TIDMBP.
RNS Number : 3789I
BP PLC
01 April 2020
press release
1 April 2020
BP details COVID-19 response
and provides market update
-- Protecting the physical and mental health of our people
-- Supporting the communities where we live and work
-- Strengthening our finances to better weather market volatility
BP today set out actions it is taking in response to the
COVID-19 pandemic and ongoing market disruption. It also provided
an update on factors expected to affect its first quarter
results.
Chief executive Bernard Looney said:
"The world is in a fight against COVID-19 and I want to thank
all the people looking after us. The nurses and doctors, the first
responders and the police. The people keeping food shops open and
deliveries happening. And also the people we don't see so much,
like those behind the technologies that mean we can stay connected
with our loved ones and with our work colleagues. Many, many are
giving their time and risking their own well-being so that we can
stay safe and sound. We rely on them, we are indebted to them, and
I want to pay tribute to the sacrifices they are making on our
behalf.
At BP we are mobilising in our own way across the BP world,
taking action with three clear objectives: protecting our people;
supporting the communities where we live and work; and
strengthening our finances.
Protecting our people
I want to recognize the courage and commitment of thousands of
our people out in the field - in retail, offshore, at our plants
and elsewhere. I also applaud the adaptability of everyone working
from home as they support our operations. Together, we continue to
help supply the energy the world needs.
We are doing our best to keep everyone healthy:
-- Our operations: Changing shift patterns to make social
distancing easier; restricting workplace access; increasing
testing; and enabling safe isolation and evacuation of any
suspected cases.
-- Our retail sites: Boosting precautions to protect both staff
and customers with increased cleaning; providing personal
protective equipment for staff; installing screens; and
implementing social distancing in our stores.
-- Our projects: Reducing non-essential activity and manning
levels where possible to reduce the risk of the virus spreading.
With a large population in a remote, closely confined worksite, we
have decided to remove thousands of construction staff from the
Tangguh expansion project in Indonesia.
-- Our team: Offering psychological support in many ways,
recognizing this is a mental health challenge as well as a physical
health threat.
Job security is a big worry at this time, so we have taken the
decision that for the next three months no BP employees will be
laid off as a result of virus-related cost cutting. We simply do
not want to add another burden during what is already an incredibly
stressful time for individuals and families.
Supporting our communities
Society rightly has high expectations of companies like BP.
Given our reach, resources and skills, we have a special
responsibility, especially during times like these. I have been
admiring how so many businesses around the world are stepping up in
a big way.
That is what we are trying to do at BP. We are contributing at a
corporate level to help fight the pandemic, and we are also trying
to give thousands of BP volunteers the latitude, support and
resources to join the fight in the communities where they live and
work.
-- We have donated $2 million to the COVID-19 Solidarity
Response Fund to support the work of the World Health Organization
leading and coordinating the international pandemic response.
-- In the UK, emergency service vehicles can refuel for free at
our retail stations and we are supplying free fuel to air
ambulances. We are supporting similar efforts in Spain, Turkey,
Poland, and Australia. And in Germany we have provided fuel cards
to health care workers.
-- We are using our own stocks and supply chain to donate
personal protective equipment to health services in the United
States, UK, France, Belgium, Spain, The Netherlands and
Germany.
-- In Brazil, our biofuels joint venture is diverting some of
its sugarcane ethanol production to make a disinfectant product and
supplying it to local health services that serve a population of
1.4 million.
-- Food from cafeterias we have closed in the UK is being donated to foodbanks and charities.
-- After coronavirus border restrictions cut off supplies of
clean water to a town in Mauritania, our local team repaired an old
water tank to provide a temporary supply for the community and is
working with authorities and NGOs to develop a permanent
solution.
-- And around the world, people are putting BP's new purpose
into action. Colleagues are running online home-schooling sessions,
co-ordinating food deliveries to those in need, and even stitching
masks and 3D-printing goggles for local hospitals
We know there is more we can do -- and that we won't get
everything right -- but we are challenging ourselves to try to find
more ways to have a positive impact.
Strengthening our finances
At the same time, we are in action to protect the financial
health of BP. This may be the most brutal environment for oil and
gas businesses in decades, but I am confident that we will come
through it -- we know what to do and we have done so before. And we
also entered this environment in great shape with good operating
momentum and financial discipline, strong liquidity and extensive
optionality in our portfolio. We remain committed to growing
sustainable free cash flow and distributions to our shareholders
over the long term.
We are now acting quickly and decisively to further strengthen
our financial frame in response to the currently volatile and
extremely challenging market conditions. We will continue to review
these actions, and any further actions that may be appropriate, in
response to changes in prevailing market conditions.
-- Divestment programme: BP's existing divestment programme to
deliver $15 billion of announced transactions by mid-2021 remains
on track. The phasing of receipt of $10 billion of divestment
proceeds by the end of 2020 may be revised as transactions
complete, particularly while volatile market conditions persist.
This includes the sale of our Alaskan business to Hilcorp which we
continue to expect will complete during 2020, subject to regulatory
approvals. We will provide further information on this transaction
going forward, as appropriate.
To date, $9.6 billion of transactions have been announced since
the start of 2019, with around $3.4 billion of cash proceeds
received. This divestment programme is underpinned by a wide range
of options, including assets in less commodity-sensitive businesses
where demand remains strong.
-- Capital expenditure: We now expect 2020 organic capital spend
to be around $12 billion, around 25% below our prior full-year
guidance. In Upstream, this includes a reduction of around $1.0
billion in spend on short-cycle onshore activity, including in BPX
Energy, as well as deferral of certain exploration and appraisal
activity and optimisation of our major project spend. In
Downstream, we expect a reduction in spend of around $1.0 billion,
which includes reduced spending across our fuels marketing,
refining and petrochemicals businesses.
The expected impact of these capex interventions on 2020
underlying Upstream production includes a current reduction of
around 70 thousand barrels equivalent per day (mboed) attributable
to BPX Energy. Looking ahead, full year 2020 underlying Upstream
production is expected to be lower than in 2019.
-- Cost savings: We expect to achieve around $2.5 billion of
cash cost savings by the end of 2021, compared with 2019, with
digitisation and increased integration across the group as key
drivers of this next phase of cost efficiencies. Some of these cost
savings may have associated restructuring charges, which will be
reflected as appropriate in our financial disclosures.
-- Liquidity: BP has around $32 billion of cash and undrawn
facilities available at the end of the first quarter 2020. Last
week S&P reaffirmed BP's A- credit rating while revising its
outlook from positive to stable. And today Moody's reaffirmed BP's
A1 credit rating and revised its outlook from stable to
negative.
First quarter update
BP's first quarter 2020 results are scheduled to be reported on
Tuesday 28 April. Notwithstanding the interventions outlined above,
the challenging environment is expected to have an impact on our
first quarter results and there is uncertainty around how long
current depressed commodity pricing and weakness in product demand
will continue.
-- BP continues to monitor the impact of COVID-19 on our global
operations and in the first quarter there was no significant
operational impact. This could change through the second
quarter;
-- BP's first-quarter reported Upstream production is expected
to be lower than fourth-quarter 2019, in a range of 2,550-2,600
mboed;
-- BP's first-quarter Downstream refining availability is
expected to be in a range of 95-96%, with some reduction seen in
utilisation towards quarter-end due to reducing fuel demand;
-- We expect Downstream first quarter results to be impacted by
a significant and growing decline in demand for fuels, jet fuel and
lubricants as countries implemented significant measures to address
COVID-19. This has been particularly evident in China and, towards
quarter-end, has extended into our larger US and European
markets;
-- The impact of the stronger US dollar on deferred tax balances
is expected to significantly increase BP's underlying effective tax
rate in the first quarter relative to our full year guidance;
-- BP routinely manages its working capital balances across the
business with an aim to minimise cash volatility, and as a result
we do not expect a benefit to cash flow from the change in first
quarter quarter-end pricing;
-- BP continues to review potential first quarter impairment
charges and currently expects to take a non-cash, non-operating
charge of around $1 billion in the quarter;
-- BP's marker prices and marker margins for first quarter 2020
can be found in the Investors section of www.bp.com ;
-- We will provide further details on these and other matters in our first quarter results.
I have been incredibly inspired by the response of colleagues
globally to the coronavirus situation. They are taking care of each
other, supporting their communities, and identifying new ways to
safely drive down costs and strengthen our finances. I truly
believe that our purpose is driving our actions during this crisis.
That is why I am confident we will weather this storm and emerge
better able to deliver our ambition -- to make BP a net zero
company by 2050 or sooner and help the world achieve the same
goal.
I am just as confident that the world will emerge stronger as
well. As hard as that may seem today, we will get through this and
learn important lessons in the process. We are seeing the best of
people. We are coming together as a global community. We can come
out of this crisis closer, more collaborative, and more caring,
with all the benefits that brings for society and the planet."
Further information:
BP press office, London: bppress@bp.com , +44 (0)7831 095541
Cautionary statement:
In order to utilize the 'safe harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995 (the
'PSLRA'), BP is providing the following cautionary statement. This
press release contains certain forward-looking statements - that
is, statements related to future, not past events and circumstances
- which may relate to one or more of the financial conditions,
results of operations and businesses of BP and certain of the plans
and objectives of BP with respect to these items. These statements
are generally, but not always, identified by the use of words such
as 'will', 'expects', 'is expected to', 'aims', 'should', 'may',
'objective', 'is likely to', 'intends', 'believes', 'anticipates',
'plans', 'we see' or similar expressions. In particular, among
other statements, statements relating to the coronavirus pandemic
(COVID19) including its risks, impacts, consequences and challenges
and how BP is prepared for and responding to this; plans and
expectations relating to BP's ambition; plans and expectations
relating to the financial frame and the investor proposition, focus
on safety, the operational impact of COVID19, commitment regarding
employee job security, the divestment programme including
expectations with respect to completion of transactions and the
timing of receipt of proceeds of agreed disposals (including the
announced sale of our Alaskan business to Hilcorp), reductions in
organic capital expenditure and reductions in production due to
capex interventions, cash cost savings and associated restructuring
charges, full year 2020 production guidance and expected range,
expectations for demand for our products, downstream refining
availability and expected impact on first quarter results due to
decline in demand, the effective tax rate relative to guidance,
working capital balances and assessment of impairment charges, are
all forward looking in nature. By their nature, forward-looking
statements involve risk and uncertainty because they relate to
events and depend on circumstances that will or may occur in the
future and are outside the control of BP. Actual results may differ
from those expressed in such statements, depending on a variety of
factors including the negative impact of the COVID19 coupled with
actions by OPEC+ including the significant drop in the oil price,
overall global economic and business conditions impacting our
business and demand for our products, as well as the risk factors
set forth in our most recent Annual Report and Form 20-F under
"Risk factors" and in any of our more recent public reports.
Our most recent Annual Report and Form 20-F and other period
filings are available on our website at www.bp.com or can be
obtained from the SEC by calling 1-800-SEC-0330 or on its website
at www.sec.gov
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END
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