Title

Presentation

BP p.l.c. misses on earnings expectations. Reported EPS is $0.53 EPS, expectations were $0.56.

Craig Marshall: Welcome everybody to BP’s First Quarter 2025 Results Call. We will be focusing today’s call on the first quarter performance and the contents of the video that I hope many of you will have seen by now. Let me first hand over to Murray for a few brief opening remarks.

Murray Auchincloss: Thanks Craig. Today marks the first quarter since we laid out our reset strategy. We are delivering on our priorities at pace. We delivered strong operational performance in 1Q with over 96% refining availability and more than 95% upstream plant reliability supporting record operating efficiency. In upstream we have successfully started our three major projects Cypre in Trinidad, Raven in fill in Egypt, and GTA in Mauritania and Senegal. That adds a 100 mbd of capacity on our targeted 250 mbd by 2027. Made six exploration discoveries including in the Gulf of America, Trinidad, Egypt, and a significant discovery in Namibia. And our customer’s business delivered a strong quarter, it was the best first quarter since 2020 on an underlying RCOP basis.

Underlying pretax earnings met consensus. Gas and low carbon mist primarily due to a weak gas trading result but we saw a strong performance from customers and products which beat consensus. We recognize and continue to monitor market volatility and are focused on what we can control. We have taken a 1.5 billion intervention around cash flow for 2025. We continue to optimize our investment plans and have reduced CAPEX by $0.5 billion in 2025 down to $14.5 billion. Excluding the inorganic payment for bp Bunge organic CAPEX is now below $14 billion in 2025. And with 1.5 billion of completed or signed divestment agreements year-to-date we now expect 3 billion to 4 billion in divestments for 2025 with proceeds weighted to the second half. We are also making strong progress with a strong progress with a strategic review of Castrol with significant interest in the business.

And we have made good progress in costs with underlying operating expenditure down 500 million quarter-on-quarter. We will provide more color on cost reductions at 2Q results. Finally, and as we guided in our trading statement, net debt rose in the quarter primarily due to the working capital build however, we expect the majority of that to unwind through the year in a flat price environment. In summary operations are running well creating a strong foundation with our financial results resilient. We have an ambitious growth plan that we are focused on delivering at pace that is what we need to keep building on quarter in and quarter out. Back to you Craig.

A – Craig Marshall: Thanks Murray. And as usual for everybody on the call for Q&A I am going to ask you again, please limit yourself to two questions. We have got a number of people on the call today to get through. And we will look to close the call by 2 PM and of course the IR team is available for any follow-ups. So with that let’s get started. I am going to go to the States to start off. This morning, this afternoon and we will take the first question from Steve Richardson. Steve, good morning. Maybe we don’t have Steve. So in which case we will stay in the States and we will go to Doug Leggate at Wolfe. Doug, good morning. Doug we can’t hear you either. Maybe the connection — looks like we have got a bit of an audio problem.

What I am going to try and do then maybe there is a connection problem with the U.S. or maybe come back to the UK. Let’s try Josh Stone at UBS. Okay, we seem to be having some audio problems on the Q&A. If everybody on the line can hear me, if you can just hold as we try and rectify the problems. Just bear with us please. We wait for some emails so we are using the time efficiently. [Technical Difficulty]

Biraj Borkhataria: Buybacks, can you walk through the bridge here and how much of it relates to reinvent BP share option plans. I do understand sound may have come back as well. I do understand sound maybe back as well. So maybe if we deal with those first two questions?

Murray Auchincloss: Fantastic. Kate, why don’t you lead off on those two. Apologies for the sound issues team.

Kate Thomson: Yeah, will do Murray. Thank you.

Craig Marshall: Okay, we’re being asked to repeat the two questions from Biraj. First one, trying to unpack the weakness in gas and low carbon, beyond trading what is driving the higher non-cash costs, should we consider this run rate for the rest of the year, or is there a one-off element? And the second question was on share count. It went up despite the 1.75 billion buyback. Can you walk through the bridge here and how much of it relates to reinvent BP share option plans, Kate?

Kate Thomson: Yeah, thank you, and hello, Biraj. Sorry, I can’t hear your voice today, and apologies for these issues. In terms of the non-cash items going through the gas and low carbon energy segment, this quarter. Quarter-on-quarter, we’ve got about 200 million of higher non-cash items. So DD&A is higher. Obviously, we’ve got the starter per Raven infill, so that was delivered ahead of schedule, which was a great performance by the team. They were unique to the fourth quarter. So in terms of the quarter-on-quarter delta, I think that’s a little bit different because of the one-off that you’ve seen going through 4Q versus 1Q. In terms of the DD&A rate going forwards, that’s probably a decent run rate with regard to the startup of Raven.

Turning to share count, the end of the quarter share count reduction was actually slightly down. In terms of the reinvent, I can’t break that out for you at this moment. As we’ve said before, the reinvent options have a six-year vesting period, and it’s quite hard to forecast the extent and the timing of which that may impact our share count. I think a lot of it is going to be driven by human behavior with regard to what’s going on in terms of the share price and other factors. What I can say is that of course we will continue to offset dilution related to employee share plans over time as we always have done. And so far since 2021 we’ve reduced our total share count by about 22% and that remains our intent going forward to offset employee share plan impacts over time.

Craig Marshall: Thanks Kate. We are going to try the lines. So we’ll take the question from Josh Stone at UBS. Now Josh can you hear us?

Joshua Stone: I can hear you, can you hear me.

Craig Marshall: And can you go ahead with your question Josh, thanks?

Joshua Stone: Yes. I’ll go ahead, thanks Craig. And good afternoon Murray, good afternoon Kate. Murray, in the video you talked about a very strong operational performance this quarter, and I think you should be commended for that. But when I look at your cash flow statement, that strong performance, at least doesn’t seem to be coming through yet. So maybe just expand a little bit on the difference between your production performance and your cash flow performance and what gives you some confidence that, that can actually get better through this year. Some discussion maybe on gas trading and costs would be helpful. But maybe if there’s any other line items do you think we should be paying attention to that driving some of that mismatch in the first quarter?

And then a second question for Kate. I noticed another issuance of hybrids of about $500 million this quarter. It looks to be sort of light source, but just remind us how you’re thinking about the hybrid balance this year and the timing of when you might start to redeem some of these bonds? Thanks.

Murray Auchincloss: Yes, Josh, nice to hear your voice. Thanks, sorry for the technical difficulties this morning, this afternoon. As far as conversion from earnings into cash flow, it’s helpful to look at EBITDA and we continue to provide EBITDA. So you can see that. I think the principal issue we have in the quarter is obviously a working capital build. That’s something we signaled to you both at Capital Markets Day and the trading statement. We’ve had a seasonal build in working capital as we fill up our refineries ahead of the driving season and the flying season across 2Q, 3Q and 4Q. So we’d expect the majority of that working capital to unwind and you would start to see that coming through, through the rest of the year, assuming a flat price environment.

As far as gas trading, yes, as signaled a weak gas trading oil was average. You’ll remember that we aim for a 4% return on — a 4% earnings return on trading across the five years, and we have the same aim this year. Very, very volatile trading circumstances in the first quarter. The oil side did well to hit average. And then the gas side caught out a little bit on European regulation changes, and you should expect us to get back to normal on that in the future, you should expect average performance out of us on gas. So I hope that helps on cash flow conversion, and we feel confident in our plans to grow cash flow from 8 to 14 across the next three years. And it’s been a great operational start for the team. Kate, over to you for that other question.

Kate Thomson: Yes. Thank you. I think you also asked about costs Josh, I think I counted three questions nested in there, but let me quickly talk about costs. So making incredible progress with regard to our $4 billion to $5 billion cost reduction program, very much building on the progress that we started in 2024, where we delivered $800 million of structural cost reductions and $300 million of absolute reductions through the year. Quarter-on-quarter, we are already $500 million lower in terms of our absolute cost base. So that’s good progress, and we can talk more on subsequent questions, I’m sure, in terms of how we’re getting after this and what more we’re going to deliver. Turning to hybrids. Yes, you’re correct, we did issue $500 million.

This is really just bridge financing for us as we think about bringing in a partner in Lightsource BP. These — this $500 million of hybrids is only in place until the beginning of next year. They mature in 2026. And my overall strategy with regard to hybrids remains completely unchanged from what I said at Capital Markets Day. I do not intend to grow the stack of the 12 billion group hybrids at all. And as we step towards each maturity window, we have the first one between June and September this year and the next one in 2026. Then we’ll be very thoughtful with regard to our cash flows and whether or not we want to take advantage of the ability to reduce that hybrid stack by up to 10% each year. Obviously, we’re capped to a maximum of 25% reduction on a cumulative basis by the rating agencies, but we will think about that as and when we get to each maturity window, Josh.

Joshua Stone: Got it, thanks for the comments.

Craig Marshall: Thank you, Josh. We’re going to go back to the U.S. where we try to start. I’d just note, Steve and Doug, you were on the call list. I don’t see you there again. So if you want to try and dial in again if you’ve got a question, please do. But I’m going to start with Roger Read at Wells Fargo, Roger.

Roger Read: Yeah good morning and good afternoon. Hopefully, you can hear me this time.

Craig Marshall: Yes, we can, Roger. Thank you. Thanks for bearing with us.

Roger Read: Alright, success. I like it. So I’d just like to maybe start off BPX. We’ve had obviously commodity prices come down on the oil side. They’ve remained pretty favorable on the gas side. It’s too soon after the late February Investor Day you announced big changes, but maybe just get a feel for how you’re looking at it, how this fits within the range of expectations, and what you would think about in terms of either increasing activity on the gas side, like the Haynesville or pulling back at all in Eagle Ford or the Permian with oil closer to 60 here?

Murray Auchincloss: Yes. Great. Roger, thanks very much. I’ll take those. On BPX, our plans remain unchanged for now. We continue to think about investing $2.5 billion this year. I think we’ve got 9 or 10 rigs active right now across the basins. We’ll closely monitor this. If oil price stays low, of course, we’ll moderate our plans and switch over into gas. But for now, we plan to keep it pretty tight. Like you, I’m getting somewhat optimistic on gas pricing. The demand for natural gas is pretty high and production needs to flow, and new drilling needs to start to help that production flow to fill up the LNG plants and to fill up the other demand that’s coming through in the U.S. Our Haynesville position, our Eagle Ford position are well positioned for that, very close to market, and very little differentials.

So in time, we think we’ll grow that gas position, the drilling inside that gas position. Right now, it’s not quite the right time, and we’ll just keep this tightly under review as we watch what unfolds with the hydrocarbon pricing. Thanks, Roger.

Roger Read: Thank you.

Craig Marshall: Thank you, Roger. We’re going to stay in the U.S. Doug, I see you managed to rejoin, over to you, please.

Douglas Leggate: Can you all hear me, okay?

Craig Marshall: Yes. Yes. We’re good, Doug, all sorted.

Douglas Leggate: Excellent. Okay. Good. I’m just glad it wasn’t a screw up on my end. But anyway, Murray, I wonder if I could hit the disposal target. You’ve nudged it up a little bit for this year, small, obviously, but you’ve got a big number out there. And it seems to us, at least when we kind of walk through the waterfall of the potential disposal candidates, it seems you could far exceed that $20 billion number. And I realize it’s very early days, but I wonder if I could ask you to frame how you’ve risked that number in terms of, is there an upside case and maybe put a range around what that might look like over time?

Murray Auchincloss: Yes. Great. Doug, thanks very much. As you say, we have very high-quality assets. And transactions are not slowing down right now. Obviously, we’ve got $1.5 billion behind us in the first quarter, which is fantastic. We’re upping our range to 3% to 4% based on the strength we see in the conversations on the retail positions that we’re looking at as well as the refining position. And obviously, we’ve launched Castrol as well. I feel it’s a well underpinned plan. I can’t give you — it’s risk. We’ll deliver the $20 billion. We have lots of options around that. I think for now, given that we’re only one quarter in, I wouldn’t be guiding to upside. I think we just need to start to get more track record on that and see how the process goes.

But I’m very confident in it. We — it is a number that we will hit much like the net debt target is a number we will hit, and there’s lots of interest inside the assets that we see, especially as interest rates fall here in Europe, they may not be falling in the U.S. yet, but as interest rates fall, in Europe, people are looking for yield and our assets are good for yield. So we continue with our strong process. We feel very good about the $20 billion number. We’ve got strong progress and strong interest inside Castrol, and we keep moving forward, Doug. Thanks for the question.

Douglas Leggate: Thanks, Murray. I wonder if I could risk a quick follow-up. It’s also on BPX. A little selfishly, you recently dissolved the JV with Devon. There seems to be conflicting data out there as to what it means for BPX, I think in EnerVest report the other day, seeing you guys got the better side of the deal, but Devon suggests that the capital costs come down dramatically, with them operating. So I wonder if you could offer your perspective on that and whether it impacts the 650,000 barrel a day target in 2030? I’ll leave it there, thank you.

Murray Auchincloss: Yes. No impact to 650 kbd target for now. We really like the transaction. We got more production early on that’s why it adds more value. And I think that’s what you’re referencing in the EnerVest reports that has been put out. Now I think there’s a different philosophy, between ourselves and some companies on what you do in the lower 48. Our focus is on creating as much NPV as we possibly can for the dollars we spend, whereas some operators simply focus on cost. That’s not what we do. And again, if you look at EnerVest and they benchmark us across all of our three basins, we are best in class on the NPV per dollar spent. And that’s about getting more resources for the dollar we spent on a relative ratio. That applies in the Permian, that applies in the Haynesville and here in the Eagle Ford as well.

I think the principal difference between the two companies is we believe in three strings to capture more resource. I think Devon believes in two strings, to minimize cost. So they’re right, they’ll spend less on the wells on the casing strings, etcetera. But again, the benchmarking is showing that using the technology we do, mattered pressure drilling, insulated drill pipe, and drilling automation, our teams are keeping the costs relatively consistent. So I think benchmarking will tell over time, who’s right on this and it’s very transparent under the U.S. system, but we remain confident, given our track record that we’ve got a great team. They’re doing great work, and we’re very, very focused on value for dollars, not just dollars. So we love the deal, and we look forward to seeing the results of it and we shall challenge ourselves on benchmarking to make sure that we continue to be the best in the basins in which we operate SNF the way that we think about it.

I hope that helps, Doug.

Douglas Leggate: It does, thanks a lot Murray.

Craig Marshall: Thank you Doug. We’re going to come back to the UK, and we’ll go to Lydia Rainforth at Barclays. Lydia?

Lydia Rainforth: Good afternoon. Two questions actually, please. On refining and trading side, if I think about that business, looking at the numbers, about $30 million of operating profit despite what is 96% uptime. And assuming it’s a positive contribution from trading, it does still suggest that the refining business is loss-making even with that good number operationally. So I guess the question is, is that a concern and how quickly can you actually get that back to where it should be and I suspect that will link in a little bit to the cost side? And then the second one, just around the Head of Strategy role and what do you gain from not having that role in place now and how do you make sure you respond quickly to changing circumstances, I think part of the [indiscernible] the pivot back to what you’re doing now, didn’t happen as quickly as it could have done.

So it is just the idea of how do you make sure that you can keep it up and that you can — you’ll send to check in that kind of flexibility side of it? Thanks.

Murray Auchincloss: Yes, Lydia, I think on the Head of Strategy role, we’ll continue to have Head of Strategy, the person will just report to Kate. It will be much more tightly integrated into planning and actuals. And that role continues to be very important. I’m just not choosing to have that role on my leadership team, but Kate will ably be able to help us navigate all the twists and changes in the external world, and the team will remain in place to help us with that. I think on refining, what would I say. So 1Q, a difficult margin environment in the Midwest, where there was a surplus of gasoline and obviously, Whiting is a gasoline focused refinery, so that was very, very difficult pricing inside the Midwest. And then in Rotterdam as well, diesel oversupply.

So the pricing inside Rotterdam was quite, quite difficult. We are seeing these things rebound as we move into turnaround season globally and as demand starts to pick up. Remember, 1Q in the U.S. was pretty difficult. There were quite a few storms in 1Q in the U.S. that drove that low demand. So we’re starting to see the refining margin lift up now. We’ve obviously got Atlantic Basin refineries, 1.2 million a day shut in now. So we are seeing that start to lift up, and we now think that we’re above our planning basis for refining margins. But as always, these things are volatile, we’ll see what happens. At the same time that’s happening, we continue with our efficiency and cost journey. We’re obviously high grading the Gelsenkirchen refinery.

We continue in those conversations with counterparts and we have a big cost program across refining that we laid out. Our overall aim is to improve the profitability of that business by $2 a barrel over the next few years from 2025 to 2027 and we’re well on track with that. And I think we were just in an oversupply situation, both in 4Q and 1Q. And but that now seems to be starting to alleviate itself as 1.2 million a day capacity shuts down and demand starts to pick up as we move into driving season. I hope that helps with you.

Craig Marshall: Thank you, Lydia. We’ll turn next to Kim Fustier to HSBC, Kim.

Kim Fustier: Hi, good afternoon and thanks for taking my questions. Firstly, on CAPEX. The oil is about $5 a weaker now than the $70 brand you assumed in the CMD in February. You’ve turned 2025 CAPEX by about 3%, which seems like the right thing to do. I appreciate there’s not much flexibility to reduce CAPEX in the near term, but maybe on the 12-month view, would you be able to reduce CAPEX further and if so, would you cut CAPEX proportionally across upstream and non-upstream businesses? And I guess related to that, I think that you exited the low carbon transport business and you’ve also canceled another biofield project. So relative to the CMD in February, that points to further downside to your transition CAPEX guidance? Thank you.

Murray Auchincloss: Yes. I think, Kim, no change to the overall guidance that we provided at Capital Markets Day. We set a range of $13 billion to $15 billion. You’ve obviously seen us cut our capital from 15 down to 14.5. That’s across — that’s not in any specific business that I’d highlight. It’s across the patch. It’s about capital efficiency that we see coming through as well as a few investment choices, none of the two that you mentioned were really impactful inside that capital frame. As far as how we think about this, we’re very, very returns driven. We will be doing whatever makes the most sense for returns as we make these decisions. In the event of an oil or gas price downside on a 12-month basis, we’ve got a lot of flexibility in our onshore rigs around the world so we can obviously act on that basis.

And of course, we can always trim C&M refining capital as we need it across the business as well. So I think what I’d say is, we’re being extra careful given what’s going on with the macro environment. We’ve trimmed capital by $500 million. We’ve accelerated divestment proceeds. So we’ve added $1.5 billion to the cash flow of the corporation in 2025 in case the macro continues to turn worse. And we have optionality to reduce $2.5 billion of CAPEX across the group and the event prices go lower. That would obviously challenge long-term growth. So we’re not doing that now, but we do have that $2.5 billion, which equates to a further $10 price downside. Of course, the last comment I’ll make is, in the event prices do start going that low, we’ll start to see significant deflation based on what we’ve seen in past cycles, and that tends to pass through quite, quite quickly.

We have seen softening in the U.S. rig market and completions market now with the rig fleet down 10%. We’re starting to see a bit of softness in the offshore floaters, so let’s just see how this unfolds, but we’re well prepared for any scenario.

Craig Marshall: Thanks, Kim. We’ll stay in the UK and go to Chris Kuplent at Bank of America. Chris?

Christopher Kuplent: Yes, thank you very much Craig. One for you, Kate. Could you walk us through a little bit the restatement and where Archaea has moved from. I remember at the time of the acquisition, this was meant to generate $500 million plus of EBITDA this year, and I’m not sure what I can compare between your prior quarterly reports entirely tallied up. So that would be helpful to understand the movements between downstream and low carbon? And then perhaps for you, Murray, you’ve now signed and published that Kirkuk agreement. But I’m still missing numerical details. Is there anything you can provide to us in terms of hand rails, whether it’s CAPEX statistics, BOE, or IRRs? Thank you.

Murray Auchincloss: Great. I’ll start off with — I’ll start off with Kirkuk and then we’ll hand over to Kate for your other question. The government of Iraq will publish the PSA at some moment in time is what we understand. They have not done so yet. So I have to be guarded in what I say, Chris. I hope you understand that I don’t want to break any of those agreements. I think the way you should think about this is this will be an incorporated joint venture where we bring partners into. There will be CAPEX on balance sheet for a little bit, but then the CAPEX will move off balance sheet as we bring those partners in, that’s the first thing to say. So it will be a very capital-light investment into Iraq. The terms are much better than the previous rounds.

Remember, we’re on the eighth round now of price improvements since the first awards back in 2027 and 2028. And I think some of the terms from the around have been published. So you can — you can look at those inside the various different sources and you’ll know that we’re doing at least as well as that. The other things that are public that I can talk about is with Rumaila we only had the oil rights, now we have both the oil rights and the gas rights and it’s a decent gas price. So I will be very incentivized to help the nation with natural gas supplies, which they’re encouraging us to look at. So that offers up an entirely different tranche of profitability relative to Rumaila. And I think the other thing to say is that there’s price upside inside this PSA that did not exist in the previous tranches as you look back across time.

So it’s pretty profitable. It will be cash flow positive quite quickly. Volume ramp-up, I can’t really disclose volume ramp and volume numbers until the PSA is published. And hopefully, that gets published, and then I can talk about this more wholesomely. That’s just for the 3 billion barrels inside the 25-year agreement we struck. We also continue to look at exploration optionality underneath the existing five domes. So that will be — we have some commitments to drill some wells there that will open up new avenues beyond the 3 billion barrels, and I’m sure there’s lots of resource there. The source rock is very, very rich. And of course, we continue to conversations with them about the surrounding acreage as well and getting more exploration opportunities.

So we think this is a great investment. And as we get that PSA published, I would look at the last round for now. And then when the new PSA is published, you should be able to model it pretty tightly, Chris. Over to you, Kate.

Christopher Kuplent: I appreciate that. Helpful, thank you.

Kate Thomson: Hi Chris. Yes, so on Archaea, we moved it out of the customer and products segment and into the gas and low carbon energy segment. So where we have materiality, we have restated the 2024 numbers to demonstrate the impact of that. And with regards to disclosure, we’ll disclose annually in terms of EBITDA as we said we would when we were talking about this back at the Capital Markets Day. In terms of progress, it did well last year, nine plants online. We’ve got three online already this year. I think we’re expecting 8 million to 10 million and we still continue to expect Archaea to be free cash flow positive by 2026. So from our perspective, it’s well on track.

Craig Marshall: Okay. Thanks, Chris.

Christopher Kuplent: Okay. Thank you, Kate.

Craig Marshall: Sorry, Chris, did you have a follow-up there?

Christopher Kuplent: All good. I’ll circle back later, thank you very much, Craig.

Craig Marshall: No problem. Thank you. We’ll jump back to the U.S. Jason Gabelman at TD Cowen, Jason.

Jason Gabelman: Good afternoon. Happy to be back on the call. I wanted to start on gas and low-carbon energy. The tax rate was high across the company, but also in that segment. I was wondering if you could talk about what drove that and what your expectations are on the tax rate for that segment going forward and more broadly for the company? Thanks.

Murray Auchincloss: Yes. I’ll let Kate as our Head of Tax, talk about that.

Kate Thomson: Thanks, Murray. Yes, so the group tax rate, the effective tax rate for the first quarter was around 50%. That’s higher than it was in the previous quarter and then in the previous year in terms of 1Q, largely driven by the composition of our profits. We tend to have higher taxed areas in our oil production and operations segment than we do in either our customer products or gas and low carbon energy. And that’s what’s driving the effective tax rate for now. I think it’s important to remind people that we haven’t changed our guidance for the full year. We still currently expect our effective tax rate to be around 40%.

Jason Gabelman: Okay. Can you say something specifically about gas and low carbon energy. It looks like 1Q tax rate for that segment was 47%, it’s been around 30% in the past couple of years?

Kate Thomson: Yes, I think we’ll follow up with you separately on that. We don’t disclose tax rates by segment. So I’ll let Craig and the IR team pick that up with you afterwards, if that’s okay, Jason.

Jason Gabelman: Okay. That’s fine. And then my follow-up is just on gas hedging. And I believe you had a solid gas hedging program for the Lower 48 last year, and I was wondering if you’re doing the same this year, if you could talk about pricing you’ve locked in? Thanks.

Murray Auchincloss: Yes. We won’t be specific, it’s a bit commercially sensitive right now. But I’ll say the majority of the gas hedges are locked in for BPX, the majority of the production profile is locked in around $4 Jason. So that’s what we’ve got roughly right now.

Jason Gabelman: Okay, great.

Craig Marshall: Thanks Jason, no problem. We’ll come back to the UK and take the next question from Martijn Rats at Morgan Stanley. Martijn.

Martijn Rats: Yes, thanks. I’ve got two as well. I wanted to ask about a few line items that we don’t often talk about. But actually, in terms of our ability to model earnings and balance sheet gearing are quite important. What was the line about the minorities, which seems to have sort of grown over time and look, frankly, it’s quite hard to know really sort of what’s in there, but any sort of indication guidance, what that sort of minority line could put this current quarter or at least an indication of what we can expect over the next couple of quarters? And also related to that, the line item sort of adjusting items, which we never talk about, on our end, we always assume that it’s 0 going forward. But over the last six quarters, it’s averaged negative $1.7 billion per quarter.

And so in terms of modeling balance sheet gearing, this is actually moves around, things sort of quite a bit. To the extent that you can say anything about the line item adjusting items going forward, perhaps not being zero, is there anything you can sort of guide us there, I guess it would help us sort of modeling the balance sheet? Then next to these two accounting questions. I’ve got one specific question about Kaskida, as in my understanding is that the platform for Kaskida is under construction at the yard, I believe, in Singapore. If that platform is imported into the United States, I would suspect that they would need — a tariff would need to be paid, but I wanted to ask if you could confirm that indeed like the importing that platform for that project is subject to an import tariff?

And also, we can say something about how that might impact the economics of the Kaskida project overall?

Murray Auchincloss: Yes. Just to take Kaskida first, finished goods are not subject to tariff Martijn. So I think I don’t think that’s a risk at this stage. So nothing we’re particularly concerned about. On NCI, I think you’re asking a question, I’ll let Kate tackle that one. Just on adjusting items, I can’t really give you any guidance. There are 1 million things that flow through there, fair-value accounting effects on hedges, on derivatives, etcetera, move through there. So it’s quite a volatile set of accounting elements that go through it. You can see it on Page 24 of the FCA. I think if I tried to give you guidance on that, I’d just get it wrong. If you think back in history, what’s happened there at one moment in time, there were $21 billion of adjusting items in a particular quarter because of the moves on gas prices against the hedges that we had in our LNG trading book.

And those eventually evaporated to zero over time. So I’d just encourage you to think about cash flow would be my suggestion because that page of adjusting items is very, very difficult to forecast, it has a lot to do with interest rates. It has a lot to do with oil and gas pricing and the contracts we have in place. Generally, there will be offsets in the underlying business, and it’s more of an accounting issue than a cash flow or earnings perspective, which is why we provide the adjustments we do. Kate, over to you on NCI.

Kate Thomson: Yes. Thanks, Murray. Hi Martijn. The only other point I’d add on adjusting items is, of course, you get tax items flowing through that as well. And this quarter, the pretax adjusting items were about $400 million, then those are $500 million adjusting our item relating to the extension of the EPL in the UK system. So that also flows through. Turning to NCI. Yes, look, it tipped up a little bit in this quarter. A lot of that was really due to the fact that we pre-issued around $2.5 billion of hybrids in the fourth quarter. If you could recall back to that I was explaining that we took advantage of pretty unusually good conditions to issue in advance of upcoming maturities through 2025 and 2026 as did our peers actually.

And so as a consequence, the costs associated with the hybrids are up a bit. But you can’t see is that we chose to take that cash and invest it. And so we are earning interest income on the other side of that, which largely offsets it. In terms of how that’s going to look for the next few quarters. As you know, I’ve just said the first maturity window with regard to our hybrid stack doesn’t open up until June. We have the opportunity if we choose to reduce by up to $1.2 billion, let’s see when we get there. But unless and until we reduce that hybrid stack, the level of NCI income is going to remain fairly stable.

Martijn Rats: Okay, thank you.

Craig Marshall: Thank you, Martijn. We’ll go next to Michele Della Vigna at Goldman Sachs, Michele.

Michele Della Vigna: Thank you. Two questions, if I may. The first one is on net debt. I was wondering if you could give us perhaps some guidance of where you expected at the end of the year, assuming flat pricing given the operating working capital reversal that you expect through the rest of the year? And then secondly, I wanted to ask you a broader question on tariffs beyond the Kaskida platform. Just whether there is any sensitivity that you guys have done on what could be the impact on your business from tariffs and if there is any part of it, which is especially subject to it? Thank you.

Murray Auchincloss: Michele, I’ll take tariffs, and I’ll hand over net debt to Kate. I think on tariffs, look, so far, we haven’t seen a material impact to the business. If you think about our American business, we import product from Canada to process in our refineries. That’s now been exempted under the U.S.-Mexico-Canada trade agreement. The aluminum and steel tariffs, we are not seeing any impact in our Lower 48 business, because we took a choice 18 months ago to source all of that steel domestically, so we don’t see much of an impact. And in the Gulf of America, as we just talked about, there’s some specialty steels that we import for drilling and casing but it’s very, very small, and it’s not going to have a material impact on the business. So I think as I think about the U.S. operations themselves, there’s just not much of an impact on tariff Michele at all. Kate, over to you on the question on net debt.

Kate Thomson: Yes, hi Michele, I think the first thing I do want to say on net debt is that the target that we’ve set out of the $14 billion to $18 billion by 2027. I know Murray said it in his opening comments, but I think it bears reinforcing. We’re very confident in the delivery of that, and that’s what we’re really focused on. With regard to the trajectory through the rest of 2025, we’ve got some big moving parts on there. So we’ve got about — as I look at it, around $2.5 billion, perhaps a little bit more of the working capital will reverse. And if we hit the top of the new target on divestment proceeds, you’ve got around another $3.5 billion of proceeds coming in from that source. So there’s some big moving parts on top of the operational performance.

So I think I would like to just take a moment to just comment on the way that we’re going to tackle on that debt target. If you remember, in February, we talked about ring-fencing divestment proceeds from transactions on Castrol and Lightsource. We’ve launched the process on Castrol. We’ve got, as you might imagine, great interest in that asset. It’s an iconic brand that’s been in place for 125 years, and the team are doing a fantastic job for the last few years, improving their performance and delivery every single quarter. So that’s looking strong, and we expect to launch a process on Lightsource BP this quarter. So the proceeds from both of those go to bring our balance sheet back into the $14 billion to $18 billion range, and we feel very confident of that.

Craig Marshall: Thanks very much. We’ll take the next question from Matt Lofting at J.P. Morgan. Matt.

Matthew Lofting: Thanks for taking questions. Two, if I could, please. I wanted to specifically first ask you about trading. I think you talked about gas earlier, but I wanted to just ask on oil and liquid because over the last 12 months, BP generally turned the contribution in this sort of the average to weak range. And then optically on a headline basis, it seems to have coincided with moderated oil and product market. So I wondered if you could just talk about whether there’s any key market or spread characteristics that the company would want to see strengthen in order for the contribution of that business to follow suit? And then secondly, on the buyback and $750 million for Q1. Is there any frame you can share on how BP is thought about, the calibration of that $750 million for the full year, for example, where at the moment, you think is most appropriate to be for 2025 within the 30% to 40% CFFO range? Thanks.

Murray Auchincloss: Yes. Great, Matt. I’ll take the trading question and I’ll let Kate take the other question. I think on trading, look, as Carol talked about at our Capital Markets Day nine weeks ago, our trading is made up of three bits, there’s the day-to-day business where we provide customers with energy that makes up about half of our profitability. There’s 25% about re-diversions when disruptions occur. So 75% of both oil and gas really is all about that base level business that we continue to work away at. On top of that is trading in a speculative sense where we do tend to take time spread positions. I think on that particular bit, the things that make it easier or make it hard, I think headline-driven events, political headline driven events make it quite difficult to trade.

And that’s what you saw if you look at the results of the trading houses over the past 12 months. Some of them have outright exited the space as they’ve dealt with the headlines because they didn’t have the physical flow that we have. And then you’re just looking to take advantage of spreads over time, whether geographic spreads, time spreads, quality spreads. That’s the space where our oil trading book tends to make money. If Matt, I’m afraid if I go any further than that, my traders will get angry with me. So I’ll stop there and pass over to Kate. Go ahead, Kate on buyback.

Kate Thomson: Yes, thanks, hello Matt. Yes, with regard to the 1Q share buyback, at the Capital Markets update, we suggested that the buyback for the first quarter was likely to be in the range of $700 million to $750 million to $1 billion. As we think about the buyback each quarter as a Board, the first element of the thinking is the way we have now framed our approach to distributions in our new financial framework. We have said that the total of the resilient dividend and the share buyback over time will be around 30% to 40% of operating cash flow. That’s over time. It’s not a mechanical quarter in, quarter out calculation, it’s a frame for the Board to use as a guardrail in terms of how it thinks about it. And we’ve also said it’s a mechanism to share excess cash, at each Board decision as we step through the quarters, will, of course, take into consideration what’s going on in performance as well as the frame of 30% to 40% of ops cash, but also current volatility, outlook medium term across the range of the commodities that drive our cash flow.

But we’re not going to guide forward. We will update you at 2Q when we’ve stepped through that decision-making process.

Matthew Lofting: Thanks guys.

Craig Marshall: Thank you, Matt. We’ll take the next question from Irene Himona Bernstein, Irene.

Irene Himona: Thank you, good afternoon. I had first of all a question on the $500 million cost reduction in Q1, which I thought was quite an impressive number. You said you will update us in Q2 on cost, but I just wanted to try and understand the type of cost savings we’re talking about, where is it coming from, if you can perhaps give us just a couple of examples to understand? And then secondly, Kate, if I may go back to the adjusting items and the $539 million UK energy profits in Q1, that amount was greater than the full year 2024 amount. So should we treat this as a one-off Q1 event or is there more to come later this year on this UK energy profits levy, please? Thank you.

Kate Thomson: Hi Irene. I’ll take the second question first. It’s very straightforward. It’s purely the tax effecting of the extension of the EPR 2030, which was substantively enacted in the first quarter. You, therefore, have to take the full adjustment at that point in time. So you shouldn’t think that, that is recurring. It’s all been accounted for fully now. With regard to the $500 million cost reduction, yes, I’m in a similar place to you. I thought it was a good outcome. It’s reflective of the fact that we have the teams in action at pace right across the company. And in particular, I think for 1Q, I’d call out progressing customer and products, I think they’re doing very well, but also we’re trimming costs, as I’ve said, across all business, but also at all of the sort of corporate head office functions as well.

And we’re making good progress. One of the things that we’ve talked about in the past is our focus on taking out third-party and supply chain, and we have around 3,000 contractors that have now left BP. We’re now going through the next 3,400 contractors role by role and we’re able to use some technology with the help of Palantir that allows us to go through that exercise and create data-led decision-making, as I say, role by role on those contractors and move at a pace that we just couldn’t do it manually. So we are in action enormously right across the company on that. And I look forward to updating in much more detail at the second quarter.

Craig Marshall: Thank you, Irene. We’re going to turn to Lucas Herrmann next at BNP, Lucas.

Lucas Herrmann: Thanks very much. And a couple, if I might. Probably Kate, volumes in venture now. I presume that they’re flowing. Can you give — should we assume that you’re going to received broadly 1.5 million tons of LNG this year and start incorporating that, obviously, in numbers, just any observations there? And I’m going to ask this one, I think it’s probably going to be seen by you as a statement of heresy almost. But — and it relates to trading, it strikes me that for BP and reestablishment of confidence and trust, increased stability, whatever within quarterly numbers is of increasing importance. I don’t doubt for a moment, the confidence or the scale of the trading business and your ability historically to generate healthy average returns across an extended period, if not within a short period.

But as you say, Murray and as Kate highlighted, I mean, you have fantastic flows, which should lead to — which obviously drive a sustainable level of margin, albeit obviously vary depending on price. And then you have a solid ability to optimize, is this not a point in time where perhaps the organization should think less about value trading. I think just more about trying to deliver a stream that is more stable, more consistent, and drives less volatility in the quarterly numbers that have tended to be away over the last several quarters? You’re welcome to shoot me, Murray.

Murray Auchincloss: Yes. Yes, Lucas, I’m trying to think about how to answer your second question. I’ll answer the first one, which is quite easy, which is ventures. Yes, it is flowing. It started flowing in mid-April. And we’ve got 2 MTPA capacity at venture offtake. And I think I’ll stop describing anything on venture beyond that, on Venture Global. On trading, look, the trading benches are incentivized to make as much money as they possibly can. And they take views based on the risk that is out there. If I told them stabilize your income, it really wouldn’t be a trading organization. It would be a marketing flow organization, and you’d lose an awful lot of edge inside the commercial delivery that we see. So I kind of understand the question, but all trading organizations across the world are highly incentivized to drive as much profit as they can, as opposed to a partial profit.

And I understand the volatility point you’re making. And all I’d encourage everyone to think about is that you should not look at this on a quarter-by-quarter basis nor should you look at on a bench-by-bench basis. You should think of it in an annual cycle, in a multiyear cycle. We have earned 4% over the past five years. It has been about half gas, it has been about half oil. And of course, you should divide that in four, as you estimated. And we’re continuing to have a strong track record of delivering that 4% no matter what the macro environment conditions are. So I think that’s my response, Lucas. Thank you for the challenge.

Lucas Herrmann: Thank you.

Craig Marshall: Thanks Lucas. We’ll go next to Henry Tarr at Berenberg, Henry.

Henry Tarr: Hi there Craig. Hi everybody, thanks for taking my question. I guess with some positive news in Namibia over the last few days with Azul, what are your plans from here in Namibia, I guess and would you be interested in getting more exposure to the region if the right opportunity came up? Thanks.

Murray Auchincloss: Great. Thanks, Henry. Yes, it was a significant discovery that our partner Rhino led when we operate through the Azul joint venture, a 50-50 joint venture with ENI. We’re very pleased with the well, it was a significant discovery. They did an extended well test on it and obviously produced 10 kbd of light sweet oil as they did that. We’re currently evaluating the results from the drill stem test and thinking about what the next steps forwards are with our partners. I think it’s premature to say anything more than that other than we’re very pleased with it. As far as would we do more in Namibia, we’re always looking for interesting exploration acreage around the world and it’s possible. But right now, I think we’re pretty happy with the position we have and the block we have, and we’ll update you in due course on that over time, Henry, thank you.

Henry Tarr: That’s great. Thanks.

Craig Marshall: Thanks, Henry. We’ll take the next question from Giacomo Romeo at Jefferies, Giacomo.

Giacomo Romeo: Thank you and two questions remaining, maybe put more clarification. Murray, when you talked about $2.5 billion reduction potential for CAPEX. I’m just trying to understand what you are thinking there in terms of what level of prices would trigger such a reduction, and should we see — expect that to be more linearly if prices go down or there’s a particular level you have in mind that where you would see an acceleration? Second question is on gas and low carbon. I appreciate the color on cost. If I look though at the EBITDA, I still find it quite low compared to when I get through the model. Just trying to understand around the contribution from LNG trading whether there was — that was, in fact, positive this quarter or is there any chance you had actually a negative contribution to the EBITDA this quarter?

Murray Auchincloss: Thanks, Giacomo. No, we didn’t have a loss. It was a weak quarter though, as you signal. On CAPEX flexibility, look, we’ve made a decision to trim 500 based on the macroeconomic environment. Let’s wait and see what happens over the coming weeks. There are some OPEC meetings, we’ll have to see how the negotiations between the U.S. and Iran unfold, and we’ll have to see how the tariffs unfold as well and what that does to overall demand. We will stay right on top of this, making the decisions we need to make. We have lots of flexibility with the 2.5% that we talked about. Of course, it will demand decisions on different parts of the business. So we’re not just an oil company. We have oil, we have natural gas, we have service stations that we fund, etcetera.

And so we’ll be thinking about the different macro environments into each of those if we were to make those decisions. But a first step of $500 million and no plans to make further cuts at this stage, but we will remain tightly attuned to the marketplace and ensure that we can meet our targets for 2027. Thank you, Giacomo.

Giacomo Romeo: Thank you.

Craig Marshall: Thanks, Giacomo. We are going to make time to take the last two questions — or sorry, the last two individuals with questions. So first of all, Paul Cheng at Scotia, Paul?

Yim Chuen Cheng: Thank you. Two questions, please. Murray, in the Gulf of America, U.S. just have a new rule, the downhole commingling. Can you give us some idea that what this new rule, do you see the most opportunity set in your portfolio and how big are those? Second question is that if indeed the commodity markets become more challenging, how you contemplate or that the decision process between reducing your CAPEX, which you certainly could, but how about further reducing your buyback, I mean, how would you balance between the two? Thank you.

Murray Auchincloss: Go ahead, Kate, on the balance between buyback and CAPEX, and then I’ll take the question on Gulf of America.

Kate Thomson: Yes, will do. Thanks and hi Paul. So the financial frame that we set out in February alongside our reset strategy, I think, was pretty clear in terms of how we think of the order of priority inside our financial frame. The first one, we’re very clear is a resilient dividend, and we said that you should expect a 4% increase a year, and that’s a floor. After that balance sheet is our next priority. We are categorical in the delivery of this $14 billion to $18 billion target by 2027. After that, we look at CAPEX, and we have designed the financial frame in totality to be able to be flexible, but yet ensure we can deliver on our four primary targets. We have a lot of flex in CAPEX, that $13 billion to $15 billion range.

And then we share excess cash for shareholders. And that’s where we have positioned the share buyback in this financial frame as a part of our total distributions, which are over time at around 30% to 40% of operating cash flow. So I hope that helps you think how — and understand how we think about the prioritization. We are going to protect our balance sheet. And yes, the anchor point for us at the moment as the Board is thinking about the operating cash flow and using share buybacks as a mechanism to return excess cash to shareholders, but we’ll step through that quarter by quarter.

Yim Chuen Cheng: Okay. Can I ask to clarify if that means that even in a lower oil price at the moment, you’re still going to pay out about 30% to 40%, but not below that range because I thought 30% to 40% is just average throughout the cycles, right, so yet you were in particular looking at the one cycle, should we have a payout lower than the 30%?

Kate Thomson: The 30% to 40% is over time. And of course, our operating cash flow will move up and down with price, but we’re not looking at it in a particular quarter as we step towards the decision as a Board. At the end of each quarter, we’ll take into account what’s going on inside the company, how we’ve performed in the quarter, but also, as I said earlier, the sort of medium-term outlook of the prices that drive our cash flow, it’s not just oil, it’s also gas and its refining margin, and we’ll take into consideration all of that as we make our decisions each quarter, but we’ve been pretty clear, we’re not going to be guiding forward on share buyback.

Murray Auchincloss: And Paul, on downhole commingling, I suppose it’s really targeted at the Paleogene, where we do see the differential pressures. Obviously, Cascade will be our first development on that. So it’s going to take a bit of time. We don’t see as much potential right now inside the Miocene, but it’s early, and we’re continuing to test that right now. So it’s mainly for us right now, a Paleogene question and obviously, the Paleogene production comes later in the decade for us. Thanks for the question, Paul.

Yim Chuen Cheng: Thank you.

Craig Marshall: Okay, thanks, Paul. We’ve got the last question, Biraj, you helped us out with the virtual ones at the start. Maybe we can hear your voice now. You’ve hung on to the end.

Biraj Borkhataria: Hi there, thanks for taking my questions. Just one quick clarification or a modeling thing and happy to follow up after. But just a comment, I think Martijn asked about the EVNCI charges. And I guess part of that is the hybrid and part of that, I’m assuming it’s the standing of things like [indiscernible]. But just to comment, Kate, you made around the flip side of that, the higher interest. Presumably, that would result in a lower OB&C charge for the year. So I’m just wondering, in that context, why the 2025 guide was still $1 billion? Thank you.

Kate Thomson: So Biraj, the short answer is you’re correct on both. Yes, the NCI is made up of both the charges associated with the hybrid bonds, but also dividends that we pay out of BP subsidiaries where there’s a level of the equity held by others and things like divestments around pipelines fall into that category as well. Sorry, could you remind me of the second question? OB&C, yes. So the interest income, yes, you’re correct, is reported inside OB&C. We don’t split it out. But the other very big component that moves OB&C around is FX and in particular, movements on various components, including hybrid swaps. So you’ll see quite a lot of FX volatility. That’s the primary element that’s driven the quarter-on-quarter change inside OB&C.

I can’t predict where FX is going to go. For now, what I look at is my underlying spend and my underlying expectation with regard to costs and income going through the year. And at the moment, the guidance feels about right. But we’ll, of course, review that when we get to the second quarter and we look again at the full year.

Biraj Borkhataria: Thank you.

Craig Marshall: Thanks, Biraj. And thank you, Kate. Thank you, Murray. We’re going to close the call there. We’ve managed to get through all the questions. Thank you for raising them. And I’d just like to thank you again for the patience at the start of the call. We’ll certainly be looking into what happened there, very unusual. So I think we’ll close the call on that note. And on behalf of Murray, Kate, and myself, thanks very much for listening and for your interest in BP’s results today.