BP p.l.c. (NYSE:BP) Q2 2018 Earnings Conference Call Transcript

Jul 31, 2018 • 04:00 am ET

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BP p.l.c. (NYSE:BP) Q2 2018 Earnings Conference Call Transcript

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Presentation
Executive
Bob Dudley

announced the series of investments through the half year in FreeWire, StoreDot and Chargemaster. This combination of interest in fast-charging technology, battery innovation and the U.K.'s largest electric vehicle charging network operator helped to position us effectively for the fast-evolving electric vehicle market. Not a threat but an opportunity for BP. We are doing all of this while maintaining our tight organic capital expenditure range of $15 billion to $17 billion over the medium term and gearing within a range of 20% to 30%.

Given our quarter-by-quarter results and with our confidence in the outlook for group organic free cash flow, we announced last week a 2.5% increase to the quarterly dividend. With this, the second quarter dividend is increased to $0.1025 per ordinary share or $0.615 per ADS. This is the first increase in the dividend in 4 years, demonstrating the confidence the board has in our disciplined financial framework, the operational momentum across the whole business and our commitment to growing distributions to shareholders over the longer term.

Turning to the macro environment, the world economy continues to grow despite concerns around potential trade disputes and other market forces. Global GDP is expected to increase by around 3% in 2018 and '19, supporting strong oil demand growth as well as increasing demand for natural gas, notably Asian demand for LNG. Across the refining system, margins remained strong at above-average levels, supported by high levels of utilization and diesel demand.

Looking at the oil market more closely, OECD stock levels have returned to a more normal level, as shown in the chart on the left. Oil prices have trended higher this year supported by strong demand growth and a number of contributing supply factors which have unsettled the outlook, particularly supply disruptions from oil-producing nations, particularly Venezuela and Libya. There are questions over the timing and effects of U.S. sanctions on Iranian crude exports and U.S. infrastructure bottlenecks, particularly in the Permian basin.

OPEC and other participating countries have agreed to increase production to counter the effects of these supply disruptions, but there is uncertainty as to whether there's sufficient spare capacity if the disruptions increase significantly. These uncertainties could serve to maintain upward pressure on the oil price over the near term. Looking further out, we continue to plan for oil prices in the range of $50 to $65 per barrel.

So we have been delivering this strategy we laid out to you in February last year, shaping our portfolio and creating a business that is resilient and fit for the changing world. We continue to grow our gas and advantaged oil portfolio in the Upstream. We have a strong set of major projects out to 2021, driving growth in the near term and creating deep optionality into the next decade. I can't remember when it has looked this good.

Alongside that, we are optimizing and high-grading the portfolio by deepening it in our core areas and exiting assets where we can create value by divesting to others.