英國石油 (BP) 2011 Q3 法說會逐字稿

Welcome to the BP presentation to the financial community webcast and conference call.

I now hand over to Fergus MacLeod, Head of Investor Relations.

Hello, everyone, and welcome to our results conference call for the third quarter of 2011.

I am Fergus MacLeod.

Before we begin, I'd like to add a personal remark.

As many of you may know, I am moving to a new role as BP's Head of Strategic Planning and as a result this will be the last quarterly webcast that I host.

Jessica Mitchell will be taking over as Director of Investor Relations.

I have really enjoyed my nine years in investor relations, and I'd like to thank you all for that.

Today's presentation will be by Bob Dudley, our Group Chief Executive; and Byron Grote, our Chief Financial Officer.

Before we start, I'd like to draw your attention to our cautionary statement.

During today's presentation, we will make reference to estimates, plans, and expectations that are forward-looking statements.

Actual outcomes could differ materially due to factors we note on the slide and in our regulatory filings.

Please refer to our annual report and accounts, 20-F and third quarter Stock Exchange announcement for more details.

Both of those documents are available on our website.

Thank you, and I will now hand over to Bob.

Thank you, Fergus.

Hello, everyone.

Thank you for joining us.

Today is the presentation of our third quarter results.

I'm also going to use this opportunity to tell you about our direction going forward and at the speed at which we will move.

The last year has been an unprecedented one for BP.

So first, I want to update you on what has happened during 2011, but this year of consolidation is essentially over.

I want to tell you about the Company we will be in the future.

Back in February, I promised we would focus on value ahead of volume.

And today I will tell you what that means and how you can measure it.

Byron will then take you through our results for the third quarter.

I will then move on to a more detailed look at how our new direction will be delivered through a businesses.

I know we need to rebuild confidence in the Company and see its true value reflected in our share price.

We have firm plans to make that happen.

Our goal is to grow operating cash flows to a substantial degree, a degree that will allow us to both invest for future growth, and we have a great project pipeline, as well as directly increase returns to shareholders.

We are going to talk for about an hour, and then there will be plenty of time for Byron and I to take your questions.

In February, I outlined three priorities.

One, to put safety and risk management at the heart of everything we do.

Two, to rebuild trust in BP's ability to operate.

And three, to pursue direct value growth for shareholders.

These priorities remain central to our strategy.

Much has been achieved, and to give you the headlines, our new safety and operational risk organization is changing the way we work across BP.

We have announced new voluntary standards for how we will drill in the Gulf of Mexico, and we are introducing other new global standards for our operations.

For example, with blowout preventers.

We have undertaken an extensive program of 48 major upstream turnarounds scheduled for completion this year, of which the majority are now complete.

All of our businesses operate under our single Operating Management System, or OMS.

We have reshaped our upstream into three divisions, each of which report to me.

This increases accountability and uses and builds capability more efficiently.

We have centralized and standardized the way we work to drive uniformity, capital efficiency, and simplicity.

We are meeting our commitments in the Gulf.

We have already paid half of the $20 billion we committed to the Trust Fund to meet the costs of the Deepwater Horizon incident.

We have reached settlements with Mitsui and Weatherford and just last week announced settlement with Anadarko.

We've made the Company more secure financially.

We've strengthen the balance sheet, improved our credit ratings, and restored dividend payments to our shareholders.

We have agreed asset sales totaling $26 billion against our program of up to $30 billion.

We have achieved a record year for new [exploration] access.

Over the last 12 months, BP received awards in 11 countries for 67 new exploration licenses.

And there is still more to come this year.

We have won new opportunities in the world's fast-growing large economies.

In particular, we are now investing at scale in Brazil, and we have a new strategic alliance in India.

We are the first Company to reach our initial production target in Iraq.

Output at the super giant Rumaila field has grown significantly.

In refining and marketing, we continue to deliver underlying earnings momentum.

2011 looks likely to be the highest year ever of downstream earnings for BP and it provides valuable cash for the Group.

And we are getting back to work in the Gulf of Mexico.

As of today, we have three deepwater rigs permitted the Gulf of Mexico engaged in plugging and abandonment activities.

Just last week we received approval for the Kaskida exploration plan and subject to approval hope to have a fourth rig splitting the appraisal well in the very near future.

By the end of the year, subject to obtaining the necessary approvals, we hope to have five deepwater drilling rigs operating in the Gulf.

And as we move through 2012 and operations are fully restored, we hope, again, subject to receive necessary approvals, to increase this to seven deepwater rigs.

This ramp-up in activity will create a significant number of direct jobs within BP in the United States.

It would also provide US jobs for our contractors and suppliers.

Along with that, there will also be a significant number of indirect jobs.

So we will have taken major steps forward on many fronts in a relatively short space of time.

Of course, as we said up front, this has increased some cost and reduced some volumes.

But these were short-term effects as we laid stronger foundations for the future.

And this has brought us to a clear turning point.

Operationally, October 2011 marks a turning point for BP.

The low point in production has now been passed.

Most of the big turnarounds this year are complete, and production is rising again, and mostly in high margin areas.

Of course, future divestments will impact the reported numbers, but we are confident that underlying momentum is returning.

And there is more to come, as you will see shortly.

Let me talk about our future direction.

We have delivered what we said we would do in the last year.

We are now in action to become an even stronger Company.

So we are resetting the Company to be leaner and fitter, a BP that plays to its strengths.

Here is the outline of the 10-point plan to move BP forward.

Five are changes you can expect, some are already underway, and the second five are what you can measure us by.

Again, the first five are what you can expect.

First, and most important, we will continue to have a relentless focus on safety and risk management across all of our operations.

I am determined that BP will deliver world-class performance in safety, risk management, and operational discipline.

We will be a Company that systematically applies our global standards as a single global team.

Second, you can expect the BP to focus intensively on its proven strengths, those areas where we have deep seated experience and proven capability.

BP has distinctive strengths.

Let me identify key ones for you.

We are great at exploration.

We are very good at finding oil and gas and doing it at scale.

We are among the real pioneers of the deepwater and have a long track record of building value there.

We manage many giant fields around the world, and we develop valuable gas value chains.

We have learned lessons from the Deepwater Horizon incident, which have made us stronger.

We have the opportunity upstream to build the same scale and depth in new basins like Brazil as we have today in Angola, Azerbaijan, the North Sea, and the Gulf of Mexico.

And our downstream business is world-class.

It has a high quality set of assets and it is generating good earnings and cash flow.

Underpinning these strengths are deep capabilities of building relationships and developing carefully chosen flagship technologies.

We forecast world energy demand growing around 40% by 2030 and foresee a need for many sources of energy to meet this demand.

We believe our strengths position us very competitively as we face this future.

Third, we will be a stronger and more focused BP with a base of assets which is high graded and high performing.

Fourth, you will see a simpler BP.

Our organization is already much more standardized.

Our footprint is smaller with fewer assets and operations in fewer countries, and our internal reward and performance processes are more streamlined.

This will drive better and more sustainable performance in safety, quality and efficiency with less variation.

Fifth, you can expect greater visibility of the value we are creating.

We are going to improve transparency in the reporting of our business segments.

Beginning next year, we will break out the numbers of certain parts of our businesses, such as lubricants and petrochemicals in the downstream.

Now, points six through ten are what you can measure us by.

Point six, active portfolio management, to build value will continue.

In addition to the current $30 billion divestment program, we intend to divest a further $15 billion of assets over the next two years.

Planned divestments will result in a total of $45 billion.

This includes the sale of two US refineries announced earlier this year.

We want to focus our portfolio further on our areas of strength and deliver increased financial flexibility.

To put it in perspective, the targeted $45 billion compares against a current market capitalization of around $130 billion.

Seventh, you can measure a strong list of upstream projects coming onstream over the next three years.

By 2014, unit cash margins on production from this new wave of projects are expected to be around double our existing average.

Eighth, we will grow our cash flow.

Between 2011 and 2014, BP's operating cash flow will grow faster than volumes.

You can expect us to generate an increase of around 50% in operating cash flow in 2014 compared to 2011, around half from ending Gulf of Mexico Trust Fund payments and around half from our operations.

Ninth, BP will use this additional operating cash prudently.

We want to use around half for increased investment in our project inventory for growth and around half for other purposes, which would include increased distributions to shareholders through dividends and buybacks as appropriate or repayment of debt.

And finally, the strength of our balance sheet will be enhanced.

We will move to the lower half of our 10% to 20% gearing range.

So this is our approach in a simple 10-point plan.

Five things you can expect and five things you can measure.

This is underway to build a stronger and safer BP.

I am convinced that this is now the right direction for BP to take and the right path to get us there.

BP will be simpler because we will focus on our strongest assets with our strongest capabilities, and BP will be safer because we are fundamentally changing our approach to managing risk.

We will have our more detailed strategy discussion in February.

We will amplify on these ten points then.

With that, let me now hand over to Byron, our Chief Financial Officer, to review our third quarter results.

Thank you, Bob, and good day to those joining us on this call.

I will begin my review of the quarter with the trading environment.

The table shows the percentage year-on-year changes in BP's average upstream realizations and the refining marker margin for the third quarter as well as year-to-date.

Compared with the previous quarter, our liquids realization reduced by 3% to $104 per barrel but was 47% higher than a year ago.

Our gas realization increased to $4.95 per thousand cubic feet, up 9% on the prior quarter and 26% higher than a year ago.

Taking both oil and gas together, our third quarter average hydrocarbon realization was up 41% versus a year ago and 31% higher on a year-to-date basis.

Relative to 2Q, the refining marker margin fell by $1.40 per barrel to $12.50, but was 25% higher than the third quarter of 2010.

On a year-to-date basis, the refining marker margin is 24% higher than last year.

Turning to the financials.

Our third quarter underlying replacement cost profit was $5.3 billion, a production of 4% on the third quarter of 2010, driven by the low tax rate experienced in that quarter.

The underlying result reflects high realizations and a stronger refining environment, offset by lower production, increased turnaround activity and higher costs.

The underlying effective tax rate for the quarter was 31% compared to 25% in the third quarter of 2010, a rate which reflected the impact of asset disposals announced over that period.

We continue to expect the full year effect of tax rate to be towards the higher end of the February guidance at around 34%.

Third quarter operating cash flow was $6.9 billion.

Excluding Gulf of Mexico oil spill related post tax expenditures of $900 million, underlying cash flow was $7.8 billion, down 7% compared with the third quarter of 2010.

Cash flow was down 20% on the prior quarter, primarily due to the unusually large dividend received from TNK-BP in the second quarter.

We now expect our organic capital expenditure in 2011 to be around $19 billion, slightly lower than our original projections primarily due to the delays in getting back to work in the Gulf of Mexico.

In exploration and production, we reported a pre-tax underlying replacement cost profit of $7.1 billion for the quarter.

The primary factors impacting the quarter's performance relative to a year ago were high realizations, partly offset by lower production volumes and higher costs.

TNK-BP earnings and the gas marketing and trading contribution both improved compared to the prior year.

Costs in the third quarter were impacted by continued rig standby charges in the Gulf of Mexico and increased turnarounds and maintenance with this activity peaking in 3Q.

Production for the quarter was 3.32 million barrels of oil equivalent per day, 12% lower than a year ago and 8% lower after adjusting for the effect of acquisitions and divestments and entitlement impacts on our production sharing agreements.

The lower production primarily reflects the continued impact of suspended Gulf of Mexico drilling and higher turnaround and maintenance activity.

Once again, the reduction was weighted towards our higher margin areas, including the Gulf of Mexico, the North Sea, and Azerbaijan.

As we explained in February, turnaround activity in 2011 is higher than 2010, and significant progress was made on these turnarounds in 3Q.

Most turnarounds are underway or completed with 80% delivered on schedule.

This will support improved 4Q production and have longer-term benefits on reliability and integrity.

Production in the fourth quarter is expected to be higher post the peak turnaround season and the completion of the Reliance transaction.

Production will continue to be impacted by divestments and the pace of drilling activity in the Gulf of Mexico.

TNK-BP continues to perform well.

Our share of TNK-BP net income was over $900 million in 3Q as we benefited from a stronger environment and higher production volumes compared to the prior year.

We received cash dividends of $425 million in the quarter.

This brings the total dividends received from TNK-BP this year to $2.1 billion.

In refining and marketing, we reported a pre-tax underlying replacement cost profit of $1.7 billion for the third quarter compared to $1.6 billion for the same quarter last year.

The third quarter saw a return to strong operational performance following the outages of the second quarter.

Compared with a year ago, our result reflects an improved refining environment and a stronger supply and trading contribution.

These improvements were partially offset by increased turnaround activity and adverse foreign exchange effects due to the strengthening of the US dollar against the euro and the Australian dollar and a difficult marketing environment.

During the third quarter, we continued to realize significant refining feedstock benefits in the US due to our location advantage in accessing WTI price crude grades.

In the fuels value chains, Solomon refining availability remained high at 95.3% for the quarter.

During August, the last of the units impacted by the second quarter weather related power outage at the Texas City refinery was brought back onstream.

In the international businesses, petrochemicals production volumes were down year-on-year in the third quarter by approximately 10%, the majority of which was driven by plant shutdowns in Asia.

Looking ahead, we expect a normal seasonal decline in refining margins in the fourth quarter.

Our overall level of planned turnarounds is expected to be lower relative to the third quarter.

However, our Whiting refinery will undergo planned maintenance that will affect approximately half its crude capacity for the expected one-month duration of the activity.

In other businesses in corporate, we reported a pre-tax underlying replacement cost charge of $410 million for the third quarter, a reduction of $80 million versus the charge of the year ago primarily reflecting foreign exchange effects.

Current expectations are for a substantially greater charge in the fourth quarter as a consequence of the normal seasonal increase in functional costs retained within OB&C.

The expected underlying charge for the full year remains in line with February guidance.

The next slide provides an update on the costs and provisions associated with the Gulf of Mexico oil spill.

In the third quarter, we recognized a pre-tax charge of $600 million for the incident bringing the year-to-date charge to $400 million.

The 3Q charge reflects a number of provision adjustments and the ongoing quarterly expenses of the Gulf Coast Restoration Organization.

The total charge taken for the incident at the end of the quarter was $41.3 billion, including the $20 billion Trust commitment.

The charge excludes the Anadarko settlement reached on the 17th of October, which will be recognized in the fourth quarter reducing the overall pre-tax charge for the incident by $4.1 billion.

The settlement from Anadarko when received will be applied to the Trust Fund.

As a result, we expect to complete our payments into the Trust Fund by the end of 2012.

Pre-tax BP cash outflow related to oil spill costs for the nine months was $7.3 billion.

As we indicated in previous quarters, we believe that BP was not grossly negligent and we've taken the charge against income on that basis.

Turning now to cash flow.

This slide compares our sources and uses of cash in the nine months of 2010 and 2011.

Year-to-date, operating cash flow was $17.1 billion.

Before Gulf of Mexico oil spill related post tax expenditures of $5.6 billion underlying year-to-date operating cash flow was $22.8 billion, 7% lower than a year ago with higher working capital requirements being a major factor.

Operating cash flow in the fourth quarter will be impacted by the normal seasonal working capital build.

We received $6.4 billion of disposal proceeds for divestments completed in the first nine months, and additionally, held $4.5 billion in deposits for transactions to be completed subsequent to the quarter end.

These deposits were reported as short-term debt.

Organic capital spending for the first nine months was $12.6 billion.

In addition, inorganic capital spending was $7.9 billion and included the purchase of Brazilian assets from Devon Energy, the acquisition of the majority control of Brazilian ethanol and sugar producer CNAA, and stage payments of $4 billion in respect to our transaction with Reliance Industries.

The remaining payment of $3 billion was paid to Reliance on the 3rd of October.

Total cash held at the end of the third quarter was $18 billion.

Our net debt ratio was 19% at the end of 3Q.

As I mentioned earlier, the $4.5 billion of deposits for divestments to be completed subsequent to the quarter and was reported as short-term debt.

As these transactions complete, net debt will reduce accordingly.

We now expect the sale of our 60% interest in Pan American Energy, which is pending regulatory approvals, to complete in 2012.

BP believes that the transaction provides significant value to both parties and we'll continue to work toward securing the necessary regulatory approvals.

BP continues to hold a $3.5 billion deposit with respect to the disposal.

Gearing at year end, which will be impacted by seasonal year end working capital increases and the final payment for the Reliance transaction is expected to remain around 20%.

Our intention continues to be to reduce our net debt and realize the financial flexibility of a gearing level in the lower half of the 10% to 20% band.

Building on Bob's earlier remarks, I'd like to add a few thoughts on the medium-term financial framework for the Group.

From the first quarter of 2012, we plan to provide additional information around our segment results.

TNK-BP's result will be reported as a segment in its own right.

We will also provide additional disclosure on the performance of the fuels, lubricants and petrochemicals businesses as part of the refining and marketing result.

Since we announced the current disposal program, we've agreed transactions totaling $26 billion.

We still expect to have agreements in place for around $30 billion of disposals by year end, although as I have indicated, some transactions will not complete until 2012.

As Bob described, we now plan to increase the vestments by a further $15 billion to a total of $45 billion by the end of 2013.

This increase includes our intention to sell previously announced refining and associated marketing assets in the United States.

The increased disposal program allows us to focus our portfolio on areas of strength.

It also underpins the reduction in gearing and provides flexibility for other purposes.

The projected growth in cash from operations supports our plans to increase capital spending, as well as to fund other priorities, including higher distributions to shareholders.

We will review our 2012 distribution plans in February and adjust them in line with the approving circumstances of the firm.

That concludes my remarks.

Now back to Bob.

Thank you, Byron.

I want to return now to our three priorities of safety, trust, and value growth.

In terms of value growth, I have a fair amount of detail to give you on progress and plans for both upstream and downstream.

But first, a few points on safety and trust.

We have a clear strategy of embedding safety and operational risk management at the heart of BP.

We are growing deep capability in our Safety and Operational Risk Organization, or S&OR.

It now has nearly 500 staff with over 160 specialists hired this year and more being recruited.

Teams are now embedded in our operations.

They have the ability to intervene when necessary and are driving continuous improvement by supporting the ongoing implementation of BP's operating management system.

We also continue to implement lessons learned from the Gulf of Mexico oil spill and to share these lessons globally.

A dedicated team is overseeing implementation of the recommendations of the Bly Report and new standards and processes are being embedded.

Of note, we now have a new zonal isolation standard and a new rig audit handbook.

We are also changing how we work with contractors by focusing on developing fewer, deeper, and longer-term relationships.

We will implement a systematic selection process and strengthen our oversight and verification work.

This is something we will be implementing throughout 2012.

So I am pleased with the progress we are making, but we believe in continuous improvement, in safety more than anything else.

We will continue to drive change across the Company.

Turn to rebuilding trust.

Let me briefly update you on progress related directly to the Gulf of Mexico incident.

While we recognize there's ongoing impact in the region, the summer saw strong signs of improvement in tourism and fishing industries demonstrating that the region continues to recover.

We have now paid out around $7.3 billion in claims and government payments.

We have committed up to $1 billion to early natural resource restoration projects.

BP has paid nearly $10 billion into the Trust Fund.

We are also making progress in resolving liabilities.

We have reached settlements with Mitsui and Weatherford and just last week with Anadarko.

This latest settlement resolves the issues between the lease holders.

We continue to encourage others, including Transocean and Halliburton to step forward.

We continue to cooperate with all of the investigations and hearings into the incident.

The latest report to be issued was that of the final Marine Board inquiry.

Its core conclusion was consistent with every other official investigation, that the Deepwater Horizon incident was the result of multiple causes involving multiple parties, including Transocean and Halliburton.

The limitation and liabilities trial remains scheduled to commence in February 2012.

So uncertainties remain with further reports and proceedings to come, but some significant steps are now behind us.

Turning now to value growth.

As I outlined to you earlier, you will be able to measure it through growth in operating cash flow across the whole portfolio.

But it will be delivered through the distinctive strengths of each of our businesses through increased investment into focused, high quality assets and through the capabilities that underpin value in each business.

Let me start by briefly reminding you of the five key drivers of value growth in the upstream.

These include risk reduction, increasing investment with a particular focus on exploration, active portfolio management, growing our operating cash faster than production, and all the while focusing on the major growth engines which play to our strengths, in the deepwater, in gas value chains, and in giant fields.

We will talk more about these drivers in February, but let's look at some key progress today.

Let me start with exploration.

In this business, access to new opportunities is key.

2011 is turning out to be a record year for access to new acreage.

Over the past 12 months, we have gained access to 67 new exploration licenses in 11 countries with a total of 335,000 square kilometers of new acreage, including ten new basins.

In the third quarter of the year, we continued to make significant additions to our portfolio.

In July, we were awarded two deepwater exploration and production blocks by the government of Trinidad and Tobago.

In August, we completed our acquisition of a 30% interest in 21 oil and gas production sharing contracts in India.

This is the beginning of what we expect to be a long and successful working relationship with Reliance Industries.

Also in August, we agreed terms to farm into a deepwater exploration block in Namibia.

And it is this growing portfolio that will allow us to continue to increase our investment in exploration over the next few years.

We are on track to double our exploration investment.

By 2013, we intend to be investing around $1 billion in exploration drilling alone.

We are also increasing our spend on seismic and other geosciences activity as they are critical for sustaining exploration activity over the long term.

We will continue to access new acreage in the established basins as well as entering new basins.

We are an industry leader in seismic imaging and are continually pushing the boundaries of what seismic can achieve.

We have detailed plans to expand the drill out of our prospect inventory.

We plan to increase the number of wells drilled from six this year to at least double that next year and to as many as 15 to 25 in 2013.

We plan to significantly increase the number of wells which test new plays over the next few years.

The objective is to drive a higher contribution of reserves replacement from new exploration discoveries.

The additional exploration drill out also provides option value, as we can decide what resources to keep and develop and what we divest.

Recent successes include the Moccasin discovery in the Gulf of Mexico in which we have a stake, and successful appraisal wells and significant extensions to both the Mad Dog field in the Gulf of Mexico and the Clair field in the North Sea.

Realizing value means also knowing when to divest assets as well as when to access and invest.

So we are continuing to actively manage our portfolio.

We approach this by looking at assets and asking if they meet certain key criteria.

Do they play to our strengths?

How much risk do they involve?

And how much potential do they have for growth?

We invest significantly in promising assets where risk can be tightly managed and growth potential is strong.

We also acquire new assets as appropriate.

For example, our recent Brazil and India additions.

We divest assets which do not meet these criteria and where others can deliver more value.

This allows us to focus our leadership, technical resources, and organizational capability on those investments that will really grow value in our portfolio.

The best capabilities apply to the best assets.

We are planning a further tranche of divestments distributed across the world which will leave us with a somewhat smaller but stronger portfolio with higher production and operating cash flow growth rates.

While exploration will assure our longer-term growth, we are also paying close attention to our cash generation.

At the half-year, I said we were going to grow operating cash faster than production.

I now want to add some detail to that statement.

As I've explained, our divestment program continues to high grade our portfolio.

This will leave us with a higher growth core of operations.

We expect to see an increase in volume from the higher margin areas of Angola, Gulf of Mexico and the North Sea as new projects come onstream.

The average unit operating cash margins from these new projects by 2014 are expected to be twice the current unit operating cash margin for the upstream segment.

That excludes TNK-BP and assumes a constant $100 per barrel oil price.

This will contribute to operating cash growth after adjusting for the environment in any divestments.

This growth will be driven both by growth in production volume is new major projects start up and by the improvement in the margin mix.

Of course, operating cash flow momentum will also be driven by the return of higher margin production that was absent in 2011.

So here is the detail on the program of major project start-ups over the next three years.

After essentially no major project start-ups in 2010, we are now expecting to see 15 major project start-ups by end of 2014, beyond the two already seen this year.

Of the 15, we expect to see six in 2012, including three in Angola and two in the North Sea, and nine others in 2013 and 2014 across our three growth engines.

We have made the final investment decisions for all of these projects.

As I have said, they are predominantly in our higher unit margin areas of the Gulf of Mexico, the North Sea and Angola.

A major factor in operating cash flow momentum will also be a return to work in the Gulf of Mexico.

Preparations for getting back to work are progressing.

Clearly, all our restart activity is contingent on approval by the US regulators, the Bureau of Ocean Energy Management, and the Bureau of Safety and Environmental Enforcement.

As I mentioned earlier, to date we currently have three rigs permitted in the Gulf of Mexico.

Just last week we received approval for the Kaskida exploration plan, and subject to approval, hope to have a fourth rid spudding this appraisal well in the very near future.

By year end, we hope to have five rigs operational with the return to service of our Thunder Horse PDQ rig.

Looking forward to 2012, our plans include drilling exploration, appraisal, and development wells, and the start-up of an additional two rigs.

Our criteria for restarting operations include new voluntary standards that meet or exceed regulatory requirements, including extra safeguards on blowout preventers, more third party inspection, new plans for containment and response based on worst case discharge scenarios.

By 2013, we expect to return to around the historical level of new well delivery.

Clearly, there is some remaining uncertainty in respect to timing, but our intent and readiness to get back to work is clear.

Turning now to Russia.

TNK-BP is a very strong part of our growth momentum.

It represents a significant investment for BP into the third largest oil company in Russia.

We remain pleased with its continuing strong performance.

A solid track record of growth is being maintained with production noticeably surpassing 1 million barrels per day net to BP for the first time this quarter.

TNK-BP has been a major taxpayer in Russia with over $150 billion of duties, levies, and taxes paid today.

BP has received around $17 billion in dividends since the formation of the joint venture in 2003.

And over the last four years, this has represented roughly $2 billion per annum of cash flow to BP.

TNK-BP also has significant future potential.

Plans are in place to offset mature field decline while world-scale greenfield projects, including the Yamal and further development of the Uvat area provide the potential for steady growth.

Its gas business also has opportunities, for instance, the Rospan development.

And TNK-BP is expanding internationally with the recent addictions of Venezuela and Vietnam assets to the portfolio through purchases from BP.

We remain committed to our investment in TNK-BP and to our ongoing presence in Russia.

Let's turn now from the upstream to the downstream.

The focus of our refining and marketing business since 2007 has been on turning the business around based on a consistent set of priorities executed in a systematic and disciplined way.

This began with safety combined with a focus on improving the quality and efficiency of the business and restoring its earnings momentum.

As a result, we now have the platform to sustain and grow a truly world class downstream business.

We have a clear definition of world class.

For us it means being the highest quality business measured by delivery of leading returns and cash flow growth.

Our business in refining and marketing is that of hydrocarbon value chains and it incorporates three business models, fuels, lubricants, and petrochemicals.

We are today delivering returns in each of these business models at or near the top of the competitive range.

Let me expand on what it takes to be world class and what we focus on.

Safety remains the top priority, as it does across BP with our safety and operational risk function at the heart of all of our operations.

We are committed to leadership and process safety and have returned operations to strong, competitive performance in reliability and availability.

Hydrocarbon markets are highly competitive and it requires excellent execution, the efficient use of all resources and the right capabilities to win.

BP is achieving leading returns that are attractive and materially differentiated relative to the marginal price setter.

We have managed our portfolio actively investing in businesses where we have strengths in terms of core location configuration, integration, technology, and brand while divesting assets that do not display these key strategic characteristics.

We have developed leading market positions and will continue to invest in these to sustain our base business.

These leading positions attract high utilization and drive strong cash flows.

We are growing our margin share by investing in expansion and margin capability.

The most material example is the major repositioning of our Whiting refinery.

We also have excellent exposure to growth via our petrochemical and lubricant operations.

We plan to extend our footprint within these businesses with a focus on growth markets.

All of this will continue to be achieved within a disciplined financial framework.

Let's turn now to refining and marketing's financial performance, focusing firstly on earnings and returns and then on operating cash flow.

This chart is new and helps illustrate the sources of earnings growth that has been delivered to date relative to a 2007 baseline and all of 2009 refining margins.

As you can see, we expect to deliver more than $6 billion of incremental earnings in 2011 versus 2007.

This confirms we are on track to deliver over $2 billion of earnings growth by 2012 relative to a 2009 baseline.

The red line indicates actual pre-tax returns which have approximately doubled since the low in 2008.

This momentum has been achieved while yearly average refining margins have fallen from over $15 a barrel in 2008 to between $9 and $12 a barrel over the last three years.

Beyond 2012, earnings momentum across the business is projected to continue despite competitive pressures.

On top of this, the material additional earnings from the repositioning of the Whiting refinery towards heavy feedstock advantage are indicated separately on the chart.

The Whiting refinery modernization project is scheduled to come onstream in the second half of 2013.

All of this is at 2009 margins or a refining marker margin of around $9 per barrel.

At higher levels such as today, refining and marketing will clearly earn more.

Here we see the drivers of our operating cash flow momentum and a chart illustrating this over the period 2011 to 2014.

Earlier, I talked about the importance of ensuring a strong and sustainable base operation.

We will invest in our base at around depreciation levels to maintain our competitive position.

We will also invest to further improve efficiency and margin capture capabilities, including a continued focus on working capital and project management effectiveness.

Refining and marketing has a set of high quality growth activities to underpin improvements in cash margin capability.

The largest component by far is the Whiting refinery modernization project.

This is indicated separately on the chart.

As discussed during our 2Q results, we expect this project to generate in excess of $1 billion of operating cash flow per year depending on the environment.

We also have material options underway to expand cash margin capability in other areas.

These range from smaller refining upgrades and logistical optimization within the value chains to new product and process technologies.

A significant part of our downstream business is exposed to growth markets and we expect this to increase as we invest into these markets.

So in summary, BP has a world class refining and marketing business which is now performing very well relative to its competitors and will contribute materially to BP's operating cash flow growth.

So bringing all of the parts together for the Group as a whole, we can see how we expect operating cash flow to develop over the next three years.

We project an increase of around 50% in operating cash flow by 2014 at $100 a barrel, approximately half from ending Gulf of Mexico Trust Fund payments and half from operations.

You have seen the many drivers of this improvement, but we can summarize the four primary drivers as, one, growth from new projects coming onstream, mostly in high margin areas including Angola.

Two, the restoration of high-value production which is off-line today due to the positing activity in the Gulf of Mexico and our increased turnaround activity.

Three, the Whiting refinery upgrade coming onstream, and, four, completion of contributions to the $20 billion US Trust Fund.

So to sum up, the management team and the BP Board fully recognize the need to move forward and rebuild confidence in the Company.

From this month, with most of our turnarounds complete, we have accelerated the engine to deliver a clear and competitive future for everyone who has a stake in BP.

Today we have given you our strategic direction and a solid sense that we can and will deliver that future.

Let me end with a few specific milestones you should look for from BP.

By the end of this year, we expect to have completed our extensive 2011 program of 48 major upstream asset turnarounds.

We hope to have five big deepwater rigs operating in the Gulf of Mexico.

We will have agreements in place for the major part of our planned original $30 billion divestment program.

And we will have met three-quarters of our commitments to the Trust Fund.

2012 will be a year of milestones with momentum continuing to build in 2013.

The full operational and financial benefits of the 2011 turnaround should be evident.

We will complete our payments into the Trust Fund by the end of 2012.

We will extend our divestment program to $45 billion with a further $15 billion of divestments by the end of 2013.

And also in 2013, we expect to bring onstream the major upgrade to the Whiting refinery.

So that by 2014, you should expect 17 major upstream projects to have been brought onstream since 2011 outside of TNK-BP.

The firm's overall operating cash flow to have increased by around 50% in a $100 world.

And you will see us using around half this projected incremental cash for increased investment and around half for other purposes, including increasing distributions to shareholders.

Going forward, we expect to be able to increase distributions in line with the improving circumstances of the firm.

And as Byron noted, we expect to review our 2012 distribution plans in February.

So to conclude, moving forward, our priorities of safety, rebuilding trust and delivering value growth remain unchanged.

We have a well-defined path to grow value, a clear 10-point plan, a plan that shows you what you can expect and what you can measure.

It concentrates our distinctive talents on high-value, advantage assets and it is sustainable through our new structures, process, and discipline.

The past year has shown me just how much can be achieved when BP aligns and applies itself.

In the past year, this Company has been steadied, turned around, and now this month with much of our high margin assets returning onstream, we can march ahead.

I am very confident we are on the right path and I am determined that it will reward all those with a stake in BP's success.

With that, Byron and I are now ready to take your questions.

(Operator Instructions)

Thank you, operator.

The first question comes from Alejandro Demichelis at Bank of America Merrill Lynch.

Go ahead, Alejandro.

Yes, good afternoon, gentlemen.

Three questions for me.

The first one is, could you please define what is the base for that cash flow growth, what is included, what's not?

The second thing is you have been talking about using half of your increased cash flow into CapEx.

Does that mean we should be looking for around $30 billion in CapEx by 2014?

Then the third one is in terms of disposals, outside of the refineries that you have earmarked already for disposals, should we assume that all of the disposals are coming from upstream or not?

So Alejandro, hi, this is Bob.

I will take some of these, and then I'm going to ask Byron to be very, very clear in terms of the base cash flow for 2011, which is 2011 actual cash flows we are using as the base.

On the disposals, I think that's a fair conclusion, that putting aside the refineries, the additional disposals will likely come from the upstream, a variety different areas across the Company.

Byron, maybe you can clarify the cash flow [pace]?

Yes, Alejandro.

As Bob said, the base for our projections is the actual delivery of cash flow in 2011.

That is what is indicated on the first page of the Stock Exchange announcement shown in more detail on the cash flow statement, which is through the first nine months of the year $17.1 billion.

I know some analysts are asking the question, should they be adjusting for working capital effects or not.

It's the actual delivery of cash flow in 2011 that we will use as the base, recognizing that we still have a three-month period to go, but we believe we've got a good understanding of what that's going to turn out to be.

As far as 2014, again, there is no presumption on any material working capital movements in that period, but we believe that the projection that we are providing you is robust against normal swings and working capital on an annual basis.

Back to Bob.

So then the CapEx number that we are left with is $25 billion to $30 billion.

Is that right then?

Well, you will have to take a look at where we are in the course of the -- that's a nine-month figure I think you are taking.

$17.1 billion is the basis that we are at through September, so we have another quarter to add to the $17.1 billion we've accumulated over the course of the first three quarters of the year.

Okay.

Yes, and specifically on your CapEx point, Alejandro, I think the key point is around 50% of the incremental cash from operations going into capital spending.

As you said, the fourth quarter of the year typically is not so strong in terms of cash from operations because of normal year end working capital increases.

So you pick your number.

I don't know what your estimate is, typical number is $21 billion, $22 billion for the year.

Around half of that increment from there, the 50% increase around half of that 50% increase from $20 billion, $21 billion going into CapEx.

If you start from a base of $19 billion, typical numbers that I've seen in analyst notes are sort of $24 billion, $25 billion, but clearly, those are not guidance coming from us.

They are the sort of numbers that are in the market at the moment.

Next question comes from [Tepan], [Tepan Jothalingam] now at Nomura.

[Tepan]?

Yes, thank you.

Good afternoon, gents.

Just a couple of questions.

Firstly, just coming back to disposals, could you maybe give us an indication of whether you think the disposals will have a similar impact on cash flow as the disposals already made in the program?

Secondly, just if you could give a little color on your assumptions on the MidCon spread for the downstream?

And then lastly, it's good to see BP on the front.

I was just wondering, in terms of sort of timing, does the management team, the Board feel more confident around the provision made from the [condo?] I don't know whether you can give any color in terms of any discussions you are having with the US administration or the DHA.

That would be great.

Thank you.

Well, I think, [Tepan,] -- this is Bob.

A couple things on the disposal.

I think the cash from future disposals, it will depend on the assets but there will be upstream assets.

It will be a variety of assets.

Some will be pipelines, gas plants, as well as production.

So it's probably not right for us to go beyond saying anything around that, but it will be similar in character.

On the provisions in our discussions with the US government, it isn't right for us to talk about that in terms of provisions.

We think we have provisioned the right amount, as does the Board, for where we are today.

I think it's probably worth expanding a bit because a number of questions have come in today around our ability to settle legal proceedings in this assumption by 2014.

We do assume underlying that we will not include, we won't have cash outflows in the year 2014 as a result of the Deepwater Horizon incident.

We've said a number of times, and said it earlier today, we would like to resolve the litigation and any investigations from the event, including fines and penalties, but only if we can do so on reasonable terms.

And our settlements with Mitsui and Anadarko are good examples of this.

But by 2014, we do believe that those expenditures will be gone.

If they are not by 2014, and we've not been able to reach any reasonable resolution, whether it's private litigation, government claims, we could be in litigation with those claims over a period of many years, possibly very many years.

So we are absolutely ready to settle, prepared to defend the claims in court, and we are preparing for the MDL trial litigation in February in New Orleans right now, although we would rather reach a settlement if we can do so on some reasonable terms.

But it probably wouldn't be right to go beyond that, I think, at this point, Tepan.

And in the MidCon spread, you will, of course, we'll know and see that production from the Bakken shales and other things continues.

There's bottlenecks in Cushing that are creating those spreads.

I think that will continue for a while.

We are all watching to see whether those pipelines come through in the US

As I said in my earlier remarks, currently both Whiting and Toledo are benefiting from the disparity between WTI price (inaudible) feedstock into a global-based product market and that looks, as Bob said, likely to continue as we move into 2012.

Yes, the Whiting refinery and the Toledo refinery both benefit from this for us.

We just watch it all very carefully.

Okay, Fergus?

Yes, thanks, [Tepan.] Next question comes from the United States, another name nice to see back on the list, Doug Terreson.

Doug, are you there?

I am.

Good morning, guys.

First, congratulations on your environmental and remediation efforts on the Gulf Coast because there has really been minimal Macondo oil in the area since the well was contained last fall.

And on this point, between record tourism on the Gulf Coast, which I think Bob mentioned that happened this summer, plus the negligible effect of tropical storm Lee which pretty much sat right on top of Macondo for three to four days last month, it seems that if there were residual oil from Macondo that were meaningful we would probably know about it by now.

So my question is, how do these two items affect your ability to progress discussions with individuals and the businesses and municipalities, et cetera, towards final settlement?

Meaning, has the tone or substance changed as it relates to perceived liability in light of the fact that it appears that we have much better visibility in this area on this potential liability?

Well, hello, Doug.

It's been a long time since I've heard your voice.

It has, Bob.

Good to hear from you.

You too.

You are right.

One of the uncertainties that was overhanging BP for some time over the last year was that even though primarily the beaches, the cleanup effort has been very, very extensive on the beaches.

Water quality measurements are showing low impact now, the fishing in most categories is back up and tourism is back up.

But there was this lingering feeling that if there were a hurricane in the Gulf this summer that there was all this oil unseen that was going to bring itself up on the beaches.

Clearly, that has not happened, like you say.

The work -- we continue in discussions with the plaintiff's attorneys around various settlements.

We will see whether that results in anything.

We have paid out $7.5 billion in claims to individuals and businesses across the Gulf Coast.

That work is still going to continue on.

Ken Feinberg's facility is still opening, and there are some payments out of that, but they continue to level off.

I think those who actually believe that a storm would result in a second wave of real bad damage I think we have not heard much about that.

In that sense, it does remove a big piece of uncertainty from many of the communities, which is good.

But can't really comment on the tone with the remaining litigation.

That we will just have to see between now and as we head into the trials in February.

Okay.

Thank you.

It sure seems like it fits into the turning point category that you guys have used today.

But thanks a lot, guys.

Thanks, Doug.

Thank you, Doug.

And now back to the UK and Jon Rigby at UBS.

Jon?

Hi, I have two questions actually.

One is on the spill liability.

The second is on restarting the Gulf.

On the spill liability, can you just go into some of the specific numbers and just confirm for me, as I understand it, if I look at your press release, you've accrued for the full $20 billion that you're going to pay into the Fund, less, obviously, what you've paid to date.

But you appear to be indicating that as far as you can see that everything that would fall under that would be a shortfall of $6 billion, or $6.1 billion, id est, that actually, it's probably an over accrual of $6 billion.

Is that correct?

And then secondly, obviously, with Anadarko, you could make a judgment call that it say that you were probably $10 billion of comforts on your provision.

Would that be a correct interpretation of where we stand right now?

The second is just on the Gulf of Mexico restart.

I like the visibility you give on the rigs and the restarts there.

Can you just talk a little about what the pace of drilling you were doing pre-Macondo and the capability of the organization that you see going forward to be able to run X-number of wells.

What do you think the capability, or how many wells you think you could be drilling at any one time in the Gulf with this sort of new organization you put in place?

Thanks.

Well, I will ask Byron to comment on the provisions.

Then I'll come back to the capability one, which is a vital question.

Jon, relative to the $6 billion, yes, in the disclosure we've indicated that we haven't taken specific provisions against the final $6 billion within the $20 billion Trust Fund.

But there is a significant range of uncertainty that continues to exist, and there may be other things that we can't currently estimate at all that would be calls on that $6 billion.

So the only thing you should take away from that is that there is still considerable (inaudible) relative to what we can see at this moment in time within the $20 billion Fund.

We wouldn't be expecting to reduce that, because we've taken a provision against the whole amount, and we will continue to hold that until the uncertainties become more certain.

As far as the $4 billion that we are receiving from Anadarko, yes, that will reduce the provision by $4 billion in the fourth quarter results.

Back to Bob.

Yes, Jon, this question of capability, given that we do have such a big position in the Gulf of Mexico, has been absolutely critical.

It's taken a lot of our time.

Maintaining the capability we had was critical.

We obviously dropped way off in 2010.

There was a lot of uncertainty with our staff, a lot of question marks.

People were wondering, would we be able to get back to work, and be allowed to get back to work in the Gulf?

We worked very hard with our -- and there was a lot of headhunting that was going of talent within BP.

We also have a lot of dedicated people, absolutely dedicated to it.

We have retention agreements that were put in place for much staff, and we are now clearly getting back to work, three rigs.

We've got the staff to be able to support five rig lines, so it's five rigs with work and then anticipated work going forward.

We've got actually three rigs that we intend to add to that.

We said seven here total, two more in the presentation, but we are now planning on eight rigs getting back to work.

We do have the staff.

We do have the capability.

We have beefed that up and brought in some additional capability as well.

And so the Company absolutely did not want to lose that great deepwater capability that we had in terms of people.

I think that the worst period and the worst fears we had there are now behind us.

How does eight compare with what you were running for early 2010, 2009?

Well, certainly, early 2010 I believe it was five.

I can't give you the exact numbers, Jon, but if we get up to eight next year, that will be the highest we've ever been in the Gulf of Mexico.

Okay, great.

Thanks.

And we have quite a significant set of exploration prospects, as well, in the Gulf.

Thanks, Jon.

Next question, also in London, from Alastair Syme at Citi.

Alistair?

Clearly, you've lost a lot of earnings this year from the Gulf and also over derisking activities.

I don't suppose you would care to sort of quantify that and maybe think about how much of that earnings you expect to get back by 2014?

And then secondly, very quickly, on the divestments, just on the big picture, I'm struggling to think what it is about the environment or within your own business that has made you want to raise this divestment target today?

Let me answer the first one first.

The divestment -- we are not in a position where we need to divest assets for cash.

That's clearly not it.

What we want to do and what we said we would be is a Company that plays to its strengths and we will focus its capability and on a somewhat smaller footprint.

There may be some risk aspects, derisking with certain assets as well.

But we have a very, still a large portfolio of some pieces of it with very mature parts of the asset set that others may value more than we do, that don't have the growth potential.

So it's those kinds of divestments that you could see going forward.

In terms of quantifying, I will just say that taking the time out, doing the integrity maintenance turnarounds on our assets not only in the Gulf of Mexico but around the world I believe is clearly good business.

And so as those assets come back on, as they have been during the month of October, I think we are going to see value from that.

It's an investment we made consciously this year.

Of course, everyone in the Gulf of Mexico, and with BP being the largest producer, had assets down during the drilling moratorium.

And we, more so than others, sustained the idol rig costs more than others.

But that period is also behind us now.

And also I'll just add that if you wanted to get an idea of the impact, the opportunity cost of that investment for the future, just look at the unit margins over the last 18 months and you can see the impact quite clearly, I think, and the potential for recovery.

Staying in London, Lucas Herrmann at Deutsche Bank.

Lucas, are you there?

Yes, good afternoon, Fergus, afternoon, gentlemen.

Two or three, if I may.

Firstly, the change in tone, Bob.

The last several quarters you've been very cautious in terms of comments particularly about getting back to business in the Gulf.

You've been very sensitive to the authorities.

Today that tone has changed dramatically.

I appreciate wholeheartedly that integrity is moving towards an end, if integrity ever ends, but just some more commentary on why did you feel that you can be much more aggressive now in your statements about back to business in the Gulf, more rigs coming onstream, higher distributions potentially in the future to shareholders?

Secondly, I just wanted to get a better fix, if I could, around production through Q4 and beyond.

My impression is that you are still consolidating Pan American.

Reliance comes in next quarter.

On which basis, the guidance that you have given for the full year, now I would say, if anything, seems very conservative.

Is that a reasonable assumption?

And thirdly, and I guess it follows on from Jon's question earlier, to the extent that you are able to build out your drilling plans as you'd wish in the Gulf of Mexico, when, if at all, do you think you could return to the kind of levels of production that we saw in 2009?

Lucas, thank you.

That's quite a few questions there.

I think the first one, it is important.

We have had a change of tone.

I would say that it is not just the Gulf of Mexico in terms of the change of tone in the sense that if you look across the assets and whether it's Angola or the North Sea and some of the Gulf of Mexico, these integrity maintenance programs are starting to come on now, so we've got taps opening up just in the last three weeks.

The month of October has been a very important change for us.

So there is a change in tone, a change in spirit across the Company.

If you are in Aberdeen or Houston or Sunbury, you can feel it.

People do feel differently.

I certainly don't mean to be aggressive about getting back to work in the Gulf of Mexico.

What people have done in the Company is worked incredibly hard to take a step back from drilling, how we manage our own activities, how we interact with contractors.

We have developed a new set of voluntary drilling standards in the Gulf, which we will adopt much of that and use it globally, and getting ready, and then approaching the authorities, who I think value the work that we're doing.

And they see the changes and the commitment to it.

And as a result of that, we are step-by-step getting back to work in the Gulf.

It's been part of rebuilding trust.

Certainly, the work that I outlined -- I just want to underline -- every bit of it will require approval by the authorities going forward.

We don't take anything for granted.

But I see an organization who is doing the right things here, provides a lot of economic benefit to the US I think this is what the authorities would expect from us.

In terms of distributions, I see the high margin barrels coming back onstream, and you also can see between now and 2014 these 17 major projects that will come on, with high margin barrels.

The margins from those projects will be roughly double the existing portfolio.

So that's why we have the confidence to talk about increased distribution, increased operating cash flow, which is the real key value metric that we are targeting.

The production guidance for this year, which we laid out at 3.4 million barrels a day, we always said this is not exactly an easy number because the timing of divestments and the timing of some acquisitions, and we weren't sure when exactly they would come through.

I would note that we had assumed an earlier bringing in of the Reliance production.

That hasn't happened.

Pan American is still awaiting some approvals, but I can say that our 3.4 million barrel a day estimate that we will comfortably exceed that for the year end total.

Lucas, I would just point out that the average volume to date through the third quarter was 3.44 million barrels of oil equivalent per day.

Clearly, we expect to exceed the original target by some amount.

Again, as Bob said, driven by the timing of various activities which was always uncertain when we laid out the forecast.

Okay.

And Gulf of Mexico and returning to 2009.

I mean, perhaps associated with that, you could give some indication of the extent to which you have lost Gulf barrels specifically as a consequence of your actions, which we could expect to return relatively quickly integrity and those that have suffered the underlying decline that one would anticipate from the field given your inability, or given the inability of all to go back and drill and [maintain?]

So Lucas, you will know that the decline rates of the characterization of the deepwater in the Gulf of Mexico is a 15% to 20% decline.

So the lack of being able to get back there and get in and drill water injectors and producers has certainly brought production down.

Our annual production this year will be somewhere around 250,000 barrels per day plus.

I expect on 2012 we will be relatively flat because of those decline rates as we ramp up the activity.

So we don't expect to get our assets right back up to where we were in 2009.

What we need is to get back in and do the basic recompletion work.

We will have some programs of turnarounds in 2012 as well that will keep probably our production this year and next year around the same level.

We will do a big turnaround in the Atlantis assets, for example.

But these are very high margin barrels, and we are going to sustain that decline rate and level it out.

You will know how profitable that is.

And then as we continue on with some new projects coming on in the Gulf, 2012, 2013, this is going to be a very, very important province for BP going forward.

Okay.

Thanks very much, gentlemen.

Yes, so, Lucas, I guess the key point there is 3Q is the low point.

We do see it is a turning point, and the underlying the momentum returning and if 2011 was a year of two halves in the Gulf of Mexico then if we are allowed to return to work as we hope and in a way to create jobs that Bob was talking about then 2012 could be a mirror image, but a number of years to get back to where we were prior to the incident.

In terms of production guidance, I guess I should just draw everybody's attention to the fact there is a slide in the deck that we talked to earlier showing the expected production impact of divestments.

Clearly, that's no precision there because of the precise timing of the completion of transactions.

But you would expect to see a material impact from the divestment program.

We do expect underlying growth.

Clearly, we will have to separately identify the impact of divestment on reported production for you as we go forward to allow you to see that underlying picture, and we will provide guidance for 2012 as normal in the early part of next year.

Now coming back to the United States, Robert Kessler at Tudor, Pickering.

Robert?

Hi, Fergus.

Congratulations on moving on and not having to speak to us any longer.

I'm sure BP will be well served in your new role.

I am not sure I caught on your answer thus far just provided on the production guidance.

Can you give us some fairly explicit numbers for 2014?

And then on the Gulf of Mexico, just looking for a little bit more on your indications of activity.

How many total drilling permits have you waiting in the queue awaiting approval?

There are a number of others I had.

I thought your slide 28 was fairly useful, the end year production from new wells.

You may tell me this is more of an offline clarification, which is fine, but I thought I would throw these out, nonetheless.

Interested in the associated well counts together with this production contribution.

Interested if this is full year average as opposed to an exit rate kind of number?

And then finally, would you include in this chart things like pressure maintenance?

A water injection well obviously benefits production.

Is that included as a production add in this chart or is it simply producing wells?

Thanks.

Well, after you said those very kind things, I guess I should probably take this one.

First of all, on production guidance.

I mean, clearly, as I think Bob made clear earlier on the focus is on value, not volume.

Volume is in a very real sense an outcome of the program to rebuild value that we've got.

We will help you understand what the volumes are as we move forward and the interaction between divestment of [assets] and underlying growth.

But we are not going to get back into giving year-by-year production guidance.

We will give you a value goal, and that's what we are working towards.

I think we'd better take the drilling question offline, if you don't mind, Robert, due to that's a very specific question.

Clearly, everything depends on us being allowed to return to work in the way that we hope and plan.

We will take that one with you offline, if I may.

Can I just clarify one thing, Fergus?

This is Bob.

We do not have an inventory of permits sitting there waiting.

The practice right now is that you apply for the permit when you have the rig and you are ready to work.

Then you apply for the permits and then they come through.

We have the permits for the three rigs that are running today and doing that work.

We do have one permit, which the exploration permit was granted on Friday.

There is a drilling permit that should come, I think, in a very reasonably short period of time.

But I just want to make clear that there is not an inventory of permits sitting there waiting.

We will be ready when we are ready to submit them.

That seems to be the practice now with the regulator.

That's helpful, Bob.

Can I ask why then Kaskida took front seat on the next rig instead of some seemingly quick payback development type activity?

Well, think it has to do with we have been working with the Kaskida prospect for some time.

We and the regulars, of course, recognize the timing on leases has driven that.

So we've been working with them on the timing on the leases and to be ready for that as well.

And those other ones you talk about, we need to get some of the plug and abandonment work done soon in those fields.

That's what's underway now.

And some of the kind of activities, water injections, recompletions, other things that you're talking about.

Again, subject to approval by the regulators, those will be coming down soon.

Thank you.

Thanks, Robert.

Now returning to London, Lucy Haskins at Barclays Capital.

Lucy?

Good afternoon.

Two questions, if I may.

You talk about some upstream divestments as part of the incremental program.

Have you got a feel for what you see as the right size for the upstream business?

Should we be thinking about 3.4 million barrels per day as the kind of starting point there?

And the second question was with the new transparency in terms of the fuels, lubes and petrochemicals disclosure that will be starting next year, is that also sort of an indication that if perhaps others see higher value in that part of the portfolio you might want to look to resize your downstream business as well?

Yes, Lucy, so if you think about BP in the past, roughly, roughly a 4 million per barrel day oil Company with 1 million barrels a day being TNK-BP and the other piece of BP being 3 million barrels a day you're not far off there.

I think when we go through and we look at the divestments that 3 million-barrel-per-day piece will be taken down significantly in the 2.3-million-barrel to 2.4-million-barrel per day range after the divestments.

We've got a little ways to go there, but that will be pretty close.

Regarding the transparency, we just think we have good businesses in lubes.

We have good businesses in petrochemicals and being able to provide more visibility in that value should see more value in the overall share price of the Group.

Not everyone discloses that, but I think we will try to set a trend there by providing that visibility to you.

Thank you.

Thank you, Lucy.

Now on to Jason Kenney at ING.

Jason?

Hi.

Thanks for taking my questions.

A couple questions away from the US Gulf of Mexico.

The Reliance chairman has said that your joint venture is not restricted to India.

I was just wondering if you had already progressed other areas of interest outside of India where you could pursue that combination there?

And maybe related, obviously, you are ramping up your exploration commitment over the next few years.

India is one of the largest acreage exposures you have with the access slide on page 23, 240,000 kilometers squared.

Australia is another sizable chunk.

I'm just wondering if you could give us some sort of insight as to where those 15 to 25 exploration wells are going to be focused?

Are they in the larger acreage areas?

Or are they in a higher margin areas, which might be smaller acreage pieces?

On the back of that, I very much appreciated the commitment to the North Sea with the Clair Ridge development activity announced earlier in the month, and obviously, you are looking at 200,000 to 250,000 barrels per day through 2030, I think, from the North Sea.

I mean, how much exploration spend do you have to commit to the North Sea in order to maintain that kind of level of output on such a long-term basis?

Well, Jason, thank you.

Mukesh Ambani is the chairman of Reliance.

We were just out there in India two end a half weeks ago.

Spoke with him.

This business in India where we have 30% with Reliance is essentially the majority of the gas production of India, which is such a growing economy and in need of gas.

Our cooperation there is based on further developing the gas.

They have a field that we've all known and we knew it when we went in.

It was under decline, but we were already in action with our exploration teams looking at satellite fields.

We spoke to the government about hopefully getting the approval to fast-track the development of satellite fields to bring that gas in.

But because this business right now is not only the production of gas, but there's a 50/50 joint marketing joint venture for gas marketing.

Gas value chains is the basis right now of our relationship with Reliance.

So it's a country that is so hungry for gas that I could see working with Reliance outside of India on projects to bring gas into India, although it's early days on that.

Our focus is, of course, right now on the production there.

Ramping up exploration, we will ramp up exploration.

It's a variety of different kinds of prospects.

We are looking at ten new basins.

We've got 15 new fairways that we want to test in our inventory of prospects.

India is one of those.

Out of those 21 blocks, some are more prospective than others.

We will focus on that for sure.

Australia is a new basin that we are very enthusiastically have evaluated and looked at.

It has provided some interesting insight.

But it's a very new basin.

So it's a high risk, high reward exploration which you will see more of BP doing.

But other areas, Brazil, we are now investing and operating at scale in Brazil.

There is exploration and appraisal work happening there.

We are in the middle of an appraisal well right now in a prospect called [Etypu] that we will know more about by the end of the year.

Trinidad acreage is more frontier acreage up in the north away from the island that could open up some new prospects up there.

And in Angola, there is pre-salt potential in Angola.

You will see more exploration by BP in that pre-salt that nears in many ways what's happening in Brazil.

The analogs are there.

In the North Sea, we do have exploration prospects there, up west of Shetland.

We will continue to look at that.

The northern and central southern North Seas, there have been a lot of exploration there, but the west of Shetland has got the biggest promise there.

Clear Ridge, huge field, we found it in the 1990s.

It's taken a lot of technology and the teams have done a great jon in locking that with horizontal wells and the imaging and the seismic and an appraisal well which has found a younger reservoir off the top of it.

So we are very enthusiastic about that.

So it is those kind of prospects around the world, both big and new and some in our existing basins that we will be ramping up the exploration on, Jason.

Excited about it.

Got a good team on this.

Just to give you a sense of that, Jason.

We are planning to test as many new plays in the next five years as we did in the whole of the last decade, so it's a real step up in activity.

Coming back to the US, Pavel Molchanov at Raymond James.

Pavel?

Thanks very much.

A question about Russia, if I may.

Glad to hear things are going well with TNK-BP financially, but at the same time a lot of news flow about lawsuits, whether TNK will join as a corporate entity the litigation filed by AAR.

Just your latest thoughts on that would be helpful?

Well, it seems like every day you pick up something and there is a Siberian lawsuit on something, but TNK-BP does continue to perform well.

There was, I believe, a decision by the TNK-BP holding board not to join the lawsuit -- a lawsuit by a minority shareholder.

And now there is some talk about the TNK Board itself, and I'm not a member of that Board, but that Board joining the lawsuit against BP.

I mean, the bottom line here is that is if Rosneft had wanted to do exploration in the Arctic before with TNK-BP that would've been fine with us.

They don't have that capability.

So I'm just trying -- I would recommend, actually, you not be too distracted by what will -- you know, Pavel -- will be a constant flurry of activity there.

And I will just -- I can't resist.

The Wall Street Journal had great quote about TNK-BP this weekend.

They said it was like a squabbling rock band that keeps rolling down the road delivering hits.

And that's probably not a bad way to describe TNK-BP.

Understood.

A quick follow-up, if I may, about Argentina.

In the worst case scenario where the existing transaction does not reach a conclusion, would you be looking to find a secondary buyer or would you prefer in that case to keep the asset?

Well, Pavel, what I'd say about that -- we've reached that agreement last year at a time when oil prices were lower.

It was a time when we actually needed to make some divestments of properties.

We are past that point.

We don't actually need to make that divestment.

We are committed to doing it.

If it happens, we think approvals will take some time.

We'll wait and see.

And I do think that that deal will eventually get its approvals and agreements will be reached.

But if it doesn't happen, it's absolutely fine.

Okay, appreciate it.

Thank you, Pavel.

Now coming back to the UK and Kim Fustier at CSF, at Credit Suisse.

Kim?

Yes, hi, good afternoon.

I have two questions, if I may.

Firstly, if I could just go back to the asset disposal.

I think there has been a marked slowdown in the pace of your asset disposals in the last six months.

Are you able to give any color on the current asset markets?

For instance, are potential buyers having trouble accessing financing, or are there too many assets for sale at the moment?

Secondly, on upstream turnarounds, I think you mentioned 48 upstream turnarounds in 2011.

I wonder, could you give an indication on the number of planned turnarounds you expect next year as part of your normal course of business?

Kim, I'm going to ask Byron, as head of M&A, to comment on sort of his perceptions of the market on this and then I'll come back to the turnarounds.

Kim, I don't think you should read into what you are seeing, the conclusion you've come to.

When we started down the path of $30 billion of disposals back in December of last year, we clearly progressed those that could move more quickly out at the front of the queue.

The ones that we are still working on are the deals that are more complex and have required a much longer period of time to get them positioned for sale.

But as I said in my remarks, we still believe we will have agreements in place for around $30 billion worth of transactions by the end of the year, completions similar to Pan America.

Completions take a longer period of time in today's regulatory environment.

So you have a deal in place but it is not closed until the regulators have done a thorough review of it.

So we are comfortable with where we are.

We are comfortable about the realization of the transactions.

We don't think the environment is actually in any way particularly impeding it.

These are just tough transactions to get finalized and we are progressing them accordingly.

Thanks, Byron.

Kim, on turnarounds, I think there's two variables here.

One is the number of turnarounds and one is the size and scale of the turnarounds.

I am guessing that next year -- we haven't set out the exact number of turnarounds next year.

There are always seasonal turnarounds, particularly offshore in the North Sea, for example, so we will have seasonal turnarounds the second and third quarter.

I'm expecting that number to be around 30 next year.

But what is different is the size and scale of them will not be quite the same.

We do have some big ones in the Gulf of Mexico, I mentioned earlier, on the Atlantis field but it will be greatly reduced compared to this year.

Thanks, Kim.

Now moving on to Martijn Rats at Morgan Stanley.

Martijn, are you there?

Good afternoon.

I only have one question which regards to the dividends and the balance sheet gearing.

It sounds -- you sound much more optimistic than in the past.

Clearly, your fortunes have improved with some good news over the last couple of weeks and you're saying we'll review the dividend policy in February next year and adjust the dividend in line with the prospects of the firm.

You will assess them at the time.

At the same time, you are also targeting the balance sheet gearing to be in the lower half of 10% to 20%.

I was wondering, what will happen if by February you assess the prospect of the firm to be better, yet you are not there where you would like to be in terms of gearing yet.

How will you make that trade-off on what type of considerations go into that argument?

Can we expect the dividend to start trending upwards despite the balance sheet gearing not yet where you would like it to be?

Well, Martijn, as I indicated, we expect the gearing is still going to be around 20% at the end of the year.

We've made our comments with the realization that we are not quite there yet.

As we look across the course of 2012, we would expect a number of the divestments, both from the original program as well as the expanded program, to complete and provide proceeds that would reduce the net debt.

It remains an uncertain environment in 2012 with respect to potential calls on the Group's cash with respect to the Macondo liabilities.

Obviously, the general economic environment remains uncertain.

But on an underlying basis, as Bob has referenced a number of times, the firm has turned the corner.

We need to -- when the Board meets -- to determine the dividend in February of 2012.

Consider all the factors.

The net debt and gearing will move down over the course of time.

We are confident of that.

But we will take a decision in February based on a full suite of factors.

All right.

Thanks.

That's helpful.

Thank you, Martin.

And now on to Irene Himona.

Irene, from SG.

Yes, good afternoon.

I had three questions.

First, in the downstream, is it possible to quantify for us the benefit to R&M, maybe it's in the nine months from the US location advantage in terms of the WTI spread.

And the better downstream disclosure is obviously very welcome.

I wonder could that be an indication that the old Burmah-Castrol business might eventually be disposed of?

And my final question is on the asset disposals, looking at the $26 billion agreed disposals, is it possible to give us an indication of approximately how many barrels of reserves, oil indeed resources you have disposed of so far?

Thank you.

Irene, hi, this is Bob.

On the benefit on the US dislocation, it's something really for competitive reasons we don't disclose that because of the asset mix that we have and the competitiveness of that.

We have given you some indication that we benefit from the pricing differentials, particularly in the Midwest US.

On lubricants, we are going to provide the visibility on lubricants going forward.

We will do it on a historical basis as well as going forward because, again, we think maybe it's not reflected sufficiently in our share price, but I wouldn't read anything into it beyond that.

And then on the amount -- I'm going to ask Fergus who has got the figures right in front of him on your third question.

Yes, Irene, I mean, the number is in terms of proved reserves on divestments announced and agreed already including, obviously, Pan American, which is material, around 1.9 million barrels and based on the press releases and various announcements being made, when the various sales have been announced.

I would just say, to follow up Bob's remarks, that on the terms of the US downstream impact of the location advantage of Whiting, you can look at the geographic mix and see the improvement in US profitability and clearly it's an important part of that.

And I think in terms of why provide the additional disclosure on Castrol I think it's a great success story and I'm not sure how many people out there actually understand just what a huge success Castrol has been under BP's ownership since 2000.

Hopefully, that will be very interesting for you when the numbers become available for you.

Thank you.

Going back to the US, Mark Gilman from Benchmark.

Mark, are you there?

Yes.

Very good.

Thank you.

Bob, Byron, good afternoon.

I had a couple things.

I want to go back to this balance sheet debt ratio target for a moment.

Byron, can you talk about whether or not that 10% to 20%, in particular the low half, is intended to be a permanent long-term target?

It's well below that which was in place traditionally.

And in that regard, can you address the issue of whether or not you believe there are appearance and/or political issues as to the timing of any dividend increases or distributions to shareholders?

Second question is very simple.

I am assuming that there are no direct Gulf of Mexico spill related outlays outside of the payments from the escrow fund, could you confirm that that is accurate?

Third one just relates to Kaskida.

If I recall correctly, the intent was to do a long-term production test on the next well.

Is that still the intent?

Thanks, guys.

Let me start with respect to the balance sheet.

The decision to move our target range down to the lower half of the 10% to 20% band is based on the uncertainty that the firm is facing at the current time.

It's not a statement about a permanent destination.

It's the right place for us to be over the course of the next couple of years, but it is not a statement about we believe that that's the right sort of balance sheet structure for the firm to have.

Bob, do you want to handle the rest of it?

Yes, I would say, Mark, a couple things.

Your question around the political issues, I think that BP has been a really good corporate citizen in the US It has met many, many of its commitments there and will continue to do so to support the communities.

I think the political period of not being able to consider things like raising the dividend buybacks, I think that's over.

We are going to do that, though, prudently recognizing that the uncertainty still remains.

I think that's more the driver as our own prudence around managing the balance sheet and cash balances.

Regarding Kaskida, we are not planning to do a long-term production test on this appraisal well coming up.

What we want to do is look at the structure and see the size of the structure that will help us assess the reserve resource size, and then we've got additional decisions to make on, do we need to appraise it further down the road with long-term production tests?

So the answer to your question is no.

We will know more earlier.

I think your other question -- no direct -- Gulf of Mexico -- did you --?

Yes, I'm not quite sure I fully understood your question.

But settlements with individuals and businesses can come out of the Trust Fund, whether or not those are through the current facility that is led by Kenneth Feinberg or via a direct negotiation between BP and the parties, or through the result of court action.

So there is lots of ways in which the spill fund can be used.

Things that are not of that sort, then payments would be outside of the Trust Fund.

And, of course, the response costs that we have incurred in the cleanup operation, those do not come out of the Trust Fund.

That, of course, explains why the provision we have taken to date is over $40 billion recognizing only $20 billion of that is a recognition of the Trust Fund.

I hope that answers your question, Mark.

What I am asking is whether or not those payments outside of the disbursements from the Fund are continuing?

And what they are and what level they are at.

Outside of the Fund, we continue to have restoration payments that we make regarding some monitoring the beaches.

We are down to 44 miles of beach and marsh land that we are either monitoring or we have equipment on.

So there is an ongoing small level of response costs that do continue.

Natural resources damage assessment or early restoration projects are coming out of the funds.

What is not in the Fund but we provision for outside of that are fines and penalties.

And, Mark, the team in Houston can help you.

There is a note to our quarterly Stock Exchange announcement that goes through this in some depth and has got all the numbers, I think, you're looking for.

So the team there would be very happy to walk you through that.

Coming back to the UK, we've got Peter Hutton at RBC.

Peter?

Hi, and thank you very much for taking the call.

I just wanted to understand and perhaps reconcile the CapEx implied by the mathematics on your cash flow target with the real increase in the activity levels between now and 2014.

If you take the base, you take the top of the range of say $24 billion, you are increasing it by 50% so you are getting $36 billion.

And you're taking 50% of that as the CapEx.

That implies something like $18 billion --

Let me stop you, no.

It's 50% of the increment in operating cash flow, not of the total operating cash flow that would be used to increase capital spending.

Okay.

On top of where you are today?

Correct.

Okay, understood.

Thank you very much.

No problem.

Thank you very much.

Staying in the UK, Sergio Molisani at UniCredit.

Yes, good afternoon to everybody.

Two questions, if I may.

The first question is actually clarification on slides 26 and 35.

Do you mean that the 50% growth in operating cash flow expected by 2014 factors in the completion of the $45 billion US disposal plan announced today, or it includes only the $26 billion US completed to date?

It doesn't include disposals, Sergio.

It's operating cash flow, so it doesn't include divestment proceeds.

It does take into account the loss of operating cash flow from assets that are divested over that period.

Sorry, I didn't catch this point because does it include the loss of cash flow associated to the new disposal plan?

Yes, it does, yes.

It presumes all $45 billion worth of assets are completed by the start of 2014.

Okay.

And the cash flow associated with the $45 billion US as well, okay.

It's removed from the operating cash flow of the Group.

That's correct.

That's fine, that's fine.

And the second is, again, on your statement regarding the possibility to increase distribution to (inaudible) in line with improving circumstances of the firm.

Do you stick to your 2010 statement regarding BP dividend over distribution in the past or after the recent positive news flow there is room to bring back your cash distribution at the (inaudible) level in the next few years?

Thank you very much.

Sergio, hi, this is Bob.

We will come out with more clarity on the distribution policy after we view it with the Board in February.

But I will say it is unlikely that what we will see in the future is a stair-stepping up to the levels of the dividend we had before.

In 2009, we were in a position of borrowing to pay the dividend.

I think what you'll see is not that kind of aggressive dividend policy because we also have a great portfolio of projects to invest in in the future and it will be a mix of both.

We don't want to hold back what would be excellent projects to invest in as well, but we have a lot of room to increase distributions.

And, of course, Sergio, we have said that buybacks could be part of that tool kit.

Yes.

Staying in the UK, thank you, Sergio.

Staying in the UK, David Cline at RBS.

David?

Good afternoon.

Two quick ones, if I may.

Firstly, on turnarounds, just a clarification.

You mentioned that the scale of the program will contract from 48 this year to 30 smaller turnarounds on average in 2012.

Can you just give us some context [prima condo] what the scale of turnarounds were prior to the accident?

Secondly, perhaps this is too specific a question but I think you implied earlier that you haven't submitted an application for a permit to drill in connection with the Thunder Horse PDQ rig.

Is that correct?

Yes, David.

Hi.

Turnarounds, I think if you look historically it has been around in the 30s in terms of turnarounds.

We did 34 turnarounds in 2009, 35 in 2010.

So going up to 48 was a spike.

And, of course, the size of the turnarounds we did this year.

For example, a big one in Angola just had more impact.

So I think we will go back to historical levels of turnarounds.

We will have a couple of big ones next year.

Your second question, again, David?

I think you implied --

PDQ, yes.

The PDQ is going through its testing and rig preparation work.

When that rig is close to the point of being able to go out, we will submit the permit.

It is not sitting there waiting, but we will be ready and there is various stages of leading up to a permit.

And so, of course, the regulatory authorities are aware that this is a direction we're heading in.

I am hopeful that that rig will be prepared and, of course, assuming the approvals from the authorities are received, it will be in action with that rig before the middle of November.

Many thanks.

Thank you, David.

Now some very patient people waiting on the line, Blake Fernandez at Howard Weil.

Blake?

Hi, thanks, Fergus.

Two quick big picture questions for you, Bob, if I may.

It seems like share repurchases are kind of popping up in conversation a little bit more.

When I hear more divestitures, it almost reminds me of a scenario of one of your smaller US peers that recently embarked on a strategy to aggressively sell assets and buy back stock at a depressed level, capturing that arbitrage.

Do you think that's a direction we could be heading in?

And then the second question is on potentially a corporate split.

I believe there was some discussions around that several months ago.

I see we now have the increased reporting in the downstream.

I'm just wondering if this is an indication of moving in that direction potentially?

Thanks.

Yes, Blake, I think it's, both are good questions.

I think it's a bit of a leap on both of those in terms of assuming that that's what of our direction or strategy is.

Our divestments are really to focus our skills and capabilities down.

That's the primary driver of it.

We will have a higher quality, higher margin, smaller footprint to be able to drive what we do very well.

And then we had talked about buybacks, but I wouldn't link the two directly there.

I do think that the shares are undervalued.

It would be -- we have to be prudent with what we do with our cash right now.

So we will consider, as Fergus said, it's part of the tool kit going forward.

In terms of a corporate split, we have looked at that in quite a bit of detail.

Our downstream business 2011 is on track, so it's a forecast projection, will be the best year we've ever had in the downstream, and that provides valuable cash and earnings for BP.

So the idea of splitting just for splitting wouldn't be good strategy, wouldn't be in the interest of the shareholders.

And I would also note that if you look at the business models of our downstream, which is lubricants, petrochemicals, and fuels, and then you look at where those businesses set against peers, they are performing near the top in all three of those different models.

That is valuable for our shareholders.

So our asset set is different, quite a bit different than the number of the other companies who have decided to go down that path.

Perfect.

Thank you very much.

Thank you, Blake.

Now Oswald Clint at Bernstein.

Oswald, are you still there?

Yes, thanks, Fergus.

Thank you very much.

Maybe just one question for me.

On exploration, given you have the ramp-up in exploration wells coming through the next couple of years, and I guess some of your peers are also pursuing a similar strategy.

Can you, or would you be able to say that the vast majority of these 12 or 17 wells next year or 15 to 25 the following year would be classified as high impact wells and could you go as far as to say [high big] in terms of net barrels the prospects could be for BP?

And then maybe just link to that, I see testing a number of new plays.

And I just want to be comfortable or does BP feel they have all of those skill sets in house in order to go out and actually target some of these new plays that are certainly being targeted today?

Thank you.

Yes, Oswald.

Out of 12 to 17 wells that we expect to move up, it will be a mix.

Some will be around in our existing basin, but certainly some of those are very potentially high impact.

There's different ways of defining what high impact means.

But I will just take Australia, for example.

It's a completely new basin.

So a discovery there would be high impact, lots of appraisal work, lots of further work would be required.

The sub-salt in the southern areas of Angola would be high impact.

Some of the things that we are drilling in Brazil would be high impact.

So it's quite a spectrum of prospects.

Not only for next year but for the year after that as well.

Do we have the skills in-house?

I believe BP is one of the best explorers in the world.

We've got a great team.

We've got decades of experience and a highly experienced team.

So that experience comes in the form of sort of fundamental geology, of course, of a province in a region but really good seismic and seismic interpretation work that identifies the prospects.

And then commercially, we've got good deals out there.

There will be more coming.

You've seen the care that we're taking with drilling going forward.

We do have great experience inside the Company in terms of capability.

We are not short on it.

And also on your question that would we disclose things like sort of unrisked estimates for these kind of wells.

It's a great question for Mike Daly who is in charge of this area.

And I think we are going to give you an opportunity for many of you to meet with Mike next month, so maybe it's a good question to put to him when that meeting takes place.

Iain Reid at Jefferies.

Iain, are you there?

Yes, hi, I'm here.

Bob, question for you about TNK-BP and it's not about the politics, it's not about the legal situation.

It's in the context of your volume, sorry, your value versus volume strategy.

When you look at the barrels from this Company, although you've obviously done very well in terms of getting dividends out of the business, it is the lowest margin pretty much part of your business.

So I wonder why it's immune, if you like, from your future shape, as you were talking about earlier in terms of that and why you don't exit that and think about areas of the world where you can develop higher margin barrels, which seems to be pretty much your strategy right now?

Iain, well, thank you for asking your question about the oil and gas business in Russia.

Most people are worried about things that are more exciting but actually less important.

So TNK-BP is quite an unusual oil company.

It's one of the lowest capital intensive oil companies in the world for its size.

So it's CapEx, although it is producing gross 2 million barrels a day, it is a company that invests roughly only $4 billion a year.

While those are low margin barrels, there is an enormous amount of cash that it generates for us.

I think we are projecting it will be $2.7 billion this year.

So it is a self-funding joint venture, continues to fund itself.

And it continues to find new greenfield projects in Russia.

While you are right, they are lower margin barrels they have that unusual characteristic of low capital intensity.

Can I just ask a follow-up there?

If another transaction came up with another Russian company which involved a disposal of [that,] would that attract you if it was something similar to the Rosneft deal?

Well, the Rosneft deal, which began with three exploration blocks, so people sort of talked about our growth strategy.

It was three out of the 67 that we've done this year.

The discussions did evolve into a further evolution where at least some, if not all, of our TNK partners were interested in their own exit.

For whatever reason between that group it didn't happen.

I think we are settling down and want to get back to work with TNK-BP without the distractions on the side.

But you never say never about anything.

If there is interesting, new creative ideas that come along, we would certainly be interested.

We're not going to be the catalyst, though, for generating those different ideas right now in Russia.

Okay.

Thanks, Bob.

Thank you, Iain.

And the very last question is from a very patient [Jean Pierre Damergian] from [Auto.]

Yes, good afternoon.

Quick question on TNK-BP.

Looking at the chart on the slide 29.

Given the initial investments in TNK-BP and the dividends received from BP, can you just tell us what is in your calculation the internal return rates on this investment?

Thank you very much.

Well, Jean Pierre, they are very large.

I think given that it is an independent company, I think that's a good question that would be good for you to ask the TNK-BP organization there.

But this is very high return for us.

Jean Pierre, we have long since received dividends back to cover our initial investment in TNK-BP, so the returns, as Bob said, have been extremely attractive and continue to be so.

I would think about it as initial investment made of $6 billion, $17 billion in dividends back in a company that is valuable today.

Let me just turn.

There is a question that has come.

There's a number of questions that have come through the Web and then I will make some closing remarks here.

But there has been a question from [Oberon Houston] who has asked the question, can you confirm if you intend to expand on the way BP plans to execute its many projects because we've talked about the importance of new projects, many deepwater projects?

Would we expand on these at the next strategy presentation or at some other time?

I think there's a couple things.

In February, we will expand more deeply on the ten points that we've laid out here and what you can expect and what you can measure.

We will give you greater visibility on the major projects that we have, and including exploration, for example.

We will also have a series of investor events.

Iain Conn, who heads our downstream operations, will be leading an investor event in November.

We hope to get Mike Daly together with a group to talk about exploration going forward.

And, Fergus, I don't know if we have a date on that.

But our intention is to open this up and provide that insight.

With that, let me make some closing remarks.

Thank you all very much for good questions, and a whole variety across the spectrum.

Thank you.

I hope you have seen from the announcements today, it does feel like and it is of substance, October 2011 is a turning point for the Company.

It feels different inside the Company.

That doesn't mean that we don't have some uncertainties going ahead.

We certainly do.

We are not back to business as usual.

We are a fundamentally different Company about how we manage risk and the care we take with our decisions.

If you spend time with any of our management team and employees, I know you will feel that.

If I could leave you with just some very key messages today for you all as investors.

Back in February, we said we would get off the volume treadmill, and that rather than volume, we'd talk about value.

What you should see all through this is we are regarding the key value metric as being operating cash flow.

We've targeted 2014 because it moves through some period of volatility.

We think that goal by 2014 is the 50% improvement in operating cash flow from today to 2014 assuming $100 a barrel.

We will be through a lot of the Gulf of Mexico periods, payments, and we see cash margins from our new production around double the average of the existing portfolio.

That's what gives us the confidence to say this.

We want to take half of that higher cash flow in 2014 and use it for other purposes.

Half for CapEx and spending on good growth projects, but also higher distributions.

Dividends and buybacks, if appropriate.

We are raising the divestment target to $45 billion, from the up to $30 billion that we have said now.

And then flagging this increased visibility and transparency on our businesses going forward in February.

So we do look forward to spending much more time with you in February in terms of our strategy, but we thought that given where we are and the fact that things are different, and I do think that the year of stabilization is over and now we are into a period of multiple milestones over the next three years, it was appropriate for us to communicate to you now at the end of what is normally a quiet 3Q earnings presentation.

I'd just like to say that concludes this webcast.

I'd like to thank you all very much for your participation, and I'd just like to say goodbye.