BP p.l.c.

Welcome to the BP Presentation to the Financial Community webcast and conference call. I now hand over to Craig Marshall, Head of Investor Relations.

Good morning, everyone, and welcome to BP's first quarter 2022 results presentation. I'm here today with Bernard Looney, Chief Executive Officer, and Murray Auchincloss, Chief Financial Officer. Before we begin today, let me draw your attention to our cautionary statement. During today's presentation, we will make forward-looking statements, including those that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to the factors we note on this slide and in our UK and SEC filings. Please refer to our annual report, stock exchange announcement and SEC filings for more details. These documents are available on our website. I'll now hand over to Bernard.

Thanks Craig. Hello everyone and thanks for joining us. As everyone is aware, we are reporting today against the backdrop of Russia's attack on Ukraine and the terrible consequences it is having for people in the country and in the region. At BP we have been supporting the humanitarian response through a financial contribution to the relief efforts, matching of employee donations by the BP Foundation and paid leave for BP staff who wish to volunteer to support the relief effort. And as we know, the war is also having an impact globally on energy markets and the cost of living, creating a terrible situation for many people around the world. We are looking at what we can do to provide support while also remaining fully focused on the day job, which at its core is about keeping the energy flowing where it is needed. To that end, we are in close contact with governments in Europe, working hard to provide the energy that customers and economies need. On 27 February, we took the decision to exit our 19.75% shareholding in Rosneft. In addition, we plan to exit all our other businesses in Russia. The Board undertook a thorough process, concluding that Russia's military action represented a fundamental change, and that BP's involvement with Rosneft, a state-owned enterprise, simply could not continue. This decision impacts our people. Before the conflict, we had around 200 employees in Russia, the majority Russian nationals. We are doing all we can to look after them, including continuing to pay their wages until at least the end of 2022 and looking at options for redeployment. And of course, this decision has a financial impact. With today's first quarter results, we have taken a material non-cash charge and as a result have reported a significant headline loss this quarter. Murray will talk to this shortly. However, the underlying business continues to perform. Importantly, we have accommodated the loss of future Rosneft dividends within our resilient financial frame, which remains unchanged, as does our strategy. Now turning to BP's strategy. Current events emphasize that the world faces an energy trilemma. We need energy that is not only cleaner, but also reliable and affordable. And in our view, these are not mutually exclusive. This is exactly why we outlined our strategy in 2020 to become an integrated energy company, to deliver resilient hydrocarbons to provide energy security today, while at the same time investing at scale to accelerate the energy system of the future. We have been delivering step by step ever since. And as you can see from the slide, we have made a strong start to 2022 in each of our strategic focus areas. In resilient hydrocarbons, we have started up the high margin Herschel expansion major project in the Gulf of Mexico. We signed an innovative deal to combine our Angolan assets with those of ENI through the creation of Azul Energy, bringing the potential for more efficient operations and increased investment. we partnered in an oil discovery in brazil where evaluation is ongoing signed an 18-year agreement with cogas to supply around 1.6 million tons of lng per year from 2025 and advanced our strategic ambitions in biofuels starting production of saf at our lingen refinery in convenience and mobility we are making rapid progress executing our strategy Here we have advanced our EV charging strategy, launching a strategic partnership with Volkswagen Group to roll out an EV fast charging network in Europe and the UK, and announcing plans to invest £1 billion over the next decade to support the rollout of fast, convenient charging infrastructure across the United Kingdom. We signed a strategic collaboration agreement with DHL Express to supply SAF and signed a global strategic convenience partnership with Uber, aiming to make more than 3,000 retail locations available on Uber Eats by 2025. In low-carbon energy, we are excited to welcome our new EVP, Anja Dotsenrath, as we continue to focus on building scale with capital discipline. Since the start of the year, we have increased our position in offshore wind with the Scott Wind Lease Option Award of around 1.5 gigawatts net. We've announced an agreement to form an offshore wind partnership with Marabini in Japan, announced plans for a 250 megawatt green hydrogen project in Rotterdam, and signed an agreement to form a joint venture with Aberdeen City Council to develop a hydrogen hub. As you can see, we have real momentum. We are executing our strategy, delivering real progress across our five transition growth engines, EV charging, convenience, bioenergy, renewables, and hydrogen, as we transform to an integrated energy company. Let me now hand over to Murray, who will run through our first quarter results. Murray.

Thanks, Bernard, and good morning, everyone. Let me start with the macro environment. Turning first to the oil price. Against a backdrop of reduced levels of spare capacity, Russia's attack on Ukraine added to the upward pressure on prices. This reflects both an increased risk premium and the impact of sanctions and self-sanctioning by market participants. In early March, Brent reached its highest level for almost 14 years. And in the first quarter, Brent averaged $102 per barrel, 28% above the fourth quarter. Looking ahead, there remains an elevated risk of price volatility. This reflects uncertainties around the level of disruption to Russian supply, the capacity for increased OPEC plus supply, the ongoing impact of COVID on demand, and the impact of the war on economic growth. Moving to gas markets, heightened concern on supply risk drove an increase in quarter average prices in Europe. Forward prices also moved higher, and the outlook in the short term remains heavily dependent on Russian pipeline flows to Europe. Quarter average spot prices in the US were broadly flat, but forward prices moved higher as gas production remained below 2021 peaks and LNG export demand grew. Finally, refining, where industry margins have increased sharply since the invasion. BP's RMM rose by 25% to average $18.90 per barrel in the first quarter and currently stands significantly above this. This move has been driven by a particularly tight oil product market. OECD product stocks in February were 9% below their five-year average. In the second quarter, we expect industry refining margins to remain elevated due to ongoing supply disruptions, particularly in Russia and Europe. Turning to the impact of BP's decision to exit its businesses in Russia, with BP's two nominated directors having stepped down from the Rosneft board as of the 27th of February, BP no longer equity accounts for its shareholding and will no longer report Rosneft as a separate segment. This change has resulted in a net pre-tax charge of $24 billion with today's results, classified as an adjusting item. This comprises, first, a pre-tax impairment charge of $13.5 billion, representing the full carrying value of the Rosnest stake at the 27th of February. The level of uncertainty as to the value of the shareholding means that, under IFRS, it is not currently possible to estimate any value other than zero. Second, a pre-tax charge of $11.1 billion, principally due to foreign exchange losses accumulated from the date of the initial investment to the 27th of February. Of this, around $1.4 billion has an incremental impact on equity. And third, an offset of around $500 million representing BP's share of Rosneft's post-tax income in the first quarter until the 27th of February. In addition, BP's decision to exit its other businesses with Rosneft in Russia has resulted in a pre-tax charge of $1.5 billion, which includes the full carrying value of those businesses. This is also recorded as an adjusting item. And finally, adjusting items include the release of a $1.1 billion deferred tax liability relating to Russian withholding tax on BP's estimated share of Rosneft's undistributed profit. Taken together, these adjusting items resulted a post-tax charge of $24.4 billion and a total reduction in equity of $14.7 billion in the first quarter. As disclosed in BP's 2021 annual report, the exclusion of BP's share of Rosneft net income from BP's underlying result has increased our expected underlying effective tax rate for 2022 to around 40%. Looking further ahead, on the 27th of February, we indicated that as a result of no longer equity accounting for our interest in Rosneft, the expected loss of future earnings from Rosneft have lowered our 2025 EBITDA targets for resilient hydrocarbons and the group by around $2 billion. We have also lowered our respective 2030 EBITDA aims by the same amount. However, excluding Rosneft and our other Russian businesses from both base years and future periods, we continue to expect to sustain EBITDA from resilient hydrocarbons around 2021 levels through 2025. Aim to hold around this level through 2030 at constant real price assumptions and expect to deliver a 7% to 9% EBITDA per share CAGR between 2H19, 1H20, and 2025 at $50 to $60 per barrel 2020 real. Our target to grow Group Oachi to 12% to 14% by 2025 and the aim of $9 to $10 billion of EBITDA from transition growth businesses by 2030 are also unchanged. And we have accommodated the expected loss of future Rosneft dividends within our resilient financial frame, with our five priorities remaining unchanged. This includes our guidance on distributions and capital investment. Finally, in the appendix to this presentation, we have updated some of the key slides presented on February 8th to reflect the exclusion of Rosneft and our other Russian businesses. Moving to results. In the first quarter, we reported an IFRS loss of $20.4 billion. This included pre-tax adjusting items of $30.8 billion, primarily relating to our investments in Russia. Excluding adjusting items, we reported an underlying replacement cost profit of $6.2 billion compared to $4.1 billion last quarter. Turning to business group performance compared to the fourth quarter, in gas and low carbon energy, the result benefited from higher realizations and an exceptional gas marketing and trading result. In oil production and operations, the result reflects higher realizations despite the impact of price lags in the Gulf of Mexico and the UAE. This was partly offset by the impact of lower production. In customers and products, the product's result benefited from exceptional oil trading and a stronger refining result. The customer's result was resilient despite seasonality, ongoing COVID impacts, notably in Germany and China, and lower margins due to rising commodity prices. Looking ahead, there is an elevated level of uncertainty due to the developing impacts from the conflict in Ukraine and ongoing COVID-19 restrictions. For the first quarter, BP has announced a dividend of 5.46 cents per ordinary share, payable in the second quarter. Turning to cash flow. Operating cash flow was $8.2 billion in the first quarter. This included a working capital build of $4.1 billion after adjusting for inventory holding gains and fair value accounting effects. Capital expenditure was $2.9 billion, with our guidance for 2022 remaining in the range of $14 to $15 billion. And disposal proceeds were $1.2 billion, with guidance of $2 to $3 billion in 2022 also unchanged. During the quarter, we repurchased $1.6 billion of shares. This included $500 million to offset the expected full-year dilution from vesting of employee share awards in 2022 and $1.1 billion of the $1.5 billion program announced with fourth quarter results. This program was completed on April 27th. Reflecting the strong underlying cash flow delivery, net debt fell for the eighth consecutive quarter to reach $27.5 billion. And with first quarter surplus cash flow of $4.1 billion, we intend to execute a buyback of $2.5 billion prior to reporting second quarter results. As already outlined, our financial frame remains unchanged. We continue to believe this disciplined frame provides transparency around our capital allocation plans and serves us well in this volatile price environment. An average 2021 to 2025 cash balance point of around $40 per barrel provides resilience and supports our dividend, balance sheet, and investment plans. And a clear CapEx range, including in organics, together with a framework for distributions, drives investment discipline and provides a transparent mechanism for returning surplus cash flow to investors while also strengthening our balance sheet. We remain committed to allocating 60% of 2022 surplus cash flow to share buybacks subject to maintaining a strong investment grade credit rating. I'll now hand back to Bernard to conclude today's presentation.

Thanks, Murray. To summarise, against an uncertain backdrop, we are working hard to provide the energy that customers and economies need. At the same time, we are steadfast in our focus on delivery, on performing, while progressing our transformation to an IEC, all in service of delivering long-term value for our shareholders. We should stop here now and take any questions that you might have.

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OK, thank you everybody again for listening. We're going to turn to Q&A now. We are going to try and keep this tight and look to finish on the hour. So as a reminder, as usual from me, please limit your questions to no more than two so we can give everybody a chance to get through. On that note, we're going to take the first question from Christian Malik at JP Morgan. Christian, good morning. Christian, do we have you?

Hi, Christian. Yeah, sorry, can you hear me?

Yes, we can. Thanks.

So congratulations on the results. First question, I think to stick to one question, is your all-macro outlook, and just in the context of your long-run all-price. I know two years ago you talked about sort of more sort of bearish for longer view, and within that context, I wanted to have you have an update on your macro outlook. Thank you.

Very good. Good morning, Christian. Sounds like you're traveling. Hope all is well. On the macro outlook, if we talk kind of oil and gas prices in general, I think there's probably about a million barrels a day we would estimate off the market today of Russian crude. That number, we think, will probably increase this month when the existing sanctions come into effect for real. That number could double. And obviously, if there's further sanctions, we shall see. As we step back, I mean, I think stocks are relatively low on gas and oil at the moment, filling a bit in Europe on gas, but relatively low overall. Spare capacity in oil, I think, is relatively low. And, of course, a lot of uncertainty out there at the moment, a lot of uncertainty overall. whether it be what's going to happen with Iran, the zero COVID policy in China, what's happening with inflation and the knock-on impacts on global economic growth, what's going to happen in Libya, what's going to happen with U.S. shale. So a lot of uncertainties. I think where does that leave us? I think probably in a world where Volatility will continue to be the order of the day. So I think we expect a continued volatile outlook for energy prices and we probably expect prices to remain strong in the near to medium term. In terms of updating our assumptions, we do that on an annual basis. We'll be doing that, Murray, in the middle of the year. And I think it's best that we come back to you then with how, if at all, this current environment has shifted our medium, longer-term outlook. So we'll come back to that in the middle of the year.

Sean, just to sort of follow up, and I guess the backdrop to the question was around your capital frame and whether we could see a higher allocation towards particularly oil investing and around shale if it were to prove that we're in a more higher for longer environment outlook. So in an event that we see a sort of reframing around the long run outlook, could we expect you to sort of allocate or sort of shift investments and potentially slow down renewable? Or is it very much a sort of business as usual, no fundamental change, just relative to two years ago when you were sort of framing your macro outlook as 2030?

I think one of the good things that we have is our financial frame is very clear and it's been very consistent. I think discipline is the order of the day. We'll spend between 14 and 15 billion dollars on capital investment this year. Our medium term guidance around capital is 14 to 16 billion dollars. There's no change to that. We're going to continue to invest in the hydrocarbons that the world needs today and we're going to continue to increasingly invest in advancing the energy transition, which is also what the world needs. So no change to our plans, staying with the plan that we have, discipline being the important order of the day. Excellent. Thank you very much. Thanks, Christian.

Thanks, Christian. We'll take the next question from Biraj Bokhtari at RBC. Biraj.

Thanks for taking my question. The first one's hopefully a straightforward one, but just looking at the differential cash tax versus P&L, obviously, I'm assuming this is just the lag, you know, in terms of the rate at which commodity prices increase and flow through to cash tax. Is there any reason why, you know, in a, let's say, a steady-state commodity price environment, that wouldn't sort of normalize as we move through the year? And the second question, just following up on the last one, You referenced the energy trilemma. I'm just thinking, as you're moving away from crisis management to thinking about the longer-term or medium-term strategy, you put the press release out today on the UK investments. Presumably, other governments and stakeholders are probably asking you to do more, but you're sticking with the current capital framework over the medium term. If you're spending more to accelerate the transition, where is that capital coming from or where are you slowing down or doing less? Thank you.

Raj, thank you. Murray, tax, your favorite subject from your previous life, I think.

Thanks, Bernard. I still try to deny that. Morning, Barrage. On effective rate and cash tax rate, on an underlying basis, you saw that our effective rate was 32%. Our cash tax was a little bit lower than that, as it normally is. I wouldn't look at the headline rates. They're pretty tricky, given the scale of the impairment that we saw this quarter. So you would expect ETR and CTR to close over time. Maybe the cash tax rate's a little bit lower through cycle, so... I would anticipate that 40% effective tax rate that we talked about on an underlying basis, cash tax slightly less than that. And of course, any one quarter can deviate from that really based on mix of profits. And that's what you saw in the first quarter was a mix of profits.

Very good. So, Baraj, thank you for the question. I think stepping back, let's just think about our strategy as an integrated energy company. And as you said, its purpose, and we actually said this two years ago, we're not just saying it now, its role in life, its purpose is to solve the energy trilemma. Yes, the world needs cleaner energy, but it also needs energy that's reliable or secure. And it needs energy that is affordable. That is the energy trilemma. And the role of an integrated energy company is to solve that trilemma. Now, how do we do that? We do that by investing in hydrocarbons today. And you see us doing that with the majority of our investment today going into hydrocarbons. And we do that at the same time, not a or, at the same time by investing in accelerating that energy transition. And we invested probably about 3% of our capital in 2019 in non-hydrocarbons. By 2025, which is just a few years away, over 40% of our capital will go into non-hydrocarbons, and that number will be 50% by 2030. The increase that you refer to in the UK, the £18 billion in the UK, that is part of the financial framework that we have laid out. We have said within that that we're increasing investment in the UK from what has historically been 10% to 15% of our capital. will now go up through this decade to 15% to 20% of our capital. And that's because the policies are in place here in Britain to support that. The resources, be they hydrocarbon resources or low-carbon resources, are here to enable us to do that. And the skills and the education system is here to enable us to do that. So in many ways, what you see in the UK barrage is a microcosm of the integrated energy strategy overall, and you're seeing it on a national or a country level. Investing in hydrocarbons like we will do in the North Sea today, bringing on a new development like we're doing at Murlock, and at the same time, investing in the energy transition system of the future, investing in offshore wind, investing in hydrogen, investing in solar, investing a billion pounds in electrification. So part of our plan and the increase that you're seeing is an increase in the weighting of capital in the UK from 10% to 15% to 15% to 20%. Hopefully that helps.

Biraj, thanks for your question. We'll take the next question from Martin Ratz at Morgan Stanley. Martin, good morning.

Yeah, good morning. I've got two questions, if I may. First of all, I was hoping you could elaborate a little bit on the comment around sort of tightness in product markets. It strikes me as very clear, all the product prices are extremely high, but I was wondering how you see that developing sort of going forward. How much slack do you think there still is in the global refining system. Are BP's refineries by now running at maximum capacity? I think that's an important question. So your perspective on that issue. And then secondly, perhaps your answer is going to be, well, this is more for full year results than for 1Q results. But I'm going to ask the question nonetheless. The combined share buybacks that you've now announced for the first half of the year are sort of in the order of $4 billion. The market cap of BP is about $100 billion, so you can buy back 4% of the shares. With 4% of the shares, you've effectively neutralized the 4% DPS growth that you've guided for. So if there are incremental buybacks in the second half, if you stick to the 4% dividend growth guidance, actually the total dividend that the company distributes and absolute billions of dollars, which actually sort of start to shrink. And I was wondering if that is sort of, you know, the message that you want to send or whether perhaps this 4% DPS growth guidance could at some point be reconsidered. And I'd be interested in your thoughts about that, too.

Very good. Martin, why don't I let Murray answer the dividend question?

Yeah, thanks, Martin. Financial frame's intact, guidance around it's intact. Martin doesn't change until it changes. We have the capacity to grow the dividend, which is our first priority at 4% per annum out to 2025, assuming a $60 world. And, of course, on buybacks, we have the capacity to do $4 billion a year at $60 as well through 2025. That guidance remains unchanged for now. and each quarter we'll revisit the guidance and decide what we do. But you are correct, we are buying back substantial shares right now. So that will be something for the board to contemplate each quarter as it thinks about the financial frame.

Martin, thank you. On products, I think what you're seeing is that the system in the West, the refining system in the West, is sort of running flat out. The spare capacity that is in the global system is largely now in the East. BP's refineries are running pretty much flat out at the moment where they can. And we're doing everything that we can to give the market what it needs. I think gasoline stocks, jet stocks are relatively low at the moment. Diesel stocks are actually globally in reasonable shape. So there is a strong environment at the moment for refining. I think we saw RMM. up around 17 in the first quarter. I think it's running at 37 Murray-ish today, 30, 37 today. So it is a strong environment. The refineries that we have are running flat out. The majority of the spare capacity in the world is firmly in the east today. So hopefully that helps, Martin. Thank you.

Thanks, Martin. We'll take the next question from Lucas Herman at Exxon BNP. Lucas.

Two questions, if I might, both relatively straightforward. Murray, first of all, divestment proceeds from the year, you've done over a billion in the first quarter, as all should come through through the course of this year. Two to three billion is starting to sound relatively modest, isn't it, if I treat as all as being a divestment, the proceeds coming in as being a divestment. And secondly, if I could just... ask around the price lags, you know, and not least, you know, what's happening with the U.S. onshore business and the direction of production, which seems to have moderated this quarter. And price realizations, not least on gas, also seem relatively modest. But if you could expand on, you know, price lags in the Gulf and why perhaps, you know, profits there as well were not as high as one might have anticipated given the macro backlog. Thank you.

Thanks, Lucas. I'll let Murray take both.

Yeah, divestment proceeds, Lucas, the overall frame we talked about is 25 billion out to 2025. I think we've got 14 of proceeds in so far to date relative to that promise. And you're right regarding we're guiding two to three billion a year. We achieved 1.2 in the first quarter, which was a good start to the year. We do have other divestments in the hopper. And of course, timing on these things is very tricky to predict. The other thing I'd say is bid-ask spreads are fairly wide right now between buyers and sellers, and so it's taking more time. I do think the two to three remains good guidance for now. And if you're right and things move faster, then we'll update guidance in due course. But we're just being careful given how long it's taking to close transactions given bid-ask spreads right now. I think on price lags, etc., you might remember that in the Gulf of Mexico, we price on a lag. It's just custom and practice. So all of our Gulf of Mexico offshore production, the prices it receives are December, January, and February. In those months, obviously, there was a big difference between December and March. And that decreases the prices in the quarter by $20. But we obviously picked that up in 2Q as we priced March, April, May. So that's what's happening inside GOM and Abu Dhabi when you look at our realizations. On BPX, it's a little bit difficult to look at those realizations. When you look at BPX liquids, that's both NGLs and oil. So you have to create a melted pot of pricing to understand that. And on the gas side, we obviously hedge the gas side. So that's why you see slightly lower gas prices. I think that covered the questions, Lucas.

Murray, how far out do those hedges run in terms of the gas side?

Generally, we're running. Yeah, generally, we're running. Sorry, go ahead, Lucas.

No, I was just going to say, I mean, realizations or rather headline prices for Q2 are clearly very strong. To what extent has that been seeded via hedging, which is not something I expected to do, but.

Yeah, we've had a long practice now of hedging BPX when we set it out separately to ensure that we could continue the activity inside the entity. So that's a choice we've made as a corporation. And generally, the hedge windows are out 12 to 18 months later.

And not all the gas is hedged.

And not all the gas is hedged.

And on divestments, Lucas, I think the key overall message is we're not in a rush here. We're going to take our time. We're going to be seekers of value. And with prices being where they are today and the outlook being the outlook, that's only going to help our situation going forward when it comes to making sure we get good value for our assets. But There is no rush on these divestments, and that's our guiding purpose there. So thanks. Good to hear from you.

Thanks, Lucas. We'll take the next question from Irene Hamona at Societe Generale. Irene, good morning.

Thank you. Good morning, and my congratulations on very strong results. My first question of two is on Russia. Obviously, BP has been there for decades. You've always presented this as a key strategic region of prolific low-cost resources. Now you're out for reasons essentially beyond control. You retain your financial frame and the guidance, but does the organization perhaps feel that there is a little bit of a gap left in the AppSIM portfolio, strategically more than financially? And my second question on cost inflation, in the U.S., you reported a BPX unit production cost, which is up around 15%, I think, year on year. And then you report a BP overall upstream production cost, which is actually down. Can you please talk about the differences you're seeing in cost inflation pressures in U.S. shales versus rest of the world? Obviously, you're seeing more in the U.S. and how you're dealing with this. Thank you.

Irene, thank you. Good to hear from you. And I'll let Murray take the question around production costs and inflation. On Russia, just a couple of things I would say. Number one, you said we're out because of reasons outside our control. I guess I would just say that we chose to exit Russia. We chose to exit within... 96 hours of the the invasion starting so it was a choice obviously and driven by the attack on on Ukraine but at the end of the day it was a choice that we made and we made that choice because we believe it's in the It was both the right thing to do and it was the right thing to do for our shareholders. The first quarter results that you see today, Irene, are without Russia's contributions. So you're seeing BP and how it can perform absent Russia. You see a business that, yes, had a good trading performance, but also had its highest reliability in many, many years now, which is fantastic, 96.1%. We had our strongest first quarter convenience sales on record. Basket sizes, believe it or not, are up between 20% and 40%, 38%, I think, in Thorntons in the U.S. between now and pre-pandemic. So you see a company and what it's capable of. And our strategy is to become an integrated energy company. And that is about investing in hydrocarbons today while investing in the energy system of the future. And that's the five growth engines that we've laid out. So I don't see a gap in our portfolio at all. And I think I will just leave it there.

Great. And on cost inflation, Irene, I guess it's a cycle that's very similar to past cycles. The first place inside the portfolio you see inflation is generally the lower 48, and that's what BPX is seeing. Probably around 10% inflation after mitigation on CapEx, somewhere between 5% to 8% inflation across a broad range of services on cost. We're not seeing similar levels of inflation outside BPX, The U.S., there continues to be excess capacity inside the supply chain, and so we're just not seeing that there. On broad performance, we remain very, very focused on driving cost efficiency into the business through digitization plans that we've often talked about in the past, not only in BPX, but in the rest of the portfolio. So we're very focused on it. We believe we need to continue to drive cost and capital efficiency because only 15 months ago the price of oil was very, very low. So we're just going to continue to focus on that efficiency throughout the business. And as always, BPX is tackling the front end of inflation right now. And they're very, very focused on what they can do to mitigate that. I hope that helps.

Thanks very much. Thank you, Irene. We'll take the next question from Oz Clint at Bernstein, please.

obviously exceptional number. Could you perhaps talk about, you know, was that all gas? Is there any signs of power trading coming through that number? And I'm really kind of get a sense of whether you're set up appropriately for the rest of the year in terms of 2022. And just linked to that, I mean, and talking about CapEx here, I mean, how much gas can you bring forward in the portfolio and start to monetize within this kind of new gas environment? Is there gas caps? Is there subsea compression you're starting to work on? Things like that. That's the first question. Secondly, on convenience mobility, I think you say marginally down in the release this morning. It looks weak to me. This is convenience mobility ex-Castrol. Q1's not obviously the big quarter, and there was some talk around costs and foreign exchange, but Is it just that wholesale price coming up, squeezing the margin? Was it just FX? Is there anything else that's not working here? I'd just love to get a sense of that particular quarterly number. It does look weak. Thank you.

Oswald, thank you. Maybe I'll just have a quick go at the second and let Murray think about trading power and potential for accelerating natural gas. On convenience and mobility, as you say, excluding Castrol, it actually was our strongest first quarter on record. driven by a number of the things that I spoke about earlier. Basket sizes are up, as I said, between 20 and 40 percent, 20 to 30 percent up in Europe, 40 percent up in the U.S. at Thornton's. We have more loyal customers. We're up to 16 million loyal customers now, and we make quite a bit more from a loyal customer than we do a non-loyal one, so to speak. We have more premium sites. We have more premium fuel sales. They're up 2% since 2019. And the margin share from non-loyal Fuel sales has risen from 25% to 32%. So what are you seeing? I think the big thing is you're still seeing an effect of COVID, and retail fuels are still below the levels that we saw in 2019, I think, for BP. Our retail volumes are probably down about 8%. And, you know, we still had strong lockdowns in Germany in the first quarter. And we also have the situation in China. So at the core of your question, is something fundamentally an issue here? I would say absolutely not, Oswald. I just think it's a tough environment with the remnants of COVID lockdowns in Europe today. continuing in China, and obviously high oil prices, which are always a challenge for that convenience business. But the underlying performance of the business, loyal customers, we've got more customers as well, by the way, on BP Me on the app, more premium sites, more growth sites in India, more premium fuel sales, bigger basket sizes. And in electrification, we sold three times the amount of power in the first quarter than we did in the previous first quarter of last year. So that business is really accelerating with our top sites now being profitable. So that hopefully gives you a little sense of what's going on behind the scenes in convenience and mobility. Murray Trading Power, Natural Gas.

Yep. Hi, Oz. So on gas trading, I think that was your question. You know, what are the teams focused on? First, flow assurance, making sure that molecules get from the producing locations to the consumers. We think that's exceptionally important right now, given where the world is. So they're very focused on flow assurance and making sure that energy flows. Generally, our trading organization is set up to make profits when volatility occurs. And the first quarter was probably the highest quarter of volatility we've seen. So it's more about volatility. It doesn't matter if prices is high or low. It's about volatility. So are we set up well for the rest of the year? I'll let you judge what's going to happen with the rest of the year. On CapEx and acceleration, we have a lot of options to bring gas forward. to help Europe. Obviously, Tortue and Mauritania, Senegal, the first phase is ongoing. We're looking at a second phase that would help. In places like Chardonnays, we're looking at expanding the compression on the pipeline and bringing additional gas resource to Europe. Across the portfolio in the UK, we're looking at options around ETAP to try to draw more gas in as well. Some of the things you're talking about, like blowdowns, et cetera. So the organization is very, very focused on what we can do to help the energy flows in the world across many jurisdictions as we point towards Europe right now.

And not just on the upstream side, I guess also on the ultimate role of trading that we need to remind ourselves is to make sure that the molecules find a home and connecting supply with demand has never been more important than it has been for the energy systems in the first quarter. 55 cargoes of LNG into Europe in the last five months, 10 of those into the UK. We just signed, I think, our biggest LNG deal ever, actually, with COGAS for 1.8 million tonnes, I think, just a few months ago. So it's not just an upstream equity investment story around natural gas. It's also through the marketing and trading business, Oswald. So hopefully that helps.

Super. Thank you.

Thanks, Oz. We'll take the next question from Paul Cheng at Scotiabank in the U.S. Paul, thanks for being up early again.

Thank you. Good morning. Two questions, please. First, just curious that, I mean, with the Russian invasion, I think just want to see how that impact operationally your European refining operation. If the crew slay on the product yield, all those being impact within your system. And second question is on page 27 on your presentation. For your 2030 EBITDA, the chart there for the resin and hydrocarbon, it seems the chart suggests the oil and gas business will see a couple billion dollar of the improvement Can you quantify or maybe help us understand a little bit better where the improvement come from? Thank you.

Very good, Paul. Thank you. I'll let Murray take the second question. On the European refining system, we've got four refineries in Europe, in Castellón in Spain, Gelsenkirchen in Lingen in Germany and Rotterdam in the Netherlands. And I can confirm that all of the European refineries are All of BP's European refineries are clear of Russian molecules. So we've managed and adapted as you would expect. And those refineries are running independent of Russian crude today. And with that, I will pass you to Murray for the question on page 27, which is about the 2030 Outlook. Murray.

Yeah, morning, Paul. Let's see if I've hit your question here. You're looking at the resilient hydrocarbon Abbott Daw Bridge, and you're wondering where the increase in profit comes from across the decade. Obviously, the stuff we've talked about in the past, first of all, we're bringing in the upstream. We're bringing on higher margin barrels, offsetting decline in the other barrels. So that's a big chunk of it is an improvement in the mix. Second, we have a big focus on cost and improving the cost inside the oil and gas business driving the production cost per barrel from seven down to six across through 2025 and then holding that through the decade of course we're seeing an improvement in refining as the margin gets back to pre-covered levels and then we're able to optimize the refining slate and last inside bioenergy where we've got big plans to expand across five plants around the world, and those are in the engineering design phase, and we're looking forward to our first investment decisions in the next 12 months. So that gives you a sense of where the growth is coming from 2021 to 2030, and these slides we put in the slide presentation to just restate without Rosneft to make sure that our guidance was clear. Hope that helps, Paul, and happy to take more questions on the sell-side call later today if you'd like.

Thanks, Murray. And Paul, I would just add that the European refineries that we have are running at max throughput as well, doing everything we can to obviously help the situation. Back to you, Craig.

Thanks, Paul. We'll take the next question from Lydia Rainforth at Barclays. Good morning, Lydia.

Good morning. Two questions, if I could. Firstly, just to come back to the strategy question, obviously it was set up to be conservative at $60, but At $100, you are generating more cash. So does really nothing change other than more buybacks and lower debt? So I'm just trying to understand how you adapt it at the margin. And then secondly, and possibly linked to that, you do have a new head of low carbon, Anya. Can you talk through what you want from her and any observations that Anya may have made to the Exco about the current BP portfolio that you might like to share?

very good Lydia good morning why don't I let Murray reiterate our point around discipline around strategy and what our financial framework is but thank you for that question on on Anya so she's just in and I have to say that she's probably listening in but you know we're absolutely delighted with with the impact she's making she clearly brings enormous experience in this sector, which is important as we really lean into the space, asking lots of questions, challenging, turning things away, accelerating things and hiring lots of people. We're actually are in the process of bringing some fantastic talent on board from several other companies in the sector and I'm incredibly pleased that they're joining BP and I think part of it is because of our strategy and I think part of it is because of the credibility that she has. We'll get Anya in front of the market hopefully later this year. And I'd love you to get the opportunity to spend time. But too early to say any changes other than obviously she's running her eye right across the strategy. And we're working with her on any changes that that might bring about. And as soon as we know if there are any, we'll update you later in the year. But really delighted to have her on the team. Murray, on strategy, nothing changes?

Yeah, I think my boss answered the question, Lydia. Nothing changes. Dividend, number one priority. We need to make sure it's resilient and that we can pay it at $40 balance point. We think that's exceptionally important. It was only 15 months ago that the oil price was in the 40s. Second, we need to continue to reduce debt. And, you know, we're very pleased to see eight straight quarters now down to 27.5 of net debt. Third, the lesson of the past 20 years is stick with capital discipline. Every time the oil price rises in the past, we've spent an awful lot more as a sector, and we destroy value. And we're focused on not destroying value now, continuing to drive efficiency into all of our spend, whether that be capex or cost, and then no change to what we do with our surplus, 60% to share buybacks and 40% to debt reduction. Hope that helps, Lydia.

Thanks, Lydia.

Thank you, Lydia. We'll take the next question from Chris Coupland at Bank of America. Chris.

Good morning. Two quick questions, please. On Russia and your exit, can you elaborate a little bit what criteria you're going to use for selecting buyers coming forward for your Rosneft stake? Is it purely on highest price, or are there other considerations you're going to take into account And obviously this is for the market, I believe, not just about price but also about time it takes for you to finally actually exit in reality. And then to your energy trilemma point, and I appreciate you're going to update us later on on changes to your longer-term commodity price assumptions, but could you perhaps comment again about BPX? Isn't, you know, partly the idea of having short cycle in your portfolio made for this time? Is it because of the hedging that you referred to earlier? And I'm by no means suggesting you should significantly upgrade your capex, but if there are opportunities out there with one, two-year paybacks, I wonder why your capex message hasn't changed, if at least not in the composition of the overall capex. So maybe let me wrap up by asking, As to that press release regarding the UK investments, which of these have actually changed? You know, we've been in this new world energy order for the last, I guess, 10 weeks. Which of your CapEx numbers, if any, do you think have changed that you're representing in these press releases? Thank you.

Very good, Chris. Thank you. I'll let Murray talk about BPX and what we're doing there. You're beginning to sound a little bit like Dave Lawler, who runs that business, so who's always looking for more capital, but we'll take that question. And on the plans that we've announced, as you will have seen, many of these things have been in place. Many have been put in place over the last several months as the government has rolled out its policies supporting the drive and electrification. That's what's allowed us to commit to a billion pounds in electrification through this decade. And the government has just published its energy security strategy for the UK. And I think we can expect to see further investments coming over the coming months from BP in support of that strategy. So I would say watch the space on that. All within that, you should not expect to see our overall capital frame for BP change. On your question on Russia, I will unfortunately say the same thing to you as I say to everyone else. When it comes to commercial processes, we don't comment. We have a policy of not commenting, and we're not making an exception for this particular case of Russia this morning. We'll come back to you and update you once we know more. Murray on BPX, please.

Yeah, on BPX, Chris, we have increased the amount of investment going in. Last year, you'll remember, we spent around $1 billion. This year, we're spending somewhere between $1.6 and $1.7 billion. We'll see how we go through the year. Our focus inside the Permian is in building out two... Big gathering systems, they should be up by the end of the year, and at that stage we'll have the capacity to ramp up drilling more. Right now we don't have the capacity to ramp up drilling more in the Permian. And then in Haynesville, Eagleford, with ourselves and with partner-operated, we're increasing the investment there. I think we're up to nine rigs now. so yes we are increasing the investment in there and it's all about doing it efficiently we don't want to ramp up too fast or we become inefficient and we want to make sure that we've got the facilities in place to ensure that we don't flare or event methane as we we go through the expansion in the permian so very happy that we're investing upwards to 1.6 to 1.7 and we have plans further in 2023 and beyond to continue increasing CapEx, remember that we're trying to get a dividend out of BPX, having bought the assets from BHP a few years ago. We're now trying to get our money back, so we're looking for a dividend out of that entity. Bernard, back to you.

Understood. Understood. And therefore, no change to your hedging policy there? No change to hedging policy. Thank you, Chris. Thank you.

Thanks, Chris. We'll take the next question from Alistair Syme at Citi. Alistair.

Greg, first question just on the RNN guidance that you have out there. Is there any reason why that guidance wouldn't apply to the RNN environment we're seeing to date, i.e. to just use that guidance in 2Q? And then secondly, on the low carbon, specifically wind, we've seen another profit warning from a wind developer yesterday Again, a bit of back to this point on inflation. It just seems to me as though there's some loss somewhere in the system, either you guys or the supply chain, that is unable to pass on the increase in costs that we're seeing in the supply chain. Thank you.

Alistair, thank you. I'll ask Murray to take the question around RMM and I think rules of thumb and guidance. On low carbon, certainly on offshore wind in particular, I think a... A challenging marketplace on a number of dimensions, including for suppliers in that sector. A couple of things I would say. Number one, we will only do projects that meet our guidance of 8% to 10% returns. We recently bid in a license round in the United States and were unsuccessful. and i hope you take that as a sign of discipline we've got over five gigawatts net of offshore wind and bp today that's up from zero about 18 months ago we're comfortable with the portfolio that we have we obviously want to grow that but we don't want to grow it at any cost or at all costs so we are very disciplined and we will look at future rounds in Holland in Norway in Japan you'll have seen the announcement with Mary Bunny so it's a case-by-case basis they're all very very different containing very different upfront commitments and so on and we'll do it on a case by case and if we can't meet our returns we won't do it and then the second thing that I would say is that you are seeing cost increases in the sector You are seeing a resharing, I guess, of an opportunity to reshare risk reward across the entire supply chain. BP should be well placed to do some of that. We can hedge steel prices. We're a massive consumer of upstream steel in our upstream business. So these are the types of things that IEC can do that others may struggle to do. And we're also seeing in some cases a knock-on impact on the power prices, where power prices are going up to ensure that the investments remain economic as you would expect a market to do. So, yes, some challenges out there in that sector with a desire of the world to do more. as there is the UK going up by 10 gigawatts, people increasing hydrogen ambitions and so on. There is a continuing need for this form of energy. We will do it and we will invest in it and bring our skills, but only do it where we can make the investment returns that we have promised. So hopefully that helps you, Alastair. And Murray, guidance?

Yeah, on RMM guidance, it's a bit tricky to figure out how to guide right now. We haven't seen this level of RMM before in the past. So the rules of thumb would be a starting point. Things to think about, CO2 prices are very high. Gas prices as inputs into refineries are very high. and market dislocations locally are very high. So I think start with the rules of thumb, and then I'd aim off a bit. I wish I could give you better guidance than that, but we have not seen prices like this before, so we'll have to learn with you as we move through 2Q and 3Q and understand how they work at these higher prices. Last comment, there's a big year of TARs ahead of us, and we've got a couple big TARs in 2Q as well, so that's something to consider. Hope that helps all.

Thanks, Al. We'll take the next question from Michele Delevigne at Goldman Sachs, please.

Once again, congratulations on the results. I was wondering if you could give us an update on... the four or five key projects that drive your growth over the next couple of years. I'm thinking in particular of Mad Dog, Tanguto, and Trinidad. And secondly, I was wondering if the revival of long-term demand for LNG makes the next phase of TOTU more likely, and especially given the need for long-term contracts for project financing there. Thank you.

Very good. Michele, we might tag team this one. Murray, maybe lead on the chances or outlook for the next phase of TOR2, which is, I guess, only improved by today's price environment. On the projects, you know, you've mentioned the big ones, Mad Dog. Phase two is doing well actually on location. I think all of the subsea is connected now. We've had some real challenges out there with loop currents which happen in the Gulf of Mexico. So first and most important job is safety of that operation and the team has done that. exceptionally well and all the wells that we need are pre-drilled in fact a couple of extra so we're very excited about that project starting up and it'll start up by the end of this year. Cassia compression in Trinidad will also start up by the end of the year as will KGD6 in India. completing that phase of development there. So excited about that. And then Tortu and Tangu expansion in Indonesia, Tortu in West Africa. We've had some major impacts from COVID there. The teams have been doing, I think, if you don't mind me saying, some heroic work. jobs and keeping those projects going in tangu for example we have over 10 000 people over seven or eight hours from jakarta and the team has been doing an exceptional job of managing with covet we'd hope for those projects both of those to start up by the end of next year but a lot of it depends on how COVID evolves, particularly with the FPSO in China being completed in China for TAR II. So that's a little bit around the progress of those projects, but all in all, in pretty good shape. And Murray, you want to add anything to that or comment on TAR II next phases?

Yeah, nothing to add to that. And then TorchU next phase is, Michele, as you say, a better environment for it now. We're pleased with the progress on TorchU and looking to expand it. It will just take completion of commercial negotiations with the country and with partners and suppliers to get there. I had the chance to meet with the finance minister of Senegal a few weeks ago here in St. James. And things are feeling positive right now. So we're looking forward to hopefully sanctioning phase two in the future.

Great. And we should also add, Michele, that BPX, the liquids growth from BPX this year and in the coming years, while not a major project, will also be a real adder to those projects we just talked about. So thank you, Michele.

Thanks Michele. We'll take the next question from Giacomo Romeo from Jefferies. Giacomo.

Thank you and good morning. First question is, I noticed that your renewable hopper somewhat fell from 17 gigawatts to 12. Now I understand that 1.8 moved into the developed plus pipeline bucket. Just wondering sort of if you can reconcile what happened to the remaining projects, if that's a reflection of the higher cost pressure you're seeing or whether it's sort of already an impact of ANIA looking at your bidding opportunities there. Second question is around the potential divestment of the Rosnia stake. If you can talk a little bit about what you're looking at to use potential proceeds from the divestments if they would be reinvested in more of an upstream side of the business or what they could be. are invested into accelerating the lower carbon growth, or if there could be a return to shareholders. A little bit of clarity on the use of proceeds there would be helpful. Thank you.

Giacomo, thank you. On the proceeds from the commercial process that we're not commenting on, I think, again, we'll just leave that until we have something further to say on that commercial process. If that's OK, I think our financial frame is very clear and hopefully lays that out. On the renewable hopper, you know, hoppers should grow and should shrink. That's the nature of a hopper. Yes, I think you've seen it fall. It's probably not the best measure in many ways. The pipeline is probably a much better measure. Why has it fallen? Because we've chosen not to do things. And we've chosen not to do things because you are right. Anya is running a very, very tight rule over things and has already kicked back some proposals, which we think is a very positive thing. So she is doing exactly what we want her to do, which is, yes, we want to... lean in and accelerate. But we only want to do so if we can make the returns that we've promised. And that's why we've hired her. So partly because of Anya's rule that she is running over things and obviously all because we don't believe that we can make the returns that we have promised you all. So it's a combination of both. And that's all I would say on that. So thank you for noticing and thank you for the questions.

Okay, thanks very much. And we'll take the final question from Henri Patricot, UBS. Thanks for being patient, Henri.

Yes, everyone. Thank you for taking my question. Just a quick one on the gas low carbon production. We took the guidance for the year. So production expected broadly flat. This is slightly lower previously. Can you comment on what's driving the change and then secondly, whether we could see further improvement as you look to maximize gas production?

Henri, thank you. I'll let Murray take that question.

Yeah, it's just a little bit less base decline than we thought we'd see inside Trinidad. That's why we've updated that guidance.

Very good. Henri, thank you for being patient. And back to you, Craig.

Yeah, that's the end of all the questions. Thanks, everybody, for keeping the questions tight. Thanks for listening. Let me hand over Bernard back to you for some closing comments.

Very good. Well, thank you, everyone. Thank you for your time. Just a few things to close. You know, for us here at BP, the role of an integrated energy company has never been clearer in many ways than it is today. And the role of an integrated energy company is to solve the energy trilemma of providing the world with cleaner, reliable and affordable energy. That means providing the world with the hydrocarbons that it needs today. with lower emissions and at the same time investing in accelerating the energy transition. That's what we're doing. The second thing I would say is that delivery is our focus. We've set our direction. We've done our change. It's all about delivery inside our company and I hope you can see that in the first quarter results today with reliability being strong. with that first quarter inconvenience being strong on a first quarter basis, with trading being strong. So delivery is what it's all about. We are doing what we said we would do, which is to perform while transforming, performing for our owners today and at the same time transforming the company for tomorrow. We're now focused next up with the annual general meeting. On the 12th of May, it's the first time that we've been able to do this in person since Aberdeen of 2019. We look forward to meeting some of you, welcoming you there. And we look forward to your support of the board's recommendations on the resolutions that have been put forward. And with that, we appreciate your interest and we leave everybody to it. So thanks very much, everybody. Take care.