BP p.l.c. Q4 FY2024 earnings call

• Strategic progress: 10 new FIDs, access to Iraq and India, divestments in Trinidad, exited Empire Wind, formed JERA Nex bp, focused EV charging and hydrogen pipeline, acquired full ownership of bp bioenergy and Lightsource bp, announced sale of Gelsenkirchen refinery.
• Upstream: Production around 2.36 million bpd, up 2% with plant reliability >95%.
• Trading: Average 4% uplift to group ROACE over 5 years despite lack of volatility.
• Refining: Challenged by 1Q outage, margin environment, weak biofuels margins, and TA impact; focused on improvement plans.
• Distributions: Dividend per share grew 10%, $7B share buybacks including $1.75B announced today.

Upstream production was around 2.36 million barrels per day, up 2% this year with plant reliability above 95%. Trading delivered an average 4% uplift to group ROACE over the past 5 years. Refining had a difficult year with a widening outage in 1Q, challenging margin environment, weaker biofuels margins, and trucking recession impact on TA. Revenue contribution: Upstream production was a key segment, trading contributed to ROACE, refining faced challenges.

• Refining: Confident of improving to profitability by focusing on plant reliability, commercial optimization, cost agenda, and lower complexity TARs in 2025.
• Trading: Expect to continue track record of 4% uplift to group ROACE.
• Capital Markets Day: Comprehensive update in two weeks to reset strategy, drive performance, grow cash flow, returns, and shareholder value.
• Bioenergy: Progress with Archaea plants, 13 plants online, with continued growth expected.
• Gas area: Contemplating increasing rigs due to solid gas pricing and triple-digit plus returns in refracs in Eagle Ford.

• Refining: Industry-wide margin and pricing challenges, outage impact.
• U.S. tariffs: Uncertain impact on Whiting refining margins due to dynamic market flows.
• Arbitration: Uncertainty around Tortue venture arbitration affecting volume expectations.
• Sanctions: Impact of sanctions on Rosneft affecting divestment plans.

Q: With my one question, I'll focus on the refining and trading performance this quarter. It was another weak quarter, but you talked about improvement plans. So I just want to get a sense how confident are you, the issues you experienced in 2024 are now in the rearview mirror? And what more can be done to improve the profitability of that division? And maybe if you can give any early insights of how trading has performed during the first quarter, given we're almost halfway through.

A: Great. Thanks, Josh. You're right, it was a challenging year for refining. The industry in the basins in which we are operating were probably bottom of cycle for margin and pricing. So I think that's an industry-wide issue that we're a part of as well. But of course, we had the outage in 1Q in Whiting as well, an electrical fault that tripped the plant. In 4Q itself, reliability was fine across the portfolio. We, of course, had a massive turnaround at Whiting. It was a huge program. We replaced the coker tops, which is an incredible effort by the teams. And so that obviously dramatically impacted the results in 4Q. As we look forward, we are confident that we will continue to improve the business. Gordon can talk about this in a few weeks' time when we talk through what we're doing to improve the refining business. We're focused on four things. First of all, getting plant reliability back to that 96%, making sure that we don't have material trips. Turnarounds are going well. Maintenance is going well, but we have to stick to it and make sure we hit that 96%, and Gordon and the team are laser-beam focused on that. Out of that then comes the ability to commercially optimize. When you have outages, you can't commercially optimize. So we think between getting back to 96% and steady operations, that then lets us start to optimize and earn more money. The third thing I'd say is there's a strong cost agenda across all of CMP, and that will really start to take root in refining in 2025. And last, we will have a year of much lower complexity TARs in '25 than '24. That should all take us back to profitability. And I think we feel confident in that. And again, in two weeks' time, Gordon can take you through those plans. On trading, it was an average year, a 4% year. Despite the lack of volatility on the oil and refined products side, I think you'll have seen some of that reported out of competitors about how much -- how far down they were. So the teams did well to make sure that we continue to hit that track record that we've had over the past 5 years. Now looking forward, refining margins started the year very bad in January. They're starting to uptick now as we move into TAR season globally. I think the RMMs are up a bit, and we're starting to see some volatility. So I think that's probably all I'll say, Josh, but we are laser-beam focused on it. We know we need to do better, and we will. Thanks for the question.

Q: I just had a question on some of your recent upstream announcements. So your deal with ONGC and then also the redevelopment of Kirkuk. Can you perhaps talk a bit more about what you found attractive about those opportunities and then potentially the sort of returns you might see for those sorts of technical service contract type agreements?

A: Great, Peter. Thanks for the questions. Look, we've established a pretty strong track record in the Middle East and Far East to being able to help operators with late light developments. So as water starts to come into developments, as you have to develop tricky reservoirs, we've built a very, very strong reputation, started in Alaska, moved to [indiscernible] is a good example of it, et cetera. So we have a very strong track record in this, and that's what's enabling us to take advantage of these opportunities for direct access like in India and like in Iraq. And ONGC, it's a services contract. We're very pleased with it. We don't deploy cost or capital. Instead, we provide people and advice to drive stronger performance inside that business. I can't really talk about what the commercial returns are, but they're quite attractive for India, and they're quite attractive for us. We found a nice middle ground where both sides actually can do very well for each other if we can start to drive that production higher. And we believe, based on all the due diligence we've done that we can certainly help India with that. And then on Kirkuk, we're in the final throes of the negotiations now, 5 domes of oil, 20 billion barrels yet to produce, a competitive PSA agreement, competitive internationally. And of course, it's because of our track record inside the nation that we're able to help them there. So that -- we'll give you more on Kirkuk once we've finished off the negotiations and announce it. Let's see when the teams can get to completion on that. But we feel very excited about that, and it will be internationally competitive, and we look forward to telling you more about that. Hopefully, at Capital Markets Day, we can update you more on that.

Q: And firstly, thank you for the breakdown on the operating cost side, and it's good to see the sort of internal lens versus what we see. Just thinking about your strategy. It looks like you're going to be including a more capital-light approach and more JVs and things like that, like the JERA deal. As it relates to your cost reduction targets, are you able to say the sort of quantum of costs that will come off your balance sheet as part of the transactions that have already been agreed? Just so I can get a sense of the magnitude of that.

A: Yes. Biraj, thank you for the comment with regard to our cost disclosure. We have tried to help people by giving, I think, quite a lot more granularity and specificity than we have done previously. So I'm pleased that, that has worked for you so far. So let's see. With regards to the capital-light approach on renewables, I think for capital, let's leave that to Capital Markets Day. We'll update you comprehensively with regard to capital right across the portfolio at that point. And with regard to cash costs. So we have already been successful in reducing some of our cash costs through focusing our portfolio, which we talked about on previous quarterly results calls. It's part and parcel of the $750 million of structural reductions that we've delivered this year, which is great progress. And beyond that, we will just update you as we go. We will try and be as specific as we can quarter-on-quarter on the areas where we are delivering cost reductions and point out where they're coming from with regard to third-party supply chain or focusing the portfolio. So we will make sure we give you enough granularity on that going forward, too.