BP p.l.c.

Welcome everybody to BP's first quarter 2025 results call. We'll be focusing today's call on the first quarter performance and the contents of the video that I hope many of you will have seen by now. Let me first, though, hand over to Murray for a few brief opening remarks.

Thanks, Craig. Today marks the first quarter since we laid out a reset strategy and we are delivering on our priorities at pace. We delivered strong operational performance in one queue, with over 96% refining availability and more than 95% upstream plant reliability, supporting record operating efficiency. In upstream, we have successfully started up three major projects, SEEP in Trinidad, Raven Infill in Egypt, and GTA in Mauritania and Senegal. That adds 100 MBD of capacity on our target of 250 MBD by 2027. We made six exploration discoveries, including in the Gulf of America, Trinidad, Egypt, and a significant discovery in Namibia. And our customers' business delivered a strong quarter, with the best first quarter since 2020 on an underlying R-COP basis. Underlying pre-tax earnings met consensus. Gas and low carbon missed, primarily due to a weak gas trading result, but we saw strong performance from customers and products, which beat consensus. We recognize and continue to monitor market volatility and are focused on what we can control. We have taken a $1.5 billion intervention around cash flow for 2025. We continue to optimize our investment plans and have reduced capex by half a billion dollars in 2025 down to $14.5 billion. Excluding the inorganic payment for BP Bungay, organic capex is now below $14 billion in 2025. And with $1.5 billion of completed or signed divestment agreements year-to-date, we now expect $3 to $4 billion in divestments for 2025, with proceeds weighted to the second half. We're also making strong progress with the strategic review of Castrol, with significant interest in the business. And we have made good progress in costs, with underlying operating expenditure down $500 million quarter-on-quarter. We'll provide more color on cost reductions at two key results. Finally, and as we got it in our trading statement, net debt rose in the quarter, primarily due to the working capital build. However, we expect the majority of that to unwind through the year in a flat price environment. In summary, operations are running well, creating a strong foundation with our financial results resilient. We have an ambitious growth plan that we're focused on delivering at pace. That is what we need to keep building on quarter in and quarter out. Back to you, Craig.

Thanks, Marie. And as usual, for everybody on the call for Q&A, I'm going to ask you again, please limit yourself to two questions. We've got a number of people on the call today to get through. We will look to close the call by 2pm. And of course, the IR team is available for any follow up. So with that, let's get started. I'm going to go to the States to start off this morning, this afternoon, and we'll take the first question from Steve Richardson. Steve, good morning. Maybe we don't have Steve. So in which case, we'll stay in the States and we'll go to Doug Leggett at Wolf. Doug, good morning. Doug, we can't hear you either. Maybe the connection... Looks like we've got a bit of audio problems. What I'm going to try and do then, maybe there's a connection problem with the US. We'll maybe come back to the UK. Let's try Josh Stone at UBS. Okay, we seem to be having some audio problems on the Q&A. If everybody on the line can hear me, if you can just hold as we try and rectify the problems. Just bear with us, please. so we're using the time efficiently. Buybacks. Can you walk through the bridge here and how much of it relates to reinvent BP share option plans? I do understand sound may have come back as well. I do understand sound may be back as well. So maybe if we deal with those first two questions.

Fantastic. Kate, why don't you lead off on those two? Apologies for the sound issues, team.

Yeah, will do, Murray. Thank you.

Okay, we're being asked to repeat the two questions from Biraj. First one, trying to unpack the weakness in gas and low carbon beyond trading, what is driving the higher non-cash costs? Should we consider this run rate for the rest of the year or is there a one-off element? And the second question was on share count. It went up despite the 1.75 billion buyback. Can you walk through the bridge here and how much of it relates to reinvent BP share option plans? Kate?

Yeah, thank you. And hello, Biraj. Sorry, I can't hear your voice today and apologies for these issues. In terms of the non-cash items going through the gas and low carbon energy segment this quarter, quarter on quarter, we've got about 200 million of higher non-cash items. So DDNA is higher. Obviously, we've got the startup of Raven Infill. So that was delivered ahead of schedule, which was a great performance by the team. There were also some positive non-cash items in 4Q, which we haven't obviously seen again in 1Q. They were unique to the fourth quarter. So in terms of the quarter on quarter delta, I think that's a little bit different because of the one-offs that you've seen going through 4Q versus 1Q. In terms of the DDNA rate going forwards, that's probably a decent run rate with regard to the quarter. Their startup of Raven turning to share count. The end of the quarter share count reduction was actually slightly down in terms of the reinvent. I can't break that out for you at this moment. As we've said before, the reinvent options have a six year vesting period. And it's quite hard to forecast the extent and the timing of which that may impact our share count. I think a lot of it is going to be driven by human behaviour with regard to what's going on in terms of the share price and other factors. What I can say is that, of course, we will continue to offset dilution related to employee share plans over time, as we always have done. And So far, since 2021, we've reduced our total share count by about 22%, and that remains our intent going forward to offset employee share plan impacts over time.

Thanks, Kate. We are going to try the lines. So we'll take the question from Josh Stone at UBS. Now, Josh, can you hear us? I can hear you. Can you hear me? Can you go ahead with your question, Josh? Thanks.

Yep. Yep. I'll go ahead. Thanks, Craig. And good afternoon, Murray. Good afternoon, Kate. Murray, in the video, you talked about very strong operational performance this quarter, and I think you should be commended for that. But when I look at your cash flow statement, that strong performance at least doesn't seem to be coming through yet. So maybe just expand a little bit on the difference between your production performance and your cash flow performance. and what gives you some confidence that that can actually get better through this year. Some discussion maybe on gas trading and costs would be helpful, but maybe if there's any other line items you think we should be paying attention to that's driving some of that mismatch in the first quarter. And then a second question for Kate. I know this is another issuance of hybrids of about $500 million this quarter. It looks to be sort of light source, but just remind us how you're thinking about the hybrid balance this year and the timing of when you might start to redeem some of these bonds. Thanks.

Yep, Josh, nice to hear your voice. Thanks. Sorry for the technical difficulties this morning, this afternoon. As far as conversion from earnings into cash flow, it's helpful to look at Abbott Dock. And we continue to provide EBITDA so you can see that. I think the principal issue we have in the quarter is obviously a working capital build. That's something we signaled to you both at Capital Markets Day and at the trading statement. We've had a seasonal build in working capital as we fill up our refineries ahead of the driving season and the flying season across 2Q, 3Q and 4Q. So we'd expect the majority of that working capital to unwind, and you'd start to see that coming through through the rest of the year, assuming a flat price environment. As far as gas trading, as signaled a week, gas trading, oil was average. You'll remember that we aim for a 4% earnings return on trading across the five years, and we have the same aim this year. Very, very volatile trading circumstances in the first quarter. The oil side did well to hit average. And then the gas side caught out a little bit on European regulation changes. And you should expect us to get back to normal on that in the future. You should expect average performance out of us on gas. So I hope that helps on cash flow conversion. And we feel confident in our plans to grow cash flow from 8 to 14 across the next three years. And it's been a great operational start for the teams. Kate, over to you on the other question.

Yeah, thank you. I think you also asked about costs, Josh. I think I counted three questions nested in there, but let me quickly talk about costs. So making incredible progress with regard to our four to five billion cost reduction program, very much building on the progress that we made. that we started in 2024, where we delivered 800 million of structural cost reductions and 300 million of absolute reductions through the year. Quarter on quarter, we're already $500 million lower in terms of our absolute cost base. So that's good progress. And we can talk more on subsequent questions, I'm sure, in terms of how we're getting after this and what more we're going to deliver. Turning to hybrids, yes, you're correct. We did issue 500 million. This is really just bridge financing for us as we think about bringing in a partner in light source BP. This 500 million of hybrids is only in place until the beginning of next year. They mature in 2026. And my overall strategy with regard to hybrids remains completely unchanged from what I said at Capital Markets Day. I do not intend to grow the stack of the 12 billion group hybrids at all. And as we step towards each maturity window, we have the first one between June and September this year and the next one in 2026. then we'll be very thoughtful with regard to our cash flows and whether or not we want to take advantage of the ability to reduce that hybrid stack by up to 10% each year. Obviously, we're capped to a maximum of a 25% reduction in a cumulative basis by the rating agencies, but we will think about that as and when we get to each maturity window, Josh.

Got it. Thanks for the comments. Thank you, Josh. We're going to go back to the US where we tried to start. I just note, Steve and Doug, you were on the call list. I don't see you there again. So if you want to try and dial in again, if you've got a question, please do. But I'm going to start with Roger Reid at Wells Fargo. Roger.

Yeah, good morning. Good afternoon. Hopefully, you can hear me this time.

Yes, we can, Roger. Thank you. Thanks for being with us.

All right. Success. I like it. So I'd just like to maybe start off BPX. We've had, obviously, commodity prices come down on the oil side. They've remained pretty favorable on the gas side. It's too soon after the late February investor day to announce big changes, but maybe just get a feel for how you're looking at it, how this fits within the range of expectations, and what you would think about in terms of either increasing activity on the gas side, like the Haynesville, or pulling back at all in Eagleford or the Permian with oil closer to 60 here.

Yep, great, Roger. Thanks very much. I'll take those. You know, on BPX, our plans remain unchanged for now. We continue to think about investing $2.5 billion this year. I think we've got 9 or 10 rigs active right now across the basins. We'll closely monitor this. If oil price stays low, of course, we'll moderate our plans and switch over into gas. But for now, we plan to keep it pretty tight. Like you, I'm getting somewhat optimistic on gas pricing. The demand for natural gas is pretty high and production needs to flow and new drilling needs to start to help that production flow to fill up the LNG plants and to fill up the other demand that's coming through in the U.S. Our Haynesville position, our Eagle 4 position are well positioned for that, very close to market and very little differentials. So in time, we think we'll grow that gas position, the drilling inside that gas position. Right now is not quite the right time, and we'll just keep this tightly under review as we watch what unfolds with the hydrocarbon pricing. Thanks, Roger.

Thank you. Thank you, Roger. We're going to stay in the U.S. Doug, I see you managed to rejoin. Over to you, please.

Can you all hear me okay?

Yeah, yeah, we're good, Doug. We're all sorted.

Excellent. Okay, good. I'm just glad it wasn't a screw-up on my end. But anyway, Murray, I wonder if I could hit the disposal target. You've nudged it up a little bit for this year. You know, small, obviously, but you've got a big number out there. And it seems to us, at least when we kind of walk through the waterfall of the potential disposal candidates, it seems you could far exceed that $20 billion number. And I realize it's very early days, but I wonder if I could ask you to frame how you've risked that number in terms of, you know, is there an upside case and maybe put a range around what that might look like over time?

Yep, great. Doug, thanks very much. As you say, we have very high quality assets and transactions are not slowing down right now. Obviously, we've got one and a half billion behind us in the first quarter, which is fantastic. We're upping our range to three to four based on the strength we see in the conversations on the retail positions that we're looking at, as well as the refining position. And obviously, we've launched Castrol as well. I feel it's a well-independent plan. I can't give you its rest. We'll deliver the $20 billion. We have lots of options around that. I think for now, given that we're only one quarter in, I wouldn't be guiding to upside. I think we just need to start to get more track record on that and see how the process goes. But I'm very confident in it. It is a number that we will hit. much like the net debt target is a number we will hit. And there's lots of interest inside the assets that we see, especially as interest rates fall here in Europe. They may not be falling in the U.S. yet, but as interest rates fall in Europe, people are looking for yield, and our assets are good for yield. So we continue with our strong process. We feel very good about the $20 billion number. We've got strong progress and strong interest inside Castrol, and we keep moving forward. Doug, thanks for the question.

Thanks, Murray. I wonder if I could risk a quick follow-up. It's also on BPX. A little selfishly, you recently dissolved the JV with Devon. There seems to be conflicting data out there as to what it means for BPX. I think Inveris had a report out the other day saying you guys got the better side of the deal, but Devon suggests that the capital costs come down dramatically with them operating. So I wonder if you could offer your perspective on on that and whether it impacts the $650,000 target in 2030. I'll leave it there. Thank you.

Yeah, no impact to 650 KBD target for now. We really like the transaction. We got more production early on. That's why it adds more value. And I think that's what you're referencing in the NRVS report. reports that has been put out. Now, I think there's a different philosophy between ourselves and some companies on what you do in the lower 48. Our focus is on creating as much NPV as we possibly can for the dollars we spend, whereas some operators simply focus on cost. That's not what we do. And again, if you look at Enervus and they benchmark us across all of our three basins, we are best in class on NPV per dollar spent. And that's about getting more resources for the dollar we spent on a relative ratio. That applies in the Permian, that applies in the Haynesville, and here in the Eagleford as well. I think the principal difference between the two companies is we believe in three strings to capture more resource. I think Devon believes in two strings. to minimize cost. So they're right, they'll spend less on the wells, on the casing strings, etc. But again, the benchmarking is showing that using the technology we do, matter pressure drilling, insulated drill pipe, and drilling automation, Our teams are keeping the costs relatively consistent. So I think benchmarking will tell over time who's right on this, and it's very transparent under the U.S. system. But we remain confident, given our track record, that we've got a great team. They're doing great work, and we're very, very focused on value for dollars, not just dollars. So we love the deal, and we look forward to seeing the results of it. and we shall challenge ourselves on benchmarking to make sure that we continue to be the best in the basins in which we operate in the way that we think about it. Hope that helps, Doug.

It does. Thanks a lot, Murray. Thank you, Doug. We're going to come back to the UK, and we'll go to Lydia Reinforce at Barclays. Lydia.

Good afternoon. Two questions, actually, please. Refining and the trading side, if I think about that business... looking at the numbers, about 13 million of operating profit, despite what is 96% uptime. And assuming it's a positive contribution from trading, it does still suggest that the refining business is loss making, even with that good number operationally. So I guess the question is, is that a concern? And how quickly can you actually get that back to where it should be? And I suspect that'll link in a little bit to the cost side. And then the second one, just around the head of strategy role and what do you gain from not having that role in place now? And how do you make sure you respond quickly to changing circumstances? I think part of the criticism so far has been that the pivot back to what you're doing now didn't happen as quickly as it could have done. So just that idea of how do you make sure that you can pivot that, that you can, you'll send a check in that kind of flexibility side of it. Thanks.

Yeah, Lydia, I think on the head of strategy role, we'll continue to have a head of strategy. The person will just report into Kate. It'll be much more tightly integrated into planning and actuals. And that role continues to be very important. I'm just not choosing to have that role on my leadership team. But Kate will ably be able to help us navigate all the twists and changes in the external world. And the team will remain in place to help us with that. I think on refining, what would I say? So 1Q, a difficult margin environment in the Midwest where there was a surplus of gasoline and obviously Whiting is a gasoline-focused refinery. So that was very, very difficult pricing inside the Midwest. And then in Rotterdam as well, diesel oversupply. So the pricing inside Rotterdam was quite, quite difficult. We are seeing these things rebound as we move into turnaround season globally and as demand starts to pick up. Remember, 1Q in the U.S. was pretty difficult. There were quite a few storms in 1Q in the U.S. that drove that low demand. So we're starting to see the refining's margin lift up now. We've obviously got Atlantic Basin refineries, 1.2 million a day shut in now. So we are seeing that start to lift up, and we now think that we're above our planning basis for refining margins. But as always, these things are volatile. We'll see what happens. At the same time that's happening, we continue with our efficiency and cost journey. We're obviously high grading the Gelson-Kirken refinery. We continue in those conversations with counterparts. And we have a big cost program across refining that we laid out. Our overall aim is to improve the profitability of that business by $2 a barrel over the next few years from 25 to 27, and we're well on track with that. And I think we were just in an oversupply situation both in 4Q and 1Q, but that now seems to be starting to alleviate itself as 1.2 million a day capacity shuts down and demand starts to pick up as we move into driving season. Hope that helps, Lydia.

Thank you, Lydia. We'll turn next to Kim Fustier at HSBC. Kim.

Hi, good afternoon, and thanks for taking my question. Firstly, on CapEx, the oil price is about $5 weaker now than the $70 range you assumed in the CMD in February. You've turned 25 capex by about 3%, which seems like the right thing to do. I appreciate there's not much flexibility to reduce capex in the near term, but maybe on a 12-month view, would you be able to reduce capex further? And if so, would you cut capex proportionally across upstream and non-upstream businesses? And I guess related to that, I've seen that you edited the low-carbon transport business, and you've also canceled another Rye Fields project. So relative to the CMD in February, does that point to further downsides to your transition capitalist guidance. Thank you.

Yeah, I think, Kim, no change to the overall guidance that we provided at Capital Markets Day. We set a range of $13 to $15 billion. You've obviously seen us cut our capital from $15 down to $14.5. That's not in any specific business that I'd highlight. It's across the patch. It's about capital efficiency that we see coming through as well as a few investment choices. None of the two that you mentioned earlier. were really impactful inside that capital frame. As far as how we think about this, we're very, very returns driven. We will be doing whatever makes the most sense for returns as we make these decisions. In the event of an oil or gas price downside on a 12 month basis, we've got a lot of flexibility in our onshore rigs around the world. So we can obviously act on that basis. And of course, we can always trim CNM refining capital as we need it across the business as well. So I think what I'd say is we're being extra careful given what's going on with the macro environment. We've trimmed capital by 500. We've accelerated divestment proceeds. So we've added a billion and a half to the cash flow of the corporation in 2025 in case the macro continues to turn worse. And we have optionality to reduce two and a half billion of CapEx across the group in the event prices go lower. That would obviously challenge long-term growth, so we're not doing that now, but we do have the $2.5 billion, which equates to a further $10 of price downside. Of course, the last comment I'll make is in the event prices do start going that low, we'll start to see significant deflation based on what we've seen in past cycles, and that tends to pass through quite, quite quickly. We have seen softening in the U.S. rig market and completions market now with the rig fleet down 10%. We're starting to see a bit of softness in the offshore floaters. So let's just see how this unfolds. But we're well prepared for any scenario.

Thanks, Kim. Thank you, Kim. We'll stay in the U.K. and go to Chris Coupland at Bank of America. Chris.

Yeah, thank you very much, Craig. One for you, Kate. Could you walk us through a little bit the restatement and where Arkea has moved from? I remember at the time of the acquisition, this was meant to generate 500 million plus of EBITDA this year. And I'm not sure what I can compare between your prior quarterly reports entirely tallied up. So that'd be helpful to understand the movements between downstream and low carbon. And then perhaps for you, Murray, you've now signed and published that Kirkuk agreement, but I'm still missing numerical details. Is there anything you can provide to us in terms of handrails, whether it's CAPEX statistics, BOE, or IRRs? Thank you.

Great. I'll start off with Kukuk, and then we'll hand over to Kate for your other question. The government of Iraq will publish the PSA at some moment in time is what we understand. They have not done so yet, so I have to be guarded in what I say, Chris. I hope you understand that I don't want to break any of those agreements. I think the way you should think about this is this will be an incorporated joint venture where we bring partners into. There will be CapEx on balance sheet for a little bit, but then the CapEx will move off balance sheet as we bring those partners in. That's the first thing to say. So it will be a very capital light investment into Iraq. The terms are much better than the previous rounds. Remember, we're on the eighth round now of price improvements since the first awards back in twenty seven and twenty twenty eight. And I think some of the terms from the eighth round have been published. So you can you can look at those inside the various different sources and you'll know that we're doing at least as well as that. The other things that are public that I can talk about is with Ramela, we only had the oil rights. Now we have both the oil rights and the gas rights, and it's a decent gas price. So we'll be very incentivized to help the nation with natural gas supplies, which they're encouraging us to look at. So that offers up an entirely different tranche of profitability relative to Ramela. And I think the other thing to say is that there's a price upside inside this PSA that did not exist in the previous tranches as you look back across time. So it's pretty profitable. It'll be cash flow positive quite quickly. Volume ramp up, I can't really disclose volume ramp and volume numbers until the PSA is published. And hopefully that gets published and then I can I can talk about this more wholesomely. That's just for the three billion barrels inside the 25 year agreement we've struck. We also continue to look at exploration optionality underneath the existing five domes. So that will be we have some commitments to drill some wells there that will open up new new avenues beyond the three billion barrels. And I'm sure there's lots of resource there as the source rock is very, very rich. And, of course, we continue to have conversations with them about the surrounding acreage as well and getting more exploration opportunities. So we think this is a great investment. And as we get that PSA published, I would look at the last round for now. And then when the new PSA is published, you should be able to model it pretty tightly, Chris. Over to you, Kate.

I appreciate that. Helpful. Thank you.

Hi, Chris. Yes. So on Arkea, we moved it out of the customer and product segment and into the gas and low carbon energy segment. So where we have materiality, we have restated the 2024 numbers to demonstrate the impact of that. And with regards to disclosure, we'll disclose annually in terms of EBITDA. as we said we would when we were talking about this back at the Capital Markets Day. In terms of progress, it did well last year, nine plants online. We've got three online already this year. I think we're expecting eight to ten. We still continue to expect Archaea to be free cash flow positive by 2026. So from our perspective, it's well on track.

Okay, thanks, Chris. Okay, thank you, Kate. Sorry, Chris, did you have a follow-up there? All good. I'll circle back later.

Thank you very much, Craig.

No problem. Thank you. We'll jump back to the U.S. Jason Gableman at TD Cowan. Jason.

Good afternoon. Happy to be back on the call. I wanted to start on gas and low-carbon energy. The tax rate was high across the company, but also in that segment, I was wondering if you could talk about what drove that and what your expectations are on the tax rate for that segment going forward and more broadly for the company. Thanks.

Yeah, I'll let Kate, as our head of tax, talk about that.

Thanks, Murray. Yeah, so the group tax rate, the effective tax rate for the first quarter was around 50%. That's higher than it was in the previous quarter and in the previous year in terms of 1Q. Largely driven by the composition of our profits, we tend to have higher taxed areas in our oil production and operations segment than we do in either our customer products or our gas and low carbon energy. And that's what's driving the effective tax rate. For now, I think it's important to remind people that we haven't changed our guidance for the full year. We still currently expect our effective tax rate to be around 40%.

Okay. Can you say something specifically about gas and low carbon energy? It looks like 1Q tax rate for that segment was 47%. It's been around 30% the past couple of years.

Yeah, I think we'll follow up with you separately on that. We don't disclose tax rates by segment. So I'll let Craig and the IR team pick that up with you afterwards, if that's okay, Jason.

Okay, that's fine. And then my follow-up is just on gas hedging. And I believe you had a solid gas hedging program for the lower 48 last year and was wondering if you're doing the same this year, if you could talk about pricing you've locked in. Thanks.

Yeah, we won't be specific. It's a bit commercially sensitive right now. But I'll say the majority of the gas hedges are locked in for BPX. The majority of the production profile is locked in around $4, Jason. So that's what we've got roughly right now.

Okay, great. Thanks, Jason. No problem. We'll come back to the UK and take the next question from Martin Ratz at Morgan Stanley. Martin.

Yeah, thanks. I've got two as well. I wanted to ask about a few line items that we don't often talk about, but actually in terms of our ability to model earnings and balance sheet gearing are quite important. One is the line about the minorities, which seems to have grown over time and Frankly, it's quite hard to know really what's in there, but any sort of indication, guidance, what the minority line could report this current quarter is an indication of what we can expect over the next couple of quarters. And also related to that... The line item sort of adjusting items, which we never talk about, and on our end we always assume that it's zero going forward, but over the last six quarters it's averaged negative 1.7 billion per quarter. And so in terms of modeling balance sheet gearing, it actually moves around things sort of quite a bit. To the extent that you can say anything about the line item adjusting items going forward, perhaps not being zero, is there anything you can sort of guide us there? Because it would help us sort of modeling the balance sheet. Then next to these two accounting questions, I've got one specific question about Kaskida. As in, my understanding is that the platform for Kaskida is under construction at the yard, I believe, in Singapore. If that platform is imported into the United States, I would suspect that a tariff would need to be paid. But I wanted to ask if you could confirm that, indeed, importing that platform for that project is subject to an import tariff. And also, if you can say something about how that might impact the economics of the Kaskida project overall.

Yeah, just to take a casket of first finished goods are not subject to tariff, Martin. So I think I don't think that's a risk at this stage. So nothing we're particularly concerned about on NCI. I think you're asking a question. I'll let I'll let Kate tackle that one just on adjusting items. I can't really give you any guidance. There are a million things that flow through there. Fair value accounting effects on hedges, on derivatives, et cetera, move through there. So it's quite a volatile set of accounting elements that go through it. You can see it on page 20. 24 of the SEA. I think if I tried to give you guidance on that, I'd just get it wrong. If you think back in history, what's happened there at one moment in time, there were 21 billion of adjusting items in a particular quarter because of the moves on gas prices against the hedges that we had in our LNG trading book. and those eventually evaporated to zero over time. So I just encourage you to think about cash flow would be my suggestion because that page of adjusting items is very, very difficult to forecast. It has a lot to do with interest rates. It has a lot to do with oil and gas pricing and the contracts we have in place. Generally, there will be offsets in the underlying business, and it's more of an accounting issue than a cash flow or earnings perspective, which is why we provide the adjustments we do. Kate, over to you on NCI.

Yeah, thanks, Maria. Hi, Martin. The only other point I'd add on adjusting items is, of course, you get tax items flowing through that as well. And this quarter, the pre-tax adjusting items were about 400 million. Then there was a 500 million adjusting item relating to the extension of the EPL in the UK system. So that also flows through. Turning to NCI. Yeah. Look, it tipped up a little bit in this quarter. A lot of that was really due to the fact that we pre-issued around $2.5 billion of hybrids in the fourth quarter. If you could recall back to that, I was explaining that we took advantage of pretty unusually good conditions to issue in advance of upcoming maturities through 2025 and 2026, as did our peers, actually. And so, as a consequence, the costs associated with hybrids are up a bit. The bit you can't see... is that we chose to take that cash and invest it. And so we are earning interest income on the other side of that, which largely offsets it. In terms of how that's going to look for the next few quarters, as you know, I've just said the first maturity window with regard to our hybrid stack doesn't open up until June. We have the opportunity, if we choose to reduce by up to 1.2 billion, let's see when we get there. But unless and until we reduce that hybrid stack, the level of NCI income is going to remain fairly stable.

Okay, thank you.

Thank you, Martin. We'll go next to Michele Della Vigna at Goldman Sachs. Michele.

Thank you. Two questions, if I may. The first one is on net debt. I was wondering if you could give us perhaps some guidance of where you expect it at the end of the year, assuming flat pricing given the operating working capital reversal that you expect through the rest of the year. And then secondly, I wanted to ask you a broader question on tariffs beyond the Casquita platform. whether there is any sensitivity that you guys have done on what could be the impact on your business from tariffs and if there is any part of it which is especially subject to it. Thank you.

Michele, I'll take tariffs and I'll hand over to Kate. I think on tariffs, look, so far we haven't seen a material impact to the business. If you think about our American business, we import product from Canada to process in our refineries. That's now been exempted under the U.S.-Mexico-Canada trade agreement. The aluminum and steel tariffs were not seeing any impact in our lower 48 business because we took a choice 18 months ago to source all of that steel domestically, so we don't see much of an impact. And in the Gulf of America, as we just talked about, there's some specialty steels that we import for drilling and casing, but it's very, very small, and it's not going to have a material impact on the business. So I think as I think about the U.S. operations themselves, there's just not much of an impact on tariff, Michele, at all. Kate, over to you on the question on net debt.

Yeah. Hi, Michele. I think the first thing I do want to say on net debt is that the target that we've set out of the 14 to 18 billion by 2027, I know Murray said it in his opening comments, but I think it bears reinforcing. We're very confident in the delivery of that. And that's what we're really focused on. With regard to the trajectory through the rest of 2025, we've got some big moving parts on there. So we've got about as I look at it, around two and a half billion dollars, perhaps a little bit more of the working capital will reverse. And if we hit the top of the new target on divestment proceeds, you've got around another three and a half billion dollars of proceeds coming in from that source. So there's some big moving parts on top of the operational performance. So I think I would like to just take a moment to just comment on the way that we're going to to tackle our net debt target. If you remember in February, we talked about ring fencing divestment proceeds from transactions on Castro and LightSource. We've launched the process on Castro. We've got, as you might imagine, great interest in that asset. It's an iconic brand. It's been in place for 125 years, and the team are doing a fantastic job for the last few years, improving their performance and delivery every single quarter. So that's looking strong, and we expect to launch a process on LightSource BP this quarter. So The proceeds from both of those go to bring our balance sheet back into the $14 billion to $18 billion range, and we feel very confident of that.

Thanks very much. We'll take the next question from Matt Lofting at J.P. Morgan. Matt.

Thanks for taking the questions. Two, if I could, please. I wanted to specifically first ask you about trading. I think you talked about gas earlier, but I wanted to just ask on oil and liquid, I guess, over the last 12 months. BPs generally turn the contribution in the average to weak range. And optically, on a headline basis, it seems to have coincided with moderated oil and product markets. So I wondered if you could just talk about whether there's any key market or spread characteristics that the company would want to see strengthened in order for the contribution of that business to follow suit. And then secondly, on The buyback and 750 for Q1, is there any fame you can share on how BP's thought about the calibration of that 750 for the full year, for example, where at the moment you think it's most appropriate to be for 2025 within the 30% to 40% CFFO range? Thanks.

Yep, great, Matt. I'll take the trading question. I'll let Kate take the other question. I think on trading, look, as Carol talked about at our Capital Markets Day nine weeks ago, our trading is made up of three bits. There's the day-to-day business where we provide customers with energy that makes up about half of our profitability. There's 25% about rediversions when disruptions occur. So 75% of both oil and gas really is all about that base level business that we continue to work our way at. On top of that is trading in a speculative sense where we do tend to take time spread positions. I think on that particular bit, the things that make it easier or make it hard I think headline-driven events, political headline-driven events make it quite difficult to trade. And that's what you saw if you look at the results of the trading houses over the past 12 months. Some of them have outright exited the space as they've dealt with the headlines because they didn't have the physical flow that we have. And then you're just looking to take advantage of spreads over time, whether geographic spreads, time spreads, quality spreads. That's the space where our oil trading book tends to make money. Matt, I'm afraid if I go any further than that, my traders will get angry with me. So I'll stop there and pass over to Kate. Go ahead, Kate, on buyback.

Yeah, thanks very much. Hello, Matt. Yeah, with regard to the 1Q share buyback, the capital markets update, we suggested that the buyback for the first quarter was likely to be in the range of $750 to $1 billion. As we think about the buyback each quarter as a board, the first element of the thinking is the way we have now framed our approach to distributions in our new financial framework. We have said that the total of the resilient dividend and the share buyback over time will be around 30 to 40 percent of operating cash flow. That's over time. It's not a mechanical quarter in quarter out calculation. It's it's a frame for the board to use as a guardrail in terms of how it thinks about it. And we've also said it's a mechanism to to share excess cash. And each board decision, as we step through the quarters, will, of course, take into consideration what's going on in performance, as well as the frame of 30% to 40% of ops cash, but also current volatility, outlook, medium term, across the range of the commodities that drive our cash flow. But we're not going to guide forward. We will update you at 2Q when we've stepped through that decision-making process.

Thanks, Beth. Thank you, Matt. We'll take the next question from Irene Hermona Bernstein. Irene.

Thank you. Good afternoon. I had first of all a question on the $500 million cost reduction in Q1, which I thought was quite an impressive number. You said you will update us in Q2 on costs, but I just wanted to try and understand the type of cost saving we're talking about. Where is it coming from? If you can perhaps give us just A couple of examples to understand. And then secondly, Kate, if I may go back to the adjusting items and the $539 million UK energy profits levy in Q1, that amount was greater than the full year 24 amount. So should we treat this as a one-off Q1 event or is there more to come later this year on this UK energy profits levy, please? Thank you.

Hi, Irina. I'll take the second question first. It's very straightforward. It's purely the tax effecting of the extension of the EPR to 2030, which was substantively enacted in the first quarter. You therefore have to take the full adjustment at that point in time, so you shouldn't think that that is recurring. It's all been accounted for fully now. With regard to the £500 million cost reduction, yeah, I'm in a similar place to you. I thought it was a good outcome. It's reflective of the fact that we have... the team's in action at pace right across the company. In particular, I think for OneQ, I'd call out Progress in Customer and Products. I think they're doing very well. But also we're trimming costs, as I've said, across all business, but also in all of the sort of corporate head office functions as well. we're making good progress. One of the things that we've talked about in the past is our focus on taking out third party and supply chain. And we have around 3000 contractors that have now left BP. We're now going through the next 3400 contractors role by role. And we're able to use some technology with the help of Palantir that that allows us to go through that exercise and create data-led decision-making, as I say, role-by-role on those contractors and move at a pace that we just couldn't doing it manually. So we're in action enormously right across the company on that, and I look forward to updating in much more detail at the second quarter.

That's great. Thanks very much. Thank you, Irene. We're going to turn to Lucas Herman next at BNP. Lucas. Thanks for talking to us, Jeff.

Thanks very much, and a couple if I might. Sorry, Kate. Volumes from venture now, I presume that they're flowing. Should we assume that you're going to receive broadly a million and a half tons of LNG this year and start incorporating that, obviously, in numbers? Just any observations there? And I'm going to ask this one. I think it's probably going to be seen by you as a statement of heresy. Almost, but it relates to trading. It strikes me that for BP and for reestablishment of confidence and trust, increased stability, whatever, within quarterly numbers is of increasing importance. I don't doubt for a moment the competence or the scale of the trading business and your ability historically to generate healthy average returns across an extended period, if not within a short period. But as you say, Murray, and as Carol highlighted, I mean, you have fantastic flows, which obviously drive a sustainable level of margin, albeit it will obviously vary depending on price. And then you have a solid ability to optimize. Is this not a point in time where perhaps the organization should think less about value trading and think just more about trying to deliver a stream that is more stable, more consistent? and drives less volatility in the quarterly numbers, as has tended to be the way over the last several quarters. You're welcome to shoot me, Murray.

Yeah, Lucas, I'm trying to think about how to answer your second question. I'll answer the first one, which is quite easy, which is ventures. Yes, it is flowing. It started flowing in mid-April. And we've got two MTPA capacity at venture offtake. And I think I'll stop describing anything on venture beyond that, on venture global. On trading, look, the trading benches are incentivized to make as much money as they possibly can. and they take views based on the risk that is out there. If I told them stabilize your income, it really wouldn't be a trading organization. It would be a marketing flow organization, and you'd lose an awful lot of edge inside the commercial delivery that we see. So I kind of understand the question, but all trading organizations across the world are highly incentivized to drive as much profit as they can. as opposed to partial profit. And I understand the volatility points you're making, and all I'd encourage everyone to think about is that you should not look at this on a quarter-by-quarter basis, nor should you look at it on a bench-by-bench basis. You should think of it in an annual cycle, in a multi-year cycle. We have earned 4% over the past five years. It has been about half gas. It has been about half oil. And, of course, you should divide that in four as you estimate it. And, you know, we continue to have a strong track record of delivering that 4%, no matter what the macroenvironment conditions are. So I think that's my response, Lucas. Thank you for the challenge.

Thank you. Thanks, Lucas. We'll go next to Henry Tarr at Berenberg. Henry?

Hi there, Craig. Hi, everybody. Thanks for taking my question. I guess some positive news in Namibia over the last few days with Azul. What are your plans from here in Namibia, I guess? And would you be interested in getting more exposure to the region if the right opportunity came up?

Thanks. Great. Thanks, Henry. Yeah, it was a significant discovery that our partner Rhino led. We operate through the Azul joint venture, a 50-50 joint venture with E&I. We're very pleased with the well. It was a significant discovery. They did an extended well test on it and obviously produced 10 KBD. of light sweet oil as they did that. We're currently evaluating the results from the drill stem test and thinking about what the next steps forwards are with our partners. I think it's premature to say anything more than that, other than we're very pleased with it. As far as would we do more Namibia, we're always looking for interesting exploration acreage around the world, and it's possible. But right now, I think we're pretty happy with the position we have and the block we have. and we'll update you in due course on that over time, Henry. Thank you.

That's great.

Thanks. Thanks, Henry. We'll take the next question from Giacomo Romeo at Jefferies. Giacomo.

Thank you. Two questions remaining, maybe for moral clarification. Mary, when you talked about the $2.5 billion reduction potential for CapEx, I'm just trying to understand what you're thinking there in terms of what level of prices would trigger such a such a reduction, should we expect that to be more linearly if prices go down, or there's a particular level you have in mind where we would see an acceleration? Second question is on gas and low carbon. I appreciate the color on cost. If I look, though, at the EBITDA, I still find it quite low compared to So what I get through the model, just trying to understand around the contribution from energy trading, whether that was in fact positive this quarter or is there any chance you had actually a negative contribution to the EBITDA this quarter?

Thanks, Giacomo. No, we didn't have a loss. It was a weak quarter, though, a weak quarter, as you signal. On CapEx flexibility, look, we've made a decision to trim 500 based on the macroeconomic environment. Let's wait and see what happens over the coming weeks. There are some OPEC meetings. We'll have to see how the negotiations between the U.S. and Iran unfold. And we'll have to see how the tariffs unfold as well and what that does to overall demand. We will stay right on top of this, making the decisions we need to make. We have lots of flexibility with the two and a half that we talked about. Of course, it will demand decisions on different parts of the business. So we're not just an oil company. We have oil. We have natural gas. We have gas. service stations that we fund, et cetera. And so we'll be thinking about the different macro environments into each of those if we are to make those decisions. But a first step of 500 million and no plans to make further cuts at this stage, but we will remain tightly attuned to the marketplace and ensure that we can meet our targets for 2027. Thank you, Giacomo.

Thank you. Thanks, Giacomo. We are going to make time to take the last two questions. Sorry, the last two individuals with questions. So first of all, Paul Cheng at Scotia. Paul.

Thank you. Two questions, please. Murray, in the Gulf of America, the U.S. just have a new rule, the Downhole Commingling Act. Can you give us some idea that where this new rule you see the most opportunities set in your portfolio and how big are those? Second question is that if indeed the commodity market become more challenging, how you contemplate or that the decision process between reducing your capex, which you certainly could, but how about further reducing your buyback? I mean, how do you balance between the two? Thank you.

Go ahead, Kate, on the balance between buyback and... And then I'll take the question on Gulf of America.

Yeah, will do. Thanks. And hi, Paul. So the financial frame that we set out in February alongside our reset strategy, I think, was pretty clear in terms of how we think of the order of priority inside our financial frame. The first one, we're very clear, is a resilient dividend. And we've said that you should expect a 4% increase a year. And that's a flaw. After that, balance sheet is our next priority. We are categorical in the delivery of this 14 to 18 billion dollar target by 2027. After that, we look at CapEx and we have designed the financial frame in totality to be able to be flexible, but yet ensure we can deliver on our four primary targets. We have a lot of flex in CapEx, that 13 to 15 billion dollar range. And then we share excess cash with shareholders. And that's where we have positioned the share buyback in this financial frame as part of our total distributions, which are over time at around 30 to 40 percent of operating cash flow. So I hope that helps you think how and understand how we think about the prioritization. We are we are going to protect our balance sheet. And yes, the anchor point for us at the moment as the board is thinking about the operating cash flow is, and using share buybacks as a mechanism to return excess cash to shareholders. But we'll step through that quarter by quarter.

Kate, can I ask that to clarify? If that means that even in a lower oil price environment, you're still going to pay out about 30% to 40%, but not below that range? Because I thought 30% to 40% is just average throughout the cycles, right? So if we particularly looking at one cycle, should we have a payout lower than 30%?

But 30 to 40 percent is over time. And of course, our operating cash flow will move up and down with price. But we're not looking at it in a particular quarter as we step towards the decision as a board at the end of each quarter. We'll take into account what's going on inside the company, how we've performed in the quarter. But also, as I said earlier, the sort of medium term outlook. of the prices that drive our cash flow. It's not just oil, it's also gas and it's refining margin and we'll take into consideration all of that as we make our decisions each quarter. But we've been pretty clear we're not going to be guiding forward on share buyback.

Okay. And, Paul, on downhole commingling, I suppose it's really targeted at the paleogene, where we do see the differential pressures. Obviously, cascata will be our first development on that, so it's going to take a bit of time. We don't see as much potential right now inside the myosin, but it's early, and we're continuing to test that right now. So it's mainly for us right now a paleogene question, and obviously the paleogene production comes later in the decade for us. Thanks for the question, Paul.

Thank you. Okay, thanks, Paul. We've got the last question. Biraj, you helped us out with the virtual ones at the start. Maybe we can hear your voice now. You've hung on to the end.

Hi there. Thanks for taking my question. Just one quick clarification. It's all a modelling thing and I'm happy to follow up after. But just a comment I think Martin asked about the NCI project. And I guess part of that is the hybrid and part of that, I'm assuming, is the selling of things like TANAP and TAP. But just the comment, Kate, you made around the flip side of that, the higher interest, presumably that would result in a lower OBNC charge for the year. I'm just wondering, in that context, why the 2025 guide was still $1 billion. Thank you.

So, Baraj, the short answer is you're correct on both. Yeah, the NCI is made up of both the charges associated with the hybrid bonds, but also dividends that we pay out of BP subsidiaries where there's a level of the equity held by others and Things like divestments around pipelines fall into that category as well. Sorry, could you remind me of the second question? OB&C, yeah. So the interest income, yes, you're correct, is reported inside OB&C. We don't split it out. But the other very big component that moves OB&C around is FX and in particular movements on various components, including hybrid swaps. So you'll see quite a lot of FX volatility. That's the primary element that's driven the quarter on quarter change inside OBNC. I can't predict where FX is going to go for now. What I look at is my underlying spend and my underlying expectation with regard to costs and income going through the year. And at the moment, the guidance feels about right. But we'll, of course, review that when we get to the second quarter and we look again at the full year.

Thank you. Thank you. Thanks, Biraj. And thank you, Kate. Thank you, Murray. We're going to close the call there. We've managed to get through all the questions. Thank you for raising them. And I'd just like to thank you again for the patience at the start of the call. We'll certainly be looking into what happened there. Very unusual. So I think we'll close the call on that note. And on behalf of Murray, Kate, myself, thanks very much for listening and for your interest in BP's results today.