Q1 2021 BP PLC Earnings Presentation

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And we continue to support our staff, our frontline workers as well as those who continue to work remotely remaining focused on their health and wellbeing. During this unprecedented period.

This supports our operational performance, which continues to be resilient and as an underpin to strong financial delivery as.

As we like to say of safe business is a good business.

In the first quarter cash flow was strong with an inflow of around $11 billion, including the accelerated disposal proceeds.

As a result, net debt reduced by $5 $6 billion, and we achieved our target of $35 billion during the quarter.

Around one year earlier than expected.

We are commencing share buybacks during the second quarter, starting with the intent to offset the full year dilution from employee share schemes.

<unk> will talk more about the shortly now.

And at the same time, we continue to make disciplined progress executing on our strategy, including continuing the rollout of our single operating model to drive efficiency throughout our organization.

Strengthening our position in offshore wind here in the U K and accelerating the development of our electrification of agenda in Europe.

So overall, we're in good shape and I'm encouraged by the progress we are making in support of our proposition to deliver long term shareholder value.

I'll come back in a little while to share some more about how we are advancing our strategy, but let me first hand, you over to Marie to take you through our results and provide more detail on our financial frame Murray.

Thanks, Bernard as usual, let me start with the environment.

Oil price rebounded in the quarter with Brent averaging $61 of 38% increase from the fourth quarter.

We expect oil prices to remain firm as demand improves driven by strong growth in the U S on China, the ongoing vaccine rollout programs and supported by continued supply intervention by OPEC plus.

The Henry hub gas price averaged $3 50.

Up from $2.50 on the fourth quarter.

The increase was due to storm Yuri in the Middle of February which resulted in very high gas demand combined with a substantial drop in production pushing prices to record levels.

And refining margins improved Bp's RMM averaged $8 70.

Up from $5.90 from the previous quarter supported by improved U S margins following storm Yuri disruptions on the higher cost of renewable fuel credits in the U S.

As demand improves refinery utilization rates are expected to increase although with net capacity additions of almost 1 million barrels per day in 2021, we expect industry refining margins to improve compared to 2020, but remain below pre COVID-19 levels.

Looking to the second quarter of 2021 realized refining margins are expected to show of smaller improvement due to the slower recovery on diesel and jet demand.

In addition, we expect a narrower north American heavy crude differential and a higher level of turnaround activity in our refining portfolio.

Before I turn to results, let me remind you that this is the first quarter reporting under our new segmental structure.

Further details on this and our new disclosure framework, including restated in the re segmented data for 2019 and 2020.

It can be found on BP dot com.

I also want to draw your attention to a change in accounting presentation commencing this quarter.

As previously disclosed we have moved to net presentation of certain derivative contracts related to our trading business. While this is of significant change to revenue and costs. It has no impact on replacement cost profit or cash flow.

Moving then to Bp's underlying results.

In the first quarter, we reported an underlying replacement cost profit of $2 6 billion compared to <unk> 8 billion, a year ago and point of $1 billion in the fourth quarter of 2020.

Compared to the fourth quarter. The result reflects on exceptional gas marketing and trading performance, notably from LNG and the impact of storm area in the U S. The.

The result, also reflects significantly higher oil prices and higher refining margins.

And of course, my favorite figure on the slide in the last four quarters net debt has fallen from over 51 billion to around $33 billion in the first quarter.

Finally, the first quarter dividend payable on the second quarter remains unchanged at five <unk>.

Per ordinary share.

Turning to cash flow on the balance sheet.

Operating cash flow of $6 1 billion was underpinned by strong business performance and included of working capital build of $1 2 billion with <unk> $5 billion of severance payments the.

The build was largely offset by other timing differences.

Cash flow was supported by the earlier than anticipated delivery of disposal proceeds with $4 8 billion of disposal proceeds realized in the first quarter.

We now expect proceeds for the year to reach $5 6 billion.

During the latter stages of 2021.

Our target of 25 billion of disposal proceeds between the second half of 2020 and 2025 is now underpinned by agreed or completed transactions of around $14 7 billion.

With approximately 10 million of proceeds received.

During the quarter capital expenditure was $3 $8 billion.

Of this $1 2 billion was one off expenditures, including the final payment to <unk> related to the formation of our U S offshore wind joint venture.

And the initial payment following our success in the U K offshore wind lease round.

We continue to expect capital expenditure of around 13 billion during 2021, including in organics.

Reflecting the strong cash flow delivery net debt fell by $5 6 billion during the quarter to $33 3 billion.

Surplus cash flow of $4 $7 billion was generated during the first quarter.

After reaching our $35 billion net debt target.

Looking ahead to the second quarter, we continue to expect cash flow to be impacted by the $1 2 billion pretax annual Gulf of Mexico oil spill payment for.

Further severance payments associated with our reinvent program and a smaller improvement in realized refining margins relative to the quarter to date rise on our RMM.

As a result of these factors, we expect the cash flow deficit in the second quarter.

Having reached $35 billion net debt target, we now progressed for the second phase of our financial frame.

We have a clear set of priorities for the uses of cash on a disciplined approach to capital allocation to support the delivery of our strategy.

On our first priority is the resilient dividend intended to remain fixed at $5 25 per ordinary share per quarter subject to the board's discretion each quarter.

Second having reached $35 billion net debt, we now retire this target.

We remain committed to maintaining a robust balance sheet with a strong investment grade credit rating.

Third capital investment we.

We expect Capex of 14% to 16 billion per year during the second phase, including inorganic spending. However, we continue to expect capex of around $13 billion, including in organics during 2021.

And finally share buybacks.

We are introducing an intent going forward to offset dilution from vesting of awards under employee share schemes through buybacks surplus.

Surplus cash flow is now defined after the cost of buying back the shares.

In addition, having reached our net debt target, we remain committed to allocating at least 60% of surplus cash to share buybacks.

Subject to maintaining a strong investment grade credit rating and considering the quantum of buybacks. The board will take account of the cumulative level of and the outlook for surplus cash flow.

With the intention to provide guidance on a quarter forward basis, while macro uncertainties remain.

Now, let me explain how we plan to implement our distribution policy in 2021.

First our priority of our resilient dividend remains unchanged.

Second this quarter, we intend to offset through buybacks the expected full year dilution from the vesting of awards under employee share schemes at.

Out of cost of around $500 million.

Third for 2021, the board is committed to using 60% of surplus cash flow for buybacks subject to maintaining a strong investment grade credit rating.

We plan to allocate the remaining 40% to continue strengthening the balance sheet and support our credit rating.

Fourth given continued macro uncertainty and the expected second quarter cash outflow, we will provide an update on our third quarter buyback plans at the time of the second quarter results taking into account the surplus cash in the first half of the year as well as the outlook for surplus cash.

In the second half of the year, we expect to generate surplus cash above an oil price of around $45 per barrel with an RMM of around 13 per barrel and Henry hub of three.

Looking ahead through 2025, we believe our approach to dividend and buybacks provides for attractive total distributions per share with upside the higher prices. Thanks for listening and now let me hand back to burner.

Great. Thanks Marie.

As I mentioned earlier in.

In addition to driving performance of the business, we've been making disciplined progress in advancing our strategy.

I thought it might be helpful to share some examples with you.

Let me start with some highlights from the quarter and then I look at three examples in a bit more depth and we will then have time to take your questions.

This slide shows the progress we have made so far this year from taking delivery of the Rguest platform in Texas after of 16000 mile journey across the world. The planning the largest blue hydrogen project in the UK.

I won't call out everything in detail, but I do want to emphasize some key points.

Starting with the cash engine resilient and focused hydrocarbons to new major projects are now online further underpinning our production target of 900000 barrels equivalent a day by the end of this year.

First the Raven project in Egypt. This is a significant milestone and is expected to continue to ramp up throughout this year to deliver a round of 140000 barrels a day oil equivalent of high margin production capacity.

Second the K G D. Six satellite cluster in India. The second of three projects, we are developing with our partner reliance.

At peak the projects are expected to produce around 65000 barrels oil equivalent of day net enough to meet around 15% of India's gas demand.

And in the Gulf of Mexico, The Mad Dog Phase two Rguest platform arrived safely in Texas.

Once online the project is expected to deliver around 65000 barrels a day equivalent to BP supporting high margin growth through 2025 in.

In addition, we recently announced an oil discovery at the Puma West prospect near Mad Dog further highlighting the strength of our business in the region.

Turning to low carbon electricity and energy.

During the first quarter, we increased our hopper of offshore wind and solar opportunities by 15 Gigawatts.

While continuing to high grade turning down projects that did not meet our strategic our returns requirements.

Net to BP, Our Hopper now stands at 35 gigawatts of opportunities that could be progressed into our renewable pipeline.

During the quarter, we grew our pipeline of identified projects by three gigawatts in the.

<unk>, one four gigawatts of solar pipeline.

And preferred bidder status on 1.5 Gigawatts awarded in the U K offshore wind lease round for I will come back to talk about this in more detail shortly.

Our pipeline now stands at 13, eight gigawatts firmly underpinning our 2025 target of 20 Gigawatts net to BP developed to final investment decision.

And we also announced our plans to develop the Uk's largest blue hydrogen facility targeting one gigawatt of production by 2030.

Integrated with the BP operated net zero T side, and northern endurance partnership. This project marks an important step in bp's hydrogen business and would significantly contribute to the U K's 10 point plan.

We have also continued to extend our partnerships with countries cities and industries recently, signing a memorandum of understanding with emphasis in India.

Together, we will explore development of of digitally enabled energy as a service offer at emphasis campuses, which could later be scaled for industrial parks in the cities.

And finally, we continue to advance our convenience and mobility strategy compared to the same period a year ago. We've added around 300 strategic convenient sites and increased our convenience gross margin by over 10%.

The electrification is core to our Nextgen mobility strategy, and we've announced plans to work with the number of Orient such as BMW, Daimler and Volkswagen group to increase the scale reach and utilization of our <unk> network.

Let me now explain how these announcements come together to underpin delivery of our <unk> agenda.

Our EV customers want fast convenient reliable and seamless charging integrated with leading convenience offers and services.

To deliver this our strategy is to provide the fastest most convenient and reliable network of Chargers situated in the advantaged locations.

Have leading edge digital technology.

And drive higher EV adoption and utilization of our network.

By 2030, we aim to have more than 70000 BP operated EV charging points.

And expect to have grown margin share from convenience in the electrification to around 50%.

So how are we progressing we already have an established presence in the UK, Germany, and China, and we need to continue to rapidly scale up to meet growing customer demand.

The announcements we have made this quarter clearly demonstrate that we are in action and.

And leveraging our integrated model, particularly in Europe.

First our announced investment in digital charging solutions, alongside Daimler and BMW.

Through apps and in car dashboards Dcs connects millions of EV drivers to of European network of nearly 230000 charging points.

Through our investment Bp's network of 8700 charging points will be integrated with those of Dcs. We expect this to drive up our utilization rates and increased footfall at our convenience stores.

Second in Germany, we are accelerating deployment of ultra fast charging points at our row retail sites, we planned 500 ultra fast charging points at our sites by the end of the this year and.

And we expect to capture significant integration value with our convenience offer.

Third we have recently signed a memorandum of understanding with Volkswagen group to explore the expansion of ultrafast EV charging networks and the integration of our own charging networks into their vehicles across Europe.

This has the potential to add a further 8000 charging points by 2025.

And finally BP pulse has announced the rollout of EV only ultra fast charging hubs in the U K with the first you within a year.

As we build scale, we expect to create significant demand for electrons and the opportunity for integration synergies with our renewable power business.

For example, we plan to grow the BP pulse network for 16000 charging points by 2030, creating around one terawatt hour of annual demand and.

And by 2040, even in our low case electron demand from our EV charging network in the UK could underpin over half of our net output from the recent U K round for offshore wind lease awards, creating ups take optionality and further supporting our aim to be the most efficient price setter.

And the EV charging.

In summary, we know what our customers want and we have an integrated strategy designed to meet their needs.

The progress we have made this quarter is a clear demonstration of that we are expanding our network to help drive the adoption of Evs and provide customers with a great experience.

And we are leveraging the power of partnerships to enable better and faster utilization of our network.

And we are moving at pace to keep up with this fast evolving market.

We believe the strategy will underpin our aim and convenience of mobility to nearly double EBITDA by 2030 from $5 billion in 2019, and deliver 15% to 20% returns.

Turning to offshore wind in the nine months since launching our strategy. We've made good progress growing our offshore wind pipeline to three seven gigawatts net to BP and materially growing our hopper.

Some of asked us about our strategy and why we believe we can deliver attractive returns.

To explain I'm going to talk about the U K, where we have been selected as the preferred bidder for two leases in the Irish Sea, along with our partner E. M. B W.

We believe this is an advantage project, which compares favorably to other leases offered in round for.

It benefits from for key attributes.

One advantaged wind resources to our favorable location optimal connection to infrastructure will enable the lower connection costs and stronger operating reliability.

Three less complex consenting and grid connection issues, which should result in a shorter development cycle time and for adjacent leases offer opportunities for synergies and execution and operations.

We expect this project to meet our investment threshold of 8% to 10% returns.

Our integrated model gives us confidence that we will deliver value from this project a few examples.

The development phase will benefit from our centralized projects organization, bringing our offshore hydrocarbon expertise to offshore wind.

We plan to leverage our established offshore supply chain, using our scale and experience to manage costs and supplier relationships for example, with turbine manufacturers.

And decades of offshore project management experience will help us plan and execute the projects efficiently.

And the operational phase, we will use technical skills established during 10 years of onshore wind operations, including our digital Knowhow.

Finally in the offtake phase our World class trading organization will utilize our expertise in power markets to manage risk and market access optionality likely to include Cfd mechanisms. We are building a portfolio of customer demand contracts with companies like Amazon.

And supply agreements with customers, such as pure planet and utility.

And in our own business, we are creating demand pools, which will allow us to establish integrated value chains through.

Through our rapid expansion in EV charging that I described earlier, the potential electrification of our offshore oil and gas facilities and in the longer term the potential for green hydrogen underpinned by the Optionality of a 60 year offshore wind lease term in summary, our integrated model gives us confidence in achieving 8% to 10.

Percent returns and accessing multiple sources of upside.

Turning to our single operating model the most significant change to come from our new organizational structure.

We see a huge price and running operations across the whole group in one place.

This includes oil wells refineries and offshore wind farms.

We expect this to significantly contribute to one $5 billion of annual cost savings from our hydrocarbon business by 2023 part of our $3 billion to $4 billion reinvent the pea targets.

Drive improved reliability and availability.

And create integration value as we leverage our capabilities into low carbon energy.

So how do we plan to achieve this.

First through a centralized and standardized approach to development and operations.

While we had centralized teams in our upstream oil and gas business. Our operating model is now being extended to all of our businesses, including refineries and low carbon through our newly created BP solutions team. We are sharing best practices across our global portfolio deploying our best experts to work on our biggest opportunities in order to add value.

Here are two great examples from the last three months.

We've taken furnace experts from our European refineries to support the safe startup of our Raven Major project.

And we've deployed compressor expertise from the Whiting refinery to of construction yard in Mexico to support the commissioning plan for the Cassia compression major project.

And looking to our low carbon business. In addition to leveraging our established supply chain and project management experience in offshore wind hydrogen Ccs and Biofuels are other areas, where are our existing capabilities and integrated single operating model can create a competitive advantage.

Second we are in action to change the way we work.

Following a successful pilot in Azerbaijan. We are now rapidly scaling the use of business agility techniques across oil and gas production in our refineries.

By the end of this year, we expect to have over 14000 people working in agile teams across BP.

Third we continue to invest in digital tools as a key enabler for performance delivery and risk reduction.

We will manage production from San face to exports and an integrated fully digitized workflow assisted by our apex and vertex products as well as the use of digital twins across our portfolio.

We're also deploying of proprietary tool called operator workbench the.

So perhaps field teams with mobile technology, and digitize workflows to improve collaboration safety and efficiency.

Two examples in AUM on its use has freed up thousands of hours to allow operators to focus on priority work and has reduced the amount of driving and risk of human error by signing off on work at site.

On our Atlantis platform, we're using it in our operator rounds and as enables savings of $1 $5 million per annum on water treatment alone.

We believe the use of this integrated approach will allow us to leverage our deep skills and knowledge across all operations and we will be at the heart of our transformation to an integrated energy company.

So in summary, those are just three examples of our strategy in action and the illustrate the momentum we see in our business I.

I hope they help you understand what an IAC looks like and why we believe that the energy transition represents such a great business opportunity for BP as we transform we will continue to share our progress with you.

And we welcome your feedback on how we can provide greater insight into our strategy.

In the nine months since launching the strategy, we have achieved a lot.

We've reset BP and entered 2021 in a strong position to compete.

We are a leaner flatter nimbler and 100% focused on execution.

We've delivered a strong set of results for the first quarter.

Our financial frame is robust we are committed to distributions and are commencing share buybacks in the second quarter.

As you can see we are progressing our strategic agenda with discipline and a focus on value.

This is what we mean by performing while transforming and how it supports the delivery of long term value for our shareholders.

We're excited about what's the come and look forward to updating you more as the year goes on.

Thank you for your time today on let's now turn to your questions.

If all the participants would like to ask a question. They may do so by pressing star one to cancel your question. Please press the hash all panicky.

If you are listening on the web. Please submit your question using the web question facility.

Okay. Thank you again, everybody for listening, let's turn to questions and answers.

Usual guidelines for me before we start please do limit your questions to no more than two we've got a lot of people on the phone to get through.

On on that no I think we'll turn firstly to Michela Delavan you Goldman Sachs Mcneely.

Thank you very much on and congratulations on the strong results.

I really I had a question on net dividend and cash returned to shareholders. You are about to embark in a major buyback program, which if we take into account the current share price. The current oil price could effectively reduced the share count by about 22% by the middle of the decade I was wondering in this context.

Why keep the big EPS flat.

Why why keep the Stocktake I can't understand why in oil and gas company, we didn't want to actually grow the code meet demand to the D V. David.

But on the other side as the share count shrink because I was just wondering why not grow the EPS without actually increasing the GP burden for the company perhaps.

You need to be more time to start reducing the share count now that you've reduced the level of net debt, but I was thinking is there an opportunity where the BP then comes back to growth.

And my second question, he's he's actually seemed to ease the what are the key macro assumptions, you're currently implying into your guidance for the second quarter. Thank you.

And Kelly good good morning to you and hope you and your family of well and good morning actually two to everyone on the call.

At least here you all and see you.

Your name is on the screen of we can't be with you in person.

Kind of your Marie will will Die then and help me here.

Look I think it's important too.

To realize we just laid out our new financial framework on the fourth of August last year, So, we're six or seven months and there.

There were two stages of the framework phase one on phase two today with net debt coming down in fact, it's now down $18 billion over the pandemic period.

We move into phase two and we start that buyback program.

Just two things that I would say around the choices that we made around the dividend and around the buybacks.

Number one we want people to be able to rely on the trust the dividend. That's why it's the first call on cash and the financial framework there are.

Five potential calls on cash and the dividend is the first call and that's why we call. It a resilient to dividends. So we want to make sure of that people can rely on that and depend on that and that's what it gives us and then secondly, we want to give them the upside that they deserve.

On the buyback program and with equity prices, where they are today.

We think that makes a whole lot of sense buying back our shares at the.

At this price and that's why we're very very.

The.

Delighted actually to announced the buyback program getting kicked off here in the second quarter. So.

No change to our financial framework to dividend policy is as stated the buyback program has now.

Dan and we believe and believe quite strongly that in a moderate price world.

As we look out over the next year or two investors can get back to that pre pandemic.

Distribution levels.

The cash distribution levels and that that's very possible within.

Certainly as we head into next year, So that's really where we're at and I wouldn't say anything beyond that at the moment Maria anything you'd add on that on maybe the second question around the macro assumptions.

I think I think maybe Mikael a the the thing that we have to hold in mind is there still an awful lot of surplus of oil that OPEC losses, managing right now on there's still a lot of uncertainty on the environment with the pandemic. So it's just the prudence is on our mind as we think about decisions quarter on quarter.

As far as your question on <unk> on what our macro assumptions are obviously you can you can take a look at what's been realized to date I think the March and April pricing is in the sixties for brands and RMM starting to move up a bit we won't we won't realize as much of that in.

In the second quarter, given that a lot of our refineries are focused on jet fuel.

And of course of of the WTO of WCS differential in North America is remaining quite narrow.

But if you think about should we will we have of surplus in the second quarter.

The macro assumptions around that I think it's just better to look at our look of what's happened already through the quarter and you can look at the markets understand that for March and April inside of the oil business.

And we publish on our M M on the website.

Yes.

Thanks for the Kaley, we'll take the next question from Thomas Adolf at Credit Suisse Thomas.

Good morning, guys.

Just two questions from me as well the first of all in I guess, it's just to get a better sense for the discretionary buyback you've mentioned, you'll give us guidance was the two Q results looking back at the first half, but also looking forward. So you're saying was the <unk> results will get the annual 2021.

The discretionary buyback announced on.

That's question one question two is on the disposals.

Youre aiming for five to six this year and you've done almost.

In the first quarter and you've got another tend to go over the next few years. So I guess the question I have is.

Why not more than the five to six since you've done already clients and how should we think about the rest of between.

Downstream and upstream thank you.

Great. Thanks Thomas.

Oh, no I take the one around the disposals and I'll, let Mary take the one around the forward look on the the buybacks.

Look I think.

So the team has done a fantastic job accelerating those.

Proceeds into the first quarter.

The things that came into place for us in a few places that we hadn't quite thought would go. So quickly. So took a lot of work on it meant that we did get that signal almost $5 billion of cash in the door and <unk>, which were very very pleased with obviously.

<unk>.

We.

Have up to target for the year to five to six.

I mean, the key thing going forward around divestments is we're just not in a hurry, we're just not in a rush.

Particularly now with net debt down $18 billion through depend demick down $18 billion through depend on make down $5 6 billion in the quarter 33 per one 3 billion.

Below our 35 target.

And you know on with the buyback program will continue to allocate 40% of surplus cash the balance sheet. So the main messages Theres no real rush Theres no real panic, we've got four to five years to do the next $10 billion.

And we will be driven by value and.

We get great prices for assets as we think we did in Oman, and what we did with pet chems. That's when we'll execute those transactions there'll be a whole variety of things there'll be upstream assets downstream assets there'll be infrastructure assets there'll be things that you would continue to look for but the main driver is growth.

And to be making sure we get value for the good assets that we have in our company.

No rush to do so and as the environment improves and things begin to stabilize over the coming months and years. I also think we will probably find a healthier M&A environment. So.

Main messages are comfortable with where we're at continue to focus on the balance sheet continue to focus on value from the divestments, but importantly, no rush value driven Murray Thomas's first question, Yeah, Hey, Tom it's good to hear you.

So just three points around this really first of all we had a surplus of 1.7 billion on the first quarter second we've said, we'll have a dearth of deficits in the second quarter in aggregate our sensors will have a surplus but let's see how of life goes on.

And then in the first half of that is and then for the second half of the year of the guidance. We've given you is that we're breakeven around $45 oil 13, RMM in three Henry hub and that's on that glide path down to the 21% to 25 target that we talk about of a 40 breakeven 11 of our amendment three so you can see we're making good progress.

Just kind of take time to continue to take costs out to.

To continue with the capital discipline, and obviously get new projects online like kind of Mad dog phase two tango I'm growth growing the CMP business. So that's a little bit about the guidance points that we've given so far we feel pretty pleased about that that progress as far as how we'll think about the second quarter. What we've said is while uncertainties remain and that.

The uncertainties of the overhang on the oil supply and obviously, the the pace of vaccinations and comments and while that uncertainty remains we will only be guiding one quarter of hand, we just think right now that we need to be prudent with the balance sheet.

Our number two priority once we've we've paid off the dividend. So we're just going to announce one quarter ahead.

So in <unk> when it comes to make the decision with the board will think about that first half surplus will be thinking about the 60 40, and we will have an eye towards the future oil price and the.

Environment on refining conditions, we see in the second half of the year hope that helps domes very good I think the only thing I can put on if I could Thomas Murray.

A question I got on the from the media. This morning is somehow the suggestion that these $500 million of buybacks in the second quarter on really buybacks or words to that effect and of course, they are real buybacks.

We've.

Been issuing shares for employees over the last decade.

In fact, the shares that we'd be buying back in the second quarter were issued in the first quarter.

So I.

I think an equity investor would look at that as a very positive thing.

And I just wanted to clarify that but I know you're all very much aware of that on this call, but thank you Thomas.

The fact you Craig.

Thanks, Thomas I will take the next question from Jason Kenney of Santander Jason.

Yes.

Thanks, and congratulations on the gas marketing and trading results.

Delivery of Raven to can you remind us about the overall support for cash flow from new project startups, including Raven by two.

<unk> 2022 vs.

I think it was 2019 when when it was first announced.

Yes.

The upsides thereof, because of the the stronger oil macro and year to date.

Second question I'm sorry. This is this is a bit less sales.

Is BP looking at or has it considered turning its access to mature or late life upstream resources.

In search of clean hydrogen production of ships and there's no is there a reason why.

Very good Jason Thank you.

On the projects won.

I think Murray Die then and helped me out I think we're we said we'd do 900000 barrels a day of new production by the end of 'twenty, one worried about 770 today.

Raven has just come online.

It's running at about 600 million of day to day on its way to 900 to 1 billion through the rest of the year.

We got the second project on in India.

Satellite project reliance has done a very good job there.

They are the operator, so that's come on line that's good.

The piece of business for us.

And I've actually looked over the next out to the end of 'twenty three we've got 14 more projects to come on line actually through the end of 'twenty three.

And some big ones in there not least mad dog phase II in the Gulf of Mexico on.

You'll have seen the photographs of the Argus facility, having made its 16000 mile trip around the world and ending up in Texas. There on the last few weeks from a big milestone all of the wells of pre drilled there and that's kind of 65 mbd net.

Type of business, so, helping the gum approach that 400000 barrels a day from the golf that we talked about some time ago over the coming years.

<unk> expansion some great projects to come on in the next couple of years as well all supporting an increase in.

And in cash and Raven in particular quite leveraged they are mad dog Tango expansion, obviously very very leveraged as well.

You can clarify of that helps you or not but a good sweet Marie anything you'd add on the projects Yeah, Jason I don't know if youre thinking about the 35% higher margin that we've talked about from our major project suite.

That was around if you you have to go way back in time back to 2015, where.

When we talk about this 900 mbd of projects coming online as of 35% higher margin than the existing base of business.

We upped that to 2016 and current could clarify that after but the 35% higher margin.

News and particularly this wedge coming through now.

For any of them on Mad dog Phase two and Tango train three of three three very very large projects with very high margins.

And on hydrogen on your left field question as you called it.

I don't think its left field. It's a good question Jason look we look at all options for all of our assets and clearly we can take advantage of a traditional asset.

And of late life asset and somehow take advantage of the transition.

Then we will do that.

Those opportunities arise you can certainly see that.

Potentially in the case of carbon capture and storage.

We're in many ways.

We'll be doing in T side here in the U K, what I call.

Taking the carbon back the cash.

Robin that was taken out of those reservoirs will end up putting it back into some of those reservoirs in the hydrogen will be part of that solution. So we continue to look at sort of all options and all uses for the assets that we have and are particularly interested if we can take advantage of the transition.

And what you see us doing here with hydrogen.

And carbon capture in the U K is a is one is one such example in the southern North Sea. So hopefully that helps Jason and good to hear your voice.

Yes. Thanks.

Okay. Thanks, Jason we'll take the next question from Lydia rainfall of set Barclays Lydia and good morning.

Thanks, and good morning, everyone.

The question that I had on the first one just on Capex as you move into phase two of them clearly the capex numbers with Anthony that's there's lots of that 14% to $16 billion and I'm just wondering how youre thinking about that on whether you think opportunities that you want to accelerate because of wet and that that number they've got today and then secondly on just the on the U S side and the <unk>.

And then of that just decided I think it was just told US yesterday that the he was on applied to debt for it.

Retail license.

And in terms of that is that the case till you actually don't seem to have testing is now on the electricity side. The hanging in the past you said the it wasn't something that you really thought you needed. Thanks.

The linear good morning, good to hear your voice as well.

Yes, Indeed, this FERC application has raised some chat.

Chatter in the media.

The amongst people, it's something that so.

So I guess the first thing to say is there's no change in strategy.

We're certainly after customers, but our focus is predominantly on commercial and industrial customers. So that's where our focus has been and that's where our focus.

It will remain so zero change in our strategy and our approach.

This you should think of as the local team taking a local option.

I actually wasn't personally aware of the application that gives you a sense of the significance of it inside the company.

One of many things that I'm sure are happening around the world.

On each and every day, so just think of it as optionality.

But not the change in strategy in any.

Dimension.

At all so we can talk more about that later, if you want to but no change of our strategy at commercial and industrial being our focus on customers secondly.

Secondly on capital.

We have moved to phase II.

Phase two does imply for $14 billion to $16 billion of capital guidance I think the keyword that I would draw your attention to is discipline.

I think it's.

Desperately important for us that we.

Both exercise.

Internally and demonstrate to the market.

Discipline.

As we go through this transition.

And of course of uncertainties remain as Murray said in the World you know.

The recorded its largest.

Number of COVID-19 cases ever on Sunday, so while those of US here in the U K and the U S may think we're coming out of the pandemic debt does not mean that the world is coming out of the pandemic. So that's why we made the decision to not change our capital guidance for this year. It remains at around $13 billion and as we look to next year, we'll assess the situation.

As we approached the end of the year and make a choice within the framework that's out there but.

We are very very focused Murray you used the word prudent I used the word disciplined.

On managing this business carefully and well taken care of cash returns for the shareholders taking care of of that balance sheet.

While at the same time being able to transition the company and I hope that's what people have taken from this morning's results. So hopefully that helps on the deal.

Thank you.

Thanks, Lydia we'll take the next question from Paul Cheng Scotia, Paul Good morning.

Hi, Good morning. Thank you two question for us.

Can you guys discussed on the it would be more of a thought the economic of E. Charger business and that also debt in the configuration that I think that most of them that <unk> include any of your existing service stations. So I mean, how many of you charging station. So that's number one and second question is on your.

Our GAAP and low carbon.

That's all of its a very very strong.

And you indicate that you had the exceptional trading so any.

Any kind of all of the maybe debt.

I'm trying to understand what is the underlying oil and gas.

The operating performance in the contact all the in the first quarter when you earn $2 three per.

600, 700 years on debt and.

And then I guess operation result.

Thanks, So much Paul I'm going to give the trading question two definitely avoid saying what the trading number was too to Murray and the moment, but thank you for your question on on charging.

We have an ambition.

Last year, we had about seven 5000 charge points on the company, we had an ambition to grow that the 70000 by 2030.

Maybe about 25000 by 2025 today, we're at a little over 10000 charge points from the company.

The majority of them are in the U K around eight and a half thousand a week.

We've got a couple of hundred in Germany on our retail sites and we've got about 500 in China, which is around the <unk> joint venture and reminding you that D. D is the world's largest mobility provider and.

The world's largest owner of electric vehicles in that joint venture is going incredibly well.

As we build that out we hope to add about 500 ultra fast charging points to our rail network in Germany by the end of the year.

I think we'll get up to about 30000 in China by the end of the decade.

On our focus on the U K is around ultra fast charging.

Adding about another.

One to 2000 by the end of the decade here in the U K.

We're also working with fleets.

So it's not just the.

On the go where we're working with fleets here in London, with Uber, where they're our partner here in London, where also the partner and in Houston and the economics of this game or obviously in their early days, but whats going to drive this is ultimately its utilization.

In terms of the economics of the actual transaction itself and of course, we will add to that the economics of the convenience business that we have a rounded utilization.

It's driven by getting people to your site, that's why we've done it.

Deal with.

Dcs.

Which is all about the incur dashboard software for vehicles, and we want to be in debt. The dashboard, we want to be pointing people to the BP charge stations and that's what that does and the second thing that it relies on is making sure that their electric vehicles out there and for there to be electric vehicles out there you need the infrastructure to be out there which is why.

We did the deal with Volkswagen.

Which is looking at six to 8000 charging points across Europe over the coming years and again, putting us in the dashboard of Volkswagen. So utilization is key building the convenience offer around the charging is going to be key obviously, it's key on fleets as well so that's a little bit of a summary of our charging a per.

<unk> for the next couple of years personally I have to say very excited about it very excited about these partnerships with Daimler with Volkswagen group hugely a huge opportunity for us there Murray trading Yep, Hey, Paul.

Look I'm not going to satisfy you because I won't give you a number because we don't disclose numbers on trading I'll give you the the secret key that we use as our average strong very strong and exceptional.

I think from memory, we've had three exceptional quarters over the past decade, or so on the last exceptional quarter. We had was the second quarter of last year in the oil and obviously, we've had an exceptional quarter on the gas trading side of this corner. So that some we just don't provide numbers of.

Choice that we've made the support on the management team and I think if you just look at the run of quarters on gas on low carbon from the day disclosures, we put in place you'll be able to draw your own conclusions from that.

In terms of the underlying business I guess Murray of way to look at it is the fact that in a normal trading environment. So we're not relying on an exceptional trading going forward, but in a normal trading environment. This business is breaking even at $45 in.

In the second half of the year $3, Henry hub and $13 or M. M. So that gives you a sense of that we don't rely on exceptional trading to deliver the.

On the cash performance that were delivering.

We take that out of the equation when we factor in.

Breakeven for the second half of the year and maybe the last disclosure point, we can help you with Paul as we talked about on September 16th that our training business makes about 2% on top of rucci.

For the business. So hopefully that helps you understand scale.

Craig back to you on it.

Okay. Thanks, Paul I will take the next question from barrage of bulk Qatari of RBC barrage.

Hi, Thanks for taking my questions.

Two please the first ones on the 500 million for the for the share Awards can you just kind of whether that's the typical run rate for each year I recall of the announcement.

For the months ago.

On around the new strategy and offering of kind of special round to the employees I don't know if this is part of that or.

Whether we should expect from roughly 500 million of yes. So just wondering how to think about the run rate there.

And then the second question is on some niche the overnight.

Flows for shack, the knees had been halted the funding for some reports on future contract issues I was wondering if you could shed some light.

On that and what's happening there. Thank you for.

Raj Thank you on.

The.

On the share awards.

What we are referring to is the ongoing equity debt issued on an annual basis, what you're referring to.

On the announcement of couple of months back is what we call of reinvent share plan.

That will not be come equity until 2025, I think Murray.

So this is not in relation to that.

And we've been issuing shares as part of our equity plan every year for the past.

For the past decade, and this is the point in time, where we've chosen to.

The buy back those shares and prevent that dilution so it's not associated with the.

The the reinvent BP share of plant, which will become a factor in 2025 of them will depend on the price and so on and so forth on debt.

On that day.

<unk> Denise Murray anything you have on the nothing nothing I'm one of our of we'll check back on within a minute, we'll follow back up with you.

Barrage of on that and I think just on the previous question.

Around.

The gas and low carbon as well, you'll also have seen production growth and.

In the quarter.

As we've got.

Coming out of maintenance, but importantly, as Raven has ramped up and you'll also see lower costs in gas and low carbon in the in the quarter as well so not just the trading story.

And underlying business improvement story, as well as an exceptional and trading results in gas and low carbon Marie back to you on Shah Deniz, Yeah barrage, maybe I don't know exactly what you're referring to but we do have a contract for the stage one of shot of knees that ends with Turkey on that might be when it's talking about a ton of course that's been.

Renegotiated and extended some of it maybe maybe there was a press article on the contractual situation, but short on he is flying as far as we know thanks.

Thanks for US Okay. Thank you.

Thanks for actually I will take next question from Irene homeowner Irene.

Thank you good morning.

My first question and congratulations on the reaching ill.

Hmm.

The beating your net debt target of nine months, two out of leap, but having done that.

You say that you know intend to devote flow to the center of the new definition of surplus cash to the balance sheet. So how should we think about what you're trying to achieve with the balance sheet going forward you don't have the.

Gearing target any longer and I was wondering.

How far you you intend eventually choose to decay of the in the balance sheet on the second question.

You used to disclose.

Cash flow and working capital, excluding deepwater horizon Easter still available for us to see please thank you.

Very good Mary second question Yep on deepwater Horizon, Irene it's gone to such a level that it's just not material anymore.

In the second quarter, when we make our annual payment well will give you a disclosure on that payment I think you know that payment cycle of $1 2 billion pre tax, but the overall levels just declined for such a level that we.

We don't disclose on its probably somewhere around $150 million would be my God. So I was just in the attempt to clean up some of our disclosures.

Great and Murray of why don't you take on <unk> first question is all around her for too to Delever Yeah IRA.

Irene I think it starts from a place of prudent on making sure that we protect the balance sheet and protect our ratings.

As Bernard talked about our first priority is that resilient dividend our second priority is.

Ensuring that we have a strong investment grade credit rating, having reached our $35 billion target.

We obviously work with all three ratings agencies manufacturing S&P. They all describe from strong investment grade credit rating or the or the ratings the mechanisms for calculation of all quite different. So it's very hard to give a specific calculation that would emulate what they do so instead, we're just trying to focus of the market on maintaining strong investment grade credit.

Rating across those ratings agencies.

We believe our out of an abundance of caution due to the oil overhang and and the the unfolding situation with vaccines and kind of in that it just makes sense to continue to D care of the balance sheet and so we have stated with the board this week.

Then 40% of surplus cash flow will go towards the balance sheet and that's that's the disclosure we can make at this moment in time, we're not guiding on what what future targets might be.

But we just think given the uncertainty of the world and its very very sensible for the 60% of of the surplus cash to shareholders 40 per cent continues to go to the balance sheet and we'll reevaluate that at year end and communicate it appropriately at yearend great. Thank you 100% agree. Thank you. Thanks Irene.

Okay. Thanks, Irene we'll take the next question from Jon Rigby at UBS John.

Yeah.

Thanks, a lot of great Hi, guys I'm kind of just.

Get back to the the gas trading.

Figure.

Well not the figure but the the of current can you just talk a little bit of about what what happened is this is just basically sort of serendipity just happens to be the the way youll positioned structurally.

Structurally.

Benefited from here or was that in.

In the moment adjustments to capture.

On excess returns on this.

And this is probably the crux of my question is.

Is it it's not always going to be asymmetric EBIT you can always gain but you can avoid the same kind of.

The exceptional losses.

What I'm really kind.

So on the biopsy is how much risk.

How are you managing that risk.

In the gas business.

The second question.

Just on the the the comments you made about.

Electrification.

[laughter].

Two things I think one is the question on the new relationship you have for the Oems is that.

Something that's unique to you.

Or is it share or can they be replicated by competitors.

And then just sort of picking up on batch and then the BP pulse.

The comment I, just because to me that when you look at those things.

Please also the common agreement soon.

How how can you differentiate the.

The supply of power to cause.

Just the Commoditized. If indeed, you have the same relationship with Oems and Youll, providing.

Pallets of cards without the non fuel side of.

The business I'm still struggling with this concept that the.

Electrification of the transportation.

Fleet leads to you being able to expand.

Your margin in the in the convenient space.

Thanks, John.

I'll say a few words on the on urea in the North America, and let Mark talk about the specifics around risk and so on on the electrification you know.

On the deal with with Volkswagen Places BP and the dashboard of no one else.

So that's a very very clear, that's where you will get directed to a BP charge point.

In Europe.

That is true of Daimler today on Mercedes Benz actually here in the U K today as well. So these deals are of differential.

In that regard on the deal with Dcs will we'll obviously put us in a prominent position.

On where you get directed.

So that's number one how.

How do you dive range, how do you differentiate.

On the elektron from an electron on.

On the back of that you differentiated by.

The experience quite frankly.

If you can charge your car to go 100 miles and 10 minutes.

I think that's a differentiated experience that's why we're focused very heavily on ultra fast charging if you have of digital solution that is end to end that is easy to use the allows easy payment that will differentiate you. If you have of loyalty mechanism, which we have and we're growing that will bring you back that will.

Differentiate you and if you wrap that around a convenient sulfur.

Which is differential as we think we have here in the U K with marks and Spencer's and as we have in Germany with of row that will differentiate you and that's what gets you the utilization which in turn gives you.

The returns so.

Hopefully that gives you a little bit of a sense is it going to become more competitive over time, absolutely no question about it in my mind and the rent will move around.

From maybe early on it will be the electrons and over time will shift to the to the total offer so it will become more convenient and we're preparing for that without question.

But I absolutely believe that there is an opportunity to provide a differentiated service in this space. So that's a little bit on the thinking around electrification.

On the North American position.

I think it is important that people understand that for.

First and foremost, Texas is not just the market for us.

It's our home in America, and we've got thousands of employees.

Many of whom went without water of power.

For for many many days and our first priority was to take care of them as we did.

Putting some of them up in the hotels, providing them with supplies and so on and so forth having done that we then focused on how we can keep power flowing and gas flowing.

In North America are in Texas in particular during that time on our teams worked quite frankly, heroically 24 hours a day driving around the city of trying to find Wifi.

At Starbucks stores to keep the machine running calling tens if not 100 utility companies to find if we could offer.

More ways of getting power and gas to them. So the whole focus was on maintaining.

Maintaining as much supply to.

To our customers as we could operating within the market and obviously doing everything with the utmost of integrity. So that was very much the focus during the period has to say.

I'm incredibly proud of how hard that team worked to do what they did and.

But your specific question around risk and whether we're taking on too much risk and wasn't serendipity and so on I'll leave the tomorrow morning.

John I think the way to think about US is we don't take short and long positions bear naked.

We have offsetting shorts on longs.

And the the moments in time, where trading south of escape inherent at the highest level on the oil and gas training.

We make money when we can arbitrage so Atlanta price goes up in say Asia, we redirect of cargos from one place to the other out of me make arbitrage by by moving across the different charging along as we have.

That business is risk managed constantly you can imagine the complexity of the mathematical models around it and monitored daily Daily I got the note that shows us what what risk exposure, we have on and how we're placing the restaurant on and off so it's pretty finely managed we make sure we don't get too short or too long on any particular product for for the concern that you just voiced.

And I think we have a very very strong long history of knowing how to manage these disruptions on and doing well and of course, we have disruptions on the first quarter in Asia on the United States.

And the only thing I would add genres, and very clear delegations from the board in the matter of risk in this space as well which are.

Actively managed as you would expect them to be so very strong governance in place around things like <unk> and so on so hopefully that helps you on.

Thank you.

Thanks, John I will take the next question from Christine Malek at J P. Morgan.

Hi, good morning, guys and great to hear of voices.

So again, it's going to be back to the Q3, two H buyback calibration. When you look at the variables to calibrate the part of Quanta.

I think it's fair to say, it's heavily pro cyclical on the full price move just to say $70 a barrel the message I situation of them too.

Two thirds of your market cap by the middle of the decade.

Well, that's a pretty nice the nice comp.

Contemplate I Couldnt help wonder whether in reality would.

Would you prefer to really excess funds into debt reduction of further debt reduction or accelerating the transition capex because I'm just trying to get a sense of how free yield free cash flow is.

Against that slide that you put up on on an upside around around the buyback.

The second question on trading I get the E.

Can you quantify but.

Given the outsized contribution in Q1, what is the what are the indicators you'd be looking at to get a sense of how the business will go for them in future quarters of contango backwardation cost structure of the price spreads just to get a sense of the standard deviation given clearly it was outsized in Q1. Thank you.

Maybe I'll ask you to comment on trading and maybe help me out on the on the buybacks I mean look I think guys. It's it's great debt I think May Kelly, you talked about 20% of our share count dressing Christian is talking about two thirds of our market cap by the middle of the decade.

I think.

It's sort of great that people are thinking like that and equally.

The World is still in the middle of all of the pandemic, there's the supply overhang.

And Theres a lot of uncertainty around them. So we are.

I'm delighted that we have started buybacks today on the back of the hard work of the team over the last.

12 months been very very focused on this and today, we see some of the fruits of that work.

But I think we are also very conscious that we just laid our framework out.

Just you know on August the fourth and therefore, it is far too early in our minds to be considering.

Any change to any part of that it's very very clear of the capital framework question within that is very very clear on what I am particularly comfortable with is.

Is that even at $13 billion of capital this year, which we will stick to and not increase.

We have the ability to do the things that we need to do to transition the business while generating.

The surplus cash that enables the buybacks to be I.

I hope quite healthy so we're taking it day by day, we're taking it quarter by quarter, We've announced 500 million today, we'll check back in at the end of the two key results from we'll announce or are planned for the third quarter and so on so wireless of uncertainties remain.

We remain very focused on taking those decisions on a quarter to quarter basis and secondly.

We're not moving or attempted to move from the financial framework that we have just set out it's a good framework we think.

It gives us what we need and we're now going to execute on the Maria anything you'd add on that.

No it's shrinking and then on trading.

Christian I I'm I'll be careful on what I say here I don't really want to give up commercial advantage.

We have short and long positions when market disruptions occur.

Arbitrage to the between them on a temporary basis as well as of product basis. So that's the general characteristic of our trading business I don't think I'm kind of go any further and describing what we do commercially. It's just not helpful for the traders of finding them. So I hope you don't mind I'll stop there.

Yeah, and I guess are are traders probably wouldn't would say that there is more to the lifetime Serendipity is as John said so.

Thanks.

Thanks, Marty for that and Christian Thanks for the the question hope that helps.

Okay. Thanks, Christine we'll take the next question from Chris Coupland at Bank of America, Chris.

Yes. Thank you.

At the two quick questions. Please.

One a bit left field.

Can you comment on.

On Mexico, which seems to be stepping back a little bit from liberalization of the energy industry have you already seen any impact are you concerned on your growth expectations and margins in the country downstream.

On the second question I'm afraid goes back to buybacks and Youll 60 per cent rule. So I just wanted to see where the okay. You want to be disciplined and cautious. So now we're the still the 60% payout rule I understand correctly, you highlighted excess free cash flow of the one 7 billion a.

500 of batch is gonna be allocated to offsetting the employee award scheme, but then you would still be left with $1 2 billion. So you could for now already announce of 60% payout of that which would be quite substantial. So are you, saying you're going to apply that sort of match with.

Half year under your belt, considering your <unk> guidance.

Just checking why that rule has not yet been applied and weather.

Whether and when it will be thank you. Thanks, Chris.

See if I can have a go it is one H and the reason it's one H is because we have had the.

A very strong whatever language you want to call. It first quarter and we have some unusual outgoings in the second quarter.

Particularly around the deepwater horizon, and we have chosen to look at it on the one H basis and going forward will be on a quarter basis as Murray has indicated but one H comes together at the end of <unk>, obviously, and we'll announce what the surplus there was on what the buyback for the third quarter is there the $500 million you can tie it to the $1 seven.

If you wish but it is simply.

The decision that we will no longer.

Dilute our shareholders in this way and that we will purchase repurchase those shares and that's what are.

On the basis for that decision is.

But the reason for one H, Robert and <unk> is the.

The unusual nature of the strong performance in the first quarter and some of unusual outgoing items in the second quarter Murray just take Claire just to clarify that Chris So in the second quarter, we will look at the one H on the outlook for the second half of the year and make a decision just to just to be supersede per claim.

And on Mexico low.

I think there's probably a lot going on in Mexico.

I won't get into commenting on the politics and what is happening there.

Mexico is important but it's not.

Like it's the core of our growth strategy and convenience of mobility. The real area of focus really over the coming years is India, where we're going from 500 sites. The five 5000 sites and that's not to say the Mexico doesn't matter of course, it's a part of the story, but it's not the story.

The story in growth markets and convenience of mobility in particular.

<unk> and <unk>.

India and our plans take account of risks.

Risks like that in both countries and in countries like Mexico.

And we've drawn up our plans with that risk in mind Chris.

Okay. Thank you. Thank you very much okay. We'll take the next question from Peter low at Redburn Peter.

<unk>.

Hi, Thanks for taking my question just for.

One follow up on the fee.

<unk>.

As the proceeds.

Some of the losses outstanding payments related to the Alaska well yeah.

That was $4 billion of assets second lifestyle on the balance sheet related to low net.

And that provision can you give any additional color on the expected phasing of payments from held for because it's quite a material moving part of your guidance would imply you aren't going to see much of it this year. Thanks.

Just one question Peter.

Sorry.

Thanks for it.

Yeah, Peter Nice to hear your voice.

There are two components to it there's a loan for $2 billion that I think has a five year duration. So I think that's a that'll be a choice of doesn't.

Does it get paid out earlier does it kind of pan out in five years, and that's obviously a hell of a court decision.

So that's the first component of it the rest is through the profit sharing mechanism.

I think with the strong prices, we're seeing now you should presume that the balance of payments will occur over the next three four years pretty hard to predict it depends on the performance of the field the oil price.

And there are ratchets on the sharing mechanism, so it's pretty hard to predict easily but.

You're right to be prudent tennis or them ratable, probably over three or four years would be my my gut instinct right now.

But let's see how it plays out of there are quite of few variables in there and so you can imagine production moving up and down efficiency of moving up and down whether moving up and down price point of write down et cetera et cetera. So there's a lot of moving parts on it.

Hope that helps okay. Yeah, that's helpful color. Thanks.

Thanks, Peter I will take the next question from Jason gable minute Cowen Jason.

Yeah.

Thanks for taking my question.

I'll answer the go back to the E on the strategy.

Paul.

The net.

Right.

Okay.

And so I'm, just wondering what kind of.

On mobile.

On the global market.

The region.

On the level.

The quality.

We.

And the changing.

Yes.

We installed each other.

Yes.

Thanks.

Yeah.

Both of them.

Yes.

Thank you.

I'm Joe on.

Planning.

Okay.

One of them.

On the profitability.

Jason Thank you as the little hard to hear you, but I think I got your question and let me see if I can help with the answer I mean.

It is this classic a chicken and egg without the infrastructure of the vs won't come without the vs.

No need for the infrastructure so to speak so, but here's what we are seeing I guess, we've got three scenarios and our.

Energy outlook.

The business as usual rapid transition net zero transition.

On the rate of EV penetration today.

Today is probably one of the few things in the energy outlook that is actually proceeding at a pace that is consistent with somewhere between a rapid and the net zero of world. So it is actually the debt.

The not the one but one of the few that is actually proceeding at real pace and we're seeing that in Europe in particular, and we're beginning to see it.

On the coasts in America, and we're obviously seeing it very much in China.

So our job is to is to make sure that we build the infrastructure at the pace that is consistent with not having assets that sit there doing nothing and Conversely that.

Have lines of cars switch that nobody's going to buy an EV and we think we've got that pace about right.

It is important that as we do this we are directing traffic to our charge stations, which is why these deals with Volkswagen and Daimler and Dcs are so important to us because they give us the confidence to invest there are also why these deals with fleets are so important to us from that's the deal here with Uber in London, where.

Looking at Uber in Houston.

As well and we will continue to build out the fleet offering as well. So we're trying to get that balance right now it is a growth business.

And we need to think of it accordingly.

But the world is electrifying the light duty transport I think that is now without question.

And we want to make sure that we've got the right infrastructure with the right digital offer with the right convenience offer and that we've got the right partners debt on.

Allow us to to make the most of money out of that debt, we can over the coming years and so far so good I hope that gets to your question Jason.

Okay. Thanks, Jason.

We'll take the next question from Lucas Hermann net axon Lucas.

Yeah, Thanks, very much Craig.

But on the borrower clients, but I think youre, increasing the insight and the coherence and stuff.

The integration, while youre running the business.

From.

A quick one if I might.

And the concept in terms of attached but working.

Working capital clearly what the.

Thanks to this course of but you talk about offsets just wondering whether you could indicate where the offsetting items are likely to reverse during the course of the second quarter.

On the savings can you give us any better idea of the profile of savings by division, but business over the course of this year and into next year. Thank you alluded to $1 5 billion of savings in the oil products or in the oil business.

And the idea of how things how things split across the three divisions and at the time on where we are.

In terms of capturing those.

And Marty just a quick one I'm sorry, the quick.

It's a very simple question.

That's all day of split.

The present time of the.

The results by U S rest of the world et cetera, et cetera on my waiting for the Echo My line.

Or just thoughts of would hold those disclosures now no I think its coming out tomorrow.

To your third question Lucas, So I think that'll be out tomorrow is that right.

Okay. So that comes tomorrow.

Of that the C yoga on that one here I know a lot of life was asking on during the week. So Lucas Thanks, where we're on the same page on working capital I'll, Let Mary talk about it and he will probably correct me on the savings question.

Just a high level.

Three of $4 billion of savings by 2000 $23 billion to $5 billion.

End of this year $2 $5 billion by end of this year is ahead of schedule. So we will deliver this year.

In the middle of this year and it won't be an exit run rate.

So that's going well.

The program overall is going well it's focused on the restructuring is focused on agile, where we've got 14000 people now working in agile teams and piano.

And it's focused on digital which you are familiar with our history in that space the.

The majority of the savings as you'll see from the $1 five number do come from the oil and production operations area, because that's where the majority.

<unk> of the workforce is in many regards and where the majority of the cost is so it is heavily weighted there. So one of the half of the tune of half is coming from there and then it's probably on the.

On the remainder of its probably two thirds, one third or maybe two thirds of 50 50 between gas and the low carbon and.

On EMS business. So hopefully that gives you a little bit of a sense, but the the engine room of where the cost is consumed is obviously in the refineries in the production facilities and that's where the majority of the savings on opportunity quite frankly comes Murray on working capital in.

And the offsets yes Lucas.

You spotted that little bit so working capital did build and.

On the first quarter of 1 billion ish or something I think was the number.

Offsetting that.

It was things like variation margin, you'll remember in for Q, We had a big variation margin outflow on the gas side, that's come back in in the first quarter as an example.

So the two are largely offsetting I wouldn't I wouldn't expect too much of a working capital release until Q would be my suggestion of at this moment in time and of course Lucas you know then it's wickedly volatile, especially with oil price gas price refining margins moving around as much as they are right now so in a steady state world between one came on two key you wouldn't expect.

For lease, but if theres volatility then.

Oh, it'll just depend on what happens with with pricing of mental determine which way that goes up that helps like us.

Yes.

I'll just come back on the cost savings very briefly the delta between the savings you'll achieve through the course of they see the relative to the savings you achieved in 2000 22020 I've been at the do you still expect can you give any insight.

Do I understand the quit Murray do you on it.

Sure I understood.

They're worse I mean, there are some charges. There are some costs that were deferred from last year, because we couldnt get to a turnaround or something like that and we're taking those out of that cost savings number because it's the it's a true synergistic cost savings is what we're after and not simply a deferral of cost of Murray Yeah, maybe let me give us the gut Lukas So we had 20.

Nine worth of total cash costs in 2019, and that's what we're measuring it against.

We think we said originally we'd had the two 5 billion run rate by the end of 2021 burners just describes that probably by the <unk> will declare victory on that.

You can take a look of what our 2020 numbers, where I think the right team and the half I can't quite refinement of 18, five yeah, and then we're saying $3 billion to $4 billion by 2023.

Relative to 2019, so hopefully if you.

Do the math that will give you the.

2019 for 2020, and then we've given you a strong indication of.

What 2021 is looking like and just the cleanup on allocation between historic.

P historic upstream.

Gets about 60% of it as Bernard talked about 20% goes to historic downstream and 20% of Ob and see give or take are of the rough numbers on hold on my head for how that will shape up of that.

It helps you.

You can divide you can just take a look at the car we can take a look at the cost inside the gas low carbon vs.

Vs OPO.

And that'll that'll give you that the historic upstream split of that helped Lucas if not I can follow up on the sell side calls.

Thanks for thanks Bill.

Okay. Thanks, we'll take the penultimate no. It's not we've got three if I can can will take the of third final question from James Hubbard at Deutsche Bank.

Yes, hi, Thanks for taking my question two questions.

We've seen peers build solar and wind.

On projects and then tell on the Stakes.

In various levels of aggressiveness, some and then almost private equity like manner and then there's other people that build and keep it and I'm wondering.

When you talk about your 50 Gigawatts by 2030, where do you sit on that spectrum do you plan to build it and keep all of that.

Because that's your future earnings is going to replace oil as the declines or will you be.

And at some level of.

On the direction to take an opportunistic opportunities to sell down Stakes should the market and how you can make a quick return on <unk>. So that's one question.

On the second one is back to E vs. It.

Seems to me as the electric car owner the model of works right. Now is you paki plugging the chance for 10 2030 minutes you get the coffee sit down.

How 'bout donuts whatever it goes to the loop.

I mean, it doesn't seem that the average BP petrol station, even if the UK service stations fits that model, where even if it's only 10 minutes.

EBIT people are going to sit on the call for 10 minutes of wonder on the iOS buying chocolate for 10 minutes of ideally they have so much just sitting out of coffee and I'm wondering if you.

You've obviously looked at that do you agree and if so how would you adapt to that kind of model or do you just think of that charging will get so fast that will become redundant. Thank you.

James Thanks.

<unk>.

I don't on the Navy, yet so I need to get with the experience.

Yeah I think.

I think our place is actually pretty well suited to charging but you're obviously more more.

Closer to of deny him but.

The marks <unk> Spencer the convenience offered that we make people will want to go and grab of coffee and sit down and have a doughnut as you say, but they may also want to do a bit of of shop.

That's we're seeing our gross margin in that business up 10% year on year continuing to be of very strong part of the business and we're seeing the same by the way in Germany.

With the Raven offer with the with our ROE.

So I do think the our experience says that are convenient sites are actually are actually well suited to going on getting that coffee and of course, if there is somewhere in the set even better.

But that is the experience that we have today.

And it seems to it seems to be working.

Marie add anything on that if you wish.

And then on the on the farm Downs, which I think is what you're referring to.

It's a good question.

We're not in this for a quick return so to speak solar as a farm down business. So that model is very much.

Farmed on business and that's what <unk> does and I have to say does exceptionally well the offshore wind business.

We feel is different.

The option exists to farm down and on many people suggested that we overpaid for those Elizabeth licenses in the Irish Sea and as I've said for somebody this morning, if I had a pound for everyone who wanted to buy into those leases, having one of them we'd be we'd be doing quite well. So there is a very.

<unk> strong market for these assets, but.

But as you suggest there is the choice between.

Earning a quick Buck so to speak are actually retaining those for long term's, earning.

Streams, and and offshore wind I think we're probably more in the latter category than in the former category, but we have the option and of course. They are of strategic reasons that you may want to bring in a certain partner for a certain reason that goes beyond the pure financials. So solar of very much in that mode offshore wind I think we are.

Got the assets to have the discussion and the options, which is great and more work to do down the road Maria anything to add on either.

Maybe just on the electrification Hammersmith roundabout is a good place to go look at I've traveled by a once a day it seems like.

If you're charging day is always full retail always fall of Carwash always fall.

I think over time, the EV charging will increase in pace.

Given the technology announcements and we think the that's a moment in time, you'll be doing five or six minute charges, which are about equates to when it takes time for them up your tank with gasoline. So it's a perfect chance to go in and get a sandwich the chocolate bar of coffee.

So we think over time, it'll merge towards that and as I look at Hammersmith, That's it's awfully busy and I think it's a great.

The current example for all of US to go feel on touch and see why we believe we can move from fuel and convenience to charging and convenience of over the coming decades on the U K and help on the Prime Minister and his aspirations to move towards the low carbon economy.

And I think James just maybe a couple of things from me we are starting to rollout of these ultrafast charging hubs with convenience as well, which are much more dedicated to ultra fast charging.

So certainly I think an evolution in the model there as we think about it you know the.

The benefit we have with the access to the customer network as we start to understand the customer preferences needs.

Et cetera, so we'd be looking at that and you know.

I think Emma Delaney and the team at the capital markets day laid out.

You know a sense of how we see that that model developing over time, so as an ease of use of yourself for thing you'd you'd recognize this model is going to evolve so.

If you Havent go back and take a look at some of what amarin and the team rolled out of the C. M D and the last thing on them on the I guess I'll just reiterate as I assure you know this the 50 Gigawatts is developed to F. I D.

Which basically has been and said you know implies that we retain optionality from a value point of view as to what decision we take around farm down depending on the business, but that 50 gigawatts of the Sei has developed to F. D. It's not held operating in our hands.

Right. Okay, all right that's clear. Thank you. Thanks, Thanks, James we will take the real penultimate question from other Clint at Bernstein now.

Oh, Thank you I was hoping for the last one.

Two questions. Please convenience from ability just picking up on some of the stuff you've mentioned.

300 sheets strategic sites up over the last year 1400, new retail sites in growth markets and the convenience margin is up over 10%, but we've also had the lockdowns end.

Yes, a lot of people using the the rest of your 19000 foot print. So I just wanted to get a sense of how much the new locations. The new strategic centers are really driving that.

10% plus margin uplift and how youre feeling about that sustainability are at this point going forward.

Secondly, yes.

Just just back on U K wind I mean, it's the helpful slides, you'll have this morning, and you mentioned people, saying you overpaid.

And then you also asked for feedback, but Theres a lot of renewable companies out there, saying, yes, you overpay, there's even other chief executives and the pressing overpaid, which frankly isn't helping you convince investors. So I mean, I see renewable companies announcing returns on projects to one decimal place. So I'm really asking why can't do.

You just put some of these comments to rest and say what do you think the internal rate of return is on such a project. It's it's not the trading business.

Hi, do you have to be so secretive.

All of us thank Sam on the.

On the 10%.

The increase.

I think you know retail fuel volumes were down about 9% year on year, aviation's down, 45% actually but on the 10% gross margin on the convenience. It's the it's the size of the basket, but more importantly, it's the value of the basket and it's also of premium fuels driven.

This process and.

This is a business that's got track record of growth and I think we're optimistic.

The optimistic Emma is optimistic that we'll continue to to grow and so it's it's not necessarily just about those new sites for those new conversions. It is.

Also about what we are actually giving people in those sites, which is.

The quality of that basket and also the fuel offering the premium fuels that we're giving them. So.

More on that to come in on the offshore wind one look.

It's easy to get dragged into he said she said an eye on.

Not going to do that are there then to say look we were successful.

We were the the winning bidder, we werent alone we have of partner who's very experienced in this space and VW.

So we didn't do it on our own we would also we should also point out that we were prepared to bid on the leases in the north sea the.

Same team same partnership same methodology, obviously different environment and we would not have won those leases on the other side of the British ores in the North Sea.

So that should give you a sense that you.

We were we were grounded in reality, so to speak and as I said lots of people coming in and wanting to buy in.

You know we can we can publish on.

A return to a decimal point.

But it's not going to be right, because I think it's simply going to I hope and I believe actually ours.

Get better over time, and it sort of gives the a level of accuracy.

That isn't consistent with the range of opportunities that we have.

To create additional returns in that business and therefore, I worry personally that we'd end up under selling.

The value of the business when I talk about.

Optionality I'm not just talking about the fact that we're going to bring our decades of experience and pretty strong project management experience to the offshore wind that we're going to bring our operating experience both offshore and onshore wind farms in our digital tools, which give us uptime.

And we bring our UK supply chain and we bring our UK relationships, but I'm also talking about you know the point, we made them in the script today, which is about linking it into the charging business from that.

Could be up to half if not more Murray thinks it could be two thirds of the power demand from from pulse could could be offset there and we just announced the hydrogen deal. So we can take power over to the T side place and build hydrogen over there so the sort of the Optionality and an integrated energy company.

Round, an anchor asset like Elizabeth is or what we call Elizabeth is absolutely and utterly fantastic and the more we learn and the more we do the more it sort of builds and grows so.

Other than to say look I am supremely confident in our ability to deliver 8% to 10% returns from that project personally over time, I think it'll get better than that because of the optionality that we have and we're just going to crack on and execute on it and give people the steps and the milestones along the way that same we can execute.

And people will judge for themselves what they think is right but.

Very very pleased with the doors and people will say, what they want to say.

And we were different.

We leave them to it so to speak so.

I hope that helps so we won't we won't publish a decimal point return I'm, sorry, but I know you are supportive of the transaction, but it's just there's.

There's just too much optionality and quite frankly, there's too much upside and we'll end up under selling.

Undervaluing in asset in my own view Murray you disagree.

That's right and the the way that I relate to this thing guys was 100 years ago.

People discovered oilfields don't refineries to process. It built service stations to sell it to consumers.

All of you are saying with the offshore wind is the rebuilding of that hundreds of your business. Some of the upstream is on an oilfield anymore on some wind farm.

It through we can choose to go through the utility of we can go direct herself.

The plants that we have will be hydrogen plants for the green hydrogen overtime and the service stations of the service stations. So I think it's the recreation of the business that we've known for the past 100 years on oil and gas and all of you can say about the businesses that we've built like that as of the integrated energy companies of men material material returns on that overtime.

And we're convinced we'll do the same moving forward with us.

I guess peer plans probably can't sign up for.

It is different and we do have real optionality and on real upside so but anyway. It's good to hear your voice. Thank you.

Thank you guys. Okay. Thanks ores, and we will take the last question from Alastair Syme. Thanks for your patience Alistair of Citi.

Thanks, Craig and thanks, everyone for sticking around.

Can you talk again about the sort of the global offshore market for for when the seabed leases.

It does feel like the might be a little bit of of lack of supply versus the industry demand the nuts that'd be driven up.

Some of the pricing is out of view your share in the do you think the market dynamic is going to change at any point.

And then my follow up was just on <unk> LNG.

It's a relatively recent acquisition of the BP portfolio, but it was also a big part of the 'twenty 'twenty of payments.

So I just wanted to get a sense of what's happening there to get to the phase two and phase III development.

Oh sure.

Sure. Thanks, I'll, let Mary take tour too on offshore wind is a competitive <unk>.

Space Theres no question about that and.

Of companies like us playing the that Houston to play.

Our job is to compete.

Our job is to bring something that others can't and therefore earn a return.

In the license round when others can't.

And I think the more time, we spend on it and <unk> done a brilliant job in getting us into this business, we had 009 months ago or eight months ago.

We've got seven or eight gigawatt gross today, it's an extraordinary achievement I think in a very short space of time and he deserves a lot of credit and his team to learn to serve a lot of credit, but our job is to be able to compete when others can't.

It's bringing things that others can't and so we bring the offshore experience them quite frankly that is real it is not made up it is absolutely real UN Drummond Bill.

The Bill Chuck Denise He's now sitting on the board of our icon or offshore wind joint venture into the United States and we've got many more people who are gone from the upstream now working on the offshore wind business and we're going to deliver the same sort of repeat ability that we delivered in the upstream over the past.

Several years and we bring the integrated energy company and we've talked about the things that today that the integrated energy company brings so all we have to do is no what we bring and be disciplined and yes, it's competitive but as long as we're disciplined and we don't get carried away and we are turning down as much as we are excepting will be fine.

But that discipline is a word that we keep coming back to that's going to have to stay and that's how we'll address this so competitive yes, we got to know our business, which we do we got to know what we bring when we got to say no. When we say no Murray.

On <unk>, yes, we did have a bit of a write down last year, you're right based on changing views of gas prices.

As far as the project itself goes.

Been tricky with COVID-19, we obviously had to slow down as COVID-19 swept the cross Mauritania and Senegal.

We're back to work now we saw some fantastic pictures last week of the first pylon being.

Being loaded out of the the sharp shore base in Montana.

<unk> taken out to see to start to create the breakwater.

The offshore so we're glad to be back on working out of the FM situation and on working away and we continue to optimize phase two and phase III of we're working with our partners on the government to look at how we can take those horn I think you know in summary of Theres a lot of gas there is close to Europe since the close to I think market.

And overtime I'm trying this with the American investment burner of anything you don't know.

It's all about the resource in the marketplace on the teams are doing a very good job. So the resources there and.

We will continue to work it so Craig.

Yes, that's the end of the questions. Thanks, very much the interest we've run slightly over that of thanks for staying with US maybe on that note. Let me just hand back to you Bernard to.

Close the call.

Thanks, Craig Thanks, Maria and thanks to all of the teams that.

Helped us put this together thanks for everyone on line for listening.

Just a bit of of close if I can.

As we've had many many conversations with our investors over the last year and we've had many conversations I think the key question on many investors' minds has not been so much about strategy, but on weather.

Whether it is possible to deliver cash returns competitive cash returns at the same time as transitioning a company like BP and I think that's a very understandable question and that's why we have been focused so hard on the balance sheet on capital discipline on cost discipline on bringing those.

The major projects on on growing that convenience business and as the environment.

Improves as it has.

You are beginning to see those efforts are bearing fruit and our job is to show that over time, we can do both we can transition.

BP for the future while at the same time not or at the same time deliver our investors competitive cash returns and that's why we have the sprays performing while transforming and I hope you'll agree that I think this quarter is of Great example.

All of US doing just that so thanks for the time, we look forward to being in touch and following up with that of any other questions. You have so thanks very very much take care.

Yeah.