BP plc · LSE:BP.
BP — Investor Presentation (February 2003)
85 slides from BP's investor presentation, Feb 11, 2003
Slide 1: Presentation to the financial community
presentation to the financial community tuesday 11th february 2003
Slide 2: Introduction
oe John Browne introduction
Slide 3: Agenda
agenda introduction & context John Browne 4Q and 2002 results Byron Grote strategy overview John Browne plans and prospects upstream Tony Hayward gas, power & renewables Ralph Alexander refining & marketing John Manzoni petrochemicals Iain Conn Russia & conclusions John Browne
Slide 4: 2002 scorecard
2002 scorecard improved safety performance competitive financial performance proforma result $8.7 bn (down 25% vs 2001) cash from operations $19.3 bn (down 14% vs 2001) proforma ROACE 13% improvement of $1.2bn at mid cycle dividend up 9% Veba acquisition 175% reserves replacement 2.9
Slide 5: Lessons from 2002
lessons from 2002 review of strategy strategy sound portfolio review/highgrading clearer capital and cost allocation production volume useful indicator of growth but only if combined with value and risk measures not an end in itself
Slide 6: The external world
the external world uncertain world recovery weak financial markets lack of consumer and business confidence war fears strong oil price – less strong fundamentals US gas strong market facing businesses remain weak ..……a difficult and uncertain trading environment
Slide 7: 4th quarter & 2002
Byron Grote 4th quarter & 2002
Slide 8: Forward-looking statements
This presentation and the associated slides and discussion contain statements, particularly those regarding acquisitions, availability, capacity, capital employed, capital expenditure, cash flows, costs, savings, debt, demand, depreciation, divestments, dividends, earnings, efficiency, gearing, grow
Slide 9: Trading environment
trading environment Full 4Q 01 3Q 02 4Q 02 Year2001 2002 average realisations 17.72 24.40 24.78 liquids $/bbl 22.69 22.50 2.28 2.25 2.87 natural gas $/mcf 2.46 3.30 indicator margins 2.40 1.98 2.76 refining $/bbl 2.11 4.06 112 120 100* petrochemicals $/te 102*109 *provisional
Slide 10: Financial results
financial results % change results for the fourth quarter vs 4Q 01 proforma $2.6bn 49% reported $1.7bn 140% net cash from operating activity $6.2bn 12% dividend 6.25¢/share 9% ROACE (proforma) 14.8% % change results for the year vs 2001 proforma $8.7bn (25)% reported $4.7bn (43)% net cas
Slide 11: 2002 vs 2001 variance
2002 vs 2001 variance proforma basis $bn RCP 14 12 $1.2bn pre-tax $0.8bn post-tax 10 8 6 4 2 0 2001 gas refining other underlying interest 2002 prices margin environmentimprovement expense effects
Slide 12: Sources of underlying improvement
sources of underlying improvement proforma basis $bn pre-tax feb 2002 2002 estimate result upstream 0.6 0.2 gas, power & 0 0 renewables refining & marketing 0.4 0.4 petrochemicals 0.6 0.6 overview (0.2) 0 total 1.4 1.2
Slide 13: Special and exceptional items
special and exceptional items $bn pre-tax 2 1 0 (1) 4Q 2002 (2) specials: (0.6) disposals in 2002: 0.3 (3) disposals in 2003: (1.2) (4) (1.5) 96 97 98 99 00 01 02
Slide 14: Sources and uses of cash
sources and uses of cash $bn 2001 2002 30 buybac 25 disposals ks dividends 20 acquisitions operations 15 10 22.4 13.3 19.3 13.4 organic capex 5 tax, interest & 0 msi sources uses sources uses
Slide 15: Financial framework
financial framework 2001 2002 dividend declared (¢/UK share) 1Q 5.25 5.75 2Q 5.50 6.00 3Q 5.50 6.00 4Q 5.75 6.25 buybacks 1 281 750 ($millions) proforma tax rate 35.4% 34.7% proforma gearing* 29.5% 27.5% *proforma gearing = net debt / (net debt + equity - acquisition adjustment)
Slide 16: Strategy overview
John Browne strategy overview
Slide 17: Strategy
strategy choice: create distinctive set of investment opportunities upstream bias invest or divest to realise value choice improves quality financial discipline: balance cash in and cash out over time at standardised assumptions productivity: strategic focus - ‘right’ level of costs gr
Slide 18: Dividends
dividends 5 year 20 year 5 year 20 year dollar dps 4% sterling dps 7% 7% 7% inflation 2% 4% inflation 2% 3% CAGR % CAGR % 10 10 8 8 6 6 4 4 2 2 0 0 dollar inflation sterling inflation dollar inflation sterling inflation dps dps dps dps 5 year 20 year average average
Slide 19: Strategy: key points
strategy: key points finding reserves building new upstream profit centres investment and returns upstream growth in refining, oil products marketing & petrochemicals
Slide 20: Upstream
upstream disproportionate share of largest / lowest cost fields discoveries > 250mmboe 1998 - 2002 1998 - 2001* 25 • highest reserve 20 replacement added by 15 range exploration alone 10 (119%) 5 • lowest finding cost ($0.95/boe) 0 BP major competitors source: Wood Mackenzie *source: company repor
Slide 21: Superior opportunity set
superior opportunity set relative production capacity – new profit centres 2002 2007* GoM Deepwater Trinidad Angola Azerbaijan Asia Pacific LNG ca. 20% of ca. 40% of total total *BP projection
Slide 22: Building new profit centres
building new profit centres production mboed capex $m 2500 7000 6000 2000 5000 1500 4000 1000 3000 2000 500 production capex 1000 0 0 01 02 03 04 05 06 07 ROACE* 10 9 10 11 12 14 *proforma ROACE estimated using source: BP capacity projections 2003 - 2007 standardised assumptions
Slide 23: Upstream summary
upstream summary production mboed capex $m 4500 13000 4250 production 12000 4000 3750 11000 3500 10000 3250 3000 9000 2750 capex 8000 2500 2250 7000 01 02 03 04 05 06 07 ROACE* 13 12 12 12 12 13 *proforma ROACE estimated using source: BP capacity projections 2003 - 2007 standardised assumptions
Slide 24: Refining & marketing
refining & marketing proforma capital employed broadly flat asset high grading continues cost focus gross margin growth potential ROACE at standardised assumptions expected in 12-14% range
Slide 25: Petrochemicals
petrochemicals focus on 7 advantaged products competitively advantaged gross margin structure capital employed broadly constant ROACE at standardised assumptions - +3% expected by 2006
Slide 26: Business segments
business segments upstream Tony Hayward gas, power & renewables Ralph Alexander refining & marketing John Manzoni petrochemicals Iain Conn
Slide 27: Upstream plans and prospects
Tony Hayward upstream plans and prospects
Slide 28: Basin lifecycle
basin lifecycle cumulative production reserves cashflow capex creat build produce harves e t
Slide 29: Create - giant discoveries
create - giant discoveries exploratory replacement by number 98-02 ratio average 98 - 01 25 1.4 BP 1.2 20 TFE 1 15 0.8 10 0.6 XOM CVX 5 0.4 Shell 0.2 0 BP XOM TFE Shell CVX 0 0 1 2 3 4 finding cost $/boe giant discoveries >250mmboe source: Wood Mackenzie source: company reports
Slide 30: Create – strategic focus
create – strategic focus remaining resources BP others yet to find Azerbaijan GoM DW Trinidad Asia Pacific Angola DW LNG* source: BP estimates *comparative data not available
Slide 31: Create - summary
create - summary right decisions (quality through choice) right right tools capabilities (technology) (know-how) state of the art petroleum system best in class seismic depth imaging analysis - regional evaluation
Slide 32: Build – five new profit centres
build – five new profit centres mboed production capacity 2500 2000 1500 1000 500 0 01 02 03 04 05 06 07 GoM Deepwater Trinidad Angola Azerbaijan Asia Pacific LNG Rest of World source: BP projections 03 - 07
Slide 33: Build – five new profit centres
build – five new profit centres $m capital 2003 - 2007 7000 total build capital 6000 5000 4000 3000 2000 1000 0 01 02 03 04 05 06 07 Azerbaijan GoM Deepwat er Asia Pacific Trinidad Angola LNG source: BP projections 03 - 07
Slide 34: Build – improving quality
build – improving quality $/boe cash margi profit n margi n 2002 average 2007 average* 2002 build 2007 build* proforma RCOP non cash cost cash costs *BP projection, RCOP estimated using standardised assumptions
Slide 35: Existing profit centres
existing profit centres mboed $m 3500 8000 Asia Pacific Domestic 3000 7000 Middle East 6000 2500 Latin America 5000 2000 Egypt 4000 North Sea 1500 3000 North America Gas 1000 2000 Alaska 500 1000 capital expenditure 0 0 01 02 03 04 05 06 07 source: BP projections 03 - 07
Slide 36: Existing profit centres – sustaining the reserve base
existing profit centres – sustaining the reserve base % reserve replacement 100 90 80 70 60 50 00 01 02 proved developed reserves source: BP
Slide 37: Existing profit centres – sustained investment quality
existing profit centres – sustained investment quality cum. rate $m/mboed mboed 16 investment efficiency 200 wellwork evaluation & tracking 14 12 150 GoM Shelf 10 8 100 Rockies 6 4 50 Prudhoe Bay 2 programme Bruce 0 0 01 02 03* 0 100 200300400 500 600 spend $m *BP projection
Slide 38: Best-in-class costs
best-in-class costs lifting costs $2.61 /boe $2.44 $2.35 to /boe $2.40 /boe 01 portfolio operating 02 portfolio operating 03* practice & practice & restructuring restructuring *BP projection
Slide 39: Upstream divestments
upstream divestments year asset pre-tax proceeds $bn 2002* Veba package Al Rayyan 2.5 Qadirpur Kashagan 2003 Montrose/Arbroath N. America packages Forties/GoM Shelf package 3.0 Trinidad interest* JDA / Colombia Swap Tangguh interest* total 5.5 *completed
Slide 40: Upstream summary
upstream summary production mboed capex $m 4500 13000 4250 production 12000 4000 3750 11000 3500 10000 3250 3000 9000 2750 capex 8000 2500 2250 7000 01 02 03 04 05 06 07 source: BP capacity projections 03 - 07
Slide 41: Gas, power & renewables plans & prospects
Ralph Alexander gas, power & renewables plans & prospects
Slide 42: Gas, power & renewables strategic purpose
gas, power & renewables strategic purpose integrated with other business segments maximise the value of our gas through marketing grow value of our natural gas liquids production build a profitable renewables business
Slide 43: Building markets ahead of LNG supply
gas, power & renewables building markets ahead of LNG supply markets captured gas supplied to plants as of 31/12/02 Trinidad mmscfd mmscfd 2&3 China 2000 2000 Trinidad 1 Othe Indonesia r 1500 Australia 1500 Americas 1000 1000 Spain 500 500 Japan 0 0 00 01 02 03 04 05 source: BP projections 03 - 05
Slide 44: Building markets ahead of LNG supply
gas, power & renewables building markets ahead of LNG supply markets captured gas supplied to plants as of 31/12/02 Trinidad mmscfd mmscfd 2&3 China 2000 2000 Trinidad 1 Ne Othe Indonesia w LN r 1500 Australia G 1500 Americas 1000 1000 Spain 500 500 Japan ~ 0 0 00 01 02 03 04 05 08 source: BP projec
Slide 45: Atlantic basin LNG: optimising returns with market flexibility
Atlantic basin LNG: optimising returns with market flexibility BCFD 2 1.5 1 0.5 0 02 05 08 source: BP projections 05, 08
Slide 46: Refining & marketing plans and prospects
John Manzoni refining & marketing plans and prospects
Slide 47: R&M: building scale
r&m: building scale marketing average index volumes $bn 1998 = 100 refining throughput $bn proforma capital divestment 24 employed 160 proceeds 2 1.6 20 140 1.2 16 120 0.8 12 100 0.4 8 80 0 98 99 00 01 02 98 99 00 01 02
Slide 48: R&M: efficiency
r&m: efficiency unit costs index cash 1998 = 100 costs 110 $bn 10 unit costs cash costs 9 100 8 90 7 80 6 98 99 00 01 02 03* *BP projection
Slide 49: R&M: brands
r&m: brands position in relevant market #2 Europe #1 #2 North America #2 Australasia #1 China # 1* India #2 *foreign oil company
Slide 50: Refining: investment
refining: investment refining capex $m clean fuels capex base capex 1000 800 600 400 200 0 99 00 01 02 03 04 05 source: BP projections 03 - 05
Slide 51: Refining: quality
refining: quality unit costs index 1998 = 100 availability % 100 97 90 80 96 70 60 95 50 40 94 98 99 00 01 02 03* availability unit costs *BP projection
Slide 52: Refining: quality
refining: quality unit costs index refining unit gross margin vs 1998 = 100 availability % $/bbl 00** 100 97 1.5 90 80 96 1 70 60 95 0.5 50 40 94 0 98 99 00 01 02 03* 01 02 03* availability unit costs *BP projection **at standardised assumptions
Slide 53: Retail: portfolio
retail: portfolio volumes up 45% since 1998 market selection convenience markets fuels markets continuous highgrading
Slide 54: Retail: convenience growth
retail: convenience growth sales index 1998 = 100 BP convenience sales convenience market sales (OECD data) 130 120 110 100 90 98 99 00 01 02 03* *BP projection
Slide 55: Retail: efficiency
retail: efficiency index store sales per m2 2000=100 unit costs $000/m2 130 average fuel volume 8.6 per site 120 7.8 110 7.0 100 90 6.2 00 01 02 03* *BP projection
Slide 56: Lubricants: growth and efficiency
lubricants: growth and efficiency growth & efficiency unit costs index revenues 2000=100 120 115 110 105 100 95 90 00 01 02 03* *BP projection
Slide 57: Lubricants: growth and efficiency
lubricants: growth and efficiency growth & growth vs market efficiency unit costs market share index index revenues unit gross margin 2000=100 2000=100 120 115 115 110 110 105 105 100 100 95 90 95 00 01 02 03* 00 01 02 03* *BP projection
Slide 58: R&M: summary
r&m: summary powerful platform with opportunities for growth unit gross margin expectation - stable or increasing aim to continue productivity improvements focused investment choices
Slide 59: Petrochemicals plans and prospects
Iain Conn petrochemicals plans and prospects
Slide 60: Capacity growth and transformation
capacity growth and transformation mte 36 34 32 30 28 26 24 22 20 98 99 00 01 02 03* capacity (mte) *BP projection
Slide 61: Capacity growth and transformation
capacity growth and transformation index 1998 =100 mte 140 36 34 120 32 100 30 28 80 26 24 60 22 40 20 98 99 00 01 02 03* capacity (mte) gross margin/te (production) *BP projection
Slide 62: Capacity growth and transformation
capacity growth and transformation index 1998 =100 mte 140 36 34 120 32 100 30 28 80 26 24 60 22 40 20 98 99 00 01 02 03* capacity (mte) gross margin/te cash fixed costs/te (production) (capacity) *BP projection
Slide 63: Seven core products
seven core products acetic acid #1 (1.9 mte) acrylonitrile #1 ethylene #1* (1.0 mte) (4.8mte) PTA #1 polypropylene #2 (5.7 mte) (2.8 mte) high density PE #2 paraxylene #1 (1.7 mte) (2.8 mte) Notes: 1) product, BP market position (2002 capacity) 2) *BP #1 in Europe, #4 globally
Slide 64: Disciplined investment
disciplined investment $m % core capital employed 2500 100 2000 90 1500 80 1000 70 500 60 0 50 99 00 01 02 03 04 05 06 BP investment JV financed investment % core capital employed source: BP projections 03 - 06
Slide 65: Distinctive portfolio
distinctive portfolio capacity growth - leverage to the upside focus on seven core products portfolio, costs, functional excellence plans to improve underlying returns by 3%
Slide 66: Russia
oe * Russia
Slide 67: Surgutneftegaz – Russian industry position
Russian industry position 2002 production mboed 1600 1200 800 400 0 Surgutneftegaz Tatneft Sidanco Sibneft TNK Lukoil Yukos NewCo
Slide 68: Terms
terms consideration $3bn cash at close $1.25bn in BP ordinary shares per year for 3 years after close BP and AAR combine nearly all Russian assets including: Sidanco TNK BP retail in Moscow RUSIA interests Sakhalin interests
Slide 69: Value
value valuation TNK / BP Lukoil Yukos metrics Sidanco EV/DACF 2003 4.9 8.6 5.1 5.5 EV/reserves $/boe: 1.8 – 9.7 0.9 1.8 (5.2*- 8.6** bn boe) 3.1 EV/2003 production $000 per boe/d 13.4 43.9 9.4 12.3 *BP view **Miller & Lents on behalf of TNK multiples are based on broker forecasts for BP, Lukoil and
Slide 70: Potential upside
potential upside sources of upside $bn to NewCo value NPV at 9% synergies and cost 1.5 reductions production capacity 2.0 growth future growth options 2.0 pricing reforms up to 2.0 total up to 7.5 source: BP estimates
Slide 71: Financial impact on BP
financial impact on BP equity accounted gearing for BP up by 2 - 3% at closing accretive to earnings per share and ROACE at standardised assumptions self-financing at standardised assumptions around 13% of BP 2002 oil & gas production around 30% of BP 2002 oil reserves* * including all e
Slide 72: Governance
governance corporate structure 50/50 ownership BP/AAR subject to English law shareholders’ agreement board representation (50%) extensive reserve powers and veto rights financial framework and 3-year agreement corporate governance and management BP CEO of NewCo BP performance and c
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Slide 74: Target delivery 00-03
target delivery 00-03 proforma basis $bn RCOP improvement 4 $500m RCOP 2001 - $2.0 bn improvement 2002 - $1.2 bn required for 3 remaining 10% CAGR target delivery 2 1 0 00 01 02 03* *BP projection
Slide 75: Patterns of investment
patterns of investment $ billions 2001 2002 2003 2004 2005 capital expenditure 13.2 13.3 14.0 -14.5 13.5 - 14.5 12.2 -13.2 upstream 8.6 9.3 9.8 - 10.2 gp&r 0.4 0.3 0.4 - 0.5 refining & marketing 2.4 2.7 2.7 - 3.0 petrochemicals 1.4 0.8 0.7 - 0.9 other 0.4 0.2 0.3 - 0.4 acquisitions 0.9 5.8 divestmen
Slide 76: Impact of prices and margins
impact of prices and margins avg 98 99 00 01 02 6 realised hydrocarbon price 17.9 $1/boe = $1bn RCOP (6) 2 realised refining unit gross margin 4.3 $1/bbl = $1bn RCOP (2) 20 petrochemicals unit gross margin 237 $35/tonne = $1bn RCOP (20) •protection of financial strength on downside gross margin = re
Slide 77: Cost efficiency
cost efficiency 2000 2001 2002 2003* cash costs $bn money of the day 17.8 19.5 20.3 20.3 inflation adjusted** 17.8 18.9 19.2 18.7 proforma ACE ($bn) 56.6 66.5 71.9 76.0 costs(mod)/proforma ACE31% 29% 28%27% *BP projection **inflation corrections use global consumer price index (2000 real)
Slide 78: Strategic management of costs
strategic management of costs operating costs grow with volume best in class efficiency long term approach revenue investment optimise across segments overhead costs align with needs of business economies of scale
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Slide 80: Delivering value
delivering value ROACE % BP ROACE at standardised assumptions capital 20 employed $bn proforma average capital employed 100 15 75 10 50 5 25 0 0 99 00 01 02 03 04 05 ROACE = (proforma result + after tax finance interest + MSI) / proforma ACE BP projections 2003 – 2005
Slide 81: Delivering value
delivering value a balanced framework value growth dividend policy stock buy backs $4bn to date $2bn announced
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Slide 84: Q&A session
q&a session John Browne group chief executive Dick Olver deputy group chief executive Byron Grote chief financial officer Tony Hayward chief executive, e&p Ralph Alexander chief executive, gp&r John Manzoni chief executive, r&m Iain Conn chief executive, petrochemicals David Allen chief of staff
Slide 85: Presentation to the financial community
presentation to the financial community tuesday 11th february 2003