SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 6-K
Report of Foreign
Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of
1934
for
the period ended February, 2017
BP p.l.c.
(Translation
of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or
will file annual
reports
under cover Form 20-F or Form 40-F.
Form
20-F
|X| Form
40-F
---------------
----------------
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the
information to the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of
1934.
Yes
No |X|
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press
release
28
February 2017
BP strategy update: Getting back to growth
●
Cash flow growing
materially:
−
Upstream $13-14 billion pre-tax free cash flow in
2021
−
Downstream $9-10 billion pre-tax free cash flow in
2021
●
Continuing discipline in
capital and costs:
−
Financial frame maintained to 2021, organic capital spending
$15-17 billion a year, gearing 20-30%
●
Rising production from new
Upstream major projects:
−
6 projects began production in 2016; 7 projects to come
online in 2017; 9 projects now under construction expected onstream
2018-21
−
Upstream production expected to grow by average of 5% a year
from 2016 to 2021
●
Cash balance point for BP
expected to fall to around $35-40/barrel in
2021
BP
today updates the financial community on details of its strategy
and, in particular, medium-term plans for the next five years,
based on oil prices similar to where they are today. Following a
presentation today in London, BP management teams will this week
travel to London, Edinburgh, New York, Dallas, Houston, Paris and
Frankfurt to update investors.
Over
the past six years BP has delivered around $75 billion of
divestments, focused investment to build a distinctive and balanced
portfolio, and improved safety, reliability and underlying
performance. Group chief executive Bob Dudley and his management
team are now setting out plans to 2021, demonstrating how BP plans
to deliver growth throughout its businesses over the next five
years.
Bob
Dudley said: "In six years we have fundamentally reshaped and built
a very different BP. We are now stronger and more focused - fully
competitive and fit for a fast-changing future.
"We
have proven financial discipline, clear plans in action and have
built a distinctive portfolio which gives us a strong platform for
growth, now and into the future. Striking a balance between short
and long-term value, our recent acquisitions and agreements have
strengthened this even further.
"We
can see growth ahead right across the Group. While always
maintaining our discipline on costs and capital, BP is now getting
back to growth - today, over the medium term and over the very long
term."
Over
the next five years BP expects both of its major operating segments
to deliver material growth in operating cash flows while the Group
maintains its existing financial frame. In the Upstream, growth is
expected to come from a continuing series of major higher-margin
project start-ups, while the Downstream expects to deliver strong
marketing-led growth, both underpinned by BP's continued focus on
safe and reliable operations, increasing efficiency, simplification
and modernisation.
Production ramping
up from new Upstream projects is expected to deliver a material
improvement in BP's operating cash flow through the second half of
2017.
BP
intends to maintain its existing financial frame throughout the
five years to 2021, with organic capital expenditure kept within a
range of $15-17 billion a year and the target band for gearing
remaining at 20-30%.
Brian
Gilvary, BP chief financial officer, said: "Last year we delivered
our targeted $7 billion reduction in cash costs a year early, and
capital spending was $8.6 billion lower than its peak in 2013 -
without damaging our growth pipeline. We will continue that tight
focus on costs and capital discipline and seek further improvements
throughout the Group.
"We
expect this combination of continued cost discipline with the
growing cash flow from our core businesses - and the recent
portfolio additions - will steadily drive down the cash balance
point of the business. Over the next five years we expect this to
fall to around $35-40 a barrel for the Group overall."
Volume
and margin growth throughout BP's businesses are expected to
increase returns over the next five years. Assuming a stable price
environment and portfolio, BP now expects return on average capital
employed (ROACE) for the Group to recover steadily over the next
few years and to be over 10% by 2021.
Upstream
Over
the past five years BP's Upstream segment has begun production from
24 major projects, including six in 2016. Seven projects are
expected online during 2017 - making it one of the largest years
for commissioning new projects in BP's history. These projects are
on average ahead of schedule and below budget. A further nine
projects that are expected to start up through 2018-2021 are
already under construction.
The
projects coming on line in 2016 and 2017 are on track to deliver
500,000 barrels of oil equivalent a day (boe/d) new production
capacity by the end of this year.
The new
Upstream projects remain on track to deliver 800,000 boe/d of new
production by 2020, as previously guided. On average, the new
projects are also expected to have operating cash margins 35%
higher than the average of BP's Upstream portfolio in
2015.
More
than 200,000 boe/d of production is expected by the end of the
decade from the recent additions to BP's portfolio - primarily from
the ADCO onshore concession.
This
strong pipeline means that BP is now confident that Upstream
production will grow from 2016 by an average of 5% a year out to
2021. BP Group production, including BP's share of production from
Rosneft, is expected to be around 4 million boe/d by
2021.
With
capital investment kept steady and increasingly efficient
operations and modernisation driving costs lower, BP now estimates
that this growth will enable the Upstream segment to generate
$13-14 billion of pre-tax free cash flow by 2021, at oil prices
around $55 a barrel.
Downstream
BP's
Downstream segment has delivered $3 billion sustainable reductions
in cash costs since 2014 - halving the refining margin needed for
the segment to deliver a pre-tax return of 15%.
In its
refining and petrochemicals manufacturing businesses, BP expects
the Downstream to deliver further performance improvements by
continuing to focus on efficiency and operational performance,
improving both competitiveness and resilience to the price and
margin environment. Underlying earnings from the manufacturing
businesses in 2021 are expected to be $2.5 billion higher than in
2014.
BP also
expects significant earnings growth from its Downstream marketing
businesses, with underlying earnings in 2021 more than $3 billion
higher than in 2014. In lubricants, growth is expected to come from
increasing the sales mix of premium lubricants, exposure to growth
markets and BP and Castrol's differentiated offers, brands and
technologies. In BP's fuels marketing activities,
particularly retail, growth is expected to come through premium
fuels, differentiated convenience partnerships - such as the recent
agreement with Woolworths in Australia - and access to growth
markets.
Combined with the
ongoing focus on simplification and efficiency throughout the
segment, BP believes this growth will enable the Downstream to
deliver $9-10 billion of pre-tax free cash flow by 2021,
with returns of around 20% in
2021.
New
business models
Beyond
the next five years, BP's strategy also aims to ensure that the
company continues to meet the energy demands of a changing
world.
BP's
Alternative Energy business - comprising US Wind and Brazilian
biofuels - is already the largest operated renewables business
among oil and gas peer companies and BP is further optimising and
improving efficiency to deliver incremental growth. In Wind BP is
upgrading some of its existing turbines and, in biofuels, has
debottlenecked manufacturing sites to increase
production.
BP is
also exploring new business models and technologies which may
potentially develop into options for material businesses in the
future, with investment into venturing in areas such as low-carbon,
digital and mobility to incubate and grow options for the
future.
Notes:
●
The presentation to the financial community can be seen via
www.bp.com/investors.
●
The December 2016 agreement with Woolworths in Australia is
subject to regulatory approval.
Further information:
Cautionary statement:
In
order to utilize the 'safe harbor' provisions of the United States
Private Securities Litigation Reform Act of 1995 (the 'PSLRA'), BP
is providing the following cautionary statement. This press release
contains certain forward-looking statements concerning expectations
that Upstream and Downstream pre-tax cash flow will reach $13-14
billion (at an oil price of $55 per barrel) and $9-10 billion,
respectively in 2021; plans and expectations to maintain organic
capital spending at $15-16 billion per year and gearing between 20%
and 30%; plans and expectations to start up 7 projects 2017 and 9
projects between 2018 and 2021; expectations to reach an oil price
cash balance point at around $35-40 per barrel over the next five
years; expectations that return on average capital employed will
exceed 10% in 2021; expectations that Upstream growth will come
from higher-margin project start-ups and Downstream growth will
come from marketing; expectations that production ramp-up from new
Upstream projects will deliver improvement in operating cash flow
through the second half of 2017; expectations that Upstream
projects coming on line in 2016 and 2017 will add approximately 500
thousand barrels per day of new oil equivalent production in 2017
and 800 thousand barrels per day of new oil equivalent production
by 2020; expectations that new Upstream projects will average
approximately 35% better margins than the 2015 portfolio;
expectations that Upstream additions will add more than 200
thousand barrels per day of oil equivalent production by the end of
the decade primarily from the ADCO onshore concession and Zohr in
Egypt; expectations that Upstream production will grow at an
average of 5% per year to 2021; expectations that BP Group
production will be 4 million boe/d by 2021; expectations that
underlying earnings from the Downstream manufacturing businesses in
2021 will be $2.5 billion higher than in 2014; expectations that
underlying earnings of BP's Downstream marketing business will be
$3 billion higher in 2021 than in 2014; expectations that the
Downstream lubricants business will grow due to product mix and
differentiated offers, brands and technologies; and expectations
that the Downstream fuels business will grow due to sales of
premium fuels, convenience partnerships such as the agreement with
Woolworths in Australia and access to growth markets. Actual
results may differ from those expressed in such statements,
depending on a variety of factors including changes in public
expectations and other changes to business conditions; the timing,
quantum and nature of divestments; the receipt of relevant
third-party and/or regulatory approvals; future levels of industry
product supply; demand and pricing; OPEC quota restrictions; PSA
effects; operational problems; regulatory or legal actions;
economic and financial conditions generally or in various countries
and regions; political stability and economic growth in relevant
areas of the world; changes in laws and governmental regulations;
exchange rate fluctuations; development and use of new technology;
the success or otherwise of partnering; the actions of competitors,
trading partners and others; natural disasters and adverse weather
conditions; wars and acts of terrorism, cyber-attacks or sabotage;
and other factors discussed under "Principal risks and
uncertainties" in our Stock Exchange Announcement for the period
ended 30 June 2016 and under "Risk factors" in our Annual Report
and Form 20-F 2015.
This
press release contains references to non-proved resources and
production outlooks based on non-proved resources that the SEC's
rules prohibit us from including in our filings with the SEC. U.S.
investors are urged to consider closely the disclosures in our Form
20-F, SEC File No. 1-06262. This form is available on our website
at www.bp.com. You can also obtain this form from the SEC by
calling 1-800-SEC-0330 or by logging on to their website at
www.sec.gov
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BP
p.l.c.
(Registrant)
Dated: 28
February 2017
/s/
J. BERTELSEN
..............................
J.
BERTELSEN
Deputy
Company Secretary