Welcome, everybody, to BP's Fourth Quarter and Full Year Results Call. We'll be focusing today's call on the fourth quarter and 2024 performance and the contents of the video that I hope many of you will have seen by now. I also understand there is significant interest in our capital markets update in a couple of weeks' time. However, I'm sure you'll also appreciate that we can't comment on any issues relating to that today. So please focus your questions accordingly. With that, let me hand over to Murray.

Thanks, Craig, and thanks, everyone, for joining Kate and I on the call today. When I look back at 2024, we've achieved a lot. We made significant strategic progress, taking decisive action in reshaping our portfolio and laying the foundations for growth, including 10 new FIDs, including Cascadia and Tangguh, new access to Iraq and India, divesting tail assets in Trinidad, exiting the Empire Wind in the U.S. offshore, decapitalizing our offshore wind business by agreeing to form a joint venture, JERA Nex bp, focusing our EV charging business and our hydrogen pipeline, acquiring full ownership of BP bioenergy and Lightsource BP and recently announcing our intention to sell the Gelsenkirchen refinery. In two weeks' time, we will build on the actions taken in the last 12 months and provide a comprehensive update at our Capital Markets event. It will be a fundamental reset of our strategy. It will demonstrate our focus on actions to drive performance, and it will enable us to grow cash flow and returns and shareholder value. With that said, let me focus on today and briefly recap our highlights for this year. Many of our businesses performed well during 2024. Upstream production was around 2.36 million barrels per day, up 2% this year with plant reliability above 95%. It was a good year for trading and its track record for delivering an average 4% uplift to group ROACE now extends to the past 5 years despite the lack of volatility. But we have had a difficult year in refining with a widening outage in 1Q and the challenging margin environment, and we were also impacted by the weaker biofuels margins and trucking recession impact on TA. We remain firmly focused on taking action to improve our performance across refining and on the work to integrate our recently acquired businesses into BP, driving the synergies and underlying performance that we expect. Finally, on distributions, we grew our dividend per share by 10% and announced $7 billion of share buybacks, including a $1.75 billion announced today. With that summary, let's go to Q&A. Over to you to get us started. Craig?

Thanks, Murray. Given my earlier remarks, I'm going to ask you to limit yourselves to one question so we can let everyone get a chance. We'll look to close the call by 1:45 p.m. time. There's obviously plenty of time in two weeks' time for more questions. And of course, the IR team is available to follow up. So with that, let's get started. I think we will take the first question from Josh Stone at UBS, please.

With my one question, I'll focus on the refining and trading performance this quarter. It was another weak quarter, but you talked about improvement plans. So I just want to get a sense of how confident you are that the issues you experienced in 2024 are now in the rearview mirror? And what more can be done to improve the profitability of that division? And maybe if you can give any early insights on how trading has performed during the first quarter, given we're almost halfway through.

Thank you for the question. It was indeed a tough year for refining. The industry faced significant challenges in terms of margins and pricing, and we were no exception. We also had an outage at our Whiting plant in the first quarter due to an electrical fault. However, reliability across our portfolio was satisfactory in the fourth quarter. We undertook a major turnaround at Whiting, replacing the coker tops, which was a significant effort from our teams and greatly affected our fourth-quarter results. Looking ahead, we are optimistic about improving the business. Gordon will provide more details in a few weeks on our refining improvement plans. Our focus is on four key areas: restoring plant reliability to 96%, ensuring no significant outages, optimizing commercially, and executing a strong cost agenda across CMP, especially in refining in 2025. Additionally, we anticipate simpler turnaround programs in 2025 compared to 2024, which should help us return to profitability. As for trading, it was a typical year for us, with a 4% performance. Despite lower volatility in oil and refined products, our teams maintained a solid track record over the past five years. Looking forward, refining margins started poorly in January but are beginning to improve as we enter global turnaround season, with rising RMMs and some volatility. We understand the need for improvement and are committed to achieving it. Thank you for the question.

Thanks, Josh. We'll turn next to Peter Low at Redburn. Peter?

I just had a question on some of your recent upstream announcements. So your deal with ONGC and then also the redevelopment of Kirkuk. Can you perhaps talk a bit more about what you found attractive about those opportunities and then potentially the sort of returns you might see for those sorts of technical service contract type agreements?

Thank you for the questions, Peter. We have established a strong track record in the Middle East and Far East, successfully assisting operators with late-light developments. As water begins to enter these developments and we tackle complex reservoirs, we have built a solid reputation, starting in Alaska and moving to various other locations. Our proven experience enables us to seize opportunities for direct access in places like India and Iraq. With ONGC, we have a services contract that we are pleased with, as we do not deploy costs or capital; instead, we focus on providing personnel and expertise to enhance performance within the business. While I can't disclose specific commercial returns, I can say they are quite appealing for India and beneficial for us as well. We've found a balance that allows both sides to thrive if we can increase production. Based on our thorough due diligence, we are confident that we can assist India in this regard. Regarding Kirkuk, we are in the final stages of negotiations, which involve 5 domes of oil and 20 billion barrels yet to be produced, as part of a competitively structured PSA agreement that aligns with international standards. Our track record in the nation has positioned us to provide valuable help there. Once negotiations conclude, we will share more about Kirkuk. We are excited about this development and believe it will be internationally competitive, and we look forward to updating you further, possibly at Capital Markets Day.

Thanks, Peter. We'll take the next question from Biraj Borkhataria at RBC. Biraj?

And firstly, thank you for the breakdown on the operating cost side, and it's good to see the sort of internal lens versus what we see. Just thinking about your strategy. It looks like you're going to be including a more capital-light approach and more JVs and things like that, like the JERA deal. As it relates to your cost reduction targets, are you able to say the sort of quantum of costs that will come off your balance sheet as part of the transactions that have already been agreed? Just so I can get a sense of the magnitude of that.

Kate?

Yes. Biraj, thank you for the comment with regard to our cost disclosure. We have tried to help people by giving, I think, quite a lot more granularity and specificity than we have done previously. So I'm pleased that that has worked for you so far. So let's see. With regards to the capital-light approach on renewables, I think for capital, let's leave that to Capital Markets Day. We'll update you comprehensively with regard to capital right across the portfolio at that point. And with regard to cash costs. So we have already been successful in reducing some of our cash costs through focusing our portfolio, which we talked about on previous quarterly results calls. It's part and parcel of the $750 million of structural reductions that we've delivered this year, which is great progress. And beyond that, we will just update you as we go. We will try and be as specific as we can quarter-on-quarter on the areas where we are delivering cost reductions and point out where they're coming from with regard to third-party supply chain or focusing the portfolio. So we will make sure we give you enough granularity on that going forward, too.

Thanks, Biraj. We'll take the next question from Doug Leggate at Wolfe.

I have a question for Kate. Can you provide us with more details about the $40 breakeven point and help us set expectations for what you will announce later this month? Specifically, I'm trying to understand the $917 million one-off cost incurred this quarter and how that impacts your current view of the run rate breakeven. Also, are the financing charges below the operating line factored into that definition? Please help us gauge the starting point ahead of the Capital Markets Day.

Yes. Thanks, Doug. With regard to the balance point, we'll update the financial framework in totality in 2 weeks' time. The $40 balance point is important to us internally as we think about our dividend; it's a key part of ensuring that it's resilient through the cycle. In terms of the one-off, so there were a couple of one-offs that we called out specifically in oil and gas. I don't recognize the $900 million. I recognize about $400 million that we highlighted in the OPO segment. There was $300 million in there which was associated with the hedging and income from a sale of royalties and about $100 million in the gas and low carbon, really trying to be transparent in helping you as we move towards the first quarter I wanted to demonstrate there were a few things in our fourth quarter results that are unlikely to be repeated in the first quarter. But I'm happy that we sweep up after the call if you have a different number in your head.

Yes. Doug, the financing costs are inside the balance point, including hybrid and interest expense. That's all part of the balance point.

So $917 million remeasurement of joint venture step acquisition is what I'm referring to.

Thank you. Yes, I can tackle that one very quickly. So the transactions that we had with regard to the acquisition of BP bioenergy and Lightsource BP were both step transactions as we already own significant percentages of the equity in those organizations. It's just an accounting term. The $917 million were both arising with regard to Lightsource BP. It's just a remeasurement of the existing equity we held in Lightsource BP and a remeasurement of the assets that we hold for sale in regard to Lightsource BP. So it's a technical accounting non-cash.

Thanks, Doug. We'll take the next question from Al Syme at Citi. Al?

Not the front on the strategy update, but you've put the words fundamental reset out there in today's press release. So can I ask what's going on in the last few months in the environment and in your discussions with the Board to change the emphasis from the prior wording that you use, which I think was mid-strategy update?

Thank you, Al. It's great to connect with you. Looking back at the level of activity we've experienced over the last year, it's quite notable. We have approved 10 new projects and prioritized the top 30 projects across our operations. We have expanded into new countries and fully shifted our focus on renewables. This represents a significant transformation in our portfolio moving forward. Given this substantial change, it's the perfect time to reevaluate our strategy and embark on a new chapter. We've accomplished a lot in the past year, and I'm eager to discuss this with you, the community, in a couple of weeks. I believe it will be an exciting update.

So it's not the externalities of the macro environment, Murray?

No.

Thanks, Al. We'll take the next question from Irene Himona at Bernstein. Irene?

I had a question on your transition engine EBITDA. I presume this is the last time we will get EBITDA given you're retiring the metric. But I wanted to focus on bioenergy. It seems adjusted to the same definition that has remained flat at around $700 million a year. Can you give us a sense within that of the split between biofuels and biogas? The question is really about our care. Can we assume that our care has improved within that total since we know that biofuels margins were particularly weak? I mean, liquid biofuels?

Yes, thank you, Irene. Archaea continues to make progress. Last year, we brought 9 out of 15 plants online, and now 3 more are operational. We still have 3 plants in development that aren’t ready to declare startup yet. This year, we’ve established 12 new plants, which will naturally impact our earnings from 2024 into 2025. We are seeing improvements in Archaea as we advance. As you correctly noted, biofuels present significant challenges, particularly in Europe, where we don’t expect much performance momentum. Therefore, we are exercising caution regarding any new plant sanctions. You might have noticed developments in recycling in Australia as well. We are pleased with our progress in Archaea, though we are about 12 months behind our intended timeline due to the need for careful design, permitting, and establishing midstream connections. We've had to spend more time on these aspects than we initially anticipated, and that responsibility lies with us. However, with 13 plants operational now, our nearest competitors are only managing 2 to 3 plants each year, which puts us in a strong competitive stance. Demand and pricing remain robust, and we look forward to continued growth from Archaea. Carol will provide further updates on this in a couple of weeks, Irene.

Thanks, Irene. We're going to see the next question from Lydia Rainforth at Barclays. Lydia?

Regarding the cost base, I agree with Biraj's comments on this topic, as it provides very useful information. I would like to know how Archaea defines the strong cost margin ratio and how you measure it. Additionally, I am curious about any changes in this area over the past couple of years, since the cost base and generating EBITDA are important for your operations.

Thank you, Lydia. As mentioned in our disclosures, a significant portion of our variable costs is tied to our trading business, which is very margin-focused. We pay close attention to the gross margins generated from trading. Over the past few years, we've seen shipping costs increase by about 45% due to rising freight rates. Additionally, our LNG portfolio has grown by over 50%, contributing to our cost structure in this area. It's crucial to recognize that variable costs are directly linked to margin delivery. While we ensure these costs are managed efficiently, it would be unwise to target reductions in this area. For instance, asking Carol to cut shipping costs wouldn't align with our goal of driving value and returns. This is our perspective, which is why we've provided detailed information about our cost base and will continue to do so.

In a couple of weeks' time, Carol will be talking about the trading business again, Lydia. She will unpack some of this as well. And I think you'll find that there's a fixed margin that we have across our business that's driven by this portfolio of shipping oil or shipping diesel, bunkering and the LNG expansion. So more details to come in a couple of weeks' time, and Carol will be happy to answer more detailed questions on that then.

Thanks, Lydia. We'll now go to the next question from Lucas Herrmann at Exane BNP. Lucas?

And Murray, I hope it went well and that you're doing well. Just a brief question. Regarding LNG and volumes this year, what kind of increase do you expect from Beach with Tortue potentially achieving volumes from the venture? Could you provide an estimate of the additional tonnes you're budgeting for? That's all.

Thank you, Tortue, for the kind wishes. I'm feeling great, Lucas. It's nice to be back in the office. Tortue and Beach are expected to add about 3 million tonnes per year, assuming a full year flow. I'm not going to comment on Venture as the arbitration is ongoing; we will wait to see how that progresses. Hopefully, we will receive a ruling in the latter half of the year, and then we will start to see flow. Between Tortue and Beach, we anticipate 3 million tonnes per annum that will come through.

Thanks, Lucas. Moving on to Matt Lofting at JPMorgan, Matt?

Two, if I could, please. First, just on cost. I think you showed in Slide 12, about $5 billion of structural cost reduction over the last few years. If I understood right, I think that includes divestments. I wondered if you could break down how much of that $5 is divestments versus underlying, given that BP has divested about $20 billion of assets over the course of that period? And then second, I just wanted to ask you about Russia and sort of Rosneft, given the debate over recent days and weeks around Russia, Ukraine and sort of ceasefire scenarios, etc. Could you see a sort of a feasible scenario? And could it be sort of palatable for BP at Board level around the case for reconsolidating the Rosneft shares in the future onto the balance sheet? I just wondered how you sort of see that today?

Okay, Matt, you've already broken the rule. But we're going to accept that. I'm going to let Murray address the question about Russia, but first, Kate, let's discuss your question regarding costs.

Yes. So we're not planning on breaking this down by portfolio movement, Matt. We're very clear that it does include portfolio, but we're trying to give you as much granularity as we can. But I think we need to draw the line in some areas, and where it's a very big portfolio impact, of course, we'll try to call it out and help you with regard to understanding the underlying cost base going forward.

Lots of ins and outs in there as well. And then on Russia, look, our principal focus right now is on divesting the stake. There are more than a dozen countries that have sanctions on the entity. So we think the best focus that we can possibly have is on continuing to divest this, and we'll update the market as we go along on that. Thanks for the question.

Thanks, Matt. We're going to just move to a quick question from Ahmed Ben Salem from ODDO who's online. Ahmed's question is, how do you see the impact of U.S. tariffs on Canadian crude on Whiting's refining margins?

Yes. Thanks, Ahmed. Pretty difficult to predict is my answer. We have the ability to flow volumes south to north in the United States if we need to. Obviously, the Canadian producers have the optionality to flow some product to the West Coast and overseas as well. Upon the announcement of the tariffs, the WTI-WCS spread opened up quite a bit, probably absorbing half of that tariff. So I think it's a very, very dynamic scenario, and it's very difficult to predict what will happen to margins on the northern tier. And so we'll just have to watch and see how the market turns out on this one. I don't think it's straightforward because there are so many different flows that get impacted with Mexican flows with Southern U.S. to Northern U.S. flows, with Canadian flows. So I have studied it heavily with the teams, and I'm afraid I find it very, very difficult to predict what will happen, but we will update you in due course as we learn about it. Thanks for the question.

Thanks, Ahmed. We're going to turn to Chris Kuplent at Bank of America. Chris?

It's important to be cautious about setting new precedents. Could you confirm whether the surplus cash flow for the full year was approximately $4 billion? Additionally, I would like to understand your perspective on the value of issuing more hybrid bonds in November, which I believe will increase your cash outflows at a cost of around 8% of their carrying value. How attractive do you find the idea of continuing to issue hybrid bonds to reduce your net debt?

Great. Let's focus on one question. Kate, can you address the hybrid question? Chris, we can discuss your question offline.

Yes. So you all have heard me say in previous calls, Chris, I do think they're an important part of our capital structure. We're not seeking to build towers here. Just to be super clear, what we did in the fourth quarter, which others also did, by the way, is take advantage of a really strong environment. The senior sub-spreads were at an all-time low. And so we were able to issue hybrids in advance of our upcoming maturities in this year and in next year. And it's really just a value play, right? The hybrid market can fluctuate. We wanted to make sure that when it was in a particularly strong moment that we took absolute best advantage of that. That's all that's going on with hybrids. I remind you that about half of our hybrids are fixed cost and also the payments regarding these are fully tax-deductible. So yes, I mean, they're not the cheapest, but it's an important part of our capital structure. And we will continue to look very carefully and select maturities as and when the value feels right for us.

Thanks, Kate. Thank you, Chris. We're going to turn to Roger Read in the U.S. at Wells Fargo. Roger?

But let me ask a U.S. question. BPX, just kind of update on performance and how you're thinking about any particular increase in activity in any of the gas areas?

Great. Roger, Nice to hear your voice. We continue to admire what BPX is doing. They continue to perform very well. We've got our third central gathering facility up online and full now in the Permian, and we're looking forward to getting the last one up around the middle of this year. I think the most interesting that we're seeing right now are these refracs inside the Eagle Ford, where the refracs and downspacing are actually creating more flow than the original motherbores. So there's something about a recharging reservoir going on there that we didn't really predict in shale. And that's a very interesting opportunity as the returns are triple-digit plus in that space. On the gas side, we're contemplating increasing rigs right now. Gas pricing is very, very solid as we look at the second half of '25 and into early '26. And so Gordon and Kate and I are debating, should we be doing that, what head strategy would we have around it and how many rigs should we grow? But with the prices that we're seeing now on the forward markets, the returns inside the gas now beat the returns inside the oil basins. So that will be something that we're thinking about, and we'll look forward to more questions in that space in a couple of weeks' time, where you can ask Gordon about that stuff as well. Thanks, Roger.

Thank you, Roger. We'll turn to Alejandro Vigil at Santander next, please. Alejandro?

Yes. My question is basically about the Slide #16 of the presentation where you are talking about building momentum into '25. And you saw this chart with a significant increase in year-on-year in EBITDA, which are the moving parts of this increase? I remind there are some consolidation portfolio, etc.? And I'm making this question also in the context of looking at consensus number of $37 billion for this year looks like there is a big gap between consensus and this Slide #16. You can elaborate on this, please.

Thank you, Alejandro. Regarding the 2024 EBITDA, we reported 38 billion for that year. If we adjust that figure using 2023 prices, it's important to recall that we discussed the impact of prices on our EBITDA target of 46 billion to 49 billion during the second quarter of last year. When you adjust our 2024 EBITDA for 2023 prices, and considering that while commodity prices fluctuate, the overall trend aligns with our planning assumptions, you can see how this works. Additionally, taking into account that Whiting will be fully operational this year, along with the portfolio adjustments and typical year-on-year growth we expect, we arrive at a figure that falls just short of our target of 46 billion to 49 billion. As we have indicated before, our focus is increasingly shifting towards cash. In two weeks, we will provide a comprehensive update on our targets, metrics, and financial framework, which will clarify the retiring of this target for you.

And I think on '24 versus '25, obviously, we've got the absence of the Whiting outage, depending on the margin, that's worth quite a bit of money. And then we have the 3% to 4% underlying growth that I've been talking about quarter in and quarter out that we see year-on-year across the business for '24 versus '25 that comes broadly across cost. So continued cost improvement based on a great start we've done this year, along with improvements in things like Castrol, TA doing better, European convenience doing better, Australian convenience doing better and continue to improve performance inside the Upstream, along with, as I said, in the refining coverage, less complicated TARs. So it's a lot of small things that add up to that 3% to 4% improvement in underlying plus the recovery from the Whiting outage in 2024.

Thanks, Alejandro. We will turn to Michele Della Vigna, at Goldman Sachs. Michele?

And very much looking forward to the CMD. Just one modeling question from my side. We've seen two items before below EBIT, which were larger than expected, the net interest cost and the minorities. I was just wondering if you could perhaps guide us on whether we should assume this is a new ongoing run rate or if there was any one-off impact in the quarter?

Yes. Thanks, Michele. In terms of net interest, that was up quarter-on-quarter really just because our gross debt had grown. We took advantage this year in terms of markets and issued a fair amount of debt without actually buying back any more of our maturities. That's something that we'll continue to address as we have done previously, based on value in terms of the cash. It's a very minimal cost of carry right now given the forward curves as well. So that's all that's going on in net interest.

And for the minorities?

So there's a movement and that really just related to the change in hybrids in the fourth quarter.

You would likely anticipate those to reverse over time, and you would expect both to revert as you reduce your hybrids, unless you eliminate your debt.

Thanks, Kate. Thank you, Michele. We'll turn to Paul Cheng in the U.S. at Scotia. Paul?

Kate, can I go back into the 2025 EBITDA? You're saying that adjust for the pricing, it will be slightly below the low end of the range? So comparing to the midpoint, that's probably, say, call it $2 billion less. Can you tell us that comparing to the initial expectation, which area that are seeing the miss and what's causing those?

Yes. Thank you. So I think the two areas I would highlight, we've talked before about bio margins in Europe being suppressed due to two reasons. One, the Nordic countries rolling back their voluntary mandates to the EU mandated levels and also a level of oversupply from Asia. The other area I would call out is TravelCenters of America where it's been slightly slower than we expected in terms of recovery from the trucking recession. We see green shoots. It's starting to improve. I think we're probably a year further out in terms of seeing full recovery. That's more likely to come through in 2026 now.

Thank you, Paul. And it looks like just now the last question is from Giacomo Romeo at Jefferies. Giacomo?

I have one more question regarding the modeling side. Your lease expenses have obviously increased as you indicated. I’m trying to get a clearer idea of how we should anticipate lease payments to trend moving forward. In Q4, they appear to be relatively consistent with previous quarters, but I would like to understand if they are expected to rise and to what degree into next year.

Yes, I'll take that. There's the leases were pretty flat quarter-on-quarter, but we did add to our lease liabilities in the fourth quarter with the completion of Bunge. They've got about 300,000 hectares of land leased. So you will expect a small increase with regard to that. And then there was an extension of a lease for trading use in the U.S., but for commercial reasons, I wouldn't go into that. So 4Q versus 3Q, pretty flat, but you'll see a little bit of tick up with regard to the Bunge leases.

Super. Thanks, Kate. We're going to let Biraj sneak in with the last question. Over to you, please.

Sorry, I assume someone going to ask this, but as a last one, I might as well. Given the news yesterday around your new shareholders, any comments you can make about any engagement you've had with Elliott?

Look, Biraj, it's market speculation right now, and we don't comment on market speculation. Thanks for the question.

Thank you for the question, Biraj. There are no more questions online, so we will close the call here. That's the last question. We appreciate your participation on behalf of Murray, Kate, myself, and the leadership team who will join us on February 26. We look forward to seeing many of you in London and those attending the event via webcast. We will see you in a couple of weeks, and thank you for being part of today's call.