Q3 2023 BP PLC Earnings Call
Speaker 1: Ross, Chief Executive Officer, and Kate Thompson, Chief Financial Officer.
And Kate Thompson, Chief Financial Officer.
Craig Marshall: Ross, Chief Executive Officer, and Kate Thomson, Chief Financial Officer. Before we begin today, let me draw your attention to our cautionary statement. During today's presentation, we will make forward-looking statements that refer to our estimates, plans, and expectations. Actual results and outcomes could differ materially due to the fact as we note on this slide and in our UK and SEC filings. Please refer to our annual report, stock exchange announcement, and SEC filings for more details. These documents are available on our website.
Before we begin today, let me draw your attention to our cautionary statement.
Speaker 1: Before we begin today, let me draw your attention to our cautionary states.
During today's presentation, we will make forward looking statements that refer to our estimates plans and expectations.
Speaker 1: During today's presentation, we will make forward-looking statements that refer to our estimates, plans, and expectations.
Actual results and outcomes could differ materially due to factors. We note on this slide and in our UK and SEC filings.
Speaker 1: Actual results and outcomes could differ materially due to the factors we note on this slide and in our UK and SEC filing.
Please refer to our annual report stock exchange announcement and SEC filings for more details. These documents are available on our website let.
Speaker 2: Please refer to our annual report, stock exchange announcement, and SEC filings for more details. These documents are available on our website. Let me now hand over to Murray. Thanks, Craig. Good morning, everyone. Thanks for joining us. We hosted our investor update in Denver a few weeks ago, focused on our oil, gas, and bio-
Let me now handover tomorrow.
Murray Auchincloss: Let me hand over to Murray. Thanks, Craig.
Thanks, Greg Good morning, everyone. Thanks for joining us.
Murray Auchincloss: Good morning, everyone. Thanks for joining us.
We hosted our Investor update in Denver, a few weeks ago focused on our oil gas and biogas businesses.
Murray Auchincloss: We hosted our investor update in Denver a few weeks ago, focused on our oil, gas, and we had three core messages that I want to re-emphasize today. First, our strategy, transforming to an integrated energy company, is unchanged. Second, we are focused on delivering our strategy safely, quarter on quarter, to meet our 2025 targets and 2038s.
Including a site visit to be PX as Permian operation.
We had three core messages that I want to reemphasize today.
First our strategy transforming to an integrated energy company is unchanged.
Speaker 2: First, our strategy, transforming to an integrated energy company, is unchanged.
Second we are focused on delivering our strategy safely CT.
Quarter on quarter to meet our 2025 targets in 'twenty 30 aims.
Speaker 2: quarter on quarter to meet our 2025 targets and 2030 aims. And third, we are focused
And third we are focused on growing long term shareholder value. We continue to expect to grow EBITDA at a 2025 and aimed to keep growing to 2030.
Murray Auchincloss: And third, we are focused on growing long-term shareholder value. We continue to expect to grow EBITDA to 2025, and aim to keep growing to 2030, all while delivering compelling shareholder distributions. Earlier this month, we said we expect 2030 adjusted EBITDA aims from resilient hydrocarbons and group will be around two billion higher than BP's previous targets to a range of $41 to $44 billion and $53 to $58 billion respectively. Underpinning this increase, we presented what we believe is a high-quality, distinctive oil and gas portfolio, and a leading delivery model enabling efficient execution. We expect to grow EBITDA from oil and gas to 2025, sustain it at that level through 2030, with the capacity to sustain well into the next decade, and we believe there's more to come.
Speaker 2: continue to expect to grow Abba.da 2025, and aim to keep growing to 2030. All while delivering compelling shareholder distribution.
All while delivering compelling shareholder distributions.
Earlier. This month, we said, we expect 2030 adjusted EBITA aims for Brazilian hydrocarbons and group will be around 2 billion higher in bp's previous targets to a range of $41 billion to $44 billion.
Speaker 2: Earlier this month, we said we expect 2030 adjusted debit aims from resilient hydrocarbons and group will be around two billion higher than BP's previous targets to a range of forty one to forty four billion dollars and fifty three to fifty eight billion respect.
And 53 to 58 billion respectively.
Underpinning this increase we presented what we believe is a high quality distinctive oil and gas portfolio.
Speaker 2: Underpinning this increase, we presented what we believe is a high quality, distinctive oil and gas portfolio.
And a leading delivery model, enabling efficient execution.
Speaker 2: and a leading delivery model enabling efficient execution.
We expect to grow EBITDA from oil and gas to 2025.
Speaker 2: We expect to grow EBITDA from oil and gas to 2025, sustain it at that level through 2030, with the capacity to sustain well into the next.
Sustain it at that level through 2030.
With the capacity to sustain well into the next decade, and we believe theres more to come.
This slide summarizes the key message from the event and if you haven't seen the materials. We encourage you to take a look on V. P Dot com.
Speaker 2: This slide summarizes the key message from the event. And if you haven't seen the materials, we encourage you to take a look on BP.com. Turning then to our third quarter, 2023 results. For the third quarter.
Murray Auchincloss: This slide summarizes the key message from the event, and if you haven't seen the materials, we encourage you to take a look on BP.com.
Turning then to our third quarter 2023 results.
Murray Auchincloss: Turning then to our third quarter, 2023 results. For the third quarter, we delivered strong operational performance, with upstream plant reliability and refining availability at around 96% year to date. This came on top of 3% volume growth here to date, and a 6% decline in unit production costs.
For the third quarter, we delivered strong operational performance with upstream plant reliability and refining availability at around 96% year to date.
Speaker 2: with upstream plant reliability and refining availability at around 96% year to date.
This came on top of a 3% volume growth year to date, and a 6% decline in unit production costs.
Speaker 2: This came on top of 3% volume growth here to date and a 6% decline in unit production costs.
Underlying earnings were $3 $3 billion, and we delivered robust operating cash flow of $8 $7 billion, including a working capital release of $2 billion.
Speaker 2: underlying earnings were $3.3 billion and we delivered robust operating cash flow of $8.7 billion billion, including a working capital release of $2 billion.
Murray Auchincloss: Underlying earnings were $3.3 billion, and we delivered robust operating cash flow of $8.7 billion, including a working capital release of $2 billion. We are executing against our discipline financial frame.
We are executing against our disciplined financial frame.
Today, we have announced a further 1.5 billion share buyback. This reflects the confidence in our performance.
Speaker 2: Today we have announced a further 1.5 billion share buyback. This reflects the confidence in our performance and the outlook for cash flow.
Murray Auchincloss: Today, we have announced a further 1.5 billion share buyback. This reflects the confidence in our performance and the outlook for cash flow.
And the outlook for cash flow.
Turning to strategic delivery, where we see continued momentum.
Murray Auchincloss: Turning to strategic delivery, where we see continued momentum. In oil and gas, we started up the Tangu expansion project in Indonesia, our third major project this year. In August, we started up Bingo, Bpx's second major processing facility in the Permian, doubling our oil and gas processing capacity in the basin, and we received regulatory approval for Merlock, a two well oil and gas redevelopment of the Merlock SCUF field in the north.
In oil and gas we started up the tango expansion project in Indonesia, Our third major project. This year in August we started up pingo <unk> second major processing facility in the Permian doubling our oil and gas processing capacity in the basin.
Speaker 2: In oil and gas, we started up the Tangu expansion project in Indonesia, our third major project this year. In August , we started up Bingo, Bpx's second major processing facility in the Permian, doubling our oil and gas processing capacity in the basin. And we received regulatory approval for Murlock, a two well oil and gas redevelopment of the Marnax-Skua field in the North.
And we received regulatory approval for Murloc, a two well oil and gas redevelopment of the <unk> field in the North Sea.
Murray Auchincloss: C. In LNG, we signed a long-term agreement with OMB to supply up to 1 million tons per annum of LNG for 10 years, from 2026, and we secured our third long-term LNG off-take contract from Wood Fiber, where we are the sole off-taker of almost 2 million tons per annum from 2027. Turning to our transition growth engines, in bioenergy, we are scaling up our biogas business, Arcaya Energy, with the first Arcaya modular design, renewable natural gas plant, now online in Madora, Indiana.
In LNG, we signed a long term agreement with OMB to supply up to 1 million tons per annum of LNG for 10 years from 2026 and we.
Speaker 2: In LNG, we signed a long-term agreement with OMB to supply up to 1 million tons per annum of LNG for 10 years from 2026. And we secured our third long-term LNG off-take contract from Wood Fiber, where we are the sole off-taker of almost 2 million tons per annum from 2027.
We secured our third long term LNG off take contract from wood fiber, where we are the sole off taker of almost 2 million tonnes per annum from 2027.
Turning to our transition growth engines.
Speaker 2: Turning to our transition growth engines. In bioenergy, we are scaling up our biogas business, Arcaya Energy, with the first Arcaya modular design, Renewable Natural Gas Plant, now online in Madora, Indiana. This underpins our confidence in our expansion plans going.
In bioenergy, we are scaling up our biogas business archaea energy.
With the first RK, a modular design renewable natural gas plant now.
Now online and Madora, Indiana, this underpins our confidence in our expansion plans going forward.
Murray Auchincloss: This underpins our confidence in our expansion plans going forward. In EV charging, we continue to accelerate our EV charging ambition across key markets. We have announced an agreement with Tesla for the future purchase of 100 million dollars of ultra-fast chargers in the US. This is part of our approved 500 million dollar EV charging infrastructure investment in the US previously announced. In the UK, BP Pulse, together with partners, launched the country's largest public EV charging hub at the NEC campus in Birmingham, enabling 180 EVs to charge simultaneously.
And EV charging we continued to accelerate our EV charging ambition across key markets.
Speaker 2: In EV charging, we continue to accelerate our EV charging ambition across K-Mark.
We have announced an agreement with Tesla for the future purchase of $100 million of ultrafast Chargers in the U S.
Speaker 2: We have announced an agreement with Tesla for the future purchase of $100 million of ultra-fast chargers in the US.
This is part of our approved $500 million EV charging infrastructure investment in the U S previously announced.
Speaker 2: This is part of our approved $500 million EV Charging Infrastructure Investment in the US previously in it.
In the U K BP pulse together with partners launched the country's largest public EV charging hub at the empty seat campus in Birmingham, enabling 180 evs to charge simultaneously.
Speaker 2: In the UK, BP Pulse, together with partners, launched the country's largest public EV charging hub at the NEC campus in Birmingham, enabling 180 EVs to charge simultaneous.
And convenience travel centers of America continues to integrate well and in the first nine months of 2023, excluding Ta we delivered around 8% year on year growth in convenience gross margin and we.
Murray Auchincloss: In convenience, travel centers of America continues to integrate well, and in the first nine months of 2023, excluding TA, we delivered around 8% year on your growth in convenience gross margin, and we extended our successful strategic convenience agreement with Aachen in Poland, with plans to add more than 100 stores to our network by the end of 2025. In Hydrogen, the Midwest Alliance for Clean Hydrogen, of which BP is a member, announced it has been selected by the US Department of Energy to develop a regional clean hydrogen hub in the US Midwest.
Speaker 2: In convenience, travel centers of America continues to integrate well. And in the first nine months of 2023, excluding TA, we delivered around 8% year on your growth in convenience, gross margin. And we extended our successful strategic convenience agreement with Aachen in Poland with plans to add more than 100 stores to our network by the end of 2024.
We extended our successful strategic convenience agreement with Auken and Poland with plans to add more than 100 stores to our network by the end of 2025.
And hydrogen the Midwest Alliance for clean hydrogen.
Speaker 2: In hydrogen, the Midwest Alliance for Clean Hydrogen, of which BP is a member, announced it has been selected by the US Department of Energy to develop a regional clean hydrogen hub in the US Midwest.
Of which BP has a member announced it has been selected by the U S Department of energy to develop a regional clean hydrogen hub in the U S. Midwest.
And finally in renewables and power we have increased our pipeline to 43.9 Gigawatts with the addition of four Gigawatts from two offshore projects in Germany recently awarded.
Murray Auchincloss: And finally, in renewables and power, we have increased our pipeline to 43.9 gigawatts, with the addition of four gigawatts from two offshore projects in Germany recently awarded.
Speaker 2: And finally, in renewables and power, we have increased our pipeline to 43.9 gigawatts with the addition of four gigawatts from two offshore projects in Germany recently.
Now, let me hand over to Kate to take you through our third quarter results in more detail.
Speaker 2: Now, let me hand over to Kate to take you through our third quarter results in more details.
Kate Thomson: Now, let me hand over to Kate to take you through our third quarter results in more detail. Thanks, Mary, and good morning, everyone. It was great to meet a number of you in Denver recently.
Thanks, Mary and good morning, everyone.
Speaker 3: Thanks, Mary, and good morning, everyone. It was great to meet a number of you in Denver recently.
It was great to me a number of you in Denver recently.
For the third quarter, we reported an underlying replacement cost profit of $3 $3 billion compared to 2.6 billion last quarter.
Kate Thomson: For the third quarter, we reported an underlying replacement cost profit of $3.3 billion, compared to $2.6 billion last quarter. Compared to the second quarter, in gas and low carbon energy, the result reflects a weak gas marketing and trading result following the exceptional performance in the first half of 2023. In oil production and operations, the result reflects higher oil and gas realizations, despite the impact of price lags on Gulf of Mexico and UAE realizations and higher production.
Speaker 3: For the third quarter, we reported an underlying replacement cost profit of $3.3 billion compared to $2.6 billion last quarter.
Compared to the second quarter.
Speaker 3: Compared to the second quarter, in gas and low carbon energy, the result reflects a weak gas marketing and trading result following the exceptional performance in the first half of 2023.
And gas and low carbon energy. The result reflects a weak gas marketing and trading result, following the exceptional performance in the first half of 2023.
And oil production and operations. The result reflects higher oil and gas realizations. Despite the impact of price lags on Gulf of Mexico, and UAE realizations and higher production.
Speaker 3: In all production and operations, the result reflects higher oil and gas realizations despite the impact of price lags on Gulf of Mexico and UAE realizations and higher production.
And then customers and products. The products result reflects a higher realized refining margin a lower level of turnaround activity and a very strong oil trading result.
Kate Thomson: And in customers and products, the product's result reflects a higher realized refining margin, a lower level of turnaround activity, and a very strong oil trading result. In our customers' business, we continue to show strong momentum in convenience and aviation, benefiting from seasonally higher fuel volumes, partially offset by lower margins given the rising cost of supply.
Speaker 3: And in customers and products, the product's result reflects a higher realized refining margin, a lower level of turnaround activity, and a very strong oil trading result.
And our customers business, we continue to show strong momentum inconvenience and aviation benefiting from seasonally higher fuel volumes, partially offset by lower margins given the rising cost of supply.
Speaker 3: In our customers business, we continue to show strong momentum in convenience and aviation, benefiting from seasonally higher fuel volumes partially offset by lower margins, given the rising cost of supply.
Turning to cash flow and the balance sheet.
Kate Thomson: Turning to cash flow and the balance sheet. Jean-Marie Operating cashflow was $8.7 billion in the third quarter. This includes the working capital release of $2 billion after adjusting for inventory holding gains and fair value accounting effects and other adjusting items. Capital expenditure was $3.6 billion, including in organic expenditure, net of adjustments. During the quarter we repurchased $2 billion of shares. The 1.5 billion program announced the second quarter 2023 results was completed on 27 October, surplus cashflow was $3.1 billion, a net that reduced by $1.3 billion to $22.3 billion.
Operating cash flow was $8 $7 billion in the third quarter.
Speaker 3: Operating cashflow was $8.7 billion in the third quarter.
This includes a working capital release of $2 billion.
Speaker 3: This includes the working capital release of $2 billion after adjusting for inventory holding gains and fair value accounting effects and other adjusting items.
After adjusting for inventory holding gains and fair value accounting effects and other adjusting items.
Capital expenditure was $3 $6 billion, including inorganic expenditure net of adjustments.
Speaker 3: Capital expenditure was $3.6 billion, including an organic expenditure net of adjustment.
During the quarter, we repurchased $2 billion of shares.
Speaker 3: During the quarter, we repurchased $2 billion of shares. The 1.5 billion programme announced the second quarter 2023 results was completed on 27 October .
One 5 billion program announced its second quarter 2023 results was completed on the 27th of October.
Surplus cash flow was $3 $1 billion.
Speaker 3: surplus cash flow was $3.1 billion, a net debt reduced by $1.3 billion to $22.3 billion.
Net debt reduced by $1 3 billion to $22 $3 billion.
Yes.
Our disciplined financial frame remains unchanged with our focus on five key priorities.
Kate Thomson: Our disciplined financial frame remains unchanged with a focus on five key priorities. A resilient dividend remains our first priority. We have today announced a dividend of 7.27 cents per ordinary share for the third quarter. We remain committed to maintaining a strong investment grade credit rating and continue to target progress within the A range. We aren't targeting a double A rating. We are investing with discipline in our transition growth engines and in our oil, gas and refining businesses.
Speaker 3: Our disciplined financial frame remains unchanged with a focus on five key priorities.
Our resilient dividend remains our first priority, we have today announced a dividend of 7.27 cents per ordinary share for the third quarter.
Speaker 3: A resilient dividend remains our first priority. We have today announced a dividend of $0.27 per ordinary share for the third quarter.
We remain committed to maintaining a strong investment grade credit rating and continue to target progress within the a range.
Speaker 3: We remain committed to maintaining a strong investment grade credit rating and continue to target progress within the A range. We aren't targeting a
We are targeting a double a rating.
We are investing with discipline in our transition growth engines and in our oil gas and refining businesses.
Speaker 3: We are investing with discipline in our transition growth engines and in our oil, gas and refining businesses.
Capital expenditure guidance for 2023, including an organics is now expected to be around $16 billion.
Speaker 3: Our capital expenditure guidance for 2023, including in organics, is now expected to be around 16 billion dollars.
Kate Thomson: Our capital expenditure guidance for 2023, including in organics, is now expected to be around $16 billion. And we're committed to allocating 60% of 2023 surplus cashflow to buybacks, subject to maintaining a strong investment grade credit rating. Finally, we intend to execute a buyback of $1.5 billion prior to reporting fourth quarter results. This reflects the confidence we have in our performance and the outlook for cashflow.
And we're committed to allocating 60% of 2023 surplus cashflow to buybacks subject to maintaining a strong investment grade credit rating.
Speaker 3: and we're committed to allocating 60% of 2023 surplus cash flow to buybacks, subject to maintaining a strong investment grade credit rating.
Finally, we intend to execute the buyback of $1.5 billion prior to reporting fourth quarter results.
Speaker 3: Finally, we intend to execute a buyback of $1.5 billion prior to reporting fourth quarter results.
This reflects the confidence they have in our performance and the outlook for cash flow.
Speaker 3: This reflects the confidence we have in our performance and the outlook for cash flow. I'll now hand back to Murray for his closing remarks.
I'll now hand back to Mary for his closing remarks.
Murray Auchincloss: Our now hand back to Murray for his closing remarks. Thanks, Kate.
Thanks, Kate let me wrap up.
We are growing the value of V P.
Murray Auchincloss: Let me wrap up. We are growing the value of BP, investing in today's oil and gas system and investing in our transition growth engines. We are firmly focused on delivering our strategy safely with discipline. And in doing so, quarter on quarter can meet our 2025 targets and 2030s. All in service of growing long-term shareholder value.
Investing in today's oil and gas system and investing in our transition growth engines.
Speaker 2: investing in today's oil and gas system, and investing in our transition growth.
We are firmly focused on delivering our strategy safely with discipline.
Speaker 2: We are firmly focused on delivering our strategy safely with this.
And in doing so quarter on quarter to meet our 2025 targets and 2030 aims.
Speaker 2: and in doing so, quarter-on-quarter, to meet our 2025 targets and 2030 aims. All in service.
All in service of growing long term shareholder value.