SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended 27 February 2008
BP p.l.c.
(Translation of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No |X|
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February 27, 2008
BP CAN PUMP FOUR MILLION BARRELS A DAY
UNTIL 2020, EVEN WITHOUT NEW FINDS
BP replaced its annual production by 112 per cent in 2007, taking its proved
reserves of oil and gas to 17.8 billion barrels. It also added some 2.4 billion
new barrels to its non-proved resource base which now stands at a further 42.1
billion barrels of oil equivalent.
Assuming a $60 oil price, the strength of this position - reinforced by recent
access to new opportunities in Oman, Libya and Colombia, along with heavy oil in
Canada - supports production potential of around 4.3 million barrels a day by
2012, BP chief executive Tony Hayward said today.
Highlighting key elements of the company's annual strategy presentation to
financial analysts, Hayward said that in a $60 price world BP was confident not
only of boosting output over the next four years but of being able to sustain
production of at least 4 million barrels a day until 2020 even with no new
discoveries or access to new opportunities.
"However, bearing in mind a rise in exploration spend to nearly $1 billion this
year together with significant additions of fresh acreage in established areas
such as the deepwater Gulf of Mexico and a continuing drive to access new
provinces around the world, we expect to do better than this," Hayward said.
In its downstream business he said the company now had a clear, step-by-step
plan to close the performance gap with rivals over the medium term, focusing
spend on manufacturing over marketing and aiming for an improvement in pre-tax
profits of up to $4 billion within three to four years, assuming an average
refining margin of $7.50 a barrel.
He said BP expected to spend some $1.5 billion in Alternative Energy this year -
a front-end acceleration of its longer-term $8 billion plan to build a new
business, based chiefly on solar, wind and biofuels and offering significant
growth potential as world demand rose dramatically for low- or non-carbon
energy.
"We intend to grow this business predominantly for its equity value," he said.
"Taking stock market valuations for similar companies, we estimate it is already
worth between $5 billion and $7 billion. As we go forward we will be looking at
how best we can realise that growing value for our shareholders."
Hayward said that since taking over as CEO ten months ago he and his senior team
had conducted one of the most wide-ranging reviews of the BP Group's operations
in its recent history. They had now established a clear and focussed agenda for
operational recovery and long-term renewal which took pragmatic account of the
changing external environment, including continuing high oil prices.
"We have slimmed the top team from six executive directors to four and the next
tier by more than 10 per cent. Across wider management we are reducing numbers
by around 12-13 per cent.
"As I said at our fourth quarter results, we aim to cut corporate overheads by
15-20 per cent and eliminate some 5,000 posts worldwide over the next 18 months.
Some 50 per cent of the reductions will result from streamlining our functions,
40 per cent from refining and marketing and the remainder from exploration and
production."
He said the move of resources to the front line, the beefing-up of technical
expertise through, for example, the recent recruitment of over 2,000 new
engineers and senior operations managers, the establishment of proprietary BP
training academies at MIT and a significant rise in technology spend this year
were all aimed at delivering a strong improvement in the efficiency and safety
of operations across the Group.
Hayward confirmed likely capital spend for this year at between $21 billion and
$22 billion, up from $19 billion in 2007. Some $15 billion was earmarked for
upstream, $5 billion for downstream and $1.5 billion for the other businesses,
including Alternative Energy. Divestments were estimated at $1 billion. He said
the rise reflected a mix of sector inflation and growth. Gearing would remain at
20-30 per cent.
He said that in the seven years since 2000 BP had distributed some $91 billion
to shareholders, roughly half in dividends and half in share buybacks. Of the
share buybacks, some 85 per cent had been funded from divestments.
The recent year-on-year 31 per cent dividend boost represented a shift in the
balance away from buybacks to dividends as a means of returning cash to
shareholders. It reflected increased confidence in the likelihood of a
continuing higher oil price, as well as stronger gas prices and refining margins
than have been the case historically.
Exploration & Production chief executive Andy Inglis said BP had found a major
new reservoir below the Shah Deniz field in Azerbaijan, one of the largest
discoveries in the world last year. Other big finds were made in Egypt, Angola
and the Gulf of Mexico.
The company added 2.4 billion barrels to resources in 2007, boosting the
resource base to 42.1 billion barrels. This combined with year-end reserves of
17.8 billion barrels, took resources plus reserves to 60 billion barrels,
extending the life of BP's production from 41 to 43 years at current rates.
Inglis estimated 2008 upstream spend at $15 billion, or $17.5 billion including
BP's share of spending by TNK-BP and Pan American. This included a 50 per cent
rise in funding for research and development - in part to advance ten major
technology projects, each with the potential to add 1 billion barrels of oil
equivalent to reserves. He said BP expected to bring more than 25 new projects
on stream between 2007 and 2009, and progress a further 30.
TNK-BP chief executive Robert Dudley, also attending the presentation, said the
Russian company had invested some $3.5 billion last year, excluding
acquisitions. "In 2008, we expect this to rise to around $4 billion as
investments in major projects and downstream increase.
"We now have over $15 billion of new major projects in various stages and we
expect to see a production contribution from these post-2009. Therefore, in 2012
we expect production to be around 1.9 million barrels a day."
Dudley said that since the business was formed in 2004 it had paid the Russian
government over $68 billion in taxes, duties and excise. "Russia attracts much
coverage," he said. "But the underlying picture for TNK-BP is one of a
consistent track record and delivery and an established presence as a respected
and successful Russian company.
"We have a very strong resource position which we intend to maintain and produce
with improved recovery rates in future. For these and other reasons, I am
confident our next five years can be as fruitful as these first."
Iain Conn, chief executive of Refining and Marketing estimated the gap with
rivals due to poor performance in BP's downstream business at $3.5-$4 billion a
year, assuming an average refining margin of $7.50 a barrel. He said plans were
now in place to reduce that by nearly half by end-2009 - chiefly from restoring
and up-grading BP's refineries, including Texas City where remaining
distillation capacity would be back on stream in the coming weeks and most of
the margin capability in place in the second quarter.
The remainder of the shortfall, slated mainly for delivery in 2010-2011, would
be made up from business simplification in marketing - producing more rigorous
investment choices, better margins and lower costs - and from significantly
reducing support costs and business services.
Conn said he was cutting senior management jobs by 15 per cent and reducing the
number of downstream business units from 40 to 15. Lubricants would move to
third-party distributors in some 20 countries and the aviation fuel business
would pull out of 20 of the 100 countries where it operates. In Europe the
intention would be to ultimately shrink the existing 80 business service centres
to one. Globally, downstream job cuts would exceed 2,000, on top of 9,500 US
payroll staff moving to franchisees.
Vivienne Cox, chief executive of Alternative Energy, said BP had invested some
$1.5 billion in alternatives since the business was set up in 2005, with a
further $1.5 billion of spend planned for this year. The company had assembled a
landbank sufficient to build 15 gigawatts of wind generation in the US,
including Cedar Creek in Colorado, one of America's biggest wind farms, and more
capacity was planned for Europe, India and China. In Solar, sales of 800
megawatts, and similar levels of production, were targeted by 2010.
Cox said that, based on market assessments of similar companies and projects,
the estimated value of BP's solar business was between $2.1 billion and $3.9
billion and its wind business between $1.8 and $2.1 billion. Including the
gas-fired power generation segment of the business, this gave Alternative Energy
a value of approximately $5-$7 billion.
In conclusion, Tony Hayward said: "We have made significant progress at BP over
the past ten months, quietly and without fuss, in resetting essential context,
in establishing sound, practical objectives and beginning to deliver them.
"Our asset base is high-quality; our task - on which we are already vigorously
in action - is to improve how it operates. We have a workforce which, as it is
increasingly freed of unnecessary complexity and overhead cost and given clear
aims and accountability, will translate the operational momentum we are already
seeing in the first half of 2008 into steadily improving financial returns
thereafter."
- ENDS -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BP p.l.c.
(Registrant)
Dated: 27 February 2008 /s/ D. J. PEARL
..............................
D. J. PEARL
Deputy Company Secretary