2015 Annual General Meeting: group chief executive

Speaker: Bob Dudley
Title: group chief executive
Speech date: 16 April 2015
Venue: ExCeL London
Thank you Carl-Henric and good morning everyone.

I'd like to add my thanks to the chairman's. When I look out and see so many familiar faces it reminds me that you have been loyal to BP through some challenging years.

Not just the past five years – I know many of you have been loyal to BP over many decades.

As a shareholder in BP, one of Britain's great companies, one that is over a century old, you understand the value of investing in a business that can look a long way back as well as a long way forward.

When I think back on the past years there have been many moments that have reminded me what a great company this is.

Last year we celebrated 50 years of BP in the North Sea and it brought back many memories – happy memories for me of living and working in Aberdeen and bringing up a young family in Scotland in the 1980s.

We were opening up a new world energy frontier at the time, and a new era for Britain. And it's a frontier that is still going strong for us.

We started-up a new project, Kinnoull off Aberdeen – one of seven start-ups in total around the world last year.

And made a new discovery in the central North Sea, Vorlich – one of the five discoveries we made around the world in 2014.

That is a good performance, and just one of the anniversaries we have been marking. I was also proud to represent BP in September as we marked the anniversary of an agreement we first signed in Azerbaijan 20 years ago.

That deal to produce oil became known as the Contract of the Century.

It has brought new prosperity to the people of Azerbaijan – and I would suggest to you all, it is a good place to visit – but it also paved the way for new business deals and future partnerships.

I showed you this map last year and there is a reason I'm showing it again.

Last year it was just a line on a map, showing the path for a new 3,500 kilometre corridor – the Southern Gas Corridor – opening up a completely new supply of gas to Europe.

This year, right now, the pipes are being laid in the ground.

Here we see the Presidents of Azerbaijan, Turkey and Georgia at a ceremony in Kars in Turkey last month. It marked the start of construction of the 1,850km section of the pipeline across Turkey.

We are leading a flagship for the industry, demonstrating how BP's major projects continue to move forward at pace.

It shows how quickly things can happen when business and governments work well together.

Such projects will generate value for BP for many decades to come and I am very proud to go to work knowing we make big differences to people's lives in this way.

Our aim is always to achieve the best possible value for you, our shareholders. But at the same time we are a business with a wider purpose. The money you invest and the energy we deliver transform economies and transform millions of people's lives, as the Chairman has said.

We have been doing that consistently for a long time.

It is already 25 years since we started working in Russia.

It is 50 years since we took our first steps in Egypt.

Sixty years ago we first started refining at Kwinana in Australia.

And 100 years ago saw the launch of BP Shipping – as we saw in the film the Chairman spoke about. And I know we have some great past BP ship captains here today.

It is a story of great courage, great adventures, and great leadership.

One of those leaders started work with BP 44 years ago. He joined BP Shipping as a young cadet so he could see the world.

John Ridgway has certainly managed to do that and he retires as Chief Executive of BP Shipping this month.

I would like to ask everyone to join me in showing our appreciation to John, and also to BP Shipping for a century of service to the company

Reshaping BP

Over the past hundred years we have celebrated many milestones. But as we all know, there have also been some bad days and some tough times.

In four days' time we will mark the fifth anniversary of the Deepwater Horizon accident when we lost 11 colleagues.

We have also recently remembered the 15 colleagues who lost their lives in the accident at the Texas City refinery 10 years ago.

These events and others – like the terrorist attack at In Amenas – remind us that we work in a high risk industry in a high risk world – one where we must always be highly vigilant, where we must learn constantly – and where we rigorously apply what we learn with discipline every day.

We never forget the colleagues we have lost and their loved ones, and we constantly strive for the highest standards of safety.

BP has faced some big challenges. But we have pulled together as a team. We had a determination and conviction to put right the things that went wrong – and to do the right thing by those who were affected.

Our head of safety and operational risk, Bob Fryar, has put this very well and I'd like to share a short video with you now of Bob speaking about the Gulf of Mexico.

As Bob says, we are a changed business.

We reshaped the business and we made a commitment to you in 2011 – a commitment we detailed in a 10-point plan.

We set ourselves a goal three years ago to deliver this plan and last year was the final year.

Now, on behalf of thousands of BP people across the globe, I am proud to say that we have delivered on every one of those commitments to you. Every one.

Safer, stronger, better

In short, we said we would make BP a safer, stronger, better business that delivers more value to shareholders.

We have done all of those things.

First safety.

In 2014 we had fewer of the most serious safety events, known as Tier 1s, than in 2011, fewer leaks and spills – known as losses of primary containment – and fewer recordable injuries.

And here's something else we have demonstrated.

The actions that improve safety also improve reliability and efficiency at the same time. Alongside those improving numbers on safety we have seen a 7% increase in plant reliability since 2010.

We made 13 significant discoveries in the three years of the plan – 5 of those in 2014, as I said earlier.

We delivered 15 new major project start-ups – including the 7 from last year.

We completed the major upgrade of our Whiting Refinery.

We have also seen performance benefits coming through from our more- than-$40 billion divestment programme. We have taken out complexity, taken out risk, and focused on strong assets with good margins that generate good value for the company

Alongside these changes to the asset base we have been running a programme to make sure the rest of the business is in the right shape, stripping out complexity and duplication everywhere we can.

That has seen us reduce cash costs by $1 billion in the last year, and we see this downward trend continuing.

All of this has enabled us to achieve the plan's major financial goal.

We committed to increase our operating cash flow by 50% over the three years. And last year we delivered on that goal as well.

We believe that kind of performance is the right way to demonstrate our prioritisation of value over volume and the markets seem to agree.

While the lower oil price has had an impact on share prices across the sector as a whole, the prudent measures we have been taking have seen our shares performing strongly in comparison with our peers.

And over the past year we have distributed $5.9 billion in cash to shareholders through dividends.

So, I do believe, we are a safer BP, a stronger BP and a better performing BP.

The challenges ahead

As the Chairman said, we have been well served by the 10-point plan, and it has prepared us for the challenges ahead. And there will, as always, be many.

Some of these are specific to BP. Others relate to the broad world in which we operate.

In that first category we have the legal proceedings in the US associated with the Deepwater Horizon accident and oil spill.

We await the ruling on the penalty phase of the trial and have appealed the first two phases, including the finding of gross negligence in phase 1.

We are consistently pursuing a fair outcome while protecting your interests.

And then there is our unique interest in Russia.

We, of course, comply with all relevant sanctions. But we also continue to view our stake in Rosneft of nearly 20% as a sound long-term investment. It is a distinctive investment in a country that will continue to be a vital trading partner for many nations around the world given its abundance of oil and gas resources.

In a world where resources are unevenly spread, trade in energy has long been – and must continue to be – a means of achieving stability between nations.

Turning to the challenges that face the whole industry, the first is obviously the fall in the oil price and the return to volatility.

This is a return to business as usual for those of us with a long term view.

I well remember the crash in 1986 when I worked in Aberdeen.

Many businesses and their people were affected.

As businesses feeling the pressure we must be flexible and adjust.

In time the supply chain will adjust, associated cost factors will adjust and the market will respond. That is simply the world of business. If a business does not adjust, it won't survive.

We have had to make some tough decisions ourselves in recent months about resetting BP for $50 oil, and the UK government's response on costs in the North Sea has been welcome.

But our actions over the past three years have prepared us for the global conditions we now face.

We have the flexibility to manage operating costs and be competitive.

We have the discipline to reduce our capital investment, as we are doing by reducing this to $20 billion this year from a previously announced $24 to 26 billion.

And we have a financial framework that allows us to meet our obligations while still investing for the future.

And of course our number one financial priority remains that of distributions to our shareholders in the long term, whilst addressing all of the challenges we face.

The climate change challenge

That brings me to one further challenge.

The Chairman has already set out BP's position on carbon emissions, and we will be having a further discussion. But I just wanted to welcome Special Resolution 25.

At BP we have consistently advocated for stronger government action and have been open and transparent about our environmental impact.

The challenge ahead is to make the case for the necessary role of fossil fuels, and further transparency supports that case.

BP's portfolio is already 50% natural gas.

We are working on a number of major projects that will add more gas, like Shah Deniz 2 in Azerbaijan, the Southern Gas Corridor to Europe, Khazzan in Oman, and the $12 billion investment we have just agreed in Egypt.

So to conclude, we have a very positive contribution to make as an oil and gas business, and as a sizeable biofuels business.

We have a contribution to make that offers people energy security for the future along with improving energy sustainability.

And by offering security and sustainability – we can offer you, our shareholders, enduring value for many more decades to come.

Thank you very much for being here today.

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