BP plc · LSE:BP.
BP — Investor Presentation (March 2009)
63 slides from BP's investor presentation, Mar 3, 2009
Slide 1: BP Strategy Presentation
BP Strategy Presentation London 3 March 2009
Slide 2: Cautionary Statement
Cautionary Statement Forward Looking Statements - Cautionary Statement This presentation and the associated slides and discussion contain forward looking statements, particularly those regarding growth in the upstream business; turnaround and restoration of earnings and operational momentum in the d
Slide 3: Tony Hayward, Group Chief Executive
Tony Hayward Group Chief Executive
Slide 4: Agenda
Agenda Introduction Tony Hayward • 2008 in perspective • Business environment • Technology • TNK-BP Refining & Marketing Iain Conn Exploration & Production Andy Inglis Conclusions Tony Hayward • Alternative Energy • Financial framework 4
Slide 5: 2008 in perspective
2008 in perspective Safety : People : Performance • Safe, compliant and reliable operations: our No. 1 priority • Operational and financial momentum • Strategy in progress − Upstream growth − Downstream turnaround − Alternative Energy: focused, disciplined − Corporate simplification 5
Slide 6: Safe, compliant and reliable operations
Safe, compliant and reliable operations 2.5 Recordable Injury Frequency 80 Integrity Management Incidents 2.0 60 1.5 Industry range(1) 40 1.0 20 0.5 0.0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008(2) 1,200 Oil Spills ≥ 1 barrel 1,000 800 600 400 200 0 2000 2001 2002 2003
Slide 7: Operational momentum in 2008
Operational momentum in 2008 Upstream growth • Growth in line with guidance • 5% underlying, excluding PSC entitlement effects • Major project start-up volumes ahead of plan • Cost increases below sector inflation • Strong reported reserve replacement and resource growth Downstream turnaround • Rest
Slide 8: Financial momentum in 2008
Financial momentum in 2008 Underlying(1) Net Income ($bn) 26.2 43.7 28.4 22.8 20.5 Year on Year % 39% 10% 12% 30% 22% Cash from operations ($bn) 38.1 59.7 43.9 29.6 27.5 Year on Year % 54% 15% 27% 19% 13% Reported volumes (mboed) 3838 3921 3248 2530 2341 Year on Year % 1% -6% -2% -3% -2% (1) For BP
Slide 9: Oil prices
Oil prices Brent $/bbl 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Platts 9
Slide 10: US gas prices, production and rig count
US gas prices, production and rig count $/mmbtu bcf/d US gas rig count 14 60 1,800 1,600 1,400 11 55 US gas 1,200 production 1,000 8 50 800 600 Henry 5 45 Hub 400 200 2 40 0 2004 2005 2006 2007 2008 2009 Source: EIA and Baker Hughes rig count 10
Slide 11: Refining margins and utilization
Refining margins and utilization Global Indicator Global Margin $/bbl(1) Utilization(2) 12 88% $9.92 87% 10 $8.56 $8.49 86% 8 85% $6.38 $6.50 6 84% $4.50 $4.50 $4.11 83% 4 $2.30 82% 2 81% 0 80% 2000 2001 2002 2003 2004 2005 2006 2007 2008 (1) GIM on 2008 portfolio basis (2) Global refinery throughpu
Slide 12: Deep technology focus
Deep technology focus BP’s approach to Research and Technology: • Sustained increase in technology investment • Building leadership positions • Implementation at scale • Long-term commitment to research and development • Collaborative and open innovation models 12
Slide 13: BP's major technology programmes
BP’s major technology programmes Resource business Conversion Low-carbon extensions technologies technologies • Unconventional Gas • Fuels • Solar • Unconventional Oil • Lubricants • Biofuels • Gulf of Mexico Paleogene • PTA • Carbon Management • Advanced Seismic Imaging • Acetic Acid • Beyond Sand
Slide 14: TNK-BP: updated governance
TNK-BP: updated governance • Revised shareholder agreement retains 50/50 ownership structure • Three new independent directors on TNK-BP Board • Significant TNK-BP group subsidiaries now have both BP and AAR directors • Potential Initial Public Offering of up to 20% of equity 14
Slide 15: TNK-BP: operating performance
TNK-BP: operating performance • Production growth of 30% since inception • Five-year average reserve replacement around 200% • Proved reserves increased from 1.8bn boe to 3.6bn boe since 2003 • Total resources increased from 11.6bn boe to 18.9bn boe • Five-year finding and development costs averaged
Slide 16: TNK-BP: financial performance
TNK-BP: financial performance Since the formation of TNK-BP: • More than $25bn of net income generated • More than $20bn distributed as dividends • Around $14bn of capex invested • More than $90bn in taxes and excise duties paid • Highest return on capital employed in Russian oil industry 16
Slide 17: TNK-BP: expected future performance
TNK-BP: expected future performance • 2009 investment ~$3bn • Production broadly flat • Lower costs • Fiscal regime changes • Cash and earnings breakeven in 2009 at ~$35–40/bbl 2009 BP projections 17
Slide 18: Iain Conn, Chief Executive, Refining & Marketing
Iain Conn Chief Executive, Refining & Marketing
Slide 19: The Downstream turnaround
The Downstream turnaround Restored missing revenues 2008 Business simplified Safe operations and OMS(1) Behaviours and core processes 2009 Repositioning cost efficiency (1) OMS – Operating Management System 19
Slide 20: Performance gap at $7.50/bbl refining margin
Performance gap at $7.50/bbl refining margin(1) Pre-tax replacement cost profit 2007 gap of $3.5bn–$4bn Portfolio / mix Performance gap closed in 2008 Remaining performance gap ~50% of gap closed in 2008 (1) BP Global Indicator Margin (GIM) 20
Slide 21: Our portfolio
Our portfolio 2008 2008 Av. pre-tax Pre-tax operating underlying RC capital empl. profit Fuels Value ($bn) ($bn) Chains Convenience Fuels Marketing 16 2.0 and Supply Refining 19 (0.7) International Lubricants Businesses 10 2.0 Petrochemicals Global Fuels Total Refining & Marketing 45 3.3 Relative ar
Slide 22: Performance momentum
Performance momentum Pre-tax underlying RC profit ($bn) (3.3) 2.7 3.9 3.3 2007 Environment Performance 2008 Improvement 22
Slide 23: Competitive performance
Competitive performance Underlying ROACE(1) % (post tax) 30 25 20 Competitor average(2) 15 BP R&M Competitor range(2) 10 5 0 2003 2004 2005 2006 2007 2008 (1) BP and competitor return on average capital employed data adjusted to comparable basis (2) Competitor set comprises R&M segments of Super Maj
Slide 24: Regional refining margins and BP's relative exposure
Regional refining margins and BP’s relative exposure Refining regional indicator margins (US$/bbl) Regional refining capacities US$/bbl 30 BP 25 20 15 Average of competitors 10 5 0 1Q07 3Q07 3Q08 1Q09 3Q06 1Q08 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 1Q03 US Europe US NW Europe Singapore Rest of World (1) Com
Slide 25: Closing the performance gap in a challenging environment
Closing the performance gap in a challenging environment Repositioning cost efficiency 9 • Business services and overheads programme scoped and underway • 15% reduction in Senior Management on track • Flat cash costs at constant forex in high inflation environment Simplification 9 • Integrated Fuels
Slide 26: Restoring missing revenues
Restoring missing revenues Refining availability Solomon availability Lost opportunity (historical and expected) (@ $7.50/bbl refining margin)(1) 100 3 Pre-tax Replacement Cost Profit ($bn) 90 2 80 % 70 1 60 50 0 2004 2005 2006 2007 2008 2009 2005 2006 2007 2008 All excl. Texas City, Whiting, Toledo
Slide 27: Business simplification
Business simplification Pre-programme Programme launch End 2008 target Integrated Fuels Value Chains Designed Implemented Competitive US Company owned Sites 805 512 0 Countries with direct Lubricants 60 50(1) 40(1) presence Countries with Aviation 101 69 55 presence (1) Reduced direct presence in a
Slide 28: Headcount
Headcount R&M Headcount (exc. Retail site staff) R&M Senior Management 40 190 180 39 170 Headcount (‘000s) 2000 reduction 160 15% reduction 38 target target 150 140 37 130 36 120 110 35 100 Mid 2007 End 2008 End 2009 Mid 2007 End 2008 End 2009 2009 BP projections 28
Slide 29: BP R&M cash cost index
Repositioning our cost efficiency 140 130 BP R&M cash cost index 120 110 100 90 80 70 60 50 2004 2005 2006 2007 2008 Cash cost index Cash cost index at constant forex and energy 29
Slide 30: Portfolio strengths
Portfolio strengths Advantaged Fuels US West Coast, Rhine, Southern Africa and Australasia Value Chains Petrochemicals Concentrated focus in fast growing Asian markets Lubricants Castrol brand and marketing capability Global Fuels Brand and supply chain integration Value chain Integrated Supply and
Slide 31: Portfolio improvement
Portfolio improvement US / Europe based Petrochemicals Sale of Innovene in 2005 9 Exposure to Asian growth Continued growth of Petrochemicals 9 in China Exposure to European gasoline Sale of Coryton and purchase of 9 remaining Rotterdam share Fragmented approach Integrated FVCs and bias to 9 manufac
Slide 32: Whiting modernisation project
Whiting modernisation project • Location advantage as more extra Canadian Oil Sands heavy crude flows from Canada to the Gulf Whiting Toledo • Repositions Whiting to process Crude (Husky JV) advantaged feedstocks at scale Products − Capture light / heavy spread and location advantage − Run 340,000+
Slide 33: Investment: Bias to manufacturing
Investment Bias to manufacturing Organic capital expenditure ($bn) 5.0 4.5 4.0 3.5 Other 3.0 Lubricants and Global Fuels 2.5 Fuels Marketing and Supply 2.0 Petrochemicals 1.5 Refining 1.0 0.5 0.0 2004 2008 2009 2009 BP projections 33
Slide 34: Summary and what to expect
Summary and what to expect Achievements so far: • ~$2bn of performance gap closure in 2008: − Restoration of revenues complete − Fuels Value Chains established − Lubricants, Aviation and Convenience Retail footprint reduced − Cost efficiency improvements 2009: • Emphasis on performance delivery and
Slide 35: Andy Inglis, Chief Executive, Exploration & Production
Andy Inglis Chief Executive, Exploration & Production
Slide 36: 2008: resources and reserves
2008: resources and reserves Excluding TNK-BP(1) TNK-BP Proved: 14.6 bn boe Proved: 3.6 bn boe Conventional oil 13 years 10 years Deepwater oil Water flood viscous and heavy oil Conventional gas 45 years LNG gas 26 years Unconventional gas Non-proved: 28.0 bn boe Non-proved: 15.4 bn boe • Extended r
Slide 37: Access in 2008
Access in 2008 CANADIAN ARCTIC Beaufort Sea 6,000km2 in three blocks CANADIAN OIL SANDS Sunrise SAGD project LIBYA Offshore 30,000km2 Onshore 23,000km2 INDIA US GULF OF MEXICO East Coast 125 leases from OCS One block in NELP VII 205, 206, 207 US SHALE GAS 225,000 net acres in two deals with Chesapea
Slide 38: Libya access
Libya access Offshore Sirt Tripoli Deepwater Benghazi Hassi Messaoud Ghadames Palæozoic gas In Salah Gas In Amenas Gas 200km Algeria Libya BP acreage 38
Slide 39: Exploration success in 2008
Exploration success in 2008 UK Kinnoull BP (77%) and operator Oil discovery EGYPT Satis GULF OF MEXICO Nile Delta Freedom BP (50%) and operator BP (25%) and operator First HP/HT Oligocene discovery 550 feet net pay Kodiak BP (64%) and operator ANGOLA 500 feet net pay Dione ALGERIA Block 31 Tin Zaoua
Slide 40: Gulf of Mexico
Gulf of Mexico Largest remaining resources (mmboe)(1) Largest current lease acreage(2) 2,000 BP Oil Gas Anadarko 1,500 Chevron 1,000 Shell XOM 500 Hess Statoil 0 BHP Devon Petrobras Statoil Devon Hess Anadarko ExxonMobil Chevron BHP Shell BP Net COP Murphy 100 150 200 250 300 350 400 450 100 50 50 0
Slide 41: Technology flagships
Technology flagships Each has potential to deliver 1billion+ boe increase in reserves Inherently Reliable Facilities Monitor, predict and manage Field of the Future TM corrosion to increase operating Deliver 100mboed through real time efficiency reservoir, wells and facility management Advanced Seis
Slide 42: Pushing Reservoir Limits: step change in oil recovery technology
Pushing Reservoir Limits: Step change in oil recovery technology Bright WaterTM The results Injected thermally activated particle pops 1500 Milne Pt incremental oil open and blocks better swept zones Oil rate (bopd) 0.1 to 1 1 to 10 Incremental production micron microns Warmth Treatment 0 Time 500 T
Slide 43: Production outlook 2008–2013
Production outlook 2008–2013 mboed 5,000 TNK-BP 4,000 Asia Pacific Angola 3,000 Gulf of Mexico South America 2,000 N. Africa, Middle East and Caspian Trinidad 1,000 North Sea N. America onshore 2008 2009 2010 2011 2012 2013 2009-2013 BP projections 43
Slide 44: Super Major production since 2002
Super Major production since 2002 120 115 110 BP 105 100 Total 95 Chevron 90 Exxon Mobil 85 Shell 80 2002 2003 2004 2005 2006 2007 2008 Barrels of oil equivalent as reported in company disclosures, indexed to 2002 44
Slide 45: Improving drilling performance
Improving drilling performance North America Gas days per 10k E&P days per 10k drilling performance drilling performance 20% days per 10k 15% days per 10k 2007 2008 Trinidad days per 10k drilling performance 25% 2007 2008 days per 10k 2007 2008 10k = 10,000 feet 45
Slide 46: Cost focus
Cost focus Production costs ($/boe) 12 Shell 10 Chevron 8 Exxon Mobil BP 6 Total 4 2 0 2004 2005 2006 2007 2008 Production costs and production per FAS69 disclosure in 10-K / 20-F. Consolidated subsidiaries only. Total’s 2008 estimate based on FY08 presentation. 46
Slide 47: Major Projects contributing to 2013 growth
Major Projects contributing to 2013 growth Angola North Africa, Middle East Kizomba C Phase 1 9 and Caspian Kizomba C Phase 2 9 ACG Phase 3 9 Angola LNG Egypt Gas Phase 1 9 Pazflor Saqqara 9 PSVM North America onshore Gulf of Mexico Canada Noel Thunder Horse 9 Liberty Atlantis Phase 2 North Sea Dora
Slide 48: LNG growth
LNG growth BP equity gas into LNG plant(1) 2008 equity gas into LNG plant(2) mmscfd mmscfd 3,500 3,500 3,000 3,000 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 0 2007 2008 2009 2010 2011 2012 2013 Trinidad and Tobago NWS T1-5 Bontang Tangguh Phase 1 Egypt Phase 1 (1) BP projections for
Slide 49: Investing for growth
Investing for growth Organic capital expenditure ($bn) 20 18 16 14 Pan American Energy 12 10 TNK-BP 8 6 BP 4 2 0 2004 2005 2006 2007 2008 2009 Organic Capital Expenditure above excludes: 2004 – Slavneft; 2006 – Rosneft, 2007 – asset exchanges with Occidental; 2008 – accounting treatment related to o
Slide 50: Potential for continued production growth to 2020
Potential for continued production growth to 2020 DEVELOPMENT DEVELOPMENT GROSS CAPACITY PROJECT STAGE LOCATION BP OP. TYPE /MBOED WI (%) Liberty Post FID Alaska 9 Oil 40 100 In Salah Gas Compression Post FID Algeria Gas 40 33 Chirag Oil Project FEED Azerbaijan 9 Oil 185 34 Sunrise Appraisal Canada
Slide 51: Delivering upstream growth
Delivering upstream growth • Ongoing success in growing the resource base − Resource base continues to grow: 61.6 billion boe at end 2008 − 15 year track record of reporting 100%+ reserves replacement(1) • Growing production to 2013 • Potential for continued production growth to 2020 • Portfolio off
Slide 52: Tony Hayward: Conclusions
Tony Hayward Conclusions
Slide 53: Alternative Energy: 2008 performance
Alternative Energy: 2008 performance Solar • 2008 sales up 41% • Manufacturing footprint optimized Wind • Strategic decision to focus on US • 3rd largest US portfolio Biofuels • First JV production of Brazilian cane-to-ethanol • Lignocellulosic conversion: Verenium deal closed 53
Slide 54: Alternative Energy: disciplined growth
Alternative Energy: disciplined growth Solar • Further optimization of manufacturing base Wind • Continued build out of portfolio • Pace to finance and partner constraints Biofuels • Grow Brazilian bioethanol • Demonstrate biobutanol commercialization • Develop lignocellulosic conversion technology
Slide 55: A challenging environment
A challenging environment Our response • Immediate priorities − Safe and reliable operations − Dividend − Rapid cost reduction: drive deflation into our business • Strengths − Cost momentum: ‘every dollar counts, every seat counts’ − Operational momentum: production, refining − Strong balance sheet
Slide 56: Oil price and costs
Oil price and costs BP cash Brent oil price cost index ($/bbl) 170 100 160 150 80 140 60 130 120 40 110 100 20 90 80 0 2004 2005 2006 2007 2008 2009 2009 BP projections 56
Slide 57: Investment guidance
Investment guidance $bn 2007 2008 2009 Exploration & Production 13.7 15.6 15–16 Refining & Marketing 4.4 4.7 4 Other (including Alternative Energy) 0.9 1.4 1 Organic capital expenditure 19.0 21.7 20–21 Divestments 4.6 0.9 2–3 2009 BP projections 57
Slide 58: Financial framework: 2001–2008
Financial framework: 2001–2008 $bn 27 • 2001–2008 total shareholder distribution of $105bn 21 • Dividend per share has grown average ~15%/year 2001–2008 15 • $50bn share buybacks, majority funded by divestments 9 • Gearing range 20–30% 3 (3) 2001 2002 2003 2004 2005 2006 2007 2008 Dividends Buybacks
Slide 59: Net debt ratio
Net debt ratio % 40 35 30 25 20 15 10 2001 2002 2003 2004 2005 2006 2007 2008 Net debt ratio = net debt / ( net debt + equity ) Net debt includes the fair value of associated derivative financial instruments used to hedge finance debt except for 2001 and 2002 where net debt has not been restated for
Slide 60: Debt book
Debt book 2008 • Continued access to bond and commercial paper markets • Issued $7.5bn of new bonds in 2008 (2007: $7.4bn) − $4.6bn of new bonds in 4Q 2009 • Bond maturities of $5–6bn • Continued capital markets access • Funding rates • Commercial paper issued at very low rates; slightly above US Fe
Slide 61: Sources and uses of cash
Sources and uses of cash $bn (post tax) 50 45 40 Sources 35 Disposals 30 Operations 25 Uses 20 Buybacks Dividends 15 Inorganic capex 10 Organic capex 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2001 and 2002 operating cash flow including Innovene 61
Slide 62: An enduring and consistent strategy
An enduring and consistent strategy • Upstream growth • Downstream turnaround • Alternative Energy: focused, disciplined • Corporate simplification 62
Slide 63: 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 Vivienne Cox Chief Executive Alternative Energy 63