Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BP PLC (BP, Financial) reported strong operating cash flow of $8.1 billion for Q2 2024.
- The company achieved a 10% increase in announced dividends.
- BP PLC (BP) announced a $1.75 billion buyback in respect of Q2 results and committed to $3.5 billion of share buybacks for the second half of 2024.
- The company reduced net debt by $1.4 billion to $22.6 billion.
- BP PLC (BP) demonstrated high operational efficiency with 96% upstream plant reliability and 96% refining availability.
Negative Points
- BP PLC (BP) faced a 4% increase in unit upstream costs.
- Transition engine EBITDA halved year-on-year in the first half of 2024.
- Biofuels, convenience, and renewables segments reported declines.
- The company has ongoing challenges with regulatory uncertainty affecting biofuel margins.
- BP PLC (BP) experienced higher exploration charge-offs, particularly in the Gulf of Mexico.
Q & A Highlights
BP PLC (BP) Q2 2024 Earnings Call Highlights
Q: Irene Himona (Bernstein) - Can you provide an update on the $2 billion operating cost reduction target and the transition engine EBITDA, which has halved year-on-year?
A: Kate Thomson (CFO) - We are on track to deliver $2 billion in cost reductions, with $0.5 billion expected in 2025. The increase in unit production costs is due to portfolio mix. Murray Auchincloss (CEO) - Transition engine EBITDA is expected to reach $3-4 billion next year, with significant contributions from convenience and electrification.
Q: Biraj Borkhataria (RBC Capital Markets) - Can you address concerns about your debt levels and the 80% surplus payout?
A: Murray Auchincloss (CEO) - We focus on credit rating rather than net debt. Our A+ rating provides flexibility. Kate Thomson (CFO) - Share buybacks are part of our sector-leading distributions, and we plan to offset employee share options over time.
Q: Paul Cheng (The Bank of Nova Scotia) - Can you explain the higher OpEx in the quarter and the activity level for BPX in the second half?
A: Kate Thomson (CFO) - The higher OpEx is due to a $100 million exploration write-off in the Gulf of Mexico. Murray Auchincloss (CEO) - BPX activity will focus on liquids growth, with minimal drilling in the Haynesville due to low gas prices.
Q: Michele Della Vigna (Goldman Sachs) - Are you considering more long-term LNG contracts given the potential oversupply? Also, why did you decide not to proceed with two biorefineries?
A: Carol-Lee Howle (EVP, Trading and Shipping) - We balance long-term and short-term contracts to optimize value. Murray Auchincloss (CEO) - We reallocated capital to the Bunge acquisition, focusing on upstream opportunities for long-term value.
Q: Lucas Herrmann (BNP Paribas) - Can you clarify the earnings power of your refining assets and the capital allocation towards renewable power businesses?
A: Emma Delaney (EVP, Customers and Products) - Refining margins have been volatile, and we optimize commercial value. Murray Auchincloss (CEO) - We are focusing on fewer, high-value renewable projects and will update capital allocation in February.
Q: Martijn Rats (Morgan Stanley) - Can you provide an outlook on production in the second half of the decade and the issue of impairments?
A: Murray Auchincloss (CEO) - We focus on cash flow and returns rather than production volumes. Kate Thomson (CFO) - Impairments are driven by business decisions and market conditions, and we aim to manage them prudently.
Q: Alastair Syme (Citigroup) - What are you seeing in global same-store sales, particularly in the US?
A: Emma Delaney (EVP, Customers and Products) - We see growth in convenience and electrification, with a mix of like-for-like sales and store revamps. The US market shows a balance of both.
Q: Christopher Kuplent (BofA Securities) - Can you clarify the assumptions behind the 2025 EBITDA targets and the outlook for net working capital?
A: Kate Thomson (CFO) - The 2025 targets are based on 2023 prices, and we expect a net working capital release in Q3, with net debt trending down.
Q: Josh Stone (UBS Group AG) - Why did you decide to fully consolidate Bunge and Lightsource BP, and how do you view surplus cash flow and buybacks?
A: Murray Auchincloss (CEO) - Consolidating Bunge and Lightsource BP allows us to unlock more value and integrate operations. Kate Thomson (CFO) - We aim for at least 80% of surplus cash to go to buybacks, considering both current performance and future outlook.
Q: Doug Leggate (Wolfe Research) - Why do you believe share buybacks are the optimal way to maximize shareholder value given your debt levels?
A: Kate Thomson (CFO) - Our investors support the balance of our financial frame, which includes sector-leading distributions and a strong balance sheet. The buyback flywheel supports increasing dividends and earnings per share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
