BP Plc Q1 FY2024 earnings call

Key Sections - Resilient Financials: Despite the Whiting refinery outage, first quarter financials were resilient with adjusted EBITDA at $10.3B, underlying earnings at $2.7B, and operating cash flow at $7.4B. - Strategic Progress: Safe start-up of Azeri Central East project, Checkmate and Archaea's RNG plants, Azule's farm-in in Namibia. - Cost Savings Target: Announced target to deliver at least $2B of cash cost savings by end-2026, focusing on portfolio optimization, digital transformation, supplier alliances, and global capability hubs. - Simplification: Ongoing efforts to simplify the company structure, with plans for further simplification steps.

BP reported first quarter adjusted EBITDA of $10.3 billion, underlying earnings of $2.7 billion, and operating cash flow of $7.4 billion after adjusting for seasonal working capital build. Segments such as upstream, refining, and transition growth engines (including TA, Archaea, etc.) contributed to these financial results. The company also highlighted strategic progress like the safe start-up of the Azeri Central East project and the commissioning of Archaea's large modular RNG plant.

Forward-Looking Statements - 2025 EBITDA: Reiterated target of $3B to $4B from transition growth engines (TGEs), confident in 3%-4% underlying cash flow growth through the decade. - CapEx: $16B CapEx guidance evenly spread over the year, moving away from earlier first-half weighting. - Growth Outlook: Anticipates strong growth from upstream projects, BPX expansion, TGEs, and businesses like Castrol, with confidence in EBITDA growth in 2024 and 2025.

Risks Identified - Macroeconomic: Challenges like diesel recession in the US, uncertain bio margins in Europe due to regulatory changes. - Foreign Currency: Impact of Egypt's currency devaluation on financials, affecting tax rates and cash flow. - Cost Savings: Uncertainties in achieving the $2B cost savings target, including potential delays in realizing synergies from initiatives like digital transformation and supplier alliances. - Low Carbon: Uncertainties in low carbon trading performance and offshore wind project progress (e.g., Beacon Wind in US).

Q: Josh Stone asked about 2025 EBITDA targets and risks, and lessons from Whiting refinery outage.

A: Murray Auchincloss responded that 2025 EBITDA target comes from TA, Archaea, EV breakeven, hydrogen focus, bio, and convenience growth. On Whiting, lessons learned still in process, but teams focused on recovery.

Q: Biraj Borkhataria inquired about cost cutting benchmarking and relisting.

A: Katherine Thomson discussed challenges in comparing costs due to accounting differences, emphasizing focus on cash costs and IFRS 18. Murray Auchincloss stated relisting not on agenda, focused on performance.

Q: Paul Cheng asked about Egypt devaluation impact and gas/LCE performance.

A: Katherine Thomson explained Egypt's currency devaluation led to ~$0.2 impact, and gas/LCE performance affected by lower realizations and FX.

Q: Ryan Todd asked about refining impact of TMX and project cost inflation.

A: Murray Auchincloss discussed TMX mitigating crude differential impact, and Katherine Thomson addressed project cost inflation, focusing on wage growth and procurement strategies.

Q: Chris Kuplent asked about surplus cash flow metric and ADNOC JV.

A: Katherine Thomson explained shift from surplus cash flow disclosure for clarity, and Murray Auchincloss discussed ADNOC JV as asset held for sale, expected to contribute to $2B-$3B disposal proceeds.

Q: Lydia Rainforth asked about cost savings examples and EBITDA guidance.

A: Murray Auchincloss detailed cost savings through portfolio focus, digital transformation, supplier alliances, and global capability hubs, stating confidence in 3%-4% underlying cash flow growth.

Q: Michele Della Vigna asked about EBITDA under 2025 conditions and FT article on production.

A: Murray Auchincloss provided EBITDA context under 2025 conditions, emphasizing return-driven approach in hydrocarbons and diversification in low carbon.

Q: Roger Read asked about diesel recession and BPX Permian operations.

A: Katherine Thomson discussed diesel recession mitigation, and Murray Auchincloss provided updates on BPX Permian operations, including capacity and productivity.

Q: Alejandro asked about Namibia investment plans after Azule announcement.

A: Murray Auchincloss discussed BP's Namibia presence, farm-in through Azule, and plans for drilling wells.

Q: Christyan Malek asked about liquids growth and low carbon disclosure.

A: Katherine Thomson addressed low carbon trading disclosure, and Murray Auchincloss discussed liquids growth through sanctions and countercyclical approach in low carbon.

Q: Irene Himona asked about cost savings vs inflation and convenience GM.

A: Murray Auchincloss aimed to beat inflation with cost savings, and Katherine Thomson discussed convenience GM growth excluding TA.

Q: Lucas Herrmann asked about share count and BPX production.

A: Katherine Thomson discussed share dilution offset, and Murray Auchincloss provided BPX liquids growth outlook.

Q: Peter Low asked about gas production growth and price lag impact.

A: Katherine Thomson addressed price lag impact, and Murray Auchincloss explained gas production growth through hedging and value-driven approach.

Q: Kim Fustier asked about CapEx and $2B cost savings restructuring.

A: Katherine Thomson addressed CapEx even spread, and Murray Auchincloss discussed cost savings initiatives and restructuring charges.

Q: Menno Hulshof asked about org structure simplification and $2B cost savings breakdown.

A: Murray Auchincloss discussed org structure simplification steps and $2B cost savings through four initiatives.

Q: Henry Tarr asked about US offshore wind and countercyclical low carbon.

A: Murray Auchincloss discussed slow progress on Beacon Wind and countercyclical approach in low carbon.

Q: Giacomo Romeo asked about countercyclical acquisitions and Namibia farm-in.

A: Murray Auchincloss discussed countercyclical acquisition approach, and Katherine Thomson and Murray Auchincloss addressed Azule's origins and Namibia farm-in geology confidence.