The suppliers is probably a nice little example to think about eliminating waste. Our good partners at Subsea 7 have formed an alliance with us. In the past, we would have overseen what sub — what they were doing. Instead, now we form joint teams. They work together on a job, they try to figure out how to optimize it. We incentivize them for time and efficiency and we have co-located teams that work together on these things. So what it does is it eliminates bid cycles, it reduces the number of engineers involved from both sides in getting everything done, it reduces vessel time, etc. So that’s just one concept of alliances that we’ve been doing in the capital side with projects and drilling for a while and we’re now pushing that into the operation space both in the upstream and the refineries.
So that will take out a lot of waste as we move these alliance as forward as well. And then last, global capability hubs. We have a continuing need for engineering. It’s scarce in the west. So we’re looking east for that engineering capability. It’s a different cost profile sometimes, but fabulous efficiency. We see that both in contractors. So contractors we work with are shifting that way and then ourselves as well across engineering, IT, etc. So those are the four examples of how we think we’ll get to the at least the $2 billion. No, Lydia, I’m not going to give you an update on the ’24 and run-rate to EBITDA. All I’ll say is I’m confident in the growth on an underlying cash flow basis of 3% to 4% through the decade, including in ’24 and ’25.
We see strong growth out-of-the upstream with new projects coming online with BPX growing, with new LNG coming online from ’23 to 25 MTPA, a return to normal tar seasons in our refineries along with all the growth that we see from the TGEs, and business-like Castrol. So we feel comfortable with that 3% to 4% growth per annum underlying on a free-cash flow basis through ’24 and ’25. Will the cost savings add to that? Let’s see. I think it will take time to do some of these things. Some things will come through faster than others. But for now, we’re saying that an end ’26 basis and let’s see how we get on. Kate?
Kate Thomson: I think you kind of did my job for me.
Murray Auchincloss: Did I roll into your question? Sorry about that.
Kate Thomson: The only thing I was going to add is that some of the changes that we’re contemplating take time to affect and execute and we do it in a way that we are confident we’re managing risks. So there may be some parallel running costs at some point and we’ll update you as we get clearer on that path and on any associated.
Murray Auchincloss: Hope that helps, Lydia.
Lydia Rainforth: Great. Thank you, both.
Craig Marshall: Thanks, Lydia. We’ll take the next question from Michele Della Vigna at Goldman Sachs. Michele?
Michele Della Vigna: Thank you very much and congratulations on the focus on cost efficiency despite the relatively positive macroenvironment. Two questions, if I may. On the dividend per share, it looks like we are up for an announcement next quarter. And I was wondering, how should we think about the underlying growth. We’ve got 3% to 4% absolute growth of the business and we’ve got a share retirement that is running at between 6% and 7%. Is it too simplistic to think about growth of the business plus share retirement equal what can be achieved in terms of sustainable DPS growth? And then secondly, on the net interest expense, it’s quite a difficult line to forecast. It’s been around $900 million for the last three quarters. Is it fair to assume we remain at about that run rate in the coming quarters or is there anything else we need to take into consideration? Thank you.
Murray Auchincloss: Kate, you want to handle the dividend?
Kate Thomson: Sure. So, Michele, I think you may have done my arithmetic for me. I guess a couple of points to just to add to that. So if you think about the financial frame, remember to anchor on our balance points and also the fact that we are — our first priority is that resilient dividend and at $60, the capacity to increase by 4% per annum. But as you rightly point out, we’ve had previous increases in 2Q ’22, 4Q ’22, 2Q ’23, each around 10%, underpinned by strong performance and by reduced share count. So as you’d imagine, the Board will look into many factors when we come to that conversation in 2Q, but as you consider what we’ve done with our share count, I think we’re 17% reduced by the end of ’23 and since 2Q ’23 at the moment, we are about 5.5% reduced share count. So I’ll let you add that to your current arithmetic.
Murray Auchincloss: But the Board makes that decision each and every quarter and of course, you can look backwards to think about what we do looking forward. I think, Michele, on your net interest income expense, presuming flat is a sensible thing to do moving forward. I think that’s just the easiest thing to do rather than give guidance. Thank you.
Michele Della Vigna: Thank you.
Craig Marshall: Thanks, Michele. We’ll take the next question from Martijn Rats at Morgan Stanley. Martin?
Martijn Rats: So last quarter, you were helpful in providing a sort of a comment on the EBITDA that was delivered if it was restated under 2025 reference conditions, which, of course, given that we’re sort of tracking towards that 2025 guidance over the next couple of quarters is actually quite helpful. So this quarter EBITDA was $10.3 billion. What can you once again provide some color on what that would have been under 2025 reference conditions? And secondly, I wanted to ask you about yesterday’s FT article. I’m sure you’ve read it, but there was an FT article that said that BP could make some additional changes on it as a longer term sort of. So targets, including the guidance for a decline in production by the end of the decade, the well-known 25% reduction target. I was wondering, if you had any comments on that article.
Murray Auchincloss: Sure. I’ll tackle both of these, Martin. Thanks for the questions. So what we said is that the conditions that prevailed in 2023, which ironically are very close to the conditions that prevailed in 1Q 2024, that was a good starting point for how you should think about 2025 and then, you should just apply underlying growth rate to get to what you think the EBITDA would be across the two years. And we’ve talked about 3% to 4% underlying cash flow growth since CapEx is flat and since proceeds are relatively flat, that implies 3% to 4% EBITDA growth across ’24 and ’25 as well. And you can — you have said the sources of those value numerous times to help you think about how you can quantify that. I think the only thing I’d say is the 10.3 that we had in 1Q ’24, obviously had the unusual incident with Whiting.
We wouldn’t obviously plan for something like that moving forward. It had an impact of around $0.5 billion in the quarter. So you should probably add that back and you’re getting close to $11 billion EBITDA out of both the right conditions for ’25, I think 11 times for, I’ll let you do that math, but you can get a sense of where we are performing and then the 3% to 4% gives you a sense of where we think we’ll be in 2025 and all of you will adjust that based on what you believe will happen with performance and what will happen with the environment. So I think that’s probably about as good as I can do in that space. As far as the FT article about 2 million a day, I’m just going to again be consistent with what I talked about last quarter. We continue to — with the strategy of transitioning from an IOC to an IEC, we will diversify the business over time.
We will focus on bio, EV convenience, hydrogen, and renewables. We will continue investing into this space. We will be pragmatic and we will make sure the investments we make hit our returns hurdles. And of course, at the same time, we’ll be investing into hydrocarbons. On the hydrocarbons 2030 is an aim, it’s not a target. We estimate it at around $2 million a day right now and it will largely be determined by the long list of potential final investment decisions we have to make across ’24 and ’25. There are around 30 of them, some in the upstream, some in refining, some in the transition growth engines. And based on what decisions we make, that will determine the volume outcome, but what I’m really, really focused on with the organization is returns and cash flow, not volume.
So during the quarter, back to that story again, we sanctioned one oil project in the Gulf of Mexico and we let go of two gas resources in the West Coast of Africa. So that tells you we’re return driven, not volume driven and once we’re through deciding the final investment decisions over the next couple of years, we’ll update you with a target for 2030 production. Could it be higher than $2 million a day? Yes, could it be lower than $2 million a day? Yes. It’s all going to be a return on cash flow focused, Martin, as I think you would hope we would be. I hope that provides enough clarity.
Craig Marshall: Thanks, Martin. We’ll take the next question. Actually, we’ll go back stateside from Roger Read at Wells Fargo. Roger?
Roger Read: Yeah. Thanks. And I do appreciate more reasonable time for those of us on this side of the pond. I just wanted to dive back in. Murray, earlier you mentioned a diesel recession going on since you have a pretty impressive global footprint. Just wondering, if you could expand on that a little bit. And then the other question would just be, can we get a little more of an update on how things are going in the Permian with BPX? Just a little more depth into the operations, what you’re seeing in the way of product — productivity and efficiency, things like that.
Murray Auchincloss: Sure. Kate, you want to take diesel recession?
