BP plc · LSE:BP.
BP — Investor Day (February 2008)
80 slides from BP's investor day presentation, Feb 27, 2008
Slide 1: BP Strategy Presentation
BP Strategy Presentation 27 February 2008
Slide 2: Tony Hayward, Group Chief Executive
Tony Hayward Group Chief Executive Safety – People – Performance
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 oil and gas prices and impact of price changes; global oil demand growth; capital expenditure; capital in
Slide 4: Agenda
Agenda • Closing the competitive gap Tony Hayward • Exploration & Production Andy Inglis • TNK-BP Bob Dudley • Refining & Marketing Iain Conn • Alternative Energy Vivienne Cox • Financial Framework Byron Grote • Conclusions Tony Hayward
Slide 5: Oil prices: a more positive outlook
Oil prices: a more positive outlook 100 80 60 $/bbl 40 20 0 1975 1979 1983 1987 1991 1995 1999 2003 2007 Nominal Brent price Real Brent price Source: Platts, BP – February 2008 prices; US CPI discounted
Slide 6: US gas prices: disconnected from oil price
US gas prices: disconnected from oil price WTI, Henry Hub and US Residual Prices 100 17.2 WTI 80 Henry Hub 13.8 (right scale) 60 10.3 $/mmbtu $/boe 40 6.9 20 Residual LSFO 1% Futures 3.4 (USGC) 0 0.0 Jan-06 Jan-07 Jan-08 Mar-08 Mar-11 Mar-09 Jan-03 Jan-04 Jan-05 Mar-10 Source: Platts, BP; Futures da
Slide 7: Industry challenges
Industry challenges Challenges • Sector inflation • Rising government take • Competition for new access BP’s response • Increased investment in: − Exploration − Access − Technology • Focus on: − Reciprocity − Costs − Developing low-carbon options
Slide 8: Refining margins
Refining margins Global Indicator Margins $9.94 10 $8.56 $8.49 8 $6.38 6 $/bbl $4.50 $4.50 $4.11 4 $2.30 2 0 2000 2001 2002 2003 2004 2005 2006 2007 Source: Platts, BP
Slide 9: Closing the competitive gap
Closing the competitive gap • Safe and reliable operations • People: building capability • Performance: − Restoring momentum − Reducing complexity • Technology: increased focus • Securing the future
Slide 10: Closing the competitive gap: Safe and reliable operations
Closing the competitive gap Safe and reliable operations Recordable Injury Frequency Integrity Management incidents 2.5 80 70 2.0 60 1.5 50 40 1.0 Industry range* 30 20 0.5 10 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2004 2005 2006 2007 * 6 majors Oil spills >1 barrel 1,200 1,000 800 600 400
Slide 11: Closing the competitive gap: People: building capability
Closing the competitive gap People: building capability Operations • Major Projects Common Process • Operations Academy • Operating Management System Selective recruitment • Building technical and functional expertise • 2,000 additional engineers over two years • Increased graduate recruitment to 75
Slide 12: Closing the competitive gap: Performance: restoring momentum
Closing the competitive gap Performance: restoring momentum • Momentum building in 2008 • Project start-ups • Restoring refining availability
Slide 13: Closing the competitive gap: Performance: reducing complexity
Closing the competitive gap Performance: reducing complexity • Organizational simplification − Three segments to two − Separate Alternative Energy business • Delayering − Reducing corporate overheads by 15-20% − Fewer layers of management − Smaller corporate infrastructure • Restructuring − Overhead
Slide 14: Closing the competitive gap: Technology: increased focus
Closing the competitive gap Technology: increased focus • Building leadership positions • Implementation at scale • Long-term commitment to research • Sustained increase in technology investment − $2.9bn over the last three years − $1.1bn in 2007 − ~ $1.3bn in 2008
Slide 15: Closing the competitive gap: Securing the future
Closing the competitive gap Securing the future Exploration & Production • New resource access and continued exploration success − Net resource additions of 1 billion boe in 2007 − 14th consecutive year of reporting >100% reserves replacement* • Production − Growth to 4.3 mmboed at $60/bbl in 2012 −
Slide 16: Andy Inglis, Chief Executive, Exploration & Production
Andy Inglis Chief Executive, Exploration & Production
Slide 17: Exploration and access success continues
Exploration and access success continues TNK-BP Canadian oil sands Sakhalin North America Gas Azerbaijan Algeria Egypt GoM Libya Pakistan Oman Colombia Angola Onshore core Australia Offshore core PAE Offshore test Access Concession renewal
Slide 18: Access: Canadian oil sands
Access: Canadian oil sands Regional oil sands leases M cClelland Lake • Expected to be sanctioned in Athabasca Partnership River development 2008 area • Joint investment to 2012 Fort McKay estimated at around $3 billion • First production expected in 2012 • Building to expected 200+ mboed gross by e
Slide 19: Resources and reserves growing
Resources and reserves growing Non-proved Proved Conventional oil Deepwater oil Water flood viscous 17.8 bn boe and heavy oil* 42.1 bn boe Conventional gas LNG gas* Tight gas* 13 years Coal bed methane* 30 years * Non-conventional Resources at end 2007 on a combined basis of subsidiaries and equity-
Slide 20: Incumbent resource positions
Incumbent resource positions Coal bed methane 0 – 2 bn boe Light, condensate and volatile oil 2 – 10 bn boe Heavy / viscous oil Tight gas > 10 bn boe Wet gas Total resources = proved and non-proved Dry gas
Slide 21: Technology focus areas: Converting resources to reserves
Technology focus areas Converting resources to reserves Each has potential to deliver >1bn boe increase in reserves 1. North America Unconventional Gas Prove 12 tcf tight gas resources via fracture sweet spot identification and technical limit drilling and completion 2. Alaska Heavy Oil Progress 2bn
Slide 22: Growing production: 2008–2012
Growing production: 2008–2012 2008 Growth versus 2007 2009 Above 4.0 mmboed* 2012 Around 4.3 mmboed* * Projections based on current portfolio at $60/bbl
Slide 23: Potential PSC impacts versus $60/bbl
Potential PSC impacts versus $60/bbl Incremental impact on 2008-2015 of $100/bbl vs. $60/bbl 2008 2009 2010 2011 2012 2013 2014 2015 0 mboed (100) (200) BP projections based on current portfolio
Slide 24: Key project start-ups
Key project start-ups 2007 2008 2009 2010-12 Rosa 9 Kizomba C Ph1 9 Atlantis North Flank Angola LNG Block 31NE (PSVM) Greater Plutonio 9 Saqqara Canada Noel Great White Kizomba A Ph2 Egypt Gas Ph 1 Dorado (Marimba North) 9 ACG Phase 3 Foinaven P2S Horn Mountain NWFX Kizomba Satellites Phase 1 Atlant
Slide 25: Securing the future
Securing the future • Our current resource base is capable of sustaining production above 4mmboed to 2020* − Without assuming any future exploration success − Without assuming any new access • An increasing proportion of projects are expected to develop unconventional resources which have long, sust
Slide 26: Sustaining production through 2020
Sustaining production through 2020 Conventional oil Foinaven P2S Conventional oil NWAD Saqqara Clair Ridge Valhall Redevelopment Deepwater gas Conventional gas Egypt Gas SNS Compression Conventional oil/gas Harding Area Gas ACG Phase 3 Skarv Shah Deniz Phase 2 In Salah Gas compression Uvat Verkhnech
Slide 27: Alaska
Alaska Our assets 2007 Production and Capex BP leases Map location Beaufort Sea 500 3,000 Production Discovery / Alaska development 400 2,500 Milne Point Northstar 2,000 mboed Point 300 $m McIntyre 1,500 Niakuk Endicott 200 Kuparuk 1,000 Prudhoe Bay Liberty Badami 100 500 TAPS 0 0 0 Miles 20 ANWR Pr
Slide 28: North America Gas
North America Gas Our assets 2007 Production and Capex Production 500 3,000 Discovery / development 400 2,500 Canada 2,000 Canada CBM mboed 300 $m 1,500 Jonah Over Thrust Wamsutter 200 Moxa 1,000 San Juan North Hugoton 100 500 San Juan Anadarko South Arkoma 0 0 East Texas Production Capex Permian On
Slide 29: North Sea
North Sea Our assets 2007 Production and Capex Shetlands Hub 500 3,000 Sullom Voe 400 2,500 Terminal Deep 2,000 Water mboed Northern 300 Hub $m Hub Stavanger 1,500 200 Norway 1,000 Aberdeen Hub 100 500 Central Hub 0 0 Production Capex 0 km 200 Southern Production Hub Priorities Development • Safe an
Slide 30: Gulf of Mexico
Gulf of Mexico Our assets 2007 Production and Capex 0 km 100 500 3,000 New Orleans Houston 400 2,500 2,000 mboed 300 $m 1,500 200 1,000 100 500 BP leases Production 0 0 Discovery / Production Capex development Technology application – King Subsea Pump Priorities • Safe and reliable operations • Incr
Slide 31: Trinidad & Tobago
Trinidad & Tobago Our assets 2007 Production and Capex BP leases Caribbean BP leases – deep rights 500 3,000 Sea Production Port of Spain Discovery / development 400 2,500 Midstream assets Trinidad 2,000 mboed 300 $m Atlantic 1,500 Atlas Methanol Ocean Plant 200 Atlantic LNG Plant 1,000 100 Columbus
Slide 32: Angola
Angola Our assets 2007 Production and Capex 0 100 Cabinda Dem. Rep. km of Congo 500 3,000 Block Angola LNG 400 2,500 15 2,000 Block mboed 300 $m 31 Block 17 1,500 Angola 200 1,000 100 BP leases 500 Production 0 0 Discovery / Block development Production Capex 18 Midstream assets Luanda Priorities Gr
Slide 33: Azerbaijan
Azerbaijan Our assets 2007 Production and Capex 500 3,000 0 300 Russia Kazakhstan km 400 2,500 Black Sea Caspian Sea 2,000 mboed Georgia WREP 300 $m Supsa Tbilisi Pipeline Sangachal 1,500 Terminal Turkmenistan 200 BTC Baku ACG 1,000 Pipeline Oil Production Oil South & Development 100 Caucasus Azerba
Slide 34: Egypt
Egypt Our assets 2007 Production and Capex 0 100 ProductionDiscovery Production Discovery / / km BP leases Development 500 3,000 BP leases development 400 2,500 2,000 mboed 300 $m 1,500 200 1,000 Gulf of 100 500 Suez EGYPT 0 0 Production Capex Cairo Priorities Multi-azimuth seismic • Safe and reliab
Slide 35: LNG growth
LNG growth BP equity gas into LNG plant BP liquefaction plant output 3,500 18 16 3,000 14 2,500 12 2,000 mmcf/d mmtpa 10 1,500 8 6 1,000 4 500 2 0 0 2012 2013 2006 2007 2008 2014 2015 2005 2014 2015 2011 2009 2005 2006 2007 2008 2009 2010 2010 2011 2012 2013 Trinidad & Tobago NWS T1-4 Existing Bonta
Slide 36: BP LNG portfolio
BP LNG portfolio Isle of Grain Bilbao Cove Point Elba Island Egypt Guangdong ADGAS Trinidad & Tobago Bontang Tangguh Ph 1 Angola Tangguh Ph 2 Browse NWS T 5 IoJansz NWS T 1-4 Operating LNG project Sanctioned LNG project Prospective LNG project Re-gasification capacity
Slide 37: Growing investment 2006–2008
Growing investment 2006–2008 18 16 14 12 Organic capex Pan American Energy 10 $bn 8 TNK-BP 6 4 BP 2 0 2006 2007 2008 Organic capex above excludes Rosneft in 2006, swaps with Occidental in 2007 and accounting treatment related to joint ventures with Husky Energy in 2008 2006 and 2007 includes capex p
Slide 38: A sustainable future
A sustainable future • Continued success in focused exploration and access strategy − Resource base continues to grow: increasing by 1 billion boe in 2007 − 14 year track record of reporting 100%+ reserves replacement* • Sustainable production out to 2020 − Application of technology to move resource
Slide 39: Bob Dudley, President and CEO TNK-BP
Bob Dudley President and CEO TNK-BP
Slide 40: TNK-BP
TNK-BP Bolshekhetskiy Russkoye Van Yogan PK1/2 Kammenoye Talinskoye Core production areas Project areas Refinery assets
Slide 41: Delivery on promises
Delivery on promises • The four promises made in February 2003: • Production growth – 6.5% per annum since 2003 • Technology transfer – 3D Seismic, Samotlor and waterflood • Corporate governance – Minority shareholder, internal processes and transparency • Good corporate citizen of Russia – > $68bn
Slide 42: Environmental challenges and responses
Environmental challenges and responses Challenges Responses Production growth Technology / operating practices State companies Co-operation / partnering Organizational capability Training and innovation Levels of compliance Governance and transparency Tax regime and inflation Investment advocacy and
Slide 43: Samotlor 4-Way closures: Status and plans
Samotlor 4-Way closures Status and plans Discovered Current Status Planned 2008 • 100% discovery success (7 for 7) 3D Future • 60mmboe reserves 2008 • 30mboed current production 3D 2009 2008+ Plans • Four new closures (24 wells) • 4,000 metres departure technology will allow additional Ust 2008 opti
Slide 44: TNK-BP recovery factors
TNK-BP recovery factors Top five fields have 55% of proven reserves OOIP(1) Recovery factors Up to 2004 TP(2) 2007 TP(2) Top five TNK-BP fields bn boe end 2007 PRMS(3) PRMS(3) Samotlor (South) 45.3 38% 42% 44% Samotlor (North) 9.3 22% 27% 34% Khokhryskovskoye 2 17% 32% 29% Yem-Yegovskoye 6.4 3% 12%
Slide 45: Technology: Russkoye
Technology: Russkoye Pilot 4 Pilot 1 Pilot 3 Pilot 2 Hot water Injection Wire • Estimated resources > 2bnboe wrap Screen+ gravel pack • Piloting alternative technologies with Cold water Steam Injection Injection encouraging results • Infrastructure synergy available Slotted Wire wrap liner screen
Slide 46: TNK-BP: an integrated company
TNK-BP: an integrated company Project Areas Core Production Refineries Marketing Gas Uvat Samotlor Ryazan Moscow SIBUR JV Verkhnechonskoye Nyagan Saratov Ukraine Rospan Rospan Orenburg Lisichansk St. Petersburg Niz GRES3 Bolshekhetskiy Novosibirsk Krasnoleninsk Ryazan Russkoye Nizhnevartovsk Nizhnev
Slide 47: TNK-BP production and capex 2003-2008
TNK-BP production and capex 2003-2008 2.5 5 2.0 4 Production (mboed) Capex ($bn) 1.5 3 1.0 2 0.5 1 0.0 0 2003 2004 2005 2006 2007 2008 Capex excluding acquisitions Production Divested production TNK-BP projections for 2008
Slide 48: TNK-BP Projects
TNK-BP Projects Gas Conventional oil / gas Rospan Bolshekhetskiy Conventional oil / gas Heavy / viscous oil Kammenoye Russkoye Heavy / viscous oil Van Yogan PK1/2 Conventional oil / gas Talinskoye Conventional oil / gas Conventional oil / gas Uvat Verkhnechonskoye
Slide 49: TNK-BP in Russia
TNK-BP in Russia • Greater integration and engagement key for long-term success • TNK-BP – a venture between BP and Russia – Technology / operations – Participant in global markets • Russia will continue to provide ample opportunities
Slide 50: Iain Conn, Chief Executive, Refining & Marketing
Iain Conn Chief Executive, Refining & Marketing
Slide 51: Closing the performance gap
Closing the performance gap • Performance versus competitors • Closing the performance gap • Portfolio and future prospects
Slide 52: Competitive performance
Competitive performance Underlying ROACE(1) (post-tax) % 30 25 20 Competitor average(2) % 15 Competitor range(2) 10 BP R&M 5 0 2003 2004 2005 2006 2007 (1) BP and Competitor data adjusted to comparable basis (2) Competitor set comprises R&M segments: ExxonMobil, Royal Dutch Shell, Chevron, ConocoPhi
Slide 53: Performance gap at $7.50/bbl refining margin
Performance gap at $7.50/bbl refining margin(1) Pre-tax earnings Portfolio / Mix Performance $3.5-4.0 bn RCP pre-tax (1) BP Global Indicator Margin (GIM)
Slide 54: Our portfolio
Our portfolio 2007 2007 Av. pre-tax Pre-tax operating underlying RC capital empl. profit ($bn) ($bn) Fuels Marketing and Supply Convenience 19 1.2 Fuels Value Chains Refining 16 1.2 Lubricants International 10 1.5 Businesses Global Fuels Petrochemicals Total Refining & Marketing 45 3.9 Relative area
Slide 55: Closing the performance gap
Closing the performance gap 1. Safety and operations 2. Fundamental shift in behaviours 3. Restoring missing revenues and earnings momentum – Texas City, Whiting; improved refining availability 4. Business simplification – Integration, channel strategy, focused marketing footprint 5. Repositioning o
Slide 56: Closing the performance gap: Sources and phasing
Closing the performance gap Sources and phasing Repositioning cost efficiency • Business services and overheads Simplification • Fuels Value Chains, marketing operations • Portfolio – consolidation and focus of footprint Restoring revenues • Refining performance 2008 2009 2010 2011 BP projections
Slide 57: Restoring missing revenues
Restoring missing revenues Refining availability Solomon availability Lost opportunity (historical and expected) @ $7.50/bbl refining margin(1) 100 3.0 90 2.0 80 Pre-tax RCP $bn % 70 1.0 60 50 0.0 2004 2005 2006 2007 2008 2009 2005 2006 2007 All excluding Texas City, Whiting, Toledo Texas City Whiti
Slide 58: Business simplification: Fuels value chains
Business simplification Fuels value chains US Mid West Rhine Texas City Iberia US West Coast Southern Africa KEY (including East Integrated refiner marketer (IRM) FVCs Africa) ANZ BP refinery JV refinery
Slide 59: Business simplification: Marketing participation strategy
Business simplification Marketing participation strategy • Retail channel strategy − US convenience: de-capitalize and move to franchise offer − Rest of World: hurdle rate returns • Focused marketing footprint − Lubricants: reducing direct presence in ~20 countries − Aviation: maintain global networ
Slide 60: Repositioning our cost efficiency
Repositioning our cost efficiency • Fewer performance units • Consolidate and standardize business service provision • Reduce overheads − Minimize central activity − Fewer layers • Third-party spend − Leverage procurement
Slide 61: Future prospects: Bias to manufacturing
Future prospects Bias to manufacturing Organic capital expenditure ($bn) 6.0 5.0 Other 4.0 Global fuels and lubricants 3.0 Fuels marketing supply and convenience 2.0 Petrochemicals 1.0 Refining 0.0 2004 2008 2008 BP projection
Slide 62: Future prospects: Upgrading and expanding in manufacturing
Future prospects Upgrading and expanding in manufacturing United States Europe – upgrading and Asia – accessing growth expansion markets • Northern tier refineries to Canadian heavy oil • Rotterdam reconfiguration • PTA expansion: Zhuhai and potential hydrocracker • Acetic acid expansion: • Castello
Slide 63: What to expect
What to expect By end 2011, we aim to: • Close the performance gap • Deliver material free cash flow Actions underway: • Restoring missing revenues • Business simplification • Repositioning our cost efficiency Shifts in emphasis: • Manufacturing • Integration Opportunities for long-term growth
Slide 64: Vivienne Cox, Executive Vice President, Alternative Energy
Vivienne Cox Executive Vice President, Alternative Energy
Slide 65: Alternative Energy: objective
Alternative Energy: objective • Developing material growth options for BP in low-carbon technologies • Building a portfolio of operating businesses and ventures Three stages of development Growing: Wind, solar and gas-fired power Developing: Biofuels and Hydrogen Energy Incubator: Carbon capture and
Slide 66: Alternative Energy: the market today
Alternative Energy: the market today Demand growth p.a. since 2001 Global new investment in clean energy 40 125 $117.2bn 100 $86.5bn 30 % 35 wth r o G 75 $54.6bn $bn 20 % % 58 wth 50 r o G $28.6bn % 10 91 wth 25 Gr o 0 0 Total Primary Wind Solar Biofuels 2004 2005 2006 2007 Energy Sources: Primary e
Slide 67: Alternative Energy: future market drivers
Alternative Energy: future market drivers Global new investment in Demand growth p.a. 2005-2030E Clean Tech forecast 25 300 20 $300bn p.a. required to meet government targets 200 15 $bn % % 10 20 wth 100 o Gr 5 0 0 Total Primary Wind Solar Biofuels 2007 2008 Investment Energy required Sources: Prima
Slide 68: Alternative Energy: solar market
Alternative Energy: solar market BP Solar Sales Global Solar Sales 800 4,000 th gr ow th tor p.a. row .a. S ec 21 % G Solar Sales (MW) Solar Sales (MW) 600 3,000 BP 0% p >6 400 2,000 200 1,000 0 0 2006 2008 2010 2006 2008 2010 Sources: BP projections Source: New Energy Finance • BP Solar investment
Slide 69: Alternative Energy: wind market
Alternative Energy: wind market North America wind installed BP wind installed capacity (gross) capacity (gross) 4 60 50 th 3 o w .a. gr p Installed GW Installed GW P B 80% 40 > 2 30 20 1 10 0 0 2006 2008 2010 2006 2008 2010 2015 Installed at end 07 Development Pipeline Installed at end 07 Developme
Slide 70: Alternative Energy: equity valuation
Alternative Energy: equity valuation Solar multiples based on 7 pure play peers EV / MW Production BP Solar Production Solar 20-30 130 MW valuation X $2.1 – 3.9bn EV / Revenue BP Solar Revenue 3-5 $700m Wind multiples based on recent transactions Installed BP Installed $2.0m-$3.3m / MW X 172 MW Wind
Slide 71: Alternative Energy: forward priorities
Alternative Energy: forward priorities BP’s investment in Alternative Energy since launch is $1.5bn and planned investment for 2008 is $1.5bn Wind • Install 3GW gross capacity by end 2010 Solar • Manufacturing expansion and ~800MW sales in 2010 Biofuels, Hydrogen Energy and CCS • Deployment of major
Slide 72: Byron Grote, Chief Financial Officer
Byron Grote Chief Financial Officer
Slide 73: Organization simplification: Re-segmentation and 2008 reporting change
Organization simplification Re-segmentation and 2008 reporting change • Two operating segments: Exploration & Production, Refining & Marketing • Gas, Power & Renewables segment eliminated − NGLs, LNG, gas & power marketing and trading businesses incorporated into Exploration & Production − Alternati
Slide 74: Investment guidance
Investment guidance $bn 2006 2007 2008 Exploration & Production 12.2 13.7 ~15.0 Refining & Marketing 3.1 4.4 ~5.0 Other (including Alternative Energy) 0.6 1.1 ~1.5 Organic capital expenditure 15.9 19.2 21-22 Divestments 6.3 4.3 ~1.0 2006 excludes $1bn investment in Rosneft IPO 2008 excludes accounti
Slide 75: Financial Framework: 2001-2007
Financial Framework: 2001-2007 25 20 • 2001-2007 total shareholder 15 distribution of $91bn $bn 10 5 • 12% CAGR in dividend over 0 period 2001-2007 (5) 2001 2002 2003 2004 2005 2006 2007 • $46bn share buybacks, Share issues Buybacks Dividends paid majority of which funded by divestments 2001-2007 Av
Slide 76: Financial Framework
Financial Framework Changed context • Confidence in stronger trading environment • Revenue restoration on track • Reduced shares outstanding by 16% since the end of 2000 Response • Increased capex to support growth • Target gearing band unchanged at 20-30% • Rebalance proportion of free cash flow di
Slide 77: Balancing sources and uses of cash
Balancing sources and uses of cash SOURCES USES Organic Organic capex capex Operating Operating cash cash Dividends Dividends Divestments Divestments Cash acquisitions Cash acquisitions Increase Increase 20-30% Red Reduuce ce debt debt Band debt debt Balance Share Share buybacks buybacks
Slide 78: Tony Hayward, Group Chief Executive
Tony Hayward Group Chief Executive Safety – People – Performance
Slide 79: Conclusions
Conclusions • Strategy evolving • Long-term planning assumption $60/bbl • Closing the competitive gap: − Safety : People : Performance • Securing the future − Exploration & Production: sustainable long term − Refining & Marketing: closing the performance gap − Alternative Energy: a valuable option f
Slide 80: Questions & answers
Questions & answers