Q1 2024 BP PLC Earnings Call
Welcome to Bp's first quarter 2024 results presentation I'm.
I'm here today, with Moroccan Claus, Chief Executive Officer, and Kate Thompson, Chief Financial Officer.
In this presentation, we make forward looking statements that refer to our estimates plans and expectations.
Actual results and outcomes could differ materially due to a range of factors noted on this slide and in our U K and S SEC filings.
Please refer to our annual report stock exchange announcement, and SEC filings for more details.
These documents are available on our website.
I'll now hand over to Murray Hello, everyone and welcome.
This quarter, we delivered resilient financial performance, despite our unplanned outage at our Whiting refinery.
Murray: Adjusted EBITDA was $10 $3 billion.
Murray: Underlying earnings were $2 $7 million and upstream production grew by 2% year over year to 2.4 million barrels of oil equivalent per day.
Murray: And we continue to make strategic progress safely starting up the Azeri Central East project in the Caspian Sea, our first major project in 2024.
Murray: In the Gulf of Mexico. The final investment decision has been made on the Atlantis drill center expansion.
Murray: N P. P X, we started up our third central processing facility Checkmate.
Murray: And biogas, we brought our largest RK a modular design renewable natural gas plant online in Kansas City.
Murray: And we're currently commissioning five plants.
Murray: And last week, our JV Xul announced a 42.5% farm in into an exploration block in the Oran G basin offshore Namibia.
Murray: All of this is underpinned by our disciplined financial frame, including today announcing a further 1.75 billion of share buybacks looking ahead, our destination from IOC to IC remains unchanged.
Murray: But we are delivering is a safer simpler more focused and higher value company.
Murray: We have six clear priorities and three weeks ago, we announced some organizational changes to simplify the business.
Murray: We continue this today with the announcement of a target to deliver at least 2 billion of cash cost savings by the end of 2026.
Murray: I will cover this in more detail shortly but let's first hear from Kate on our first quarter results.
Katherine Thomson: Thanks, Larry and Hello, everyone.
Katherine Thomson: Looking at segment performance in the first quarter.
Katherine Thomson: The gas and low carbon energy underlying financial result was around $100 million lower than the previous quarter, reflecting lower realization, including declines in non Henry hub natural gas market prices and foreign exchange losses on Egyptian pound balances.
Katherine Thomson: This was partially offset by lower exploration write offs.
Katherine Thomson: Gas marketing and trading result was strong.
Katherine Thomson: And all production and operations. The underlying result was around $400 million lower than the previous quarter.
Katherine Thomson: Electing lower realization largely driven by the unfavorable price lag impacts in the Gulf of Mexico, and UAE and declines in non Henry hub natural gas market prices, partially offset by higher production.
Katherine Thomson: And customers and products. The underlying result was around $500 million higher than the previous quarter.
Katherine Thomson: Looking at the businesses.
Katherine Thomson: And customers the underlying profit was 370 million around $500 million lower than the previous quarter.
Katherine Thomson: The result reflects significantly weaker fuels margins seasonally love all in and the absence of one off positive effects that benefited the prior quarter, partly offset by lower costs.
Katherine Thomson: And part of it's the underlying profit was $920 million around $1 billion higher compared to the previous quarter.
Katherine Thomson: The result reflects higher realized refining margins, a significantly lower level of turnaround activity and higher commercial optimization.
Katherine Thomson: Partially offset by the impacts of the Whiting refinery outage.
Katherine Thomson: The oil trading contribution was strong following a weak result in the fourth quarter.
Katherine Thomson: Collectively these factors, we reported a group underlying replacement cost profit before interest and taxes of $6 billion.
Katherine Thomson: After interest and taxes, we reported group underlying replacement cost profit of $2 $7 billion.
Katherine Thomson: Our underlying effective tax rate increased in the first quarter to 43% largely due to some non deductible foreign exchange impacts and for the full year. We continue to expect the underlying effective tax rate to be around 40%.
Katherine Thomson: We recorded net adverse adjusting items of $1.1 billion after tax primarily related to impairments due to regulatory and portfolio changes.
Katherine Thomson: We also recorded inventory holding gains of 700 million during the quarter.
Katherine Thomson: Taking these items into account and I are first basis, we reported a headline profit of $2 $3 billion.
Katherine Thomson: Turning to cash flow and the balance sheet operating cash flow was $5 billion that was around $4 4 billion lower than the previous quarter, largely reflecting a working capital build of $2 4 billion in the first quarter compared to a release in the previous quarter.
Katherine Thomson: The working capital build was driven by expected seasonally higher inventory.
Katherine Thomson: And the usual timing effects of payments, including annual incentive payments to employees and.
Katherine Thomson: In addition to the impact of the price environment.
Katherine Thomson: The build in working capital contributed to a $3 1 billion increase in net debt to $24 billion at the end of the first quarter.
Katherine Thomson: Looking forward and subject to the price environment and they want $1 billion of schedule payments in the second quarter relating to the Gulf of Mexico oil spill settlement. We had spent most of this quarters bill to be reversed by the end of the third quarter.
Katherine Thomson: Turning to the financial frame on five priorities are unchanged.
Katherine Thomson: Our first priority remains a resilient dividend accommodated within a balance point of $40 per barrel, Brent $11 R. M M and $3 Henry hub.
Katherine Thomson: And as you saw this morning, we have announced a dividend of 7.27 cents per ordinary share for the first quarter.
Katherine Thomson: Our second priority is a strong investment grade credit rating, we're targeting to further progress our credit metrics within the a grade credit range through cycle, we aren't targeting a double a credit rating and the March Moody's upgraded they pay to Avon.
Katherine Thomson: Third and fourth we plan to invest with discipline and driven by value, including delivering returns consistent with our hurdle rates across our transition growth engines, and our oil gas and refining businesses.
Katherine Thomson: We continue to expect capital expenditure to be around $16 billion in 'twenty 'twenty four but we now expect the phasing to be spirit split broadly evenly between the first half in the second half.
Katherine Thomson: And today, we announced 1.75 billion of share buybacks part of our commitment to announce three $5 billion for the first half of 2024.
Katherine Thomson: There's no change to the share buyback guidance, we issued in February which was $3 5 billion for the first half and at least 14 billion for the two years to the end of 2025.
Katherine Thomson: Looking ahead to the second quarter.
Katherine Thomson: We expect upstream production to be slightly lower compared to the first quarter.
Katherine Thomson: And customers, we expect seasonally higher volumes and fuel margins to remain sensitive to movements in the cost of supply.
Katherine Thomson: And products, we expect realized refining margins to be impacted by narrower North America heavy crude oil differentials and to remain sensitive to relative movements in product cracks.
Katherine Thomson: In addition, we expect the absence of the first quarter plant wide power outage at Whiting refinery to be partly offset by a higher level of turnaround activity.
Katherine Thomson: On a full year 2020 full guidance, we continue to expect full year production to be slightly higher than last year and other than the slight change to the 'twenty 'twenty four capex phasing and I mentioned earlier, there's no other change to what we laid out in February.
Tomorrow: With that I'll hand back tomorrow. Thanks Kipp.
Speaker Change: As I said earlier, our focus is on safety performance and the drive to 2025 key lever. We're focused on is safely driving further efficiency into our business.
Speaker Change: How we work and the cost base associated with that.
Speaker Change: All of which underpins the 2 billion of targeted cash cost reductions we announced today.
Speaker Change: As you can see on this slide B piece reported costs in 'twenty twenty-three or around $42 billion.
Speaker Change: Adjusting for the variable costs much of which are volume driven as well as adjusting items leaves, what we view as our controllable cash cost base.
Speaker Change: $22 $6 billion.
Speaker Change: And while we've seen growth in our total reported costs with rising energy prices growth in the costs as we invest to grow our T Gs both organic and inorganic.
Speaker Change: And increased tariff costs in some of our businesses, we see further opportunity to drive reductions in this cash cost base.
Speaker Change: You may recall that in 2020, we targeted around 3 billion of cash cost reductions, which we delivered through 2022.
Speaker Change: Since then cash costs have increased by around 8% versus 2019, although from a very different portfolio mix.
Speaker Change: As we look forward. We've now identified the next 2 billion of cash cost reductions or around 10% of our cash cost that we expect to now deliver.
Speaker Change: These reductions are expected to come from all parts of the business as we focus our portfolio.
Speaker Change: Drive continued digital transformation into the business.
Speaker Change: Continue work with our suppliers to take out waste.
Speaker Change: And take advantage of global capability hubs.
Speaker Change: We are already in action.
Speaker Change: We have a significant number of individual transformation programs in progress were confident we will be able to deliver these reductions.
Speaker Change: We currently expect the bulk of the savings to be realized in 2026 with some of these savings expected to have associated restructuring charges.
Speaker Change: As we progress we will provide further updates.
Speaker Change: In conclusion, our six priorities are unchanged and where that action.
Speaker Change: Safety remains our number one priority.
Speaker Change: We are focused on driving performance supported by our six priorities.
Speaker Change: And we remain confident in delivering on the drive to 2025 at our target of 46 to 49 billion of Avatar and 2025.
Speaker Change: Looking forward the price environment remains unpredictable.
Speaker Change: As we have seen with volatility in global gas prices over the past few years.
Speaker Change: So we're focused on what we do control draw.
Speaker Change: Driving further operational momentum building on its year up strong delivery in 2023 and growing EBITA across three key areas of our business first in oil and gas we expect the startup of a further five new major oil and gas projects.
Speaker Change: In addition, we expect to be PX 20, twenty-five production to grow by 30% to 40% compared to 2022 levels and in LNG, our target of 25 M. T. P. A by 2025 up from 23 M. T. P. A in 2023 is well underpinned.
Speaker Change: Second in refining we expect underlying performance improvement improved realized margin capture and the return to a more normal turnaround schedule in 2025.
Speaker Change: And third and our T. G ease we expect to deliver three to 4 billion of EBITA by 2025 growing from around 1 billion in 2023, we see positive momentum in bioenergy and our K is on track to bring online in 15 to 20, new plants per year in each of 'twenty 'twenty, four and 'twenty 'twenty five.
Speaker Change: In convenience, we are focused on the rollout of strategic convenient sites integrating travel centers of America, and realizing deal synergies I expect to grow EBITDA to around $800 million in 2025 with convenience a significant contributor.
Speaker Change: And in EV charging we plan to grow energy sales across our four key markets and expect to be EBITDA breakeven by 2025.
Speaker Change: In summary, our direction remains unchanged from IOC to IEC.
Speaker Change: We are investing in today's energy system, and helping to build tomorrow's all in service of growing the value of BP.
Speaker Change: We look forward to updating you as we move through the year and thank you for watching this video.
Speaker Change: [music].
Speaker Change: Sure.