Are you still on track to give back $4 billion worth of buybacks this year?
Well, Danny and Mark, good morning. Thanks very much for having me on.
Look, I think it's been another good quarter for for the company.
We grew our oil and gas production by 3% while we drove costs down by 9% in that
business. We brought on two new projects, one in
the United States, one in India, about 90,000 barrels a day.
And we grew in our transition growth engines, as we said we would, 10% growth
in biofuels. We almost tripled the amount of power
we're selling in our EV charging network, and we increased our renewables
and our hydrogen pipeline. So it's been a good quarter and it's
that performance and that outlook that has given the board the confidence to
announced a one and a half billion dollar buyback this morning.
And as you said, importantly also increased the dividend by 10% and that
dividend increase of 10% is in part due to the fact that we've reduced our share
count by 9% over the last four quarters. So we can essentially keep the dividend
amount the same while increasing the dividend per share.
So this has been a good quarter. The company is running well and and
we're very pleased. Bernard, good morning.
Investors likely to be happy with that buyback amount, as you mentioned, and
the increase in the dividend. Do you think that's going to be
sufficient to close the valuation gap with some of our European peers or U.S.
peers? Because one of the issues has been in
the past the disappointment on buybacks. You've now fixed that or made a big step
to fix that. But there's been another comment about
the lack of predictability around buybacks.
And is this the start of a new era of more aggressive buybacks, or do you
think that predictability is still going to be an issue?
Mark, thanks for the question. I think just a couple of things.
On the buyback program itself. I think we're just being very
consistent, to be quite frank. We said at the beginning of the year our
distribution policy in general says that we'll return at least 60% of surplus
cash to shareholders through buybacks. And then each year we update on
specifically what that year will be. This year we've said it will be 60% that
we will return as per last year. So that's the steps that we've taken to
date, 1.75 in the first quarter, 1.5 in the second quarter are entirely
consistent with what we believe the outlook for the year will be, which
means that we'll return that 60% to shareholders.
So that's consistently what we are doing.
The financial framework is unchanged and as I said, we expect to do $4 billion of
buybacks at $60. And with prices above that, one can
expect the buyback level to be about that as you are seeing in terms of
valuation gaps that people speak about, not necessarily within the European
companies, but versus the United States. It's simply a question of focus and
delivery. We've got real plans to grow this
company materially over the next couple of years.
Between now and 2025, we intend to bring on 200,000 barrels a day of new
production from new oil and gas production from major projects.
We're going to double our biofuels production, we're going to double our
bio gas production. We're going to grow the business and our
business and our growth engines. That was delivering $700 million just in
the first half of this year will be delivering 3 to $4 billion by 2025 and
indeed 10 to $12 billion by 2030. So this is a growth story.
This is about execution, this is about focus.
And that's what we're doing.
Bernard, when it comes to the execution of your traders, you point out another
exceptional quarter for gas trading, though, softer than the first quarter.
How much softer what was the difference between these two quarters for your
trading units? Yeah, the training organization and in
Gaza in particular had had a very good quarter, an exceptional quarter, as we
called it, a little bit less than the first quarter, but still exceptional as
we say. And it's really just a characterization
of a slightly lower volatility in the in the markets in the second quarter than
there was in the first quarter. What's your outlook on demand in both
oil and gas, particularly coming into winter?
Are there any particular regions where you're kind of worried about the demand
strength? You know, I think there's a lot of talk,
obviously, about concerns about the global economy.
There's a lot of talk about concerns about China growth.
In spite of all of these things, demand for oil has been incredibly resilient.
And in fact, there are some reports that say oil will reach its maximum demand
ever this year. So we're expecting over 2 million
barrels a day of growth and demand for oil this year, which is very strong when
you look back in history. And we expect that demand growth to
continue into next year. And when you couple that with the
discipline that we're seeing from Opec+, then I think you can only
believe that while it's very difficult to predict, obviously one would have to
suspect that the outlook for our oil prices is as strong over the coming
months and years, driven by demand and driven by the discipline that we see
from opec+ and natural gas. If I look in Europe, I think obviously
storage levels are much better than they were last this time last year.
So that's that's good news. But there's a lot of uncertainty and it
really depends around how much demand will recover from what we saw as a loss
last winter and what the weather will be like.
So not out of the woods yet when it comes to gas and in Europe, but
certainly in a better position than we were this time last year.
What about industrial demand in China, Bernard?
What is the read through look like for that to recover?
I think in in China, in many ways, what we're seeing throughout the world, if I
look at it through through our product lines, I think we're seeing very strong
gasoline and very strong jet fuel demand.
People are traveling, people are spending on services, let's say.
And then on the the diesel end of the spectrum, which tends to be more
associated with the manufacturing end of the spectrum.
We see that as being weaker than people had expected.
China is still growing. It's grown 3% in the first half of this
year, obviously well short of what people would expect from China, 5 to 6%.
But we do see things beginning to recover in China.
So it's really a story that we see throughout the rest of the world, strong
services and relatively weak manufacturing.
You got some criticism recently for winning a German offshore bid that you
might have overpaid for bidding for these low carbon projects.
And I'm curious about what kind of returns you expect in that project.
And are you worried about diluting your returns by bidding such high prices for
low carbon projects? Yeah.
Thanks, Mark. First of all, we're absolutely delighted
with that when it's exactly aligned with the strategy of the company 100%, we
said that we will get 6 to 8% unlevered returns from the renewables part of the
business, which is one part of our five transition growth engines.
We fully expect to get 6 to 8% from this when in Germany.
I think just a couple of points I'd I'd make is what's a little bit different
maybe to other companies is we have a huge demand for green electricity into
2013 from our own businesses in Germany, from our own refineries and our
decarbonization plans there. We're building out, I think, now the
second largest fast charging network in Germany.
So we need green electricity for our charging business.
We need it for our biofuels projects that we're building there, and we need
it for our trading business. So we think we'll need 5 to 10
gigawatts. We think they're going to be a shortage
of green electricity in the 2030s, and our belief is that we can develop and
build and operate these wind farms, providing that green electricity, those
green electrons cheaper than we can do by procuring it on the marketplace.
We don't need to necessarily own the assets.
We want access to the electrons. We'll bring in partners, we'll farm it
down over time. But we're absolutely delighted with
this. It's consistent with strategy and it's a
great win for BP and for our shareholders.