BP announces growth plans for the next five years at presentation
LONDON -- During a presentation in London, BP updated 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.
Group chief executive Bob Dudley and his management team are setting out plans to 2021, demonstrating how BP plans to deliver growth throughout its businesses over the next five years.
“In six years we have fundamentally reshaped and built a very different BP,” Dudley said. “We are now stronger and more focused -- fully competitive and fit for a fast-changing future. 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 modernization.
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%.
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 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.
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