The world wants and needs energy that is safe and affordable, as well as low carbon.
That’s what BP CEO Bernard Looney said in a strategy update posted on the company’s website on Tuesday, adding that all three together are what’s known as “the energy trilemma.”
“To deal with that, we need to act to accelerate the transition. And at the same time, we need to act to make sure the transition is orderly, so that affordable energy continues to flow where it’s needed today,” Looney said in a company statement.
“As an integrated energy company, BP is very deliberately built to help on both counts. With three years of delivery and track record, we have increased confidence that our strategy is working. And with today’s announcement, we we are leaning more,” he added.
“We are increasing our investment in our transition and, at the same time, increasing investment in the current energy system. In doing so, we see a huge opportunity to create value. And it’s what governments and customers are asking from companies like us,” Looney continued.
In the strategy update, BP noted that it now aims to accelerate earnings growth from its Transitional Growth Engines (TGEs) while delivering higher-than-previously-expected earnings from its oil businesses and gas until 2030. The company stated that it plans to support. this growth through disciplined increases in investment over the period to 2030 of up to $8 billion in TGEs and up to $8 billion in oil and gas.
TGE Investment
BP highlighted in the update that it aims to increase investment in its TGEs to an average of $1 billion a year, or up to an additional $8 billion cumulatively by 2030, noting that it now expects that his investment in his TGE reaches $7. 9 billion a year by 2030 “with a cumulative investment during 2023-2030 of around $55-65 billion”.
The company said it intends to invest around half of this accumulated total in the TGEs where it has established businesses, capabilities and track record: “in bioenergy, and in electric vehicle comfort and charging; the other half in hydrogen and renewables and energy”.
BP said it expects to achieve yields in excess of 15 percent from bioenergy, and electric vehicle comfort and charging combined, and double-digit yields from hydrogen. An unlevered return of six to eight percent is expected from renewables.
BP noted that earnings at its TGEs are expected to grow as a result of these changes, and said it now expects TGEs to deliver EBITDA of $3 billion to $4 billion by 2025. The company is targeting between 10 billion and $12 billion by 2030, with more than $4 billion. from bioenergy, more than $4 billion for convenience and electric vehicle charging, and between $2 and $3 billion from hydrogen and renewables and power.
“We will increase our focus on transition growth engines capable of delivering near-term solutions, such as electric vehicle chargers and sustainable aviation fuels, that can help people and businesses decarbonize sooner,” he said. say Looney in the update.
“And we will continue to build our hydrogen and renewables and energy businesses for the long term, based on projects where BP’s integrated approach can create significant additional value,” he added.
Investment in oil and gas
In the strategy update, BP highlighted that it aims to increase investment in “resilient and high-quality oil and gas projects”, again by an average of up to $1 billion per year, or up to $8 billion cumulatively through 2030. The investment will help meet short-term demand for secure oil and gas supplies, generating additional revenue that can further strengthen BP and support investment in its transition, he said. point to BP.
“Incremental investment through 2025 will target short-term, quick-payback projects that maximize value and can deliver quickly, with minimal new infrastructure,” BP said in the update.
“While BP will continue to improve its global oil and gas portfolio, due to improved operational reliability and commerciality over the past four years, it also expects to retain some oil and gas assets longer than previously planned planned,” the company added.
BP now expects its oil and gas production to be around 2.3 million barrels of oil equivalent per day in 2025 and aims for around 2.0 million barrels of oil equivalent per day in 2030 , the update revealed. That 2030 output would be about 25 percent lower than BP’s 2019 output, excluding Rosneft output, compared with BP’s previous expectation of a 40 percent cut, he noted the company
BP noted that, as a result, it is now targeting a 20% to 30% drop in carbon emissions from its oil and gas production by 2030 compared to a 2019 baseline, which noted that it was lower than the previous target of 35-40%.
“We need continued near-term investment in the current energy system, which relies on oil and gas, to meet current demands and ensure an orderly transition,” Looney said in the update.
“We have high-quality options across our portfolio, allowing us to choose only the best. We will prioritize projects where we can deliver quickly, at low cost, using our existing infrastructure, allowing us to minimize additional emissions and maximize both value as our contribution to energy security and affordability,” he added.
Results of the fourth quarter of 2022
In addition to Tuesday’s strategy update, BP today released its fourth-quarter 2022 and full-year 2022 results.
The company reported an underlying replacement cost benefit for the fourth quarter of $4.8 billion, compared to $8.15 billion in the prior quarter. Compared to the third quarter, the result was impacted by a below-average gas marketing and trading result following the exceptional third quarter result, lower oil and gas completions, a higher level of maintenance activity and refinery turnover, and lower and seasonal marketing margins. lower volumes, BP said in the earnings statement.
RC’s underlying profit in the fourth quarter of 2021 was $4.06 billion, while RC’s underlying profit in 2022 as a whole was $27.65 billion, compared to $12.81 billion in 2021.
Operating cash flow in the fourth quarter of last year was $13.57 billion, including a release of working capital (after adjusting for inventory losses, fair value accounting effects and other items adjustment) of $4.2 billion.
Operating cash flow was $8.28 billion in the previous quarter, $6.11 billion in the fourth quarter of 2021 and $40.93 billion in 2022. That cash flow was $23.61 billion in 2021. The Net debt fell for the eleventh consecutive quarter to $21 billion. end of the fourth quarter. This number stood at $30.61 billion in the fourth quarter of 2021.
BP announced a dividend per ordinary share of 6.610 cents for the fourth quarter, which was an increase of about 10 percent. The company also disclosed that based on its current forecast of around $60 a barrel Brent and subject to board discretion each quarter, it expects to be able to offer share buybacks of around $4 billion annually and said which has capacity for an annual period. increase in the dividend per ordinary share of around four percent.
“We are strengthening BP, with our strongest upstream reliability on record and our lowest production costs in 16 years, helping to generate strong returns and reducing debt for the 11th consecutive quarter,” Looney said in the the company’s latest results statement.
“What is important is that we are delivering to our shareholders, with buybacks and a growing dividend. This is exactly what we said we would do and will continue to do: act as we transform,” he added.
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