BP 1Q 2019 Results 30 April 2019 keep advancing BP 1Q 2019 - - PowerPoint PPT Presentation

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BP 1Q 2019

Results

30 April 2019

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Craig Marshall

Head of Investor Relations

BP 1Q 2019 Results

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Cautionary statement

Forward-looking statements - cautionary statement

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’) and the general doctrine of cautionary statements, BP is providing the following cautionary

• statement. This presentation and the associated slides and discussion contain forward-looking statements – that is, statements related to future, not past events and circumstances – with respect to the financial condition,

results of operations and business of BP and certain of the expectations, intentions, plans and objectives of BP with respect to these items, in particular statements regarding expectations related to the world economy, future oil and gas prices and global energy supply and demand including with respect to oil and natural gas; plans to invest up to $100 million over the next three years in the Upstream Carbon Fund to support projects to deliver new greenhouse gas emissions in the Upstream; plans and expectations regarding progress against near-term emissions reduction targets; plans to produce 900,000 boed from new major projects by 2021; plans and expectations regarding the Azeri Central East project, including to achieve first production in 2023 and produce up to 300 million barrels over its lifetime; plans and expectations regarding the integration of the assets acquired from BHP in BPX Energy, including delivery of synergies and further upside potential; plans to add 1,000 new BP branded retail station sites in China over the next five years; plans and expectations to expand the production capacity at BP’s joint venture petrochemicals facility in South Korea; plans and expectations regarding share buybacks, including to offset the impact of dilution from the scrip program; expectations regarding refining margins, discounts for North American heavy crude oil and refining turnarounds; expectations regarding Upstream reported production in the second quarter of 2019, seasonal turnaround and maintenance activity; expectations regarding continuing growth in the Downstream; plans and expectations with respect to Upstream projects; expectations regarding BP’s strategic plan and financial frame including organic capital expenditure,

• rganic free cash flow and operating cash flow, the DD&A charge, Gulf of Mexico oil spill payments, cost and capital discipline, the Other Businesses and Corporate average underlying quarterly charge, and the 2019

underlying effective tax rate; plans and expectations to deliver returns exceeding 10% by 2021 at a $55 per barrel real price assumption; plans and expectations regarding sustainable free cash flow and growing distributions to shareholders; expectations regarding the amount, timing and uses of divestment proceeds; plans and expectations to target gearing within a range of 20-30%; and plans and expectations with respect to dividends. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of BP. Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the specific factors identified in the discussions accompanying such forward-looking statements; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain acquisitions and divestments; future levels of industry product supply, demand and pricing, including supply growth in North America; OPEC quota restrictions; PSA effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; amounts ultimately payable and timing of payments relating to the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses; decisions by Rosneft’s management and board of directors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed under “Risk factors” in BP Annual Report and Form 20-F 2018 as filed with the US Securities and Exchange Commission. This document contains references to non-proved resources and production outlooks based on non-proved resources that the SEC's rules prohibit us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosures in our Form 20-F, SEC File No. 1-06262. This form is available on our website at www.bp.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or by logging on to their website at www.sec.gov. Reconciliations to GAAP - This presentation also contains financial information which is not presented in accordance with generally accepted accounting principles (GAAP). A quantitative reconciliation of this information to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on our website at www.bp.com. Tables and projections in this presentation are BP projections unless otherwise stated. April il 2019 2019

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Brian Gilvary

Chief Financial Officer

BP 1Q 2019 Results

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(1) Underlying operating cash flow is net cash provided by/(used in) operating activities excluding post-tax Gulf of Mexico oil spill payments (2) Group reported oil and gas production including Rosneft

1Q 2019 highlights

$2.4 billion underlying replacement cost profit $5.9 billion underlying operating cash flow1

Resilient earnings and cash flow Solid operational performance

3.8 mmboed

group production2 Upstream major project delivery

Advancing the energy transition

Continued focus on emissions reductions Upstream Carbon Fund announced Downstream marketing growth

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Environment

Brent oil price1

$/bbl

Refining Marker Margin2

$/bbl 45 50 55 60 65 70 75 80 Jan Feb Mar Apr

Henry Hub gas price1

$/mmbtu 6 8 10 12 14 16 18 Jan Feb Mar Apr 2.0 3.0 4.0 5.0 6.0 Jan Feb Mar Apr

(1) Source: Platts (2) Refining Marker Margin (RMM) based on BP’s portfolio All data 1 January 2019 to 26 April 2019

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$bn $bn 1Q18 4Q18 1Q19

Underlying replacement cost profit 2.6 3.5 2.4 Underlying operating cash flow1 5.4 7.1 5.9 Underlying RCPBIT2 Upstream 3.2 3.9 2.9 Downstream 1.8 2.2 1.7 Rosneft3 0.2 0.4 0.6 Other businesses and corporate (0.4) (0.3) (0.4) Underlying earnings per share (cents) 13.0 17.4 11.7 Dividend paid per share (cents) 10.00 10.25 10.25 Dividend declared per share (cents) 10.00 10.25 10.25

1Q 2019 results summary

(1) Underlying operating cash flow is net cash provided by/(used in) operating activities excluding post-tax Gulf of Mexico oil spill payments (2) Replacement cost profit before interest and tax (RCPBIT), adjusted for non-operating items and fair value accounting effects (3) BP estimate of Rosneft earnings after interest, tax and minority interest (4) 1Q18 and 4Q18 have not been restated following the adoption of IFRS 16. 1Q19 impacts are disclosed in the appendix

1Q 2 2019 19 vs 4 4Q 2018

▪ Lower price environment ▪ Upstream turnaround and divestment impacts ▪ Strong supply and trading

4 4 4

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1 2 3 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3

Sources and uses of cash

1Q 2018 organic cash inflows/outflows1 $bn Other inflows/outflows1 $bn 1Q 2019 organic cash inflows/outflows $bn Other inflows/outflows $bn

(1) 1Q 2018 has not been restated following the adoption of IFRS 16 (2) Underlying operating cash flow is net cash provided by/(used in) operating activities excluding post-tax Gulf of Mexico oil spill payments (3) Cash dividends paid (4) Lease liability payments (5) Divestments and other proceeds

Underlying cash flow2 Organic capex Dividends3 Disposals5

Gulf of Mexico oil spill

Underlying cash flow2 Organic capex Dividends3 Disposals5

Gulf of Mexico oil spill

Inorganic capex Share buybacks Inorganic capex Lease payments4 Share buybacks

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Operational highlights

Major project Final Investment Decisions

▪ Atlantis Phase 3 ▪ Seagull ▪ Azeri Central East

Carbon reduction initiatives

$100m Upstream Carbon Fund Three year commitment to US Environmental Defense Fund

Marketing growth

Opened >260 sites in new markets in the last 12 months Launched BP brand in Shandong, China with JV partner

Major project start-ups

▪ Constellation ▪ West Nile Delta – Giza/Fayoum ▪ Angelin

Advantaged manufacturing

Bio-processing growth Petrochemicals expansion agreed in South Korea

Advancing the energy transition

Air BP & Neste to supply sustainable aviation fuel

BPX Energy update

Assumed full control of acquired BHP asset field operations

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2019 guidance

Upstream

▪ Production broadly flat – reflecting ramp- up of major projects offset by ongoing seasonal turnaround and maintenance activities in high margin regions

Downstream

▪ Higher industry refining margins, similar level of North American crude oil discounts ▪ Significantly higher level of turnaround activity 2Q 2019 guidance 2019 guidance

Organic capital expenditure $15-17bn DD&A ~$18bn Gulf of Mexico oil spill payments ~$2bn Share buybacks Fully offset dilution since 3Q17 Gearing 20-30% Other businesses and corporate underlying quarterly charge ~$350m Underlying effective tax rate ~40%

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(1) Brent oil prices 2017 real (2) Share buyback programme expected to fully offset dilution since 3Q17 by end of 2019 (3) Organic free cash flow: operating cash flow excluding Gulf of Mexico oil spill payments less organic capital expenditure and lease liability payments. In USD cents per ordinary share, based on BP planning assumptions (4) DPS: dividend per ordinary share at current dividend rate of 10.25 cents per share per quarter

Medium term financial frame

Cost t and nd capit pital l discipline ipline

$15-17bn p.a.

• rganic capital expenditure

Dives estment ments

>$10bn over next 2 years

Gearin ring

20-30%

Retur turns ns

>10% ROACE by 2021 at $55/bbl1

Distrib tributio utions ns

Progressive dividend and share buyback programme2

2019 – 2021

2018 at $71/bbl 2021

Organic free cash flow per share3

$55/bbl1

Current full DPS4

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The BP proposition

Growing sustainable free cash flow and distributions to shareholders over the long-term

A distinctive portfolio fit for a changing world Value based, disciplined investment and cost focus

Safer Focused on returns Fit for the future

Safe, reliable and efficient execution

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Q&A

Brian Gilvary

Chief Finan anci cial al Office cer

Craig Marshall

Head of Inves estor

• r Relation
• ns

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Appendix

BP 1Q 2019 Results

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1Q 2019 summary

(1) Replacement cost profit before interest and tax (RCPBIT), adjusted for non-operating items and fair value accounting effects (2) BP estimate of Rosneft earnings after interest, tax and minority interest (3) Finance costs and net finance income or expense relating to pensions and other post-retirement benefits (4) Underlying effective tax rate on replacement cost profit adjusted to remove the effects of non-operating items and fair value accounting effects (5) Underlying operating cash flow is net cash provided by/(used in) operating activities excluding post-tax Gulf of Mexico oil spill payments (6) 1Q18 and 4Q18 have not been restated following the adoption of IFRS 16

$bn $bn 1Q18 4Q18 1Q19 % Y-o-Y % Q-o-Q

Upstream 3.2 3.9 2.9 Downstream 1.8 2.2 1.7 Other businesses and corporate (0.4) (0.3) (0.4) Underlying business RCPBIT 1 4.6 5.7 4.2 (8%) (26%) Rosneft2 0.2 0.4 0.6 Consolidation adjustment – unrealised profit in inventory (0.2) 0.1 (0.0) Underlying RCPBIT1 4.7 6.3 4.8 3% 3% (24%) Finance costs3 (0.5) (0.7) (0.8) Tax (1.6) (2.1) (1.6) Minority interest (0.1) (0.0) (0.1) Underlying replacement cost profit 2.6 3.5 2.4 (9%) (32%) Adjusted effective tax rate4 37% 38% 40% Underlying operating cash flow5 5.4 7.1 5.9 11% (16%) Underlying earnings per share (cents) 13.0 17.4 11.7 (10%) (33%) Dividend paid per share (cents) 10 10.25 10.25 3% 0% Dividend declared per share (cents) 10 10.25 10.25 3% 0%

6 6 6 6

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1500 2000 2500 3000 3500 4000 1Q18 2Q18 3Q18 4Q18 1Q19

Upstream

Underlying RCPBIT3 $bn

(1) Group reported oil and gas production including Rosneft (2) Realisations based on sales of consolidated subsidiaries only, excluding equity-accounted entities (3) Replacement cost profit before interest and tax (RCPBIT), adjusted for non-operating items and fair value accounting effects

Volume mboed

Group production1 Upstream production excluding Rosneft 3.2 3.5 4.0 3.9 2.9 0.0 1.0 2.0 3.0 4.0 5.0 1Q18 2Q18 3Q18 4Q18 1Q19 Non-US US Total

Realis lisations ions2 1Q18 18 4Q18 18 1Q19 19

Liquids ($/bbl) 61 62 56 Gas ($/mcf) 3.8 4.3 4.0

1Q 2019 19 vs 4Q 2018 018

▪ Lower liquids realisations ▪ Portfolio impacts from divestments; and ▪ Gulf of Mexico turnaround activity

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Downstream

Underlying RCPBIT2 $bn

1.8 1.5 2.1 2.2 1.7 0.0 0.5 1.0 1.5 2.0 2.5 1Q18 2Q18 3Q18 4Q18 1Q19 Fuels Lubricants Petrochemicals Total

(1) BP-operated refining availability (2) Replacement cost profit before interest and tax (RCPBIT), adjusted for non-operating items and fair value accounting effects

94%

Refining availability 4Q18: 96%1

Refinin fining g env nviron ironment ment 1Q18 18 4Q18 18 1Q19 19

RMM ($/bbl) 11.7 11.0 10.2

1Q 2019 19 vs 4Q 2018 018

▪ Narrower North American heavy crude oil differentials ▪ Lower industry refining margins; and ▪ A lower fuels marketing result Partially offset by: ▪ A lower level of turnaround activity; and ▪ A strong supply and trading contribution

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0.0 0.2 0.4 0.6 0.8 1.0 1Q18 2Q18 3Q18 4Q18 1Q19

Rosneft

(1) On a replacement cost basis and adjusted for non-operating items; 1Q19 represents BP estimate (2) From 2018, represents BP’s share of 50% of Rosneft’s IFRS net income, 2017 includes full year 2016 dividend and dividend relating to first half of 2017 (3) 2H 2018 dividend recommended by the Rosneft board for approval at the Rosneft AGM. BP’s share is estimated at $330m after tax at current foreign exchange rates. Expected to be paid later this year (4) Average daily production for the first quarter of 2019

0.0 0.2 0.4 0.6 0.8 2017 2018 2019 Dividend paid Estimated half yearly dividend

BP share of Rosneft dividend2 $bn BP share of underlying net income1 $bn

1.2mmboed

BP share of Rosneft production4

3

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IFRS 16 – leases

Upstream Downstream OB&C

Rigs Midstream & Retail Vessels

▪ Accounting impact but does not change how the business is run ▪ Operating leases brought onto the balance sheet − included in extended net debt calculations by credit rating agencies ▪ $10.3bn lease liability1 − ~3.5% weighted average discount rate − includes full liability where BP is the sole signatory rather than our working interest in Upstream joint operations

Key takeawa ways ys

▪ Negligible replacement cost profit impact ▪ No free cash flow impact ▪ Gearing maintained as per financial framework

(1) Closing balance at end of 1Q 2019

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IFRS 16 – 1Q19 impact

Balance nce sheet et1 Right-of-use assets $9.6bn Lease liabilities $10.3bn Incom

• me

e statem emen ent Operating lease expenses ~$0.6bn DD&A $0.5bn Interest charge $0.1bn Negligible igible impact ct on replac lacement ement cost prof

• fit

it Cash flow Operating cash flow ~$0.5bn Capital expenditure ~$0.1bn Lease payments $0.6bn No impact on free e cash h flow Key metrics cs Gearing 30.4% Unit production costs $0.34/boe ROACE minor negative impact2

(1) Closing balance at end of 1Q 2019 (2) ROACE metric disclosed as part of full year financial results