Katherine Thomson: Yes. Thanks. And morning — very early morning for you, Roger. Thank you for joining us today. Let me step back a little bit. So if you think about our balance sheet and where we were in 2020, we had net debt of over $50 billion. And I think you could argue we’re starting from perhaps a slightly different place than some of our peers. And the focus that we have put into strengthening the balance sheet and putting 40% of surplus to that balance sheet and deleverage over the last few years, I think, has been really, really important. And as we’ve said today a number of times, it’s taken us to a place now where we are stronger than we were. We’ve got confidence that our balance sheet can tolerate movements. And that has allowed us to do more with regard to shareholder distributions and move to the 80%.
We feel that’s in line with our peers. And so it’s very much around the journey that we’ve taken to get to where we are today. Today, with what we’re announcing with our predictable, simplified enhanced guidance, we feel that, that very much puts us in line with our peer group.
Murray Auchincloss: Good. Thanks, Roger. Why don’t we come back into the room. Yes.
Josh Stone: It’s Josh Stone here from UBS. Two questions, please. Firstly, you haven’t made any reference to emissions today. You revised your scope 2 emission target this time last year. Just how comfortable do you feel with that target for 2030? Are there some easy wins you can do to reduce emissions and still maintain value? And then second question for Kate on working capital. You mentioned there was a large release related to LNG. Just can you remind us, is there anything left to release on the LNG side?
Murray Auchincloss: Sure. On emissions, so we’ll update our emissions in the ARA for what we actually achieved in 2023. We’re still busy calculating that, as you can imagine. But I think we’ve got strong progress on scope 1 and scope 2 emissions from our company. We continue on with the drive to hit 50% reduction in emissions from scope 1 and scope 2 by 2030. That’s engineering. It’s pure and simple engineering. Now it’s big programs like you’ll see in Indonesia of taking carbon injecting it into the reservoir, getting more natural gas out, the carbon stays and trained, and there’s less emissions for the planet. So those are the kind of things that we’ll be doing, but it’s a very — Gordon has a very precise list of projects that we’ll work our way through over the next 4 or 5 years to hit that particular target.
I mentioned earlier, aim 4, which was about methane reduction. We hit an incredible milestone. Huge compliments to Gordon and the team for putting methane measurement in place across the oil and gas business. That’s demanded new engineering, new technologies, working internally and externally to get to that result. I really proud of it because it’s the most important thing for the planet that we reduce these. Methane emissions, we’ll, of course, be sharing this technology and this learning with anybody inside the sector who wants to. On aim 3, the product mix changes, right? The product mix just changes over time. You could hear what I was saying about more electrons being sold. So we have fuel stations where we sell fuel. Some of that’s migrating towards electrification as an example.
And I think sales of electricity over 150% up on the previous year. So no concerns with the direction of travel we have right now. And we are seeing strong adoption. And we think things like Lightsource bp will help us immensely on this journey as well. So we can couple lower carbon offers with natural gas offers to customers as well. So no change. No change to what we’re thinking as far as the aims go. Kate?
Katherine Thomson: Yes, thanks. Thanks, Josh. So back at the third quarter results, I talked about around $3 billion still to come in terms of LNG delivery. As you saw, we’ve got around about a $2 billion working capital release in the fourth quarter. Most of that is related to LNG deliveries. So I would hold it that there’s about a 1 left to come, as those deliver through the course of the first half of the year.
Murray Auchincloss: Great. Thanks, Kate. Martijn.
Martijn Rats: It’s Martijn Rats from Morgan Stanley. A little positive in this set of results. I mean you’re giving us an awful lot to work with. So that’s great, but I do want to ask you two things. I wanted to ask about the impairments because in the fourth quarter, there were still some impairments, and we tend to sort of shake them off and say, well, noncash, but it was cash once. Is there some common denominator in this impairments, perhaps you can sort of say a few words about that? And the other one I wanted to ask about the activist shareholder letter, if you had any response to that? I know it’s a small investor, but nevertheless, it was sort of intriguing.
Murray Auchincloss: Why don’t you start with impairments, Kate?
Katherine Thomson: Yes. Thanks, Martijn. So impairments, yes, as you would expect every quarter, we look for potential impairment triggers. In the fourth quarter, there are a number of things that come together. We update our price perspective. We update our group discount rate. We’ve got our changes to reserves, and you put all of those assumptions together and — so it’s a confluence of a number of things coming together that cause impairments. So a theme around updates to prices and rates, coupled with some other things that are going on — for example, one of the things I would talk about — I think in the stock exchange announcement, we do reference BPX. We were out in Denver. We are unwavering in our confidence with regard to BPX.
There’s a couple of things going on in that number. And it’s price and discount rate, but it’s also some acreage swaps that’s driving that. So you shouldn’t interpret the impairments as having any impact on our EBITDA targets in 2025. If there are some changes on reserves, we may see some downward trend in terms of volumes from one part of our portfolio, but they’re offset by upward trends in other parts of the portfolio. So we’re comfortable.
Murray Auchincloss: And then on your second question, Martijn. Look, we welcome constructive engagement with all shareholders. I think that’s an important thing as a publicly traded company, we think about. We disagree with our assertions. We just disagree with them, if I’m honest. We run an integrated model. I think you’ve heard me talk about integration quite a bit today, and we think we do it fairly well. We’re really proud to be bringing Lightsource bp in. It has a strong track record of delivery. It’s a top 5 solar producer globally, and it’s achieved mid-teens returns — mid-teens returns over the past 5 years in their development flip model. And we’ve obviously been in power for a long time, 15 years now in the U.S. in integrated power onshore.
So we do quite a lot with electricity across our business, coupling it with gas. I think we’re #1 in gas and #2 or 3 on any day in power trading in the United States. And on offshore wind, as we’ve said before, our returns hurdles on offshore wind are 6% to 8% unlevered. But by the time you lever it up, by the time you farm it down and bring in a partner, by the time you integrate it into our business, you’re well into double-digit returns, and that competes well with the rest of our business. So we’re happy with our strategy. Direction is unchanged. You’ll see us be much more focused, much simpler and very, very returns focused, but we’re very happy with the direction of travel and the shareholders I talked to are happy as well. Thank you for the question.
Next question in the room?
Unidentified Analyst: Can I go back towards cash flow? And just if I look at the cash flow statement [indiscernible] movements in inventories, other current liabilities, et cetera, et cetera, it’s been in the order of 9 billion, 9.5 billion the largest, past 2 years sort of that’s upon the — most of the LNG is now with you. I’m just trying to understand the extensive — the reasons behind the increase — on through that particular line, how much of it is about putting more up on trading, so on and so forth, perhaps you can help me. Sorry, I should have taken a microphone…
Katherine Thomson: I’m going to turn to my cash flow statement set as well…
Unidentified Analyst: There is a second one.
Katherine Thomson: Do you want to ask the second one, while I just look at the cash flow statement?
Unidentified Analyst: Yes. And the second one is, it goes back to the customers’ business and just 2019, the guidance for ’25 with $7 billion of EBITDA from the $5 billion base, 4 years on, 3 years on with $4.3 billion or so of EBITDA. You’re indicating $1 billion or so of further improvement from the transition growth engines in that business. There’s obviously something that comes from travelers, but help me bridge the gap.
