BP p.l.c.

Thanks everyone for joining BP's first quarter 2024 results call today. As you'll be aware, we introduced our quarterly trading statement this quarter, and this morning also published the slides and script along with a video presentation in conjunction with our SOC exchange announcement. Alongside this, the results call has moved to early afternoon UK time, and we hope together these updates around our process and disclosures has been helpful to everyone, and you've had a chance to review everything this morning and this afternoon. So we're going to aim to finish the call at 2pm UK time, as some of you will be aware. We understand our counterparts at Saudi Aramco start their call around that time, and we want to give you a chance to join that as required. So maybe let me start there, and on that note, hand over to Murray for a few brief opening remarks.

Good, thanks Craig, and thanks everyone for joining Kate and I on the call today. To recap today's results, we delivered resilient financial performance despite the unplanned outage at our Whiting refinery. First quarter adjusted EBITDA was $10.3 billion, and underlying earnings were $2.7 billion. Adjusting for the expected seasonal working capital build operating cash flow was $7.4 billion in the quarter. We continue to make good strategic progress, and this quarter saw the safe start-up of the Azeri Central East project in the Caspian Sea. BPX also brought online Checkmate, our third central processing facility, and in Biogas, Arkea brought online its largest modular RNG plant to date, and has five in commissioning. Last week, our JV Azul announced a .5% firm end into an exploration block in the Oranji Basin offshore Namibia. You've also heard about how we are simplifying removing complexity across the company, and today we have announced a target to deliver at least $2 billion of cash cost savings by the end of 2026. Craig, back to you.

Super, thanks Murray. So we'll go straight to questions now, and we'll take the first question from Josh Stone at UBS. Josh.

Yeah, thanks, Craig, and good afternoon Murray and Kate, and appreciate the slightly longer time to study the results. Yeah, two questions, please. First, I want to pick up on your 2025 EBITDA targets, which you reiterated specifically in the TGEs of $3 to $4 billion. If I look at consensus, it feels like few people believe in these numbers, and it's only now almost 18 months away. So if I look at how the business has started, the buyer business looks like it started a bit lower than you might have expected. You talk about TA was impacted by an ongoing recession or freight in the US. So my question is, where do you see the biggest risk in these 2025 targets, and what do you think the market is missing on that side? And then second question on the Whiting refinery, and good to see back online. Maybe now the dust has settled. Can you just talk about what lessons you've learned from the outage and maybe some initiatives you've put in place to prevent further issues going forward?

Thank you. Yeah, sure, Josh. Thanks for the questions. I'll take both of these, actually. I think on Whiting, it's a bit too early for lessons learned. The teams had a full electrical outage at Whiting. It took us about six weeks to get it back operating safely. The teams have now done that. Well done to the teams for achieving that. And they're now going through the process of lessons learned, probably in the design space. So that is still work to do. As far as EBITDA from the transition growth engines, as we reported last year, we made about one billion of EBITDA. We're aiming for three to four billion of EBITDA by 2025. Where does that come from? A full year of TA, continued growth out of Archaea. It comes from EV moving to break even. It comes from real focus inside hydrogen as we focus the portfolio and move to the most likely things to move forward. And it comes from growing bio and growing convenience as well. I think on the confidence side, CNN continues to grow very strongly. We continue to see 9 percent -on-year growth. And with the expansion in TA, that should be very, very good for convenience. EV remains on track. I think the number is 93 percent of – 83 percent of all the fast chargers are EBITDA positive now. So Richard and the team are doing a good job driving that engine to break even. Archaea continues to get plants online. As I said, we got a big one online in one queue. And we're commissioning five as we speak. So we should be in good shape for the 15 to 20. And RIN prices are holding very high for the D3 RINs in the United States as well. On the challenging side, bio – as everybody knows, the biomargains in Europe were tricky through four queue and one queue as mandates were rolled back across some of the Scandinavian countries. We do expect change on that in the future. But it's hard to predict. It's kind of like a macro assumption that's hard to predict. And diesel, as you say, is challenging in the United States. There's a diesel recession. We feel that will unwind as well as we move towards the back end of the year and into 2025 as well. But we feel confident on the three to four. And we'll just have to see how that goes. But good momentum operationally, good momentum on synergies. And the macro is what we're fighting against a little bit right now. But let's see how that macro turns out. Thanks for your question, Josh. Thanks,

Josh. We'll turn to Biraj Bokhtari, RBC. Biraj.

Hi, thanks for taking my questions and appreciate the more condensed format. The first one is just on the cost cutting. When I look at the public disclosures across you and your peers, if I take STNA, for example, it does look like your figures are quite out of sync. It seems like they're growing faster than the peer group. And I can't really tell if it's all accounted for the same or not. I guess in your slide, you do some adjustments here. So maybe the question is, when you benchmark your costs and your performance, what is the starting position for BP? Is it that today you're better than average or you're slightly worse? And particularly, where do you see the opportunity there? And then the second question is on another hot topic, which is relisting. It's brought up by one of your counterparts. Where does BP sit on this? Is it a live debate? Do you see it as a structural disadvantage? Unlike your counterparts, you do have a big domestic US business upstream and downstream there. So just wanted to get your thoughts on that. Thank you.

Great. Baraj, I'll ask Kate to tackle the cost question and how different we all account for these things. On relisting, I'll be consistent with what I've said in the past, Baraj. This is not on our agenda. What's on our agenda is safely performing quarter in and quarter out. We're in a great position with the business. We've got strong growth coming through. We've got solid targets out to 2025 that we believe we can deliver. It will deliver 3% to 4% underlying cash flow growth if we hit our plans through the rest of the decade and certainly through 2025 as well. And as we continue buybacks, that gives us then the chance to increase the dividend over time. We have confidence from it because it's worked before. In 2022, in the first half of 2023, we compressed the share price with some of the Americans by a third simply by doing that performance. So that's what's on our agenda, not relisting. And so we're just focused tightly, tightly on performance, Baraj. Kate, over to you on the first question, please.

Thanks, Murray. And hi, Baraj. Yes, so I've seen some of the narrative. Look, it's incredibly hard under the current accounting standards to really try and compare like for line by line through the P&L account. There's a level of interpretation, let's say, on how companies can actually account for their costs through the income statements. That makes line by line comparison quite tricky. What I would say is that if you step back to February and we talked about the fact that we were going to drive focus through the business and we were going to deliver the next wave of efficiency, what we're really focused on is how we create our own greater efficiency and our own reduction in our cash costs. And what I would say is on a unit production cost, our lifting costs, we think we're very competitive at six dollars a barrel. So I guess my guidance to you going forward, Baraj, is to anchor yourself on cash costs, which, as you can see from the slide we've tried to point you towards, if you toggle from where our total reported costs are down to our cash costs. That's how we've disclosed against in the past. That's how we'll continue to disclose against as we deliver this two billion of cost reductions through the end of twenty twenty six. And then finally, what I would say is I think I for us, eighteen, which comes in at the beginning of twenty seven, will probably make your lives a bit easier. It will force more transparency and probably greater comparability across the sector. So I hope that's helpful.

Thank you, Baraj. We're going to move stateside now, given we're at a slightly more hospitable time. Take the first question from Paul Cheng at Scotiab poll.

Thank you. Good morning, guys. Oh, good afternoon. In the press release, you guys talking about the EJ devaluation balance impact or foreign currency impact. What's the number that you can share that how big is that number? And also that from the fourth quarter to the first quarter, the gas and LCE is down roughly about 100 million in the adjuster earning. How is that contribution is coming from the low carbon side? In other words, there is no carbon getting better or getting worse that we are seeing there. So that's the first question.

Great. Kate, over to you on Egypt. I think it answers the second question as well, doesn't it?

Yeah, pretty much does. Hi, Paul. Yes. So on Egypt, we saw a significant devaluation in the currency. It went from 30 to 48 when Egypt refloated ahead of the injection of funds from the IMF and others, as you'll have seen. So that foreign exchange impact has flowed through the first quarter. It's around about point two. You can also see it driving our our tax rate up in the quarter as well. So that's what's going on with regard to Egypt and devaluation with regard to the gas and low carbon performance. So we were we're up on production, our cop down really down just quarter on quarter based on lower realizations and effects. So that's that's the story with regard to GNLC for the quarter.

OK, on the cost reduction, the two billion, how much of them is related to any divestment or that that's purely on on the actual underlying cost performance data?

Yes, so we'll step through the interventions. There are four areas we're focusing on, and one of it is is focusing our portfolio, as you've talked heard us talk about for a little while now since since we we set out our six priorities in February. So there will be some of that which is delivered through portfolio change as we get clearer on the component parts and how they contribute and when they get delivered, we'll update you in due course.

Yeah, it's prime. Paul, it's more about focusing our engineering efforts. If you think about 2020 to 2023, it was about creating an awful lot of options in the upstream and refining in all of the transition growth engines as well. And we now have 32 final investment decisions to make across 24 and 25. So a large part of this focus is getting really clear which ones of these we're going to take forward. And as we do that, redeploying engineers to the highest quality ones, redeploying third party resources, etc. That'll create a lot of cost savings as we as we really, really focus on these things moving forward. A small, a small example of that to think about during the past 90 days is we decided to sanction Atlantis tieback in the Gulf of Mexico. So you sanctioned that at the same time we decided to release Birala and Yarka Trang and Mauritania and Senegal. So that's about being really, really driven by returns and deciding the best value. And then we can reallocate engineers and yes, and lose use less third party services, which creates cost savings.

Thank you, Paul. Thank you. We'll stay in the US and take the next question from Ryan Todd at Piper Sandler. Ryan.

Great, thanks. Maybe a first one on refining. You referenced the impact that narrowing crew differentials in North America. Can you can you talk about the impact that you expect in the US from the start up of TMX, any flexibility that you might have to mitigate the impact, whether in the mid con or on the West Coast of Cherry Point? And then maybe a follow up on the on the cost that you were talking about there. There's increasing, increasing focus on on cost inflation on the project side that we've seen in areas like deep water and LNG and the impact that it's having on on some project returns. So can you maybe talk about what your standard of the portfolio impact on potential future FIDs like the paleogene or future LNG expansion phases and and your ability to mitigate those?

Yep, sure. I'll take the first one. Kate, you want to take the second one on the first one on TMX and what we're seeing, obviously, differentials have started collapse on WTI WCS. I think they're probably sitting last time I looked somewhere around 14. It's probably not a bad range plus or minus a couple of bucks as far as what the range is on WTI WCS is moving forward. Hard to predict, of course, but that's our sense of what will occur. We've done two things to mitigate against this. First of all, as TMX comes online, it gives a direct route for that oil and the Cherry Point. So that will mitigate. Cherry Point will be able to access more affordable product moving forward. So that should be a benefit to us that helps mitigate some of that effect. Plus, we have some pipeline re-wheeling that we've done over the past few years to be ready to flow product up and down, up and down across North America to manage risk associated with whiting as well. So net net, we think we're probably still in the same shape we were pre TMX coming online between Cherry Point and between our flexibility with whiting and cushing. Kate, over to you on the capital question.

Yeah, sure. Yeah, thanks. All right. So in terms of inflation, I think the area where we're still seeing inflation persist is in wage growth. So that that's an area that we continue to battle against. The procurement team that we have inside the organization are are working and have worked over the last few years incredibly hard to mitigate all the effects of inflation that we can through things like competitive bidding and moving into much more performance based models. Alliancing and partnerships have been effective in terms of helping us drive our costs down. What I would say is the odd capacity is tight. Utilizations are high, probably the highest they've been for about a decade, and we think they may well remain like that for another three or three to five years, perhaps. So that's something we will pay attention to. At the end of the day, when we think about the investment decisions, we will be as you'd expect us to be returns and and value driven. So we will be making sure that that all our projects that we sanction are meeting hurdles, but we feel pretty good about Cascada right now. We hope to be able to move to sanction that at some point during the remainder of this year.

And I think on the LNG side from recent bids, we're seeing that we're OK to continue moving those forward, whether it's in Asia or the Middle East as well. I think enough enough companies are now recycling things that we're seeing some looseness inside the supply chain. But it's a good question to ask us each quarter to observe as we see the bids come in with the potential sanctions upcoming.

Thank you.

Thanks very much. We'll take the next question from Chris Kupland to Bank of America. Chris.

Thank you, Craig. Hello. Just two quick questions for me. I was wondering whether there is a specific reason you no longer publish your surplus cash flow metric. That seems to have dropped off the page and just checking whether my back of the envelope minus one point five billion in the quarter is anywhere close to where you would get to with with your definition. That's question number one. And question number two is on the APNOC JV in Egypt. I'm assuming that is yet to close and it's appearing in your assets for sale. So I wonder whether that will translate into disposal proceeds and obviously, you're guiding still to two point two to three billion for the full year. And if you could give us any more clarity on how you're going to account for that, JV, thank you.

Yeah, sure. I'll let Kate answer the surplus one and then I'll tackle I'll tackle Egypt.

Yeah, thanks, Chris. So when we updated the financial frame in February and set out a two year frame to the end of 2025, what we were after was creating greater clarity and predictability on distributions. As a consequence of that, we've delinked our quarterly share buyback from a surplus cash calculation. It was creating an awful lot of volatility. It remains something we look at over time. As you can see from the fin frame, we said that over time, we expect to distribute 80 percent of surplus cash to shareholders. So we'll think about the rate at which we may or may not want to include further disclosures. It's not something we intend to disclose on quarter on quarter now, no longer as it's not a direct input to the share buyback. So we don't feel the need to make any any quarterly disclosure on that. At the end of the day, cash flow is going to go up and down over the quarters with things like working capital movement. So we expected the balance sheet to tolerate some fluctuations in the first half. We saw that come through. We had the typical working capital build and we've got heavy capex in the first quarter and our devising proceeds are back ended. But our balance sheet strong enough to tolerate that we can look through that over time. And that's why we have moved to a frame that that stops that quarter on quarter link to a surplus cash calculation.

Great. Thanks, Kate and Chris on adnock. Yes, we've moved forward with the transaction. It's an asset held for sale. As you say, we're waiting for completion second half of the year, probably three Q, four Q. It depends on it depends really on how we move our way through the with the Egyptian authorities. The accounting for that will show up as proceeds. As discussed, I can't disclose those proceeds now. We're under confidentiality agreement, but by the time it closes, you'll you'll see that inside the accounts, but it'll take up a good chunk of the two to three billion target that we talked about. Hope that's clear, Chris.

Thank you, Chris. Thank you. Thanks. We'll take the next question from Lydia Rainforth at Barclays. Lydia.

Thanks, Greg. And good afternoon, everyone. To if I could just if we could go back to the cost base and the targets that you've got the least two billion dollars, can you just walk us through in more detail some of the examples of what that involves? And because it's sometimes quite hard to go. What a good cost that help growth and what about costs reflecting inefficiencies. And I am a little bit surprised that you're talking about twenty billion dollars of costs that in that transportation and shipping costs that there's absolutely nothing you can do about. And that just that just surprised me a little bit. So any thoughts you have on that? And then I'm going to come back a little bit to the guidance, given the cost savings number, it's a reasonable argument that actually the numbers and targets should be moved a little bit higher. And effectively, I guess why I'm asking for Maria is I separately is a and I say, you know, it's giving me this, but an exit rate on a bit for twenty twenty four is to just we should be seeing momentum at this stage in that number during this year.

Right. Great. Lydia, thank you. Thank you for your questions. Let's see cost examples. I'll tackle, I think, the second question I'll let I'll let Kate deal with on cast examples. So there are four areas that were really focused on Lydia to deliver at least two billion by the end of twenty twenty six. The first one was focusing the portfolio. You heard about me talk about that already. So I won't repeat myself. The second one is your favorite, which is digital digital transformation. We've done an awful lot to digitize many parts of our business and we're now applying to it. The places that we're seeing tremendous, tremendous results on are coding. We need 70 percent less coders from third parties to code as the A.I. handles most of the coding. The human only needs to look at the final 30 percent to validate it. That's a big savings for the company moving forward. Second, things like call centers, the language models have become so sophisticated now they can operate in multiple language. 1415 languages easily in the past. That hasn't been something we can do so we can redeploy people off that given that the A.I. can do it. You heard my advertising example last quarter where advertising cycle times move from four to five months down to a couple of weeks. So that's obviously reducing spend with third parties. We've now got Jenny in the hands through Microsoft Copilot across many, many parts of the business. And, you know, we'll continue to update with you with anecdotes as we go through. But I think I think this is just a tremendous step change in digital for our company. And I continue to look for ways to drive higher margin and reduce costs both on capital and cost. The suppliers, probably a nice little example to think about eliminating waste. Our good partners at Subsea 7 have formed an alliance with us in the past. We would have overseen what sub what they were doing. Instead, now we form joint teams. They work together on a job. They try to figure out how to optimize it. We incentivize them for time and efficiency. And we have co-located teams that work together on these things. So what it does is it eliminates bid cycles. It reduces the number of engineers involved from both sides in getting everything done. It reduces vessel time, et cetera. So that's just one concept of alliances that we've been doing in the capital side with projects and drilling for a while. And we're now pushing that into the operation space, both in the upstream and the refineries. So that will take out a lot of waste as we move these alliances forward as well. And then last, global capability hubs. We have a continuing need for engineering. It's scarce in the West. So we're looking east for that engineering capability. It's a different cost profile sometimes, but fabulous, fabulous efficiency. We see that both in contractors. So contractors we work with are shifting that way and then ourselves as well across engineering, IT, et cetera. So those are those are the four examples of how we think we'll get to the least the two billion. No, Lydia, I'm not going to give you an update on a 24 and run rate to EBITDA. All I'll say is I'm confident in the growth on an underlying cash flow basis of three to four percent through the decade, including in twenty four and twenty five. We see a strong growth out of the upstream with new projects coming online, with BPX growing, with new LNG coming online from twenty three to twenty five. MTPA return to normal tar seasons in our refineries, along with all the growth that we see from the TG's and business like Castrol. So we feel comfortable with that three to four percent growth per annum underlying on a free cash flow basis through twenty four and twenty five. Will the cost savings add to that? Let's see. I think it will take time to do some of these things. Some some things will come through faster than others. But for now, we're saying that on 26 basis and but let's see how we get on. Kate,

I think you kind of did my job for me.

Did I did I roll into your question? Sorry. The

only thing I was going to add is that some of the changes that we're contemplating take time to affect and execute, and we do it in a way that we are confident in managing risk. So there may be some parallel running costs at some point. And we'll update you as we get clearer on that path and on any associated ratics.

Hope that helps. Right. Thank you. Thanks, Lydia. We'll take the next question from Micaela Delavina at Goldman Sachs.

Thank you very much and congratulations on the focus on cost efficiency despite the relatively positive macro environment. Two questions, if I may on the dividend per share, it looks like we're up for an announcement next quarter. I was wondering, how should we think about the underlying growth? We've got three to four percent absolute growth of the business and we've got a share retirement that is running at between six and seven percent. Is it a is it too simplistic to think about growth of the business plus share retirement equal what can be achieved in terms of sustainable DPS growth? And then secondly, on the net interest expense, quite a difficult line to forecast. It's been around 900 million for the last three quarters. Is it fair to assume we remain at about that run rate in the coming quarters or is there anything else we need to take into consideration? Thank you.

Kate, you want to handle the dividend?

Sure. So, Micaela, I think you may have done my arithmetic for me. I guess a couple of points to just to add to that. So if you think about the financial frame, remember to anchor on our balance points and also the fact that we are first priority is that resilient dividend and and at sixty dollars the capacity to increase by four percent per annum. But as you rightly point out, we've had previous increases in two Q twenty two, four Q twenty two, two Q twenty three, each around 10 percent underpinned by strong performance and by reduced share count. So as you'd imagine, the board will look into many factors when we come to that conversation and to Q on. But as you consider what we've done with our share count, I think we're 17 percent reduced at the end of twenty three. And since two Q twenty three at the moment, we are about five point five percent reduced share count. So I'll let you add that to your current arithmetic.

But the board makes that decision each and every quarter. And of course, you can look backwards to think about what we do looking forward. I think Micaela on your net interest income expense, presuming flat is a sensible thing to do moving forward. I think that's just the easiest thing to do rather than give guidance.

Thank you. Thanks, Micaela. We'll take the next question from Martin Ratz and Morgan Stanley Martin.

So, last quarter, you were helpful in providing a comment on the EBITDA that was delivered, if it was restated under twenty twenty five reference conditions, which, of course, given that we're sort of tracking towards that twenty twenty five guidance over the next couple of quarters, it's actually quite helpful. So this quarter EBITDA was ten point three billion. Can you once again provide some color on what that would have been under twenty twenty five reference conditions? And secondly, I wanted to ask you about yesterday's article. I'm sure you've read it, but there was an article that said that BP could make some additional changes on it on its longer term. So the targets, including the guidance for a decline in production by the end of the decade, the well-known twenty five percent reduction target. I was wondering if you had any comments on that article.

Sure, I'll I'll tackle both of those, Martin. Thanks for the questions. So what we said is that the conditions that prevailed in twenty twenty three, which ironically are very close to the conditions that prevailed in one two twenty twenty four. That was a good starting point for how you should think about twenty twenty five. And then you should just apply underlying growth rate to get to what you think the EBITDA would be across the two years. And we've talked about three to four percent underlying cash flow growth since CapEx is flat and since proceeds are relatively flat. That implies three to four percent of growth across twenty four and twenty five as well. And you can you have said the sources of those value numerous times to help you think about how you can quantify that. I think the only thing I'd say is the ten point three that we had in one to twenty four obviously had the unusual incident with Whiting. We wouldn't obviously plan for something like that moving forward. It had an impact of around a half a billion dollars in the quarter. So you should probably add that back. And you're getting close to eleven billion at about the right conditions for twenty five. I think eleven times four. I'll let you do that math. But you can you can get a sense of where we are performing. And then the three to four percent gives you a sense of where we think we'll be in twenty twenty five. And all of you will adjust that based on what you believe will happen with performance and what will happen with the environment. So I think that's probably about as good as I can do in that space. As far as the FTE article, about two million a day, I'm just going to again be consistent with what I talked about. Talked about last quarter, we continue to with a strategy of transitioning from an IOC to an IEC. We will diversify the business over time. We will focus on bio, EV convenience, hydrogen and renewables. We will continue investing into this space. We will be pragmatic and we will make sure the investments we make hit our returns hurdles. And of course, at the same time, we'll be investing into hydrocarbons on the hydrocarbons. Twenty thirty is an aim. It's not a target. We estimated at around two million a day right now, and it will largely be determined by the long list of potential final investment decisions we have to make across twenty four and twenty five. There are around 30 of them, some in the upstream, some refining, some in the transition growth engines. And based on what decisions we make, that will determine the volume outcome. But what I'm really, really focused on with the organization is returns and cash flow, not volume. So during the quarter, back to that story again, we sanctioned one oil project in the Gulf of Mexico and we let go of two gas resource gas resources in in the west coast of Africa. So that that tells you we're return driven, not volume driven. And once we're through deciding the final investment decisions over the next couple of years, we'll update you with a target for twenty thirty production. Could it be higher than two million a day? Yes. Could it be lower than two million a day? Yes, it's all going to be returned and cash flow focused, Martin, as I think you would hope we would be. I hope that provides enough clarity. Thanks, Martin.

We'll take the next question. Actually, we'll go back stateside from Roger Reed at Wells Fargo.

Roger. Yeah, thanks. And I do appreciate more reasonable time for those of us on this side of the pond. Just wanted to dive back in. Mary, earlier you mentioned diesel recession going on since you have a pretty impressive global footprint. Just wondering if you could expand on that a little bit. And then the other question would just be, you know, can we get a little more of an update on how things are going in the Permian with BPX, you know, just a little more depth into the operations, what you're seeing in the way of productivity and efficiency, things like that.

Sure. Kate, you want to take diesel recession?

Yeah, sure. Yeah, thanks. Roger is out with with T.A. actually about a month ago. We talked a lot about this. So the sector that T.A. has historically focused on is a sector where there are probably smaller sized truckers capturing a higher margin. As a consequence, they're probably far more sensitive to spot price. And actually, what's happened in the spot freight rate over the last couple of years is it has declined. If these truckers are being sensible, they don't drive when the economics don't make sense. So as a consequence, we've seen volumes down. What I would say to you is, is having spoken with Debbie and her L.T. out there, they are all over how they offset that until such point as the recovery starts to kick in. We expect currently that that trucking recession will probably start to mitigate towards the end of this year with a full recovery next year. So as you would expect thereafter, streamline in their costs, they're contemplating how to high grade their site portfolio and they're focused on securing some customers which diversify their customer base into the larger fleets where you may get slightly slimmer margins, but you're going to capture upside from the non fuel income.

Great. Thanks. Thanks, Kate. I think on the Permian, Roger, obviously we got our third we got our third central gathering process up online now. I think that takes our capacity for black oil up to around 100 KBD. So I think a lot of the wells are drilled and we should be popping them and filling that up as we move through the second quarter conditions inside the Permian. It's a bit looser. There's there are more rigs available, obviously, from low natural gas prices. That's making the supply side of it a little bit better and no real change from October on the productivity. All the recent benchmarking we're doing is showing us at the top of the pack on the productivity on NPV for drilling spent. So we're proud of the team for driving that as well. We're not feeling any constraints. We're not feeling any constraints on export at this stage, and we're looking forward to getting the fourth and last last central facility online mid next year. So hope that helps. I'll be out. I'll be out there next week to see the guys and next quarter I can give you a more detailed report.

Thank you.

Thanks very much. We're actually going to jump to an online question that we've received from Alejandro at Santander. He's struggling with the phone line. Sorry about that, Alejandro. He's asking Murray and Kate about Namibia and the investment plans there after the Azul energy announcement.

Yep, sure, I can take that one. So we've been in Namibia as BP for about a decade. We entered back in 2010 or 2011, drilled a couple dry holes, unfortunately, last decade. But we've been monitoring it ever since. Given the recent success that's happened, we started to look at some farm ends. And obviously, we were able to farm into the block south of GALP's big discoveries with RIDO. We farmed in for 42 percent and we chose to do it through ENI, ENI ourselves chose to do that through Azul, which is our West African, our West African energy company. So we're looking forward to completing that farm in. We then move towards drilling wells later in the year. There are two wells to drill under our agreement and we'll see how it goes. But it's a nice little addition to Azul. It's got a great growth profile inside Angola to the end of the decade and cross fingers. If we get some discoveries, it gives it legs for another 10 or 20 years. So we'll see. We'll see how the drilling goes. You can never count on these things, but it looks like it's in a nice postcode. Craig, back to you.

Thanks, Murray. We'll take the next question from Christian Malek at JP Morgan.

Hi, thanks for taking my questions and sorry for the background noise in the airport. Two questions, please. First, just on the cost savings, I have to congratulate you. You continue to drive efficiencies. My only sort of kind of just question around growth is your liquid growth from 26 back to that sort of theme. Why aren't you thinking or framing, you know, in the same way you're doing costs, but more in an upcycle view of you to consolidate or scale up your liquids, given your constructed outlook? It strikes me as sort of very bear market to continue to focus on costs, albeit that's absolutely necessary. So I just want to hear more about your liquids plan, particularly given the U.S. consolidation that we're seeing and how do you frame that on a medium term basis, given we are, after all, talking about 2026. And the second question is around low carbon and trading. Is there a plan or thinking about being more explicit around those businesses in terms of breaking them up to show your cash flow pathway? Clearly, trading is more challenging given it's more discreet, but on the low carbon side, I just understand better what the free cash flow trajectory will be on a medium term basis. We start to think about drawing a path through EBITDA targets. Thank you.

Great. Kate, do you want to lead off with disclosures on low carbon trading?

Yeah, so thanks, Christian. So the low carbon trading is obviously included in our trading numbers. It's also included in our in our transition growth engine disclosures when we make those at the half year and the full year. But we don't we won't be breaking those out beyond the five transition growth engines. I think there's enough complexity in that disclosure as it is already.

And on liquid side, Christian, I guess in our Denver presentation to you back in October, we talked about a pretty resilient. Oil portfolio with the capacity to grow production through 2027 by two to three percent. As we look at our sanctions moving forward from sanctions in the Middle East to sanctions in the East Coast of Canada to Brazil to the Gulf of Mexico to the North Sea, potentially to a Zool and Acre Bp. We have an awful lot of oil in the portfolio. And as we make those sanctions, that would give us more duration to grow the oil business as well beyond 2027. But I can't really I can't really commit to that until I'm clear until I'm clear about which sanctions we move forward. I think on the question of do you want to go by, I'm a counter cyclical human being with low carbon energy in the doldrums right now. Now is the time to go counter cyclical. That's why we're doing light source Bp at a counter cyclical moment in time. And, you know, watch the space. We more do may do we may do some more things over the coming years in a counter cyclical environment on the oil side with oil at 85 or 90 dollars. I'm not sure it's the right time to be buying oil. We might consider some bolt ons, but we just would prefer to be counter cyclical rather than pro cyclical. And we do we do have some pretty strong growth as we look forward, especially relative to the competition, especially in the high margin basins of the OECD. So I feel OK where we are right now. I don't want to do I don't want to do high price acquisitions and instead I'll go counter cyclical with scarce cash where counter cyclicality exists. Hope that helps question.

Thank you. Thanks, Christian. We'll go to Irene Hamona at Bernstein next. Irene.

Thank you. Good afternoon. My first question, Mary, going back to the two billion cost saving, you did mention, I believe, eight percent cash cost inflation on that 22 billion cost base. So I wonder, should we think of the two billion reduction target as partly or wholly removing that inflationary impact and leaving the sort of underlying cost base flat, would you say? And then secondly, on convenience, I mean, your convenience gross margin grew 62 percent in 23 for an increase in side numbers of about 19 percent. So I want to talk so far in 24. Are you seeing similarly fast improvements in that convenience margin or faster, slower? Where do we stand? Thank you.

Yeah, I think on the two billion cost savings, our intent is to drive that through the business and drive that down to free cash flow delivery. So eating inflation is how I think about these things. And that's why we say at least two, maybe something above that takes us to beat inflation. But I'd like to I'd like to try to beat inflation, especially as it's as that's starting to mitigate if we look at all what all the central banks are telling us these days. So I would like to drive that through to bottom line cash flow delivery. And that certainly is a leadership team will be working towards moving forward. Kate, do you want to tackle the convenience question?

Yeah, thanks. Thanks, Irene. Hello. Nice to hear you. Yeah, in terms of convenience, a year on year, if you look at one Q versus one Q 23, you're seeing a significant impact there with regard to T.A. We've seen which we acquired last year that that's just only three hundred sites. So it's driving significant volume. What I would say on gross margin, if you exclude T.A., we're seeing between nine and 10 percent per annum growth in our gross margin year on year. So that's what gives us confidence with regard to convenience delivery.

OK, thanks very much. We'll take the next question from you. Oh, sorry, Irene. Thank you. We'll take next question from Lucas Herman at BMP.

Lucas. Thanks very much, Craig and a couple. One's very straightforward. Just just on the share count and the reduction this quarter, the buyback's obviously being one point seven five share count reductions, just over one hundred and thirty million. I presume that the absence of a greater reduction is because you've issued a lot of stock with employees, the benefits of or not the benefits. But so we'll see more material sums go out on buyback than the one point seven five or so you're indicating for future quarters. That was the first. And the second was it was almost a congratulations. You're you've achieved 30 percent growth on your 2022 Permian or your 2022 BTX numbers already. That make this number seem rather modest, shall we say. But I think more importantly, Murray, can you just comment on the profile we should expect for liquids as you move through 2025 for

the start

up of? Yeah, for BTX. Yeah. As you said, I mean, you're adding one hundred thousand barrels a day of liquid capacity, but nothing like that as yet coming through. The numbers obviously being whatever has just started to give me some better sense of where you think liquid will actually be at the end of the period.

Great. OK, fantastic. Kate, you want to take the first one? I'll take a

second. Yeah, sure. Yeah, sure. Hi, Lucas. So you look just on employee share dilution. We haven't we've made any disclosures yet with regard to the impact on 2024. If you look back over the last couple of years, I think 2022 was around five hundred million and it was just over six hundred and seventy last year. It's probably going to be of an order of magnitude and the same kind of ballpark for 2024. But obviously, it's going to depend on on share price and actually when when employers actually decide to exercise their options, that will drive a level of of impact. And we don't have that level of clarity at this point. What will update you as we step through the year?

And you would expect to offset that dilution. But the intentions to offset, right?

Yes. Yeah, over time.

Yep. We will offset over time, as you say, Lucas. So good eagle eye catch. As far as the .P.X. Liquids profile goes, you're building up the profile from somewhere between one hundred and one hundred and twenty KBD, depending on reservoir responsiveness in the Permian by 2025, assuming the fourth facility comes online as well. We're expanding. We've got most of our rigs focused on the liquid window in the Eagleford right now, given where natural gas prices are. So there should be an uplift there. I don't have a I don't have a number at my fingertips, but I can make sure I can make sure we get that for next quarter. Lucas, if you ask the question again. So there is there is strong liquids growth as we go across .P.X. through twenty four and into twenty five. OK, thanks, Mark.

Pleasure. Thanks, Lucas. We'll take the next question from Peter Lowe at Redburn.

Peter. Hi, thanks. Another question on .P.X. production, but this time on the gas side, because of your gas volume is still growing quite strongly. A lot of other producers in North America are scaling that production. Does that simply reflect your hedging position or can you talk a bit about kind of kind of why that growth is coming through in such a weak gas price environment? And then just a quick one. Are you able to quantify the impact of price lag effects in the Gulf of Mexico and the UAE on the .N.O. As a result of the quarter. Thanks.

OK, Kate, do you want to do the press flag and we'll come back to gas profile?

Yes, sure. Thank you. On price, like the impact in the quarter was about point four, pretty much what we said it was going to be in the trading statement. So we were we were in line with that.

Great. Thank you. On the gas profile, you're right, we've hedged out we've hedged out natural gas at around four bucks through twenty three and twenty four. So obviously, we've kept that going while we've got those hedges in place. We've started to reduce rate count right now and point it more to the liquids levels of the Eagle for it, as I talked about. So you're just doing retention drilling inside the Hainesville. I think what I'd say is the Hainesville is prolific where we drill and the amount of production that comes online and the sustainable is quite high per well. We're in absolutely the best spot of the Hainesville through the BHP acquisition. And the teams have really got their capital efficiency down. They've really got their fract structuring down to make sure that we get fabulous production out of these out of these wells. So I think that's what's explaining the growth is so far. And then, of course, we've got a choice as we move into twenty twenty five based on what we see on gas pricing about whether or not we ramp the gas drilling back up or we stick with liquids and oil. All I'd say is we'll be very, very value driven. We won't be volume driven and we'll see where the best value is and then apply our rate count at that rate. So I hope that I hope that helps, Peter.

Thanks. Thanks very much. Next question from Kim Fustier, HSBC.

Hi, good afternoon. Thanks for taking my question. Firstly, on capex, you said 16 billion of capex guidance now evenly spread over the year as opposed to weighted to the first half. I just wondered if there had been any project slippage to the right. And then secondly, sorry for going back to the two billion cost savings, but I think you said some of those cost savings will have associated restructuring charges. I wondered if you could provide any detail on the kinds of areas where you might incur such charges. This related to headcount reductions and the two billion figure net of those restructuring costs, or is it going to be lower than two billion after those restructuring costs? Thank you.

Great. Kate, you want to talk about those?

Yes, sure. So on on capex, so we're still confident of our guidance of around 16 billion for the full year. What's what what's happened over the course of the last couple of months is that a couple of lumpy payments that would you around the back end of the second quarter have just tipped over into the beginning of the third quarter. And we just wanted to make sure that you've got line of sight to the fact that it probably wasn't so heavily so heavily focused on the first half compared to the second half. It's a little bit more evenly now spread around the remaining quarters of the year with regard to ratics. We'll update you in due course as we get clear on on the implications of that. At the moment, we are allowing each business and function to work on their own plans to deliver efficiencies. And as we said, some some of that will have some ratics associated with it, but not all of it. And as we get clear on the scale of the numbers and when we report them, we'll update you.

Thanks, Kim, we will take the next question from Menno Menno, who's at TD Cowan Menno over to you.

Great. Good afternoon and thanks for taking my questions. So the first is on the simplification of the org structure. You've clearly made significant headway already, but where do you think you stand in that process? And then the the second is yet another follow up on the on the two billion dollar target and apologies if you talked about this already. But can we get a rough breakdown on how much each of the four initiatives is expected to contribute and whether achievement of the two billion is expected to be fairly linear over the next two and a half years? Thank

you. Sure. Why don't I tackle both of those since I gave you the last two ones, Kate, I'll give you a relief. You should you should think about the four cost initiatives, each delivering around a quarter of the benefit. It may end up being different than that, but that's a good estimate for right now. And as far as the linear nature, we said it's by the back end of 26 and it will take time to do some of these things. So I wouldn't count on much impact in 24 and 25. It should be coming in through 26 as we work our way through it on org structure itself. We have announced the first stage of simplification. There will be multiple steps along the way, maybe two or three steps is how I'm thinking about it. We have reduced my direct reports down to 10. We've combined some functions inside the organization as well. Those need to be well managed. We have to have very, very strong management of change as we go through this and make sure that safety is paramount as we do it. And we expect we expect in due course to announce another set of simplification steps to try to make the place easier to work in. Maybe maybe around here and we'll see that next step. So that's that's what's happening on simplification inside the company. Craig, back to you. Thanks, Murray.

Thanks, Mano. Three questions left. We'll take the first one from Henry Tire at Berenberg.

Hi there and thanks for taking my question. Two quickly, one on the outlook for US offshore wind at this point and your beacon wind project. How are you thinking about offshore wind broadly in the US and that project moving forward? And then just coming back to a comment about the potential to be counter cyclical in low carbon. Where do you see sort of attractive returns today in low carbon, either within your own business or sort of externally? Where might you be looking across that space?

Thanks. Great, Henry. I think I'll tackle both of these. I think on beacon look, we're going slow on that one. Infrastructure needs to develop off the northeast coast of the US. We need to see some changes in pricing mechanisms moving forward so that we can move more to an integrated model like we see in Europe. And it's hard to predict at what pace that will happen. But I think on beacon will be going slow, I think is what I'd say for now. As far as counter cyclical, I'll have to be careful on this one because the second I say anything about it, I'll have too much competition. So I think what I'd say is you know my hierarchy of returns on the growth engines from biogas to biofuel to convenience to electrification are the places that are quite interesting to me. And you can figure out what the counter cyclical moment might be inside some of those based on what's been happening recently. And I'll stop myself saying any more than that because my mergers and acquisitions team might shoot me if I say any more. So I hope that gave you enough enough hints, Henry, to think about. And then, of course, you'll see you'll see or you won't see announcements.

Let's see. I think Henry, just to reiterate, obviously, we've laid out our capex guidance and that's organic and inorganic in totality. So this there's not any leakage.

See, CEO doesn't get to spend more than 16. That was code for Craig. So

sorry. Thank you, boss. And then the last question. Sorry, I thought there was two. But the last question from Jack, Romeo, at Jeffries, Jack, thanks for being patient.

Yeah, I know. Thank you. And sorry, actually, actually slipped off the list and to go back on the first question, if I can just ask again about these counter cyclical just wanted to check with you, Murray. I think that on the Q4 call, you you talked about the fact that you've done a lot of acquisitions in the previous years and you were sort of focusing more of integration as somehow this message change or what kind of size of acquisition kind of deal we could we could expect. The second is on the Namibia farm in just trying to understand when Azul was set up in 22 was was always the was you're thinking always about making it your West Africa, West Africa venture or as this somewhat evolved over time. And just on the on the on the deal in Namibia specifically, the Pell 85 is on shallow water versus where other discoveries have may have been made. They're just trying to understand what gives you confidence that the play will extend on to on to shallower waters. Thank you.

Yeah. Let's see on counter cyclical. What I'd say is we have a tight capital frame at 16 billion in 24 and 16 billion and 25 last time I communicated with you. I said we've done an awful lot of acquisitions from T.A. to our care to light source to EDF and it's time to bring now bring the synergies out of these. And I gave you a caveat saying, however, we will consider one or two more of these things moving forward. So I'm not out of line with what I said in February and what I said the previous quarter. Jack, I'm in line with that. That's one or two opportunities that we see over the next couple of years. And I guess the point was more I'm not going pro cyclical on oil. I'll think counter cyclical and transition while prices are low. And let's see if we can actually prosecute anything. Kate, do you want to talk about origins of Azul? I can tackle the geology question.

Yeah, sure. So I mean, when Azul was set up with the N.I., it was a great marriage of of assets. Ours were later life generating significant cash and .I.s were earlier life. So it was a very nice symbiotic relationship, very similar to the one we created with ACA BP. And since we formed it, we've taken just over five billion dollars of distributions. A couple of points I'd say on the finances with regard to Azul and Namibia is it's been set up to be a self-funded vehicle and to continue to distribute back to its shareholders for the first part of Namibia. It's to exploration wells. Let's see what happens with that. Don't expect a material impact on the distributions back to back to us or in I. But let's see what happens with those.

If I channel my inner explorer, really water depth doesn't matter. It's what's happening subsurface. I think the interesting bit about these ones, Galp has had some discoveries. You've seen what their announcements are. When you look at the seismic on the block that we picked up from Rhino, it's a direct extension of the four or five structures that are in the Galp in the Galp blocks at the same geologic depth. So, you know, who knows who knows what happens with exploration. Sometimes it works. Sometimes it doesn't. But there are very, very clear structures in the Galp block. There are very clear structures in the Rhino block. They lay in a pattern. They should have the same charge. They should have the same origin. Of course, there's geologic risk around it. But water depth really doesn't play into it. So let's see. Let's see, Giacomo. Let's see what happens. You have to drill the wells to find out what's actually down there. I think with that, Craig, shall we close? So thanks, everybody, for listening to us. Another decent quarter out of BP. I'm really pleased about bringing growth to the market. So ACE getting up online in Azerbaijan. BPAC's expanding their operations with the third plant in the lower 48 in the Permian. Arkea expanding one big plant, five more in commissioning. And we've got great momentum around cost as well. So I'm very optimistic about growth for BP as we look through the next couple of years and hitting our targets and, in due course, updating you about what's beyond that. So thanks very much for listening. And I look forward to chatting with you next quarter.