BP p.l.c.

Good morning, everyone, and welcome to BP's fourth quarter and full year 2023 results presentation. I'm delighted to be here today with our newly appointed chief executive officer and chief financial officer, Murray Auchincloss and Kate Thompson. Before we begin today, let me draw your attention to our cautionary statement. During today's presentation, we will make forward-looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to 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, along with this presentation, are available on our website. Let me now hand over to Murray.

Good morning, everybody. Thanks for joining us today here at St. James. We've done this before, haven't we? But it's the first set of results where I have the privilege to talk to you as CEO of BP. It's a great company. It has great people. And it's an honor to lead. Our destination is unchanged. IOC to IEC. International oil company to integrated energy company. We're confident in our strategy to deliver this, but are going to do so as a simpler, more focused, and higher value company, providing energy solutions for our customers who are asking us to help, contributing to the energy transition, all the while remaining pragmatic and adapting in line with demand, as you saw with the update to our strategy this time 12 months ago. So what does it practically mean to transition from IOC to IEC? Over 100 years ago, we started to create our first value chain, oil fields attached to refineries with products sold in service stations and airports. We're now introducing biofuels, sustainable aviation fuel and biodiesel to the customer. At the same time, we're lowering the carbon footprint of our plants by using lower carbon hydrogen and electricity for power. Why? Because we can deliver higher margins with lower emissions. Over 60 years ago, we started to create the second value chain. Natural gas fields linked to domestic pipeline systems and eventually liquefaction plants. We're now introducing biogas, carbon sequestration, and lower carbon electricity to the customer. Why? Because we can deliver higher margins with lower emissions. And over the past four years, we've been accelerating our efforts to create a third value chain. lower carbon power and hydrogen. For example, using solar or wind to create lower carbon hydrogen to provide to our plants and customers. And using those electrons to service the growing electricity demand through our EV charging business. Why? Because we can deliver higher margins with lower emissions. All of these chains are then optimized by our fantastic trading organization, driving superior returns to what a pure play can deliver. And the more we can interlink them, the more we can expand the returns. Over the past four years, we've delivered on average around a 4% uplift to group return on average capital employed across these chains through these efforts. We think this is sector leading. Now across all these chains, we've always have choice about how much we produce ourselves in the upstream or purchase from other producers. That equally applies to oil, natural gas, and renewables. The magic is getting that mix right inside our business lines to optimize returns and trading optionality. The most important part is to ensure absolute discipline in investing our scarce capital, ensuring we hit our returns thresholds across these value chains. That's what an IEC is to me. Investing in today's energy system while building out tomorrow's. Lower carbon, higher margin. Now it's four years in, we've learned a lot and adapted along the way. It's made us stronger, more confident in the growth we have coming, and more convinced about the value we can create. I'm passionate about this strategy, as I think there are only a few companies globally that can do this at scale. And as we deliver, We will grow the value of BP, and that's what I'm focused on, growing the value of BP. So what should you expect from us moving forward? As always, let's start with safety. We're making good progress, but there's always more we can do. Delivering safety is very important to me, and it's very personal. Four generations of my family have worked in the sector. My great-grandfather actually died in an industrial accident, and I can remember my father teaching me about the dangers of hydrogen sulfide in a natural gas field as a child. We work in a high-hazard industry, and every day we must make sure everyone comes home safe. That's our first priority. The past few years have been about generating options. Now we will focus our efforts on the key areas where we can be competitive, and we'll simplify the business. We'll pursue this in every way you can imagine, from origination to our narrative. We will be relentlessly value and returns focused with our investments, focused on growing value and returns from our oil and gas portfolio, leveraging our high quality resource base, and driving efficiency and reliability, as we laid out in our update in Denver last year. and growing value from our transition businesses as we invest with discipline in the pipeline we have developed. And by creating even more value through integration. We will continue to be pragmatic in our approach to how we navigate this energy transition. Yes, we want to help scale lower carbon energy value chains and position ourselves to profit from them, but we must remain flexible, adjusting in line with changing demands and societal needs, as you saw us do in February last year. And we have a tremendous team delivering this, and I want to ensure we place engineering, science, and technology, both digital and physical, at the heart of the company. I've seen firsthand the impact and possibilities of innovation and digital solutions, including across the upstream and expanding our customer offer and improving our back office processes. And some of you saw this for yourself in Denver. What's really exciting, we see potential to do even more to transform our businesses. We've been working with AI, including machine learning and computer vision models, for more than five years, and we have over 100 live AI use cases across the business now. These provide an enormous opportunity to help us capture increased margin and decrease spending. And finally, you can expect to see us continuing to make full use of our creative commercial muscle to optimize how we invest and create value, with AcuraBP and LightSourceBP providing excellent examples for the future. So to sum up, the destination is unchanged, but we're going to deliver as a simpler, more focused and higher value company, unlocking the full potential of our assets and our people and growing the value of BP. So let's turn to 2023 and what was a year of continuing delivery. Starting with safety, we have seen improvements in our safety performance, reducing our tier one and tier two process safety events, But we have more to do. We need to keep improving to eliminate all tier one process safety events, continuing to apply OMS and constantly reinforcing and building on our operating culture across the business. Next to our business performance, where we have delivered resilient operational and financial performance in 2023. Adjusted EBITDA was $43.7 billion. Operating cash flow was $32 billion. Net debt reduced to $20.9 billion. And average return on capital employed was 18.1%. We are executing our strategy with discipline across our oil and gas business and our transition growth engines, as I'll come to in a minute. And we are delivering competitive shareholder distributions. We grew our dividend per ordinary share by 10% last year. Today, we announced a further $1.75 billion of share buybacks, bringing our total buybacks announced from 2023 surplus cash flow to $6.5 billion. We have seen strong momentum in our operational and strategic delivery in 2023. Starting with oil and gas, our upstream production grew by 2.6%. We started up four major projects that we expect to contribute more than 50% towards our target of 200 MBOED by 2025. BPX production grew by 13%, surpassing 400 MBOAD in the fourth quarter. We managed base decline between 3% to 5%, supported by high return investments in new well delivery and well work. And in refining, availability was over 96% for the year. Our LNG supply portfolio increased by 20% to around 23 million tons per annum, largely driven by Coral and Freeport. In addition, we delivered 10 million tons per annum of incremental short and midterm merchant volumes. We completed Atlantic restructuring, enabling the next wave of projects in Trinidad, and securing long-term LNG equity offtake. We accessed 44 exploration blocks in the Gulf of Mexico, Canada, Brazil, and deepwater Trinidad. Our unit production cost was around $6 per barrel of oil equivalent, in line with our 2025 target. And proudly under aim four, we met our first goal of deploying our methane measurement approach across all our existing major operated upstream oil and gas assets by the end of 2023, a very important milestone. Turning to our transition growth engines in bioenergy, we increased our biofuels production by 18% year-on-year and biogas supply volumes by 80% year-on-year, reflecting the uplift from Archaea. In convenience, we delivered 60% growth year-on-year in gross margin, including the contribution of travel centers to Americas. Excluding travel centers, we've maintained strong underlying growth of 9% year-on-year, building on the average 9% per annum over the previous three years, despite recessionary forces. In EV charging, we are rapidly building scale and demonstrating profitability in Germany and our JV in China. Energy sold rose by 150% year on year, supported by a 35% increase in the number of EV charge points and increasing utilization. Importantly, our charging customers in the UK are spending more in our shops than our fuel customers. This gives us further confidence in our fast on the go business model. We grew our hydrogen pipeline to 2.9 million tons per annum. Our focus this decade is on blue hydrogen and decarbonization of our refineries, while laying the foundation for green hydrogen production towards the end of the decade. In renewables and power, we grew our renewables pipeline to 58.3 gigawatts net to BP, including the offshore wind award in Germany, light source BP's pipeline, and our onshore renewables projects supporting hydrogen in Australia. And we have agreed to take full ownership of LightSource BP, one of the top solar providers globally. A fantastic business with a track record of delivering equity returns in the mid-teens over the past few years with our develop and flip model. Integrating all of these are our trading and shipping businesses, as I described earlier. This is our strategy in action, and we have more to come in 24 and 25 that I'll describe later. But for now, let me hand over to Kate to take you through our fourth quarter results and our financial frame. Kate.

Thanks, Murray. And good morning, everyone. I've been here once before, and I echo Murray's sentiment. It is an honor to speak with you as CFO. Let's turn to our results. BP's focus on delivery supported another quarter of strong underlying operational and financial performance. Our upstream production volume was 2.3 million barrels of oil equivalent per day, in line with our guidance. Gas and low carbon energy production was around 900,000 barrels of oil equivalent per day. The underlying financial result was around $500 million higher than the previous quarter, largely reflecting a strong gas marketing and trading result and stronger gas realizations driven by higher gas prices. This was offset by a non-cash write-off of around $300 million, largely related to the exit from a production sharing contract in Senegal and by lower production. In all production and operations, production was 1.4 million barrels of oil equivalent per day. The underlying result was around $400 million higher than the previous quarter, largely reflecting favorable price lag impacts in the Gulf of Mexico and UAE. In customers and products, the underlying result was around $1.3 billion lower than the previous quarter. looking at the businesses. In our customers' business, the underlying profit was $880 million, around $200 million higher than the previous quarter. The result benefited from stronger than expected fuel margins, driven by a declining cost of supply and a one-off positive effect of around $100 million. This was partly offset by lower seasonal marketing volumes, as well as higher costs in support of our transition growth engines. In products, the underlying loss was $80 million compared to 1.4 billion profit in the third quarter. The result reflects significantly lower industry refining margins, albeit with a smaller decrease in realized refining margins because of wider North American heavy crude oil differentials. In addition, as we guided, there was a higher level of turnaround activity, including a full-site turnaround at Castillon. The oil trading result was weak compared to the very strong result in the third quarter. Results from our other businesses and corporate segment improved around $200 million on the previous quarter, largely due to foreign exchange gains. And as we've said before, results in this segment do vary quarter on quarter. Reflecting these factors, we reported an underlying replacement cost profit before interest and taxes of $6.1 billion. After interest and taxes, we reported group underlying replacement cost profit of $3 billion. Our underlying effective tax rate increased in the fourth quarter to 42%, mainly reflecting profit mix effects. And on an IFRS basis, we recorded net adverse adjusting items of $1.5 billion after tax, primarily related to impairments reflecting changes in the group's price, discount rate, activity phasing, and other assumptions, partially offset by fair value accounting effects. We also recorded inventory holding losses of $1.2 billion during the quarter. Taking into account these items, we reported a headline profit of around $400 million. Turning to cash flow and the balance sheet. Operating cash flow was $9.4 billion in the fourth quarter, around 600 million higher than the third quarter. This was largely due to higher EBITDA and lower cash taxes compared to the third quarter, related to the timing of tax installment payments. Operating cash flow included an underlying working capital release of 2.1 billion, largely associated with the delivery of LNG cargoes. Capital expenditure was $4.7 billion, which is $1.1 billion higher than the third quarter. This brought full year capex to $16.3 billion, which is broadly in line with our guidance. Divestment proceeds were $300 million, bringing the full year to $1.8 billion. That's slightly lower than our guidance. And the $1.5 billion share buyback program we announced with the third quarter 2023 results was completed on the 2nd of February. Our balance sheet continues to strengthen, with net debt reducing to $20.9 billion. That's the lowest level for a decade. As you saw this morning, we've announced a 4Q dividend of 7.27 cents per ordinary share, an increase of 10% compared to last year. And as Murray mentioned earlier, we announced 1.7 billion of share buybacks from 2023 surplus cash flow. As you can see on the chart in total, we've now bought back over 16% of our issued share capital since we started our buyback program in 2021. To sum up, it's been another good year of delivering against our financial frame. Let me now take you through the guidance on our financial frame for the next two years. Our five priorities remain unchanged. Given the strength of our underlying financial performance, the disciplined approach to strengthening the balance sheet over the last few years and our confidence in our drive towards 2025, we now have the capacity to update our financial frame and provide clear guidance for the next two years through 2025. We're tightening our capital expenditure guidance. Enhancing our share buyback guidance, all while continuing to maintain a strong balance sheet and a strong investment grade credit rating. As Murray said earlier, we're focused on simplifying things where we can. Our first priority remains a resilient dividend accommodated within a balance point of $40 per barrel Brent 11 RMM and $3 Henry Hub. with capacity for an annual increase in the dividend per ordinary share of around 4% per annum at around $60 a barrel, subject of course to the board's discretion each quarter. Our second priority is a strong investment grade credit rating. We're targeting to further progress our credit metrics within the A grade credit range through the cycle. We're not targeting a AA credit rating. Third and fourth, we plan to invest with discipline. We're driven by value and focused on delivering returns at least at our hurdle rates across our transition growth engines and our oil, gas and refining businesses. Capital expenditure is now expected to be around $16 billion per year through 2025, including in organics. And finally, to share buybacks. As I said, we're simplifying and enhancing our guidance. For the first half of 2024, we're committed to announcing $3.5 billion, that's $1.75 billion per quarter for each of 1Q and 2Q. This provides near-term predictability. And to be clear, this is in addition to the $1.75 billion share buyback we announced today for the fourth quarter of 2023. Over 2024 to 2025, subject to maintaining a strong investment grade credit rating, our expectation, assuming current market conditions, is to announce at least $14 billion of share buybacks in total. And on a point forward basis, we're now committed to returning at least 80% of surplus cash flow. This is an enhancement to our previous guidance of 60%, and it's an affordable range underpinned by two things. The strength of our balance sheet, and our confidence in the future performance of our business. Let me now close with a summary of our forward-looking guidance before I'll hand back to Murray. This slide is a little detailed, but it summarises guidance for the full year ahead and the quarter ahead, and it's all in one place for you. I'm not going to read it line by line, but let me start just by highlighting some points in relation to the first quarter 2024 compared to the fourth quarter. We expect upstream production to be higher. In customers, we expect seasonally lower volumes across most businesses and the absence of one-off positive impacts. Fuel margins remain sensitive to movements in cost of supply. In products, we expect a significantly lower level of refinery turnaround activity. And in addition, we expect lower industry refining margins with a larger reduction in realized margins because of narrower North American heavy crude differentials. And with regard to the full year 2024, we expect this year's capital expenditure to be weighted to the first half, while our target of $2 to $3 billion of divestments and other proceeds is expected to be weighted to the second half. And as Murray mentioned, our trading business has delivered on average an uplift of around 4% to Group Roachi over the past four years. This slide forms part of some enhancements we're implementing to help the investment community. Starting with the first quarter 2024, we also plan to introduce a regular trading statement to provide our investors with up-to-date financial performance insights. Today's announcement and our updates to the financial frame, together with our detailed guidance, we hope provides more clarity for the market. And with that, I'll hand it back to Murray.