TIDMBP.
RNS Number : 1390P
BP PLC
07 February 2023
press release
7 February 2023
bp Integrated Energy Company strategy update:
Growing investment, growing value, growing distributions
-- Performing while transforming:
- Performing: 2022 EBITDA $60.7 billion; full year operating
cash flow $40.9 billion; net debt $21.4 billion, lowest for almost
a decade; ROACE 30.5%; full year tax $15.1 billion; strongest
upstream plant reliability on record; lowest production costs in 16
years
- Transforming: investment in transition growth engines c. 30%
of 2022 total investment, up from c. 3% in 2019
-- Leaning further into bp's strategy:
- Investing more in the energy transition and bp's transition ,
investing more in supporting energy security and energy
affordability today
- Up to $8 billion more into transition growth engines by 2030 -
growing in higher-return bioenergy, and convenience & EV
charging; focusing hydrogen and renewables & power where bp can
leverage integration
- Up to $8 billion more into oil and gas by 2030 - targeting
short-cycle fast-payback opportunities with lower additional
operational emissions
- Aim to materially increase earnings through 2030 - aiming for
$51-56 billion group EBITDA in 2030
-- Delivering for shareholders:
- Growing dividends: 10% increase in dividend per ordinary share
for fourth quarter, representing 21% growth from 4Q 2021
- Growing buybacks: further $2.75 billion buybacks announced
today; total of $11.25 billion buybacks announced from 2022 surplus
cash flow
- Increasing targets: over 12% annual EBIDA per share growth to
2025; over 18% ROACE in 2025 and 2030
Since introducing its new purpose, net zero ambition,
organisation and strategy in 2020, bp has built strong momentum
across its strategy and delivered value for shareholders. The major
global uncertainties experienced in the past three years - from the
pandemic and its aftermath to the impact of Russia's attack on
Ukraine - have increased the world's focus on energy security and
affordability as well as accelerated the drive towards a lower
carbon energy system.
bp chief executive Bernard Looney said: "It's clearer than ever
after the past three years that the world wants and needs energy
that is secure and affordable as well as lower carbon - all three
together, what's known as the energy trilemma. To tackle that,
action is needed to accelerate the transition. And - at the same
time - action is needed to make sure that the transition is
orderly, so that affordable energy keeps flowing where it's needed
today.
"As an integrated energy company, bp is very deliberately set up
to help on both counts. With three years of delivery and track
record - we have increased confidence our strategy is working. And
with today's announcement we are leaning further in. We are growing
our investment into our transition and, at the same time, growing
investment into today's energy system. In doing so - we see
tremendous opportunity to create value. And it's what governments
and customers are asking of companies like us."
bp now aims to accelerate the growth in earnings from its
transition growth engines (TGEs) while also delivering higher
earnings than previously expected from its oil and gas businesses
through 2030 - both compared to bp's previous aims(1) .
bp plans to support this growth by disciplined increases in
investment over the period to 2030 of up to $8 billion in the TGEs
and up to $8 billion in oil and gas. bp is adjusting its target
capital expenditure range to $14-18 billion a year out to 2030(2) ,
from the previous range of $14-16 billion. All investments will
remain subject to disciplined application of bp's balanced
investment and returns criteria.
bp expects this additional incremental investment to deliver
around $3 billion additional group EBITDA in 2025 and is aiming for
that to grow to $5-6 billion in 2030. This would comprise an
additional $2 billion from the TGEs and $3-4 billon from oil and
gas projects in 2030. bp has also raised its oil and gas price and
refining margin assumptions(3) .
As a result of both factors, bp is now targeting group EBITDA of
$46-49 billion in 2025 and is aiming for $51-56 billion in 2030, in
a $70/barrel (2021 real) oil price environment. These compare to
its previous target and aim, from May 2022, of around $38 billion
in 2025 and $39-46 billion in 2030 at $60/barrel (2020 real).
PERFORMING WHILE TRANSFORMING
After setting out its new purpose, net zero ambition, structure
and strategy in 2020, bp's focus is now on delivering its
transformation into an Integrated Energy Company.
Bernard Looney: "Throughout 2022, bp continued to focus on
delivery of our Integrated Energy Company strategy. We are helping
provide the energy the world needs today and - at the same time -
investing with discipline into our transition and the energy
transition - as demonstrated by the Archaea Energy acquisition. We
are strengthening bp, with our strongest upstream plant reliability
on record and our lowest production costs in 16 years, helping to
generate strong returns and reducing debt for the 11th quarter in a
row. Importantly, we are delivering for our shareholders - with
buybacks and a growing dividend. This is exactly what we said we
would do and will continue to do - performing while
transforming."
In 2022, bp delivered EBITDA of $61 billion, operating cash flow
of $41 billion, including around $7 billion working capital build,
and reported underlying replacement cost profit of $28 billion.
It continued to strengthen its finances, reducing net debt by
$9.2 billion over the year to $21.4 billion - the lowest for over
nine years. ROACE for the year was 30.5%. For 2022, bp incurred a
total tax charge of $15.1 billion on an underlying basis,
representing an effective tax rate of 34%.
bp also delivered sector-leading distributions for its
shareholders in 2022. bp today announced a 10% increase in the
quarterly dividend for the fourth quarter of 2022, to 6.61c per
ordinary share. Together with the 10% rise in the second quarter of
2022, this represents 21% growth in the dividend compared to the
fourth quarter of 2021.
With plans for $2.75 billion share buybacks from fourth quarter
surplus cash flow announced today, bp has also announced a total of
$11.25 billion share buybacks from 2022 surplus cash flow.
Through 2022, bp also continued to deliver its transformation,
notably with the acquisition of biogas producer Archaea Energy,
forming Azule Energy with Eni in Angola, and adding significant
potential opportunities for hydrogen, including in Australia, Abu
Dhabi, Egypt, Oman and Mauritania.
In 2022, it invested $4.9 billion, around 30% of its total $16.3
billion capital expenditure, into its transition growth engines -
including the acquisition of Archaea Energy. This compares to
around 3% in 2019. bp continues to expect this proportion to grow
to around 50% in 2030.
LEANING FURTHER INTO BP'S STRATEGY
More investment in bp's transition
bp aims to increase investment in its TGEs by up to $1 billion a
year on average, or up to a cumulative additional $8 billion to
2030. bp's investment in its TGEs is now expected to reach $7-9
billion a year in 2030(4) - with cumulative investment over
2023-2030 around $55-65 billion.
bp aims to invest around half of this cumulative total in the
TGEs where bp has established businesses, capabilities and track
record - in bioenergy, and in convenience and EV charging; the
other half in hydrogen and renewables & power.
bp expects to achieve returns of greater than 15% from
bioenergy, and from convenience and EV charging combined, and
double digit returns from hydrogen. It expects 6-8% unlevered
returns in renewables.
Earnings from bp's TGEs are expected to grow as a result of
these changes. bp now expects the TGEs to deliver $3--4 billion
EBITDA in 2025, and is aiming for $10-12 billion in 2030,
comprising: over $4 billion from bioenergy; over $4 billion from
convenience and EV charging; and $2-3 billion from hydrogen and
renewables & power.
Bernard Looney: "We will increase our focus on the transition
growth engines able to deliver nearer-term solutions - like EV
chargers and sustainable aviation fuels - that can help people and
businesses decarbonise sooner . And we will continue to build our
hydrogen and renewables and power businesses for the longer term,
based around projects where bp's integrated approach can create
significant additional value."
Bioenergy: bp plans to grow its established bioenergy businesses
materially. It plans to increase its supply of biogas six-fold,
underpinned by Archaea Energy, to up to 70,000 barrels of oil
equivalent a day in 2030. bp aims to increase biofuel production to
around 100,000 barrels a day by 2030, supported by five major new
projects at bp refineries, focused on production of sustainable
aviation fuel.
Convenience and EV charging: expansion of bp's strategic
convenience site networks is expected to drive growth in bp's
convenience gross margin by around 10% a year to 2030. Together
with EV charging they are expected to help grow bp's ability to
offer lower carbon transport solutions for customers. Today bp has
22,000 EV charge points and aims for more than 100,000 by 2030 -
around 90% rapid or ultra-fast. It is developing leading positions
in key geographies worldwide, underpinned by partnerships with
major fleet operators.
Hydrogen and renewables & power: through this decade bp aims
to establish the foundations of a material business for the future.
bp aims to build a leading position globally in hydrogen, initially
supplying its own refineries, scaling up to meet growing customer
demand and in parallel, as markets develop, developing global
export hubs for hydrogen and its derivatives. By 2030 bp aims to
produce between 0.5-0.7 million tonnes a year of primarily green
hydrogen, also pursuing selected blue hydrogen opportunities.
In renewables & power, bp will focus investment on
opportunities where it can create integration value and enhance
returns. bp aims to build a portfolio - including a global position
in offshore wind - in support of green hydrogen, e-fuels, EV
charging and power trading, together with continued growth in its
self-funded solar joint venture Lightsource bp. bp remains on track
to deliver its aim of having developed 50GW renewable power to FID
by 2030; of this it aims to have around 10GW net installed capacity
- largely operated. bp also expects to have assets under
construction and for Lightsource bp to contribute materially.
More investment in today's energy system:
bp also aims to increase investment into resilient high-quality
oil and gas projects - again by an average of up to $1 billion a
year, or up to a cumulative $8 billion to 2030. The investment will
help to meet near-term demand for secure supplies of oil and gas,
generating additional earnings that can further strengthen bp and
support investment in its transition.
The incremental investment to 2025 will target shorter-term,
fast-payback projects that maximise value and can deliver rapidly,
with minimal new infrastructure. While bp will continue to
high-grade its global oil and gas portfolio, due to improving
operational reliability and commerciality over the past four years
it also now anticipates retaining some oil and gas assets longer
than previously envisaged.
Bernard Looney: "We need continuing near-term investment into
today's energy system - which depends on oil and gas - to meet
today's demands and to make sure the transition is an orderly one.
We have high-quality options throughout our portfolio, allowing us
to choose only the best. We will prioritise projects where we can
deliver quickly, at low cost, using our existing infrastructure,
allowing us to minimise additional emissions and maximise both
value and our contribution to energy security and
affordability."
As a result of these changes, bp anticipates its oil and gas
production will be around 2.3 million barrels of oil equivalent a
day (mmboe/d) in 2025 and aims for it to be around 2.0 mmboe/d in
2030. This 2030 production would be around 25% lower than bp's
production in 2019, excluding production from Rosneft, compared to
bp's previous expectation of a reduction of around 40%. bp
correspondingly now aims for a fall of 20% to 30% in emissions from
the carbon in its oil and gas production(5) in 2030 compared to a
2019 baseline, lower than the previous aim of 35-40%.
From the first quarter of 2022, bp has no longer reported oil
and gas production from Russia. With the removal of this Russian
production, bp's full year average reported production in 2022 was
around 40% lower than the total production bp reported in 2019.
DELiVERING for shareholders
bp remains focused on the disciplined delivery of its financial
frame. Through the financial frame and bp's business plans out to
2025, in a $70 per barrel price environment, bp aims to offer:
-- Accelerating growth : with a compound average growth rate for
EBIDA per share of over 12% between 2H 2019/1H2020 to 2025 at $70
per barrel 2021 real.
-- Competitive returns : expecting to achieve a return on
average capital employed (ROACE) of over 18% in both 2025 and 2030
at $70 per barrel 2021 real.
-- Debt reduction: intending to allocate around 40% of 2023
surplus cash flow to further strengthening the balance sheet.
-- Compelling shareholder distributions:
- Dividends: bp expects to maintain a resilient cash balance
point of around $40 per barrel Brent oil price, with $11 per barrel
refining marker margin and $3 per million BTU Henry Hub gas price.
bp continues to see the capacity to continue to grow its dividend
per ordinary share by around 4% a year at around $60/barrel,
subject to the board's discretion(6) .
- Buybacks(6) : bp is committed to allocating 60% of 2023
surplus cash flow to share buybacks, expecting a buyback of around
$4 billion a year - at around $60 a barrel, at the lower end of its
capital expenditure range and subject to maintaining a strong
investment grade credit rating. The buyback commitment offers
leverage to higher price environments.
-- This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of BP p.l.c. is Ben Mathews, Company Secretary.
-- bp's fourth quarter and full year 2022 results can be seen at www.bp.com/results .
Further information :
bp press office, London: bppress@bp.com
Notes :
(1) Compared to aims set out by bp in February 2022.
(2) Capital expenditure in 2023 planned to be in range $16-18 billion.
(3) Assumptions to 2030, all 2021 real: Brent oil price
$70/barrel; Henry Hub gas price $4/million Btu; bp refining marker
margin, $14/barrel. See also note 1 of bp 4Q and full year results
2022.
(4) bp's investment in TGEs is expected to be $6-8 billion in
2025.
(5) bp's aim to reach net zero* CO(2) emissions, in accordance
with bp's Aim 2, from the carbon in our oil and gas production, in
respect of the estimated CO(2) emissions from the combustion of
upstream production of crude oil, natural gas and natural gas
liquids on a bp equity share basis based on bp's net share of
production, excluding bp's share of Rosneft production and assuming
that all produced volumes undergo full stoichiometric combustion to
CO(2) . Aim 2 is bp's Scope 3 aim and relates to Scope 3, category
11 emissions. Any interim target or aim in respect of bp ' s Aim 2
is defined in terms of absolute reductions relative to the baseline
year of 2019.
(6) I n setting the dividend per ordinary share and the buyback
each quarter the board will take into account factors including the
cumulative level of and outlook for surplus cash flow, the cash
balance point and the maintenance of a strong investment grade
credit rating.
-- For the purposes of this announcement, each of the following
terms has the meaning given to it in bp's fourth quarter and full
year 2022 financial results announcement: operating cash flow; net
debt; ROACE; upstream plant reliability; EV charge points; surplus
cash flow; cash balance point; capital expenditure; refining marker
margin (RMM); strategic convenience sites and underlying
replacement cost (RC) profit.
-- For the purposes of this announcement, each of the following
terms has the meaning given to it in the bp Annual Report and Form
20-F 2021: convenience gross margin.
-- EBIDA: has the meaning given to the term Adjusted EBIDA in
bp's fourth quarter and full year 2022 financial results
announcement.
-- EBIDA per share: share buybacks are modelled across a range
of share prices in this calculation and EBIDA is after impact of
planned divestments.
-- EBITDA: has the meaning given to the term Adjusted EBITDA in
bp's fourth quarter and full year 2022 financial results
announcement.
-- Net zero: References to net zero for bp in the context of our
ambition and Aims 1, 2 and 3 mean achieving a balance between (a)
the relevant Scope 1 and 2 emissions (for Aim 1), Scope 3 emissions
(for Aim 2) or product lifecycle emissions (for Aim 3), and (b) the
aggregate of applicable deductions from qualifying activities such
as sinks under our methodology at the applicable time.
-- Rapid or ultra-fast: rapid charging >=50kW and ultra-fast charging >=150kW.
Cautionary statement :
In order to utilize the 'safe harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995 (the
'PSLRA') and the general doctrine of cautionary statements, bp is
providing the following cautionary statement: The discussion in
this results announcement contains certain forecasts, projections
and forward-looking statements - that is, statements related to
future, not past events and circumstances - with respect to the
financial condition, results of operations and businesses of bp and
certain of the plans and objectives of bp with respect to these
items. These statements may generally, but not always, be
identified by the use of words such as 'will', 'expects', 'is
expected to', 'aims', 'should', 'may', 'objective', 'is likely to',
'intends', 'believes', 'anticipates', 'plans', 'we see', 'focus on'
or similar expressions.
In particular, the following, among other statements, are all
forward looking in nature: plans and expectations regarding bp's
performance, earnings, returns, capital expenditure, targets and
market position through 2025 and/or 2030; expectations related to
oil and gas prices and refining margins; expectations regarding
bp's plans to invest up to an additional $8 billion in its
transition growth engines and up to additional $8 billion in oil
and gas projects, both by 2030; plans and expectations related to
earnings growth, including the aim of group EBITDA of $51-56
billion in 2030 at oil prices of $70 per barrel in 2021 real terms;
plans and expectations related to bp's target of growing EBIDA per
share at over 12% compound average growth rate through 2025, and
growing ROACE to over 18% in both 2025 and 2030; plans,
expectations and assumptions regarding oil and gas demand, supply
and prices; plans and expectations regarding bp's transition growth
engines of bioenergy, convenience, EV charging, hydrogen and
renewables and power, including plans and expectations related to
allocation of capital expenditure, returns and EBITDA growth;
expectations regarding earnings from incremental investments
including the delivery of $5-6 billion of additional EBITDA in
2030; plans and expectations regarding the growth of bp's bioenergy
business; plans and expectations related to the expansion of
strategic convenience site networks and EV charge points; plans and
expectations regarding hydrogen, including aims to establish a
future material business and build a leading global position,
customer demand, the development of global export hubs, and aims
relating to green and blue hydrogen; plans and expectations in
renewables and power, including the target of developing 50
gigawatts to FID and having 10
gigawatts net installed capacity mainly bp operated, both by
2030 and Lightsource bp's contribution to bp's targets and aims;
plans and expectations regarding investment into resilient
high-quality oil and gas projects; bp's plans to continue to
high-grade its global oil and gas portfolio; plans and expectations
regarding the retention of certain oil and gas assets; plans and
expectations relating to bp's future oil and gas production; plans
and expectations relating to taxes, including the effective tax
rate; plans regarding future quarterly dividends and the amount and
timing of share buybacks; plans and expectations regarding the
allocation of surplus cash flow and cash balance point; and plans
and expectations relating to the reduction of debt and maintenance
of an investment grade credit rating.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will or may occur in the future and are outside
the control of bp.
Actual results or outcomes, may differ materially from those
expressed in such statements, depending on a variety of factors,
including: the extent and duration of the impact of current market
conditions including the volatility of oil prices, the effects of
bp's plan to exit its shareholding in Rosneft and other investments
in Russia, the impact of COVID-19, overall global economic and
business conditions impacting bp's business and demand for bp's
products as well as the specific factors identified in the
discussions accompanying such forward-looking statements; changes
in consumer preferences and societal expectations; the pace of
development and adoption of alternative energy solutions;
developments in policy, law, regulation, technology and markets,
including societal and investor sentiment related to the issue of
climate change; the receipt of relevant third party and/or
regulatory approvals; the timing and level of maintenance and/or
turnaround activity; the timing and volume of refinery additions
and outages; the timing of bringing new fields onstream; the
timing, quantum and nature of certain acquisitions and divestments;
future levels of industry product supply, demand and pricing,
including supply growth in North America and continued base oil and
additive supply shortages; OPEC+ quota restrictions; PSA and TSC
effects; operational and safety problems; potential lapses in
product quality; economic and financial market conditions generally
or in various countries and regions; political stability and
economic growth in relevant areas of the world; changes in laws and
governmental regulations and policies, including related to climate
change; changes in social attitudes and customer preferences;
regulatory or legal actions including the types of enforcement
action pursued and the nature of remedies sought or imposed; the
actions of prosecutors, regulatory authorities and courts; delays
in the processes for resolving claims; amounts ultimately payable
and timing of payments relating to the Gulf of Mexico oil spill;
exchange rate fluctuations; development and use of new technology;
recruitment and retention of a skilled workforce; the success or
otherwise of partnering; the actions of competitors, trading
partners, contractors, subcontractors, creditors, rating agencies
and others; bp's access to future credit resources; business
disruption and crisis management; the impact on bp's reputation of
ethical misconduct and non-compliance with regulatory obligations;
trading losses; major uninsured losses; the possibility that
international sanctions or other steps or actions taken by any
competent authorities or any other relevant persons may impact
Rosneft's business or outlook, bp's ability to sell its interests
in Rosneft, or the price for which bp could sell such interests;
the actions of contractors; natural disasters and adverse weather
conditions; changes in public expectations and other changes to
business conditions; wars and acts of terrorism; cyber-attacks or
sabotage; and other factors discussed elsewhere in this report, as
well as those factors discussed under "Risk factors" in bp's Annual
Report and Form 20-F 2021 as filed with the US Securities and
Exchange Commission and those factors discussed under "Principal
risks and uncertainties" in bp's Report on Form 6-K regarding
results for the six-month period ended 30 June 2022 as filed with
the US Securities and Exchange Commission.
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