slide 36: TNK-BP: future growth
TNK-BP: future growth Core production areas Project areas * 2009 start-ups Yamal Projects Moscow Suzun Tagul Russkoye Nyagan Rospan Kamennoye* Samotlor Uvat* Orenburg Novosibirsk Verkhnechonskoye 36
Slide 37: Technology: at the heart of our portfolio
Technology: at the heart of our portfolio Technology Flagships • Advanced Seismic Imaging Conventional ISSTM Method Cableless trials • Beyond Sand Control Deepwater • Efficient Reservoir Access Imaging – resource access • Field of the Future • Gulf of Mexico Paleogene • Inherently Reliable Facilitie
Slide 38: Growth to 2020
Growth to 2020 • Average 1-2% p.a. volume growth to 2015 • Increasing potential to sustain growth to 2020 • Underpinned by growing resource base and quality through choice • Key sources of growth beyond 2015 will come from: − Expanding deepwater − Leveraging expertise in gas − Managing world’s giant
Slide 39: Efficiency growth: key sources
Efficiency growth: key sources Developing organization Enhancing (creation of Centralized Deepening capital Developments Organization) capability discipline 39
Slide 40: Supply chain opportunity
Supply chain opportunity Value Contribution • Success in capturing deflation in 2009 • Category management tor enables sustainable c r improvement Se ade Le • Centralized Developments e r Organization accelerates h Ot Cs implementation IO her Ot Cs IO Level of Maturity Stage 1 Stage 3 Stage 2 Stage
Slide 41: Momentum on production costs
Momentum on production costs 12 10 ExxonMobil Chevron Production costs ($/boe) Shell 8 ConocoPhillips 6 BP Total 4 2 0 2003 2004 2005 2006 2007 2008 2009 Production costs and production from reserves per annual Supplemental Oil and Gas disclosure in 10-K / 20-F. Consolidated subsidiaries only. Data
Slide 42: Projects efficiency opportunity
Projects efficiency opportunity Project Cost • Project spend 20% above Performance sanction estimate over last 5 years 120% 5% 15% • Close the gap by: 100% Sanction − Supply chain management Estimate to better mitigate inflation and deliver higher quality − Centralized Developments Organization to i
Slide 43: Drilling efficiency opportunity
Drilling efficiency opportunity • Drilling performance improved 15% over 2 years Industry Average • Global benchmarks 1st / 2nd Opportunity Drilling Capital $m quartile in most SPUs Best in • Efficiency gains resulted in Basin $0.5bn savings in 2009 2009 BP Actual Performance Source: Benchmarking da
Slide 44: Profit growth, cost and capital efficiency
Profit growth, cost and capital efficiency • Diverse portfolio, underpinned by a growing resource base • Strong strategic, operational and cost momentum in 2009 • Average 1-2% p.a. volume growth to 2015 • Increasing potential to sustain growth to 2020 • Changes in process to sustainably drive capita
Slide 45: Iain Conn, Chief Executive, Refining & Marketing
Iain Conn Chief Executive, Refining & Marketing
Slide 46: The Downstream turnaround
The Downstream turnaround • Safe operations and OMS(1) • Behaviours and core processes • Restoring missing revenues and earnings momentum • Business simplification • Repositioning cost efficiency (1) OMS – Operating Management System 46
Slide 47: Phase 1 - Competitive gap is closed
Phase 1 - Competitive gap is closed Underlying ROACE(1) % (post tax) Underlying Net Income $/bbl (3) 30 6 25 5 20 4 15 3 10 2 5 1 0 0 2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2007 2008 2009 Competitor average(2) BP R&M Competitor range(2) (1) BP and competitor return on average capital
Slide 48: Performance recovery 2007–2009
Performance recovery 2007–2009 9 ge Ran c e an 8 fo r m er Pre-tax underlying RC profit $/bbl lP ica or 7 H ist 6 ~ $5bn 2005 2004 5 2006 4 2007 2009 3 2008 2 1 0 0 2 4 6 8 10 BP’s Refining Global Indicator Margin (GIM) $/bbl Regression line established from rolling 4Q averages in period 2001–2004 B
Slide 49: Performance momentum 2007–2009
Performance momentum 2007–2009 BP’s Refining Global Indicator Margin (GIM) Pre-tax underlying RC profit $bn 2.1 (1.8) (3.3) 3.9 2.7 3.6 3.3 2007 Environment Performance 2008 Environment Performance 2009 Improvement Improvement GIM 9.9 6.5 4.0 $/bbl Environment adjusted for refining margins, petroche
Slide 50: Our portfolio and performance 2007–2009
Our portfolio and performance 2007–2009 2009 average pre-tax operating Pre-tax underlying RC capital employed $bn profit $bn Fuels Value Chains 2007 2008 2009 Convenience Fuels Marketing 1.2 2.0 3.1 14 and Supply Refining 1.2 (0.7) (1.6) 21 International Businesses Lubricants 1.5 2.0 2.1 Petrochemic
Slide 51: Sources of gap closure 2007–2009
Sources of gap closure 2007–2009 2007 2008 2009 Repositioning cost efficiency $0.6bn Simplification $1.4bn Restoring revenues & earnings momentum $2.8bn $4.8bn(1) (1) Based on underlying pre-tax RC profit per annum, adjusted for refining margins, petrochemical margins, forex and energy costs 51
Slide 52: Refining margins 1990–2009
$/bbl 10 12 0 2 4 6 8 1990 1991 1992 1993 1994 GIM adjusted to 2009 $ 1995 1996 1997 1998 1992–2003 range 1999 2000 2001 Refining margins 1990–2009 2002 2003 2004 2005 2006 2007 2008 2009 52
Slide 53: Winning performance in a challenging environment
Phase 2 – Winning performance in a challenging environment 10 9 Pre-tax underlying RC profit $/bbl 8 7 6 2005 2004 5 2006 4 2007 2009 3 2008 2 1 0 0 2 4 6 8 10 BP’s Refining Global Indicator Margin (GIM) $/bbl Regression line established from rolling 4Q averages in period 2001–2004 Based on nameplat
Slide 54: Performance opportunity: efficiency, quality and integration
Performance opportunity: efficiency, quality and integration 2007 2008 2009 2010 2011 2012 Repositioning Repositioning cost efficiency >$1.5bn cost efficiency Portfolio quality Simplification >$0.5bn & integration Restoring revenues & Up to Growing margin share earnings momentum $0.5bn Values based
Slide 55: Repositioning cost efficiency
Repositioning cost efficiency BP R&M cash cost index 140 130 120 110 100 2004 Baseline 90 80 70 60 50 2004 2005 2006 2007 2008 2009 Cash cost index Cash cost index at constant forex and energy Adjusted to exclude major historic divestments 55
Slide 56: Improving efficiency
Improving efficiency Refining Refining performance 100 • Planning and execution 2012 95 2004 2009 • Turnarounds and projects Solomon Availability % 90 85 • Contractor management 80 • Sourcing 75 2007 70 • Energy efficiency 140 130 120 110 100 R&M refining cost efficiency(1) Year BP portfolio average
Slide 57: Improving efficiency: other sources
Improving efficiency Other sources • Manufacturing efficiency • Procurement & Supply Chain Management • Business service centres • Business process efficiency • Overheads and functions • Logistics and marketing channels • Focused footprint 57
Slide 58: Fuels Value Chains: quality & integration
Fuels Value Chains: quality & integration • Right markets, right locations • Advantaged refineries and logistics • Quality products and brands • Marketing and channel management • Supply optimisation and trading • Common processes and back office Customer Crude 58
Slide 59: Global refining quality
Global refining quality Average Refinery 2008–2009 Size (kbd) Utilization % 250 BP Divestments ’00–‘09 Alliance Mombasa (1) Coryton Reichstett 200 Grangemouth Salt Lake Lavera Singapore Mandan Yorktown Divested 150 Size represents absolute scale of Refining portfolio 100 7 8 9 10 11 (10)% (5)% 5% 10
Slide 60: Whiting Refinery Modernization Project
Whiting Refinery Modernization Project • Major rebuild of CDU to process heavy crude • New world scale 100kbd state of the art 6 drum coker • New world scale sulphur removal and gas oil hydrotreating units • Refinery infrastructure upgrade • Leveraging location advantage • Commissioning 2012 60
Slide 61: Whiting Refinery Modernization Project: sources of value
Whiting Refinery Modernization Project Sources of value 600 Indexed Pre-tax underlying RC profit $/bbl 500 Mid West post project performance for a range of WTI – Lloydminster 400 differentials 300 Mid West historical 200 performance range 100 0 0 2 4 6 8 10 12 Mid West Refining Indicator Margin $/bb
Slide 62: International Businesses: quality and growth
International Businesses: quality and growth • Material market shares • 40% of capital employed in growth markets • Leading technologies • Strong customer relationships • Premium brands • Margin share growth 62
Slide 63: Net investment
Net investment 5 4 3 2 Organic capex 1 Depreciation 0 $bn (1) Total net investment (6) (7) 2005* 2006 2007 2008 2009 2010 2010 BP projections * Includes $8.3bn proceeds for Innovene sale 63
Slide 64: Safety, efficiency, quality and integration
Safety, efficiency, quality and integration • Safe and reliable operations remains #1 • Over $2bn p.a. of pre-tax performance opportunity in 2–3 years • Costs: return to below 2004 levels • Refining: targeting break-even in similar environment to 2009 • Whiting Refinery Modernization Project on-stre
Slide 65: Tony Hayward, Group Chief Executive
Tony Hayward Group Chief Executive
Slide 66: Realising the opportunity
Realising the opportunity Exploration and Production • Production − Average 1-2% p.a. volume growth to 2015 − Increasing potential to sustain growth to 2020 • Efficiency − Projects: improve capital efficiency − Drilling: close gap to best well in each basin − Production costs: maintain momentum Refi
Slide 67: Capex and divestments 2008–2010
Capex and divestments 2008–2010 $bn 2008 2009 2010 Exploration & Production 15.6 14.7 ~ 15 Refining & Marketing 4.7 4.1 <4 Other (including Alternative Energy) 1.4 1.2 <1 Organic capital expenditure 21.7 20.0 ~ 20 Divestments 0.9 2.7 2-3 2010: BP estimates 67
Slide 68: Strategy
Strategy • Upstream profit growth, cost and capital efficiency • Downstream turnaround, cost efficiency • Alternative Energy focused and disciplined • Corporate efficiency 68
Slide 69: Q&A
Q&A Tony Hayward Byron Grote Group Chief Executive Chief Financial Officer Andy Inglis Iain Conn Chief Executive Chief Executive Exploration & Production Refining & Marketing 69