BP PLC: 1Q24

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“For a printer friendly version of this announcement please click on the link below to open a PDF version of the announcement”

http://www.rns-pdf.londonstockexchange.com/rns/3361N_1-2024-5-6.pdf

Highlights

• Resilient financial and operational performance: Adjusted EBITDA $10.3 billion; underlying RC profit $2.7 billion; upstream* production grew +2.1% vs 1Q23; start up of new Azeri Central East (ACE) platform in Caspian Sea

• Growing shareholder distributions: 1Q24 $1.75 billion share buyback announced as part of our $3.5 billion commitment for the first half of 2024; Dividend per ordinary share of 7.270 cents

• Focus on delivering our six priorities: announcement to simplify organizational structure; target to deliver at least $2 billion of cash cost* savings by the end of 2026

1. Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. There were no other proceeds for all periods stated.
2. See Note 9 for more information.

RC profit, underlying RC profit, net debt, adjusted EBITDA, underlying RC profit per ordinary share and underlying RC profit per ADS are non-IFRS measures. Inventory holding (gains) losses and adjusting items are non-IFRS adjustments.

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 30.

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Financial results

In addition to the highlights on page 2:

• Profit attributable to bp shareholders in the first quarter was $2.3 billion, compared with a profit of $8.2 billion in the same period of 2023.
  • After adjusting profit attributable to bp shareholders for inventory holding gains* and net impact of adjusting items*, underlying replacement cost (RC) profit* for the first quarter was $2.7 billion, compared with $5.0 billion for the same period of 2023. This reduction in underlying RC profit for the first quarter mainly reflects lower realizations, lower industry refining margins, a strong gas marketing and trading result compared with an exceptional result in the first quarter in 2023 and the impacts of the Whiting refinery outage.
  • Adjusting items in the first quarter had a net adverse pre-tax impact of $1.2 billion, compared with a net favourable pre-tax impact of $3.9 billion in the same period of 2023.
    • Adjusting items for the first quarter of 2024 include an adverse impact of pre-tax fair value accounting effects*, relative to management's internal measure of performance, of $0.2 billion, compared with a favourable pre-tax impact of $4.3 billion in the same period of 2023. This difference is primarily due to a small decline in the forward price of LNG over the quarter compared to a large decline in this price during the first quarter of 2023.

• The effective tax rate (ETR) on RC profit or loss* for the first quarter was 54%, compared with 29% for the same period in 2023. Excluding adjusting items, the underlying ETR* for the first quarter was 43%, compared with 39% for the same period a year ago. The higher underlying ETR for the first quarter reflects foreign exchange impacts which are not tax deductible. ETR on RC profit or loss and underlying ETR are non-IFRS measures.

• Operating cash flow* for the first quarter was $5.0 billion, compared with $7.6 billion for the same period in 2023, reflecting the difference in the underlying RC profit for the respective periods.

• Capital expenditure* in the first quarter was $4.3 billion, compared with $3.6 billion in the same period of 2023.

• Total divestment and other proceeds for the first quarter were $0.4 billion, compared with $0.8 billion for the same period in 2023. There were no other proceeds for both periods.

• At the end of the first quarter, net debt* was $24.0 billion, compared with $20.9 billion at the end of the fourth quarter 2023 and $21.2 billion at the end of the first quarter 2023. The increase in the net debt is mainly attributable to a working capital* build.

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Analysis of RC profit (loss) before interest and tax and reconciliation to profit (loss) for the period

Analysis of underlying RC profit (loss) before interest and tax

Reconciliations of underlying RC profit attributable to bp shareholders to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-14 for the segments.

Operating Metrics

1. See Operational updates on pages 6, 9 and 11. Because of rounding, upstream production may not agree exactly with the sum of gas & low carbon energy and oil production & operations.

2. Mainly reflecting portfolio mix.

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Outlook & Guidance

2Q 2024 guidance

• Looking ahead, bp expects second quarter 2024 reported upstream* production to be slightly lower compared with first-quarter 2024.

• In its customers business, bp expects seasonally higher volumes and fuels margin to remain sensitive to movements in the cost of supply.

• In products, bp expects realized margins to be impacted by narrower North American heavy crude oil differentials, and to remain sensitive to relative movements in product cracks. In addition, bp expects the absence of the first quarter plant-wide power outage at the Whiting refinery to be partly offset by a higher level of turnaround activity. 

2024 guidance

In addition to the guidance on page 2:

• bp continues to expect both reported and underlying upstream production* to be slightly higher compared with 2023. Within this, bp continues to expect underlying production from oil production & operations to be higher and production from gas & low carbon energy to be lower.

• In its customers business, bp continues to expect growth from convenience, including a full year contribution from TravelCenters of America; a stronger contribution from Castrol underpinned by volume growth in focus markets; and continued margin growth from bp pulse driven by higher energy sold. In addition, bp continues to expect fuels margin to remain sensitive to the cost of supply.

• In products, bp continues to expect a lower level of industry refining margins, with realized margins impacted by narrower North American heavy crude oil differentials. bp continues to expect refinery turnaround activity to have a similar impact on both throughput and financial performance compared to 2023, with phasing of activity in 2024 heavily weighted towards the second half.

• bp continues to expect the other businesses & corporate underlying annual charge to be around $1.0 billion for 2024. The charge may vary from quarter to quarter.

• bp continues to expect the depreciation, depletion and amortization to be slightly higher than 2023.

• bp continues to expect the underlying ETR* for 2024 to be around 40% but it is sensitive to the impact that volatility in the current price environment may have on the geographical mix of the group’s profits and losses.

• bp continues to expect capital expenditure* for 2024 to be around $16 billion, but now expects the phasing to be split broadly evenly between the first half and the second half.

• bp continues to expect divestment and other proceeds of $2-3 billion in 2024, weighted towards the second half. Having realized $18.2 billion of divestment and other proceeds since the second quarter of 2020, bp continues to expect to reach $25 billion of divestment and other proceeds between the second half of 2020 and 2025.

• bp continues to expect Gulf of Mexico oil spill payments for the year to be around $1.2 billion pre-tax including $1.1 billion pre-tax paid during the second quarter.

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gas & low carbon energy*

Financial results

• The replacement cost (RC) profit before interest and tax for the first quarter was $1,036 million, compared with $7,347 million for the same period in 2023. The first quarter is adjusted by an adverse impact of net adjusting items* of $622 million, compared with a favourable impact of net adjusting items of $3,891 million for the same period in 2023. Adjusting items include impacts of fair value accounting effects*, relative to management's internal measure of performance, which are a favourable impact of $113 million for the first quarter in 2024 and a favourable impact of $3,934 million for the same period in 2023. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges but also recognizes changes in value of the LNG contracts being risk managed.

• After adjusting RC profit before interest and tax for adjusting items, the underlying RC profit before interest and tax* for the first quarter was $1,658 million, compared with $3,456 million for the same period in 2023.

• The underlying RC profit for the first quarter, compared with the same period in 2023, reflects lower realizations, foreign exchange losses on Egyptian pound balances, higher exploration write-offs, and a strong gas marketing and trading result compared with an exceptional result in the first quarter in 2023.

Operational update

• Reported production for the quarter was 914mboe/d, 5.7% lower than the same period in 2023. Underlying production* was 3.5% lower, mainly due to base decline partially offset by major projects* which started up in 2023. Reported production includes the effect of the disposal of the Algeria business in 2023.

• Renewables pipeline* at the end of the quarter was 58.5GW (bp net), including 20.4GW bp net share of Lightsource bp's (LSbp's) pipeline. The renewables pipeline increased by 0.2GW net during the quarter. In addition, there is over 9.5GW (bp net) of early stage opportunities in LSbp's hopper.

Strategic progress

gas

• On 14 February, ADNOC and bp announced that they have agreed to form a new joint venture (JV) in Egypt. The JV (51% bp and 49% ADNOC) will combine the pair’s deep technical capabilities and proven track records as it aims to grow a highly competitive gas portfolio. As part of the agreement, bp will contribute its interests in three development concessions, as well as exploration agreements, in Egypt to the new JV. ADNOC will make a proportionate cash contribution which can be used for future growth opportunities. Subject to regulatory approvals and clearances, the formation of the JV is expected to complete during the second half of 2024.

• On 15 February, the floating liquefied natural gas (FLNG) vessel that is a core component of the Greater Tortue Ahmeyim (GTA) LNG project arrived at its destination on the Mauritania and Senegal maritime border. GTA Phase 1 is operated by bp (56%) with partners Kosmos Energy, SociétéMauritaniennedesHydrocarbures andSociété desPétrolesdu Sénégal.

• In April bp and the Korea Gas Corporation signed an agreement for bp to supply up to 9.8 million tonnes of LNG over an 11 year period starting in 2026 from bp's global LNG portfolio.

low carbon energy

• Following the announcement in January that bp and Equinor had signed an agreement under which they would restructure their investments in their US offshore wind projects, on 4 April, bp announced it has received all the necessary regulatory approvals and it is now 100% owner of the Beacon US offshore wind projects and Equinor the Empire projects.

• On March 15, our UK joint ventures Net Zero Teesside Power (bp 75%, Equinor 25%) and the Northern Endurance Partnership (bp 45%, Equinor 45%, Total Energies 10%) announced the selection of contractors for engineering, procurement, and construction contracts with a combined value of around $5 billion. The final award of contracts is subject to the receipt of relevant regulatory clearances and positive Final Investment Decisions (FID) by the projects and the UK government.

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gas & low carbon energy (continued)

1. Includes bp’s share of production of equity-accounted entities in the gas & low carbon energy segment.
2. Realizations are based on sales by consolidated subsidiaries only – this excludes equity-accounted entities.

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gas & low carbon energy (continued)

3. Because of rounding, some totals may not agree exactly with the sum of their component parts.

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oil production & operations

Financial results

• The replacement cost (RC) profit before interest and tax for the first quarter was $3,060 million, compared with $3,317 million for the same period in 2023. The first quarter is adjusted by an adverse impact of net adjusting items* of $65 million, compared with an adverse impact of net adjusting items of $2 million for the same period in 2023.

• After adjusting RC profit before interest and tax for adjusting items, the underlying RC profit before interest and tax* for the first quarter was $3,125 million, compared with $3,319 million for the same period in 2023.

• The underlying RC profit for the first quarter, compared with the same period in 2023, primarily reflects lower realizations and increased depreciation charges partly offset by increased volume.

Operational update

• Reported production for the quarter was 1,463mboe/d, 7.6% higher than the first quarter of 2023. Underlying production* for the quarter was 7.4% higher compared with the first quarter of 2023 reflecting bpx energy performance and major projects* partly offset by base performance.

Strategic Progress

• On 16 April, bp, as operator of the Azeri-Chirag-Gunashli (ACG) project, announced the start-up of oil production from the new Azeri Central East (ACE) platform as part of the ACG field development in the Azerbaijan sector of the Caspian Sea, which is the first remotely operated offshore platform in the Caspian (bp share 30.37%).

• In April bpx energy successfully brought online 'Checkmate', its third central processing facility in the Permian Basin. It is a low-emission, electrified facility that will enable further production growth for bpx energy in the basin (bp 100% operator).

• Final investment decision taken on the Atlantis Drill Center Expansion which will be a two well tie back to the Atlantis facility in the Gulf of Mexico (bp share 56%).

• bp has been awarded a licence for two blocks in the central North Sea, consolidating our position around our Eastern Trough Area Project (ETAP) central processing facility. The award aligns with our strategic focus on oil and gas opportunities that can be developed through established production facilities.

• Aker BP was awarded interest in 27 licences (of which it will operate 17) in the North Sea and Norwegian Sea (bp interest in Aker BP 15.9%).

• In May Azule Energy announced it had agreed to acquire a 42.5% interest in exploration block 2914A (PEL85), Orange Basin, offshore Namibia. Completion of the deal is subject to customary third-party approvals from the Namibian authorities and JV parties. Azule Energy is a 50:50 joint venture between bp and Eni, based in Angola.

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oil production & operations (continued)