Q1 2022 BP PLC Earnings Presentation
And resilient hydrocarbons, we have started up the high margin Herschel expansion major project in the Gulf of Mexico, We signed an innovative deal to combine our Angolan assets with those of Eni through the creation of a xul energy, bringing the potential for more efficient operations and increased investments we've partnered in an oil discovery.
Brazil, where evaluation is ongoing signed an 18 year agreement with KOL guests to supply around one 6 million tons of LNG per year from 2025, and advanced our strategic ambitions and Biofuels starting production of SaaS at Arlington refinery.
And convenience and mobility, we are making rapid progress executing our strategy.
Here, we have advanced our EV charging strategy launching a strategic partnership with Volkswagen group to rollout an EV fast charging network in Europe , and the U K and announcing plans to invest 1 billion pounds over the next decade to support the rollout of fast convenient charging infrastructure across the United Kingdom.
We signed a strategic collaboration agreement with DHL Express to supply SaaS and signed a global strategic convenience partnership with Uber aiming to make more than 3000 retail locations available on Uber eats by 2025.
In low carbon energy, we are excited to welcome our new EVP on your thoughts on rough as we continue to focus on building scale with capital discipline.
Since the start of the year, we have increased our position in offshore wind with the Scotland lease option award of around one five Gigawatts net we've announced an agreement perform in offshore wind partnership with Marubeni in Japan announced plans for our 250 megawatt Green hydrogen project in Rotterdam and signed an agreement to form a joint venture.
Aberdeen City Council to develop a hydrogen hub.
As you can see we have real momentum we are executing our strategy delivering real progress across our five transition growth engines, EV charging convenience bioenergy renewables and hydrogen.
As we transform to an integrated energy company let.
Let me now hand over to Murray, who will run through our first quarter results Murray.
Thanks, Bernard and good morning, everyone.
Let me start with the macro environment.
Turning first to the oil price.
Against the backdrop of reduced levels of spare capacity.
Russia's attack on Ukraine added to the upward pressure on prices.
This reflects both an increased risk premium and the impact of sanctions and self sanctioning by market participants.
In early March Brent reached its highest level for almost 14 years.
And in the first quarter, Brent averaged $102 per barrel.
28% above the fourth quarter.
Looking ahead, there remains an elevated risk of price volatility.
This reflects uncertainties around the level of disruption to Russian supply.
The capacity for increased OPEC plus supply.
The ongoing impact of Covid on demand and the impact of the war on economic growth.
Moving to gas markets heightened concern on supply rest drove an increase in quarter average prices in Europe .
Forward prices also moved higher and the outlook in the short term remains heavily dependent on Russian pipeline flows to Europe .
Quarter average spot prices in the U S were broadly flat, but forward prices moved higher as gas production remains below 2021 peaks and LNG export demand group.
Finally, refining where industry margins have increased sharply since the invasion.
Bp's RMM rose by 25% to averaged $18 90 per barrel in the first quarter.
And currently stands significantly above this.
This move has been driven by a particularly tight oil products market.
OECD product stocks in February were 9% below their five year average.
In the second quarter, we expect industry refining margins to remain elevated due to ongoing supply disruptions, particularly in Russia and Europe .
Turning to the impact of Bp's decision to exited businesses in Russia.
With Bp's two nominated directors, having stepped down from the Rosneft Board.
As of the 27th of February .
<unk> no longer equity accounts for its shareholding and we will no longer report rosneft as a separate segment.
This change has resulted in a net pre tax charge of $24 billion with today's results.
Classified as an adjusting item.
This comprises first a pretax impairment charge of $13 5 billion.
Renting the full carrying value of the rosneft stake at the 27th of February .
The level of uncertainty as to the value of the shareholding means that under a <unk>. It is not currently possible to estimate any value other than zero.
Second a pretax charge of $11 1 billion.
Principally due to foreign exchange losses accumulated from the date of the initial investment to the 27th of February .
Of this around $1 4 billion has an incremental impact on equity.
Yes.
And third an offset of around $500 million, representing BP share of Rosneft is post tax income in the first quarter until the 27th of February .
In addition, bp's decision to exit its other businesses with Rosneft in Russia has resulted in a pre tax charge of $1 5 billion.
Which includes the full carrying value of those businesses. This is also recorded as an adjusting item.
And finally adjusting items include the release of a $1 1 billion deferred tax liability relating to Russian withholding tax on Bp's estimated share of Rosneft undistributed profit.
Taken together these adjusting items resulted a post tax charge of $24 4 billion.
In a total reduction in equity of $14 7 billion in the first quarter.
As disclosed in Bp's 2021 annual report they.
The exclusion of BP share of Rosneft net income from Bp's underlying result.
Has increased our expected underlying effective tax rate for 2022 to.
To around 40%.
Looking further ahead on the 27th of February we indicated that as a result of no longer equity accounting for our interest in rosneft.
The expected loss of future earnings from Rosneft have lowered our 2025 EBITDA targets for resilient hydrocarbons and the group by around $2 billion we.
We have also lowered our respective 2030 EBITDA aims by the same amount.
However exclude.
Excluding rosneft and our other Russian businesses from both base shares and future periods. We continue to expect to sustain EBITDA from Brazilian hydrocarbons around 2021 levels through 2025.
Aim to hold around this level through 2030 at constant rail price assumptions and expect to deliver a 7% to 9% EBITDA per share CAGR between two H 19, one H 'twenty and 2025 at 50 to $60 per barrel 2020 real.
Our target to grow Grupo Archie to 12% to 14% by 2025.
And the aim of $9 billion to $10 billion of EBITDA from transition growth businesses by 2030 are also unchanged.
And we have accommodated the expected loss of future rosneft dividends within our resilient financial frame with our five priorities remaining unchanged. This.
This includes our guidance on distributions and capital investments.
Finally in the appendix to this presentation, we have updated some of the key slides presented on February 8th to reflect the exclusion of Rosneft and our other Russian businesses.
Moving to results.
In the first quarter, we reported an <unk> loss of $24 billion.
This included pretax adjusting items of $38 billion.
Primarily relating to our investments in Russia.
Excluding adjusting items, we reported an underlying replacement cost profit of $6 2 billion.
Compared to $4 1 billion last quarter.
Turning to business group performance compared to the fourth quarter and gas and low carbon energy. The result benefited from higher realizations.
And an exceptional gas marketing and trading results.
In oil production and operations. The result reflects higher realizations, despite the impact of price lags in the Gulf of Mexico and the UAE.
This was partly offset by the impact of lower production.
And customers and products.
The products result benefited from exceptional oil trading and a stronger refining result.
The customer's result was resilient despite seasonality.
Ongoing COVID-19 impacts, notably in Germany, and China, and lower margins due to rising commodity prices.
Looking ahead, there is an elevated level of uncertainty due to the developing impacts from the conflict in Ukraine and ongoing COVID-19 restrictions.
For the first quarter BP has announced a dividend of $5 46 per ordinary share payable in the second quarter.
Turning to cash flow.
Operating cash flow was $8 $2 billion in the first quarter. This included a working capital build of $4 1 billion after adjusting for inventory holding gains and fair value accounting effects.
Capital expenditure was $2 9 billion with our guidance for 2022 remaining in the range of $14 billion to $15 billion.
And disposal proceeds were $1 $2 billion with guidance of $2 billion to $3 billion in 2022 also unchanged.
During the quarter, we repurchased $1 6 billion of shares.
This included 500 million to offset the expected full year dilution from vesting of employee share awards in 2022.
And $1 1 billion of the $1 5 billion program announced with fourth quarter results.
This program was completed on April 27th.
Reflecting the strong underlying cash flow delivery net debt fell for the eighth consecutive quarter to reach 27 5 billion.
And with first quarter surplus cash flow of $4 $1 billion, we intend to execute a buyback of $2 5 billion prior to reporting second quarter results.
As already outlined our financial frame remains unchanged.
We continue to believe this disciplined frame provides transparency around our capital allocation plans and serves us well in this volatile price environment.
On average 2021% to country twenty-five cash balance point of around $40 per barrel provides resilience and supports our dividend.
<unk> sheet and investment plans.
And a clear capex range, including in organics together with a framework for distributions drives investment discipline and provides a transparent mechanism for returning surplus cash flow to investors.
While also strengthening our balance sheet.
We remain committed to allocating 60% of 2022 surplus cash flow to share buybacks subject to maintaining a strong investment grade credit rating.
I will now hand back to Bernard to conclude today's presentation.
Thanks Marie.
Summarize against an uncertain backdrop, we are working hard to provide the energy our customers and economies need.
At the same time, we are steadfast in our focus on delivery on performing while progressing our transformation to an IEC all in service of delivering long term value for our shareholders.
We should stop here now and take any questions that you might have.
All participants would like to ask a question. They may do so by pressing star one to cancel your question. Please press the hash all pankey. If you are listening on the web. Please submit your question using the web question facility.
Okay. Thank you everybody again for listening, we're going to turn to Q&A now we are going to try and keep this tight and look to finish on the hour. So as a reminder, as usual from me. Please limit your questions to no more than two so we can give everybody a chance to get through.
On that note, we're going to take the first question from Christine Malek at J P. Morgan Kristie and good morning.
Christine do have you Christian yes, sorry can you hear me, yes, we can.
So congratulations on the results first question just I think if you stick to one question or macro outlook.
And just in the context of <unk>.
Let me say years ago, you talked about.
Bearish and longer.
And within that context.
Thank you.
Very good.
Good morning, Christian sounds like Youre travelling I'm hopeful as well on.
On the macro outlook, if we talk kind of oil and gas prices and in general I think there's.
There's probably about 1 million barrels a day, we would estimate off the market today of Russian crude.
That number we think we will probably increase this month when the existing sanctions come into effect for real and that number could double.
And obviously, if there's further sanctions we shall see.
As we step back I mean, I think stocks are relatively low on gas and oil at the moment are filling a bit in Europe , but.
On gas, but relatively low overall spare capacity in oil I think is is relatively low and of course, a lot of uncertainty out there at the moment a lot of uncertainty whether it be what's going to happen with Iran.
Zero Covid policy in China, what's happening with inflation and the knock on impacts on global economic growth, what's going to happen in Libya, what's going to happen.
With U S shale. So a lot of uncertainties I think where does that leave us I think probably in a world where volatility will continue to be the order of today. So I think we expect a continued volatile outlook for energy prices and we probably expect prices.
To remain strong in the near to.
Medium term in terms of updating our assumptions, we do that on an annual basis, we'll be doing that more in the middle of the year and I think it's best that we come back to them with.
With how if at all this current environment has shifted our medium longer term outlook. So we'll come back to that most of the year, Sean just to sort of follow up and I guess the backdrop to the question was around your capital frame and whether we should see.
Our allocation towards particularly oil investing in around shale.
Crude that were in a more higher for longer environment.
So in an event.
We see some framing around the long run outlook.
We expect you to sort of allocate what sort of shift investments and potentially slowdown renewable or is it very much is sort of business as usual.
No fundamental change just relative to sort of two year.
Two years ago, when you had sort of framing your macro outlook.
I think one of the good things that we have is our financial frame is very clear and it's been very consistent I think discipline is the order of the day, we will spend between 14 and $15 billion.
On capital investment this year, our medium term guidance around capital is 14% to $16 billion. There's no change to that we're going to continue to invest in the hydrocarbons that the world needs today, and we're going to continue to increasingly invest in advancing the energy transition, which is also what the world needs. So no change to our plans.
Staying with the staying with the plan that we have discipline being.
The important order of today.
Excellent. Thank you very much thanks Christian.
Thanks, Christine we'll take the next question from barrage buckets area to RBC barrage.
Hey, Thanks for taking my question. The first one is a straightforward one but just looking at the differential cash tax versus P&L.
Obviously the <unk>.
I'm assuming this is just the lag.
In terms of the the rate at which commodity prices increases through to cash tax rate is there any reason why.
And then let's say a steady state commodity price environment that wouldnt normalize as we move through the year.
And then second question just following up on the last one.
You referenced the.
Energy Trilemma I'm, just thinking as you are moving away from <unk>.
Crisis management to thinking about the longer term or medium term strategy, you've put in the press release out today on the UK investments, presumably other governments and stakeholders I, probably asking you to do more.
But youre sticking with.
The current capital framework over the medium term, if you're if you're spending more to accelerate the transition.
Where is that capital coming from or where are you slowing down to doing less.
Thank you Marie tax your favorite subject from your previous life I think thanks, Margaret I still I'm, sorry, I didn't know that.
Morning barrage.
An effective rate and cash tax rate on an underlying basis, you saw that our effective rate was 32% our cash tax was a little bit lower than that as it normally is.
I wouldn't look at the headline tax rates, they're pretty tricky given the scale of the impairment that we saw in this quarter. So you would expect ETR in ctr to close over time, maybe the cash tax rate's, a little bit lower through through cycle. So I would anticipate that 40% effective tax rate that we talked about I talked about on an underlying basis.
Cash tax slightly less than that.
Of course, any one quarter can deviate from that really based on mix of profits and that's what you saw in the first quarter was it mix of profits.
Very good.
So.
<unk>. Thank you for the question I think stepping back, let's just think about our strategy as an integrated energy company and as you said its purpose and we actually said this two years ago, we're not just saying it now its role in life. Its purpose is to solve the energy trilemma, yes, the world needs cleaner energy, but it.
Also need energy that's reliable are secure.
And it needs energy that is affordable that is the energy trilemma and the role of an integrated energy company has to solve that.
Trilemma.
Now how do we do that we do that by investing in hydrocarbons today, and you see us doing that.
The majority of our investment today going into hydrocarbons and we do that at the same time not a or at the same time by investing in accelerating that energy transition and we invested in probably about 3% of our capital in 2019 and non hydrocarbons by 2025, which is just a few years away.
Over 40% of our capital will go into non hydrocarbons and that number will be 50% by 2030. The increase that you referred to in the U K. The 18 billion pounds in the UK that is part of the the financial framework that we have laid out we have said within that that we're increasing investment in the UK from what has historically.
Being 10% to 15% of our capital will now go up through this decade to 15% to 20% of our capital and that's because the policies are in place here in Britain to support that the resources be the hydrocarbon resources or low carbon resources are here to enable us to do that and the skills and.
The education system is here to enable us to do that so in many ways. What you see in the U K, but Raj is a microcosm of the integrated energy.
Strategy overall, and you're seeing it on a national or a country level investing in hydrocarbons like we will do in the north sea today, bringing on a new development like we're doing at <unk> and at the same time.
Investing in the energy transition system of the future investing in offshore wind investing in hydrogen investing in solar investing a billion pounds in electrification. So part of our plan and the increase that Youre seeing is an increase in the <unk> and the weighting of capital in the U K from 10% to 15% to 15%.
20% hopefully that helps.
Raj. Thanks for the question, we'll take the next question from Martin Rats at Morgan Stanley Martin Good morning.
Yeah. Good morning, I've got two.
Two questions. If I may 1st of all I was hoping you could elaborate a little bit on the comment around sort of tightness in product markets.
It strikes me as a very clear all the product prices are extremely high but I was wondering how you see that developing sort of going forward, how much slack or do you think theres still isn't to global refining system or bp's refineries by now running.
At maximum capacity.
Sure.
I think that's an important question. So your perspective on that issue and then secondly.
Perhaps this is perhaps your answer is going to be well. This is more for full year results FY <unk> results, but I'm going to ask a question on the last.
The combined share buybacks that you've now announced for the first half of the year are sort of in the order of $4 billion. The Mark up with BP is about $100 billion. So you can buy back 4% of the shares with 4% of the shares you've effectively neutralized a 4% dps growth.
<unk> guided for so if there are incremental buybacks in the second half.
If you stick to the 4% dividend growth guidance actually the total dividend.
Did the company distribute.
In absolute billions of dollars, which actually sort of start to shrink and I was wondering if that is sort of the message that you want to send or whether perhaps this 4% dps growth guidance could at some point to be reconsidered and I'd be interested in your thoughts about that too.
Very good Martin why don't I'll, let Mario answer the dividend question Yep. Thanks, Thanks, Martin financial frames intact guidance around it's intact.
Martin doesn't change until that changes, we have the capacity to grow the dividend, which is our first priority at 4% per annum out to 2025, assuming a $60 world and of course on buybacks. We have the capacity to do 4 billion a year at $60 as well through 2025.
That guidance remains unchanged for now.
Each quarter, we will revisit the guidance and decide what we do but you are correct. We are buying back a substantial sharon's right now so we'll that will be something for the board to contemplate each quarters as it thinks about the financial frame.
Martin Thank you own them on products.
I think what Youre seeing is that the.
System in the west the refining system in the West end.
Is sort of running flat out the spare capacity that is in the global system is largely now in the in the east the Pes refineries are running.
Pretty much flat out at the moment, where they can.
And we're.
We're doing everything that we can.
To give the market what it needs I think.
Gasoline stocks jet stocks are relatively low at the moment diesel stocks or are actually globally and are in reasonable shape. So.
There is a strong environment at the moment for <unk>.
Refining I think we saw RMM.
Up around 17 in the first quarter I think it's running at 37 Marie ish two day $30 37.
Today so.
It is a strong environment. The refineries that we have are running flat out the majority of the spare capacity in the world is firmly in the east today, So hopefully that helps Martin.
Thank you. Thanks, Martin we'll take the next question from Lucas Herrmann at Exxon BNP Lucas.
Yes.
Two questions if I buy.
It should be straightforward.
Alrighty Festival divestment proceeds from the year, you've done over 1 billion in the fourth quarter of rules should come through through the course of this year.
So you just really building and installing to sound relatively modest.
Tom.
The proceeds coming in as being a good investment.
And.
Secondly, if I could just.
Asked around the price lag.
And not least you know what's happening with the U S onshore business on the direction of production, which seems to have moderated this quarter.
Price realization is not based on gasoline being relatively modest, but if you could expand on that price lagged in the Gulf Michael Holmes progress, there as well, but not as high as one months of anticipated given the macro backhaul. Thank you. Thanks.
Thanks, Lucas I'll, let Mary take both Yep divestment proceeds Lucas the overall frame. We talked about is 25 billion to 2025 I think we've got 14 of proceeds and so far to date relative to that promise and you are right regarding we're guiding $2 billion to $3 billion a year, we achieved one two in the first quarter.
Which was a good start to the year, we do have other divestments in the hopper.
And of course timing on these things is very tricky to predict.
The other thing I'd say is bid ask spreads are fairly wide right now between buyers and sellers and so it's taking more time I do think the two to three remains good guidance for now.
And if you're right and things move faster then we will update guidance in due course, but.
We're just being careful given how long, it's taking to close transactions, Kevin bid ask spreads right now.
I think on price lags et cetera.
You might remember that in the Gulf of Mexico, we price on a lag it's just customer practice. So all of our Gulf of Mexico offshore production and the prices. It's receives our December January and February .
In those months, obviously, there was a big difference between December and March.
And that that decreases the prices in the quarter by $20, but we obviously pick that up.
In <unk> as we priced March April may so that's that's what's happening inside gum in Abu Dhabi when you look at our realizations.
On <unk>, it's a little bit difficult to look at those realizations. When you look at bps liquids, that's both Ngls and oil.
You have to you have to create a melting pot.
Of pricing to understand that and on the gas side. We obviously are hedged on the gas side. So that's why you see slightly lower slightly lower gas prices.
That covered the questions Lucas.
Maury, how far out so those hedges Ron in terms of the gas side generally where I look at realized yeah generally we're running that.
Sorry go ahead Lucas.
No I was just to say I mean realization overall the headline prices for Q2 are clearly very strong to what extent is that being seeded buyer.
Hedging, which is not something I expect you to do but.
Yes, we've had a lung practice now of hedging bps, when we set it out separately to ensure that we could.
Continue the activity inside the entity.
Joyce we met as a corporation and generally the hedge windows around 12 to 18 months.
Not all of the gas is hedged and not all the guests as such not all of the gas is hedged and on divestments Lucas I think the key overall messages, we're not in a rush here.
We're going to take our time were going to be seekers of value.
With prices being where they are today and the outlook being the outlook.
That's a that's only going to help our situation going forward when it comes to making sure we get good value for our assets, but there is no rush on these divestments and thats, our cutting guiding purpose. There. So thanks good to hear from me.
Thanks, Okay. Thanks, Lucas, we'll take the next question from Irene homeowner at Society Generale Irene Good morning.
Thank you good morning, and my congratulations on the strong results. My first question of two of these on Russia, and obviously <unk> been there for decades.
You've always presented this as a key strategic region of prolific low cost resources.
Youre out for reasons essentially beyond control.
You retain your financial frame and guidance, but does the organization perhaps feel that.
There is a little bit of a gap left in the upstream portfolio strategically and financially.
And my second question on cost inflation in the U S. You report data the PX unit production costs, which is up.
Around 15% I think year on year, and then you reported BP overall upstream production cost, which is actually down.
You. Please talk about the differences you are seeing in cost inflation pressures in U S shales versus.
Rest of the World obviously.
Obviously, you have seen more in the U S and how you're dealing with this thank you.
Irene. Thank you good to hear from you and I'll, let Marty take the question around production costs and inflation.
On Russia.
Just a couple of things I would I would say.
Number one you said, we are out because of them.
Reasons outside our control I guess I would just say that we chose to exit.
Russia, we chose to exit within 96 hours of the day envision starting so it was a choice obviously and driven by.
The attack on the on Ukraine, but at the end of the day. It was a choice that we made and we made that choice because we believe it's in the it was both the right thing to do and it was the right thing to do for our shareholders.
The first quarter results that you see today Irene are.
<unk>.
Without Russia's contribution so youre seeing.
And how it can perform.
Absent, Russia, you see a business that <unk> had a good trading performance, but also had its highest reliability.
In many many years now which is fantastic 96, 1%.
Our strongest first quarter convenience.
Sales on record basket sizes believes.
Believe it or not.
Were up between 20, and 40%, 38% I think in importance in the U S between now and pre pandemic. So you see a company and what it's capable of and our strategy.
Is to become an integrated energy company and that is about investing in hydrocarbons today while.
Investing in the energy system of the future and that's the five growth engines that we've laid out so I don't see a gap in our portfolio at all.
And I think I will just leave it there.
Great.
Cost inflation, Irene I guess, its a cycle, that's very similar to past cycles.
The first place inside the portfolio as you see inflation is generally the lower 48 and Thats what <unk> is seeing.
Probably around 10% inflation after mitigation on Capex somewhere between five to 10, 5% to 8% inflation.
Across a broad range of services on cost.
We're not seeing similar levels of inflation outside.
The U S.
This continues to be excess capacity inside the supply chain and so.
So we're just not seeing that theyre on broad performance, we remain very very focused on driving cost efficiency into the business through digitization plans.
We've often talked about in the past not only in <unk> and the rest of the portfolio.
We're very focused on it we believe we believe we need to continue to drive comp costs and capital efficiency.
Because only 15 months ago the price of oil was very very low. So we're just going to continue to focus on that efficiency throughout the business.
And as always be PX as BP access tackling the front end of inflation right now and they are very very focused on what they can data when they get that hope that helps.
Thanks very much thank.
Thank you Irene we'll take the next question from OS Clint at Bernstein. Please.
Obviously exceptional number could you perhaps talk about.
It was all gas is there any signs of power trading coming through that number and I'm really kind of get a sense of whether your setup.
Appropriately for the rest of the year in terms of 2022.
And just linked to that I mean, and I'm talking about Capex here I mean, how much gas can can you bring forward in the portfolio and start to monetize within this.
Kind of a new gas environment.
Do you have as a gas caps is there subsea compression youre <unk> you.
You are starting to work on things like that so that's the first question secondly on convenience mobility.
I think you say marginally down in the release. This morning, it looks it looks weak to me. This is convenience mobility ex Castro Q1 is not obviously the big quarter, but there was some talk around costs and foreign exchange, but is it just that the wholesale price coming up squeezing the margin wasn't just FX is there is there anything else it's not.
Working here I'd, just love to get a sense of.
That particular quarterly number it does look week. Thank you very good Oswald. Thank you maybe I'll just have a quick go into second and let Marie think about trading power and potential for accelerating now.
Natural gas.
Convenience and and.
Mobility as you say excluding Castro.
It actually was.
Our strongest first quarter.
On record.
And.
Driven by a number of things that.
I spoke about earlier basket sizes are up.
As I said between 20, and 40%, 20%, 30% up in Europe , 40% up in.
In the U S at Thorntons.
We have more loyal customers were up to 16 million loyal customers now and we make.
Quite a bit more from a loyal customer than we do.
Our non loyal ones. So to speak we have more premium sites, we have more premium fuel sales they were up 2% since 2019.
And the margin share from none.
Fuel sales has risen from 25.
32%. So what are you seeing you know I think the big thing is you're still seeing an effect of Covid and you know.
Retail fuels are still below the levels that we saw in 2019 I think for BP.
Retail volumes are probably down about 8% and we still had strong lockdowns in in Germany in the first quarter and we also have the situation in China. So at the core of your question is something fundamentally.
And issue here I would say absolutely not Oswald.
I just think it's a tough environment with the.
The remnants of Covid Lockdowns in Europe , continuing in China, and obviously high oil prices, which are always.
<unk> for that convenience business, but the underlying performance of the business loyal customers, we've got more customers as well by the way on BP me on the App more premium sites more growth sites in India more premium fuel sales bigger basket sizes.
And in electrification, we sold three times the amount of power in the first quarter.
We did in the previous.
First quarter of last year, so that business is really accelerating with our top sites now being profitable so.
That hopefully gives you a little sense of what's going on behind the scenes inconvenience and mobility Marie trading power natural gas yes.
So on on gas trading I think that was your question.
What are the teams focused on first flow assurance, making sure that molecules get from the producing locations to the consumers. We think thats exceptionally important right now given where the world is so theyre very focused on flow assurance and making sure that energy flows.
Generally our trading organization is set up to make profits when volatility occurs in the first quarter was probably.
The highest quarter of volatility we've seen so its more about volatility it doesn't matter of prices is higher allowance about volatility.
So are we set up well for the rest of the year whole, let you judge what's going to happen with the rest of the year on Capex and acceleration, we have a lot of options to bring gas forward.
To help Europe , obviously towards you.
Martino Senegal, the first phase is ongoing we're looking at the second phase that would help in places like Charlotte needs. We're looking at expanding the compression on the pipeline and bringing additional gas resource to Europe across the portfolio in the U K, we're looking at options around E tap to try to draw more gas and as well some of the things you're talking about like blow downs et cetera, So the org.
<unk> very very focused on what we can do to help the energy flows in the world.
Cross many jurisdictions as we point towards Europe right now.
And not just on the upstream side I guess also on the.
The ultimate role of trading that we need to remind ourselves as <unk>.
Is to make sure that the molecules find a home and connecting supply.
Supply with demand has never been more important than it has been for the energy systems in the first quarter. So 55 cargos of LNG into Europe in the last five months 10 of those entity U K.
We just signed I think our biggest LNG deal ever.
Actually with coal gas for one 8 million tons I think just a few months ago. So it's not just an upstream equity.
Equity investment story around natural gas it's also through.
The marketing and trading business Oswald so hopefully that helps.
Super. Thank you. Thanks, So we'll take the next question from Paul Cheng Scotiabank in the U S. Paul Thanks for getting up early again.
Thank you good morning, two questions. Please.
I'm just.
Just curious with the Watson you mentioned I.
I think so.
Just wanted to see how that impact operationally.
Our European operation, we finding work.
European refining operation.
Crude slate.
The product new all of those being impact.
In your system and the second question is on page 27.
On your presentation.
Your <unk>.
The top the airport that we seen in hydrocarbon it seems my chart suggests.
Oil and gas business, we see a couple of billion dollars.
Movement.
Can you quantify or maybe he wants to understand that maybe would be better with the improvement coming from thank you.
Very good pull thank you I'll, let Marty take the second question on the European refining system, we've got.
Oil refineries and.
In Europe , and Castillo and in Spain, Gelson, Kirkman, and Lincoln in Germany, and Rotterdam in.
In the Netherlands, and I can confirm that.
All of the European refineries are all of Bp's, you're freeing European refineries are clear of Russian molecules. So we've managed and adapted.
As you would expect and those refineries are running independent of Russian crude today.
And with that I will pass you to Murray for the question on page 27, which is about the 2030 outlet Marie <unk> morning, Paul.
Let's see if I've I've hit your question here Youre looking at the resilient hydrocarbon Abu Dhabi Bridge, and you're wondering where the where the increase in profit comes from across the decade.
Obviously the stuff we've talked about in the past first of all we're bringing in the upstream we're bringing on higher margin barrels offsetting decline in the other barrels. So that's a that's a big chunk of it is an improvement in the mix second we have a big focus on cost and improving the cost inside the oil and gas business driving the production cost per barrel from <unk>.
Even down to six across through 2025, and then holding that through the decade of course, we're seeing an improvement in refining as the margin gets back to pre COVID-19 levels.
We're able to optimize the refining slate and last inside bioenergy, where we've got big plans to expand across five plants around the world and those are in the engineering design phase and we're looking forward to our first our first investment decisions in the next 12 months. So that gives you a sense of where the growth is coming from 2020.
One to 2030.
The slides that we put in the slide presentation to just restate without raws enough to make sure that our guidance was clear hope that helps Paul and happy to take more questions on the sell side calls later today, if you'd like thanks, Marie and Paul I would just add that the European refineries that we have are running at Max throughput as well doing everything we can to.
Obviously helped the situation back to you Craig.
Thanks, Paul we'll take the next question from Lydia reinforce at Barclays. Good morning Lydia.
Okay and good morning, two questions if I could just be just.
Just to come back to the strategy question.
Well setup to be conservative that $60, but at $100 you are generating more cash.
Nothing changed other than little buybacks and lowered that so I'm just trying to understand how you adopt it at the margin and then secondly, impulsively linked to that you do have and you have to have like carbon on yet can you don't see what you want from her and any observations that you may have made today, it's kind of about the Kevin be people that you might like to shop.
<unk>.
Very good linear good morning.
Murray.
We reiterate our point around discipline around our strategy and what our financial framework is but.
Thank you for that question on <unk> on year.
So she's just an and.
I have to say that.
She is probably listening in but.
We're absolutely delighted with our with the impact she is making.
Kelly brings enormous experience in this sector.
Which is important as we really lean into this space.
Asking lots of questions challenging.
Turning things away accelerating things.
Hiring lots of people were actually.
In the process of bringing some fantastic talent onboard from several other companies in the sector.
I'm incredibly pleased that they're joining BP and I think part of it is because of our strategy and I think part of it is because of the credibility that she has we will get on yet in front of the market hopefully later this.
This year and I'd love you to get the opportunity to spend time, but too early to say any changes other than obviously she is running our eye right across the strategy and we're working with her on any changes that that might bring about them as soon as we know if there are any will update you les.
During the year, but.
Really delighted to have her on the team Maria on the strategy and nothing changes.
Yes, I think my boss answered the question Linda.
Nothing changes dividend number one priority and need to make sure is resilient and that we can pay it at $40 balanced point. We think that is exceptionally important was only 15 months ago that the oil price was in the forties.
Second we need to continue to reduce debt.
We're very pleased to see eight straight quarters now down to $27 five of net debt.
Third.
The lessons of the past 20 years, the stick with capital discipline them every time, they all price rises in the past we've spent an awful lot more as a sector and destroy value and we're focused on not destroying value continuing to drive efficiency.
Into all of our spend whether they be copper capex or cost.
No change to no change to what we do with our surplus 60% to share buybacks and 40% too.
Debt reduction.
Hope that helps.
Thanks Lydia thank.
Thank you Lydia we'll take the next question from Chris Coupland at Bank of America, Chris.
Hey, good morning, two quick questions. Please.
On Russia, R&D or exit.
Can you elaborate a little bit what criteria, you're going to look to us for selecting bias coming forward for your roadmap stake is it purely on highest price or are there. Other considerations you are going to take into account.
Obviously this is for the market I believe not just about price, but also about time. It takes for you to finally actually exit in reality and then to your energy Trilemma point and I appreciate youre going to update US later on on changes to your longer term commodity price assumptions, but could you perhaps comment again.
About <unk> isn't.
Partly the idea of having short cycling your portfolio made for this time is it because of the hedging that you referred to earlier and I'm by no means suggesting you should significantly upgrade your capex, but if there are opportunities out there with one two year paybacks.
Wonder why your Capex message Hasnt changed if at least not in the composition of the overall capex. So maybe let me wrap up by asking.
As to that press release regarding the UK investments, which of these have actually changed.
We've been in this new World Energy order for the last I guess 10 weeks.
Which of your Capex numbers, if any do you think have changed.
That you're representing in these in these press releases. Thank you.
Very good Chris Thank you all.
I'll, let Mary talk about <unk>.
<unk> and <unk> and what we're doing there you're beginning to sound a little bit like Dave Lawler.
Who runs that business, so who's always looking for more capital, but we'll take that question.
And on the on the plans that we've announced.
You will have seen.
Many of these things have.
I have been in place many.
Have been put in place over the last several months as the government has.
<unk> rolled out its policies supporting the drive on electrification, that's what's allowed us to commit to 1 billion pounds in electrification.
Through this decade and the government has just published its energy security strategy for the U K and I think we can expect to see.
Further.
Investments coming.
Over the coming months from BP in support of that strategy. So I would say watch this space on that all within that you should not expect to see our overall capital frame for BP.
<unk> on your question on Russia.
I will unfortunately.
Unfortunately say the same thing to you as I say to everyone else when it comes to commercial processes. We don't comment we have a policy and are commenting.
We're not making an exception for.
This particular case of Russia. This morning will come back to you and update you.
Once we know more Murray on bps. Please be PX, Chris we have increased the amount of investment going in last year over last year Youll remember, we spent around $1 billion. This year, we're spending somewhere between one six and $1 $7 billion.
We'll see how we go through the year, our focus inside the Permian is in building out too big gathering systems. They should be up by the end of the year and at that stage, we will have the capacity to ramp up drilling more right. Now we don't have the capacity to ramp up drilling more in the Permian.
And then in Haynesville Eagle Ford with ourselves and with partner operated we're increasing announcement investment there I think we're up to nine rigs now so.
So yes, we are increasing the investment in there and it's all about doing it efficiently we don't want to ramp up to faster we've become inefficient and we want to make sure that we've got the facilities in place to ensure that we don't flare.
Methane as we go through the expansion in the Permian, So very happy that we're investing upwards to one six to $1 seven and we have plans further in 2023 and beyond to continue increasing cap.
Capex remember that we're trying to get a dividend out of bps, having bought the assets from BHP a few years ago. We're now trying to get our money back. So we're looking for a dividend out of that entity earn back to Ya understood understood and therefore, no change to your hedging policy that.
Thank.
Thank you Chris. Thank you. Thanks, Chris we'll take the next question from Alastair Syme at Citi Alastair.
Greg first question just on the guidance that you have out there is any reason why that guidance.
Wouldn't apply to all of them.
Environment, we're seeing quarter to date.
Yes.
Use that guidance into Q.
And then secondly on the low carbon specifically when we've seen another profit warning from.
Wouldn't develop it yesterday.
Just getting back to this point on inflation or it just seems it seems to me is are there some losses somewhere in the system all to you guys or the supply chain that is unable to pass on the increase in costs that were sitting in the supply chain. Thank you.
Alastair. Thank you I'll ask Larry to take the question around or a minimum I think rules of thumb and guidance on low carbon certainty.
On offshore wind in particular I think a.
Challenging marketplace on a on a number of dimensions, including four suppliers.
That sector.
A couple of things I would say number one we will only do projects that meet our guidance of 8% to 10%.
Returns.
We recently bid in a.
Around the license round in the United States and were unsuccessful.
And I hope you take that as a sign of disciplined we've got over five gigawatts net of offshore wind and BP today, that's up from zero about 18 months ago.
We're comfortable with the portfolio that we have we obviously want to grow that.
But we don't want to grow it at any cost or at all costs. So we are very disciplined and.
We will look at future.
Rounds in Holland in Norway in Japan, you will have seen the announcement with marubeni. So it's a case by case basis, they're all very very different containing very different upfront commitments and so on.
And we will do it on a case by case and that we can meet our returns we wont do it and then the second thing that I would say is that you are seeing cost increases in the sector.
We're seeing a re sharing I guess of or an opportunity to re share risk reward across the entire supply chain b piece should be well placed.
Do some of that we can hedge steel prices were a massive consumer of upstream steel in our upstream business. So these are the types of things that are IEC can do that others may have struggled to do and we're also seeing in some cases, a knock on impact on the.
Power prices, where power prices are going up.
To ensure that the investments remain economic as you would expect the market to do so yes.
Yes, some challenges out there in that sector.
With a desire of the world to do more.
There is the U K going up by 10 Gigawatts.
People, increasing hydrogen ambitions and so on.
There is a continuing need for this form of energy, we will do it and we will invest in it and bring our skills, but only do it where we can make.
The investment returns that we have promised the market. So hopefully that helps you Alastair and Murray guns and RMM guidance.
It's a bit tricky to figure out how to guide right now we haven't seen this level of RMM before in the past. So the rules of thumb would be a starting point things to think about <unk> as a very high gas prices as inputs into refineries are very high.
And market dislocations locally are very high so I think kind of start with the rules of thumb and then our aim off of it all I wish I could give you better guidance on that but we have not seen prices like this before so we'll have to learn with you as we move through <unk> and <unk> and understand how they work at these higher prices last comment there is a big area of tires ahead of us and we've got a cut.
<unk> and <unk> as well so that's something to consider.
Hope that helps.
Okay. Thanks Al will take the next question from <unk> <unk> of Goldman Sachs. Please.
And once again congratulations on the result.
I was wondering if you could give us an update on.
The four or five key projects that drive your growth over the next couple of years I'm thinking in particular of Mad Dog Tango, two and Trinidad and secondly, I was wondering if the revival of long term demand for LNG makes the next phase of two two more likely.
And especially given the need for long term contracts for project financing. Thank you.
Very good Mckellar, we might tag team. This one Murray maybe lead on the chances of our outlook for the next phase of <unk>, which is I guess only in imp.
Improved by today's price environment on the projects you have.
You mentioned the big ones.
Mad Dog phase.
Phase two.
<unk> is still doing well actually on location I think all of the subsidy is connected now we've had some real challenges out there with loop currents, which happened in the Gulf of Mexico. So our.
First and most important job is safety of that operation and the team has done that.
Exceptionally well and.
All the wells that we need or pre drilled.
In fact, a couple of extra.
So we're very excited about that project, starting up and it will start up by the end of this year.
Cassia compression in Trinidad will also.
Chart up by the end of the year as well.
<unk> six in India.
Pleading that phase of development there.
So we're excited about that and then.
Talk to and Teng.
Tango expansion in Indonesia talk to and in West Africa.
Had some major impacts from Covid there. The teams have been doing I think if you don't mind me, saying some heroic.
<unk> and keeping those.
<unk> growing and Tango for example, we have over 10000 people.
Over seven or eight hours from Jakarta.
And the team has been doing an exceptional job of managing with Covid we.
We'd hope for those projects both of those to startup by the end of next year, but a lot of it depends on the Covid.
Covid evolves, particularly with ESPN, so in China are being completed in China.
For for talk too so.
That's a little bit around the progress of those projects, but all in all in pretty good shape and Murray you want to add anything to that or comment on the.
Next phases, yes, nothing to add to that and then talk to you next phases Makayla as you say a better environment environment for it now we're pleased with the progress on tour too and looking to expand that.
It will just take completion of commercial negotiations with the country and with partners and suppliers to get there.
I had the chance to meet with the Finance Minister Senegal, a few weeks ago here in St. James.
And things are feeling.
Positive right now so we're looking forward to hopefully sanctioning phase II.
Sure.
And we should also add mackellar would it be PX the liquids growth from <unk> this year and in the coming years, while not a major project will also be.
A real had or two.
Those projects, we just talked about so thank you Kelly.
Thanks, Matt Gili will take the next question from Jacamar Romeo from Jefferies Jacqueline.
Thank you and good morning first question first question is I noticed that.
Youll renewable hopper.
<unk> fell from 17 Gigawatts to 12 now.
That's 1.8 moved into developed.
<unk> pipeline buckets, just wondering sort of you kind of reconcile what happened to the.
The remaining projects safety, if that's a reflection of the higher cost pressure youre seeing or whether it's sort of already an impact of Ah I and you are.
Looking at your bidding opportunities there.
Second question is around the potential divestment of <unk>.
They're also mistake, she can talk a little bit about.
And what what.
While you are looking at to use potential proceeds from the divestments if.
They would be reinvested in a in more of it in the upstream side of the business of where they could be.
<unk> into accelerating the lower comp growth or if it could there could be a return to shareholders.
Product and the use of proceeds there would be helpful. Thank you Giacomo Thank you.
On the proceeds from the commercial process that we are.
Commenting on I think again, we will just let's leave that until we have something further to say on that commercial process. If that's okay, I think our financial frame.
It's very clear and hopefully.
It lays that out on the renewable hopper.
Hoppers should should grow and should should shrink that's the nature of our hopper.
So I think you've seen it fall is probably not the best measure in many ways. The pipeline is probably a much better measure.
Why has it fallen because we haven't we've chosen not to do things and we've chosen not to do things because you're right.
Is running a very very tight rule over things and has already kicked back some proposals, which we think is a very positive thing. So she is doing exactly what we want her to do which is yes, we want to.
Lean in and accelerate but we only want to do so if we can.
Make the returns that we promised and that's why we've hired her so partly because of and he is a rule that she is running over things and obviously all because we don't believe that we can make make the returns that we have promised you all so it's a combination of both and.
That's all I would say on that so thank you for noticing and thank you for the questions.
Okay. Thanks, very much and we will take the final question from Andre Patrick Hummel, UBS, thanks for being patient Henri.
Yes, I wanted to thank you for taking my question just a couple of real quick one on the gas low carbon production, we took the guidance for the year.
Southern production expecting broadly flat. This is slightly lower previously can you comment on what's driving the change and then secondly, whether we could see further.
The improvement as you go Q to maximize gas production.
Henri Thank you I'll, let Mary take that question, yes, just a little bit less base decline than we thought we'd see inside Trinidad.
It's why we've updated that guidance.
Very good on <unk>, Thank you for being patient and and back to you Craig.
Yes, that's the end of all the questions. Thanks, everybody for keeping the questions tight. Thanks for listening, let me handover burnage back to you for some closing comments very good well. Thank you everyone. Thank you for your time, just a few things to close.
For for US here at BP, the role of an integrated energy company.
Has never been clearer.
Clearer in many ways than it is today and the role of an integrated energy company is to solve the energy trilemma of providing the world with a cleaner reliable and affordable energy that means providing the world with the hydrocarbons that it needs today with lower emissions and at the same time investing in accelerating.
The energy transition and that's what we're doing.
The second thing I would say is that delivery is our focus.
We've set our direction, we've done or change.
It's all about delivery inside our company and I Hope you can see that.
In the first quarter results today with liability being strong.
With that first quarter inconvenience being strong in the first quarter basis.
With trading being strong so delivery is what it's all about we are doing what we said we would do which is to perform while transforming performing for our owners today and at.
At the same time transforming the company for Tomorrow, We're now focused next.
Next up with the annual General meeting on the 12th EMEA. It's the first time that we've been able to do this in person since Aberdeen of 2019, we look forward to meeting.
Meeting some of you welcoming you there and we look forward to your support of the board's recommendations on the resolutions that have been put forward and with that we appreciate your interest and we leave everybody to it. So thanks very much everybody take care.