英國石油 (BP) 2019 Q2 法說會逐字稿

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

I now hand over to Craig Marshall, Head of Investor Relations.

Good morning and welcome to BP's Second Quarter 2019 Results Presentation.

I'm Craig Marshall, BP's Head of Investor Relations.

I'm here today with Bob Dudley, Group Chief Executive; and Brian Gilvary, Chief Financial Officer.

Before we begin today's presentation, please take a moment to review our cautionary statement.

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

Actual results and outcomes could differ materially due to factors we note on this slide and in our U.K. and SEC filings.

Please refer to our annual report, stock exchange announcement and SEC filings for more details.

These documents are available on our website.

Now over to Bob.

Thanks, Craig, and thank you to everybody joining us on the call today.

This is an important quarter, not just because we're at the midpoint of the year, but also because we're at the midpoint of the 5-year strategy we laid out in early 2017.

I'll begin by taking you through some key highlights from the second quarter and provide some reflections on what has continued to be a challenging macro environment.

I also want to talk about the focus we're giving to the energy transition and our low carbon agenda.

Brian will then take you through the financial results in detail.

And I'll come back to talk about 3 specific areas of our business that you have been asking to hear more about: BPX Energy in the U.S.; our global fuels marketing business; and the activity we are progressing across our low carbon businesses, including the biofuels announcement we made last week.

All of these businesses are central to our growth agenda into the next decade and beyond and core to the integrated global energy business we are continuing to shape.

I'll then close and we will ensure we have plenty of time to take your questions.

So getting straight into highlights from the quarter.

We reported underlying replacement cost profit of $2.8 billion for the second quarter of 2019.

Underlying operating cash flow was $8.2 billion, which included a $1.5 billion working capital release.

This strong financial performance, alongside our strategic growth agenda, underpins our commitment to growing sustainable free cash flow and distributions to our shareholders over the long term.

You see that in the Upstream, where 4 of our 5 major projects planned for this year are now online following the start-up of the Clean project in the North Sea.

This takes us to 23 major projects online since early 2016, further underpinning the delivery of our 2021 free cash flow target and on track for our 900,000 barrels per day new production.

We have also taken 5 final investment decisions in the first half of this year, including 2 projects in the Gulf of Mexico, in Azerbaijan, the North Sea and India, keeping us well positioned for continued growth into the next decade.

We've been just as busy in the Downstream, with a large turnaround program taking place across our refining system, upgrading our facilities in advance of the new IMO 2020 regulation or some call it MARPOL, which will come into force at the end of this year.

We are continuing to grow our fuels marketing business with more than 15% underlying fuels marketing earnings growth compared to the first half of 2018.

And we've had some exciting developments with our partners, notably Groupe Renault.

From the 1st of January 2020, Castrol will become Renault's global service fuel partner for engine oil lubricants.

Castrol also extended its Formula One sponsorship of Renault's sport racing through to the end of 2024.

This further strengthens the relationship we have with a highly valued strategic partner.

Another area of strategic focus is the work we're doing to advance the energy transition.

We supported a progressive shareholder resolution on corporate reporting.

It passed with overwhelming support at our AGM in May, and means we'll provide more information about how our strategy is consistent with the goals of the Paris Agreement.

We have made strong progress on operational emissions reductions and also linked to pay of 36,000 employees or around half our workforce, including executive directors, to progress on that.

We've joined the Hydrogen Council.

We will work alongside fellow members to promote large-scale, low carbon, hydrogen-based opportunities, an important step given the major role hydrogen is expected to play as part of a lower carbon energy mix.

We've also taken a number of significant steps to grow our alternative energy business.

Our solar business, Lightsource BP, continues to grow with a big expansion in Brazil following the acquisition of 1.9 gigawatts of greenfield solar projects.

Lightsource BP now has a presence in 10 countries and continues to progress its ambition to become a significant player in the local solar market.

And just last week, we announced plans to expand our biofuels business in Brazil by more than 50% through a joint venture with Bunge.

We are combining our well-established ethanol businesses to create BP Bunge Bioenergia, a leading bioenergy company in one of the world's largest, fastest-growing markets for biofuels.

That's a very high-level summary of the progress we're making in what continues to be a volatile macro environment.

Oil prices are currently trading in a range of $60 to $70 per barrel, having recovered from around $50 per barrel at the start of the year.

We expect prices to remain volatile as continued supply growth, notably in the U.S. onshore, competes with slowing demand growth, along with ongoing concerns around the possible impact of geopolitical tensions, especially in Iran and Venezuela.

In the gas markets, an easing in demand growth following the exceptional strength seen last year and continued expansion of LNG supply has led to significantly lower prices.

The Henry Hub gas price remains well below $3 per million British thermal units and spot prices in Europe and Asia are about 40% below their levels a year ago.

In the absence of extreme weather conditions, LNG is expected to be oversupplied through 2019 and 2020, with gas prices expected to remain under pressure.

That macro view of the environment sits alongside the big energy system change that is underway as society looks to move towards a more sustainable low carbon future.

You'll see I'm putting significant emphasis on the energy transition today, and I want to be absolutely clear about our approach, how our strategy is consistent with the Paris Agreement and how we are framing our future.

If the climate goals laid out in the Paris Agreement are to be met, we need to all come together and take action collectively to bring about a rapid transition to a low carbon future.

In fact, in a world that is not currently on a sustainable path, we are actively supportive of advancing a faster transition.

As well as being in the world's best interest, we believe it is in the best interest of BP and all its stakeholders.

It means less uncertainty in planning our business and greater clarity about how we can help meet society's needs for more energy with lower greenhouse gas emissions with good returns for our shareholders.

We're guided in that by the work our economics team does in compiling our annual BP statistical review and BP Energy Outlook, and we're proud to make those available to support discussion and public debate, something we've done for many years now.

Within BP, we have a clear approach that we set out last year: our reduce, improve, create framework.

It focuses the group as a whole on reducing emissions in our operations, improving the quality of our products so that our customers can reduce their emissions and on creating new, low or 0 carbon businesses.

We have the right strategy, one that is very much consistent with the Paris Agreement and supported by our technical capabilities, financial resources and global reach.

We have a flexible portfolio of many forms of energy that is shaped by our 4 strategic priorities and enables us to adapt and move in line with the fast pace of change or as opportunities arise.

We are supporting improved transparency and engagement to help our investors better understand how we are managing BP through the transition, as seen in the resolution we supported at our AGM.

And we continue to advocate for well-designed policy measures, including putting a price on carbon for producers and consumers, which only governments can do.

We believe this is the most efficient and equitable tool to drive changes in behaviors across the entire energy system.

Everyone has to contribute: companies, consumers and governments.

There is a lot we are doing within BP without waiting on that.

We're framing our future by: actively growing our low carbon activities today; looking ahead at how we decarbonize our portfolio in a low carbon world; and as we move through this transition, ensuring we remain focused on delivering value for our shareholders.

So unlike what some of our critics may say, we believe we have a significant role to play and can be part of the solution.

Let me now hand over to Brian.

Thanks, Bob.

Turning firstly to the environment.

Brent crude averaged $69 per barrel in the second quarter compared with $63 per barrel in the first quarter.

Crude prices increased early in the quarter, supported by OPEC plus production cuts as well as supply impacts from lower Iranian exports and the ongoing production disruptions in Venezuela.

Prices have since declined, driven by increasing concerns around global economic slowdown and the potential impact on oil demand, together with continuing robust growth of U.S. tight oil.

OECD oil stocks remain around 5-year average levels, with continued supply growth from the U.S. onshore and Brazil being largely offset by OPEC plus countries' production cuts and continued, albeit weaker, demand growth.

As Bob mentioned, we expect prices to remain volatile.

Recent geopolitical events, particularly in the Strait of Hormuz and the potential for worsening global economic conditions, are creating concerns around supply and demand fundamentals, driving volatility in prices.

Turning to U.S. gas prices, which remained weak during the second quarter, with Henry Hub averaging $2.60 per million British thermal units compared with $3.20 in the first quarter.

The weakness in price reflects continued strong supply growth and inventory levels increasing relative to the low levels of the previous 2 quarters.

In Europe and Asia, spot prices have reduced significantly as LNG supply continues to grow with demand easing, particularly in China.

BP's global refining marker margin averaged $15.20 per barrel in the second quarter compared with $10.20 per barrel in the first quarter, primarily driven by stronger gasoline demand and U.S. refining disruptions.

In the medium term, refining margins are expected to see some support with the implementation of IMO 2020, which should also contribute to increased widening of light-heavy crude differentials.

Moving to our results.

BP's second quarter underlying replacement cost profit was $2.8 billion compared to $2.8 billion a year ago and $2.4 billion in the first quarter of 2019.

Compared to the first quarter, the result reflects higher Upstream liquids realizations, higher refining margins and lower exploration write-offs.

This was offset by a reduced supply and trading contribution in both oil and gas compared to very strong first quarters for both, lower gas realizations and a higher level of refinery turnarounds.

Compared to a year ago, the result reflects lower North American heavy crude discounts, lower Upstream liquids realizations and a higher level of refinery turnarounds.

This was offset by a relatively strong supply and trading result in both oil and gas and the ramp-up of major projects.

And finally, the second quarter dividend, payable in the third quarter, remains unchanged at $0.1025 per ordinary share.

Turning to cash flow.

Excluding Gulf of Mexico oil spill related outgoings, underlying cash flow was $8.2 billion for the second quarter and $14.2 billion for the first half of 2019.

This includes a working capital release of $1.5 billion in the second quarter and $0.5 billion for the first half of the year.

Organic capital expenditure was $3.7 billion in the second quarter and $7.3 billion in the first half of 2019.

Turning to inorganic cash flows.

In the first half of 2019, divestment and other proceeds totaled $700 million and we made post-tax Gulf of Mexico payments of $2.1 billion.

Inorganic capital expenditure was $4 billion, including the 2 final payments made to BHP in April of $1.7 billion.

Consequently, as anticipated, gearing rose to 31% at the end of the second quarter.

We continued our share buyback program, buying back 17 million ordinary shares in the first half of 2019 at a cost of $125 million.

Turning to guidance.

Looking to the third quarter, we expect Upstream production to be lower than in the second quarter due to seasonal turnaround and maintenance activities, including in the North Sea, Angola and Gulf of Mexico, as well as weather impacts in the Gulf of Mexico where we experienced 14 days of production disruption associated with Hurricane Barry.

In the Downstream, we expect a lower level of turnaround activity and lower industry refining margins.

At the midpoint of the year, we are maintaining our full year 2019 guidance.

We expect organic capital expenditure to be in the range of $15 billion to $17 billion and the DD&A charge to be around $18 billion.

Gulf of Mexico oil spill payments are expected to be around $2 billion.

Assuming recent average oil prices, we expect gearing to trend down through the second half of the year back into the 20% to 30% range.

We expect continue our share buyback program and to fully offset the impact of scrip dilution since the third quarter of 2017 by the end of the year.

In other business and corporate, the average underlying quarterly charge is expected to be around $350 million, although this may fluctuate between individual quarters.

And in the current environment, the underlying effective tax rate is expected to remain around 40%.

In summary, we have delivered another resilient set of quarter results.

We remain committed to delivering more than $10 billion of divestments through 2019 and 2020.

And so far this year, divestment proceeds and announced transactions have totaled $1.5 billion.

We have now completed the final payments to BHP and expect Gulf of Mexico oil spill payments to reduce.

Assuming recent average oil prices and in line with expected growth in free cash flow and receipt of divestment proceeds, we continue to expect gearing to move towards the middle of our targeted range of 20% to 30% through 2020.

With the continuing momentum across the business and growing free cash flow, we remain confident in our medium-term financial frame and the strength of our balance sheet.

This in turn underpins our commitment to growing distributions to shareholders over the longer term.

With that, let me now hand back to Bob.

Thanks, Brian.

As I mentioned earlier, let me now review the 3 business areas that you've asked about.

Firstly, BPX Energy.

While the team has only been operating the assets acquired from BHP since March 1 this year, the early results from the ongoing integration process are encouraging.

First, as we discussed when we announced the acquisition, we're now very confident in delivering over $350 million of annual synergies by 2021.

At the time of the transaction, we had expected to achieve about $90 million of this in 2019, but now expect to achieve around $240 million or 70% of the full run rate.

The majority of this has been made through our organizational efficiencies, designing the combined organization for scale and enabling us to grow with less overhead.

We also continue to ramp up activity in the newly acquired assets, with 10 rigs operating: 7 in the Eagle Ford and 3 in the Permian.

The early results from our operations have been promising.

In both basins, the wells we have drilled are performing at or above their planned production levels and costs for new wells are coming down.

We are also working to optimize life of field development.

In the Permian, we are designing infrastructure that will improve reliability and reduce costs and help us minimize emissions.

We plan to continue testing, promising new zones this year in the Permian and Austin Chalk in the Eagle Ford.

The progress to date in capturing the synergies early and the well results continues to give us confidence in the future of the business.

Given it is only 4 months in, we will have more to update you on at the end of the year.

Turning to the Downstream.

We continue to grow our fuels marketing business, supporting our target to increase Downstream earnings by $3 billion by 2021.

We are now halfway through that journey and remain on track to deliver this growth.

We have grown fuels marketing earnings on an underlying basis by more than 15% in the first half of this year and by over 40% since 2016.

Convenience sales are forecast to grow by over 8% per year out to 2025, which we are well placed to capture through our differentiated offer.

Since 2016, we have grown the number of convenience partnership sites by around 65%, delivering $1.2 billion of nonfuel retail gross margin in the last 12 months.

This model continues to deliver a strong customer value proposition while capturing higher per site earnings and differentiated returns.

In fast-growing emerging markets, we continue to expand our footprint and now have more than 1,200 sites in the fast-growing economies of China, Mexico and Indonesia.

In Mexico, where we were the first international oil company to enter the deregulated fuel retail market, we now have more than 460 sites, making this the fifth largest market in our portfolio by volume.

In digital, we continue to evolve and enhance our global customer engagement platform, BPMe.

This app provides an easy, fast and convenient way for customers to pay for fuel from their car, and downloads have doubled over the last 6 months to more than 2 million.

In the U.K., we've just launched our new loyalty program, BPMe Rewards, allowing us to interact with our customers and deliver a better personalized experience.

Customer reaction has been good with around 0.5 million registrations in the first week since its launch.

Another way we are enhancing our customer experience and strong convenient offer is the introduction of ultrafast charging in our forecourts, focusing initially on the U.K., China and Germany.

Following last year's acquisition of Chargemaster, we now have more than 7,000 charging points across the U.K. And in the coming weeks, we will begin installing ultrafast chargers at BP forecourts, building a national network of high-power charging, one which will closely replicate the current fueling experience, allowing customers to charge their cars on average for 10 minutes for up to 100-mile range.

The final business dimension now is one of our 4 strategic priorities, our growing low carbon activities.

We have a lot going on, both in terms of existing renewable energy businesses as well as our investment in new low carbon activity.

We've learned a lot from our operations in renewable energies for over 20 years.

This may seem like a long time, but it's a sector that is still evolving, especially in comparison to our foundation oil and gas business where we've been operating for over 110 years.

Through our investment in oil and gas, we provide energy to meet the world's needs as well as deliver a competitive return for our shareholders, and it is now helping fund the growth of new energies.

This year, we will invest more than $0.5 billion of capital, which is more than the total annual capital expenditure for each of the companies in the lower half of the FTSE 100.

We invest in these low carbon opportunities under a capital-light model, ensuring we remain within our disciplined capital frame while creating a material impact.

A good example of this is the $200 million investment we made in Lightsource BP in 2018, a leader in solar development.

That business has now attracted $7 billion of financing from infrastructure funds to develop large-scale solar projects around the world.

When people say our capital spending on new energies is small, I think you have to consider the leverage we enable of $200 million, in this case, to $7 billion.

Our activity spans a number of renewable energy businesses: renewable fuels, renewable products, wind, energy, solar energy and biopower, including in biofuels and biopower through the joint venture with Bunge, which brings together a combination of scale, capability and synergies in one of the world's leading markets for ethanol as a transport fuel and which we believe to be key to decarbonizing road transportation.

In wind energy, where we have a leading portfolio in the U.S. onshore sector, and as mentioned in solar, where our investment in Lightsource BP is growing rapidly, with the ambition of reaching 8 gigawatts of installed solar capacity by 2022.

That's enough to power more than 2 million homes.

Beyond our renewable energy businesses, we are also actively developing low carbon businesses and customer offers across our 5 focus areas.

We are participating in a number of ways through direct equity investments to supporting start-ups or developing our own projects.

This gives us access to a wide range of new and innovative ideas, technologies and businesses, and we can be agile in our approach.

Some of our investments will have clear adjacencies to our existing businesses such as our investments in BP Chargemaster, which fits within the Downstream's advanced mobility agenda, along with StoreDot, an ultrafast charging battery developer, and Fulcrum, which will turn municipal waste into biojet fuels.

These are scalable businesses that complement our existing offerings and we will give customers differentiated low carbon options.

Others may be in areas that are more novel, but have the potential to support our products such as Calysta's use of methane in the production of proteins for fish food.

Each investment has to meet our investment criteria and support our strategy.

And our experience in investing in start-ups over recent years, where we have invested around $600 million, has established a track record that we are using to tap into some of the world's most interesting markets.

We have an active presence across Europe, China, Tel Aviv and Silicon Valley.

We partner with leading developers where we are leveraging our relationships around the world and deploy these technologies.

Then we support the scaleup of these businesses.

And finally, we are actively working together across the industry and with other external organizations.

This includes the Oil and Gas Climate Initiative, or OGCI, the Climate Leadership Council, as well as leveraging our expertise to help in educational and research projects, just to name a few.

There will be lots more to come in this area as we continue to learn and grow these businesses as an important part of our role in the energy transition.

I'll briefly summarize now before we move to Q&A.

We're midway through our 5-year strategy.

We are continuing to deliver strong underlying operational and financial performance and are making clear progress against the 5-year plan.

Quarter 10 of that plan has been a strong one.

Safety remains our #1 priority and alongside reliable operations and a disciplined financial framework provides the foundation for growing the value of your company.

Strong financial performance also allows us to grow our low carbon activities, where we're investing with discipline in fast-growing alternative energy businesses as well as emerging low carbon businesses.

Together, these can make a significant contribution to the energy transition.

And we have plans to host an investor event in November this year where we will update the market on our current low carbon activities and future ambitions.

On that note, thank you for listening.

Brian, Craig and I will now be happy to take your questions.

(Operator Instructions)

Okay.

Thank you again everybody for listening.

We're going to turn again to questions and answers.

(Operator Instructions) We're going to take the first question this morning from Alastair Syme at Citi.

Alastair?

Brian, I wonder if you could you talk a little bit about the profitability of the Midwest refining business this quarter.

Feedstock differentials, I know, were lower than 2Q last year but wider than what they were in the first quarter.

So how is that impacting it?

And are you still bringing a portion of availability?

And second one for Bob, I guess, in the last quarter, there's obviously been this BP-BBC Panorama program around Senegal.

I just wonder if you could respond to those claims and what BP's looking at or not looking at in response?

Thanks, Alastair.

So in terms of Midwest refining, basically, Whiting refinery.

We saw the TICS diff average around $11.70 for the second quarter, which is down a little bit on the first quarter 2009 -- 1Q '19, which is around $12.70 on a like basis.

We're still seeing curtailment issues coming out of Alberta, although that's eased to a degree.

And then, of course, you've also got the issues around the big heavy cut grades from the Gulf Coast in terms of Venezuelan crude.

So I think you are seeing a little bit of pressure on WTICS (sic) [WTI-WCS].

I think if you look at the forward margins, we're starting to see that open up, so it may start to open up in the second half of the year.

But I would suspect for the second half, you will still see spreads trading in the range of about $12 to $18 a barrel.

And of course, therefore, that directly feeds through in terms of Whiting.

In terms of overall performance for the Downstream committed in the second quarter, we of course have those big turnarounds we talked about in the first quarter, which also included Whiting this quarter.

But that will start to clear out in the second half of the year.

And you may see some recovery in TICS differentials as we ease curtailment coming out of Alberta, and of course, they also had the wildfire issues as well in the second quarter.

Alastair, thanks for your question about BBC Panorama.

For those of you who don't know, there is a story on Senegal in there.

Quite frankly, it is a sensational, inaccurate and irresponsible story by the BBC, including numbers that are wildly inaccurate, including showing documents that are purportedly from BP and they are not.

And we have responded very strongly with the BBC around that.

It has led to some investigations, as you'd expect.

In Senegal, quite frankly, the really disappointing thing about this is it perpetuates the idea that European companies or British companies cannot and should not do business in Africa.

And I think that's the really disappointing thing about it.

Be happy to talk to anybody about it.

And again, we've responded really strongly to the BBC.

That's really probably all I should say, Alastair.

Thanks, Alastair.

We'll take the next question from Oswald Clint at Bernstein.

I guess one of the messages you have today is right on target at the midpoint of the 5-year plan.

I just wanted to put that in context of the Upstream free cash flow performance.

I guess if I play with some of your numbers for the first half and you think about those annualized for 2019, and probably put in the right $13 billion to $14 billion option CapEx, I'm getting to around $13 billion of pretax Upstream free cash flow.

So that's the number relative to your $14 billion, $15 billion by 2021.

And obviously, I'm adjusting for your oil price.

So I just wanted to get a sense, is that $13 billion roughly right for 2019?

Is that according to your plan?

Does it therefore step up by $1 billion or so each year from here into 2021, is the first question?

And then secondly, I just wanted to focus in on the BHP acquisition.

It looks like -- I mean you said operatorship since the 1st of March.

I do note a decent reduction in production cost per barrel, 14% or so sequentially.

So you talked about less overhead, which I guess is in SG&A.

So just wanted to know what's going on, particularly with the production costs, to bring it down so substantially sequentially.

And sorry, just linked to that.

I see you have a lot of -- 3 Permian rigs which I think you talked about going to the Permian perhaps next year or at least after the pipelines open up.

So just curious, are you kind of fast tracking your push into the Permian?

So Oswald, I'll try and unpick those and I'll work backwards.

So in terms of Permian, we're going to take our time.

I think, Bernard, in the most recent discussion we had, would have said that we'll look to make sure that we can evacuate the oil that we start to create out of the Permian, so we have got the rigs running.

We will build into that slowly.

We've ramped up Eagle Ford, which is priced straight into WTI.

But in terms of Permian, it will be slow progress through this year as we make sure that we have the evacuation routes available.

So the midstream is going to be a really big important part of that.

In terms of your question on the $14 billion to $15 billion target in terms of Upstream.

It's going to be a big function of what happens, of course, in the second half of this year in terms of production volumes.

We do have -- we've already signaled the 3Q volumes will be down somewhat.

We've got some seasonal turnarounds in Upstream in some of the big high-margin areas like the North Sea, Angola and Gulf of Mexico.

You have up to around 50,0000 barrels a day could be out through the third quarter.

And of course, we've also already had issues with Hurricane Barry this quarter with the 14 days outage in Gulf of Mexico, so I think that will impinge a little bit on volumes.

But in terms of the cash coming out of the Upstream, the $14 billion to $15 billion is pretty well underpinned now for 2021 with the projects we got onstream.

For the precise number, adjusted for oil prices, I think we're certainly 70% of the way there, Oswald.

Whether we're up as high as the numbers that you're talking about, I've not gone back and done that calculation, but we can come back to you off-line on that and we'll certainly pick up at 3Q.

But as I say, 3Q volumes will be a little bit under pressure with the seasonal turnarounds that we've got planned in those big high-margin areas.

If I could add a footnote.

On the BHP, for example, Oswald, the production costs have come down.

Some of that is the reduction in staff.

So synergies have come through very, very quickly.

And in addition, the costs came down because of a cessation of transition services cost from BHP that were in there.

And just -- that's just a little more insight on the Permian piece.

Okay.

Thanks, Oswald.

We'll take the next question from Thomas Adolff at Crédit Suisse.

Thomas?

Two questions from me as well.

Firstly, just on dividend.

In the second quarter of 2018, you chose to increase dividend.

A year on, you chose to keep the dividend steady.

You discussed the dividend every quarter.

And I was wondering why the decision went against it this time around considering you're delivering on the 5-year plan.

Secondly, out of the 35 project in your 5-year plan, you've said 23 have now been delivered and delivered ahead of schedule and below budget.

So you have another 12 to go.

And I was wondering whether the Tangguh LNG expansion is the only project with some challenges to meet the original time line.

Thanks, Thomas.

And so I think on dividend, I think it is pretty clear actually in terms of the -- what we signaled at the start of this year.

We had the BHP transaction to close this year which we chose to do with cash rather than issue shares when we originally envisaged the original transaction.

That was a $10.25 billion transaction.

So the fact we used cash so that we expected gearing to go up to accommodate that.

And then as the disposal proceeds came in, we used the disposal proceeds to delever the balance sheet.

And what that avoided was the friction costs then in terms of issuing shares around BHP and then buying those shares back.

So in terms of the conversation with the Board on dividend, you're right.

2Q last year, we did signal the increase in the dividend.

I think as you see now given where gearing is at 31%, as we see the disposal proceeds get derisked this year and we'd still anticipate -- of the $10 billion program, we've announced $1.5 billion up to the end of 2Q, we'd anticipate $4 billion to $5 billion this year should get announced.

And we signaled that at 1Q, there's no change there.

We're still seeing a pretty good suite of buyers for the assets that we have up for sale.

Some are taking a little bit longer, some are offering up other opportunities.

So I think as you see, that deleverage, that will be then a signal in terms of distributions and a move on the dividend later in the second half of this year.

But I think the Board will definitely want to come back to dividend, but it will really be triggered by, as we said to our investors, when we see the balance sheet deleverage.

we'll bring net debt down and then that will be an opportunity certainly in the second half of this year to go back and look at divi.

I think what you're seeing in terms of strong cash flow, and now what is a -- the sort of 10th quarter certainly above the expectations we have in terms of where we'd be in this process in terms of the 5-year target, I think we are more than well underpinned on the cash flow targets we laid out to 2021.

So I think that will give us a great confidence in terms of any move or look at distribution on the dividend.

And then of course, remember, we've also got somewhere close to $1.8 billion of buybacks to come in the second half of this year that will offset the scrip from the third quarter of 2017.

So I think you will see, from a shareholder perspective, distributions in the second half of the year through buybacks and a potential move on the dividend as the disposal proceeds get derisked.

Thanks.

And Thomas, as we look out, we've got 23 major projects and 35 under our belt now to get to 2021.

And Tangguh Train 3 is one of those that we see as -- with a delay.

It's been delayed in our planning now from the fourth quarter of 2020 to the third quarter of '21.

It's not going to impact delivery of the targeted 900,000 barrels a day of new production from projects.

Train 3 will add about gross capacity of about 3.8 million tonnes of LNG per year.

It will take Tangguh up to 11.4 million tonnes a year.

The status of the project right now is the offshore scope is nearing completion ahead of plan.

Onshore has been impacted by a number of things, including some very unpredictable environmental factors in the area, the 2018 tsunami events in Sulawesi and the Sunda Strait disrupted some of them local supply chains, and now that's going to require additional work, not our site, but the supply chains, and I think it's well known that one of the contractors is having some financial difficulties.

But we remain on track for bringing that on and confident by the end of '21.

And Thomas, I'll just add a little bit more context.

Just to put the 23 of the 35 major projects into context, that's equivalent to around 600,000 barrels a day at the end of 6 -- at the end of 2Q onstream, so progressing well against that 900,000 barrel a day plan that we had.

Okay.

Thanks.

We'll move to the next question from Lydia Rainforth at Barclays.

Lydia?

Two questions, if I could.

The first one, just going back to the buyback, right?

Is it right -- I think it's close to around 400 million shares in the second half that you need to buy back.

And can you -- just in terms of, is that the sort of the right way we should think about going into 2020 as well?

And then the second one, just thought going back to the low carbon businesses.

The point you make around the financing, that you put $200 million equity in for that Lightsource and that gives you $7 billion of overall finance, how do you see that low carbon business for BP evolving over time?

Is it that you want to keep going down the joint venture route as you've done with the Bunge, or do you think over time more and more of that will come on to the BP balance sheet?

Lydia, on the share buyback, the balance from the third quarter '17 is around about 270 million shares to buy back in terms of scrip.

There is some of the dilution which will come on to later.

But in terms of this pure scrip buyback, it would be about 270 million shares, which is around about $1.8 billion.

But obviously, also have a scrip that will get issued through the third quarter and then we'll look to sort of buy that back as well as we get into 4Q.

But you'll see the run rate of buybacks in terms of offsetting the scrip ramp up through the second half of the year now, especially as the disposal proceed program is derisked.

Thanks, Lydia.

On the low carbon, I mean the Lightsource BP is a really interesting story because we get told made many times we don't -- we spend only 3% to 5% of our capital on new energy ventures.

But when you look at what we enable, things that I don't think would happen, Lightsource BP is a great example, U.K.'s largest solar development company in one country.

Within a year or 1.5 years, we're in 10 countries now.

It's attracted that $7 billion of investment for infrastructure funds.

Big ones into India, for example, and now into Brazil.

It's a great way to leverage capital.

And it's not using our capital to do that.

But these things I don't think would happen without our involvement in opening the doors and good partnership with Lightsource around the world.

Going forward, these business models, I guess, I think there's a number of different ways we think about it.

We could see our role as taking and working on these projects, Lightsource BP, then selling on the projects and using our capability -- ability to raise finance outside to do more projects down the road.

We may not even have all these projects going forward.

We're turning over the portfolio.

The JV model with BP and Bunge is a great combination of things.

And some of these, of course, will depend on what our co-venturer would like to do, for example, with Bunge going forward.

But these are really good business models that allow us to really leverage off of our balance sheet, but not use the capital directly, and that will happen as well with BP Bunge.

So stay tuned, we've got lots of ideas.

We're sort of inside.

We like to think of these things as smart M&A.

In the past, we used to want to do everything 100%.

That's our history with solar and wind and biofuels.

And I think we've just seen there's a different way to use our capability to raise financing going forward and making these new energy businesses happen that might not otherwise.

Okay.

Thanks, Lydia.

Yes.

We'll take the next question from Michele Della Vigna.

Two, if I may.

The first one is about refining margins.

You've provided guidance for lower refining margins in Q3.

I was wondering, is this a conservative guidance, or do you actually see reasons for concerns over the margins in Q3 given that, quarter-to-date, we've probably see an improvement in most regions?

And then secondly, I wanted to see if you could give us some guidance on what is behind the write-downs this quarter.

It looks like you are progressing well with some disposals.

Probably these write-downs are behind some of those with U.S. gas and the Egyptian assets.

But if you could give us more visibility, that will be great.

Okay.

So maybe just start with the last question.

The impairments we had, the bulk of it is about $800 million in the Upstream.

It's a mix across the piece.

Some of it is associated with some of the BPX legacy assets.

So some of the gas assets, some of the smaller packages we've already sold and some impairment triggers on some of the bigger assets, as you can see, from some of the gas prices that you see today.

So that was part of it.

Also, a loss on sale around one of the big assets that we got away in the first and second quarter.

And actually, we also had about a just north of $100 million, looks slightly higher than that decommissioning provision move.

So it was across a suite of pieces.

It was nothing specific.

So that's where the bulk of the impairments came from, which is mostly inside the Upstream.

And then in terms of refining market margins, you saw some recovery in margins due to the big high turnaround schedules that we saw, that we signaled out for ourselves, particularly in Europe.

And we're also seeing some weakness in demand in the first half of this year, although there's been more recent pickup in that.

If you look at demand for the first half of this year, it's been tracking roundabout 1 million barrels a day compared to 1.5 million last year.

So it was down a little bit.

A lot of that was driven by what was going on economically between the U.S. and China and general economic concerns around the globe.

We are now starting to see a little bit of pickup, so that may help a bit.

But you've also got all the refineries coming back out of turnaround and I think what that will therefore do is put a little bit of pressure on refining margins.

And of course, the fourth quarter will always historically be a weak quarter typically for margins in terms of refining.

Now IMO 2020 should start to underpin margins at the back end of this year in terms of distillate cracks, and we're starting to see some benefits of that into 2020.

But now we do think margins in the second half of this year as refineries come back out of those turnarounds will start to be a little bit weaker.

Thank you, Michele.

We'll take the next question from Biraj Borkhataria, RBC.

Biraj?

Just one follow-up on the Michele's question.

Could you just confirm that the impairment for BPX, none of it was related to the newly acquired asset?

And the second question is on flaring.

Is it -- there were a number of articles recently going around highlighting BP -- BPX was one of the larger flarers of gas in the Permian.

Could you just talk about what you're putting in place to reduce that and what kind of time line you're thinking about?

So I can confirm that none of the impairments are associated with the assets we've just acquired.

If anything, it would probably be in the opposite direction given the oil-rich nature of them and the price at which we brought them.

So no.

But there's no -- been no change in terms of balance sheet around the acquired assets.

And on the flaring, I've seen the story.

I'm not sure of the accuracy of it.

Haven't looked and fact checked it.

But I can tell you that we're absolutely going to be installing across those assets very efficient infrastructure across the field, electricity, vapor, recovery units, rightsized facilities.

We'll get on this very, very fast, because having taken over the operations on the 1st of March, there's lots of things that we're doing.

It's not to say they weren't run well.

The Permian, quite frankly, right now, the United States is the largest flarer of natural gas in the world right now.

So I'd really like to go in and see those figures because they seem a touch high to me.

But don't worry, we'll be all over it, Biraj.

Okay.

Thank you, Biraj.

We'll take the next question from Christyan Malek at JPMorgan.

Christyan?

Two questions from me.

First, the path to returning more cash to shareholders, Brian, what gives you the confidence on delivering on your -- the second half, especially given volatile macro backdrop on weak U.S. gas prices?

And just to be clear, should we expect cash return in any way or form to be entirely a function of the outcome of divestments?

The second question, Bob, I have a question on energy transition.

The investment you're putting through feels really to be disproportionate vis-à-vis your total CapEx and relative to some of your peers.

And I understand the long-term ambition is to decarbonize the portfolio, but I'm not as clear what the industrial logic and returns you're looking to achieve over the medium term.

Christyan, so on divestments, I think you know we've done close to $75 billion or will have done about $75 billion since 2010 in Deepwater Horizon.

So we're pretty confident in the process.

The team is a very well-oiled machine in terms of the M&A group.

We have more than sufficient assets to cover the $10 billion.

We have $1.5 billion of the $10 billion in 2 quarters in.

Deals typically take 9 to 12 months to complete, announced.

So actually, we're pretty much on track.

And we're very comfortable we'll get 4 to 5 done this year, which is what we laid out at 1Q.

I think as we announce those deals, then I think the market gets confidence in terms of leveraging the balance sheet and you'll start to see gearing come down.

And then that opens up the path over and above the buyback program for the second half of this year to look at further distributions beyond that.

So no, we're pretty confident in terms of the disposal program.

It's just taking longer.

There is more private equity involved in some of those Lower 48 assets.

And frankly, it's not a fire sale.

We don't need to sell some of these assets, so we may well end up retaining some if we need to, but we have more than sufficient cover for the $10 billion.

And Christyan, on the CapEx number, where our CapEx -- accounting CapEx is about $500 million a year and our total spend on the new energies from BP are really over $1 billion, that $500 million of CapEx is more the CapEx than half the FTSE 100 spends, so it's not a small amount of money.

As I mentioned earlier, in the past, BP would invest in new businesses.

We do it at 100% model.

We've now realized that working with other people's capital and spending like we're doing with Lightsource BP and BP Bunge is a great way to leverage spending in the new energy sector not necessarily coming out of our CapEx.

I am a believer because I read an article by someone outside the industry that just noted, in terms of low carbon spending on capital inside the company, I mean I think we are like many of the good companies who spend more than 50% on low carbon because I am a believer that natural gas has got to be part of the solution in the energy triggers, combined with renewables.

So I think we're -- this is our strategy.

I think you can't measure it just by one number.

Christyan, thank you.

Or you had second question?

No, that was it for me.

Appreciate it.

Thank you.

And we'll take the next question from Irene Himona.

Two questions.

Firstly, Brian, you referred to lower trading in the second quarter results.

I also wonder if you can talk a little bit about it.

And also, what you're seeing so far in 3Q on that?

Secondly, you referred to strong marketing results in areas such as Mexico.

I wonder if you can give us a sense, either for the first half or the second quarter, of the split between refining and marketing ARCOP.

And then finally, on the disposals, I mean you have sold $70 billion of assets in the past.

So looking to sell $10 billion sounds a low number.

However, you did say that it's taking a bit longer.

The buyers sound very different.

My question is, as a seller, given that you were selling the $70 billion when the environment was very different, we had $100 oil, is this a radically different environment that you are trying to sell the $10 billion to?

So on the last question, Irene, I think the answer is no.

Actually, we sold assets in 2015, 2016, the oil price was $28 a barrel.

So I think people see through that and look at the forward curve.

They won't focus on the spot price.

It's always an interesting conversation when you're in negotiation because depending on whether you're buying or selling, you will try and use whatever numbers you can, but all we see through that in terms of long-term forward scrip prices help sort of cut through some of that.

So I don't think that's got any more difficult.

In terms of IST, it probably -- the way to describe it is, on the gas trading side where the results appear in the Upstream, it was a very strong first half.

It was a strong 1Q and it's a strong 2Q.

2Q was slightly down on 1Q on the gas trading, but strong in both quarters.

On oil trading, it was a very strong 1Q and a more typical average 2Q.

And so therefore, not all gas reported in the Downstream, so that will maybe just sort of help you with guiding through the relative performance as you then look at it in terms of the segment results.

In terms of marketing, actually, I mean, was a very -- I mean it's actually a strong quarter and first half with about a 15% improvement in fuels marketing earnings, 1H compared to the previous years.

So that's actually -- it is a good performance that we're seeing coming through.

We are seeing some weakness in demand, but we are seeing growth in the convenience partnership sites, and they've increased by 65% since 2016.

And the strategy that Tufan laid out.

And that's delivered around $1.2 billion of nonfuel retail gross margin.

So I think what you're seeing is maintain strong performance coming through the marketing businesses.

Mexico, I think, has been a great story of expansion as the business and Tufan have gone after that.

And we now have more than 1,200 sites in China, Mexico and Indonesia in terms of growth markets.

So I think there is more to come on that.

You'll get a full year update in terms of where Downstream are.

But what I would say, it's making good solid progress.

We'll take the next question from Jason Gammel at Jefferies.

Jason?

First question I had was on Angola where, during the quarter, you made some progress in terms of being able to potentially reinvest more money into Angola and achieve an extension.

Is there a possibility for further progress on -- in particular your operator blocks there?

And then the second question does come back to the low carbon business again.

And I guess it's really a high-level question is how you think about investment criteria in that business.

My supposition would be that the IRR is going to be lower than your traditional Upstream business.

But given your ability to significantly lever it up, you kind of take it more on a return on equity basis.

Do you think about a potential lower rate of return because of its non-decline nature, et cetera?

Just anything that you could give me on that would be great.

Okay.

Jason, on Angola, we've had some -- we have had some breakthroughs there.

We've extended our terms on Block 18 out to 2032, so that's been a breakthrough for us.

Block 17, other people operating.

Negotiations are going on there because the life extensions are coming up for review.

Same on Block 15, the Exxon-operated block.

They've signed an agreement with the National Petroleum Agency that extends that license from -- out to 2032.

So there's some good things happening there.

They also bring Senegal into the partnerships.

We've been looking at some field developments there now as a result of the extensions in '18 that will give us some more running room there.

Costs have come down quite a bit in Angola.

It's a challenging environment, of course, in general.

But the government, I think, has taken some time after the oil prices fell to adjust things.

So we have a potential FID coming up that I can mention maybe later this year, but I won't say the project because, of course, we have partners in it as well.

So all in all, a lot has happened in the last, I would say, 8 months in Angola.

They're very positive.

And then in terms of the low carbon value in terms of returns and IRRs that we look at, we have a separate committee that oversees all of our ventures, investments in alternative energy investments, it's called, around the renewal agenda in terms of new energy frontiers.

I mean maybe just to describe this.

We focus on the base business in terms of trying to decarbonize.

And so the work that Bern and Tufan are doing in our base businesses that generate all the revenue and drive earnings, drive returns and drive the targets out to 2021, there is a very strong monumental effort in terms of decarbonizing that business, and we've really taken out 2.5 million tonnes of CO2 in that business over the last 3 years and have a target to take another 1 million tonnes out to 2025 and making good progress in that this year.

We then look to improving our products, which we talked about in terms of rig framework.

But then in terms of creating new opportunities, the IRR is actually -- some of those renewables businesses look a lot more now like what we could call a traditional business 10 years ago.

So wind sits comfortably inside our portfolio, onshore wind in terms of the U.S., makes good returns that compete with the rest of the portfolio and integrates with the rest of our business in terms of Lower 48, where we are in the United States.

You then have the deal that we talked about in terms of BP Bunge, which is a real step-up opportunity for us in terms of getting that business and leveraging that business up going forward, with a 50% increase in our own portfolio in terms of volumes coming out of that.

I thinks that's a massive opportunity that that's created for us in terms of going forward and that we'll be able to benefit from being in a joint venture structure with the strengths of both sides of that business.

And then you've got Lightsource BP, which does have a leveraged investment model.

It's a huge opportunity.

Solar is very economic today.

The IRRs compete.

And of course, we can use solar as an integrated solution in terms of integrated energy solutions, both with trading, but also with our base business in terms of renewal, in terms of natural gas and oil.

So I think what you're starting to see is a lot of those businesses interacting with our base businesses generating revenues going forward.

And then, of course, there's going to be adjacent opportunities that will come up in this incredible new energy frontier space where there will be a multitude of solutions, the energy conundrum that we've got, the dual challenge going forward.

And you're going to see some more of those come along.

And those IRRs may not look like a typical IRR that you see in, say, an oil project which may look different to a natural gas project, but we'll have huge amounts of optionality.

And in those cases, that's really where we're looking at the value, the potential value those opportunities will bring before they cycle into actually a steady base business in the future.

So we are actually looking at this with 2 very different frames.

The first one is a base business that drives equity earnings.

The second one is around a value almost private equity model that looks to leverage up the finances in what is a really exciting, expanding business in terms of energy.

Thank you, Jason.

We'll take the next question from Chris Kuplent at Bank of America.

Thank you for taking my questions and thank you for laying out some of your activities on the energy transition front, and that's really where I want to focus on with my first question.

You laid out, Bob, that your goal is to be consistent with the Paris Agreement.

So can you help us a little bit, building a bridge for more of these activities and the detail levels you've given us?

And I assume you will give us going forward to how you measure that consistency with the Paris Agreement.

What kind of framework can you give us to build that bridge between the activity level and that statement that your overall activity is consistent with the Paris Agreement?

And the second question, really just a tiny detail question left.

Brian, you've got $2.1 billion oil spill payments in the first half and the full year guidance of $2 billion.

That pretty much means that BEL claims are done, doesn't it?

I'll pick up the latter one first, if that's okay.

We said just around $2 billion for this year, but we're pretty much -- BEL, I think we're down to all the BEL claims are done.

I mean they've done full stop, but they're in what's called the recycle appeal phase.

So there is still some to go back through.

I think we have 5 claims get settled through this quarter, but there are still -- there'll be a tail of claims that will be going to the Fifth Circuit appeals process, but pretty much BEL is done in terms of any major moves in terms of Deepwater Horizon.

So you should -- there -- I don't believe there to be any surprises in terms of all the agreements that have been set and put in place.

And the fund itself is pretty inactive right now in terms of activity.

It's really about the appeals process and closing out the final piece of that.

And Chris, on the energy transition and the Paris goals, we absolutely support the Paris Agreement, the goals.

We do believe the world is not on a sustainable path.

We've recognized the importance of climate change for some time.

We recognize this IPCC is the primary source of information on climate science and they've called for action for 20 years.

And we include in our goals reaching net 0 in the second half of the century.

Specifically, we're looking at limiting temperature rise to well below 2 degrees C. So we support this rapid transition.

It's both good for society and it's going to be in BP's best interest as well.

A slow or very delayed transition increases the risk of some sort of costly and disruptive event later on.

So as a global energy company, we've got to contribute to the dual challenge and that includes the 2 billion more people that will be on the planet and the world is going to need lots of energy in all forms, while at the same time reducing emissions.

And we've said it's not a race to renewables, it's a race to reduce emissions from all kinds of fuels.

So we're not going to promote only one energy source, improve energy efficiency.

We're going to use all kinds of new technology such as -- and including carbon capture use and storage.

We absolutely believe there's a price on carbon to help drive action.

We do think our strategy is consistent with the Paris goals and we've got to so we can prosper and deliver throughout the transition.

We are going to be investing the 4 points of our strategy around advantaged oil and gas, developing low carbon businesses as part of that.

We will -- we signed and supported a resolution from a group of shareholders earlier this year to describe in our corporate reporting how the strategy is consistent with the Paris goals.

So we'll be laying that out really now every year, March, April, of course, next year in our corporate reporting.

And as Craig said earlier, we'll get together a group in November and lay this out in more details.

So I could probably talk quite a bit about this.

And obviously, all the people we have, the thousands of people we have working on these new energies, is part of a demonstration in not just words, but action.

But our traditional businesses and moving our portfolio, which will shift in oil going forward, but it's certainly not a business that we intend to exit.

We don't think that's going to help the energy transition.

And we've got to be able to make sure that we remain a very good investable proposition for our investors as well.

So Chris, that's probably a longer answer than you wanted.

I'll give you one chance to clarify anything I've said or...

No, not at all.

I look forward to November then.

All right.

Thank you, Chris.

We'll take the next question from Peter Low at Redburn.

Peter?

Just to follow up on the second half step-up in the buyback run rate to around $1.8 billion.

Is that contingent on disposals getting away?

Or can you deliver that from underlying free cash flow?

And then secondly, on the biofuels combination in Brazil, clearly, it's a big increase in volumes, but Bunge's business has been challenged in recent years.

Can you give us any more color on how you expect the new combination to improve performance and over what time frame?

So in terms of the buyback second half year, yes -- no.

I mean if you take out the inorganic spends, the BHP payments in Deepwater Horizon in the first half, we were surplus cash at the sort of prices you're looking at.

And comfortably in 2Q, we were balanced around $50 a barrel.

So second half this year, operating cash will sufficiently cover the buybacks.

So no, it's not going to be contingent on the disposals.

But as I say, we're pretty confident on the disposal program.

And so yes, we'll be able to execute those buybacks in the second half of this year irrespective of where we get to with disposal proceeds.

And Peter, on the new BP Bunge combination, it will take -- today, we have 3 world-class, world-size sugarcane ethanol plants in Brazil.

This combination will take it up to 11.

It will take the volumes up to over 1 billion liters.

We just look at all the synergies that will come from combining those 2 businesses.

They're geographically relatively in the same areas.

The cost structures of the 2 systems are very different.

We've got our reliability up to 96%.

Our safety record is good.

We intend to bring this together.

Bunge operates well, but we're going to bring new technology and automation, and it should reduce the scale of the size of the organization.

Trading activities will continue to be an important part of it, both sugar and ethanol.

And we now produce quite a bit of biopower with what's left over after the crushing happens.

We now put that into the system as bioelectricity.

I'm really excited about this business.

It's got the potential to grow going forward.

It has amazing characteristics.

Somebody said to me the other day that it's not really a renewables business, which is just the wrong way to look at it.

It's basically energy from photosynthesis that puts it into a choice of sugar, and even the automobile sector, that has a choice of running on gasoline or pure ethanol.

Lots of flexibility here.

Brazil is quite blessed with these resources.

And even sugarcane itself is one of the most carbon sink plants on the planet.

So stay tuned on that, Peter.

Great.

Peter, thank you.

We'll take the next question from Jason Kenney at Santander.

Jason?

Two questions, if I can.

Brian, how relevant is the refining margin indicator, given -- I think the actual gasoline yield in the second quarter was below 40%.

And in your assumption, the indicator margin is typically around 55% to 60%.

And secondly, do you have a figure in mind for what kind of total cash return BP could afford or support over the period to 2025?

I know one of your major competitors has a number in place, either annually or percentage relative to market cap.

And then maybe a third question, if I might, to Bob.

Do you think there is a disproportionate pressure on BP currently around climate change and climate consciousness relative to other international oil companies at this time?

You do seem to be in the press consistently defending your actions in respect to climate.

So thanks, Jason.

Maybe just on the refining market margin you've basically raised, I mean you've kind of highlighted -- I think articulated quite well the issue, which is it's an indicative marker margin.

It assumes a certain crack spread across a portfolio of refineries.

And of course, what it doesn't do, as you saw in 2Q, is it would have overstated the margins we would have made from gasoline because our proportion of gasoline came through our systems lower than where the marker margin would have been.

It is an indicative thing, Jason.

There's not much we can do about it.

We've had various machinations of it previously of different types of marker margins.

This is the one that we've converged on.

It's one that the industry tends to use in terms of, I think, it's like a 3, 2, 1 crack out of the U.S. But it varies by region.

And therefore, you will get these distortions quarter-on-quarter.

I know that's not particularly helpful for you as you try and predict results quarter-to-quarter, but that's certainly impacted the Downstream.

One of the things that impacted Downstream in 2Q was, of course, that we didn't have as much gasoline that the marker margin would have contributed to the results.

On total cash returns, we've got a major out to 2021.

We're not moving to 2025 just yet.

I think we're only halfway through the original set of targets we gave you.

But if you distillate down those 2 sets of targets in Upstream and Downstream, take off assumptions around corporate costs and pension requirements, and our pensions are more than funded at the moment, so they're in relatively good shape.

But if you just assume $1 billion to $2 billion of corporate costs and pension charges and other charges a year and you look at the 2 sets of measures, Upstream, Downstream, it gets you to somewhere around $15 billion of free cash set against an $8 billion dividend in 2021.

And of course, that dividend may well move between now and the 2021 date when this arrives.

So therefore, there will be less cash available.

But we see very strong -- and the 2021 plan we laid out and the targets we laid out, we see very strong cash flow delivery.

And I think as Bob highlighted earlier, we're now 10 quarters in and we're slightly ahead of where we thought we'd be.

Actually, we're quite a way ahead of where we thought we'd be.

But at this point, we're not complacent.

We have a lot more to do.

It's only 10 quarters in.

We still got 10 quarters more to deliver.

But in terms of distributions, I think you'll start to see some of that change as we move into the second half of this year.

Thanks, Brian.

And Jason, thanks for your question about, do we feel like there's disproportionate pressure on BP than others in the industry?

Well, I think it feels a little bit that way.

I mean London has become sort of the epicenter for climate demonstrations and this is our hometown.

So I think we're clearly singled out in that.

I think we're happy to engage.

We don't mind demonstrations.

We want to talk with people.

We need to talk to people that also want to have dialogue.

I do think this demonization and polarization of companies and people is not going to help solve what is a really difficult problem.

We're not going to shy away from that.

I mean I do find it a little bit of irony because London and the U.K. here, you go around the world, the U.K. is often used as a great example for what it's done to reduce greenhouse gas emissions.

So the country's emissions are now down to 1880 levels, mainly because of the phasing out of coal and replacement with both renewables and natural gas.

We're -- we just got -- I think people don't realize all the things we're doing.

And I think we're just -- I'm a big one to say it's not what you say, it's what you do.

And I keep looking at what we do across -- around the world.

Wind farms on 10 sites.

We got Lightsource BP in 10 countries now.

We've got this renewable products portfolio plan for new JVs with DuPont, making bio-butanol in the United States.

This is Fulcrum BioEnergy, keep your eye on that one.

It makes biojet fuel just from municipal waste.

We're just doing a lot.

I think we just need to keep doing it.

But I do urge everyone who takes a very single view of the world that there should be no natural gas, there should be only renewable energy, that's not really helping the debate.

So we're going to contribute to the debate and -- but we have pretty thick skins.

We have a plan.

We know what we're going to do.

And even though we get a lot of pressure, we've also got to maintain the fact that we have to be an investable proposition for you all.

Many of you are owners of the company on the call and that's firmly in our sights as well.

So Jason, do you want to add anything or clarify anything or...

No, that's perfect.

Okay.

Thank you, Jason.

We'll go to Pavel Molchanov, who must be drinking strong coffee at 4:00 a.m.

in the morning in Houston.

One more about Bunge, if I may.

Clearly, land use in Brazil, particularly under the current administration, deforestation has been getting a lot of headlines.

From an ESG perspective, I'm curious how the Bunge investment fits into kind of some of those pushbacks we hear about sugarcane-based biofuels.

And then on traditional business, an update on exploration in Azerbaijan would be helpful since my understanding is that's supposed to accelerate towards the end of the year.

Pavel, thanks.

Well, on the BP Bunge sites, those sites are not in the Amazon really.

They're areas that I would describe as having seen them sort of scrubby grassland that prior to this had several cattle per hectare.

So people say, oh, it's taking away land for food.

I actually wouldn't see it that way.

So this joint venture -- I mean I read what I -- I read about, like you do, around the Amazon, but that's not where this is sort of Central Brazil.

I think it's just a really good use of land in Brazil.

And I think this is a different issue than what's happening up further north where I believe the country has said small populations, they need to use land for other things.

But that's not what BP Bunge is really involved with.

And I'm not sure that it does create sugar as well, so it isn't that it displaces food.

On exploration in Azerbaijan, I mean we got to be careful what we say here because we have so many partners.

It's a very big area, but we're going to spud -- once the rig becomes available, spudding the Shafag-Asiman well in 2019.

We need to have the rig, which is being used by another company first.

There's a shallow water, Absheron.

We plan to spud that in the first half of 2020 and we've got 2 other wells to follow.

So I think like you said, we're -- we've got a lot to do in Azerbaijan.

It's very exciting.

We've got an advantage gas project beneath the existing Shah Deniz development.

And we think it has multi-tcf potential and that's currently planned to spud maybe in 2020 as well.

So people say Azerbaijan, I say late life province.

We think there is lots of potential still there.

Thanks, Pavel.

We are down to the last question now from Colin Smith at Panmure Gordon.

Colin?

A completely different topic.

I was wondering whether you would like to be bidders in the Brazil transfer of rates auction later on this year.

And if you were successful, that presumably could absorb a fairly decent chunk of additional and organic CapEx.

And I just wondered if that might make a difference to some of the comments that you've been making around the potential to increase distribution or more generally set it within the framework about how you're thinking about gearing and further significant chunks of inorganic CapEx.

Well, Colin, these transfer of rights, of course, the terms are not all out there.

They look very expensive and we're just going to remain very disciplined within our capital framework.

We haven't made a decision yet.

We're still in discussions, of course, with Petrobras and looking at it.

But we're going to be really, really careful before we leap into that.

Okay.

I think that's the end of the questions.

Let me just turn over to Bob for a couple of closing comments.

All right.

Thank you, Craig, and thank everybody for joining us today.

Again, we're now halfway through or 10 quarters through the 5-year strategy we laid out in early 2017.

I do think this quarter was a strong quarter.

We've got a set of cash payments that are behind us this year.

I mean a good, strong cash generation this quarter.

I'll just note that the cash payments to wrap up the BHP acquisition are in the rearview mirror now and the annual payment we make to the Gulf of Mexico is behind us.

Overall, the strategy, I think, is on track.

Projects coming onstream.

New significant investments in new energy, consistent with the energy transition that's underway, being careful with our capital.

Maybe it's just worth summing up reminding how we think about it.

We think as an investment proposition, really 4 points and then 4 basic strategic priorities.

So our proposition to you as owners, we want to be safe, reliable and efficient execution of projects.

That's simply good business, underpins the delivery of our growth aims for near term and longer term.

As a company, an investment proposition, we want to be fit for the future.

So a distinctive portfolio that will change for the challenging world we're in.

We want strong Upstream, strong Downstream as well as the new energies that we've got to be competitively positioned.

The third, we do focus on returns.

Value-based, disciplined investment and cost focus, with the investment proposition to you growing sustainable free cash and distributions to shareholders over the long term.

Now how do we do that?

Our strategic priorities, again, growing advantaged oil and gas in the Upstream and a lot of focus on clean gas and low-cost gas and high-margin advantaged oil.

Secondly, market-led growth in the Downstream.

We market a lot of things.

We have millions of customers a day for advanced fuels, lubricants, petrochemicals, bio-products, electric vehicle charging, carbon-neutral offers, retailing in combination with other businesses as well.

Third priority, strategic priority is just venturing in low carbon across multiple fronts.

We're going to keep testing new and potentially disruptive technologies, try to develop those businesses with a return.

And then the fourth strategic priority is just modernize the whole group, including our plants, processes, portfolio, ways of working.

And I think with these strategic priorities, we're going to embrace this energy transition and it will shape how we continue to create really value for you in what is going to be a changing world.

So that's maybe too long of a summary for what we talked about today.

But again, I would just like to thank you all for taking your very valuable time and spending it with us today.