BP p.l.c.

Well, good morning, everyone. I'm Craig Marshall, BP's head of investor relations. And thanks for joining us today. I've got Bernard Murray and obviously myself here today. We've got a slightly extended presentation. In a moment, I'll hand over to Bernard to introduce and cover the full year highlights. And then to Murray, who will take you through our fourth quarter results. Then we'll turn to strategy, and Bernard and Murray will update you on the progress and financial frame. And then following that, we'll make sure we've got plenty of time for the questions, which I'm sure you'll all have. Before we begin, as usual, I'd like to draw your attention to the cautionary statement, which is included in the presentation slide deck. During today's presentation, we will make forward-looking statements, including those that refer to our estimates, plans, targets, aims, and expectations. Actual results and outcomes could differ materially due to these factors and those noted in our cautionary statement, as well as in our UK and SEC filings. please refer to those filings which are available on our website for more details. On that note, over to you, Bernard.

Great. Well, thanks, Craig. And good morning to everyone joining us on the phone and on the web. And of course, I'm also delighted that we're able to host a small audience here in person in St. James this morning. And that includes my leadership team. with the exception of Anya, who will join us on the 1st of March, which we're all very excited about, I have to say. We do have Joaquin here. Joaquin, stand up for a moment. Joaquin runs our gas and low carbon business in the meantime, until Anya arrives. I also want to introduce, and is doing a brilliant job, by the way, I want to introduce two new members of the team. Leanne, Leanne Russell, who takes over from David Iton, who is leaving the company after 40 years. And Dominic and Emeka. Where's Emeka? Emeka, who takes over from Dominic Emery, who is also leaving the company after close to 40 years. And all of those moves take effect on March the 1st. And for those of you who are on the web, you can see the team on the slide here. Murray, I think that's a very smiley photograph of you, but... Shouldn't smile, I see. That's a full-on smile, that one. The last time we held an in-person event was two years ago. And actually, I was just remarking this morning, this is actually my first time doing a results call in person in my new role. So it's amazing how time has passed. And it's hopefully a sign of progress and a sign of confidence in the future. And I promise it won't take as long as we did at BP week. So we will come back to that later. Now, in the two years since laying out our ambition, our new ambition, we've been through obviously a period of significant change. And at the same time, the world around us has changed as well. Covid, volatility in the energy markets and, of course, the accelerating energy transition. And with this backdrop, it felt like it would be a good time to pause just for a moment and reflect on the journey so far. And the BP that we see today is a company that has successfully, we would argue, completed a period of significant change. One that sees clear and compelling growth opportunities presented by the transition and one that is 100% focused on delivering the plan that we have laid out. and what you know by now we call performing while transforming. And before we get started, we love a video or two. We're going to show a short video just to share some of the highlights with you. So over to the video. It's not just because society wants us to do this and needs us to do this. It's because our employees want us to do it and indeed our shareholders. Today, that becomes BP's new purpose. To be a net zero company by 2050 or sooner. From IOC to IEC. So I think it's pretty cool in my language to see what we've delivered and it's the team around BP that has delivered it and to think that that was done virtually, most of it, and during a pandemic is, I think, it's extraordinary. And I hope it gives you a little confidence, some confidence in our ability to get stuff done. So let's get into that in a bit more detail, starting with the full year results for 2021. We delivered underlying replacement cost profit of 12.8 billion. We delivered operating cash flow of $23.6 billion, including a working capital build of $5.3 billion. And we delivered return on average capital employed of 13.3%, the highest level for a decade. In addition, we delivered our target of $2.5 billion of cash cost savings on a run rate basis relative to 2019 ahead of schedule, six months ahead. We reduced our net debt by over $8 billion, seven quarters in a row of net debt reduction. We raised our dividend per ordinary share in the second quarter by 4%, including the $1.5 billion share buyback that we've announced today. We will have delivered share buybacks from 2021 surplus cash flow totaling $4.15 billion. next to our progress in transforming BP. Since we announced the strategy to become an integrated energy company, we've been building momentum across each of our three strategic focus areas. In resilient hydrocarbons, we started up 11 major projects since the start of 2020. thereby delivering our 2016 target. Some of you will remember us talking about this with Gordon and Baku actually in 2016. Our target then was to bring on 900,000 barrels a day of new high margin production. In convenience and mobility, we've grown margin share from convenience and electrification by 4% since 2019, demonstrating the strength of our customer offers. and increased the number of EV charge points to over 13,000 across the UK, Europe, India and China. And finally, in low carbon energy, we have entered offshore wind with a pipeline of 5.2 gigawatts net to BP today following the recent Scott Wind lease option award. We built a renewables pipeline, which at the end of 2021 stood at 23 gigawatts net, a fourfold increase since the end of 19. And we've made exciting progress in hydrogen, having grown a hopper of between 0.7 and 1.3 MTPA. Progress like this, as well as the pace at which the world is moving, leads us to believe that we can accelerate our plans in some areas and reinforces our confidence in delivering our 2025 targets. But before we get into the detail around that, let's bring in Murray, who is chomping at the bit over there, to go through our fourth quarter results. Murray, over to you.

Great. Thanks, Bernard. Good morning, everyone. Nice to see all of you in person, finally. As usual, I'll start with the macro environment. During the fourth quarter, Brent rose by 8% to average $80 per barrel, its highest level in seven years. To date in 2022, Brent has moved above $90 with supply disruptions, easing concerns around Omicron, and the expectation of continued declines in inventories. Looking ahead, we expect supply and demand to move back towards balance through 2022. However, with lower levels of spare capacity price volatility is likely. Turning to gas during the quarter, seasonal demand saw Henry Hub rise by 10% to an average of $4.70. International prices rose sharply, with NBP and JKM around 90% higher than in the third quarter. This was caused by low inventory levels and concerns about the availability of supply during the winter months. With ongoing geopolitical uncertainty and low storage levels, we see the potential for continued price volatility. Turning to refining, industry margins remain broadly flat compared to the third quarter, and we expect them to remain at similar levels during the first quarter. Local margins may and are being impacted by lockdowns. Moving to our results, in the fourth quarter, we reported an underlying replacement cost profit of $4.1 billion compared to $3.3 billion last quarter. Compared to the third quarter, in gas and low-carbon energy, the result benefited from higher gas realizations and higher production due to major project ramp-up. After an exceptional first nine months, it was an average quarter for gas marketing and trading. In oil production and operations, the result reflects higher liquids and gas realizations. This includes the benefit of very strong NBP prices. The result also reflects higher production, including a recovery in the Gulf of Mexico from the impact of Hurricane Ida. And in customer and products, the product's result was impacted by significantly lower oil trading results and higher energy costs. The customer's result reflects resilient retail and convenience performance despite seasonality and COVID-19 impacts. In Castrol, volumes were higher, although results continued to be impacted by high base oil prices and additive shortages. For the fourth quarter, BP has announced a dividend of 5.46 cents per ordinary share, payable in the first quarter. Turning to cash flow, operating cash flow was $6.1 billion in the fourth quarter. This included a working capital build of $2.2 billion. Capital expenditure was $3.6 billion for the fourth quarter, and disposal proceeds were $2.3 billion. This includes $1.5 billion related to the sale of our Alaska business to Hillcorp in 2020. With proceeds of $7.6 billion received during 2021, we have received $12.8 billion of proceeds against a target of $25 billion by 2025. Strong cash flow generation enabled us to deliver surplus cash flow of $3 billion in the quarter and $6.3 billion for the full year. This underpinned a further reduction in net debt and supports our continued share buybacks. During the quarter, net debt fell for the seventh consecutive quarter to reach $30.6 billion at year-end. A share buyback of $1.752 billion was executed. This included the $1.25 billion announced with third quarter results and $475 million to complete the program announced with second quarter results. And we intend to execute a further $1.5 billion share buyback prior to announcing first quarter 2022 results. Now let me summarize the progress made during 2021 against our frame. We have a clear set of priorities. First, a resilient dividend. We announced a 4% increase in the dividend per share with second quarter 2021 results. Second, a strong investment-grade credit rating. During 2021, we achieved our $35 billion net debt target around a year earlier than expected and reduced net debt by over $8 billion. Third, disciplined investment allocation. 2021 capital expenditure was $12.8 billion, including in organics, in line with guidance of around $13 billion. And fourth, share buybacks. For the year, we announced $4.15 billion of buybacks from surplus cash flow. That takes us to total announced shareholder distributions of $8.4 billion for the year, around the level of the annual dividend distributions in 2019. I'll update you on our 2022 plan shortly. But for now, back to Bernard.

Okay, now thanks Murray. Now I'm going to speak for about half an hour to go through a strategy update. So just getting you situated in your seats before handing back to Murray and he'll cover the financial frame for about five, six minutes and then I'll close and then we'll move to Q&A. So let me turn to our strategic progress. And we now have two years, believe it or not, under our belt. And we've made progress on our 2025 targets. And we are increasingly confident, not just in those targets, but in the opportunities presented by the energy transition. And before we get into the detail, let me remind you of that strategy, which I would add remains unchanged. It is, importantly, a three-part strategy. Part one is resilient hydrocarbons. Part two is convenience and mobility. Part three is low carbon energy. Embedded across these is our sustainability framework, which sets out our aims for getting to net zero, improving people's lives, and caring for our planet. And binding it all together is integration, harnessing our collective capabilities as the energy system transitions to help more and more customers get the clean, reliable, and affordable energy that they want. And in doing so, create value for our shareholders. And we sum all of this up as BP transforming from an international oil company to an integrated energy company. And I would say, I think, we have already made significant progress on this transformation. It's important to set this in context. So if we look back, year one, we set out a new direction, a new purpose, a new ambition, a new strategy, a new financial framework, a new sustainability framework, and a new leadership team. That's done. That is now done. Year two, 2021, was about change and the largest restructuring in our company's history so that we are organized to deliver. That is now done, completed. With all of this now behind us, the decks are clear. Year three and every year from now on is focused on one thing and one thing only, delivery. The safe, efficient, and disciplined delivery of the plans that we have laid out. And maybe our biggest takeaway from our experience thus far That as we transform, we must perform. Our shareholders expect and deserve nothing less. And I hope our results show that we are doing just that. Now, I'll be emphasizing six points today, and that was point number one. The direction is set, the change is done, it's behind us, and we're focused on one thing, and that's delivery. And we will cover these points throughout the presentation, but let me briefly summarize them. Point number two is that we have confidence in delivering our 2025 financial targets. This is underpinned by resilient hydrocarbons, where we expect to sustain EBITDA through 2025 at around $33 billion. Convenience and mobility, where we expect rateable EBITDA growth to around $7 billion. and our disciplined financial frame, including annual capital expenditure, unchanged at $14 to $16 billion, with at least 40% to be invested in the transition by 2025. A commitment to return at least 60% surplus cash through share buybacks, subject to maintaining a strong investment-grade credit rating, and a resilient and growing dividend. And as a result, we remain on track to deliver what we said, a 7% to 9% EBITDA per share CAGR, 12% to 14% ROACHI, and at least 20% of capital employed in the transition. Additionally, we aim to continue to grow EBITDA to 2030. And we plan to do this by sustaining EBITDA from resilient hydrocarbons and continuing rateable growth in convenience and mobility and aiming to deliver two to three billion dollars contribution from low carbon energy so turning next to point three we aim to sustain ebitda from our hydrocarbons business through 2030. we will do this by high grading our oil and gas portfolio growing the underlying contribution from refining, and deepening our investment in bioenergy. Point number four. We aim to deliver between $9 and $10 billion of EBITDA from transition growth businesses by 2030. That's up from about $1 billion today. And that will be driven by five transition growth engines. bioenergy, convenience, EV charging, renewables, and hydrogen. And you can think of them as non-fossil and in high growth sectors. In each of these areas, and this is what I am increasingly excited about, but in each of these areas, our experience, our skills, our networks, our brand, our assets, gives us real competitive advantage. Capital expenditure invested in the transition is, as I said, expected to be over 40% of total spend by 2025, rising to around 50% by 2030. And this leads to capital employed in transition rising from over 20% at 2025 to around 40% by 2030. And then on the chart, you can see the returns that we expect from each of the growth engines. All of this within our existing $14 to $16 billion frame. Point number five, we are now aiming for net zero emissions across operations, productions, and sales by 2050 or sooner. Sales will now include traded and marketed energy products. Finally, point number six, we will remain focused on the disciplined application of our financial frame, shareholder distributions while continuing to strengthen the balance sheet and remaining disciplined in our capital expenditure. The framework is unchanged and Murray will come back to it later. So with these six points as context, let me turn then to progress across our strategic themes and starting with number one, which is resilient hydrocarbons. Here we plan to high grade our portfolio. lower our emissions and drive higher returns. We will do this through three focus areas, oil and gas, refining and bioenergy. And before I turn to each, let me take you through some of the strategic highlights to date. As I said, since the start of 2020, we've delivered 11 major projects, bringing the total to 35 since 2016, executed on average, on schedule, and around 15% under budget from that target we set back in Baku. And there is more to come, with four startups expected during 2022. Through 2021, we have driven competitiveness through portfolio decisions, We've maintained reliability and availability in the face of what I think Gordon would describe a challenging operating environment. We've reduced the non-productive time in our drilling and completion operations by 20% over that time period. And we have embedded our single operating model with around 7,500 people now deployed in agile structures, fundamentally changing how we work. For example, this single operating model helped with our approach to planned turnarounds. In 2021, the first year that these were managed globally across oil, gas and refining, we delivered 26 planned turnarounds on average under budget and with a production impact lower than planned. And we're in action on emissions. For example, further reducing our permian methane flaring intensity to a record low of around 0.6% in December. That's down 95% from when we acquired the assets in 2018. We expect to sustain EBITDA from resilient hydrocarbons at around $33 billion through 2025. And thereafter, we now aim to maintain EBITDA in a range of $30 to $35 billion until 2030. Now with our nominal, with our 2030 nominal oil price assumption broadly flat versus 2021, $71, this is driven by three factors. We aim to grow underlying EBITDA from oil and gas. We aim to grow the underlying contribution from refining. And we aim to deepen our investment in bioenergy. So let me take each in turn. In oil and gas, we continue to have a deep and high-quality resource base of 30 billion barrels of oil equivalent, and that allows us to choose the best investments. We have a disciplined capital frame for oil and gas of around $7.5 billion per annum through to the middle of the decade. In allocating this capital, we look for paybacks of less than 10 years for oil, less than 15 years for gas, so that we can select the highest quality options as we focus on cycle time. And we are confident in the value and the resilience of this investment plans for the following reasons. It leverages existing assets. Around 70% of the spend will be on existing hubs, typically lower risk and higher quality, higher returns. It holds managed base decline in a range of 3% to 5%. It is capital efficient with an average point forward development cost of around $9 a barrel compared to a 2021 unit DDNA of $15 a barrel. We aim to manage our R to P ratio down to around eight years by 2030. And it is focused with 80% of the capital spent in just six regions. This investment plan holds underlying production broadly flat through 2030. the depth of our resource base provides flexibility by 2030 we aim to high grade over the next nine years high grade around 700 000 barrels a day of oil equivalent per day relative to 2021 and the margin on these barrels is lower at an average actually less than 20 per barrel and this has expected us to allow realize additional value through the divestment of those assets, which I would add we are not in a rush. And we plan to continue to drive cost efficiency while maintaining safety and operational integrity realizing synergies through the single operating model that I discussed, our relentless focus on digital, and our adoption of agile work and structures that Gordon is leading. We plan to drive unit production costs to around $6 per barrel by 2025, and we aim to hold them at this level through to 2030. And this is expected to result in a high quality, highly focused portfolio, with 90% of the EBITDA in 2030 coming from six regions. and an improvement in unit margins relative to 2021 of more than 20%. 20% improvement in unit margin by 2030 relative to 21%. In refining, we aim to deliver around $2 billion of underlying EBITDA growth by 2030 relative to 21. This is excluding biofuels, which I will come to. Of this, around half is expected to come as demand recovers, with COVID impacts easing, supporting an increase in realized refining margins. And the remainder is expected to be delivered by our business improvement plans focused on three areas. First, availability. We're on track to deliver over 96% Solomon availability. Our turnaround improvement plans have already delivered improvements, and we expect the impact of the higher maintenance and activity in 2021 to reduce over time. Second, cost efficiencies. We plan to deliver Solomon's second quartile or better non-energy costs, which is a competitive position given our refinery configurations, while all the time keeping a rigorous focus on safety and operational integrity. And third, flexibility and yield improvements. For example, and I was there last year, through investments in Cherry Point Hydro Cracker Improvement Project and other investments in the US Midwest. In addition, we remain focused on high grading the portfolio through either conversion or consolidation of less advantaged units, or indeed divesting, where it makes sense. And together, these points underpin our target of delivering top quartile Solomon net cash margin by 2025. Turning to bioenergy, this is the first now of our transition growth engines. The market backdrop is strong. BP's energy outlook, our rapid transition scenario, shows biofuels growing by an average of 6% per annum to 2030, with sustainable aviation fuels, SAF, and biogas growing significantly faster. We aim to deliver around $2 billion of EBITDA by 2030, around half driven by the production of biofuels from feedstocks that meet applicable sustainability standards, and around half driven by biogas and other trading opportunities. Let me start with biofuels. Our refineries operate in regions where we expect to see strong growth in demand, and our manufacturing processes are well positioned to adapt to this. We already produce more than 5,000 barrels per day of biofuels at three of our refineries through biocoprocessing, and we aim to triple that production by 2030 across these sites. We plan to invest in five major biofuels projects, including three adjacent to existing refineries, and we aim to convert up to two of our refineries to biorefineries. This focus on leveraging existing infrastructure, logistics, scale, and customer relationships is expected to create real capital-efficient growth. Turning to biogas. This is a sector that we're increasingly excited about. It is capital light. It is highly modular and capable of rapid growth. It can achieve very low carbon intensities. It creates value for BP through strong integration and trading. And it delivers high returns and very fast paybacks. through our coal marketing agreement with Clean Energy Fuels. In the US, we're already the largest supplier of biogas in the US to heavy-duty fleet customers. And we recently, here in the UK, acquired a 29% stake in GasRec, and they're a major provider of biogas to heavy goods vehicles here. And we plan to retain our leadership position in the US, expand in the fast growing European market. And we aim to scale equity production around 20 fold to over 10,000 barrels a day by 2030. And through additional offtake, we expect further margin capture. That was resilient hydrocarbons. Strategic theme number two is convenience and mobility. Now, Emma has got this business. Here, our aim is to double EBITDA by 2030, while sustaining returns of between 15% and 20%. And it's all through a focus on customers. And our growth is driven by the following. It's driven by our differentiated convenience in fuels offers and selective growth market expansion. It's driven by the acceleration of our EG charging ambition across key markets. And it's driven by the contribution from Castrol Aviation, B2B and Midstream. And since we outlined our strategy, our capital allocation plans have changed in two areas. First, we are tightening our expansion in growth markets. And second, we are accelerating our EV charging ambition. This slide shows just some of the examples of the progress that we have made, which I will highlight when I cover these businesses. And it is this strong delivery, I think, that gives us confidence in the future. Now, as a reminder, we expect to deliver around $7 billion of EBITDA by 2025, and we aim for around between $9 and $10 billion by 2030, with returns of 15% to 20%. businesses have remained resilient, very resilient during the pandemic. And we expect COVID impacts of more than $600 million in 2021 to reverse over the coming years. And we expect EBITDA growth to 2030 to be split across the three businesses shown on the chart. Our convenience and fuels business, along with Castrol, are rateable, and they drive most of the growth through 2025. And then it's EV charging that drives more of the growth in the second half of the decade. So let me outline our plans in each of our business areas, and I'll start with convenience and fuels retail. Convenience is the second of our transition growth engines. It is a material business and in 2021 delivered a record $1.5 billion gross margin, more than 20% growth in just two years through the pandemic. And we aim to continue to grow at around 7% per annum. We're confident in this growth because we aim to further expand our strategic convenience network to around 3,500 sites by 2030. It was 3,000, having already added 500 sites since 2019. We continue to see increased basket sizes, which does, as it says, under 10. And we have taken full ownership of Thorntons in the US. And we have extended our partnership with Marks and Spencer's in the UK through the end of the decade. And our convenience offer builds on a strong and material retail fuels business. We have a great network of sites in established markets which generally sell more fuel than the industry average. We have strong, trusted brands like Amoco and Aral. We have premium fuels that generate around double the margin of our regular fuels in many markets. And we have differentiated digital offers and loyalty schemes. For example, our BP Me app customers have grown threefold over the last two years, since 2019. And these customers typically spend twice as much as another customer. We now aim to expand our presence in growth markets to over 6,000 sites by 2030, which will be primarily driven now by our successful GOBP joint venture in India. So turning to EV charging, the third of our transition growth engines. And we aim for this business, very exciting business, I have to say. We aim for this business to deliver more than a third of our overall EBITDA growth from convenience and mobility to 2030. We're accelerating our EV charging ambition, that's what we're saying today, across key growth markets through a focus on on-the-go charging and fleets. For on-the-go charging, Murray and I think we're getting to be expert at this stage, Murray, almost. Almost. Almost. Customers want fast, convenient, reliable, and seamless charging, integrated with leading convenience offers and services. And we're confident that we can succeed in this space for three reasons. First, we have an advantaged retail and convenience network in our key focus markets. In the UK and Germany, for example, we have established a leading presence with more than 90% of the population live within a 20-minute drive of our stores. In fact, 550 million customers live within 20 minutes of a BP store today. Second, we are focused on rapid and ultra-fast charging. And that drives higher utilization and therefore drives higher margins. And third, we expect to invest in digital technology and the strategic partnerships. We expect that to drive up utilization and increase the footfall at our convenience stores while you're getting a charge. And overall, we aim to grow our network now to more than over 100,000 EV charge points and to increase our energy sales. This will become a key metric for those sites by more than 100-fold by 2030. Our second focus area is fleets, and we think this has enormous growth potential for BP. We have a material fleet business with customers who we aim to support as they want to transition. All these fleets want to transition and they want someone to help them. We can do that. We already provide dedicated fleet solutions, which includes hardware, software, and other services. And our acquisition of AmpliPower has accelerated our entry into the U.S., which is one of the fastest-growing fleet charging markets in the world. Now, taken together, these plans give us confidence in aiming to deliver 50% margin share from convenience and electrification by 2030. That's up from 30% today. Turning finally to Castrol, aviation, B2B, and midstream, here are the three drivers of growth are as follows. First, we aim to grow Castrol revenues to more than $8 billion by 2030. And we'll do that through expansion and growth market, including in India, where Castrol is the number one brand, extending our Castrol branded service and maintenance offers globally, and providing market-leading offers in EV flutes. More than two-thirds, if you can believe it, more than two-thirds of major OEMs have approved Castrol On as part of their factory fill. Second, improving Castrol profitability through a focus on cost. Cost efficiency, simplification, digitization, and optimization of its manufacturing footprint. Third, growing aviation B2B and midstream by leveraging our strategic relationships with major airlines and airports, establishing an established position in SAF where we aim to be a sector leader with 20% share of supply, and continued growth in our bio ground fuels business. Summing up, these steps give us the confidence in our ability and our aim to deliver 9 to 10 billion of EBITDA from convenience and mobility by 2030. Hope you're all still with me. Strategic theme number three is low carbon energy. Our focus on returns and building scale with capital discipline is unchanged. We're aiming to create integrated low carbon energy hubs enabled by our last two transition growth engines. First, renewables. We aim to build a leadership position in offshore wind and accelerate our solar growth through light source BP and BP's US solar pipeline. And we remain confident in achieving 8 to 10% returns that are levered. Second is hydrogen. Here we aim to leverage BP's existing refinery demand to build regional supply positions. And as hydrogen markets develop, we aim to create a portfolio of globally advantaged supply hubs. And we aim to capture a 10% share of core markets by 2030. Over the past two years, we've made real progress. In offshore wind, we grew our pipeline from zero to over 5 gigawatts net in two core markets through our partnership with Equinor in the U.S. and EMBW in the U.K. In solar, light source BP has increased its pipeline from 1.6 gigawatts when we did the investment in 2017 to 20.6 gigawatts. And they've progressed 53 projects to FID at a weighted average expected returns of 8% to 10% prior to farm down. And we are achieving significant milestones in building our hydrogen and CCS businesses. We've successfully increased the size of our renewables project pipeline to 23 gigawatts net to BP. And we've got a material hopper of early stage renewables and hydrogen projects. Our capital investment in these businesses is growing. We spent $1.6 billion here in 2021. And we expect to invest between $3 and $5 billion per annum by 2025, rising to $4 to $6 billion per annum by 2030. We're rigorous in evaluating opportunities, rejecting a lot, Murray, and selecting only what we see as the very best projects. And this momentum and this discipline gives us confidence in the quality of the business we are building. And by 2030, we aim for this business to deliver between $2 and $3 billion of EBITDA. And as this slide shows, we now have a global portfolio of projects. We're trying to recreate the sort of oil and gas major project list, right? That's what we're doing here. You see it in offshore wind, you see it in hydrogen, and it gives us the confidence and it gives us the platform to develop those future low carbon energy hubs. Turning to hydrogen, where we have conviction in our ability to create differentiation and build a material business. We now have a hopper of 0.7 MTPA, of which half has been announced, including H2 Teesside here in the UK, Lingen in Germany, and Oman. And this hopper has the potential to grow to up to 1.3 MTPA as we continue to activate demand and scale up production. And we're focused on growing scale in key regionally integrated markets such as the UK, Europe, and US. And we're playing to our strengths here. We're leveraging our technical capabilities. We're leveraging our existing demand at our refineries to be that anchor for those first projects. We're building on our experience of delivering and operating complex projects. Remember those 35 projects delivered on time, under budget. We're creating value through integration of marketing, trading and shipping, Carol's business, for example, with power customers in Asia, just like we've done for decades in LNG. And we're deepening our partnerships, creating integrated low carbon energy hub opportunities through longstanding relationships, many times built through our oil and gas businesses, such as with Abu Dhabi, such as in Oman, and with companies such as Daimler and NYK Group. And we're confident and energized by the potential of this business. And Anya, when she arrives, will get into this, and she will discuss this with you all, the broader low-carbon business, at a session that we will do with you later this year. And I'm excited to introduce her formally to you. Turning to integration. Let me spend a few minutes explaining why we see a role, and I would say indeed a need, for an IEC such as BP. One of the few companies, we believe, and I don't say this in a boastful way, but one of the few companies who have the scale and the expertise and the experience to navigate complex markets and who can help manage increasingly interconnected energy systems, the importance of which I think have been highlighted in only the past few months. For over 100 years, we have been in, this is before your time, Marie, we've been in the business of integrated energy value chains, based on hydrocarbons as the energy source. We get oil and gas out of the ground. That's the upstream business. We transform the hydrocarbons into marketable products. That's the refining business. And we sell those hydrocarbon-based products in our marketing business. We've created a portfolio which gives us a global presence across that hydrocarbon value chain. And of course, we have our trading organization to optimize the flows and to provide an uplift to group returns of at least 2% in addition to what each standalone business can do on its own. As we move from an IOC to an IEC and decarbonize our portfolio, we plan to replicate this model of integrated energy value chains, combining hydrocarbons now with electrons and hydrogen. We're moving into renewables, solar and wind. That's where we generate the electrons. It's a new upstream business. We transform those electrons into hydrogen. It's a new downstream business. And we'll sell the products. We'll sell the electrons. We'll sell the hydrogen to customers. It's a new marketing business. And this creates an electron and a hydrogen energy value chain with upstream, downstream marketing businesses that will complement our existing hydrocarbons value chain. And at the heart of our integrated value chains is our world class, that's for you Carl, trading business. It has been decades in the making with a presence in 140 countries and over 2,000 employees. And through it, we can leverage our global asset portfolio to provide a consistently reliable supply. We've expertise in managing risk in volatile markets with high commercial, and regulatory complexity. We have deep analytics and technology expertise, and we can create integrated bespoke energy solutions for our customers. All of these are transferable, allowing us to grow in new products and markets, including, for example, biogas and low carbon products. And together, we believe this capability can allow BP to offer customers a one-stop shop for their energy needs. And the UK, where we are today, is an example of how these integrated hydrocarbon, electron and hydrogen value chains can come together in one region. We've been present across the hydrocarbon value chain in the UK for over 50 years. We produce oil and gas in the North Sea. We sell oil and gas to customers and gasoline and coffee to consumers. We're bringing gas into the UK from overseas to the Isle of Grain terminal, as well as shipping products from European refineries. We're now in action to create electron and hydrogen energy value chains in the UK. We intend to produce electrons through offshore wind farms in Scotland and in the Irish Sea and through our light source BP joint venture. We plan to construct hydrogen, CCS and biogas plants. We plan to scale up our EV charging and customer offers using our extensive physical retail network, our brand and our convenience offer. will be able to link gas and electrons to help create reliable power. And as mentioned earlier, the returns from each of these hydrocarbon, electron, and hydrogen businesses can be further enhanced by integration through our trading organization. And it's this ability to leverage existing infrastructures, existing capabilities and relationships, and integrate a cross offshore wind, hydrogen, and EV charging supported our recent successful bid in the Scott Wind leasing route. And we're already working to replicate this model in other countries. Equally crucial to our transformation to an IEC is having the right capability to enable our success. And here we're in a good position. We have great incumbent capability, skills that we can leverage, that we can increasingly leverage across our three strategic themes. Our 120-strong extended leadership team is representative of our broader workforce, bringing together a broad and diverse set of expertise, views, and perspectives, and is made up around 40% female and around 25% global minority. And from next month, I look forward to having a gender-balanced leadership team reporting to me. And on the right of the slide, you will see where we feel we need different skills, we're hiring. bringing in high caliber, specialized talent, often from other industries. Over the past 18 months alone, we have hired 38 senior executives from outside BP. And that's a marked change with our history. And for me personally, it's the most, and Kerry does this work, it's hugely encouraging to see the interest in our strategy and in our direction. Turning then to sustainability, in 2020, we announced two years ago our ambition to be a net zero company by 2050 or sooner and to help the world get to net zero. Two years on, we continue to believe our ambition is good business and we continue to believe it supports society's drive towards the Paris climate goals. We're in action and we're on track for our 2025 targets. As we progress, we continue to learn. We have growing confidence in the opportunities, especially over the longer term, in building, participating in, and integrating along and across net zero value chains. And this has enabled us to make some changes, and this work's been led by Julia. For aim one, which encompasses our scope one and two emissions from our operations, we're accelerating our 2030 aim from 30% to 35% to 50%. today. For aim three today, which includes the life cycle emissions from the products we sell, we're increasing our 2050 or sooner aim from a 50% reduction in carbon intensity to a net zero ambition. And we're updating our 2030 aim to 15 to 20%. And we're expanding aim three's scope to now include physically traded sales of energy products. Delivering of our 2030 aims will be driven by execution of our strategy, first and foremost. For aim one, this includes improvements from reduced flaring, energy efficiency, electrification, and the use of low-carbon electricity, as well as the contribution from base decline and divestments. For aim three, this is driven by our evolving portfolio, including investment in EV charging, bioenergy, renewables, hydrogen, as well as an energy product trading mix in Carl's organization that reflects decarbonization of global energy and BP's activities over time. Our other aims remain as is, including those on methane and net zero production. So in aiming for net zero across our operations, Across our production and across our sales, by 2050 or sooner, we believe that our ambition supports the global push to meet the Paris goals, including helping the world pursue efforts to limit temperature rise to 1.5 degrees above pre-industrial levels. And we intend to provide shareholders with the opportunity of an advisory vote on our net zero ambition at our 2022 AGM. And we're grateful for the continued engagement, indeed challenge, and especially support from our investors, including CA100+. Turning finally to Rosneft, who also continue to make significant progress on their sustainability agenda. We welcome their new 2030 strategy, which incorporates a target to be net zero by 2050 for scope one and two operational emissions. Their ambitions are leading among large Russian energy companies. They are supported by interim targets on absolute emissions, on methane and on flaring. And this builds upon Rosneft's commitment to improving environmental performance with a strong focus on energy efficiency and carbon and methane intensity. And we're almost to the day, one year into BP's and Rosneft's strategic collaboration agreement on carbon management and sustainability. And through sharing perspectives and exploring emissions reductions opportunities, the agreement supports both companies' decarbonization journeys. Don't know how I did for time, but let me now hand back to Murray to update you on our financial framework. Murray. Thanks, Bernard.

I'll try to be a bit more succinct for those of you who know me. So thanks, Bernard. The detail we've provided today links the delivery of our strategy to our 2025 financial targets. It also shows how we aim to transition the cash flows of the company to 2030 based on our plans. Let me briefly recap. First, we have a high-quality, resilient hydrocarbons business that we expect to sustain EBITDA around 2021 levels through 2025. And we aim to hold around this level through 2030 at broadly constant price assumptions with returns of 12% to 15%. Second, from 2021, we aim to more than double EBITDA from convenience and mobility to around $9 billion to $10 billion by 2030, while generating returns of at least 15% to 20%. Our customer businesses are ratable and drive growth to 2025, with EV charging driving growth in the second half of the decade. And third, in low carbon, we aim to grow EBITDA in the second half of the decade, reaching $2 to $3 billion by 2030. as our renewables and hydrogen businesses come online. This is all underpinned by a continued relentless focus on cost efficiency, investment in digital and agile ways of working. We continue to expect to deliver cash cost savings from reInventBP of $3 to $4 billion by 2023 relative to 2019. Taken together, this underpins our confidence in the guidance we gave you in August 2020. We expect to deliver 7% to 9% EBITDA per share CAGR between 2H19, 1H20, and 2025. Yes, that's a mouthful. And ROACHI of 12% to 14%. This assumes oil price of 50% to 60% per barrel in 2020 real terms. And looking further ahead as the businesses transition, we aim to continue to grow EBITDA to 2030 while sustaining overall returns of 12% to 14%. Within this, we are increasing our exposure to businesses which are expected to see rapid growth through the energy transition. As Bernard mentioned, this is driven by five transition growth engines, bioenergy, convenience, CV charging, renewables, and hydrogen. These businesses contribute about $1.5 billion of our EBITDA today. but we are deepening our investment here. In 2021, they represent more than 15% of our capex. By 2025, we expect this to be greater than 40%, and by 2030, around 50%. Capital employed will follow. While modest today, it is expected to reach over 20% by 2025 and close to 40% by 2030. And in the second half of the decade, we aim to deliver double-digit EBITDA growth from these businesses as the capital we are investing matures. Together, these transition businesses underpinned by these five growth engines, aimed to deliver around $9 to $10 billion of EBITDA by 2030. Our confidence in this potential reflects the progress made in building strong foundations in each of these businesses, and as a result, a clear set of operational milestones from which you can start tracking our progress. As Bernard has highlighted, in bioenergy, our plans are underpinned by five major projects, including three adjacent to existing refineries. Additionally, we will continue to rapidly expand our arrangements with biogas companies with further offtake and equity positions. In convenience, we have grown our network of strategic convenience sites by around 30% in the last two years, with clear line of sight to our upgraded targets in 2025. We are rapidly building a network of EV charge points to underpin our focus on fleet and on-the-go fast charging in our core markets. We've established a 5.2 gigawatt pipeline in offshore wind. This includes Empire Wind and Beacon Wind in the U.S., Mona and Morgan in the Irish Sea, and our new Scott Wind venture, Morven. We expect the first projects due online before the end of the decade, and our first green hydrogen projects are scheduled to start up from 2024. As we invest to drive this growth, we are committed to the disciplined allocation of capital. We expect to maintain a disciplined capital frame of $14 to $16 billion per annum through 2025, and we aim to sustain this level through 2030. In resilient hydrocarbons, we expect to invest $9 to $10 billion per annum between 2023 and 2025. With our plan to invest around $7.5 billion per annum in oil and gas through 2025 unchanged, the range reflects our plans to deepen in biotechnology. In convenience and mobility, we expect to invest between $2 to $3 billion per annum. This underpins our convenience strategy and our plans to accelerate in EV charging. And in low-carbon energy, we expect to invest $3 to $5 billion per annum between 2023 and 2025, rising to $4 to $6 billion per annum in the second half of the decade as we build out positions in renewables and hydrogen. We have a standardized approach to investment allocation, balancing investment economics, volatility and ratability, optionality and integration, strategic alignment, safety and risks, and sustainability. And we have stringent investment hurdles. These include payback periods of less than 10 years for oil and refining and less than 15 years for gas. And we also have returns expectations for low-carbon energy, as well as the transition growth engines Bernard mentioned earlier. This capital frame is also underpinned by a strong balance sheet. I like this one. We remain focused on maintaining a strong investment-grade credit rating and have made strong progress. I have already outlined the strong progress we made in reducing net debt by over $8 billion in 2021. In addition, we remain focused on maintaining an efficient balance sheet. Since the end of 2019, we've repurchased around $15 billion in short-dated bonds and issued over $11 billion of bonds with a duration of 20 years or longer. more than doubling the duration of our debt book to over nine years, and increasing our exposure to fixed rates at attractive coupons. That's looking like pretty good timing right now. Looking ahead and subject to maintaining an investment grade credit rating in 2022, we plan to allocate 40% of surplus cash flow to further strengthen the balance sheet and to manage the business with a conservative cash balance point of around $40 per barrel on average through 2025. Our financial frame enables us to reward shareholders today through committed distributions. Subject to board discretion and at around $60 per barrel, we expect to have the capacity for an annual increase in the dividend per ordinary share of around 4% through 2025. And we remain committed to maintaining a strong investment grade credit rating. On average, at around $60 per barrel, we expect to be able to deliver buybacks of around $4 billion per annum through 2025 with upside at higher prices, as you can see here. Finally, this slide provides a summary of what you can expect from us in 2022, the continued disciplined execution of our financial frame. With that, I'll hand back to Bernard to conclude today's presentation. Thank you.

Very good, that was more succinct, yep, yep. Great, so this is one to two minutes, and then we'll go to questions. So in summary, it says you have heard a lot today, I agree, on our strategic progress towards transitioning into an integrated energy company. And at the end of the day, it all comes together in our investor proposition. Craig's favorite slide. And we've shown that it is a simple, but we believe compelling proposition that combines the following. Number one, committed distributions, generating competitive cash returns today as we transform the company. Number two, profitable growth, growing EBITDA per share and growing returns. And number three, sustainable value as we invest with discipline in the five transition growth engines and lower our emissions. All of this in service of delivering long-term shareholder value. So thanks again for listening this morning. Now it's over to you. Murray and I will be delighted, it says, we will try anyway, to take your questions from the room and online. And we've got all the technology that we need to do To do that, may we ask you to keep them to two points only, please, at most, and to frame them as briefly as you can. This is all Craig's language, if you want to blame anybody, so that we can get through as many questions as possible. And it will also be helpful if you would just state your name for those people who are online. And I guess we'll start here. Murray in the room. So who wants to lead off? We'll go to the back here. Go ahead.

Hi, thank you very much for the presentation. I wanted to ask you two questions.

Just remind people where you're from and just so that people know.

Ah, perfect. It's Michele De Lavinia from Goldman Sachs. Two questions, if I may. The first one relates to your buyback program. I was wondering under what circumstances you would go above the 60% payout of the free cash flow. I was wondering if perhaps At higher oil prices, it makes sense to dedicate more to buybacks. And whether there is a hard limit to how much you can do. How much more than, let's say, $2 billion per quarter can you actually execute on the market, given the daily liquidity and the amount of shares you want to buy back in a year? And then my second question relates to the EU green taxonomy. A lot of companies are starting to work to think about what is the percentage of revenues and investments that is consistent with it. I was wondering, when I look at your numbers on the green transition, should we just effectively take it ex-convenience, which doesn't fit into the EU green taxonomy, and think that that could be a good approximation of where you could end up next? when you start to report those numbers in the next 12 months. Thank you.

Very good. Excellent. On buybacks, Murray will speak to limits and his own views on things. You know, Michela, you know as well as I do, there are many debates about what is the right use of surplus cash. And I think from day one, I think we've outlined a very clear financial framework that takes each of those potential uses of cash in order, starting with the first call on cash being the dividend. Then we want to strengthen that balance sheet, and we have done a lot. I think we had our largest reported debt was $51 billion net debt. That was at the end of a quarter. It might have been different in the middle of a quarter. We're now down at 30.6. I think we're in a much better place with our rating agencies. We're now a stable outlook with S&P having been upgraded from a negative outlook. And we'll continue to want to put that 40% on the balance sheet through this year. We then want to invest. In our hydrocarbons business, in our growth engines, and if there's any left over, the fifth and final point, it's for buybacks. So the board keeps this under constant review. We've been very clear in terms of buybacks for this year, what you can expect, and it's not at least 60%. It is 60% for 2022, with the 40% going to the balance sheet and we'll update our views on that again at the same time next year and obviously the dividend is kept under review by the board on a quarterly basis but we've laid out our expectations around that anything you'd add and anything around limits to what we can do

Yeah, I think it's just important, given the uncertainty in the world, that we continue to dedicate money to strengthen the balance sheet. I feel that's very important. You know, another shock could happen at any moment in time on Omicron or the next wave. And so I think it's better to posture in a conservative space, to be honest. So that's why we're continuing to dedicate money cash to the balance sheet. I don't think there's any way we'd regret that. As far as limitations on share buybacks, there will be market limitations. We're still learning about that, about what's possible. Of course, it depends on how fast the share price appreciates as well. That creates limitations in itself. We've already done half a billion dollars of buybacks this quarter for employee offsets in January. So that's behind us. We'll do a billion and a half by the results date. That's carefully worded because sometimes it's a little bit tricky to do it inside the quarter. So there are days where we're buffeting up against that, but liquidity in the shares is high. We just have to watch a rising share price that it's difficult to continue to buy back with that rise in share price. So far, so good. But probably another half a billion and a quarter is getting tight, depending on what happens with share price. But that's a nice problem to have, Michele.

Yeah, you're not saying that's a bad thing. That's a great thing. Okay, got it. On EU taxonomy, look, I think it's a moving space, isn't it? The proposal is being issued. I think a big question you'll have to ask yourself, Michele, is what to do with natural gas, which is in the current proposal, albeit a decarbonized version of natural gas. Let's see how that survives. Convenience is in our transition growth engines because it's the non-fuel element of our convenience business, which... In the UK today, I don't know what the numbers are, but more than half, 60, 70% potentially of people who visit a BP petrol station don't buy any fuel. So it's a convenience offer for a convenience reason. It's an incredibly fast-growing business. I've looked at the UK market. It's expected to grow at 12.5% per annum over the next five years. So it's a growth business. It's in transition because it's non-fossil. It's that aspect of the business that's in there. The trick will be what happens with natural gas, and that could obviously spring your numbers up and down. The others are clearly very much part of the EU taxonomy. So hopefully that helps. Great questions. Thank you. We'll go here next. It's like everybody's going to ask a question.

Gordon Gray, HSBC. Just one on mobility and particularly EV charging. You've got very ambitious targets for growing EV charge points. Some of that obviously is going to cannibalise your conventional fuel sales. Can you just give us a feel what you're seeing on the ground today about the margin you get from EV charging in a typical fuel station relative to historic conventional fuel margins?

I think the most we've said so far is what Emma said in an interview recently, that we're at the point where the margins are broadly equivalent. So we're at the stage where the margins are equivalent. We probably think that they can get better. If you look at our Hammersmith EV charging station. Our utilization rate in Hammersmith is 67% today, 67%. That's on a time basis. Many of the assumptions that people have in their plans are around single digit utilization rates. When you look at the residence time of a charging customer, probably a little bit longer than that of a petrol customer. We see enormous opportunity on the convenience side. In fact, we see that with our station here in the car park underneath Hyde Park in London, where the convenience offer is also a big draw. So we see opportunity there. So we're very excited about this business. We're opening 115 charge points a week now. We're adding 115 charge points a week in the fourth quarter. We sold more power in December in China than we did in the entire 2020 year. This is a business that's growing exponentially. And when you talk about the role of a company like ours in the transition and people question it, Why wouldn't we want to absolutely take on that market? Look at the starting position we have. 550 million customers within 20 minutes of a BP site. Look at the brand that we have. Look at the convenience offer that we have. Rewe to go in Germany, Albert Hein in the Netherlands, AMPM in America. we would be fools not to embrace this opportunity that is being presented to us. So we see massive opportunity. That's why since last year, that plan has accelerated. More capital is being deployed. And we're very excited about the long-term potential. Fleets, hugely interesting. Between 6% and 8% of the power that we discharged through our charging network in the UK in 2021 was to Uber. So fleets will become important. Fleets is where we're concentrating in America. So four and a half times more electricity, more power sold in 2021 than in 2020. And we're targeting a hundred-fold increase by the end of the decade. All about on-the-go, fast charging, ultra-fast charging. It's a very different business, but it's one that plays enormously to our strengths. You love it. What have I missed?

The growth in fleets in the U.S. is pretty surprising, 10 times growth over the decade. So 254,000 electric vehicles now in fleets, 10 times growth through the end of the decade is the most conservative estimate we see. That's why we went into AmpliPower to really get a leapfrog ahead on their customer book and then their digital offer. They have a great digital stack. It allows you to help manage a business on their behalf, the overall fleet, and you can charge on a fleet on a service basis. So we're bringing that back to the UK as well. We've got deals with Royal Mail, Fire Brigade, police, just customer after customer after customer. And if we can link together the offshore energy, the onshore hydrogen with these fleet and fast on-the-go charging, you've recreated the upstream in about a decade's time. So it's just a... Fabulous, fabulous opportunity ahead of us with very high returns.

And if you're a charging geek, like we obviously are, check out the Blazon blogger in Germany who compares reliability of charging networks all across Germany. And Aral, which is our brand in Germany, is number one with 1% downtime. So anyway, fun space. Who next? Lucas? And then we'll start heading over to the side of the room here shortly.

Chris?

Thanks very much for this.

This is Lucas Herman from Exxon. Two questions, a little more here and now, perhaps. The first is, you must have very good visibility on the LNG trading business into Q1, given, I suspect... You know, Carol would have said most of your positions for you. I wonder whether you can make any commentary on how you expect trading in that quarter or the next quarter to go relative to, shall we say, the last two. And the second just goes back to balance sheet Murray. And maybe it ties in with trading to some degree as well. But just the mix of cash and debt. It's very visible the Europeans carry a lot of cash relative to the US. It's also very apparent that you trade a lot more than the US. But the level of cash carried on balance sheet now, is it really appropriate? Or should you be thinking about bringing that down and suffering less of an interest hit through differentials?

That was it. Thanks, Lucas. Maria, I'll let you take both.

Sure. Starting with balance sheet, my favorite thing, Lucas. $39 billion of cash at the end of last year, down to $30 billion of cash. And you saw the statistics on debt buybacks. We'll continue to do that as long as it economically makes sense to continue to buy back debt. Depends on what happens with interest rates, but for now we think that continues to be a sensible thing to do. we do have to carry high levels of cash though as a trading organization in order to change trade on exchanges you have to have cash buffers for initial initial margin and variation margin and that's why we can drive the returns that we drive through through having that cash i think that's an effective use the returns are pretty darn high on a cash basis much better than you can get in a depository bank or or anything else so i think um i think we will run a little bit higher cash position especially as we go through The volatile times we're in right now, exchanges are demanding more margin call these days given the volatility. And until, while this deficit in energy supply lasts, we'll just need to run high cash balances. So I don't think that's a bad thing. I think it's a good thing, Lucas, because it enables Carol's profits. As far as speculating about how Carol will do in the first quarter, I think I'll hold fire. The gas markets are pretty volatile right now. Predicting is gas price going to go up, is gas price going to go down is tricky right now. We obviously have a large LNG traded book. They'll be doing a lot of cargo deliveries into Europe. I think we did 35 into Europe over the past year, seven here into the UK to try to help with gas supply. But there's a large, large position that will be delivered. And if I know Carol, she'll do pretty well. So let's see. Let's see, Lucas.

And an LNG cargo, I've learned, provides enough heat for 100,000 homes for a year. So 35 cargoes into Europe last year, seven cargoes into the UK over the winter, which is double our normal capacity. Chris.

Thank you very much. Chris Coupland from Bank of America. Murray, I fully endorse your message on the balance sheet. If I may, can you remind us of your sensitivity away from net debt in your provisions and lease books to rising interest rates, which I guess we have to prepare for? And my second question, if I may, 2021 is a special year because I remember well, 2016 and 17, investor days targeting 2021. And you've made it not exactly easy to compare with targets that were set at the time. But I would argue downstream is the one that lets you down. Of course, we're in COVID times. Downstream was particularly hit during 2021. You highlighted $600 million. Bernard, on COVID impacts, pet chem's gone, but you're using, again, convenience and mobility as a target to get excited about earnings growth. And I can't see much earnings growth over the last four years that we talked about in Pangborn. So how can you maybe convince us that this time is different?

Very good, Murray. Balanchine?

Yeah, sensitivity to interest rates. As I mentioned in the speech, an awful lot of the debt book that we've gone with recently on the debt races is fixed. So we've taken advantage of the low rates in 20s and 30s and fixed most of our balance sheet at pretty low rates. We won't retrade those, so those should carry most of the debt book fixed for the next few decades. I think that'll turn out to be fortunate timing, but two or three CFOs down the road will actually tell us what happens. As far as the rest of the leases, the leases aren't sensitive to interest rate moves, so that's not a risk. And, of course, the Macondo paydown remains out there as well on a gross basis, and that's not subject to interest rate volatility as well. So I think, you know, as I came into the job, there were a lot of people asking me about the strength of the balance sheet, the nature of our debt book. I think Kate and now Niamh have done a fabulous job of fixing it, lengthening it, and decreasing the risk profile of the business significantly. So I think that concern is largely behind us and something that shareholders can now count on for moving forward.

On convenience and mobility or the downstream business from the old days with and without products, I'd say a couple of things. I think the area that's been challenged over the last year or two in particular, aside from COVID, has been Castrol. We've had higher base oil costs feed through last year. There's a lag there. They're twice what they were pre-COVID. Our margins are off. We have challenges on the supply chain on additives. So that's an area where we've seen some challenge. No question about that. We're on it. We have a plan. We will grow that revenue base. We are going to take out costs. We see massive opportunities for digitization. We see massive opportunities in the warehouse base, and we do believe that the additive situation will resolve itself around the middle of the year. So the underlying premise of Castrol remains very, very strong. In fact, they had their highest sales on record in China last year, and they remain the number one brand in India. So that's some work to do. Beyond that, the convenience and mobility business why do we have confidence You know, 20% increase in gross margin between 2019 and 2021. That's on top of a 10% increase the previous year and a 10% increase the year before that. What's driving these types of things? Basket sizes. People are wanting to shop more local. And if the quality is there, they're going to come to your store. Basket sizes are up 20%. Thorntons are seeing basket sizes are up 29%. We have, I think, 16 million loyal customers. That's way up over the past couple of years. And a loyal customer is worth four times more than a regular customer. We've talked about the digitization and the app through BPME. We've had the highest number of transactions ever in November on the BPME app. And they're twice what a non-BPME app is. The UK in retail had its best Christmas ever. ever on record so when i look at the inputs to the business i'm very confident that under ms leadership we will deliver the plans that we've laid out covet has been some headwinds we've had a few challenges in castrol but the underpinnings of that business in that space are brilliant and they're all driven by a commitment to the brand a commitment to the quality of the offer and a real commitment and an investment in the digitization of that offer so Pretty excited about it, Chris. You'll have to hold us to account. That's what we're here to do, and that's what we intend to do. I'm going to come to Lydia here in the front row.

Thanks. It's Lydia Rainforth from Barclays. And two questions, if I could. Firstly, thank you for doing this in person. It's very interesting to see. In terms of the EBITDA... It's very interesting to be back meeting people who are in real life. If you think about the transition EBITDA, that's sort of 20% to 25%, I think, of your overall EBITDA number now by 2030. Yeah, fair enough. So within that, I mean, obviously there's been discussion about it doesn't actually look like that kind of messaging about being an IEC is necessarily getting through to the share price. So at what point do you go, actually, we need to do more around that or there's a different structure that you look at? And then the second part is clearly there's a lot of focus on the low carbon and energy transition in there. How do you feel about inflation within the CapEx side of the renewable side? So less so on the oil price on the oil side, but around the renewables business, given that these are new projects, they're the first time that you've done them. How comfortable are you in the CapEx?

Great. Murray, you want to take inflation? I'll take the IC question.

Yeah, inflation more broadly. We ate most of the inflation in 2021. The only place we're seeing material inflation in 2022 right now is things like solar panels and then our lower 48 business. Highly predictable, isn't it? When you see an upswing in price, the first place that it shows up is the lower 48. We're probably seeing a forecast of 5% to 10% inflation in the lower 48. But I suspect the guys will do better than that. A few guys have met Dave Lawler. He likes to sandbag a little bit. So I think he's just trying to make room for more activity with me. So I think I think he's going to love that, isn't he? I think it's I think we're OK in the historic upstream and the downstream and we'll be able to eat most of the inflation in 2022. You're right, Polysilicate's got inflation, 30% are some of the numbers we're seeing, but because of the cycle time with it, it's fine. You spend the money but you get a higher PPA and you still get the returns you want, so it doesn't really impact the returns ratio of the business itself. As far as the longer wavelength inside offshore wind, we're just now on Empire One and Empire Two going to market with bids. We'll see what those look like and we'll be interested to hear back from Equinor throughout the year. We should hear back by the end. I suspect Equinor will update the market once they're through all that process near the back end of 2022 about what we're seeing. I think there will be bubbles of this stuff. So there'll be some heat and then more capacity will come on, et cetera. So I think it will all be on the timing of when you contract versus when you fix in a PPA and when you fix in your debt. And I think two big companies such as ourselves will be able to manage our way through that to get to the returns. As far as CapEx, Lydia, we'll stick with the 14 to 16 and we'll just modulate our equity to manage that or modulate the debt levels we have. to make sure that we manage through this. We're focused on returns and we're focused on capital discipline. That's core in our mind as we go through this.

And on your first question, Lydia, I'll tackle it a couple of ways. One is I think as the world is beginning to grapple with the complexity of the energy transition, I think there is a day by day increasing understanding that there is a role, and not alone just a role, but actually there is a need for a company like ours. And I think that is becoming more and more apparent. It has a long journey still to go, no doubt, but it is becoming more and more apparent because reliability and affordability matters as well as clean. And the reality is that natural gas with renewables, of which we have both, which we can add a trading organization to so that we can provide a customer with that predictable, reliable, affordable, cleaner supply. There's a role for a company like that because people don't want to have to go to somebody for their renewable power and go to somebody else for their base load power and go to somebody else to hedge their pricing and to do all of these things. There is a one-stop shop here. It's called an IEC. It's called BP. So I think in some ways the challenge is, and we don't wish them to be like this, but it is a complex transition. And I think it increases the argument that we have a role and that there is more than that, that companies like ours are needed. The second thing that I would say, and that is why we had confidence clearly when we laid out our strategy 18 months ago. But the more I learn, and the more we learn, and the more time we spend in it, the more excited you get about just what a company like ours has to offer. So let's take sustainable aviation fuel. If the world is going to decarbonize aviation, sustainable aviation fuel is going to be a big part of that. Now, you can start up a company tomorrow to try and do that, or you can become a single source business that that's what you do. But it's not straightforward. Now look at the advantage that decades of history give us. First of all, the biggest issue in sustainable aviation fuel today is supply. That's what Carl's organization does, offtake agreements from all around the world. We just signed a deal last week, Carl, 10-year agreement with New Seed to do Carinata, which is a food cover, a non-food cover crop that farmers can, I wish we had it back in Ireland back in the day, but that's another story. Between crops, we signed a deal there. So we can do these big supply offtake agreements. Didn't go to manufacturing yet. Well, why wouldn't you use the refinery and the power and the utilities and all of the things that a refinery has and put a unit next to that, of which we will do two? That would be much more capital efficient than anybody can recreate. And then go to the downstream of that. You've got to sell it to customers. AirBP is in 50, 60 countries around the world. They are in every airport. They have a relationship with every airline, all ready to go. And you wrap a trading business around the totality of that flow. And you start to say, wow. Now, you go to offshore wind. I spent a day in New York with the team out there. I heard as much there as I would, it reminded me of the oil and gas days. Permitting issues, local content issues, supply chain issues, cost, maintenance issues, vessels, all these things that we're so used to. Hydrogen, who's gonna build tens of billions of dollars of hydrogen facilities? build ports, convert it into ammonia, build ships, ship it to Asia, to customers in Japan and Korea that want to decarbonize but can't. Who can do that? That reminds you of the LNG business. We've been doing it for decades. We can do that again if that is what is needed. So our confidence in the role, and we can do that because we're together. The structure of being an integrated energy company means we can do that. So you want to add? No, that was pretty passionate. You're good. Well, Okay. Does that help? Yeah. Good. Excellent. We'll go over to Barash. And we go to the phone lines here.

Hi there. Barash Bokhtari, RBC. It's a question on divestments. I mean, at this point in the cycle, your balance sheet doesn't need divestments, but you obviously have your sort of top-down targets in the upstream, the 40% decline. I just want to get a sense of how you're thinking about accelerating that potentially in light of high commodity prices. And then the second question related to that, but the 2022 guidance, could you just remind us if there's anything left due from Alaska and if that's embedded in that two to three billion number?

Murray handled the second part, Baraj. On the first part, not top down in terms of the 40% reduction in production there. We've looked back to the year 2000, and BP has consistently every year done, on average, $4 to $5 billion of divestments every single year since the year 2000. Portfolio high grading is a natural piece of running a good business, and we will be doing this. Energy transition or no energy transition. This is good business, and this is what we will do in the years ahead. We've set out a target already of $25 billion. That's what we said we'd do by 2025. We've done 15. We've got 10 to do. It's 2 to 3 per annum, which was kind of what our guidance used to be many, many years ago, $2 to $3 billion of divestments per annum. Accelerating divestments, it's all a question of value. We're not in a rush. No rush here at all. If someone else sees more value in an asset that we feel is less important to us than it might be to them, then we're open-minded. But there is no intent to accelerate. There is an intent to prosecute the plan that we've laid out. And the main thing to do is we're going to be driven by value. That's what we're going to be driven by. And if we see value, we'll do it. If we don't, we won't. And that's where I would leave it. Alaska 2022?

Yeah, so 15.5 billion proceeds have been announced, or transactions have been announced for sale. Twelve and a half has been received, so we've got three of deferred payments, including Alaska. We'll probably get, depends on the oil price, depends on performance, but 10% of that's Alaska, 10% of that two to three is Alaska inside 2022. And it's a gradual payout structure over time based on price and performance. Could be higher if the price goes higher. or if they perform better. But that gives you a rough range, Baraj.

Brilliant. Thanks, Baraj. Let's go to the phone line or Zoom, can we? Can we go to Jason Kenny at Santander? Jason, I thought you were supposed to be here.

I wish I was. Unfortunately, I mean, well, I say unfortunately, I'm in Bonny, Scotland, but enjoying a sunny day.

Very good.

Thanks for the presentation. Really enjoyed the camaraderie and the positivity that you're generating there. It's phenomenal to see and to watch. I've got a point of clarification. I think you mentioned on the biogas, bioenergy issue. Kind of a 10% split for biogas, but a much larger part of the EBITDA potential from biogas relative to the volume effort. If you could just clarify that for me. Secondly, on fleet charging, any data points around the Ampli deal in the US would be much appreciated. Are there likely to be other targets in the fleet space? I mean, fleet first is just a phenomenal opportunity. Or do you think that there's going to be mainly organic growth on the back of that positioning? And one more, if I may. Is there a scenario where BP moves net cash by mid-decade? Is that something that you've envisaged and any implications that you think could come out of that?

Great. Jason, thank you. I thought you were being nice, genuinely, but you wanted three questions. So now I get it. But Murray, if you take bio and net cash, I'll take Ampli. Ampli is a great acquisition where we've... I haven't met the team personally, but the team obviously has, and we're excited. What did we buy? We bought three things. We bought, number one, a great management team. Number two, we bought a long list of customers. And number three, we bought a digital stack that would have taken us two, three, four years to build on our own. I know that Richard Bartlett, who runs our EV charging business, is in America this week or next week, and he's meeting with the team, and they're going out to other customers, some very big customers potentially. That would be fantastic if we could sign up. hugely excited about that it's given us a big acceleration in our fleet journey in america and that's what we wanted to do will we do more deals like that possibly but what you should know is that all of what we do is within our 14 to 15 billion dollar frame for this year and within our 14 to 16 billion dollar frame uh going forward so we may uh use acquisitions uh at a relatively small scale like that to help accelerate our ambition. But you won't see any surprises in our capital because it's all in. Murray, on biofuels, it is a billion in biofuels and a billion in biogas. Anything else you want to say? It's just very high returns in biogas, right?

Yeah, the biogas is a bit of a different model than the biofuel side. Inside our trading organization, we don't generally trend to use capex. We tend to use our balance sheet for commercial commitments. So you won't see much capex put into biogas. There'll be some, but you won't see much capex go into that. It'll be long-term commercial commitments and leveraging those. So you get some pretty extraordinary returns inside a biogas business. Bless the credits. Plus the credits, of course, which are very attractive and could be traded as well. And then the biofuels will have a capex heavy period. We'll invest somewhere around $2 to $3 billion into the five facilities that Bernard talked about through the middle of the decade. We're in defined now on three of them. So let's see how the engineering estimates come through. And then very much looking forward to building these options out. It would be fantastic. As far as net cash negative, well, I guess that's a question on oil price, isn't it? We've given you a lovely little chart. I can't remember what slide it was. We've given you a lovely little chart, and we've added a yellow brick at the top for what happens to debt as price goes up. So that gives you the total free cash flow that we're getting out of the business. And certainly it's possible that we're getting more cash than we know what to do with. For now, I'm going to be conservative and manage the company as if it's $40 oil. Anything we can get above that just helps, obviously, and that will go 60% to buybacks and 40% continuing through debt. But it's possible with the pricing we're seeing now, Jason. But for now, I'll just focus on 2022 and make sure we continue to be conservative with the balance sheet.

Thank you, Murray. Excellent. Let's go to Jason Gabelman from Cowan & Company on Zoom as well. And Jason, thank you for your question, but Jason Gabelman.

Yeah, hey, thanks for taking my question. Hey, how are you? Hey, good, yeah. I had two. First, I just, it was a clarification on, I'm trying to compare this to kind of when you initially laid out the strategy, and it looks like when you laid out the strategy, bioenergy, And LNG was in your low carbon and energy business footprint. And the EBITDA growth that you were discussing had that portion in the low carbon energy. And now it looks like it's in Brazilian hydrocarbons. And the EBITDA growth associated with bioenergy and LNG is in Brazilian hydrocarbons. So if you could just clarify that. And point two, I wanted to ask, Murray, you mentioned polysilicon inflation at 30%. And that seems like a pretty eye-popping number, and you're obviously focused on growing your renewables power business quite a bit. So could you just discuss how you think about that inflation potentially continuing over time as solar and wind growth continue to accelerate industry-wide relative to your capital budget and how you manage that and think about hitting your growth targets in terms of... capacity you plan to bring online. Thanks.

Jason, thank you. On bio and LNG, bio and LNG is definitely in the resilient hydrocarbons. The reason bio is in there is because it's based on the biofuels business in there is based around those refineries, right? That's what we're going to do in there. There is no perfect place to allocate these. Believe me, we've been back and forth on on this a lot. And there's nothing cute going on there as an Irish phrase. It's simply that's where we think that best belong. And the key is what it adds up to at the end and the returns that we get from each business. But that is exactly where bio and LNG sit and where it used to sit in the old frame, the old description. Low carbon. In low carbon.

Gas and low carbon, yeah.

Yeah, in gas and low carbon because the LNG was there. We put all the resilient hydrocarbons together, LNG, gas, all of that, and biogas in there. Polysilicon?

Yeah, so let's remember the model we have on light source BP. So we injected $200 million or $300 million into light source BP a few years ago. We don't inject capital after that, so it doesn't impact our capital frame. The point of light source BP is to be a developer. So they're going to develop 25 gigawatts through the first half of the decade. That's the target they've set. And they're going to acquire land, get the permits, get the design done, get a power purchase agreement in place, get the debt in place, and then they plan to flip those molecules. So the capital construction associated with the polysilicate goes to whoever's buying it, mostly pension funds these days. So from our perspective, sitting inside BP and a shareholder, a light source BP, and sitting inside light source BP, they're not expending this capital on the solar panels themselves. That's for the purchasers to do. Instead, what we're trying to do is create this developer model that creates profit out of the flip and provides electron sources for Carol's trading business, if it makes sense. We kind of have the option to offtake that electrons into our portfolio. So that polysilicate inflation level doesn't impact BP, so to speak. It's more impacting the consumer, Jason. We're not seeing anywhere near those levels of inflation in other spaces inside offshore wind, etc. But again, we're just inside the first bidding process with the supply chain, really, this year. And Equinor, as lead partner in Empire 1 and 2, will report back to the market in due course. So I think no real impact from the polysilicate because of the nature that we run light source BP right now.

They're also looking, I think, Leanne, in your old job in procurement with... developing long-term supply agreements like we would have for long-term relationships like we would have in the old oil and gas business. So it's one of the things that I think we're working with them on to these frame agreements that we've traditionally used in oil and gas to see if they can develop long-term relationships, Jason, there. And some of these megawatts that we're flipping on at the moment look like they're not being impacted by inflation prices. They seem to be very attractive.

There are a lot of solar panels that they bought in a couple of deals a while back that they're not having to pay the increased prices yet. But we're doing, like SourceBP is doing, its first big flip as we speak. And it'll be interesting to see what comes out of that in the first half of the year. Interesting to see what the pricing is. Great. Thanks, Jason.

We're encouraged. Great, Jason. Thank you. Let's go back to the room here. Let's go in front here, Mark. Oops, that's not somebody's hand.

Hi, hello, it's Martin Ross from Morgan Stanley. I've got two questions, if I may, about the oil and gas business. The first one relates to the long-term production targets that were initially set during BP week. And I do remember sort of a 20% to 25% decline by the middle of the decade and a 40% decline by the end of the decade, initially through disposals and then later through sort of runoff of the portfolio. But listening to you earlier... I think I heard you say, but I just wanted to check that you said that with the investment plan that is now in place, this could keep underlying production flat. So it sounds like more long term, less near term, and more disposals, not an underlying sort of decline of the portfolio. So I wanted to ask you to what extent this guidance or the targets on long term production have actually changed. if I sort of broadly sort of got this correct. And then the second thing relates to oil prices, as in the interesting thing about 2030 guidance is of course that you do get into that period where you could conceivably start to think very differently about the oil market. Now, I'm not asking you to speculate about oil prices by 2030. That is, well, exactly. That stuff is anything. But it's not entirely unimportant, and it does signal that at least the underlying BP view is that even by 2030, we will not be in a sharply declining oil demand environment where prices roll down to the marginal cost of the lowest supplier. It does signal that you think by 2030, oil is still kind of sort of, at least in terms of price, business as it has historically been.

that correct so I'll take the second question around price and Murray's will take the volume question and help me if if we got anything right so on oil prices it's So we updated our oil prices as we do every year. We updated them last year. And basically, from our existing assumption, the near-term prices drifted up a little bit, and the long-term prices drifted down a little bit, such that on average throughout the period, they were pretty much the same. Our oil price assumption for 2030 is $60 real based on a 2020 baseline, which is $71, which is roughly what it was in 2021. Now, the question, of course, that you ask is, well, what if the transition goes faster, if it does this or that? What I think is interesting, Martin, about the transition question is that an accelerating transition doesn't always lead to a lower oil price. It depends on investment patterns, not just demand. so you could argue you could see a world where because of lack of investment even though the energy transition is accelerating oil prices are much much higher which is sort of counterintuitive to how some people would think about it i think because the in general sense is that accelerating transition means lower prices that need not be uh... the case because uh... As we know, it relies not just on a demand side of the equation, but also a supply side. And of course, what people sometimes forget is that oil fields decline, and therefore they need investment. So that's a long story short to say the energy transition could actually result in higher prices, even if it's accelerating, as well as obviously result in lower prices. Our job on an annual basis is to put forward our best view. knowing that it's probably not right. I think I can say that because it's true. Probably. Probably not right. But it is our best estimate, and our best estimate is $60 real, and we think that balances up all the things that we know about in the world. If oil prices are lower, our business is resilient to that. We've taken out costs. We're at $6 per barrel production costs. We've got the tightest, highest margin portfolio that we can. And that $9 to $10 billion won't be 20% of overall EBITDA. It'll be 50% or something higher and vice versa. So there's no simple answer to your question, I'm afraid, but that's how we would think about it. And then on the upstream volumes and underlying production flat...

Yeah, note one in the SEA gives you each quarter our latest view on oil price, and we don't see the dip in oil price in the SEA until 2040. God knows if we're right, but that's our viewpoint right now. Production, so the production guidance that we gave two years ago, 2.6 down to 2, down to 1.5 with squiggles as estimates a decade out. It's a little bit tricky a decade out. We were a little bit vague in what we said about divestments versus underlying decline. We didn't really give hard guidance. Ariel and the team have been, and with Gordon, have been working this very hard now for the past couple years since we last talked to you. Some transactions have changed. You know, Angola's become a very, very strong asset with the ANI transaction we did. It looks like a fabulous set of assets there. So we've had portfolio change. We've had drilling success. We're applying, we're digitizing our 10 core processes inside the upstream and refining. And Gordon and Ahmed are uncovering some pretty cool things that mean the reservoirs are going to perform better than we thought. the technology, the capital efficiency of the business is going to be higher than we thought last time around. So right now, what we're guiding to is we were at 2.6 in 2019. We're obviously around 2.2 in 2021. We still have this guidance of around 2 in 2025, and we still have this squiggle 1.5 in 2030. What we're now saying is that decline from 2.2 to 1.5 is basically going to be gradual divestments over time. and that we can hold the base business flat now with growing margins, at least 20% growth in margins as we bring on Mad Dog Phase II, Tangoo, et cetera, et cetera, and we pivot the investment more to the deepwater goms of the world, to the BPXs of the world where the Permian's doing really well. So it's a pretty material update to our view on the hydrocarbons business, and it's a fabulous cash flow generator for us through the decade. And, you know, we're investing pretty much everything we can in every basin with the exception of one, which is BPX, which we'll continue to manage for a dividend.

So just follow up very quickly there. So there's a half a million barrels a day of production in the second half of the decade for zero incremental capex relative to previous guidance?

Including divestment, et cetera, yep. Yeah. Well, we were a bit vague. We weren't very specific on what divestment was in the second half of the decade, Martin. So a little bit tricky to suggest that. We were just vague. Yep.

What we're not doing, we're not investing for growth. So we're saving that capital. We're not exploring in new basins. All of those things remain as is. What we are doing is investing in high quality investment opportunities and continuing to high grade the portfolio. So it will be smaller in a volume sense. It will have equivalent cash flow. It'll have higher returns. It'll have lower emissions. For us, it feels like a good way to run the business. The world needs it, and it will provide us with the cash flows.

And hopefully you're used to us. We generally don't make promises we can't deliver. We tend to try to make sure that we can deliver these things. So it feels prudent right now.

Let's throw it out there. We keep going in the room. Go ahead.

Hi, it's Henry Tarr from Berenberg. Two questions. Obviously, in the current environment, sharply higher commodity prices. Are you seeing risks of an increasing fiscal burden? So we're seeing headlines in the UK around windfall taxes. I wonder whether, you know, post-COVID governments are looking for ways to refill the coffers to some extent. And then the second question, on the balance sheet, obviously the position there is improving. There's been a focus on divestments. As your own valuation starts to improve, we've seen on the transition and low carbon side, valuations there sort of come the other way over the last 12 months. Are you starting to get more interested in acquisitions in some of that low carbon area? Thanks.

Great, Henry, thank you. Quickly, and Murray will correct me. Fiscal burden, are we seeing anything around the world? The answer to that is simply no, we're not. We're not seeing increased pressure at this point in time. Obviously, there's a debate in the UK about a windfall tax. We obviously have said what we feel this morning about that, which is, you know, If anything, the UK needs more gas, not less gas right now, and that's going to require more investment, not less investment, and a windfall tax isn't probably going to incentivise more investment, number one. And number two, what we need to do is help Britain transition. And we also announced this morning... that for every pound we make in the UK this decade, we will invest more than £2 into the UK this decade. And the vast majority of that investment will be into the energy transition. Offshore wind in Scotland, offshore wind in the Irish Sea, hydrogen power, hydrogen at Teesside, net zero at Teesside for power, our refuelling, our charging network that we'll build out, the list goes on and on. So that's our position here in the UK, fiscal burden upping significantly. around the world, no, we're not seeing that. Murray, second question, do you want to take it?

I think the second question was, do we have more appetite for inorganics? I suppose that we will look at inorganics, obviously, but we'll stick to our $14 to $15 billion capital range for 2022. That includes inorganics. And the longer term that we've laid out, a 14 to 16, includes inorganics as well. You'll see us do $250, $500 million deals where we think it's sensible. Biogas is interesting places to do it. Ampli charging is an interesting place to do it, et cetera. So we'll do modest, we'll be pursuing modest things, Henry.

One of the slides in Murray's back is so very important because I think one of the, let's be transparent about it, the challenges that some people have had with the strategy has been around the renewable space where the returns are guided at 8 to 10%. And we're talking about $2 to $3 billion of EBITDA there by 2030 in a business that could be generating over $40 billion of EBITDA. So that has been a question. And that's why this disclosure this morning around these five transition growth engines are so important. Because it is not just a renewables strategy, as some commentators have maybe written it to be. It's much more than that. First of all, it's a three-part strategy, of which low carbon is one. But importantly, in the transition, we talk about five growth engines. And two to three billion from renewables at eight to ten percent is one of five elements in that transition. And all the other ones have higher, much higher returns. So it is an element of, but not the totality of BP's transition story. Bioenergy is very important. EV charging is going to be a big business for us. Hydrogen is going to be a business. We've talked about convenience. So I think that is a very important message that we want to land today. Henry, thank you. We keep going. Irene, please, at the front here.

Thank you. It's Irene Kimono, Societe Generale. You gave us a lot of financial visibility on the transition. My question concerns the announcement that you aim for net zero across operations, production and sales. So I think you're adding the sales bit. I wonder if you can help us understand where Scope 3 fits in there. Is there any change to the previous definition of Scope 3 from your production only? And do we assume that the interim targets remain the same, except they now include sales?

Thank you. Very good. Great. Irene, thank you. So aim two is production, our definition of scope three. Aim three is product lifecycle emissions, and most people will call that scope three. So we cover... product emissions in two places, in our aim two, which is our production, and in aim three, which is around our sales. And the total sales in aim three used to just have our marketed volumes in there, but it's now also got our physically traded volumes in there as well, with the exception of crude, which is not something that is immediately turned into an emission. It has to go somewhere before it happens. We're consistent with some other companies on that. And that means that our baseline on AIM-3 increases from about a gigaton to about two gigatons when we include those physically traded volumes. Scope aim two is unchanged. That is still our plan. Aim three, three updates. It used to be 15% by 2030. It's now 15% to 20% by 2030. It used to be 50% reduction in intensity by 2050. It's now net zero by 2050. And the third change is that it is now total sales on all of those measures I just gave you on AIM-3 and not just marketed. And that's what we're doing. AIM-1 has also changed in that we have accelerated the 2030 ambition, which used to be 35%. We've updated that to 50%. from our operational emissions. So that's aim one is operations. Aim two is production. Aim three is sales or marketed products. So hopefully that helps. Thank you, Irene. We'll go to Oswald here.

Oswald Clender-Bernstein, two questions. First, one of your peers over in the US, I think last week, talked about collapsing the structure and the silos to bring out the best of the organisation. So something I think you said years ago, bringing downstream management from the basement up to the sixth floor and working together and things like that. So you mentioned the 26 turnarounds working together last year, but I'd love to get some more examples. of what the best of the organisation has come out through BP. Maybe numerically or cost savings structurally or volume improvement structurally would be the first question. And secondly, back on renewables and confident message again on the 8% to 10% returns. I noticed, though, in LightSource, they do deals like last year, one in Spain, They talk about commercial close pretty quickly, eight months. But one of the ways to get there is with a PPA in a competitive process with BP trading. So there's a good price coming from here to light source allows you to be confident there. But is there any value leakage as Carol's team take that the other side? And how can we be confident there's a strong return coming the other side?

Great. Oswald Murray will be thinking of the second one and help me with the first one, I think. And we can talk to Gordon afterwards on some more of the examples. But the upstreamers tend to be a pretty proud bunch. But the refineries, people have been helping them out as we brought these organizations together. So it's not a specific cost number, but we had challenges in... in Egypt around flange integrity on one of our projects. And we deployed some refining people who were expert in that space to go and sort the issue for us. We also had a situation in Trinidad on a project that we were building where we had some compressor issues or something. And again, refining technology people were deployed into the oil and gas business to help that. Now, you would argue that should be happening in any company, but there is a reality of organizational boundaries and so on and so forth. So I personally, and the turnaround one is a brilliant example, We're going to see more and more of that. I'd be lying to you if I said that everything was working exactly as we want it to be on day one. It takes time for an organization to settle down, people to get to know their new roles. There's been a lot of change, and we're settling down now, and that's what the focus is on this deliver. It's only one job now, deliver. And I think we're going to go and see more and more opportunities as the year goes ahead. You've also got Leanne next to you. who used to, in her, well, still does, I guess, or about to change, runs our global supply chain organization. And it's something we debated for years. We used to have an upstream supply chain organization and a downstream one. And we brought them together a few years back. And again, I think I've actually personally been surprised at the value that's been created through that process. You know, one of the questions we're encouraging people to ask inside the company this year is a very simple question, which, again, is obvious, but we need to do more of, which is whenever faced with a problem, whenever faced with a question, the one question we must always ask, what's the right thing for BP? What's the right thing for BP? And maybe that's a lead-in to the second question about integration, but more and more examples to come as the organization now settles down. Murray?

Yeah, I think some stats saw us on collapsing. There were maintenance contracts that the downstream had cheaper rates than the upstream had, 25% savings when you brought the contractor.

I thought we were low cost.

In the upstream? Yeah. Yeah. When you bring that together, you get 25% savings because the upstream was paying more than the downstream. That's a small example of what we've seen in the procurement space over time. The part that I'm super pumped about is we've underinvested in digital in the downstream sector. and history. We just haven't had that focus and the passion that Bernard and I had. We spent five years streamlining to one financial system inside the upstream, enables us to now deep dive and task mine and knock 30% to 40% efficiency or dis-efficiency out of the upstream. We'll have a five-year program to go invest in the downstream now, synthesizing the back office, getting onto a single system, put task mining on top of it. That prize is going to be big as we get into it. It's something that we definitely haven't done. So there's just a tremendous, tremendous prize to bring together the best of what downstream did, which was real rigor in process safety and cost discipline with the technology from from the upstream and create fabulous results. So that's enough of me and my diatribe on technology. And then on trading and shipping, that question made me smile, Oz. Carol's traders aren't going to allow her to do a deal that she loses money on. They're just not incentivized that way, et cetera. So if you see a transaction between trading and shipping and light source BP, you can know that it was a competitive process and that the traders feel they're getting a good deal. There's a reason that trading and shipping does a 2% uplift to returns, and it's from the competitive edge that they have and the scale of their business. So rest assured, it was a good deal.

We've got a few minutes left. Thanks, Oz. And we'll see Christian Malik is on Zoom.

Hi, thanks for taking my question. Hi, thanks for taking my question and sorry I couldn't be there in person, so I'm noticing a bad stomach. But first of all, I've got to say well done on today's results and delivering what you promised. Two questions from me. First, when I look at your EBITDA targets from 2025 onwards, I can't help but worry that These acute trends we're seeing on inflation, supply chain issues, rising interest rates will negate the returns that you plan to make both in oil and gas and renewables. In the former, I'm having a hard time squaring a decline in volumes or with a sustained EBITDA and if cost inflation and execution start to become problematic. So can you just help us frame what are your base case assumptions around some of these headwinds? so that we know that these returns have been appropriately risked. And the second, it's a bit more philosophical, but relates to the energy crisis we're in. I guess while on one hand we're seeing improvement in revenue coming from higher energy prices, it seems to have a negative impact vis-a-vis rising customer costs and geopolitical societal risks. So my question faces on two elephants in the room. First on Russia and how you see the long-term relationship evolving with dividends versus returns. the risk of geopolitics, and then second, on the higher economic rent, which feels like a real threat if society becomes frustrated from the energy transition becoming too costly for the consumer. Thank you.

Thanks, Christian. I'll take the second question, and I'll let Murray take the first one. On Russia, look, one of the things... I've learned in my life, you've probably all learned in your life, is let's not worry about things until they happen. And who knows what's going to happen. Russia is a big part of the energy system globally. It's a member of OPEC+. It supplies gas and energy into Europe. We, along with many of our peers, have a presence in Russia. We've been there over 30 years. Our job is to focus on the business of business, which is what we're doing. There are no changes to our ongoing business in Russia today. And if something comes down the road, then obviously we'll deal with it as it comes down the road. So that's all I would say on Russia. On rent, I think it's a great question, Christian, and it's one that's on our mind, and I'm sure it's on governments' minds. I think the real concern is that if the consumer or if society equates higher costs with the transition, then that will, in effect, have the potential risk of slowing down that transition that society so desperately wants. So that is why I think we feel very passionately about the need for real plans in this space such that we don't just tackle one side of the equation, but that all sides of the equation are tackled. Because if we don't tackle demand as well as supply, if we don't think about what's going to replace hydrocarbons or what we're going to do with hydrocarbons, then I think we end up in a situation potentially where the consumer is effectively put off the transition because of the cost. And I think that would be a real shame and not something that we want to happen. So that's what we're trying to do everything that we can to be able to prove that you can get clean, reliable, affordable energy. But it takes some compromise, and that's the reality. So two great questions. Murray, and we'll begin to wrap, I think. Yep, great.

So, I mean, for the past two decades, Christian, we've planned on CPI, and then the business has to beat that inflation. That's what we've done for the past two decades. We've been through many price cycles through those two decades, and we've been able to achieve it. Looking forward, we plan on CPI inflation, and then the business has to tackle it and has to eat that inflation. And, you know, interestingly, I think if we talked to you in Oman or in Baku, we'd have said we see 30 to 40 percent waste in the business. I still see 30 to 40 percent waste in the business. There's still just tremendous opportunity in this sector to do better. And the new sectors we're operating in, it's the exact same. So I think our job as a business is to eat that inflation. Why do I say that? Because the price could be low at any moment. We can't let costs creep into our business because we don't control the commodity price. So yes, we do plan on inflation. Yes, we do eat it. We've got two decades of track record of doing it, and I remain convinced that there's huge prize to get after that will help us tackle it over the next decade as well, Christian. So I think on balance, our plans are just fine.

And I'll give you an example. I've spent most of my career in drilling. We've had a massive focus on non-productive time for every time, every day I spent in drilling. And yet we brought it down 20% over the last two years. Or last year, we brought it down 20%. There's always room to go. There's always more to do. And that's why Agile... digital, supply chain efficiencies, where there's massive opportunity, as Murray says. Last question on the phone for those of you in the room. You can catch us afterwards. Paul Sheng at Scotiabank, and then we'll wrap. Paul, if you can make it quick, please.

Thank you. Thank you for that. I hope you get better, Christian. Two questions. One, for hydrogen business, can you talk about what's the risk to achieve your target? I mean, yes, it depends. going to be driven by some form of improvement in the economic or technology that we see or that the existing technology as well as the existing government support will be sufficient for that business? That's the first question. The second question is that when we're looking at your biofield business, With the feedstock calls have been rising because of that, and also that we see a substantial margin squeeze, how that may impact your investment plan in the future? I mean, that you think that it's just transitionary and you don't believe that it's going to have any long-term implication.

Fantastic. Murray will take the biofuels question. Paul, on hydrogen, ultimately it's a cost question, isn't it? How do we get the cost of hydrogen, of blue-green hydrogen, to a different place so that it is truly competitive? It's going to require... a mixture of things it will require policy support it will require initially customers willing to pay a little bit of a premium probably it doesn't really require much on the technology side other than it does require scale to be built so that we can get repeatability I'm personally optimistic that we will see all of that. I think the policy support, we see it here in Britain as we're trying to build a green and a blue hydrogen plant up at Teesside. I think we'll get the support that we need. Customers are crying out for this. They're all under pressure to decarbonize their portfolios. They're trying to figure out how to do it. They're coming to us all the time trying to ask, and some are willing to pay a little bit. So let's see where that goes, and the scale will come. So this is a business where we have, you know, it's like anything at the beginning. It's a bit of an effort, but that's what... we need to do. If the world is going to decarbonize, it's hard to abate sectors, which it must. Hydrogen will be a part of it. It's a necessary part of that. And that will happen. And we're beginning to see the early stages of why we should be optimistic about that. And we'll have Anya come later in the year and dive into this in greater detail. Biofuels and costs and stuff, and then we'll wrap.

Yeah, I think on biogas, the key is that you need to be along the entire value chain. So you need to take positions upstream, midstream, downstream, and that's what we do. It's hard to predict where the rent will be. It does move, much like it has in oil value chains and gas value chains in history. So from our perspective, we just make sure we're all along the value chain, and that way we don't face risk on the rent. So you will see us take some equity positions in the upstream. You'll see us do an awful lot of long-term contracts, both near-term and long-term, to manage the risk. And then Carol will optimize and trade around it across biofuels, biogas, et cetera. So playing along the whole value chain is what's critical. On biogas, we've got 35 flowing units. It's a lovely phrase, flowing units. We have 35 of them and 25 under construction, so we've got 60 out of the 220 that we're talking about already there. They're all under long-term commitments, a decade or so. So pretty cool business, makes great money.

And we'll look at expanding our RAL network in Germany, elsewhere in Europe, and we may go upstream in Europe as well in this space, so very exciting. Excellent. Thank you all. Sorry, we've run a few minutes over. For those of you in the room that we didn't get to, we'll be mingling around and happy to have a chat at least for a few minutes. Big thanks to Craig and his team for the enormous amount of work that went into that. Getting ready for today, Julia, you and your teams and strategy, huge amount of work gone in right across all the organization. Thank you for being here in person. Thank you for those of you who've listened in online. Hope it was helpful. Great to see you all back in person here in London and appreciate the interest. And we'll leave you all to it. Thanks.