BP PLC Investor Update Conference Call

BP.L - BP PLC
BP PLC Investor Update Conference Call
Mar 04, 2014 / 01:00PM GMT 

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Corporate Participants
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   *  Bob Dudley
      BP plc - Group Chief Executive
   *  Brian Gilvary
      BP plc - Group CFO
   *  Lamar McKay
      BP plc - Chief Executive, Upstream
   *  Iain Conn
      BP plc - Chief Executive, Downstream

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Conference Call Participants
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   *  Robert Kessler
      Tudor, Pickering, Holt & Co. - Analyst
   *  Peter Hutton
      RBC Capital Markets - Analyst
   *  Jason Kenney
      Banco Santander - Analyst
   *  Alastair Syme
      Citigroup - Analyst
   *  Theepan Jothilingam
      Nomura Equity Research - Analyst
   *  Lydia Rainforth
      Barclays Capital - Analyst
   *  Jon Rigby
      UBS - Analyst
   *  Martijn Rats
      Morgan Stanley - Analyst
   *  Alejandro Demichelis
      Exane BNP Paribas - Analyst
   *  Michele Della Vigna
      Goldman Sachs - Analyst
   *  Thomas Adolf
      Credit Suisse - Analyst
   *  Christine Tiscareno
      S&P Equity Research - Analyst
   *  Irene Himona
      Societe Generale - Analyst
   *  Oswald Clint
      Sanford Bernstein - Analyst
   *  Lucas Herrmann
      Deutsche Bank - Analyst
   *  Neil Morton
      Investec - Analyst
   *  Charles Whall
      Investec Asset Management - Analyst

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Presentation
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 Bob Dudley,  BP plc - Group Chief Executive   [1]
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 Good afternoon, everyone, and thank you for joining us today and welcome to BP's 2014 Investor Update. We are very pleased to have you with us, whether in person here today or over the phone or on the web. Before I begin, I need to draw your attention to our cautionary catchy statement. During today's presentation, we will make forward-looking statements that refer to our estimates, plans, and expectations. Actual results and outcomes could differ materially due to factors that we note on this slide and in our UK and SEC filings. Please refer to our Annual Reports, Stock Exchange Announcement, and SEC filings for more details. These documents are available on our website.

 So, the aim of today's presentation is to tell you about the direction we are setting for the future. It's a course based on our analysis of the future for energy, how energy will be supplied and consumed over the coming decades, and how BP plans to operate in that future to create value for our shareholders. In each case we have reflected on recent history and you'll see how we have learned and then how this is built into our plans. Today in particular, we will show you how we plan to continue playing to our strengths to drive material growth in operating cash flow to 2018. And when you combine this with our focus on capital discipline, how we expect this to drive continued growth in free cash flow and enhancing our ability to increase distributions to shareholders.

 With me on stage we have here today Brian Gilvary, BP's Chief Financial Officer; Lamar McKay, Chief Executive of BP's Upstream; and Iain Conn, Chief Executive of our Downstream business. And with us in the audience, we have members of BP's Executive team who will also be available to answer questions later. I'd also like to extend a warm welcome to Slava Slavinskiy, Rosneft's Vice President for Economics and Finance who has joined us today. Welcome, Slava. I'll start with an overview and Brian will then cover our financial framework for the medium term. We'll then hand over to Lamar to outline our plans for the Upstream and then Iain to cover the Downstream. And after a brief summary, we'll take a short break before gathering back here for Q&A.

 So, let's start with a very high level picture of energy trends in the world as we see them at BP. This is all based on the extensive work of our own economics team. Our projections show energy demand rising by roughly 40% by 2035 and that's about 1.5% per year. We anticipate that nearly all of the growth in demand, around 95% of it, will come from the emerging economies of the non-OECD world. We expect fossil fuels to remain dominant. We expect hydrocarbons will still provide four-fifths of the world's energy in 2035 in roughly equal shares between oil, gas, and coal. Indeed even in the most dramatic projections of governments acting to cut carbon emissions, fossil fuels remain dominant at least for the next few decades.

 In terms of demand, gas will be the fastest growing fossil fuel at around 1.9% per year. Oil demand will see the slowest growth at 0.8%, but that growth will be robust as oil is set to remain the fuel of choice for a growing and more efficient vehicle fleet. Until recently, a regular topic of debate was whether there would be enough energy resources to meet this demand. That debate I think is over. We've seen abundant resources opening up all around the world; notably shale, tight gas, and oil in the US, Asia, Russia, and other regions. Deepwater discoveries continue to be made. The heavy oil of Canada is being developed quite rapidly now and we know that the Arctic also has massive energy resources although also many practical and environmental challenges.

 So, what are the implications for the energy industry? We know that the demand is there, the resources are there, and that oil and gas is part of a sustainable and growing landscape. But we also know there is a need for us to be very dynamic and innovative in our industry. While the resources are plentiful, they are also increasingly tough to get at. Oil fields are depleting and that is forcing the industry to find new fields and ramp up recovery rates from established fields and gas has become a game changer especially in the US where increased production has led to lower prices and changing dynamics of supply and demand. This means that the industry needs to choose its projects very carefully, developing the technologies and capabilities needed to build and operate them, and then of course execute them in a robust way.

 So, how is our industry positioned to address this challenge? Our view is that the industry faces a very important point of inflection. If we can get our approach right, then there is opportunity to usher in a new phase of organic growth along with improving returns for investors. Get it wrong and we risk investing too much and delivering too little. We need to learn from history, some of which you see reflected on this chart in the form of a production profile for our peer group. The supermajors, which were created by the wave of mergers in the 1990s, started life as companies with newly acquired global portfolios and everything started well as they deployed and combined capabilities and even greater efficiencies of scale.

 But then came the challenge of managing and sustaining growth in these much larger portfolios; finding new prospects, building new projects, and choosing between different multi-billion dollar options. At the same time, the price of oil rose to unprecedented levels, bringing sector inflation with it. Host governments have increasingly sought to rebalance their participation in the sector and technical challenges have delayed some projects. As a result, it has become less obvious where to deploy scarce resources in the form of capital and capability. And investors tell us that they find it harder to see how the industry can continue to deliver the kinds of returns that they seek. That said, I do not believe our industry's model is broken as some would suggest.

 Looking ahead, we see the potential for short-term growth from existing and new projects and longer-term growth from long-life projects now in development, many of them in unconventional oil and gas. So, the industry is finding new opportunities and consensus suggest it is becoming more cash generative in the process. At the same time, CapEx invested has grown to around $130 billion a year. So, the real question would appear to be whether the rewards justify the continued reinvestment at these levels. In short, should we shrink or should we grow? Prices have been buoyant, but with resources plentiful, we cannot rely on higher prices to create value. Costs have been rising for too long along with the technical challenges of new projects so we need to find our own answers.

 We each need to find our own route forward, but what seems clear is that participants in our industry once again need to adapt to compete. The industry needs to show it can make disciplined investments that offer differentiated returns for shareholders and then execute on them safely and efficiently. This needs to happen right across the value chain from exploration through engineering services to operations. I believe the most successful operators will find new and even better ways to do this, to manage their CapEx and costs and extract value in the form of free cash flow through a blend of judgment, discipline, efficiency, and innovation. If one looks beyond short-term volatility and the lag effects, I believe our industry has a history of doing this and I believe there are signs that this is taking place, but some adapt better than others and that brings me to BP's own plans.

 At BP, we have learned some lessons of our own. The 2010 accident was a terrible tragedy. We recognize the impact that suspending the payment of our dividends in 2010 had on our shareholders. It has made us question everything we do and has put us on a different course. That new course began with improving safety with more systematic operations and a powerful new safety and operational risk team to work closely with our businesses and today, we are seeing the results of that. But the questions went deeper, essentially how could we not only be a safe operator, but a safe and attractive investment for years to come? Our answer very simply has been to focus on what we do best; exploration, working in the deepwater, working with giant fields, advantaged gas value chains, and quality downstream businesses.

 These are the areas where we have built distinctive capabilities over decades. We believe we are now at our own inflection point and today is about showing you what BP looks like beyond this. It coincides exactly with where we believe we need to be to compete in the environment I have just described. It has been a multi-year journey and a tough one to get to this point. With all of this behind us, we believe we are now better positioned to meet the challenges we face both as a company and as a player in our industry. Our activity in 2013 completed the groundwork. It has set us up to deliver the 10-point plan we laid out to you in October of 2011. The things we said you could expect and the things we said you can measure.

 The most important commitment was to continue to make safety the top priority and our record has improved, which I think tells you a lot about the discipline we are bringing to our operations generally. We will show you today how this is making a difference in each part of our business. We said we'd build a stronger portfolio. With $38 billion of divestments completed, we are a smaller simply and much more focused company. We've also announced an intention to divest another $10 billion of assets to further focus the portfolio. At the same time, the completion of the transactions associated with Rosneft and TNK-BP have given us a new future in Russia. Our businesses also continue to deliver significant milestones. In exploration, we've doubled our spend, reloaded our prospect inventory, and have started to see some real success with seven potentially commercial discoveries in 2013.

 The Upstream also continued to bring on a series of new high value projects with 11 major project start-ups since the start of 2012. In the Downstream, we have announced the commissioning of the new unit at our Whiting refinery and we are growing distributions. Since resuming the dividend payments in the first quarter of 2011, we have announced three further increases in the dividend. We are also using part of the cash proceeds from the sale of our share in TNK-BP to repurchase shares with $7.2 billion of shares repurchased for cancellation since the commencement of the program early in 2013. We remain confident in delivering our goal for 2014 to increase the operating cash flow by more than 50% between 2011 and 2014 assuming $100 oil price.

 Looking out to 2018, we expect all of this progress to support continued material growth in operating cash flow, which when coupled with capital discipline will drive continued growth in distributions to shareholders. Before moving on, I should say only a few words about the ongoing legal process in the United States. We continue to compartmentalize activities related to the legal processes and BP's operating teams are focused firmly on our core business. That is what today is all about so we are not going to spend time going through a detailed update on legal proceedings. What I would simply say is that we continue to stay the course. That means we are determined to pursue fair outcomes in all legal proceedings.

 Yesterday, the Fifth Circuit Court made a decision to deny BP's request for a permanent injunction to prevent business economic loss claims not traceable to the spill. We disagree with this decision and expect to request an en banc review by the full panel of active Fifth Circuit judges. Importantly, we have secured a favorable ruling regarding the need to match revenues and expenses in calculating business economic claims, which should address many of the concerns BP had a year ago. We remain committed to paying legitimate claims, but we'll continue to contest claims we believe to be unfounded. We also continue to believe that BP was not grossly negligent neither in the events that caused the accident nor in the response to it. And our financial framework is sufficiently resilient to deal with the outcomes of these proceedings without compromising the future of the firm.

 Now moving on to describe the company that we are today. Through our divestment program we have fundamentally repositioned BP. Aside from our interest in Russia, we are a company that is smaller, simpler, and more focused on value. At the same time, we have retained a broader set of interests and opportunities in line with those of a much larger company through our 19.75% interest in Rosneft. Including our equity in Rosneft, we are a company with 3.2 million barrels per day of production and 18 billion barrels of oil equivalent reserves, making us second largest among the peer group that you see on these charts. Excluding our interest in Rosneft, we have 2.3 million barrels per day of core production and 11.4 billion barrels of oil equivalent reserves.

 The repositioning of our portfolio following our divestment program has made us less complex leaving us a lower risk footprint and allowing us to streamline the way we run our businesses to be more efficient and drive faster decision-making. This slide shows the extent of the simplification across BP's Upstream and Downstream operations. In the Upstream since April 2010, we have removed around 50% of our installations, 35% of our wells, and 50% of our pipelines. This has significantly reduced complexity while only divesting around 10% of our reserve base. In the Downstream, we began to transform our business over a decade ago as part of an earlier drive to improve our competitive position.

 For example in fuels, where we have been pursuing a refining deficit strategy, we have reduced our refining capacity by 38% since 2000 while reducing our marketing volumes by only about 9% and also improving the overall quality of our sites. At the same time, the reshaping of our portfolio has made us more focused and positioned us to drive value by playing to our strengths. It has given us a distinctive platform for growth. It's still sufficiently diverse to balance geopolitical risk and play at scale yet very clearly on where and how we compete. We still have significant representation in many of the most promised and established new hydrocarbon provinces and markets in the world.

 At the point of access, exploration is focused on a reloaded pipeline of highly promising positions that allows us to build both our existing positions and explore new horizons. And at the point of investment, upstream projects and operations are focused on strong incumbent positions in our four key regions of Angola, Azerbaijan, the Gulf of Mexico, and the North Sea, and in others where we are building the profit centers in the future. Like in the Downstream, we have carefully selected a set of quality businesses. And then there is our unique investment in Russia's growing energy industry. Russia is of course one of the world's largest oil and gas producers and a country where BP has a long and successful track record.

 Through our investment in Rosneft we have created a unique position, which will allow us to significantly bring long-term value to BP's shareholders. This chart shows how our shareholding provides us with a leading position in production and resources compared to peers. We will share in the partnerships Rosneft has with other international companies while carrying a proportionately lower exposure to risk and capital investment. Notably, more than $14 billion of financing will be carried by Rosneft partners during the first phase of Russia's shelf exploration. Turning to BP outside of Russia and starting with exploration, this map gives you a sense of the competitive position that we have created.

 The small bar charts show BP's net acreage position in a selection of promising offshore conventional oil and gas basins relative to our key international competitors. Here we look to compete by using our distinctive capability and technology. We have built the leading deepwater acreage positions in the Gulf of Mexico, in Uruguay, Libya, Egypt, and the East Coast of India. BP is the second largest offshore acreage holder in Australia's Ceduna basin, Nova Scotia in Canada, Brazil, Morocco, and the South China Sea, and as a result of our shareholding in Rosneft the Arctic. And in Angola, we are the largest offshore acreage holder and importantly, the second largest within this growing pre-salt play.

 Moving from exploration to development. If we look at BP relative to its peers, we have more value in deepwater as this chart shows and a balance of liquids and selective investments in gas. There is no one size fits all or right or wrong way of doing this. It is all about choosing where to play based on our strengths and making disciplined investment choices to create the most value for our shareholders. Lamar will explain this in more detail, but put simply, we are choosing to make use of our leading deepwater capabilities and build strong legacy positions in giant fields. We also focus on gas where we have strong positions where we can play in premium growth markets and where we can bring technological advantage to bear.

 In the Downstream, it's a similar position. As Iain will explain, our repositioned Downstream portfolio has the capability to generate material free cash flow for the Group from a set of quality Downstream assets. We have repositioned our fuels portfolio to have less refining exposure than our peers. We have exited 13 refineries in as many years, but have done so while increasing the ratio of relatively more profitable marketing sales-to-refining capacity. And where we retain refineries, we invest to make them competitive. Our newly modernized Whiting refinery, for example, will give us differentiated access to lower crude prices in the North American market. In our Lubricants business we invest in technology, growth markets, and premium global brands. And in Petrochemicals, we deploy our technological advantages in growth markets, especially Asia and the Middle East.

 So, that describes where we aim to compete. But success in this industry is not only about investing in the right assets, it's also about having a set of distinctive capabilities in technology, in relationships, and in our most vital resource, our people. We have a history of pioneering many advanced technologies that both underpin and enhance our distinctive portfolio strengths. To give an example, in 2004 we began a transformation in maritime seismic imaging when we conducted the first Wide Azimuth Towed Streamer or something called WATS surveys at the Mad Dog field in the Gulf of Mexico. WATS has since transformed marine seismic imaging becoming the industry standard and we continue to develop extremely high resolution imaging technologies and tools.

 We are also an industry leader in chemical enhanced oil recovery. Technologies such as Bright Water and low salinity water injection technology or LoSal have the potential to deliver an additional 1 billion barrels of net resources in our giant fields. For example, LoSal is due to be used from the outset at the forthcoming Clair Ridge operation where we anticipate it will release an extra 42 million barrels for an additional cost of just $3 a barrel. And we have developed a number of digital tools across our upstream and downstream operations to provide real-time performance data, allowing us to improve plant reliability and optimize the management of our assets. But that's only part of the equation.

 We work to develop and nurture long-term relationships. These include the relationships we build with governments and community stakeholders such as those which were vital in completing the multiple agreements needed for the Shah Deniz 2 project to bring natural gas from Azerbaijan to Europe via the Southern Corridor. We also develop relationships with others in the industry as we collaborate to develop new capabilities. A good example here would be partnering with Maersk and FMC in our 20K program, 20,000 psi program. We also have excellent relationships with academic institutions such as the BP International Centre of Advanced Materials or ICAM based at the University of Manchester.

 Another major strength is the capability and quality of our people. We are recognized as a great employer with a reputation for hiring talented individuals early in their careers and then investing in their development. In so doing, we build a sustainable pipeline of talent. We have a common set of values and behaviors across the Group that we believe helps everyone at BP to contribute to their full potential. And we have an expectation of all leaders that their leadership embodies these BP values, creating enduring value for the Company and for our shareholders. So that describes the playing field, but what does this offer to the shareholders if we get it right? The BP proposition is a simple one and one that I hope by now is familiar to you.

 We have been talking about this for some time now and you should expect to keep on hearing the same central message. It starts with value over volume, which means active portfolio management to ensure we are playing to our strengths, divesting assets which are not core to our strategic approach, and finding alternative ways to create long-term value through portfolio realignment. The aim is to grow sustainable free cash flow. So looking out to 2018, we plan to do this by delivering material growth in operating cash flow from our underlying operations while reinvesting in a very disciplined way only into the best opportunities within our defined capital limits. This will enable us to grow distributions to shareholders in two ways.

 First and most importantly, through a progressive dividend policy that reflects the operating cash flow growth in our underlying businesses. And then by using surplus cash beyond capital and dividend payments, primarily to enhance distributions through buybacks or other mechanisms. To deliver these outcomes, there are many drivers of success, but there are three I believe to be key which I want to focus on today. First, active portfolio management including the restructuring of some parts of our business; second, disciplined allocation of capital; and third, safe, reliable, and efficient execution. These all work together to ensure we deploy our distinctive capabilities into the right portfolio of activity to achieve the best possible returns for shareholders, that we invest your money at the right level into the right projects and most important of all, that we deliver the right performance safely.

 Now, let me explain this a little bit further and I'll start with active portfolio management. Unlocking value from our portfolio has been part of the way we work for a long time. Since 2003, BP has divested around $90 billion of assets including the sale of our interest in TNK-BP. This is a significant amount of portfolio restructuring compared to any of our peers. We embarked on our $38 billion disposal program to bolster BP's finances in the aftermath of the oil spill, but we quickly became aware that this also provided an opportunity to reshape BP to be a safer and stronger company for the future while also capturing prices in excess of the net asset value to BP. At the same time, we repositioned our interest in Russia to create an exciting new future in that region.

 As I've already indicated, the divestment program has allowed us to focus our portfolio outside of Russia on areas of distinctive capability both in the Upstream and the Downstream while divesting assets where the risk profile was high relative to the potential rewards such as in the midstream. Active portfolio management means we will keep our portfolio constantly under review, looking for ways to refresh and optimize the portfolio. It is integral to our strategy of growing shareholder value. It also ensures we focus our scarce resources on doing the right things. As you are already aware, we have announced we plan to make a further $10 billion of divestments by the end of 2015. We will trade mature assets with declining cash flows to focus on those with higher returns and we will also aim to selectively farm out early life assets to diversify risk and invite a pooling of innovation.

 We will exit activities that no longer fit our strategy and very selectively acquire assets to complement our existing portfolio. And all this will simply be how we do our business, it's part of the pattern of value over volume. It's also an approach that looks beyond divestment as we constantly strive to find other innovative ways to redesign our portfolio to unlock value. This brings me to the announcement we're making today of our intention to separate our Lower 48 onshore oil and gas business in the United States. We have a significant proportion of our total resource base in the Lower 48 and we have substantially repositioned this business in recent years, exiting non-core assets and adding quality shale positions.

 With the rapidly evolving environment, our business has become less competitive. There is significant value to unlock through improving the cycle time from access through to production and the efficiency of cost management. We therefore intend to run our business in the US Lower 48 as a separate business to compete more effectively with the independents. The business will continue to be owned by BP, but will be led by a separate management team based in an independent location. It will have separate governance and processes and systems designed to improve the competitiveness of its portfolio and we will start to disclose separate financials for the new entity during 2015.

 Over time, our aim is to create another discrete high-quality, high performing business within the overall portfolio with all the optionality that that brings. The new business will remain a critical part of BP's portfolio over the long term and we remain committed to both the exceptional resource position in the Lower 48 and to the related technology learnings that can be applied to our portfolio around the world. And Lamar will come back and talk about this in some more detail later. This slide shows the outcome of our focus on value over volume over the past few years. Since 2011, the divestments have led to a decline in production in the Upstream. However, this decline in production is being outweighed by growth in operating cash margins as new major projects come on-stream.

 Similarly in the Downstream, we've seen a decline in refining capacity. Looking past 2013, operating cash flows per barrel are expected to increase as a result of significantly improved margin capture at our Whiting refinery as well as other sources of growth that Iain will describe later today. And divestments are only one part of the story. The other is reinvestment in projects that continually upgrade the portfolio over time. In the Upstream, we are achieving this by focusing our investments in key regions that are also the higher margin regions of our portfolio. In the Downstream, it's achieved by investing into assets like Whiting that provide an advantage. That brings us to the second key driver that of capital allocation, which is fundamental to this decision making.

 The objective of our capital allocation process is to maximize the value of our deep portfolio of investment opportunities. We work within the boundaries of our overall financial framework to determine the right balance of reinvestment and distributions. We also ensure investment is aligned with our strategy and that we have the right capability in place to execute well. Around 80% of our capital spend is in the Upstream. We drive capital discipline in three ways. Firstly, we constrain the level of capital overall to meet our overall range of opportunities ensuring that the highest quality activities are the ones that are selected. Secondly, we have a rigorous bottom-up process for making individual investment choices.

 Each project is tested against three price scenarios with an $80 per barrel benchmark in today's environment as well as both higher and lower scenarios. We also use a range of economic criteria, including net present value, internal rate of return, and investment efficiency to compare the projects. Commercial, technical, and operational risks are considered together with an assessment of future investment options that could be created. Our objective is to optimize the full-cycle returns at an asset level. Sanctioned projects will offer a range of potential returns from those that are higher risk and higher returns to those that may have lower returns, but offer greater certainty in outcomes or future optionality. Brian will come back to the subject of returns shortly.

 Thirdly, we have a detailed process of post-project evaluation to learn the lessons from each project once it has been completed, both in terms of execution and our decision making processes. When progressing our projects, we use a group-wide standard called the capital value process or CVP. It takes and divides the life cycle of projects into stages, which define key decision points when projects either proceed to the next stage or they get recycled. Only when a project meets the stage-gate criteria will it proceed to the next CVP stage. Significant benchmarking and project ranking takes place at the select phase as we prioritize which activity to progress and at what pace.

 The final investment decision is made between the define and execute stages as you can see on this chart with the right engineering definition and execution planning and with an acceptable combination of expected future returns, risk, and future investment options. All investments greater than $250 million are reviewed by an executive committee, including Brian and myself, and are also subject to a process of independent functional assurance. The recent recycling of projects such as Mad Dog 2 in the Gulf of Mexico and Browse in Australia is an indication of the capital discipline inherent in this process. The third, but most important driver of success is safe, reliable, and efficient execution.

 Execution is something we absolutely need to get right across all our operations in the execution of our major projects and also in the way we run our functional and support activities, which I'll come back to shortly. That is what ensures we can deliver on the future that we are laying out today. While this journey is one that is never complete, we have seen our Group safety performance improve again in 2013 with fewer major incidents, fewer leaks and spills, and fewer injuries. Together with our investments in operating integrity, we believe this is driving steady transformation in our operating reliability and efficiency. Safety, integrity, reliability, and efficiency work together to drive much better business outcomes.

 We're also starting to see an encouraging trend across a number of key metrics from Upstream plant efficiency to Downstream refining availability. That said, we believe there are areas where we can drive even greater efficiency. And both Lamar and Iain are going to talk to you in some detail about the progress we've been making and the actions we are taking in this area, which I believe will give you a clearer sense of the opportunity this presents. Good execution may be most visible in operations and projects, but our drive to execute effectively goes far wider and includes our functional and support activities. BP is a smaller and simpler company now and requires a smaller, simpler corporate overhead.

 BP invested significantly in certain areas of functional capability following the Macondo incident. By the end of 2013, we had sold $38 billion of revenue-generating assets. We're now taking the opportunity to streamline, de-clutter, and to ensure processes are fit-for-purpose for the Company that we will run going forward. We have 60 simplification initiatives in progress. Examples include combining separate internal audit functions into one and merging our Brand and Communications teams, there are many others. We've also created a Global Business Services organization, which currently manages part of our back office and customer service activities. Their remit is to drive efficiency through standardizing our transactional and accounting processes.

 We're now extending the reach of our Global Business Service centers more widely across the Group. We see this simplification process as extremely important for the Company to remain competitive in the future and Brian and I sit on the steering committees for all of these programs. We're scoping the benefits for the different initiatives at the moment and we're defining a baseline from which to measure our progress and we expect the benefits to be increasingly visible in financial terms in 2015.

 I'll now hand over to Brian who will give you more detail on the outlook for our financial framework.



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 Brian Gilvary,  BP plc - Group CFO   [2]
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 Thanks, Bob. That gives us a broad perspective on the Company, where we are today, and where we are to compete. Bob has outlined our proposition to you, our shareholders, of growing sustainable free cash flow over the medium term through to 2018. I'd like to give you a little more detail on the key financial drivers over this period. Starting with 2014. We remain confident of delivering operating cash flow of $30 billion to $31 billion in 2014 at $100 a barrel, an increase of more than 50% over 2011 as originally set out in the 10-point plan. Relative to 2011, this is substantially driven by the completion of payments into the Trust Fund in 2012, the ramp-up of new major projects in the Upstream, and the commissioning of the new unit at our Whiting refinery.

 Relative to 2013, operating cash flow in 2014 is expected to grow materially due to the ongoing restoration of high margin production, the continued ramp-up of the six upstream major projects brought online since the start of last year, and three further major projects expected later this year. Also, the commissioning of our modernized Whiting refinery and some reversal of the working capital builds that we saw through 2012 and 2013 and highlighted in previous quarter results. We continue to expect full-year capital expenditure to be in the range of $24 billion to $25 billion this year. Looking at free cash flow beyond 2014, we expect to deliver material growth in operating cash flow out to 2018 roughly in line with the shape on this chart based on our current portfolio and planning assumptions.

 This is a faster rate of growth than we see for production, which excluding Russia, is expected to grow moderately over the same period reflecting the quality of the new barrels coming on stream. In 2015, we expect operating cash flow to be broadly similar to 2014 sustaining the significant increase in 2014 operating cash flow with steady growth thereafter to 2018. In the Upstream, growth in operating cash flow is driven by a strong focus on extending high value activities in our existing operations and the ramp-up of major projects both already online and yet to start up. These projects have higher average unit operating cash margins than the average of our rebuilt portfolio in 2013. Lamar will go into a lot more detail as we go through the Upstream shortly.

 In the Downstream, the key sources of incremental cash flow delivery include the full-year benefits from the Whiting upgrade, margin expansion across the portfolio, and access to growth markets. Iain will cover this in more detail. Across our segments operations and within our corporate functions, we also see considerable opportunity for improvements in efficiency. In the near term underlying Group cash costs are expected to remain broadly flat assuming a stable oil and gas price environment. Our guidance for capital expenditure over the period from 2015 to 2018 is between $24 billion to $26 billion and we will continue to actively manage our portfolio for value as Bob outlined. We plan to divest a further $10 billion of assets before the end of 2015 as previously announced and we intend to keep gearing within the 10% to 20% target range while uncertainties remain.

 Now turning to divestments. The chart on the left shows the net book value for the set of assets we sold as part of our $38 billion divestment program against the disposal proceeds we received. As Bob noted, while the $38 billion divestment program was driven initially as a response to funding liquidity during 2010, it was the value that we unlocked early on in the sales process which drove us to go beyond what we required at the time. So far, we have agreed around $1.8 billion of the additional $10 billion of divestments planned by the end of next year and we plan to use the post-tax proceeds from this program predominantly for shareholder distributions with a bias to share buybacks. Beyond 2015, the level of divestments will be an outcome of our strategy and our drive towards value over volume. For planning purposes, we typically expect $2 billion to $3 billion of divestments per annum.

 Now a few words now on capital expenditure and returns. Bob talked earlier about the recent trends in the industry. Rising costs and an increase in investment into new large infrastructure projects across the industry has fed into higher levels of capital not in service. This goes some way to explaining the recent compression in return on average capital employed across the industry as a whole. Over the last few years, BP's ROACE has been impacted by the divestments of heavily depreciated legacy assets with significantly higher average returns than the rest of our portfolio, the period during and post the drilling moratorium in the Gulf of Mexico which severely impacted volumes and had a greater impact on BP than our peers, and an increase in capital not in service due to a step-up in growth reinvestment into exploration major new Greenfield projects and our strategic investments into new positions in Brazil and India.

 Looking ahead, we expect BP's ROACE to be slightly higher in 2014 and to grow steadily over the period based upon our current portfolio and planning assumptions. This reflects the significant operating momentum in our business from 2014 for the reasons already described and our disciplined future capital expenditure plans as Bob outlined. Returns are fundamental to how we think about value. As a measure of returns, return on average capital employed can have merit over long periods of relative portfolio stability, but can fall short when distorted by factors including price volatility, changes to fiscal terms, portfolio effects such as the life cycle of significant investments, and the impact of acquisitions and divestment activities as I outlined.

 Ultimately our goal is to increase the net asset value of the firm without dilution to shareholders. In this context, we place much more emphasis on future estimates of returns and net present value at a project or activity level and the shape of expected long-term sustainable free cash flow for the portfolio as a whole. We believe this to be a more useful indicator for shareholders. Looking at our planned capital spend, this chart provides a very indicative breakdown across our businesses. We would expect this split to vary from year-to-year according to the timing of projects in individual years and that the total will not exceed $26 billion in any one year. In the Upstream, we will continue to invest in our major project pipeline as well as a large number of investments in shorter payback, higher return activities in existing operations such as infill drilling and tie-backs.

 In the Downstream, investment reduces in 2014 following the commissioning of the Whiting refinery modernization project with ongoing capital investment focused on value adding investments across the business. Turning to distributions. The combination of material growth in operating cash flow coupled with capital discipline provides a strong platform to grow shareholder distributions. Our first priority is to grow dividend per share progressively. Our policy is to do this in accordance with expected growth in sustainable underlying operating cash flow from our business over time. As we announced with third quarter results, going forward the Board will now review the dividend in the first and third quarters of each year.

 We will then look to bias surplus cash over and above capital requirements and dividend payments to further distributions through buybacks or other mechanisms. Buybacks make our commitment to growth in dividends on a per share basis more affordable as the equity base reduces enhancing the potential for additional surplus cash. We are currently progressing a buyback program of up to $8 billion using part of the cash proceeds from the sale of our share in TNK-BP. To date we have repurchased $7.2 billion of shares for cancellation. And also as I noted earlier, the post-tax proceeds from a further $10 billion of divestments before the end of next year will be used predominantly for distributions primarily as buybacks.

 So in summary. Looking out to 2018, we expect the combination of continued growth in operating cash flow and capital discipline to grow sustainable free cash flow underpinning progressive growth in dividend per share into the future. This is strongly underpinned by the operating momentum of our businesses, including a strong focus on costs and efficiency. Our guidance for gross organic capital expenditure remains unchanged at between $24 billion to $25 billion in 2014 and we expect it to be in the range of $24 billion to $26 billion between 2015 and 2018. We will continue to actively manage our portfolio, divesting a further $10 billion of assets by the end of next year and using the post-tax proceeds predominantly for distributions with a bias to share buybacks and we also intend to keep gearing within the 10% to 20% band while uncertainties remain. And finally, over and above a progressive dividend, we intend to use surplus cash to enhance distributions to shareholders through buybacks or other mechanisms.

 Let me now hand over to Lamar, who will take you through the plans for the Upstream in a lot more detail.



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 Lamar McKay,  BP plc - Chief Executive, Upstream   [3]
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 Thank you, Brian. Today I'd like to update you on some of the progress that we're making and the outlook for the Upstream business. Firstly, and most importantly, I'll start with the progress on making our operations safer and more reliable year-on-year. Secondly, I'd like to describe to you our more focused portfolio and how this provides us a distinctive platform from which we can grow value over the medium to longer term. Lastly, I will explain why the continued improvement of operational performance through 2013 from exploration all the way through operations via our functional model gives us confidence in our ability to deliver while being disciplined in what we spend.

 So first, and most importantly, to safety where we continue to make progress; improving our management systems, developing capability, progressing a safe operating culture across all levels of the business. We continue to maintain a clear and consistent tone from the top, set clear expectations of our leaders, and with the collective efforts obviously of those folks in the field that do the work every day, we are delivering results. When measured through the Recordable Injury Frequency rate, we have been better than or broadly equal to the industry benchmark level every year over the last decade. We have also seen significant improvements in process safety delivery. We measure even very small releases of hydrocarbons, which count as a loss of primary containment, and we continue to see year-on-year reductions in the number of these releases.

 We are driving down the number of Tier 1 process safety events, which to a large part is the result of our investment in turnarounds, reliability programs, and systematic defect elimination; all part of our OMS, our operating management system. Safety and reliability are intrinsically linked. Our investments in the integrity and operability of our assets have also delivered significant improvements in our operating efficiency. Across the portfolio, our underlying business is becoming safer and more reliable. Between 2011 and 2013, we have reduced Upstream Tier 1 process safety events by about 75% and at the same time delivered an uptake in operating efficiency of 10%.

 Now, to the portfolio. As Bob highlighted, we have successfully completed our divestment program, which included in the Upstream $30 billion of Upstream assets. It reduces the risk to the business while maintaining access to about 90% of our reserve base. Over the next two years, we expect our Upstream businesses will contribute a significant portion of the Group $10 billion divestment target. Through active portfolio management, we will continue to focus on high grading our existing asset base; reducing our exposure to low growth, low margin assets, or those where others are better positioned to extract value. We will create space for financially attractive investment options progressed from our access and exploration program, from our deep major project pipeline, as well as opportunistic additions or deepening to the existing portfolio.

 In doing so, we have the potential to realize incremental and accelerate material value. Now we have retained a quality resource pipeline representing a very balanced portfolio of opportunities. Total resources at the end of 2013 were over 44 billion barrels of oil equivalent excluding Rosneft with a proved reserves to production ratio of over 13 years. Now despite the impact of that $30 billion divestment program in the Upstream, we have still managed to grow total resources by around 4% over the last four years through new access and continued appraisal. Our hopper demonstrates a good balance across resource type and geography. We have a very material deepwater oil resource base and further opportunities in areas like the Gulf of Mexico and Angola.

 We hold strong incumbent positions in the world's giant fields such as Azeri, Chirag, Gunashli in Azerbaijan, Prudhoe Bay in Alaska, and Rumaila in Iraq; where we continue in those fields to develop and deliver attractive new phases of development. We have a disciplined and selective approach to gas in its full value chain focusing on where we have strong core positions, where we can play our role in premium growth markets, or bringing advantaged technology to bear on the resources. That's evidenced by our recent investment decisions with Shah Deniz 2 and Oman Khazzan. Our portfolio in the Upstream also represents and presents a good exposure to unconventional opportunities with 38% of our resources in unconventional plays. Technology continues to provide access to developing incremental resource and a few examples.

 We are unlocking future opportunities in Trinidad using leading edge Ocean Bottom Seismic acquisition and processing. In unconventional gas from the lower 48 to Oman, our technology flagship program is helping to increase recovery through the application of imaging and rock mechanics technologies. In deepwater, we continue to build on our expertise and knowledge and we are I think an industry leader in developing 20k technology, as Bob mentioned earlier, ensuring that BP continues to be at the forefront of the next stage of deepwater developments. And with our continued access to giant fields, we are employing a suite of proprietary recovery and real-time digital technologies, which combined with our functional expertise, allow us to increase recovery and improve the efficiency.

 Now as we look out to 2018, we have confidence in our ability to deliver long-term sustainable value from our resource base. We have three points of access. Firstly, through the continued focus on our existing operations where we have significant additional resource with strong per barrel operating cash margins. So we need to progress the resource efficiently, we are maximizing the utilization of our existing infrastructure through targeted infill and enhanced recovery programs, and through investment in extension projects. Existing operations are a primary driver of operating cash and value over the medium term. Second point of access is delivering the next wave of major projects. We have a portfolio of over 50 major projects in the Upstream, which is well balanced between long life stable cash generating assets such as Oman and Shah Deniz Phase 2 as well as significant investments in shorter cash cycle assets.

 Two-thirds of our current projects, which have reached final investment decision, are focused on oil. Our third point of access is through continuing our access program and drill out of our very significant exploration prospect inventory, we will deliver opportunities for the long term, which will enable us to continue to high grade our portfolio and focus on value over volume. We will also maintain a clear capital frame and be disciplined in what we choose and what we choose not to invest in, only progressing the right quality projects into the next stage of development. The combination of operational momentum built through 2012 and 2013 and having an opportunity set biased to progressing high-margin resource provides an attractive opportunity for value growth over the next few years.

 As Brian mentioned, excluding the effects of divestments, we expect to deliver moderate production growth to 2018, with much of that growth coming from our existing key regions, the Big Fours, we call them. This, when combined with a disciplined management of costs, is expected to deliver a strong operating cash growth profile over the same period.

 So, moving to the sources of value growth, I'd like to begin by looking at the investments in our existing operations. Over 90% of our production and operating cash in 2018 is expected to come from our existing fields or major projects to which we have already committed and which are progressing very well.

 Over the medium term, we plan to optimize the delivery from our existing operations through continued improvements in operating efficiency, especially in the Gulf of Mexico and the North Sea, and by leveraging the resource base within and around our existing infrastructure. We intend to ramp up infill drilling and water injection to maximize the utilization of our existing infrastructure capacity. Such investments in our existing infrastructure are characterized by shorter payback times and higher rates of return, typically greater than 25%.

 We plan to also start up a number of high-quality projects in our existing operations which, when combined with the potential of our base resources, we anticipate being able to grow operating cash through to 2018.

 Our four key regional positions of Angola, Gulf of Mexico, Azerbaijan, and the North Sea continue to play a very important role throughout this period and generate around half of our operating cash in 2018. The North Sea and the Gulf of Mexico are expected to grow operating cash significantly through this period. Both Angola and Azerbaijan are expected to continue to deliver material, stable operating cash flows, underpinned by recent startups such as PSVM in Angola, Chirag Oil in Azerbaijan, and continued development drilling in both areas.

 From now to 2018, we maintain a balance aligned to our investment biases of giant fields, deepwater, and gas value chains. Our portfolio continues to be biased towards liquids, with selective investments in gas positions. I'd now like to take you through some of the activities that we are executing in the North Sea, Gulf of Mexico, and Lower 48 onshore US business in support of value growth.

 Now, we have operated in the North Sea for over 40 years and we do see a very long-term future in this basin. Over the past several years, we have been on a declining average plant reliability trend, mainly due to the aging nature of our facilities. In recent years, we have invested heavily in the integrity of our facilities to extend their life and deliver material improvements in their reliability.

 We have turned this around; and as a result of our actions, plant reliability has improved by about 11% between 2011 and 2013; much more, of course, remains to be done. We have developed and are executing specific improvement plans for key assets with material resource potential, including Magnus, Clair, Foinaven, and ETAP fields. These plants focus on renewal, reliability, and maintenance, and subsea improvement; and they do incorporate learnings from our top-performing assets around the world. It is expected that this work will bring continued improvements in plant efficiency and build upon their already improving safety performance.

 As previously indicated, much of our reliability progress is founded on defect elimination, which identifies the root cause of a failure or a system weakness and eliminates it from reoccurring. To manage reliability longer term, we're shifting our attention to future vulnerabilities. By proactively and systematically engineering out future defects, we expect to deliver long-term, sustained, high reliability. All of this is creating a firm foundation and together with the high-margin oil startups, including Quad 204 and Clair Ridge, is expected to contribute to a much improved operating cash flow for the North Sea region out to 2018.

 Now, in the Gulf of Mexico, we have a high-quality and focused BP-operated portfolio, with four major producing hubs; Thunder Horse, Atlantis, Mad Dog, and Na Kika. These assets are early in their life cycle, with on average only 20% of their resource base produced to date, and they offer significant long-term growth. We plan to realize this potential through ramping up infill drilling, reservoir pressure management, and executing new projects through existing infrastructure. We currently have ten rigs operating, up from six in 2009, with drilling activity on all four of those major hubs.

 With such a large untapped resource opportunity around these assets, we expect to continue development drilling operations well into the next decade. The revitalized activity is beginning to show results. In 2013, we delivered our highest production from new wells and projects since 2010.

 On Thunder Horse, we plan to have up to five rigs operating in the field this year. We have a very clear asset development plan with a medium-term focus on drilling infill wells, water injection wells, and rate adding well work; and a long-term focus on developing resources to the south through an expansion project in Thunder Horse.

 On Atlantis, we have seen strong well performance from the first phase of the Atlantis North Expansion, delivering first oil in 2013 ahead of schedule which, when combined with better-than-forecast reservoir performance, delivered on average 20% higher flow rates than anticipated.

 On Na Kika, the first Phase 3 well began oil production on the 19th of February this year, with a second well expected to start up later this year.

 With the Mad Dog rig being brought online in 2013, we are now seeing a resumption of development activity in that field. We are also optimizing the Mad Dog Phase 2 development concept, which is intended to support, obviously, longer-term production growth.

 Across all of our operated assets, we maintain a focus on long-term reservoir delivery and managing reservoir pressure to maximize value and to optimize resource recovery.

 We are also continuing the infill drilling programs across our non-operated assets, focused around Mars, Ursa, and Great White. The startup of Mars B in January of this year is an example of a major new infrastructure development in an established oilfield, which is expected to extend the life another 38 years or so and provide future opportunities for additional subsea tiebacks.

 As a direct result of this ramp-up of activity, we saw underlying production for the Gulf of Mexico grow last year for the first time since 2009. Looking forward, we anticipate production and operating cash flow to materially grow through the period to 2018.

 So turning now to the Lower 48 onshore US and building on what Bob has previously announced, our intent to separate the business. Now, over the last several years, we have very significantly refocused our Lower 48 onshore business, divesting declining non-core assets and our extensive midstream business. We have also added high-quality shale positions to our portfolio in the Fayetteville, Woodford, and Eagle Ford.

 In the Eagle Ford play, for example, through our joint venture with Lewis Energy, we have delivered a gross production of 500 million standard cubic feet of gas per day within just three years of operation. Participating in the Lower 48 is key to our Upstream strategy because we believe the Lower 48 will remain at the forefront of innovation and drive global learning in unconventionals for the foreseeable future.

 We have an extensive unconventional resource base of 7.6 billion barrels of oil equivalent, across 5.5 million acres, and over 21,000 wells. We believe there is potential to unlock significant value from this resource base and we have decades of experience in the necessary technologies. We have studied how competitive we are, where we operate, and how that compares to others, and have concluded that there is significant potential to improve performance further.

 We believe that the unique competitive environment in the Lower 48 US onshore requires speed of innovation, faster decision-making, and shorter cycle times. This is why we intend to change the operating model of the business model and run the Lower 48 onshore business as a separate business as we continue to focus on unlocking value from our existing portfolio.

 Now, turning to our second point of access, progressing the next wave of major projects, the map illustrates the breadth of projects to which we've already made final investment decisions, with a balance between world-class deepwater assets, gas value chains and giant oil and gas fields, both conventional and unconventional. This is a high-quality portfolio of projects, with one of the measures being the unit operating cash generated from these investments. Our startups in both 2011 and 2012 have already supported an improvement in our average segment operating cash margin to 2013. The ramp-up of these projects together with the future startups is expected to continue this improving trend.

 Our planned 2014 to 2015 major project startups are particularly high-margin at around double the 2013 segment average and deliver significant operating cash growth out to 2018. The operating cash margin for the next wave of committed projects, while they are lower than 2014 to 2015 startups, are still around 35% higher than the 2013 average. These projects include material investments, such as Oman Khazzan, Shah Deniz 2, and Clair Ridge, that progress significant resource and provide future optionality and attractive long-term production profiles.

 Given the scale of the resource these fields, Oman, Shah Deniz 2, have lower development costs per barrel, making them very competitive investments. We have a quality pipeline of over 50 major projects being progressed and expect this year to reach final investment decision, or FID, on five of these.

 We have a rigorous process, as Bob has said, of selecting the right development concept, optimizing the project, and then ensuring we are ready to execute. We consider our projects portfolio in three parts, the projects in post-FID, where the predictability of our cost and our schedule delivery continues to improve; projects in design, where our focus is on maximizing value, ensuring readiness to execute and consistently delivering best-in-class front-end loading; and then projects in appraisal, where our focus is on assessing commerciality and selecting the right concept.

 We have established a global center of expertise for concept development to optimize value for our projects in appraisal. We have a strong pipeline of projects being appraised. 21 of these projects have progressed to a point where they are included in the list shown.

 We continue to apply a rigorous capital value process to progress only the right projects into the next stage of development. I would now like to take you through a few examples of the progress we're making in our oil and gas projects.

 Two-thirds of our current post-FID projects are focused on oil and of these, the large majority are in our four key regions. A number of these oil projects leverage existing assets and infrastructure with major new installations that can extend and expand resource recovery and improve operating performance. In the North Sea, we're making good progress with the execution of our Quad 204 and Clair Ridge projects. Both projects are around 60% complete with construction ongoing.

 Quad 204 will provide a new FPSO to extend and expand the recovery of oil from the Schiehallion field, west of Shetland through to 2035. We have completed the main heavy-lift campaign for the new FPSO. We conducted 19 major lifts, installing 9 modules, the turrets and all other topside components totaling more than 31,000 gross tons. We are now in the final construction and commissioning stages.

 The Clair Ridge project represents the second phase of development to bring new resources from the giant Clair field online. Jackets have been installed and predrilling is complete. Engineering and procurement activities are also substantially complete and construction activities are ramping up. Both projects are on target to start field installation in 2015.

 Now, both the Khazzan field in Oman and Shah Deniz stage 2 development in Azerbaijan will bring significant gas resources to market, providing long-term optionality and generating material stable cash flow for decades. Our investment decision for the Khazzan field followed an extensive appraisal program, including the acquisition of 2,800 square kilometers of 3D seismic, an 11-well drilling program, and an extended well test facility to prove up long-term well productivity. The full field development is planned to involve drilling of around 300 wells over 15 years, delivering a plateau production of 1 billion cubic feet of gas per day and 25,000 barrels of condensate.

 This is one of the first, big tight gas developments outside of the US and it sees a subsidiary of the state-owned Omani Exploration and Production Oil Company participating with a 40% stake in the block. We believe this block, Block 61, has up to 100 trillion cubic feet of gas in place. This is equivalent to about twice the size of what's called the North West Shelf in Australia. The amended exploration and production sharing agreement and a gas sales agreement extend for an initial 30 years. They provide for the appraisal of further gas resources within Block 61, which are expected to be developed in subsequent project phases.

 We also took the final investment decision for the Shah Deniz phase 2 project in December of last year and its associated Southern Corridor pipelines. This is a further development of the existing BP-operated giant gas condensate field in the Azerbaijani sector of the Caspian Sea. The project is expected to more than double gas production from the Shah Deniz field, from 9.5 billion to 25 billion cubic meters per year and feed this gas directly to markets across Europe at European market netback prices.

 Expansion of the South Caucasus Pipeline through Georgia and construction of the Trans-Anatolian Pipeline or TANAP through Turkey and Trans-Adriatic Pipeline TAP through Greece, Albania, and Italy will result in a 3,500 kilometer link to the markets. This will be our second significant pipeline construction project following the successful completion of the 1,760 kilometer BTC pipeline, which has been exporting oil since 2006. In addition to the gas, condensate production is expected to increase to 120,000 barrels a day from current levels of around 55,000 barrels a day.

 In September 2013, we put in place agreements with nine European gas buyers worth $100 billion over 25 years and accounting for 10 of the 16 billion cubic meters per year of incremental production. These contracts follow a sales agreement for 6 billion cubic meters per year to Turkey that was signed in 2011.

 As the only major International oil company operating in Azerbaijan, BP is in a unique position to capitalize on further investment opportunities. BP's discovery of the new Shah Deniz Deep field in 2007 presents significant potential beyond Shah Deniz Stage 2. The extension of the Shah Deniz production sharing agreement from 2036 to 2048 enables further appraisal and development of this potential. BP also has the rights to explore the Shafag-Asiman gas prospect which, if successful, may rival Shah Deniz in scale.

 Now, turning to the longer term, over the last eight years, we have systematically rebuilt our exploration portfolio with the largest amount of access in decades. Last year, we accessed positions in Egypt, the UK, Nova Scotia, Brazil, China, Norway, and Greenland, and announced entry into Morocco. We have built a leading presence in major deep and shallow-water provinces worldwide and in the Arctic, including in Russia, through our partnership with Rosneft.

 We plan to explore this high-quality portfolio through the execution of between 15 wells to 20 wells per year and are on track to deliver on our earlier promise of testing 20 new plays between 2014 and 2017. We have nearly tripled our exploration prospect inventory compared with eight years ago and in doing so have maintained a good balance with half of our inventory focused on existing basins and half testing new basins.

 Our new plays include deep-water areas in the Atlantic Basin, Nova Scotia, Brazil, Uruguay, and Morocco, as well as positions in the Norwegian Barents, Greenland, and South Australia. All of these have the potential to deliver at scale; and in each, we have a material presence. In our existing basins, which includes Egypt, Angola, and the Gulf of Mexico, we are both drilling out proven plays such as the Gulf of Mexico Paleogene and also testing new ones such as the pre-salt plays in Angola.

 We also expect to pursue exploration wells targeted at filling existing infrastructure hubs, activity that tends to be lower risk, yet smaller in volume, yet high in value. 2013 was our most successful year of exploration drilling for almost a decade. 17 exploration wells were completed; and we've announced seven potentially commercial discoveries, including two discoveries in India, in Egypt the Salamat-1 well, the Gila well in the Gulf of Mexico, which is our third find in recent years in the emerging Paleogene trend following Kaskida in 2006 and Tiber in 2009.

 And in addition, we're partners in the Lontra oil and gas discovery in Angola's pre-salt play announced in October and a drill stem test was completed in December, demonstrating the quality of the reservoir. Seven of the wells planned for 2014 are significant because of their scale and potential to open up new plays. These include the Orca and Puma wells in Angola, and which by the way Orca has been announced as a discovery and major play test in Brazil, Egypt, and Morocco.

 So far this year, we've had two potential commercial discoveries. As I said, the Orca well in Angola as well as the Notus well in Egypt. Evaluation of these results is ongoing. I think exploration is recognized as one of BP's deeply held core strengths and it's really great to be able to report a return to really good performance in 2013. We believe we've created the portfolio to sustain this over the coming years.

 So we've talked about how we're creating value from some of the areas. I'd now like to turn to why we have confidence in our ability to deliver the progress we've made using and through a functional execution model. Our functional organization has been designed to leverage the scale of the Group and provide access to global capability to solve local issues.

 Over the last few years, we have developed and implemented consistent global standards and work practices, built supporting processes and brought clarity to how we work. We are already beginning to see the benefits and have made great progress through 2013 in delivering improvements across our wells, projects, reservoir development, and operations organizations, more on which in a moment.

 The functional model also provides further transparency on activity levels and performance across our portfolio and access to improving the efficiency of our spend, both capital and expense. While we've made a good start and are demonstrating strong momentum, much more remains to be accomplished. We see significant opportunity ahead of us in accessing further efficiency and driving greater alignment across the organization in how we plan and how we execute work. The progress to date gives us confidence in our ability to deliver going forward.

 Now, within our Global Projects organization, we continue to focus on capital efficiency and predictable execution. The chart on the left compares the cost predictability of our projects before and after we established our major projects come in process in 2007. The performance of our project delivery continues to improve. We're on average within 5% of our FID targets for both cost and schedule, with delivery being more predictable. We continue to focus hard on front-end loading and through our global concept development center of expertise, optimizing concept selections and support of delivering higher-value projects.

 An independent external view based on IPA benchmarking of BP's performance shows us to be first quartile for our ongoing projects in execute for the key front-end loading metrics across reservoir facilities and wells. This is anticipated in time to further underpin predictable project delivery.

 We're also making significant progress on ensuring the delivery of safe, reliable, and competitive wells. We're ramping up activity and now have 34 rigs drilling in our offshore regions, the highest number of rigs offshore since 2008. In 2013, we drilled 329 wells, our greatest since 2000. When combined with our non-operated businesses, we have delivered a 20% increase in total production from new wells when compared to 2011. We expect this increasing trend to continue into 2014. At the same time, as underlying activity has increased, we've also improved our execution as measured through plan attainment, giving us increased confidence in delivery going forward.

 Our global operations organization is focused on driving the systematic delivery of safer and more reliable operations, and this focus is delivering results. Our BP-operated plant reliability has increased significantly since 2011 from around 86% to around 92% in 2013. This has been achieved through improvements in reliability and maintenance, the application of systematic root cause failure analysis, vulnerability mitigation, and improving integration across the functions.

 We've also delivered significant improvements in those four big areas that I mentioned earlier. As examples, on our ETAP asset in the North Sea, plant efficiency has increased from 63% in 2012 to 82% in 2013. On Greater Plutonio in Angola, we've increased plant efficiency from 61% in 2011 to over 90% in both 2012 and 2013. We have executed a significant number of turnarounds in recent years, with a strong focus on building efficiency. Over two-thirds of our turnarounds over the past three years have been completed on or ahead of schedule. As an example, the Cassia B turnaround in Trinidad was completed 16 days ahead of schedule and under budget.

 Significant progress has been made, but there is much more to do. We will continue to focus on our Operating Management System, OMS, which supports the systematic application of defined standards in pursuit of delivering operating excellence. We will continue to deepen its application and our focus on process safety and plant integrity through turnaround delivery, improved planning, and controlled work.

 Now, as I previously mentioned, the functional model also provides greater clarity on activity in access to improving the efficiency of our spend and the transparency by which we view that spend, both capital and expense. We are fortunate to have more investment opportunities than we will choose to fund, as we manage within the clear capital frame that Brian outlined earlier.

 We will make choices, continuing to rigorously apply our capital value process to progress only the most competitive projects. Over recent years, the oil industry costs have risen, driven by sector and commodity price inflation. We have not been immune and this together with the increased investment in our safety and reliability agenda and the transitional investments required to embed our functional organizational model have increased our cost base.

 Organizationally, we will eliminate the transitional cost associated with setting up the functional model and we see opportunity reduce above field overhead cost to better align with our smaller portfolio. We will continue to focus on improving the efficiency of activity execution and expect a steady state of investments to support and improve reliability. This investment is planned to be at a lower level than the last three years, recognizing the significant remediation program we've delivered and a smaller portfolio going forward.

 We will also work more effectively with our global supply chain, as we leverage existing global agreements and improve functional planning.

 Lastly, we will separate our Lower 48 oil and gas business to compete more effectively through improving the cycle time from access through to production and the efficiency of cost management.

 So in summary, we have a safer, more reliable and focused portfolio of assets. We expect to deliver strong operating cash growth in the medium term, driven by growth from our existing asset base, particularly the North Sea and the Gulf of Mexico and our next wave of project startups. We will continue to focus on value over volume. We have a significant portfolio of investment opportunities. We will maintain a strict capital frame, only progressing the most competitive investments. We have confidence in delivery. Our functional execution model is working and delivering results. We've got a long way to go, but it is working. We will continue to actively manage our portfolio to unlock value.

 So, with that, I thank you for your attention very much and I'll now hand over to Iain for the downstream.

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 Iain Conn,  BP plc - Chief Executive, Downstream   [4]
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 Well. Thanks, Lamar; and good afternoon, ladies and gentlemen, I'd now like to outline progress and expectations for the Downstream.

 Over the last six years, the Downstream has had a five-point agenda to transform the business and improve our delivery, and that's repeated on the left-hand side here. I've shown you this many times. It started with safety improvements, followed by getting the right behaviors and core processes, building earnings momentum, simplifying the portfolio and our routes to market, and repositioning our cost efficiency.

 Following the major changes to our US Fuels portfolio in 2013, I believe we now have a very high-quality Downstream with excellent prospects for the future. I therefore want to begin by stating what you can expect from the Downstream in 2014 and beyond, as shown on the right here. This starts with continued strong performance in safety.

 Next, you should expect a high-quality portfolio of advantaged positions which we believe will deliver competitive performance over time. We will actively manage the portfolio to ensure this quality is maintained, as we have done for over ten years. By quality, I mean competitive margin capability in each of our Fuels, Lubricants, and Petrochemicals businesses.

 The third thing that you should expect is competitive returns on sales and on capital employed. I acknowledge that with our petrochemicals performance and the planned outage at Whiting last year, our returns were near the bottom of the pack, but I do not expect this to be the case in the future. And I'll return to this in a moment.

 And finally, you should expect the Downstream to deliver material and growing cash flows for the Group. Because of the relatively lower reinvestment ratio, the free cash flow provided by the Downstream is disproportionate to its capital employed. This free cash flow is material to the Group, and should be expected to grow through to 2018 as operating cash flow grows, while we maintain a disciplined level of capital reinvestment.

 So let me now turn to some of the underpinning evidence based on our recent track record. This slide, rather small, shows each of those deliverables and our recent progress. In safety, on many measures, we're now delivering strong performance relative to our competitors. The graph on the top left shows the API tier one process safety event rate for our refining system relative to the other supermajors. As of mid-2013, BP had become the leader on this measure. This is all about systematic management of process safety under our Operating Management System, OMS.

 As regards portfolio quality, as Bob outlined, you can see also on the top right that in all businesses, we've materially changed the portfolio, pursuing economies of scale and growth while also improving margin capability. I'll return to the quality of each business in a moment.

 On returns, over the last 10 years, we've moved from a period of underperformance to a period of robust competitive performance. During 2012 and 2013, we have slipped below the competitor average. This is for two principal reasons, which I believe to be temporary; the effects of changes to our US Fuels portfolio, with the planned outage at Whiting; and the weakness in our Petrochemicals business relative to those with ethane cracking in the US. I would expect our performance to return to competitive levels as we move through this year and into 2015, although the Petrochemicals improvements will take time as market demand absorbs current excess capacity.

 Finally, in terms of cash flow, you can see that our operating cash flow has significantly improved relative to capital expenditure since 2007; and free cash flow has been maintained at about two times to three times 2007 levels on average for the last five years. This has of course been assisted by divestment proceeds. Going forward, we expect the Whiting refinery cash flows and growth from other businesses to replace much of the historic divestment proceeds, and we will of

 course continue to actively manage the portfolio. We expect material and growing cash flow delivery to continue out to 2018.

 Performance improvements combined with active management of the portfolio have allowed us to grow underlying replacement cost profits by an average of 18% per annum from 2008 to 2012 while keeping total fixed assets broadly flat.

 So I'd now like to turn to each of our businesses, starting with Fuels. This slide shows the relative quality of our Fuels business, compared to some of our leading competitors. On the left, you have refining; and on the right, the ratio of marketing sales to refining capacity.

 In refining, we've exited 13 refineries in 13 years, leaving us today with nine operated refineries and five non-operated JV sites. Our average refining scale is now industry leading and our refining Nelson complexity is about middle of the pack. Both our scale and complexity have improved since 2000.

 Regarding complexity, we have one relatively simple but large refinery at Rotterdam. This refinery has other significant attributes associated with its location, including significant trading and logistics flexibility, allowing it to be one of our consistently more profitable sites even though its configuration is less complex. Excluding Rotterdam, our average Nelson complexity is just over 10.

 We believe high-margin quality refining anchors an integrated fuels value chain, but we prefer to operate, as Bob outlined, with a lower proportion of high-margin volatility refining relative to the marketing businesses, which tend to have steadier margins and returns. This mix allows for a more stable earnings and cash flow profile while also ensuring that our refineries remain highly utilized in what are very competitive markets. Over the last 14 years, we've now become the leader in terms of marketing cover to refining ratio and have been increasing on this measure as others have seen it fall.

 Let me now turn to the Whiting refinery. The picture that isn't on the screen is of the 102,000 barrel a day coker, which is now in six-drum operation and throughputs are increasing as we ramp up the volumes of heavy crude oil we're processing.

 As indicated in 4Q, we've had some troubleshooting items but are working through those. Whiting has now reached over 350,000 barrels a day of total crude throughput; and of that, 160,000 barrels a day of heavy oil, which is more than double the average heavy rate before commissioning. We plan to ramp up progressively to a level of about 280,000 barrels a day of heavy processing over the coming two months.

 This slide reminds us of the strategic and commercial rationale of the Whiting project. It's all about feedstock and location advantage. On the left, you see in green that we expect to increase the proportion of heavy crude capability from around 20% to about 80%. Peak rates of heavy relative to a name-plate capacity of 428,000 barrels a day will therefore approach 350,000 barrels a day. Assuming a typical utilization rate, average throughputs of heavy over time should be about 300,000 barrels a day. It's this shift and this average rate which underpin the estimated incremental $1 billion per annum of post-tax operating cash flow depending on market conditions.

 The WTI-heavy Canadian differential is shown on the right. It's been increasing over the last few years. Year-to-date, it's been over $20 a barrel, above the levels which underpin the $1 billion per annum operating cash flow estimate.

 Finally, Whiting has two location advantages. Relative to the rest of the Atlantic Basin, it enjoys the recent Brent-WTI differential; and relative to the Gulf Coast, it enjoys a freight differential for Canadian crude, being nearer to the production as well as being nearer to the inland market for products.

 We still have to complete planned revamps of older sulfur units and to establish full steady-state heavy crude oil capability, but we expect all of this to be completed in 2Q. For all these reasons, I'm confident this refinery will be a material contributor to BP's operating cash flows both in 2014 and, of course, for many years into the future.

 Margins in the refining business can be somewhat volatile. Our strategic investments into feedstock advantage such as in our North American refining portfolio make the business much more resilient.

 The Fuels portfolio has now largely been repositioned into an advantaged set of refining and marketing businesses, with excellent brands and offers. Fuels typically generates over 70% of the Downstream's operating cash flow. These flows are very material to the Group and are capable of growth through margin expansion, our ongoing cost efficiency programs, exposure to growth markets, and deployment of high-quality retail and B2B offers. By managing our reinvestment ratio post Whiting, the Fuels business will be a mainstay of Downstream's future cash flow generation.

 Turning now to Petrochemicals. Our petrochemicals portfolio is focused in large part on two main end products; Purified Terephthalic Acid, or PTA; and acetic acid. PTA is the precursor to polyester for bottles and fibers; and acetic acid is a mainstay intermediate of industries such as paints, adhesives, inks, and fibers. In 2005, we focused our portfolio onto these products because they are high growth; BP has high market shares, and proprietary and highly competitive technology.

 And on the left, you can see the growth of these products relative to the overall chemicals market since 1990. Over this period, PTA demand has grown by 9% per annum, acetic acid by 7.5% against total chemicals market growth of about 5%. Industry analysts forecast continued growth of both products in the 5% to 6% per annum range.

 On the right, you can see the manufacturing cost progression of BP's technology relative to industry average and the next best available technology on the market today. It's through such continuous technological innovation that we've been able to reduce capital, fixed and variable costs relative to the installed base in the market, so allowing us to deliver good returns through the cycle and remain profitable even in the extremely weak conditions we see today.

 Turning to returns, over the last ten years, BP's portfolio has enjoyed better levels than the competitor average with return on sales averaging about 10% from 2007 to 2011. In the last two years, we've seen particularly weak returns, just as some competitors with ethane cracking in the US have seen a major positive shift. BP's portfolio is quite biased to Asia and the typical Asian competitor is also currently seeing low returns. BP is performing above the Asian average.

 We believe that the present overcapacity in the market will progressively be absorbed by demand. Furthermore, our current suite of new technologies will allow BP to improve returns via retrofits to our existing fleet of assets, through the deployment in new-builds and through licensing, a growing and stable cash flow node for the future.

 Finally, 2013 saw BP announce a number of new proprietary technologies; notably, SaaBre for the manufacture of acetic acid and other co-products directly from syngas; and Hummingbird for turning ethanol to ethylene. We've also developed a proprietary component technology for the production of para-xylene. Recently, we've announced an MOU to develop our first SaaBre plant in Oman.

 Petrochemicals does experience investment cycles. Although we're currently seeing a very tough environment, we're confident that our mix of high-growth products with large BP market shares and proprietary technology is an excellent core platform which can deliver competitive returns well above cost of capital and material cash flows. Growth rates in our markets are high and free cash flow from Petrochemicals over the last five years has been about 60% of the capital employed in the business.

 Turning now to Lubricants, as we outlined in some detail in 2011, the Lubricants business is focused on quality premium lubricants and high-growth markets, with competitive advantage driven by leading brands, advantaged formulation technology, and distinctive partner and customer relationships.

 In terms of return on sales, the leading competitors are not only the other supermajors but companies such as FUCHS and Valvoline. Under the Castrol master brand, BP's products compete very favorably with them on return on sales and significantly above median market levels. We also enjoy material growth, both through increased premium lubricants as a proportion of our sales and through increasing exposure to growth markets.

 And this chart shows these important drivers of growth. Firstly, exposure to growth markets outside of the OECD, the earnings from which have increased by over 250% since 2007. We've also been reshaping earnings in the OECD as we expand margins and secure customers through a focus on premium lubricants with advantaged formulation technology and pursue efficiencies in our routes to market.

 Secondly, the percentage of our business, which is in premium lubricants, is approaching three times that of the industry and has been growing steadily over the last few years, as you can see on the right. It's this focus on quality brands, formulation technology, strategic partnerships, and increasing exposure to growth markets and premium products which makes our Lubricants business a material source of growth. The Lubricants business has become a material part of Downstream, with pre-tax profits of nearly $1.3 billion in 2013, representing over 4% per annum growth over the last five years, a rate we would expect, on average, to continue.

 So, that provides you with a summary of what we've been doing to deliver a quality portfolio in each of our principal businesses. Let me now return to the segment level to sum up, looking at each of competitive returns and overall cash flows.

 I commented on return on capital earlier and we've seen a big improvement from underperformance to robust competitive performance. In 2013, against a backdrop of lower refining margins and a very tough fuels marketing environment, BP's competitive return was damaged by the planned outage at Whiting combined with the new assets not yet being productive and the particularly low returns in our petrochemicals business. Whiting is now ramping up and I would expect BP to deliver robust competitive returns in the future.

 On the right, you can see the overall net income per barrel of refining capacity of the Downstream, a measure we've shown you previously. Although a simple measure, and clearly affected by the denominator, the reality is that refining capacity is also a driver of much of the operating working capital and capital assets of a downstream company. And this methodology, therefore, allows a simple comparison to be made without balance sheet accounting complexities. And since 2009, BP has delivered a very competitive outcome from our mix of businesses by a relentless focus on the quality and the integration of the portfolio.

 So, in terms of our final deliverable, material and growing cash flows, I've provided indicators of the track record for each business, and now let me outline what you should expect from the Downstream as a whole going forward.

 Cash flow starts with good operating performance, and I'm very pleased that we've materially improved both in terms of safety and in reliable operations. Beyond that, there are a number of sources of operating cash flow growth, as indicated on the left of this slide, and I've touched on most of these in the last few minutes. It's all about the things which shape advantage, and securing and driving these every day.

 In Fuels, it's about margin capability and feedstock advantage in refining, high-quality marketing positions and powerful integration through logistics, supply, and trading. In Petrochemicals, it's very much about selection of the right high-growth products underpinned by technology and innovation. In Lubricants, it's all about brands, technology, partnerships, and increasing the mix of premium lubricants. In all businesses, we must ensure that we're exposed to those markets that are growing, and I'm pleased to report that 40% of our segment pre-tax profit in 2013 was exposed to growing markets.

 Finally, cost and resource efficiency are also critical. The cash costs of the Downstream have fallen by over 20% over the last five years, with only about half of this coming from divestments and against a backdrop of continued inflationary pressure. Today, we have over 15 simplification and efficiency programs underway, with the continuing goal to offset much of or most of inflation over the next few years.

 Taking all these together, on the right, I've indicated that there is significant potential to expand the operating cash flow of the Downstream from a 2013 base in the next five years. Relative to 2013, our operating cash flow will now benefit from elimination of working capital consumption associated with divested assets, the absence of the Whiting outage last year, and of course the benefit of the new Whiting cash flows. From this new base, there is future planned growth in all businesses from the areas that I've described.

 In terms of disciplined capital expenditure, after a period of organic capital of generally between $4 billion to $5 billion per annum over the last five years, for 2014 and beyond, I would expect this to fall to about $3 billion to $3.5 billion per annum. Beyond investment in integrity management and maintenance of our competitive positions, this capital will be targeted at expanding the competitive margin quality of our portfolio and increasing our exposure to growth markets.

 The combination of growing operating cash flows and capital discipline will ensure that the Downstream remains a source of material and growing cash flows for BP.

 Therefore, in summary, the deliverables you can expect from BP's Downstream are leadership and improvement in safety performance, a continuous focus on the competitive margin quality of the portfolio, ensuring that this results in competitive returns over time from our mix of businesses as a whole, and of course material and growing cash flows, both in 2014 and out to 2018.

 Thanks for listening and I'd now like to hand back to Bob.

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 Bob Dudley,  BP plc - Group Chief Executive   [5]
------------------------------
 Well, thank you very much, Iain, and that just about wraps up the presentation. We've given you lots of detail and I want to close by picking out some of the really important points before we take a short break. The first thing to say is that the BP Proposition is to deliver value for shareholders in the form of sustainable growth in free cash flow in support of growing distributions. Again, we plan to do this through material growth in operating cash flow coupled with strong capital discipline.

 It is a proposition that has a strong focus on value rather than volume. We do this by having a high-value portfolio, both Upstream and Downstream, investing only where we can apply the distinctive capabilities and technologies that we have built up over decades. It means we will actively manage our portfolio, divesting non-core assets while reinvesting in higher-value activities, continuously optimizing the portfolio to unlock value. We will stick to our capital limits, spending your capital on the best opportunities. And we will work tirelessly to execute safely, reliably, and with increasing efficiency, building on all the improvements we've already made.

 I believe the plan we have set out today very much puts us on the right path. It is a strategy based on a century of experience as an oil and gas company, a solid understanding of the challenges and opportunities of our industry today, and the four years of transformation since an event that made us rethink virtually everything that we do.

 We are confident, first, because we are building a track record that shows we can do these things; secondly, because we are clear that this is what a company like ours should be doing in today's market. We're not trying to do everything, we're trying to do the things we do really well. And third, because we know what we are good at, from seismic surveys to premium lubricants, and we are going to focus relentlessly on the work that brings in the most value.

 And maybe, maybe, most importantly, from where I stand, I'm confident because every day at work, I see and I know we have a great team of people. There is an unstoppable combination of capability and commitment here. After the last four years and drive to succeed at BP, this drive is very strong, and I believe we will live up to this proposition and deliver the value that you expect from us.

 So with that, I want to thank all of you for your very patient listening. What we're going to do now is take a short 10-minute break before we start a Q&A session. And then, after that, for those of you that are here with us in person, there will be some refreshments outside. The rest of you, take a break and we'll see you hopefully in 10 minutes. Thank you.

==============================
Questions and Answers
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 Bob Dudley,  BP plc - Group Chief Executive   [1]
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 Okay. Now, we're on. Okay. Well, welcome back, everyone, and again thanks for your patience and your attention over the last bit of time, people have had a chance to take a break, and what we'll do is take questions here in the room here in London, and then we have a fair number of people on telephones and things as well. So we'll go back and forth, and I will start with a question here on my right; then, we will go over here, here, and then the phone. How about that? Okay.

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 Robert Kessler,  Tudor, Pickering, Holt & Co. - Analyst   [2]
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 Robert Kessler, Tudor, Pickering. Your segmentation of the Lower 48 Upstream business and the reference you made to continued ownership by BP, can you add a little bit more color to that? Is that continued 100% ownership? Is there a possibility of a spinout of a minority stake of that to shareholders? And that's one question. And second question is, of your 2014 and then your medium-term CapEx, how much of that relates to the Lower 48 Upstream business?

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 Bob Dudley,  BP plc - Group Chief Executive   [3]
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 Okay. Well, thanks, Robert. I think what you've seen us do is make a business more efficient. I'll let Lamar comment here, but we have a business that needs to rebase itself economically. So it's going to be one that rebases the cost structure and the decision-making efficiency on that, and it's one that creates an optionality for us.

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 Lamar McKay,  BP plc - Chief Executive, Upstream   [4]
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 Yes, it's a strategic change to try to build a competitive business that can thrive in the very unique and competitive environment that it sits in. The intent is to build a successful business going forward, not to try to have it less successful and sell it off. So intention is to keep going, build a better business, and add value, not only from lower cost, better investments, quicker cycle time, but also to increase transparency of what is worth within the Company.

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Unidentified Company Representative   [5]
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 On the CapEx?

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 Lamar McKay,  BP plc - Chief Executive, Upstream   [6]
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 And CapEx, I don't remember the exact number, but it's a relatively small number in the BP business, less than 5%, right now.

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 Robert Kessler,  Tudor, Pickering, Holt & Co. - Analyst   [7]
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 In the low commodity price environment, will it be free cash flow generative?

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 Lamar McKay,  BP plc - Chief Executive, Upstream   [8]
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 Well, that's tough to say. In the future, it needs to improve, but what we've been running the business so far, somewhere between $4 and $5 is where it's been, yes; and hopefully, it'll be better than that going forward.

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 Bob Dudley,  BP plc - Group Chief Executive   [9]
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 Yes, to generate the free cash flow, absolutely. Thanks, Robert. Jason?

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 Jason Kenney,  Banco Santander - Analyst   [10]
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 Yes, Jason Kenney from Santander. Thanks for the question, so thanks for the presentation today, a lot of detail there which has been very welcome. So I think the strategy is correct. Still focused on the long-term sustainable free cash flow, which is obviously one of your main aims. My question is on how the market is going to value that strategy and how you hope to close a discount relative to some of your large-cap peers. I mean is it a question of the Russia delivery, is it a question of the litigation clarity, is it just a time on de-risking of this unit cash flow expansion, which you've spoken about on [the extent] today?

 And then, secondly, just a clarity on the detail again and it may go to Robert's question earlier, and the CapEx detail 2015-2018, I think only four months, five months ago, you said, it may be $24 billion to $27 billion per year; and now, you're saying $24 billion to $26 billion per year. You've trimmed $1 billion off of the top end of that. Is there anything in particular or is it just a reassessment of phasing?

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 Bob Dudley,  BP plc - Group Chief Executive   [11]
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 Let me take the last one, because it's a simple one. We said $20 billion to $27 billion through the decade. So by getting more specific at 2014 to 2018, that's where we've come out with $24 billion to $26 billion in our financial framework. So it's actually consistent with what we've been saying.

 In terms of -- we laid out in 2011 the goal of increasing operating cash flow, increasing that by 2014 of a 50% increase in operating cash flow. We are well into 2014 and we've got that objective. How are we going to improve that? I think it's not by us talking about it, we're just going to do it. So I think that's how we're going to close some of the gap, because I think there's a lot of people that actually don't think we're going to be able to generate that kind of cash flow this year and I think -- so it's the first thing, it's now what we say, it's what we do.

 In terms of closing the gap, and Brian, you could comment here in a minute, [I may make clear] there is some overhang over what is a litigious environment in the US, there is a litigation overhang, but I think that's going to take a long time. So I think people have to kind of put that aside. And in terms of Russia, we absolutely stand by our investment in Russia, and we've had good results for us, have had good results this year, and so that's just part of our big portfolio of things. Brian?

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 Brian Gilvary,  BP plc - Group CFO   [12]
------------------------------
 Yes, I think, Jason, building off -- basically, you've both answered the question, which is a year ago, it was a significant overhang of Russia. But that was resolved I think through a very strategic move around Rosneft. I think there's still more value to create around that. It was around the Macondo outstanding litigation liabilities and I think to a degree, we have those contained within the Company now. And Bob has talked about how they are compartmentalized, but they're also compartmentalized in terms of the balance sheet and how we think about that potential liability. So we don't see that getting in the way of strategy that Bob, Lamar, and Iain have outlined today.

 And I think the last piece you flagged is actually about execution, which is exactly what Bob said and I think what you've heard today is this is all about execution now, about how we now just deliver these projects. And we will do it through quarter results, not through promises into the future.

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 Bob Dudley,  BP plc - Group Chief Executive   [13]
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 I see a question here. I forgot, who had their head up first, you guys decide and then I'm going to take one from the call. So there's Alejandro and the gentleman next to Alejandro. So, who had their hand up first? There are three market at work, okay.

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 Alejandro Demichelis,  Exane BNP Paribas - Analyst   [14]
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 Okay, thank you. Alejandro Demichelis from Exane BNP Paribas. A couple of questions. Go back to the returns available on your projects for FID, you're showing the drop of the 2015 projects over what you're going to start up in 2014-2015. The question is, what is more representative of your project base longer term? Is that what you're seeing in 2014-2015, or is it going to be that 2015 stuff?

 And then, the other question, following up from that is, you mentioned Shah Deniz 2 as one of your big projects for the next wave and so on. But we've seen some of the partners that you've had there mentioning that this was one of the lowest projects in terms of returns in their portfolio. I think, someone was talking about even less than 10% ROR. So, how is that we put those two things together?

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 Bob Dudley,  BP plc - Group Chief Executive   [15]
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 Well, Lamar can comment on returns, I would say that as we talk about the each year having an improved over the greater base of percentage increase over the margins of the overall portfolio, each year, that overall portfolio is getting better and better and better. So the base keeps getting higher and higher, but yes, the graph I showed, 2014 to 2015, we have an unusually high operating cash margin projects coming on, very, very high. We debated to the graph because it looks like a letdown as it comes down to 2016 to 2018, but actually that bar, 2016-2018 is 35% higher than today and that is representative of the project slate going forward. So that 35% increase after the unusually high-margin projects in 2014 and 2015 still helps grow this margin on a cash basis going forward. So it's very positive, I think.

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 Lamar McKay,  BP plc - Chief Executive, Upstream   [16]
------------------------------
 And in Shah Deniz, we like Shah Deniz. Phase 1 of Shah Deniz has been a very, very good project for us. We think Phase 2 has all kinds of optionality with it as well. So we probably have a different opinion than some of the partners on that. And it's a complicated project, but a lot of it goes right along the same pipeline routes that we have today. So it isn't as forging to as much new territories some people have implied with it.

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 Bob Dudley,  BP plc - Group Chief Executive   [17]
------------------------------
 Let me take one from the phones here and then we'll come back to the gentleman next to Alejandro. He has been very patient and then I'd like to come back over here for a second. So, Peter Hutton from RBC is on the line. Peter?

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 Peter Hutton,  RBC Capital Markets - Analyst   [18]
------------------------------
 Good morning. Thanks very much for the question. Just a couple, actually. I think the lot of analyst attentions are going to be looking at slide 39, (inaudible) to say what the implicit target is on the cash flow in 2018, I wonder whether it might be helped a little bit by sort of quantifying that range. And also, given the profile which is higher growth in the early stages of projects with cash margins which are higher, can we see that the trajectory between now and 2018 is more front-end loaded in terms of the gross operating cash? Would that be fair to assume? And then, finally, on Russia, is there any update on the level of potential synergies that yourself and Rosneft expect to generate over the next few years? Thank you.

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 Bob Dudley,  BP plc - Group Chief Executive   [19]
------------------------------
 Okay. That's three questions, Peter. Brian?

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 Brian Gilvary,  BP plc - Group CFO   [20]
------------------------------
 Yes. So, on the first one, Peter, no, that clearly is not explicit guidance on what that shape looks like and it's got a broad range between it. I think the way we thought of it philosophically is the key is to ensure that if you look at the bounce of that range, it gives you a flavor of what we think we can do around distributions and surplus cash, but the key is in terms of financial frame that the lower end of that range, we are comfortably within the financial frame we have outlined around 10% to 20% gearing, a progressive dividend growth over the piece as the operating cash flow grows and maintaining capital within that band of $24 billion to $26 billion. But I don't think we'll give you any more explicit guidance than what you see in that broad shape.

 And actually, there's quite a lot of information in that broad shape depending on how sharp your slide really is and how you want to try and map it. But we've looked at all potential scenarios. The key is there is undoubtedly operating cash flow growth as these projects come on stream. We've got the momentum that we're building through 2013 and 2014, and we've tried to give you a flavor of what that looks like into the future and that will underpin a progressive dividend growth and distributions to our shareholders.

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 Bob Dudley,  BP plc - Group Chief Executive   [21]
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 Okay. Peter, on Russia, I'm not going to speak on behalf of Rosneft, but I'm looking at my colleague here and I believe the last publicly stated synergy value is $10 billion and that's -- work continues on. I will say that it was only 11 months ago, the merger -- or the acquisition by Rosneft of TNK-BP occurred and it's been a remarkably fast integration of the organizations and the structure of it. There's a lot of industrial synergies just by the locations of officers and oilfields and pipelines that are aligned right next to each other. That happened very, very rapidly. But unless Rosneft comes out with a new figure, the last figure has been $10 billion.

 So, let's -- gentleman here on my right and then we will [tea pan] here right, and then the two ladies here on my left, and then well will see. Okay.

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 Alastair Syme,  Citigroup - Analyst   [22]
------------------------------
 It's Alastair Syme from Citigroup. It's a question for Lamar, so inter-related questions on the Upstream execution model. You talk about the 3% cost overrun of 2007 to 2014, can you just confirm that the current set of projects is in line with that rough overrun estimate as it stands today? Can you also talk about where contingency is? How much contingency do you have built into the financial modeling today versus say where you were five years ago? And finally, can you just talk a little bit about Mad Dog 2, about how that got through the FID decision gate before it was re-engineered under this execution model?

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 Lamar McKay,  BP plc - Chief Executive, Upstream   [23]
------------------------------
 Okay. It did not. But I'll come back to that. The project overrun and schedule delivery plot that I showed is representative of the average of that period of time. I think our projects, as we see them going forward, are on schedule, on cost as far as we can tell right now, within their estimated limits. That doesn't mean every single individual project is, but on average, I think they will be in that ballpark.

 On contingencies, we won't get into numbers on contingencies for projects or financials or anything else. I'll say this, I do think we understand our capability, what we can do and can't do, better than we have in the recent past. And so I think when we do lay plans, we have more fundamental understanding of what it entails to execute those plans. So, I think that will give us better predictability going forward than we may have had in the past, but time will tell.

 On Mad Dog 2, it had not passed what we consider the FID or offered full authorization gate. It was coming up to that and we decided that that project was not the best project it could be. So, we made a difficult decision to send the team away and go back and work it. We work well with the partners. I think we're going to come up with something that's much better than what it was. And the time that we took to time out, which will push the schedule back, was well worth it I think in the end. So, I think it was a rational decision based on the project was economic, but it wasn't as good as it could be.

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 Bob Dudley,  BP plc - Group Chief Executive   [24]
------------------------------
 Okay. Theepan?

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 Theepan Jothilingam,  Nomura Equity Research - Analyst   [25]
------------------------------
 Thank you. Theepan from Nomura. And two questions, please. Firstly, just coming back to -- I think you talked a lot about group simplification and that's been a feature over the last couple of years. So, I think [Rosneft], Brian, you talked about significant opportunities in the corporate functions. So, I was just wondering what is the value delivery that you talk about in 2015 and what surprise can we sort of quantify? Is it hundreds of millions of dollars or is it billions?

 And then, secondly, and appreciate BP has been more active in terms of portfolio management. Just in terms of the next phase, in terms of disposals, is there a risk or do you see a risk that you can cannibalize existing cash flow, particularly from the Upstream, or is the emphasis going to be more in terms of maximizing value in non-sanctioned projects or the recent exploration success? Thank you.

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 Bob Dudley,  BP plc - Group Chief Executive   [26]
------------------------------
 Okay.

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 Brian Gilvary,  BP plc - Group CFO   [27]
------------------------------
 So on the corporate simplification side, Theepan, it's significant in the overall activity within the corporate part of the business. The piece that say over and above, so it's the central functions. They're both deployed in the business, but also centralized.

 I think the key here is that the way we're thinking about this is that we can keep cash costs broadly flat going forward, which means that as all of the new projects come on stream in terms of finally now Whiting coming on, the new projects from Lamar, there are more cash cost associated with those were come to we can absorb those by some of the reductions that we'll see in some of our corporate activity and that's already started. So we're sort of well into that train now, it's really about delivery through this year, 2014 and 2015 in particular.

 And Bob outlined a couple of areas where we've simplified some things inside the corporation. I think we've built in a lot of redundancy over 2010-2011, which is the right thing to do at the time. But I think as Bob outlined for us, as that portfolio has shrunk, it's clear that we can now start to resize some of the corporate activity we have and actually it's most simplest level, it's one of the mission-critical things that we need to do in the corporate function and the things that actually drive the center in terms of support of the strategy that the team have outlined today. So we haven't quantified again, but what it means is in terms of the operating cost, it will naturally increase as new activity comes on. We can absorb those increases through reductions elsewhere.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [28]
------------------------------
 And on the portfolio question, I mean, I think, you're right, we have to be wise and measured about divestment, so a $38 billion divestment program, $5 billion of operating cash flow, earnings we're divesting. Out of the $10 billion that we've announced, additional $1.8 billion has been done and they've been a real mix of things. Some of them have been exploration prospects that we have, which of course are not affecting operating cash flow at all. There have been some downstream businesses.

------------------------------
Unidentified Company Representative   [29]
------------------------------
 Aviation fuels.

------------------------------
Unidentified Company Representative   [30]
------------------------------
 Lubes business, lubricant business.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [31]
------------------------------
 But I think they've been -- these have been carefully selected divestments. Of course, some of it will have operating cash flow, but the intention is not to break the Company up and sell off the Company here. I think you'll see us not hesitate at all to sell operating cash flow from existing mature assets to possibly in some cases deepen in better-quality existing assets as well. So it will be a mixture, but we're not going to be able to generate the operating cash flow targets for you, if we sell off too deeply the operating cash flow. So we'll have to get this balance right and it was quite a balance to get through the last four years of $38 billion of divestments and still now have the operating cash flow characteristics. So we'll balance this all carefully. So one more.

------------------------------
 Theepan Jothilingam,  Nomura Equity Research - Analyst   [32]
------------------------------
 Sorry, just to follow up on that point, I mean actually M&A has been sort of a feature in the BP DNA. I think your predecessor also mentioned that in a Q&A. So do you see a scenario where you sell cash flow to replace it with -- without the cash flow? Is there opportunity there in the market at the moment?

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [33]
------------------------------
 Well, we don't have our sights on corporate acquisitions if that's really behind your question. But deepening and M&A through deepening in existing projects or portfolios we have or other things, absolutely; and we're going to retain that muscle of M&A, most certainly in BP. Nice, Theepan.

 Okay, one, two. Okay. No, not the -- maybe right there, yes. Thank you.

------------------------------
 Christine Tiscareno,  S&P Equity Research - Analyst   [34]
------------------------------
 Christine Tiscareno, S&P Equity Research. Thank you for taking my question and thank you for a very informative present. I'm sorry to have to ask this at the same time, but could Brian tell us how much money you're losing in your US gas division and whether you think that with this restructuring and the new production coming in, you might be able to offset that from 2015, too optimistic, maybe 2018? And then, just a small question for Iain. When is the next downtime for the Whiting refining and how long would it be? Thank you.

------------------------------
 Brian Gilvary,  BP plc - Group CFO   [35]
------------------------------
 So thank you for that. So in terms of first quarter this year, firstly, you'll see all of this in 2015. So we'll show you very transparently what our Lower 48 onshore business mix in terms of the numbers in the same way that we subsegmented out some of the components of the Downstream two years ago. So you'll get the same level of transparency.

 Actually, through the first quarter this year, I've not looked at the numbers and we don't normally reveal subsegment information of our businesses, so therefore, I won't give any numbers. But I'm fairly confident that they'll have turned to profit in the first quarter given what Lamar said about the ranges of cash [breakeveness].

 On a profit basis, the breakeven is a lot lower than the $4 to $5. The cash breakeven loads of the capital program as well. So on an earnings basis, this business today is comfortably in profit. So it's not making a loss today in this quarter, but what Lamar has laid out for is it is deeply strategic to us into the future. And Lamar has now talked about how that business will be repositioned so that we can really make sure that we can find the value inside that business implicitly inside the portfolio.

------------------------------
 Christine Tiscareno,  S&P Equity Research - Analyst   [36]
------------------------------
 Okay.

------------------------------
 Iain Conn,  BP plc - Chief Executive, Downstream   [37]
------------------------------
 On your question on Whiting, like any other refinery, you don't tend to plan to bring the whole thing down unless it's a single train refinery and you do have units that get turned around from time to time. I'd say right now, we've got one of the old, the cap crackers in turnaround and that's quite normal. We wouldn't expect to bring the whole thing down and we've tested the new coker at very low rates, so it has the flexibility to handle regular turnarounds in the crude oil distillation as and when, but we don't have any big turnaround plan for some time, it is brand-new.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [38]
------------------------------
 Irene? Irene?

------------------------------
 Irene Himona,  Societe Generale - Analyst   [39]
------------------------------
 Thank you. Irene Himona, Societe Generale. My question concerns the road map. So, you give us the road map to 2018. I just wonder how you think about the legal uncertainties. How do different legal outcomes impact on the evolution of that road map? That's my first question.

 My second one was on technology, which is obviously one of the strengths and you highlight I think certain types of seismic and so on. And I always ask this question, because I'm not clear as to whether that is truly proprietary or whether it is something that becomes very quickly commoditized and shared vibrant. So therefore, is it truly a competitive advantage? Thank you.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [40]
------------------------------
 Irene, I think on the legal road map, I mean we're very clear, we are in a long process now. We've settled some things, it hasn't actually led to settling things and so we're going to keep going and we will see the court system until we think there is a sort of fair and reasonable outcomes on things. And I think, Brian, you might want to comment. The Company is in a very different sort of circumstances than it has been, really beginning in 2013 when the balance sheet and the gearing at one point was brought down to 11%. It's a different company now and the Company can weather things and [it's kind of] hard to -- we've got lots of provisions on the books and I think Brian, why don't you comment on the strength of the balance sheet and --?

------------------------------
 Brian Gilvary,  BP plc - Group CFO   [41]
------------------------------
 Yes, so in terms of the overall provision that's set aside for Macondo, which in the last quarter is somewhere between $42 billion to $43 billion, I think the number is $42.7 billion is what we've set aside. There's still $9.3 billion of that provision still to be utilized outside of the penalties and fines that Bob's already talked about that we've settled and headroom that we have within the trust fund. So, there is plenty of capacity within the existing provision, the things that we will come up probably in a less orderly fashion than we had originally envisaged in the early days in Macondo where we were trying to come to a fair and reasonable settlement and what Bob has previously talked about in terms of closure. So [it's the greed] that we haven't been able to achieve all of those aspects. We now see this playing out over many years.

 I think the key for our shareholders is we run stress tests of a number of different scenarios specific to this particular legal liability, but many other scenarios beyond that in terms of other events that may happen from a liquidity perspective and we're comfortable that the strategy the team has laid out today can be executed through any number of different stress tests that we look at and there's nothing there that will give us concern, especially given what we've laid out here in terms of our shareholders and distributions to shareholders into the future. So I think the key here is we run stress tests just like you would see the financial services sector and we can manage any number of different scenarios, but as Bob has described, it will probably [beyond] multi-years that this gets resolved.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [42]
------------------------------
 And to dispel one myth, there's a discussion about that there is no headroom left in the trust. I mean that's sort of technically the way things have been allocated I think by us and the trust, but how much cash [is left]?

------------------------------
 Brian Gilvary,  BP plc - Group CFO   [43]
------------------------------
 So right, in the trust fund today, the $20 billion we set aside, there is still $6.8 billion of cash to be disbursed to injured parties in this process.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [44]
------------------------------
 Yes, some people think, it's all oily stuff.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [45]
------------------------------
 Technology?

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [46]
------------------------------
 Oh, technology, yes, of course.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [47]
------------------------------
 You may want to chime in as well, but I think in our business, in the Upstream business, technology and its proprietary nature, you can -- there are some that are proprietary and you can -- and it generally involves subsurface things rather than surface and things like seismic processing and the interpretation, I think we're pretty good at that, maybe others do too, but when you look at sub-salt imaging, I think processing and interpretation technology is a potential differentiator. The industry moves, so you got to move too.

 I think then, EOR processes and enhanced water floods as other examples. We think we've got some enhanced technologies. So I think it's mostly through know-how and implementation that you demonstrate that, and you can hang on to some of that for a while, but the industry moves, it keeps evolving. I'm sure there are a lot of people like us that do fracs and horizontal wells that believe they have pretty good technology. That tends to proliferate in the US really quickly, because you've got multiple service companies, many operators experimenting, but the EOR seismic processing kind of things can stick for a while.

------------------------------
 Iain Conn,  BP plc - Chief Executive, Downstream   [48]
------------------------------
 Briefly, I mean, Irene, the area where we have real proprietary technology with patents is in petrochemicals and we have it in all of the three product lines and we have been developing successive new technology. What we have done over the last three years is built a licensing business. Well, we don't obviously license our very best technology, we only participate in any build, but we have been experimenting with licensing our penultimate technologies and we've been really surprised by the proportion of the future net present value that the licensor has prepared to give us to use our technology and at the end of the day, that's the thing that is the test and so yes, we've got some real proprietary technology and we've to reset very carefully.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [49]
------------------------------
 And one of the technologies is the algorithms that we interpret the seismic with is quite proprietary to us. It's actually the algorithms written that bring out the subsea images, which is quite carefully guarded. One, two, three, if that's all right.

------------------------------
 Oswald Clint,  Sanford Bernstein - Analyst   [50]
------------------------------
 Thank you very much, Bob. Oswald Clint, Sanford Bernstein. Just want to go back to the chart on your NAV percentage relative to your peers and you're kind of double the deepwater exposure of your peer group. Deepwater kind of scares me a little bit with the decline rates and what can you say to make us feel more comfortable that that doesn't appear as an issue over this five-year plan in terms of the modest volume growth expectation and the resulting cash flow, especially relative to your peer group.

 And the second question, just on the US onshore business, I think Lamar mentioned it was to allow you to be more competitive from access all the way through to production. So do you need to or should we expect you to add some high tier one, liquids-rich areas into that business over time? Thank you.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [51]
------------------------------
 Yes. First, well, on the NAV question about the balance of the portfolio, deepwater projects broadly, generally, particularly if they're oil, have a very high rate of return, quick payback, decline quickly. So what we want to do is build up a series of those in certain basins. We do have a deepwater capability, that is a big part of our portfolio. There is another myth out there that we don't have, for example, some of the longer-life unconventional projects. I mean most people don't realize 23% of our production is LNG production, long-life projects up to North West Shelf and things. So we have a mixture of these things, but we like deepwater and I think as long as we have a balance, the portfolio can work with all kinds.

 Yes, [let me] comment on that as well as --

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [52]
------------------------------
 Well, I just want to build on that. I don't think you should be afraid of deepwater, but if you are, 2018, roughly, roughly one-third deepwater, one-third giant fields, and one-third gas, in terms of ops cash. So it's almost a perfect balance. Secondly, on onshore, the onshore business, I firmly believe will get in better fighting shape, so to speak. And it will be able to invest differently and in different areas. It'll be up to that business to figure out where it needs to go and we will have a governance process to understand how much fund need to put into it or not. And it may well go into liquid plays, it will go where the value is based on its capabilities and its competition within the portfolio.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [53]
------------------------------
 Now, we need to make it faster and quicker, yes.

------------------------------
 Lydia Rainforth,  Barclays Capital - Analyst   [54]
------------------------------
 Thanks. It's Lydia Rainforth from Barclays. Two questions, please. Firstly, Bob, you talked a lot about BP playing to its strengths. Let me just ask outside of the Lower 48 areas, are there any particular areas of BP that you see as being weaker that you want to address still within that? And then, secondly, on the cash flow side, if I can come back to that chart, in 2011, you did decide to set a cash flow from operations target. Can I just ask why you stepped away from that? Is it there's just too more certainty than it was three years ago and just the process behind that? Thank you.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [55]
------------------------------
 Yes. Well, on the portfolio, Lamar can comment as well, when we've had the events that led us to divest $30 billion of Upstream around, we actually like broadly the portfolio. We've had the chance to go through and take a lot of things out of the portfolio. There is certainly things around in certain areas, fields or projects or may be even divesting percentages of certain things in exploration that I think you'll see us do, but broadly, it's not the same as Lower 48 in terms of a big area.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [56]
------------------------------
 Yes, Lower 48 is unique and we clearly can better in Lower 48. We do like the portfolio, it's been focused. Do we want to be better across the portfolio in execution? Of course. Do we have room to be better? Yes. But that applies pretty much to everywhere. And as I mentioned, I highlighted North Sea and Gulf of Mexico as areas that we think there is incremental potential to get ops efficiency up, to get wells drilled better, to get water in the ground. So there is running room in all these areas, but I wouldn't pick out an area that we think is weaker, it's really across the portfolio.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [57]
------------------------------
 And the cash flow for ops per share target, we're tracking it. You can be sure it -- I think what we didn't want to do is create a number out there that was a target that created the constraint on us around distributions or buybacks, but we're certainly tracking it.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [58]
------------------------------
 Yes, I mean I think the context of October 2011 was we set 2014 as a year, we set a target to give you a flavor of what we thought the asset could do. Remember in that period after April 2010, we were rebuilding the portfolio, did a lot of things earlier on that Bob described around liquidity. We then went further with the disposal program and now, we are in this place of rebuilding the portfolio, which we did really through 2013 in terms of stabilizing the divestments, and I think basically Bob was right, maybe it's important to give investors a sense of what 2014 looks like.

 Remember what we said at the time, we'd either have the overhang in Macondo behind us or we'd be in a very long-term process. It appears we are in the latter of those two things. And exactly as Bob has said, we'd give you some bounds around what the operating cash flow may look like, but we didn't want to constrain our options around value. And Bob talked about, this isn't just about selling assets, about deepening in some assets as well. So it gives us a lot of flexibility ultimately to ensure that value is what we're looking to return back to shareowners.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [59]
------------------------------
 I think, we were awestruck about a year ago when we went out and also said we would have the buyback program where we target the original investment [to give $8 billion]. It was quite surprising to me how many of the shareholders didn't actually believe we are going to do that either. So I think we just need to do these things and come true. So gone and then, several over here. Okay.

------------------------------
 Jon Rigby,  UBS - Analyst   [60]
------------------------------
 And yes, but it's Jon Rigby from UBS. Just a few questions. The first is, I noticed that although Iain had a number of competitive performance metrics for his Downstream business, you didn't do so much of that in your Upstream presentation. I just wondered, when we look at the performance of your Upstream business, how we should think that you are looking at it and what we would think is a good outcome given two years or three years time? And I was struck particularly by -- I think you talked about value a lot, and so are you going to try and flesh out that sort of value approach, what's in your portfolio over time?

 And the second question is about M&A, and it's two parts -- squeezed three questions in total. The first, I guess, to Brian is, I mean you're clearly very successful in selling very quickly a lot of assets when you needed to, but I think your caught the market by surprise and a lot of your peers caught on to that as well. So there's a lot of disposal programs. So you're having to adjust what you're doing to get that portfolio away and maybe you could talk a little bit about that.

 And the second is to go back to a point, I think, Theepan raised was that, one of the key attributes of BP over the years, I think, has been acquisitions, big ones like (inaudible) through I guess to 2010 and the Apache and the Reliance deals that you did. So longer term, should we think about the number you talked about in the disposals maybe as a net number that you would expect over time to be doing as you're doing both acquisitions and disposals? I guess what I'm asking really is you haven't completely gone gun shy on M&A. Thanks.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [61]
------------------------------
 First on the Upstream assets and then, Brian, you can talk about M&A, and I might comment on that last point. On competitive comparisons and I'll make no prediction or guarantee what we would share here, but to give you a sense for what we look at. We do look at competitive comparisons and understand that we are in a lot of outside operated projects. So, we sit inside competitive projects and can view our results, their results, and of course work with partners to try to get both of our results better. So, we have a lot of knowledge about what happens in live projects.

 We also do the normal benchmarking on costs, margins, and things like that that you can get from public data and you can get from targeted benchmark surveys. I think the biggest thing that we're doing that we are continuing to progress is on a functional basis how good is our drilling, how good is our reservoir management, how good is our operating efficiency, how good is our exploration. The functional kinds of benchmarks that I think will fundamentally drive improvement into our business. So we do that, we're doing more of it. I showed you a little taste of it with the benchmarking on the projects cost and schedule, that was independent data.



------------------------------
 Brian Gilvary,  BP plc - Group CFO   [62]
------------------------------
 And on the M&A question, Jon, in terms of portfolio, I think in our first early phase; you're right, a lot of these assets don't come on the market that often. And so I think the characteristic of all of the Upstream disposals, less so with refineries, it's just the nature of the business especially in the US. But certainly with all the Upstream portfolio we looked at, we had multiple bidders for each of those assets and in some cases, some quite large off-market bids. So while the market's been asking actually is that now given a lot of people are selling at the moment, is it more of a buyer's market. We're not really seeing that in what we've seen already so the $1.8 billion that we've already done as part of the [$10 billion], a little bit ahead of where we expect it to be.

 We're still seeing multiple bidders on some of these assets so we're still looking to get good value. Frankly, if we don't get good value, then that's all part of our portfolio proposition. We're not just looking to try and sell assets off, it's where we see that a buyer can see more value in that asset, then we're likely to invest in it over our plan cycles that we look at. Hence we try and liquidate that value and what Bob has laid out, we've demonstrated it. Of the $8 billion from TNK-BP and the next $10 billion, we are going to return that back to shareholders. So in terms of the M&A landscape, we're still seeing strong bids for some of the assets that we're looking to dispose of.



------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [63]
------------------------------
 I think, Jon, we have no intention of losing the M&A capability. It has been a strength of BP for many years. And I think as Brian said, there have been a number of things that we have considered selling that we've just said no to even during the $38 billion period I mean unless it's good value. I think we will confuse our investors if we start talking about us considering large M&A. I don't think that's what our investors want to hear from us. It's a really strong plan that we can lay out and work towards, generate the operating cash flow, look forward to distribution to shareholders, and a progressive dividend policy.

 So, that's the path we're on down the road as the balance sheet continues to be strong and builds up its strength and we've all gotten very comfortable with an oil price that's been about flat for three years. I mean who in the industry ever would have thought that would have happened. So down the road as commodity prices go up and down, circumstances change; there may yet be opportunities way down the road for BP to be in the M&A picture, but it's not the right time for us to think and plan along those lines. And I can see some nodding heads from some pretty big shareholders in the room who may be agreeing with this.



------------------------------
 Martijn Rats,  Morgan Stanley - Analyst   [64]
------------------------------
 It's Martijn Rats from Morgan Stanley. I wanted to ask you two things. First of fall, with regards to Oman in the Khazzan-Makarem project. My understanding is that you're looking for a partner to kind of farm in, but I just wanted to confirm that and if it is correct to ask what interest you're seeing in the project. And secondly, I wanted to ask you about exploration and particularly with regard to the balance between exploration and development. So of course in the beginning of the presentation, you talked a lot about exploration and the teams like there's a lot of activity going on, but by effectively capping the amount of CapEx to the end of the decade. I was wondering about a situation where you have quite a lot of exploration success. Will that then still add to the development pipeline or would you actually basically do the exploration without any follow-through in development and then you're looking to sell those exploration assets? I was wondering how you're thinking about the function of exploration and the balance between exploration and development.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [65]
------------------------------
 Let me comment on Oman. With Oman, originally we had an 80% interest in the project and the Omani government wanted to step in for 40% so we went to 60%. So, we are not actively looking for partners in that, I think it's up to the Oman government whether they would want to. It doesn't mean we couldn't see a little bit of sell down in that. But I think there is interest in that project, but in many ways we sort farmed out 20% of it away already on Oman. That's a good project.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [66]
------------------------------
 On exploration and development balance, I mean you bring up a great point. We hope to be so successful in exploration that we have the quality through choice is one of our big mantras and it works in exploration, it works in development too by the way, and so we hope we're in that situation. And then we would keep our capital constraint and our capital balance high grade and do the best projects, then either dilute or sell the things that we can't get to or that we need. And sometimes not all the time, sometimes we'll push an option out into the future. And all of that balancing happens within a disciplined capital frame. So, I do hope we are in that situation. But we're not oversizing exploration such that, I don't think, we are going to overdo exploration, but we do want to be in a position where we have the quality through choice in the development phase as well. It certainly is creating value for us.



------------------------------
 Michele Della Vigna,  Goldman Sachs - Analyst   [67]
------------------------------
 It's Michele Della Vigna from Goldman. If I may ask one question to Lamar and one to Brian. To Lamar, the improvement in plant reliability has been really a major driver of improved cash for an E&P over the last couple of years. I was wondering how much more space for improvement there is from here given that you've reached around 92%. And then for Brian, I was wondering if you could quantify what benefit you expect this year in terms of cash flow from the reversal of the operating working capital outflow we've seen in the last couple of years.



------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [68]
------------------------------
 Thanks for the question. We've had very, very good increases in operating efficiency, plant efficiency, and plant reliability. It is true that we probably couldn't add another 10%, but we do think there's room to run there of low-single digits. And if you think about 1% or 2% growth rate for a company going forward and as you add capacity, you add to that as well. The second thing on that is we can do a better job of getting ops efficiency up in the highest margin regions. Those happen to be some of the older assets that actually have more room to run than the segment average. So just like the ops cash for projects, we have an ops cash for operating efficiency increases as well.

------------------------------
 Brian Gilvary,  BP plc - Group CFO   [69]
------------------------------
 And on working capital, I think at the end of the third quarter of last year, which is when we first flagged it, the working capital build through many moving parts around $5.5 billion or $5.3 billion of working capital build and we said that we expected about two-thirds of that to reverse out over the next 18 months and there's no change around that. It's a lot of moving parts around what was going on through 2013, but we will expect to see some of that reverse back out over the subsequent 18 months. Some of that will be this year, some of that might flow into 2015 as well.



------------------------------
 Thomas Adolf,  Credit Suisse - Analyst   [70]
------------------------------
 Thomas Adolf from Credit Suisse. Two questions please. Just going back to the efficiency, if you will, and if we think about the UK North Sea where the industry has had issues with platform uptime and most of the industry expect this to worsen, what makes you confident that you can do a better job? Secondly, on the US GoM, I wanted to know what sort of price realization do you see and whether you expect these spreads to tighten on the back of potential crude exports from the US and what's your view on crude exports from the US? Thank you.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [71]
------------------------------
 On efficiency in the North Sea, the North Sea is a tough operating area and lots of the assets are mature and it's in a tough weather environment and there are very difficult things around the North Sea. I don't necessarily think we should be shooting for 98% on every asset in the North Sea, but I do think where we are and I can't speak for other people. But where we are, we think we can improve our operating efficiency through better planning, better integration of activity on the platforms, who gets there the drillers or maintenance people or reliability engineers, how do we sequence the work better, how do we invest in the reliability such that we don't do a turnaround every other year or every year, we do it every three years. How do we get to major components of reliability like that that can make a difference even in the North Sea at least in our portfolio I think.



------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [72]
------------------------------
 And we sold over 20 interests in more than 20 fields in the North Sea so it's simpler.

------------------------------
 Lamar McKay,  BP plc - Chief Executive, Upstream   [73]
------------------------------
 Yes, it's much simpler as well.

------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [74]
------------------------------
 On your question about the US and the GoM, I mean certainly increasing production from the Gulf of Mexico for us has more than offset this differential effect. But maybe Brian and Iain can comment on the GoM differentials.

------------------------------
 Brian Gilvary,  BP plc - Group CFO   [75]
------------------------------
 I mean I think you've sort of answered the question again. It's if crude exports are allowed and permitted and there is already some crude flows out on the existing arrangements today I think north through to Canada in some of the refineries up there. If that were to happen, clearly that would alleviate some of the spreads that we're seeing. It's not having that big an impact given that we're seeing a ramp up in the GoM production. So in terms of overall balance for BP, it hasn't been that big an effect. But maybe Iain can talk a little bit more about the supply and demand and what (inaudible).

------------------------------
 Iain Conn,  BP plc - Chief Executive, Downstream   [76]
------------------------------
 Very briefly, I mean setting the export issue to one side and I think that the other thing that's going on is congestion. There isn't enough logistics in North America to make the market sufficient and there are three principal areas of that. There's the Bakken effect, which is causing discounts in the Northern Midwest region of the US and that's being managed by rail, but there have been issues with safety on rail and so that's limiting some aspects of that keeping the differentials wide.

 Second one is around the link between Cushing and the Gulf Coast where you've had discounts of Gulf Coast grades because the pipelines joining Cushing to the Gulf Coast and along the Gulf Coast are not efficient yet.

 And the third one is Canadian into the US and elsewhere where there are clearly limits to how much Canadian can be exported other than to the US right now and there's limits to the pipeline capacity and rail capacity. So in short, I would see these congestion driven diffs remaining for some time, but working their way out as the markets and logistics become more efficient. But I think in some cases, it could take years and I think if it does take years, we are quite well positioned to benefit from it.



------------------------------
 Bob Dudley,  BP plc - Group Chief Executive   [77]
------------------------------
 In the back row.

------------------------------
 Lucas Herrmann,  Deutsche Bank - Analyst   [78]
------------------------------
 It's Lucas Herrmann at Deutsche. Two questions if I may. First, just looking at the 2015 operating cash flow targets, target's the wrong word. But you indicate that operating cash will be relatively flat, which I guess seems a little surprising given the expectation that Gulf of Mexico barrels will improve next year, you should have further ramp in Angola, you've got incremental cash coming through from Whiting. Is that associated with the working capital release you're seeing this year or is it a deferred tax benefit from your Macondo liabilities? But in essence square the circle please, why no growth in ops cash next year? And the second question for Iain if I might. I just wondered if you could walk through the refining portfolio now and where you are. I think we've got a very good sense of where the US is and the major restructuring programs, or restructuring is perhaps the wrong word, but upgrade programs complete. But where's the organization as regards Spain, Germany, South Africa, other regions of the world; Gelsenkirchen you mentioned earlier and how much more might we expect to see by way of upgrading or divestment in Downstream fuels?

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 Bob Dudley,  BP plc - Group Chief Executive   [79]
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 Okay. Well on 2015, to say it's not a straight line in terms of new projects coming on. There is a little bit of a flat spot there that's clearly coming that's going to affect it somewhat and then the $10 billion of divestments we've said will have some operating cash flow with it. So, those are probably the two other factors. But your comments about working capital and --.

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 Brian Gilvary,  BP plc - Group CFO   [80]
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 I mean the working capital will work its way out the system, Lucas, so I'm less concerned about that. It's actually what Bob has just described and remember we have the decline as well, but Lamar is working pretty hard to make sure that we manage that decline and so therefore there will be mix in there. But it there if you look at the picture closely, there is some potential growth coming through as well. But probably the biggest piece that we'd model is the disposals. The next tranche of disposals are not as cash dilutive as the last tranche, but there is some cash associated with them and the aviation lubricants business that we've already sold off had some operating cash that would have come through this year. So I think it's kind of a modeling flat spot through some of the projects and how we manage that, but it doesn't give me that much cause for concern. The key for me is is the financial frame safe and comfortable at the bottom end of that range, which it is.

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 Iain Conn,  BP plc - Chief Executive, Downstream   [81]
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 On the refining portfolio, I mean, Lucas, we've got no current plans to do any other major portfolio shifts, but we do continually look at our refining portfolio region by region so you're right. I think in the US built around feedstock advantage and having sold it to refineries we've sold, I think we've got an advantaged portfolio for the reasons I mentioned earlier and I should have said that the lower differentials obviously benefit the Downstream. But if you're producing to them, they don't benefit the Upstream, but it's not affecting us dramatically in that regard. As far as European refining is concerned, we have done a lot of surgery on it. So when we acquired Veba, we basically acquired inland refining with very high conversion capability and we sold nearly everything else BP had, I mean we sold our two refineries in the UK and one in France.

 I think in the German system from Rotterdam through, we're generally pretty happy with it, but we've got some major cost efficiency programs going on and we've got some margin improvement programs going on associated with both Rotterdam and Gelsenkirchen and we think we can reposition those quite well. You mentioned Spain, we upgraded Castellon a few years ago and it is one of the best refineries in the Med. The problem is the Med isn't a particularly good place to be in refining, but it is generating cash flow and I feel pretty good about that when you integrate it with the fuels business. And then you've got Australasia where there's been a lot of challenge to the business and we have to keep an eye on small refineries that are a long way from large crude oil economies of scale. And so we're constantly looking at the portfolio, but I think it's in pretty good shape now.

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 Bob Dudley,  BP plc - Group Chief Executive   [82]
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 Over here on my far right.

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 Neil Morton,  Investec - Analyst   [83]
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 It's Neil Morton from Investec. Couple of questions. Firstly perhaps to Brian. Historically, BP has been a source of relatively low depreciation charge at the Group level relative to CapEx, you've outlined a gently rising CapEx profile out to 2018. Can you perhaps give us some guidance on depreciation? And then just secondly, I wanted to clarify this while uncertainty has remained with regards to the gearing band and perhaps just by way of a hypothetical example, if say later in the year Phase 3 finishes, a number is put out there, you can afford it but don't agree with it and therefore try to appeal. Does that constitute the removal of uncertainties? Thank you.

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 Brian Gilvary,  BP plc - Group CFO   [84]
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 On the first one, Neil, I think if you go back to our various guidance we've given both for 2012 and 2013, you would have seen DT&A has ramped up around about over that period of time from memory; I think it's $1 billion in 2012 and it was up to [$1.5 billion to $2 billion] in 2013. The bulk of that ramp up is now with us because we're now on this new CapEx profile so that gives me less concern in terms of future guidance, but we'll continue to give guidance around that on an annualized basis. While uncertainties remain as a catch all that we've had since July 2010 in the results that we did, we've sort of kept that catch phrase, it encapsulates lots of things. Back in July 2010, it encapsulated one major thing called the litigation liabilities associated with the Deepwater Horizon accident.

 Today, that constitutes less of the uncertainties and oil price to $80 a barrel or $60 a barrel will constitute some fairly major uncertainties and so we do run the financial frame and actually test it down to $80 a barrel. It's one of the key things that we do as part of this so that would also be part of the uncertainties. But undoubtedly if a number were to be put out sometime this summer around a specific economic fine that we would then challenge mitigate and take through the various appeals process, that would at least quantify how you could see a proportion of what the balance sheet would have to absorb and we're confident that in all of the stress tests that we've done so far that we can manage that. That was a great question, but uncertainties capture more than just Macondo.



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 Bob Dudley,  BP plc - Group Chief Executive   [85]
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 And we're not really planning on a $60 or $80 oil in terms of forecasting --.



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 Brian Gilvary,  BP plc - Group CFO   [86]
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 I said stress test.

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 Bob Dudley,  BP plc - Group Chief Executive   [87]
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 Okay. Charles. And I realize we probably are out of time after this question. Charles, go ahead.

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 Charles Whall,  Investec Asset Management - Analyst   [88]
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 Charles Whall, Investec Asset Management. It's quite clear that you've been in a phase where you've been actually reducing production, as you sold assets. Now you're into a phase where you're hoping to sustain and even grow your production. It is clear for the supermajor group if you do the sums that you can't sustain reserve replacement through purely organic means if you do the F&D time scene exploration budget, it doesn't add up to sufficient reserves to replace. So therefore, you have to access through non-organic means and although your investors don't want you to make major corporate acquisitions, perhaps they certainly do want to make sure that you're making provision for organic access to good opportunities within your capital budgets. Can you talk to us, Brian, about how you actually achieve that?

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 Brian Gilvary,  BP plc - Group CFO   [89]
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 I'm going to pass that one straight back to Chief.



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 Bob Dudley,  BP plc - Group Chief Executive   [90]
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 Well, I think I might take issue with your comment that you cannot organically replace the reserves as you go forward. I mean we had 129% reserve replacement this year. If you just look at moving from TNK-BP to Rosneft, the number's up to about 199% this year and that was sort of just changing the investment to a different company. So, I think the idea must be value over volume not only with production, but with the reserves itself. And I think we will have through continued enhanced recovery from fields on that technology a pretty good sense of organic replacement as well and it's not going to be a straight line. But I'd much rather focus on the value than just getting the volume or the reserves.

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 Lamar McKay,  BP plc - Chief Executive, Upstream   [91]
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 I mean we do believe that we are a smaller company now. I think it is possible to organically replace reserves, but it will be bumpy; some years will be lower, some years will be higher with hopefully an exploration program that opening up some of these new basins gives us the chance to do that. There is a bit of this efficiency piece though that we are actually lowering the ROP a little bit so as we go through these periods of time, the ROP is coming down a bit that's through cranking up the efficiency side. So, you can actually grow production, you can't do it forever that's defying gravity, but you can grow production for short periods of time with getting more efficient.

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 Bob Dudley,  BP plc - Group Chief Executive   [92]
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 And reserves are booked at the time of FID of a project rather than just the exploration discovery so there is a lag effect in here and we've got five FIDs coming through we think this year project, which is the time which you book the reserves. That's good question, Charles, and it's a good comment.

 And I think it's actually for an oil and gas company a good way to end our presentations today on strategy and direction. I have to say I have not done a great job with people on the web and the telephones and I do want to apologize for those of you who we didn't give time on, but you can speak with Jess Mitchell and our Investor Relations team at any time.

 And once again, we thank you for your time and attention this afternoon or this morning.






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