Through our strategy we aim to create a distinctive platform for value growth over the long term
In 2011 we put forward a 10-point plan that outlined what could be expected from BP over the next three years. During 2012 we worked towards the milestones we had set out for 2014. We refined our plans and communicated further information on our longer-term strategic objectives beyond 2014.
Through this work and the actions taken to strengthen the group, BP enters 2013 a more focused oil and gas company with promising opportunities and a clear plan for the future. BP’s strengthened position, distinctive capabilities, strong financial framework and vision for the future provide the foundation for our long-term strategy. This strategy is intended to ensure BP is well positioned for the world we see ahead.
Our strategic priorities
Our aim is to be an oil and gas company that grows over the long term. We will seek to continually enhance safety and risk management, earn and keep people’s trust, and create value for shareholders. We will continue to simplify our organization and fine tune the portfolio. We will focus on efficient execution in our operations and our use of capital. We will build capability through the pursuit of greater standardization and increased functional expertise.
Our financial framework
We expect our organic capital expenditure to be in the range of $24-27 billion per year through to the end of the decade, with investment prioritized towards the Upstream segment. All investments will continue to be subject to a rigorous capital allocation review process.
We expect to make around $2-3 billion of divestments per year in order to constantly optimize our portfolio. We will target gearing in the 10-20% range while uncertainties remain. Our intention is to increase shareholder distributions in line with BP’s improving circumstances.
What you can expect
1. A relentless focus on safety and managing risk through the systematic application of global standards.
2. We will play to our strengths in exploration, deep water, giant ﬁelds and gas value chains.
3. Stronger and more focused with an asset base that is high graded and higher performing.
4. Simpler and more standardized with fewer assets and operations in fewer countries; more streamlined internal reward and performance management processes.
5. Improved transparency through reporting TNK-BP as a separate segment and breaking out the numbers for the three downstream businesses.
What you can measure
6. Active portfolio management to continue by completing $38 billion of disposals over the four years to the end of 2013, in order to focus on our strengths.
7. We expect to bring new upstream projects onstream with unit operating cash marginsa around double the 2011 average by 2014.b
8. We are aiming to generate an increase of around 50% in net cash provided by operating activities by 2014 compared with 2011.c
9. We intend to use half our incremental operating cash for reinvestment, half for other purposes.
10. Strong balance sheet with intention to target our level of gearingd in the lower half of the 10-20% range over time.
a Unit cash margin is net cash provided by operating activities for the relevant projects in our Upstream segment, divided by the total number of barrels of oil and gas equivalent produced for the relevant projects. It excludes dividends and production for TNK-BP.
b Assuming a constant oil price of $100 per barrel.
c Assuming an oil price of $100 per barrel and a Henry Hub gas price of $5/mmBtu in 2014. The projection assumes the completion of the agreed transaction with Rosneft and receipt of the projected Rosneft dividend and excludes BP’s share of the TNK-BP dividends from operating cash ﬂow for 2011 and 2014. The projection includes BP’s payment commitments under the Department of Justice and SEC settlements. It does not reﬂect any cash ﬂows relating to other liabilities, contingent liabilities, settlements or contingent assets arising from the Gulf of Mexico oil spill which may or may not arise at that time. We are not able to reliably estimate the amount or timing of a number of contingent liabilities. See Financial statements – Note 43 on page 253 for further information.
d Gearing refers to the ratio of the group’s net debt to net debt plus equity and is a non-GAAP measure. See Financial statements – Note 35 on page 234 for further information including a reconciliation to gross debt, which is the nearest equivalent measure on an IFRS basis.
e Free cash ﬂow: net cash provided by operating activities less net cash used in investing activities.