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 4 August, 2020
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|
---------------
--------------
Exhibit
1.1
|
BP's
New Strategy To Deliver Net Zero Ambition
|
|
|
|
|
|
|
Exhibit 1.1
4 August 2020
From International Oil Company to Integrated Energy
Company:
bp sets out strategy for decade of delivery
towards net zero ambition
New strategy sees bp:
Pivoting to low carbon energy and customer focus
-- 10-fold increase in low carbon investment by
2030, with
up to 8-fold increase by
2025
-- partnering with 10-15 cities and 3 core
industries in decarbonization efforts
and doubling customer interactions to
20 million per day, all by 2030
Focusing resilient hydrocarbon business on value:
-- capital intensity decreasing as major project
wave completes, combined with
continued efficiency focus, to
drive earnings and ROACE growth
-- production declines by 40% by 2030 through
active portfolio management
-- no exploration in new countries
Delivering on net zero ambition
-- emissions from bp's operations 30-35% lower by
2030
-- emissions associated with carbon in upstream
oil and gas production
35-40% lower by 2030
-- carbon intensity of products bp sells lower by
more than 15% by 2030
Delivering long term value for shareholders
-- reset resilient dividend of 5.25c/share per
quarter, with commitment to
return at least 60% of surplus cash
as share buybacks
-- profitable growth with 7-9% annual growth in
EBIDA per share to 2025
-- sustainable value with increasing investment in
low carbon and non-oil and gas
bp
today introduces a new strategy that will reshape its business as
it pivots from being an international oil company focused on
producing resources to an integrated energy company focused on
delivering solutions for customers.
Within
10 years, bp aims to have increased its annual low carbon
investment 10-fold to around $5 billion a year, building out an
integrated portfolio of low carbon technologies, including
renewables, bioenergy and early positions in hydrogen and CCUS. By
2030, bp aims to have developed around 50GW of net renewable
generating capacity - a 20-fold increase from 2019 - and to have
doubled its consumer interactions to 20 million a day.
Over
the same period, bp's oil and gas production is expected to reduce
by at least one million barrels of oil equivalent a day, or 40%,
from 2019 levels. Its remaining hydrocarbon portfolio is expected
to be more cost and carbon resilient.
By
2030, bp aims for emissions from its operations and those
associated with the carbon in its upstream oil and gas production
(addressed by Aim 1 and Aim 2 of bp's net zero ambition) to be
lower by 30-35% and 35-40% respectively.
bp
also today sets out a new financial frame to support a fundamental
shift in how it allocates capital, towards low carbon and other
energy transition activities. The combination of strategy and
financial frame is designed to provide a coherent and compelling
investor proposition - introducing a balance between committed
distributions, profitable growth and sustainable value - and create
long-term value for bp's stakeholders.
As
part of the investor proposition, bp's board has introduced a new
distribution policy, with two elements:
●
the
dividend reset to a resilient level of 5.25 cents per share per
quarter, and intended to remain fixed at this level, subject to the
board's decision each quarter, supplemented by
●
a
commitment to return at least 60% of surplus cash to shareholders
through share buybacks, once bp's balance sheet has been
deleveraged and subject to maintaining a strong investment grade
credit rating.
"Energy markets are fundamentally changing, shifting towards low
carbon, driven by societal expectations, technology and changes in
consumer preferences. And in these transforming markets, bp can
compete and create value, based on our skills, experience and
relationships. We are confident that the decisions we have
taken and the strategy we are setting out today are right for
bp, for our shareholders, and for wider society."
Helge Lund, chairman
New strategy
Earlier
this year bp announced its new purpose, net zero ambition and aims,
and its determination to reimagine energy and reinvent bp. Building
on the purpose, together with bp's beliefs about the future of
energy systems and changing customer demands, the strategy sets out
how bp expects to deliver its ambition.
"bp has been an international oil company for over a century -
defined by two core commodities produced by two core businesses.
Now we are pivoting to become an integrated energy company - from
IOC to IEC. From a company driven by the production of resources to
one that that's focused on delivering energy solutions for
customers.
"We believe our new strategy provides a comprehensive and coherent
approach to turn our net zero ambition into action. This coming
decade is critical for the world in the fight against climate
change, and to drive the necessary change in global energy systems
will require action from everyone.
"So, in the years ahead, bp is going to significantly scale-up our
low-carbon energy business and transform our mobility and
convenience offers. We will focus, and reduce, our oil, gas and
refining portfolio. And, as we drive down emissions on our route to
net zero, we are committed to continuing to deliver long-term value
for our stakeholders.
"We bring with us over 100 years of experience steeped in the world
of energy. We understand energy markets deeply, and have developed
unique capabilities in trading, marketing, technology and
innovation. And we are not starting from scratch in this new world.
From our Lightsource bp joint venture - now in 13 countries - to
our electric vehicle charging partnership with DiDi in China, and
our industry-leading convenience partnerships with M&S in the
UK and REWE in Germany - we are already building scale and
capability."
Bernard Looney, chief executive officer
The
strategy is built around three focus areas of activity and
three distinctive sources of differentiation, underpinned by a new
sustainability frame and advocacy for policies that support net
zero.
The
focus areas are:
●
Low carbon electricity and
energy: building scale in
renewables and bioenergy, seeking early positions in hydrogen and
CCUS, and building out a customer gas portfolio to complement these
low carbon energies.
●
Convenience and
mobility: putting
customers at the heart of what bp does, helping accelerate the
global revolution in mobility, redefining the experience of
convenience retail, and scaling bp's presence and fuel sales in
growth markets.
●
Resilient and focused
hydrocarbons: maintaining
an absolute focus on safety and operational reliability, bp intends
to drive capital and cost productivity up and emissions down. bp
intends to complete the ongoing wave of major projects, decreasing
capital intensity, and to continue to high-grade the portfolio,
resulting in significantly lower and more competitive production
and refining throughput. bp will not seek to explore in
countries where it does not already have upstream activities.
Rosneft is a fundamental part of bp's broader portfolio and
provides bp with a strong position in Russia.
The
three sources of differentiation to amplify value are:
●
Integrated energy
systems: along and across
value chains, pulling together all bp's capabilities to optimise
energy systems and create comprehensive offers for
customers.
●
Partnering with countries,
cities, and industries: as
they shape their own paths to net zero.
●
Digital and
innovation: to enable new
ways to engage with customers, create efficiencies, and support new
businesses.
Delivering
the strategy will see bp become a very different company by 2030.
By then, bp aims for:
●
investment in low carbon
energy to have increased
from around $500 million to around $5 billion a
year;
●
developed renewable generating
capacity to have grown
from 2.5GW in 2019 to around 50GW;
●
bioenergy production to have risen from 22,000 b/d to
more than 100,000 b/d;
●
hydrogen business to have grown to have 10% share of
core markets;
●
global customer
interactions to have risen
from 10 million to 20 million a day;
●
electric vehicle charging
points to have increased
from 7,500 to over 70,000; and
●
energy
partnerships with 10-15
major cities around the world and three core
industries.
Over
the same time:
●
Upstream oil and gas
production is expected to
reduce from 2.6 million barrels of oil equivalent a day (mmboe/d)
in 2019 to around 1.5mmboe/d; and
●
refining
throughput is expected to
fall from 1.7 million barrels a day (mmb/d) in 2019 to around
1.2mmb/d.
Through
this change, bp will continue its commitment to performing as it
transforms - maintaining its focus on safety, operational
excellence and financial discipline.
Delivering bp's net zero ambition
The
introduction of the new strategy and transformation of bp are
expected to deliver material progress towards its ambition to
become net zero by 2050 or sooner and its supporting aims. By
2030, bp aims to have delivered significant progress against its
first five Aims:
●
Aim 1 - emissions from operations, 30-35% lower
than in 2019;
●
Aim 2 - emissions associated with the carbon in
bp's upstream oil and gas production,
35-40%
lower than in 2019;
●
Aim 3 - carbon intensity of marketed products, more than
15% lower than in 2019;
●
Aim 4 - measurement of methane in place by 2023,
and progress underway to halve its
intensity;
●
Aim 5 - investment in low carbon increased from $0.5
billion to around $5 billion a year -
and
to $3-4 billion by 2025.
New financial frame, investor proposition and distribution
policy
bp
also today introduces a new financial frame that will support this
transformation and delivery of the strategy. It sets out bp's
clearly defined priorities for capital allocation:
●
supporting
a resilient dividend;
●
deleveraging
and maintaining a strong investment grade credit
rating;
●
investing
at scale into the energy transition;
●
investing
in bp's resilient hydrocarbons assets to maximise value and cash
flow; and
●
returning
cash to shareholders through buybacks.
bp
intends to maintain its financial discipline with a rigorous
business plan, including strengthening its balance sheet,
maintaining strict discipline on capital spending and deleveraging
to reduce net debt to $35 billion.
bp
intends to maintain annual capital expenditure -- including
inorganic investment - in a range of $14-16 billion to 2025;
keeping within the lower end of the $13-15 billion range until net
debt has been reduced to $35bn. As it high-grades its portfolio, bp
is also targeting $25 billion of divestment proceeds between the
second half of 2020 and 2025.
Based on expected growth in profitability, and its
focus on disciplined investment allocation, bp aims to deliver
strong and growing returns, with ROACE rising to 12-14% in
2025(1).
It also expects to rebalance its sources and uses of cash, on
average over 2021-25, to a balance point of around $40/bbl Brent,
assuming an average bp refining marker margin around $11/bbl
and Henry Hub at $3/mmBtu in 2020 real terms.
bp
is committed to delivering attractive returns to
shareholders. Therefore, as part of the financial
frame, bp's board has put in place a new distribution policy,
comprising two elements:
●
a
resilient dividend of 5.25 cents per share per quarter, with an
intention that this level will remain fixed, subject to the board's
decision each quarter; and
●
a commitment to return at least
60% of surplus cash flow to shareholders via share buybacks once
net debt is reduced to $35 billion and subject to maintaining a
strong investment grade credit rating(2).
The
board believes setting a dividend at this level takes into account
the current uncertainty regarding the economic consequences of the
COVID pandemic, supports bp's balance sheet and also provides the
flexibility required to invest into the energy transition at
scale. The commitment to return surplus cash as buybacks
offers investors benefits from potential cash flow upside, while
also reinforcing bp's commitment to investment
discipline.
The
combination of this frame and the new strategy creates bp's new
investor proposition:
●
Committed
distributions: a resilient
dividend, supplemented by a commitment to distribute surplus cash
through share buybacks.
●
Profitable
growth: underlying business
performance expected to drive growth in EBIDA per share at an
average compounded annual growth rate of 7-9% to
2025(3),
supported by the share buyback commitment.
●
Sustainable
value: with increasing
investment in non-oil and gas, by 2025 more than 20% of bp's
capital is expected to be employed in transition businesses,
including low carbon. This is expected to diversify and improve the
resilience of bp's cash flow.
"We believe that what we are setting out today offers a compelling
and attractive long-term proposition for all investors -- a reset
and resilient dividend with a commitment to share buybacks;
profitable growth; and the opportunity to invest in the energy
transition.
"I want to acknowledge the impact the reset dividend will have on
many - whether individual retail investors or large holders.
However, it is a decision that we wholeheartedly believe is in the
long-term interest of our stakeholders."
Bernard Looney
bp
will give more detail on its strategy, business plans and investor
proposition in its capital markets day presentations on 14-16
September.
Notes:
This
announcement includes inside information as defined in Article 7 of
the Market Abuse Regulation No. 596/2014. The person responsible
for arranging the release of this announcement on behalf of BP
p.l.c. is Ben Mathews, Company Secretary.
(1)
This
ROACE figure is based on $50-60/bbl (2020 real).
(2)
Following
the end of the first quarter in which net debt is reduced to $35
billion, and subject to having surplus cash flow, the board will
announce the quantum of share buybacks, returning at least 60% of
the surplus cash flow arising in such quarter. Thereafter, and
subject to maintaining a strong investment grade credit rating, the
amount to be allocated to buybacks will be calculated on a
cumulative basis, including surplus cash flow and the quantum of
buybacks in previous quarters. Once a full four quarters have been
reached, the calculation will be limited to the preceding four
quarters, on a rolling basis.
(3)
This
EBIDA figure is based on $50-60/bbl (2020 real).
Other:
●
bp's net zero ambition and aims are set out
in BP
Annual Report and Form 20-F 2019, pages 6 and 7; further information on Aims 1, 2
and 3 is provided in BP Annual Report and Form 20-F
2019, page
40.
●
For the purpose of this announcement, the
terminology below has the meaning given to it on the specified page
in BP
Annual Report and Form 20-F 2019:
Carbon intensity of products bp sells; carbon intensity of marketed
products: pages 40 and 338
("Average
emissions intensity of marketed energy products")
Emissions from bp's operations;
emissions from operations: page 40.
Emissions associated with
carbon in bp's upstream oil and gas
production: page 38
("emissions
from the carbon in our Upstream oil and gas
production")
Methane
intensity: page
34.
Net
zero: page
338.
●
For
the purpose of this announcement, the terminology below has the
following meanings:
EBIDA - underlying
replacement cost profit before interest and tax, add back
depreciation, depletion and amortization and exploration
expenditure written-off (net of non-operating items), less taxation
on an underlying replacement cost basis.
EBIDA per
share - share buybacks are
modelled across a range of share prices in this calculation and
EBIDA is after impact of planned divestments
Low carbon energy; low carbon
technologies: Low carbon
(renewable) electricity; bio-energy; electrification; future
mobility solutions; carbon capture, use and storage (CCUS); "blue"
or "green" hydrogen; and trading in low carbon products. Note
that, while there is some overlap, these terms do not mean the same
as bp's strategic focus area of "low carbon electricity and
energy", as described in this announcement.
Low carbon investment;
investment in low carbon energy; investment in low
carbon: Capital
expenditure on low carbon energy or technologies.
Low carbon and other energy
transition activities: Low
carbon energy / technologies as described above, together with
convenience; integrated gas and power; bp Ventures and
Launchpad.
Developed net renewable
generating capacity; developed renewable generating
capacity: the aggregate
quantity, net to bp, of renewable generating capacity that has been
developed, whether before or after the date of this announcement,
to the point of Final Investment Decision. This figure is
calculated irrespective of any subsequent sell-down; it represents
the quantity developed up to the relevant date (e.g., 2030) rather
than the quantity held at that date.
Bioenergy
production: production of
bioenergy on an ethanol equivalent production basis for sugarcane
ethanol and biopower production as well as refining bio
co-processing production; net to bp.
surplus cash
flow - refers to surplus
of sources of cash including operating cash flow, JV loan
repayments and divestment proceeds, over uses, including leases,
Gulf of Mexico oil spill payments, hybrid servicing costs, dividend
payments and cash capital expenditure.
ROACE - return on average capital employed as
defined in BP Annual Report and Form 20-F
2019 (page
342).
Further information:
bp press office, London: bppress@bp.com,
+44(0)7831 095541
Cautionary statement:
In
order to utilize the 'safe harbor' provisions of the United States
Private Securities Litigation Reform Act of 1995 (the 'PSLRA') and
the general doctrine of cautionary statements, BP is providing the
following cautionary statement: The discussion in this results
announcement contains certain forecasts, projections and
forward-looking statements - that is, statements related to future,
not past events and circumstances - with respect to the financial
condition, results of operations and businesses of BP and certain
of the plans and objectives of BP with respect to these items.
These statements may generally, but not always, be identified by
the use of words such as 'will', 'expects', 'is expected to',
'aims', 'should', 'may', 'objective', 'is likely to', 'intends',
'believes', 'anticipates', 'plans', 'we see', 'focus on' or similar
expressions.
In
particular, the following, among other statements, are all forward
looking in nature: BP's new strategy to focus on low-carbon
electricity and energy, convenience and mobility, cost and carbon
resilient and focused hydrocarbons, including statements regarding
its aims to increase low-carbon investment 10-fold by 2030 and up
to 8-fold by 2025, decrease capital intensity as major project wave
completes, lower oil and gas production 40% from current levels by
2030 through active portfolio management, develop around 50GW of
net renewable generating capacity by 2030, scale BP's presence and
fuel sales in growth markets, maintain focus on safety and
operational reliability, drive capital and cost productivity up,
increase bioenergy production to 100,00 b/d, increase hydrogen
business to 10% share of core markets, begin no exploration in new
countries, build partnerships with countries, cities and industries
in decarbonisation efforts and double customer interactions to 20
million per day by 2030 and increase electric vehicle charging
points to over 70,000 and to amplify value through digital and
innovation; plans and expectations to reduce Upstream oil and gas
production to around 1.5mmboe/d and refining throughput to 1.2mmb/d
by 2030; BP's new ambition to be a net zero company by 2050 or
sooner including statements regarding its aims by 2030 for
emissions reductions across operations, the carbon content of its
oil and gas production, a 50% cut in the carbon intensity of
products BP sells, methane measurement at major oil and gas
processing sites by 2023 and subsequent reduction of methane
intensity of operations, and aims to increase the proportion and
amount of investment into non-oil and gas businesses over time;
BP's expectations regarding shifts in energy markets; and BP's new
financial frame to support a shift in allocating capital towards
low carbon and other energy transition activities and for the
combination of strategy and financial frame to provide a coherent
and compelling investor proposition and create long-term value for
BP's shareholders, including statements regarding BP's disciplined
priorities for capital allocation, maintaining financial discipline
with a rigorous business plan, strengthening the balance sheet,
maintaining strict discipline on capital spending in a range of
$14-16 billion to 2025 and within the lower end of the $13-15
billion range until net debt has been reduced to $35 billion,
targeting $25 billion of divestment proceeds between the second
half of 2020 and 2025, delivering strong and growing returns, with
ROACE rising to 12-14% in 2025, rebalancing sources and uses of
cash, on average over 2021-2025 to a balance point of around
$40/bbl Brent, assuming an average bp refining marker
margin around $11/bbl and Henry Hub at $3/mmBtu in 2020 real terms,
resetting to a resilient level of dividend per quarter subject to
the board's decision each quarter, a commitment to return at least
60% of surplus cash through share buybacks once net debt is reduced
to $35 billion and subject to maintaining a strong investment grade
credit rating, deleveraging and maintaining a strong investment
grade credit rating, investing at scale into the energy transition
as well as in BP's resilient hydrocarbons assets to maximize value
and cash flow; and to drive growth in EBIDA per share at an average
compounded annual growth rate of 7-9% to 2025 supported by the
share buyback commitment and that by 2025 more than 20% of its
capital is expected to be employed in transition businesses,
including low carbon.
By
their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will or may occur in the future and are outside
the control of BP. Actual results may differ materially from those
expressed in such statements, depending on a variety of factors,
including: the extent and duration of the impact of current market
conditions including the significant drop in the oil price, the
impact of COVID-19, overall global economic and business conditions
impacting our business and demand for our products as well as the
specific factors identified in the discussions accompanying such
forward-looking statements; changes in consumer preferences and
societal expectations; the pace of development and adoption of
alternative energy solutions; the receipt of relevant third party
and/or regulatory approvals; the timing and level of maintenance
and/or turnaround activity; the timing and volume of refinery
additions and outages; the timing of bringing new fields onstream;
the timing, quantum and nature of certain acquisitions and
divestments; future levels of industry product supply, demand and
pricing, including supply growth in North America; OPEC quota
restrictions; PSA and TSC effects; operational and safety problems;
potential lapses in product quality; economic and financial market
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; regulatory or legal
actions including the types of enforcement action pursued and the
nature of remedies sought or imposed; the actions of prosecutors,
regulatory authorities and courts; delays in the processes for
resolving claims; amounts ultimately payable and timing of payments
relating to the Gulf of Mexico oil spill; exchange rate
fluctuations; development and use of new technology; recruitment
and retention of a skilled workforce; the success or otherwise of
partnering; the actions of competitors, trading partners,
contractors, subcontractors, creditors, rating agencies and others;
our access to future credit resources; business disruption and
crisis management; the impact on our reputation of ethical
misconduct and non-compliance with regulatory obligations; trading
losses; major uninsured losses; decisions by Rosneft's management
and board of directors; the actions of contractors; natural
disasters and adverse weather conditions; changes in public
expectations and other changes to business conditions; wars and
acts of terrorism; cyber-attacks or sabotage; and other factors
discussed elsewhere in this report, and under "Risk factors" in BP
Annual Report and Form 20-F 2019 as filed with the US Securities
and Exchange Commission.
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: 4
August 2020
|
|
|
/s/ Ben
J. S. Mathews
|
|
------------------------
|
|
Ben J.
S. Mathews
|
|
Company
Secretary
|
BP (NYSE:BP)
Historical Stock Chart
From Mar 2024 to Apr 2024
BP (NYSE:BP)
Historical Stock Chart
From Apr 2023 to Apr 2024