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Executives

Jessica Mitchell – Head, IR

Rob Dudley – CEO

Brian Gilvary – CFO

Analysts

Alejandro Demichelis – Exane

Jason Kenney – Banco Santander

Jon Rigby – UBS

Doug Terreson – ISI

Hootan Yazhari – Bank of America Merrill Lynch

Irene Himona – Société Générale

Brandon May – Tudor Pickering

Theepan Jothilingam – Nomura

Oswald Clint – Bernstein

Fred Lucas – JP Morgan

Rahim Karim – BarCap

Lucas Herrmann – Deutsche Bank

Iain Reid – Jefferies

Alastair Syme – Citi

Peter Hutton – RBC

Colin Smith – VTB

Bertrand Hodée – Raymond James

Steven Simcoe – Morningstar

Neil Morton – Investec

BP plc (BP) Q1 2013 Earnings Call April 30, 2013 11:00 AM ET

Operator

Welcome to the BP presentation to the financial community, webcast and conference call.

I now hand over to Jessica Mitchell, Head of Investor Relations.

Jessica Mitchell

Hello, and welcome to BP’s First Quarter 2013 Results Webcast and Conference Call. I’m Jessica Mitchell, BP’s Head of Investor Relations; and joining me today are Bob Dudley, our Group Chief Executive; and Brian Gilvary, our Chief Financial Officer.

Before we start, I’d like to draw your attention to our cautionary statement. During today’s presentation, we will make forward-looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to factors that we note on this slide and in our UK and SEC filings. Please refer to our annual report, stock exchange announcement and SEC filings for more details. These documents are available on our website.

Thank you. And now over to Bob.

Bob Dudley

Thank you, Jess, and good afternoon or good morning, everyone, depending on where you are in the world. Thank you for joining us.

Today’s presentation is mainly designed to take you through our first quarter results, but we also take the opportunity to briefly update you on some important areas of activity. In short, we’re reporting a strong set of results that reflects the work we’re doing to rebuild BP and make it a company that can grow value safely and sustainably over the years.

So as usual, we’ll start with Brian taking you through our financial results in detail. I will then review progress in the legal proceedings in the US, including the civil trial in New Orleans. We will touch on the completion of the RosNeft transaction, where we are now, and the opportunity that lies ahead. And we’ll give you a brief update on progress in the upstream and downstream. The record shows we are very much on track to deliver the objectives we set out back in late 2011 in our 10-point plan. And finally, there will be time to respond to your questions.

But first, over to Brian.

Brian Gilvary

Thanks, Bob. I’ll start with an overview of the first quarter financial performance. First quarter underlying replacement cost profit was $4.2 billion, down 9% on the same period a year ago but 9% higher than the fourth quarter of 2012. Compared to a year ago, the result reflected the absence of any contribution from Russia prior to completion of the RosNeft transactions on the 21st of March as TNK-BP was treated as an asset held for sale.

Our upstream production, due to the impact of divestments and natural field decline, partly offset by major product delivery and improved downstream results due to a strong quarter in Supply and Trading and better operational performance within a more favorable refining environment, a positive consolidation adjustment to eliminate unrealized profit on low volumes of equity crude in inventory at the end of the quarter.

Around $170 million of this is now permanently unwound due to the divestment of the Texas City refinery and will not be reversed in future quarters. First quarter operating cash flow was $4 billion and the underlying effective tax rate for the first quarter was 39% compared to 33% in the first quarter of 2012.

Turning to the highlights at a segment level, for the upstream, the underlying first quarter replacement cost profit before interest and tax was $5.7 billion compared with $6.3 billion a year ago and $4.4 billion in the fourth quarter. The lower result versus a year ago largely reflects low reported production and lower liquids realizations, partly offset by stronger gas marketing and trading activities.

Reported production decreased by around 5% compared to the same period last year, primarily due to divestments. Underlying volumes in the first quarter, after adjusting for divestments and entitlement effects, increased by around 2%. This reflects the ramp-up of major project delivery in Angola, the Gulf of Mexico and the North Sea, and improved performance in Trinidad partly offset by natural fuel decline.

Compared to the fourth quarter, the first quarter results reflects stronger gas, marketing and trading activities coupled with the benefits of high realizations, lower costs due to seasonal phasing, and increased volume in higher-margin areas driven by the continued ramp-up of the PSVM and Skarv projects. These improvements were partly offset by the impact of divestments.

Looking ahead, we expect second quarter 2013 reported production to be lower than the first quarter. This is similar to the reduction we saw between the same periods last year, and is primarily a result of planned major turnaround activity concentrated on higher margin assets in the Gulf of Mexico and the North Sea and the continuing impact of our divestment program, mainly in the North Sea. We also expect costs to be higher in the second quarter compared to the first quarter due to seasonal factors.

Turning to Russia, on the 21st of March we announced the completion of the divestment of our 50% interest in TNK-BP for a total consideration of $27.5 billion in cash and RosNeft shares.

As a result of this transaction, the gain on disposal was $15.5 billion of which $12.5 billion was recognized and reported as a non-operating item in the first quarter with a balance of $3 billion deferred and released to the income statement over time. This is required by accounting rules as we effectively retain circa 20% of TNK-BP through our ownership of RosNeft shares. Net cash received from the transaction was $12.5 billion, including the $700 million TNK-BP dividend received in the fourth quarter of 2012.

We also received shares representing an aggregate 18.5% stake in RosNeft which, together with our existing 1.25% shareholding in the company, brings BP’s total interest in RosNeft to 19.75%. For the first quarter of 2013, we have recognized $85 million of income from our new shareholding in RosNeft based on 11 days of net income as estimated by BP.

By comparison, the first quarter of 2012 included underlying profit of $1.2 billion for a full quarter of TNK-BP net income, and the fourth quarter included $224 million based on 21 days of TNK-BP net income. Looking forward, we intend to equity account our share of RosNeft as we did with TNK-BP and will report it as a separate segment so that you’ll be able to see the performance and contribution separately. As with TNK-BP, the results of our investment in RosNeft are subject to similar volatilities, especially the impact of Russian export duty lag in periods of rapid or price changes.

In the downstream, the first quarter underlying replacement cost profit was $1.6 billion compared with $900 million a year ago and $1.4 billion in the fourth quarter of 2012. The Fuels business delivered an underlying replacement cost profit of $1.2 billion in the first quarter compared with $500 million in the same quarter last year.

This reflects a stronger Supply and Trading contribution, continued strong operational performance in a more favorable refining environment, particularly in the US Midwest where heavy Canadian crudes were significantly discounted during the quarter. These benefits were partly offset by the planned outage of the largest crude unit at our Whiting Refinery. The new crude unit remains on track to start up in the second quarter of 2013, enabling the commissioning of the Whiting Refinery modernization project in the second half of this year.

During the quarter, Fuels demand was weak, resulting in both lower volumes and unit margins compared to the fourth quarter. The Lubricants business realized an underlying replacement cost profit of $345 million compared with $325 million in the same quarter last year. This reflects continued robust performance supported by growth in the share of sales of our premium national brands and strong profitability from growth markets.

The Petrochemicals business delivered an underlying replacement cost profit of $59 million compared with a profit of $112 million in the same period last year, as margins continue to be under pressure, which also led us to lower our production, particularly in Asia. In the second quarter to date, margins have been lower relative to the levels seen in the first quarter.

In other business and corporate, we reported a pre-tax underlying replacement cost charge of $460 million for the first quarter, in line with guidance. Guidance for 2013 remains unchanged from that given in February, with underlying quarterly charges volatile and expected to average around $500 million per quarter. The underlying effective tax rate for the first quarter was 39% compared to 33% in the first quarter of 2012. The increase in the rate is mainly due to a lower level of equity accounting income mostly TNK-BP which is reported net of tax. Guidance for the full year effective tax rate remains in the range of 36 to 38%

Turning to the Gulf of Mexico provision, the total cumulative net charge for the incident to date remains unchanged to $42.2 billion. The pre-tax BP cash out flow related to oil spill costs for the quarter was $500 million. At the end of the first quarter, the cash balances in the trust and the qualified settlement funds amounted to $9.4 billion, with $20 billion contributed in and $10.6 billion paid out. As we indicated in previous quarters, we continue to believe that BP was not grossly negligent and we have taken the charge against income on that basis.

Moving now to cash flow, this line compares our sources and uses of cash in the first quarter of 2012 and 2013. Operating cash flow was $4 billion in the first quarter of 2013 compared to $3.4 billion a year ago. Excluding oil spill-related outgoings, underlying cash flow was lower, reflecting the absence of a dividend from TNK-BP. As seen in 2012, the first quarter includes a large seasonal buildup of working capital which amounted to around $4 billion.

After adjusting for the purchase of RosNeft shares, we received $13.4 billion of divestment proceeds during the quarter, including a net $11.8 billion of cash for TNK-BP and $1.5 billion for Texas City Refinery. Our organic capital expenditure in the first quarter was $5.7 billion. The completion of the sale of our interests in TNK-BP has reduced gearing to the lower half of our targeted band of 10% to 20%.

At the end of the first quarter, net debt was $17.7 billion and gearing was down to 11.9%. At the time of the completion of the transactions, we announced an intention to use up to $8 billion of the proceeds for a share buyback program, which we expect to complete over the next 12 to 18 months. The balance of the cash received from the TNK-BP transaction will be used to reduce net debt. As of last Friday, we have bought back $834 million worth of shares. Our intention remains to keep gearing in a targeted band of 10% to 20% while uncertainties remain.

Looking out to 2014 and our operating cash flow objectives, we continue to expect operating cash flow of $30 billion to $31 billion, representing more than 50% growth in operating cash flow versus 2011.

Bob will illustrate the progress we are making with the operational drivers of this growth. We also continue to expect full-year gross capital spend for the group to be in the range of $24 billion to $25 billion for 2013 and to be in the range of $24 billion to $27 billion per annum for 2014 through to the end of the decade. Divestments are expected to be $2 billion to $3 billion per annum on average on average on an ongoing basis.

The sale of our interests in TNK-BP has considerably strengthened our balance sheet in the near term and increases the flexibility of our financial framework going forward. The buyback program should not only offset any earnings dilution from the transaction, but also reduces the equity base consistent with the reduction in BP’s asset base, following our major $38 billion divestment program over the past three years.

As we look further out, growth in operating cash flows beyond 2014 provide the means to increase reinvestment, as we have outlined, and to continue to maintain a progressive dividend policy, in line with the improving circumstances of the firm.

Now let me hand you back to back to Bob.

Bob Dudley

Thank you, Brian. And if I can summarize the messages from those numbers, I think they are very positive ones. We’re seeing strong operational performance from a portfolio that has been strengthened by divesting assets that are non-strategic and investing in those that can generate the most value.

We have made a new start in Russia, turning a challenge into an opportunity and positioning ourselves for a great future in the world’s most prolific oil and gas region. We are making progress in the US, no longer paying into the trust fund, making our case in Court and meeting our commitments in the Gulf of Mexico region.

We’re maintaining a strong financial framework, keeping gearing within responsible limits, generating sufficient cash to increase our capital investment, while growing distributions, including the $8 billion share buyback program. And we are firmly on track to meet our 2014 objectives, as well as, continuing to strengthen our portfolio and deepen our capability. So we can grow over the rest of the decade and beyond.

So turning to the detail, let’s look first at the status of legal proceedings in the US. The first phase of the MDL 2179 civil trial began on the 25th of February, in New Orleans. It was focused on the causes of the accident and the allocation of fault among the defendants. BP completed the presentation of its defense on the 17th of April, marking the end of the first phase of the trial. Per Judge Barbier’s order, all parties will complete and submit their post-trial conclusions and briefings for phase 1, by the 12th of July. It is not known when the Court will rule on the issue presented in phase 1 of the trial.

While the final decision rests with the Court, we believe that the evidence and the testimony presented at trial confirmed that BP was not grossly negligent, and moreover, that the accident was a result of multiple causes, involving multiple parties. We are continuing to prepare for the second phase of the trial which is scheduled to begin in September.

This phase will consider the issues of source control efforts, and the volume of oil spilled as a result of the accident. We’re also continuing to pursue all available legal options to challenge the Claims Administrator’s interpretation of the settlement agreement with the Plaintiff Steering Committee

BP believes that the Claims Administrator has misinterpreted the agreement in a way that results in awards that have no merit being made to many business claimants, based on losses that we believe are in fact nonexistent. We see that in many cases.

There is a mismatching of expenses of businesses, without the corresponding revenues, which results in very, very strange results. This can’t be what was intended by the parties. Legitimate losses, yes, but not what is happening in many cases.

We consider what is happening now to be at odds with the parties’ stated intent in reaching the settlement last year. You will be aware that this has been the subject of several Court filings over the last few weeks. BP has filed Appeals of Motions.

These have been denied by the District Court in Louisiana, and they are now progressing through the United States Court of Appeals for the Fifth Circuit, also in New Orleans. While we continue to act to protect our rights in this matter, BP remains committed to compensating those who have legitimate claims, as a result of the accident. From the outset, we have stepped up, acknowledged our role in the accident, and work to meet our commitment to help economic and environmental restoration efforts in the Gulf.

Now, as Brian outlined earlier, during March we completed the transaction to sell our share of TNK-BP to RosNeft for cash and shares. RosNeft also purchased AAR share of TNK-BP, so now owns 100% of the company and its assets. This transaction gives us a new future in Russia, allowing us to build upon the experience we had built up there over the past 20 years.

By selling our share of TNK-BP, we have monetized ten years of success, delivering both cash and a unique opportunity to remain a key player in Russia. We have a lot to contribute, as an investor, advisor, and a partner. Initially we will be sharing what we have learned from our own experiences of integrating large businesses.

Egore Satchin and I are both members of the integration committee established to oversee this process and maximize the operational efficiencies to be gained by bringing the two companies’ large set of assets together. Several work streams have now been set up to look at the integration of key areas such as the upstream, finance, refining, marketing and logistics. I am very happy to have been also nominated to join the RosNeft board which I hope to do towards the middle of the year as the first of the two board seats BP will take up.

It is worth reflecting for a moment on BP’s position in Russia following these transactions. Russia is the world’s largest producer of oil and gas combined. It also has the largest reserves of oil and gas combined, and RosNeft is now the world’s largest listed oil company in terms of production. BP holds 19.75% of RosNeft. It gives us a major stake in a company which possesses great scale in a country with huge potential.

And it enhances our own scale in reach. It means BP’s production, as a group, is now over 3 million barrels of oil equivalent per day,- and our proved reserves are over 17 billion barrels of oil equivalent. As with TNK-BP, you should also expect to see a significant contribution to BP’s earnings.

This transaction creates a unique position for BP. The deal provides us not only with a near 20% share in all that RosNeft undertakes but a close relationship that allows us to actively discuss opportunities where BP and RosNeft may be able to work together outside of the shareholding.

It’s early days, and there’s still much to do, but we’re proud of our track record in Russia and we look forward to working with RosNeft, building a bright long-term future together. Now moving on, let me update you on progress and milestones in our upstream. With much of the reshaping work behind us, our main focus is on executing what we said we would do within our current operations to deliver our 2014 targets and grow our operating cash flow for the long-term.

However, we’re also investing for growth. In exploration, we plan to compete 15 to 25 wells by the end of the year, eight of which are currently in progress, including wells in Egypt, India, Jordan, the Gulf of Mexico and Indonesia. These are pure exploration wells, and I’m not counting appraisal wells. And some of those are significant.

We continue to appraise existing discoveries in the Gulf of Mexico Paleogene and our oil sands properties in Canada. Operations have also begun to appraise our Utica shale portfolio in the US. And in Brazil, we have just announced a successful flow test at Etaipu. Our projects team has a strong pipeline of around 45 major projects to progress to the end of the decade with around a half of those in our high margin regions. We remain on track to start up four of these in 2013. And we expect to take a further five final investment decisions or FIDs during the year.

On Shatanese Space 2, we also expect to make a European pipeline selection. Good progress is also being made on our 2014 project start-ups, although the timing of work on our Shatanese in Algeria is being reassessed following the tragic incident in January. Other projects, though, may come on stream in 2014. We are continuing to ramp-up our global rig fleet, increasing mobile offshore drilling units to around 20 by year-end. In the Gulf of Mexico we expect to have eight rigs operating once we start up the mad dog platform rig later this year.

And in our operations, we are also continue to carry out our scheduled turnaround program. This is a systematic program designed to improve both safety and reliability across our portfolio. In 2013, the activity for turnarounds will be focused on the Gulf of Mexico and the North Sea. We have already completed the turnaround of the Atlantis facility in the Gulf of Mexico, and we expect to complete the majority of the remaining program in the second and third quarters.

I want to spend a few minute on the progress we’re making in our high margin areas. As you know, the ability to grow unit operating cash margins is central to our 10-point plan and its objective of increasing operating cash flow. In the Gulf of Mexico, as I mentioned, we now have seven rigs opposite rating, five engaged on production activity and two performing exploration and appraising work.

Furthermore, this will increase to eight once we start up the mad dog platform rig later this year. The idle iron work of the last three years is now substantially complete. In April, we started up the Atlantis north expansion, the first of seven wells as we further developed a field to fill the facility.

We have also decided, in collaboration with co-owners, not to move forward with the current plan for the mad dog Phase II project in the deep water Gulf of Mexico as it is no longer as attractive as previously modeled, due largely to market conditions and industry inflation. This decision is in keeping with our commitment to shareholders to maintain capital discipline and ensure we only develop projects which meet suitably competitive benchmarks.

We fully intend to develop this resource following a review of existing plans and other options and evaluating how to progress the project. In Angola, we have recently started up our third operating rig, the DS-6, which is currently drilling additional development wells on PSVM which started up last year. We have now produced around 10 million barrels from PSVM and will continue to ramp up to a plateau rate of 150,000 barrels of oil equivalent per day as we bring on additional wells.

In the North Sea and Norwegian sea area, we’ve seen a strong ramp-up in production during the first quarter, driven by the startup of the Skarv major project and improved overall production up time in the area. Skarv is now producing around 50,000 barrels of oil equivalent per day and is expected to reach a maximum rate of 165,000 barrels of oil equivalent per day. And we’ve started up new facilities at Valhall. These will give the field a further 40 years of life, and production is expected to continue to grow into the second half of 2013.

The Canoe Major Project continues to progress towards a 2014 startup with all engineering work now complete. And we have just agreed with our partners to proceed with a two-year appraisal program to evaluate a potential third phase of the giant Clair field, an initial appraisal investment of more than $500 million.

In Azerbaijan, we have seen stable production in the quarter as new wells have been brought into operation, and these offset natural decline. We continue to benefit from improved plant efficiency at the giant ACG development. On the Chirag Oil Major Project, the jacket and export pipelines are being installed ahead of startup later this year.

So when you add us all up, you can see a lot of progress. We’re well on track towards the goals that we set for ourselves in the upstream to deliver our 10-point plan. We are back to exploring, we’re bringing on high margin projects, our rig fleets are ramping up, and all of this gives us growing confidence in our plans for 2014 and beyond.

In the downstream, we are making strong progress too. As Brian explained, we had another strong results in this business. During the first quarter, we completed the divestment of our Texas City Refinery, we brought into operation the catalytic reforming project at our Toledo Refinery with our partners Husky, and we confirmed our first formal lubricants partnership agreement with the passenger cars division of China’s Shanghai Automobile and Industrial Corporation.

We also continued to make progress on the Whiting Refinery modernization project. This is now over 90% complete. We remain on track to bring the new operations on stream during the second half of 2013.

The divestment of the Carson Refinery and associated assets is expected to complete by mid-2013 subject to regulatory approval. And our clean diesel project at our Cherry Point Refinery is on schedule for operations in the mid-year. We’ve maintained our focus on safe and reliable operations while also sustaining high refining availability through the quarter, building upon the strong performance last year. All of this supports our longer-term strategy to expand the cash-generating capability of our downstream business so it can continue to deliver material and growing free cash flow for the group.

So to summarize, the year is off to a good start. We’ve completed our repositioning in Russia. It is a result that is good for BP, for RosNeft, Russia, and all the TNK-BP partners. The trial in the US has completed its first phase, and we remain resolute in our intention to defend ourselves fully while also ensuring we meet our obligations in the Gulf. And we continue to show strong progress in executing the operational milestones that support the delivery of our 10-point plan, including our commitment to growth in operating cash flow by 2014.

Longer term, our direction is very clear. We aim to be a focused oil and gas company that grows long-term sustainable free cash flow. We will do this through safe and reliable operations and through disciplined capital investment biased towards a growing portfolio of high-margin projects in the upstream, supported by a strong and increasingly cash-generative downstream. It is a simple model, a safer and stronger BP grounded in systematic operations and delivering sustainable growth.

Our aim is to operate that model and to continuously improve it in all aspects. With the completion of the sale of TNK-BP, we have commenced a share buyback program to return up to $8 billion of the proceeds to shareholders. This sits alongside the strong and flexible financial base from which we intend to grow distributions over time. In line with the improving circumstances of the firm, and to maintain a progressive dividend policy.

With that, that concludes my remarks, and now Brian, Jess, and I will be happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Right. Hello, everybody. We’ll take the first question from Alejandro A Demichelis of Exane.

Alejandro Demichelis – Exane

Yes. Good afternoon, gentlemen, Jess. A couple of questions from my side. In terms of the cost on the upstream that you have seen in the first quarter, how we should be thinking about sustainability of this new cost base going forward? And the second question is regarding Mad Dog 2, clearly you have postponed that because the returns were not, no longer attractive to you, but it seems that you no longer have a mega project in the Gulf of Mexico, in the period 2016-2020. So how we should be thinking about the development of Gulf of Mexico, post 2020?

Bob Dudley

Alejandro, hi. Thanks. It’s Bob. As we look at the first quarter, you all will know that the pattern of our costs in the first quarter tends to be lower because we’re heading into the turnaround season in the second and the third quarters. In the past, we’ve had roughly 47 turnarounds in 2011, dropping to around 30, and this year we’ll go down to 21.

And out of those 21 turnarounds in the second and third, for the year, 17 of those will be in the second and the third quarters. So we’ll see some of that. Sector inflation, we see overall, still running 5% to 10%, but we’re also seeing some sustained cost containment reduction coming because just the more efficient use of our rigs, now that we’ve got a rhythm, quite frankly, of getting our safety and operational risk in order. So we do see sustained cost reductions coming through in our operations, but it’s also the seasonality of the first quarter going forward.

On the Gulf of Mexico and the Mad Dog, I think we’re doing exactly what you would want us to do as shareholders, is to make sure we manage our capital. It’s not that unlike what’s happening with the Big Browse project in Australia, which we also have an interest of stepping back and looking again. To say we don’t have a mega-project there, I think is not correct.

But I think restructuring that project and looking at it differently, is absolutely the right thing to do. So I think we will have a project there. We definitely will develop those resources. The four big hubs for us in Thunder Horse, we continue in the near term to work on the water flooding projects near-term activity in the North field expansion Phase 1, Phase 2, and then the South in-fill after that. In Na Kika, we’ve got two wells and the topsides in 2013 ongoing.

We also have the appraisal of the Kaskeeda well, and we have also got the Hila exploration well on the way down now. So way too early to say that after 2020 we won’t have mega-projects there. But I think the one that’s captured the headlines is Mad Dog, and actually I think the organization has done exactly the right thing to reassess that.

Alejandro Demichelis – Exane

That’s very clear. Thank you.

Bob Dudley

Okay. Thanks, Alejandro.

Jessica Mitchell

Right. We’ll take the next question from Jason Kenney at Banco Santander. Go ahead, Jason.

Jason Kenney – Banco Santander

Hi, there. Congratulations on the positive start for the countdown to lift off. Good to see that again.

Bob Dudley

Thanks, Jason.

Jason Kenney – Banco Santander

So I appreciate your answer on the question from Alejandro and the seasonality of upstream costs. But the latest kind of cost data we have is the FASB date of the full-year 2012, and you’ve obviously got a very different portfolio in the upstream now, and it’s going to be a long time to wait for the FASB data in 2013. So if we were to think year-on-year, how should we think about upstream unit costs?

I mean maybe just in percentage terms or high level reduction terms, on that slimmed down portfolio, which is obviously focused on higher margin positions? And maybe secondly, on the downstream business, should we be assuming a fall back in margins, you know, through the mid part of this year?

Obviously there’s a lot of operational things happening this year, but was that kind of a one-off uptick in the first quarter? And maybe if I can just squeeze a third one in at all, again I appreciate the tax guidance in your earlier commentary for 2013. When we get Whiting up and running in 2014, where do you think that tax charge might fall to in 2014?

Bob Dudley

Okay. Jason, thank you. Brian and I will take a couple of those things. Well, first some sense of cash cost per barrel for us. If you look at the first quarter of 2012 and the first quarter of 2013, they’re almost identical. They were $13.96 a year ago in the quarter. They’re $13.91 now. They’ve come down in the – from the fourth to the first quarter from over $16 back to the $13.80 number.

So it is a long time before that comes out, but I think it depends on prices. We do see the sector inflation continuing at five-plus percent per year for both CapEx and operating costs. And for us, you’ll see an uptick in exploration for us, investment. It depends on the results of that. You’ll also see an increase in activity well work for us. But we’re going to just continue to maintain that competitive focus on selecting the right activity and making the procurement efficient and effective. Brian, what would you like to add?

Brian Gilvary

I think on cost, Jason, we’re seeing a slightly lower on unit basis 1Q, 1Q, but we’re going to have to wait until we get through this year till you really get a look at the new portfolio. So I think it’s a bit premature to give you any guidance around where the costs are heading.

We’ll have a very new portfolio on stream by the end of this year. The five projects from last year, the four projects this year, and the $38 billion of assets out of the portfolio. So I think it’s just premature yet but in terms of on a unit basis, what we’re seeing today 1Q, 1Q is slightly down as Bob described.

Bob Dudley

I think towards the end of the year as we get the turnarounds done in second and third quarters, actually the comment about margin degradation, I don’t see that. I see it the opposite happening by the fourth quarter.

Jason Kenney – Banco Santander

The tax question on Whiting.

Brian Gilvary

On the tax, that’s a bit premature Jason, but I think the guidance for this year is still 36% to 38%. The slightly higher figure of 1Q just reflects the fact that we don’t have that much Relco income there. The Relco income TNK-BP are now RosNeft and comes through on a post-tax basis, but we do see that coming back to 36% to 38%.

We haven’t gone as far ahead and modeled it out to sort of 2014. We do have an assumption in there around the targets we put out there, which is around this range of 36% to 38%. It’s really again going to be a function of whether the portfolio stabilizes at the end of the year, where we are around existing tax issues historically. So it’s impossible to give you guidance, but I think 36% to 38% is probably a good solid number for the next couple of years

Jason Kenney – Banco Santander

Okay. As long as you realize we’re all thinking about that, because it’s going to turnaround quickly as to how we can model 2014, 2015, 2016 and just how good that might be.

Brian Gilvary

I think for 2014, that’s around the range we’ve just given you around 36% to 38%. Beyond 2014, the intention would be at some point probably this year to come out with some more guidance around what the portfolio looks like beyond 2014, but really the focus this year is really about underpinning the 2014 targets.

Jason Kenney – Banco Santander

Thanks very much.

Bob Dudley

And I’ll just add a footnote to that, that as you think about Whiting, the differentials in the US have just recently reached these record levels, and they’re not necessarily guide of the future. It’s been very, very volatile. It’s very complex infrastructure, supply dynamics there. But we do think that the refinery there is quite uniquely advantaged structurally for processing Canadian heavy crudes and mid-continent crudes and even Gulf Coast crudes. So we’re all looking at that. But it’s just too early to say whether those conditions will stay.

Jason Kenney – Banco Santander

Thanks.

Jessica Mitchell

Moving on to Jon Rigby from UBS.

Jon Rigby – UBS

Yeah, hi. Thanks for taking the questions. Two, please. On the results themselves, can you characterize a little better the comments you make about trading both in the upstream and the downstream? I take the point that you don’t like to put a number on them, but I’m aware that you commented last year at 1Q that I think oil trading was somewhere below where you would expect it.

So maybe what I’m trying to say is when you say that there’s been an uptick for the better, have you returned to something more like what you would expect to get on a normal basis or was the quarter somewhat better than you would have expected? And then the second question is just to come back to Mad Dog.

As I understand it, you have single hurdle rates for FIDs. And I just really wanted to ask the question, did Mad Dog fail on the hurdle rates you were applying? Or did it just look wrong in terms of the rates of return you were getting in that previously you would have expected a large Gulf project to be very high up in this sort of pecking order of projects and this one wasn’t? So a view that perhaps you could do better even though it actually was making your rate of return hurdle? hanks.

Bob Dudley

Yeah, Jon. Thanks. Well, first, just an overall reflection on the first quarter earnings and the drivers. I would say there’s really three parts of it. Really a third of it is better margin mix, a third of it is the cost that came through, and a third of it I would say is oil and gas trading. And, Brian, why don’t you comment on the

trading.

Brian Gilvary

Jon, you’re right. Historically we don’t typically talk about the trading numbers unless we have a very strong quarter, which is what you see in the first quarter. So the way I would characterize the trading result and we’ve talked this historically on sort of an average basis, but when we compare it to an average quarter, then the trading result is around about circa $0.5 billion dollars higher than an average quarter. If you look at the last five years, average quarters it’s around about $0.5 billion higher, and it’s split roughly evenly in terms of the upstream and the downstream. So in terms of gas trading in the upstream and oil trading in the downstream, it’s split pretty evenly across the two.

Jon Rigby – UBS

But just to follow up on that, I think you commented I think in the fourth quarter that 2012 itself right across the year was not a great year for oil trading. So if you were to look back historically presumably you’re comparing it against a base that’s not actually all that good.

Brian Gilvary

No, because actually if you think – actually 2012 was a tough year for them, 2011 was an okay year, 2010 was good, and 2009 was very strong and 2008 was very strong. So if you go back the last five years...

Jon Rigby – UBS

Right.

Brian Gilvary

The average this about $0.5 billion above that average quarter for the trading results So this thing evens out over time over many, many quarters as I’m sure you’re familiar.

Jon Rigby – UBS

Yeah, and on Mad Dog?

Bob Dudley

Jon, on Mad Dog, the Mad Dog 2 Phase 2, it’s a really very much of a world class resource, and we very much intend to develop that resource with our partners, which are BHP and Chevron.

The current plan when we looked at it and one of the things that all companies with these kind of capital projects need to do is not just keep going down the road because that’s what you’ve laid out to do and go through the stage gate process. And we looked at it, and we said this project is not as attractive as we had previously modeled it mainly due to some of the market conditions and industry inflation, steel, and yards.

So we stopped at the stage gate and said we think there are other things that we need to return to, to look at improving the economics. And it could be a phase development that actually brings production earlier than we thought but at lower rates and stages it over time or not. So we just need to take another look at the engineering work and try to optimize that.

So I wouldn’t say it failed, but you’re right, these are high margin projects in the Gulf and this didn’t have the margins that we had been looking at. There’s no real read across of this to other projects that we have now, and there’s no immediate impact on the reserves of the field. And I’m most certain we will develop these resources out in time. I think this is a very healthy recycling.

Jon Rigby – UBS

That makes sense. Thank you.

Jessica Mitchell

Turning to the US, Doug Terreson from ISI. Go ahead, Doug.

Doug Terreson – ISI

Congratulations on your strong results, everybody.

Bob Dudley

Thanks, Doug.

Doug Terreson – ISI

I have a couple of questions on the downstream too. First, there seem to have been very positive mix effects in the downstream in the period. And so my question is whether you could provide insight into these factors exclusive of those relating to trading that Brian just highlighted and also whether there are any geographical effects worthy of mention as it relates to mix.

Bob Dudley

Doug, I think I’ll take that question. So if you look at what’s happened 4Q into 1Q, there is benefit coming through in terms of the trading result we talked about. There’s also seasonally lower cash costs. So you’re seeing benefits of both of those roughly evenly actually in terms of the difference.

You’ve also got the Whiting outage there. We took the cruise unit down in December. So, of course, you haven’t got the benefit of whiting to the first quarter. And we have seen some pressure on both unit margins and volumes in the Fuels business. So that’s sort of four components to it. Strong results in the global oil trading, seasonally lower cash costs but the negative side we’ve got the Whiting units out, which will be starting up this quarter and some of the margin effects in terms of fuels, volumes, and margins.

Doug Terreson – ISI

Okay. And, Brian, I think both you and Bob talked about commissioning at Whiting in the second quarter and then start up in the second half of 2013. So just for clarification, is it just as simple as to mean that feed stocking will be processed this quarter and that we’ll have full run rates in the second half of 2013? Is that the correct interpretation?

Brian Gilvary

No. So what we’ve got is the units come back on stream in the second quarter. They’re the crude units we took down in December.

Doug Terreson – ISI

Okay.

Brian Gilvary

We’ll need those back on stream to then start commissioning the coca through the second half of the year. So we’ll start to see the run rates come back through the second quarter, and then we’ll begin the commissioning process through the second half of the year.

Doug Terreson – ISI

Okay. I follow. Thank you.

Bob Dudley

I’ll just add to what Brian said in terms of our Solomon availability of our refinery system overall was 95% in the fourth quarter and 95.1% in the first quarter. So we have actually kept our units running globally in both the quarters, which also has helped these results.

Doug Terreson – ISI

Okay. Thanks.

Brian Gilvary

Thanks, Doug

Jessica Mitchell

A question now from Hootan Yazhari of Bank of America, Merrill Lynch.

Hootan Yazhari – Bank of America Merrill Lynch

Hi, there, gentlemen. Two questions, please. Let’s start with RosNeft. I just wanted to get a clearer picture of how you’re getting involved in the integration process? Obviously BP has a lot of experience with the integration process, given your – the acquisitions you have made in the past. I just wanted to see how you’re applying that to the RosNeft transaction?

And secondly moving onto your balance sheet, obviously very strong. It’s up 12% gearing. I just wanted to get a feeling of how you’re looking at the dividend and potential increases in forthcoming quarters? Thank you.

Bob Dudley

Hootan, I’ll take the question on RosNeft, and then Brian will take the point on the gearing and the dividend outlook. The integration process, I think everybody on this call has been involved to one degree or another in same major integration. You know that they’re fast paced, and they’re moving quickly.

On this particular one, given that the close was accelerated from June as it was into March, the integration is moving very rapidly. So on day one, the main thing was make sure there was, complete internal controls, that the company has the ability to pull together its earnings.

And in addition a structure was put in place, which was organized not on geographic lines, but it was the offshore, it was the on shore in the upstream, the refining, and the supply and trading logistics as these are different segments or blocks of the business that they’re called as well as putting in place a common economic evaluation methodology for all the decisions that had to be made.

There has been a – there was a popular rumor that no one from TNK-BP was going to move into RosNeft, and it would be just an acquisition, and then there would be a full scale wholesale change in multiple levels in the company, and obviously that’s not happening. There are hundreds of professionals from TNK now that are now part of RosNeft. And we have had formal integration meets, and we have had informal integration meetings as these decisions are made pretty quickly. So I think as integrations of large companies go, this one is moving very, very, very fast.

Then of course the main thing overall is to make sure that the synergies are defined and developed, which are starting to be listed and it will be up for RosNeft to describe those to the market. And it will be making sure that many of what I think are some state of the art world scale technologies around corrosion, inhibition, water flooding, reservoir modeling and the use of technology are brought together in the RosNeft to do what I think it’s going to do, which is become a model.

I think most people would say that TNK-BP on most benchmarks had evolved into the most efficient Russian oil company. And it’s openly talked about at RosNeft how to make sure they follow down that path. So I don’t know if that gets at the specifics of your question, Hootan. It’s a subject obviously we talk a lot about, but does that hit the primary point?

Hootan Yazhari – Bank of America Merrill Lynch

Yeah, I’m just trying to get a feeling of how much of the best practice in TNK-BP would be transferred to RosNeft? And indeed how much of BP’s best practices would be injected into that mix?

Bob Dudley

Yeah, so this has been a company that’s been merged now within a month. Certainly the assets are still a substantial amount of the TNK assets, which are now part – TNK-BP assets are now part of RosNeft itself. So that technology is not going to go away. And I’m always struck, if you look at a map of Russia, and you see the location of the TNK-BP properties exploration and producing properties with RosNeft, they’re all very, very close to each other out there.

And I just can’t help think that this is going to start flowing through substantially. As people have moved around with those experiences from one field to another field, and the pipes get hooked up between them, there’s going to be just a tremendous amount of best practices and I think about water flooding, corrosion, inhibition, artificial lift is going to happen. I’m not worried about that.

The first thing I was worried about in the first month was are the internal controls in place, is the company going to be able to pull its books together, is the company going to be able to forecast and project so that it’s a larger car with a steering wheel that’s working. Then that’s all gone very well in the first month. So just give it some time here. There’s no doubt that the best practices aren’t going to be lost. Let’s talk to your question about gearing in the dividends.

Brian Gilvary

Yeah, thanks, Hootan. So you’re right, the balance sheet is in a much stronger position now post the RosNeft transaction. What we’ve said previously is the board is clearly committed to progressive dividend policy. You saw us move the dividend up twice last year in February and October by $0.01 and on each occasion representing an overall 28% increase since the level we had reset the dividend at $0.07. And of course the growth in operating cash flows out to 2014 and beyond we’ll be able to – enable us to underpin that sustainable dividend growth into the future and the progressive dividend.

It will be a function of being able to deliver sustainable free cash flow which I think is one of the things that we talked about in December last year off the back of the new projects and tight capital discipline that will create the space for progressive dividend policy beyond. So that’s something which the board will review each quarter and certainly that will get reviewed at some point through this year to follow the normal course of course review of results.

Hootan Yazhari – Bank of America Merrill Lynch

Thank you very much.

Jessica Mitchell

We’ll take the next question from Irene Himona of Société Générale.

Irene Himona – Société Générale

Good afternoon. I had three questions, please. Firstly, on India, is it possible to update us on where you are in terms of gas price discussions with the government? And what would you need to match your expectations of project economics at the time of that acquisition?

Secondly, on the dispute with the claims administrator, could you provide a sense of the magnitude of the extra cost that would be involved in a scenario where you’re simply allowed to continue to follow that methodology?

And then thirdly, Whiting, in the past you had mentioned a $1 billion cash contribution obviously at a much lower level for light heavy differentials. In the Q1 environment, should we simply double our expected cash contribution because the margins were – the differentials were twice as high? Thank you.

Bob Dudley

So, Irene, thank you. We’re just – I’m not sure about doubling. I’ll let Brian answer that. First on India, I think we’ve made quite a bit of progress here in India. I’ve just been out there, spoke to the Prime Minister and every main minister here, the energy ministers.

When we originally made the acquisition, we had an assumption of the gas price – the current gas price of $4.20 in place until April of 2014, and then we made an assumption of going to $7. Since that time, I have to say, and I’m told officials in India that it’s been hard. There has been a real slowdown in government decision-making for some time, not just in our industry but every industry. They have – they recognize that their gas prices aren’t competitive.

I’ve explained that it’s not, it doesn’t make sense for BP to develop natural gas in Australia and ship it into India and that’s more economic for us than to develop there in the country. And they have had a Rangarajan – it’s called the Rangarajan Committee which has made a recommendation to the government to move the price to $8 an Mcf to somewhere between $8 and $8.50 per Mcf at $100 LNG parity which would be about $12.

What we’ve said is that that’s a step in the right direction. We can support that but we also would like a market path to market pricing after that. And our board is heading out to India later in May. We’ll have more meetings with the officials.

I’m very, very encouraged with the meetings that I’ve had and we’ve got something called the R series development plans that have now been submitted, sea bed surveys are underway. We’ve got further satellites around D6 and something called the NEC 25 areas. So I think it’s coming together. We’ve got an exploration well right now that’s down in Coring. So I think I would look at the government’s decision on that commission as the first next milestone on India. Is that clear, Irene?

Irene Himona – Société Générale

Yes. Thank you.

Bob Dudley

Okay. And then so with the claims and with Whiting, Brian.

Brian Gilvary

Yeah, so in terms of the claims process, Irene, the issue that we have with the agreement is around business economic loss claims, and for us to be able to do an estimate of what those claims look like going forward, we need two things. The first thing is a ruling in terms of the Court of Appeal.

And then having established that ruling from the Court of Appeal either way, we would then need a pattern of future claims to be able to do an actuarial calculation. So at this point, it’s actually impossible to estimate since we don’t have that patent and we don’t have the decision. What I can say is that when we did the settlement initially, we took a provision of $7.8 billion within the $20 billion trust fund. We progressively moved that by that by the end of the fourth quarter of 2012, that number was sitting at $8.5 billion.

When we had this issue arise with the court and contesting some of the claims that Bob talked about as going through which appeared quite fictitious to us and not really the people that the money should be getting to, we backed out the future economic loss claims at that point in our provision of $800 million, which at the annual report and accounts filing took us to $7.7.

This quarter we’ll now book economic loss claims as they now come through. So you will see that the provisions now moved up to $8.2 billion. So we’ve have taken $500 million this quarter, and we still have within the trust fund head room of around about $1.7 billion that has not yet been allocated and can be used for these purposes. But really at this point it’s premature in terms of trying to make any estimate around what those claims look like in the future.

Irene Himona – Société Générale

Okay. And finally on the Whiting...

Brian Gilvary

Sorry, on the Whiting question. It’s premature. Of course, we’ve seen the spreads blow out to something like $27 versus WTI Canadian heavy versus TI, and, of course, TI has blown out to Brent to the tune of $18 in the first quarter. So you’ve sort of got a $45 Brent to Canadian crude differential that Whiting will be able to capture.

Now of course part of that is being driven by the fact that the Whiting unit was down. And so, therefore, that’s – that in itself with that volume not being able to get anywhere, that exacerbates the spread. So that’s come back in line now. The current spot spread is somewhere around about $17 to WTI in terms of Canadian heavy. That’s where it is as of yesterday.

Now clearly to the degree that we see moments where the light heavy spread opens up and widens to the sort of numbers we saw in the first quarter, we’d be able to capture those benefits through Whiting and the effect of those benefits move between our upstream position with Sunrise in Canada down to the Whiting Refinery. So I think the short answer to your question is if we see these sort of spreads, there is clearly significant upside over and above the $1 billion of cash that we have talked about around Whiting Refinery.

We’re not going to quantify what that number looks like, but clearly there would be upside. And that, of course, comes into the overall 2014 targets of $30 billion to $31 billion of operating cash. We’ve risked in assumptions across the portfolio. So to the degree Whiting may be higher in those numbers, there may be balance somewhere else

Irene Himona – Société Générale

Thanks very much. Very clear.

Jessica Mitchell

Back to the US, Brandon May from Tudor, Pickering.

Brandon May – Tudor Pickering

Hi. Yes. On the natural gas realization in the rest of world, it looks like you had a nice increase relative to benchmarks. I just wanted to get your thoughts and color on what caused this and maybe what’s going on looking forward.

Bob Dudley

Well, we have because of the North American prices. I mean, the LNG prices globally have gone up, and they’ve...

Brian Gilvary

So I think it’s actually, sorry, Bob. It’s the LNG pricing was attractive for us through the first quarter around some diversions and also the benefit of truedadia volumes having additional cargoes available to us. I think that was one of the big drivers of the first quarter. Sorry, Bob.

Brandon May – Tudor Pickering

Can you maybe quantify some of those numbers?

Brian Gilvary

Typically we don’t other than the fact that it comes through the gas trading result that we talked about earlier. For the total trading it was $0.5 billion above an average quarter split evenly across the Gas and the Oil Trading businesses.

Brandon May – Tudor Pickering

Got it. Thanks.

Jessica Mitchell

We’ll take the next question from Theepan Jothilingam at Nomura.

Theepan Jothilingam – Nomura

Yeah, hi. Good afternoon. Thanks for taking the questions. Three, please. Firstly, just looking at cash generation, I know quarterly numbers are volatile, but I wanted to – if you can make any comments on how to extrapolate Q1 to your sort of 2014 operating cash flow target. I do like sort of – I get a feel for what the run rate is at 2014 referenced conditions.

I’m wondering, wanting to know whether you think you’re ahead in line or below that sort of targeted run rate. Secondly, just on exploration, if you could give some color on the eight wells drilling, what countries or plays you’re testing. That would be great. And thirdly, just to cross-check with your guidance on disposal impacts year-on-year is unchanged. Thank you.

Bob Dudley

Okay. So, Brian, on the cash, I’ll talk about exploration, and we’ll then come back to the disposal point in a moment.

Brian Gilvary

Yeah, Theepan, on the operating cash flow, remember for the first quarter, typically that as you saw the first quarter of last year, we did have a seasonal build in working capital. So on an underlying basis the actual – the $4 billion of operating cash, there’s also a $4 billion build in working capital through the first quarter, which is typical as we build products for the summer season.

That will unwind as the year progresses. So I think the short answer is, 2014 with the projects that came on stream last year, the projects this year, where we are around the commissioning of Whiting, the target of $30 billion to $31 billion of operating cash in 2014 is well underpinned.

And in terms of the first quarter, it’s always a difficult quarter to get to kind of what you’re looking for in terms of run rate. But on an underlying basis, if you take the working capital build out, it’s something like $8 billion of operating cash coming through the first quarter.

Theepan Jothilingam – Nomura

Yeah, Brian, I was just wondering, the question I’m thinking is, do you feel confident – I mean, it sounds like you’re very confident around $30 billion to $31 billion. And you’ve talked about sort of the risk assumptions. You know, you also sort of mentioned that the CFA target will be greater than 50%. I’m just wondering what the upside case could be, sort of a reference $100 oil.

Brian Gilvary

Yeah, $100 – sorry, it’s $100 a barrel and it’s $5.00 per an MMBtu of Henry Hub, remember? And of course the Henry Hub price has come back this year, we’ve seen it back over $4.00 now. So it’s sort of, it’s moving towards that trajectory for 2014. But no, I’d say it’s well underpinned into next year. There may be some upside, there may be some downside, but we’re fairly confident that $30 billion to $31 billion is well underpinned for 2014.

Theepan Jothilingam – Nomura

Okay. Great.

Bob Dudley

Theepan, hi, this is Bob. On exploration, we are currently sort of testing this reloaded portfolio. Up until now we’ve been drilling wells that were prior obligation wells, and as we move forward, we’re now really getting into the new acreage positions we’ve picked up over the last few years. So we’re currently drilling eight wells. Around five of them are testing new plays, real completely new plays.

Those would be in Brazil, Egypt and Jordan. We’ve got wells scheduled in the UK and Indonesia and India as well for the year, and in the Gulf of Mexico, of course, the Hila well. So those wells are going down right now. I think it’s just something to see what the results are coming through. We don’t really have anything new to announce today, but we’ve got some promising things that are happening out there. And that’s probably all I can say right now about it.

Theepan Jothilingam – Nomura

Okay. And then just on disposals, please?

Bob Dudley

Yeah.

Brian Gilvary

Yeah, what was – I’m sorry, Theepan, what was the specific question on disposals?

Theepan Jothilingam – Nomura

Just the impact of disposals sort of year-on-year? Are you sticking to that sort of numbers?

Brian Gilvary

Yeah, it’s around – yeah, that’s correct.

Theepan Jothilingam – Nomura

Okay. No change there, right?

Brian Gilvary

No.

Theepan Jothilingam – Nomura

All right, very clear. Thank you.

Bob Dudley

Yeah, we have received the proceeds now on $32.7 billion of the $38 billion on the disposals.

Brian Gilvary

Yeah. And there’s $5 billion more to come through this year and there’ll probably be some other disposals over and above that. But it’s basically underpinned.

Bob Dudley

Yeah, and most of the impact on the disposals are in some high-margin areas, the Central North Sea being one of them as well.

Jessica Mitchell

Right. And next question from Oswald Clint of Bernstein.

Oswald Clint – Bernstein

Yes. Hi, good evening. I have two questions. First one, could I ask if you can talk about the earnings contribution from some of those new fields starting up this quarter like Skarv and Valhall if possible? And then secondly, I’d like to go back to RosNeft and just get your thoughts on their recent strategy.

You spoke about the earnings growth potential from this investment, yet I got the sense looking at their strategy that there was limited kind of upstream growth here for the next couple of years. There was a lot of downstream investment. Synergies seemed to be more heavily weighted to 2016 onwards. Off sale a lot of natural gas growth in the domestic market. So it seems like it might be a bigger earnings growth potential post 2016. I just want to get your thoughts if you think that’s fair? Or you think it could be much more accretive over the next couple of years? Thank you.

Bob Dudley

Yeah, sure. Well, first on the new projects that have come on, certainly the Block 31 PSVM in Angola has come on. We’re projecting roughly production another 24,000 barrels a day. It’s a very high margin area for us. And Skarv, 22, more than 20 this year. That will – Block 31 will go up for net to BP above 30,000 barrels per day as will Skarv. So those are two high margin contributions for us most certainly.

And we have completed the redevelopment of the Valhall field in January as well, which we haven’t really highlighted as a major project, but it will effectively extend the life of Valhall for another 40 years. So these are some of the good things that have just come on, you see in the results, and that obviously does affect the volume mix that we’ve seen in the 1Q numbers.

On RosNeft, strategically RosNeft had some plans to modernize refineries. I think actually there was a big question mark yet on how much of their capital they will put in refinery modernizations and how much will be into looking at what are many, many opportunities across the existing on-shore fields. I think their focus is going to be significantly on the upstream. I know it is.

And I think that their projections are – we – our projections and their projections separately show underlying growth throughout the decade in RosNeft in the upstream. I think the – there is enormous amounts of associated gas production in Russia that you can see the market beginning to open up and liberalize for those companies who have the potential for monetizing that associated gas.

Some of it is now, but there’s more, and that’s probably not built into anyone’s projections right now. So I wouldn’t describe it as back-end loaded. I think it’s going to be steady progress, and I think just like BP, you know, our message to them is capital discipline is really very important and be very, very selective on those big projects that you take on, including refining modernizations.

Oswald Clint – Bernstein

Okay. And sorry, just a follow up, Bob. In earn the terms of the potential international opportunities with RosNeft, would you be contemplating letting RosNeft into your Gulf of Mexico portfolio?

Bob Dudley

Well, we haven’t talked to them specifically. Of course we have a very large Gulf of Mexico portfolio. I think they have their hands full focusing on the integration right now. But I would say that nothing is off the table with use as we talk with them around the world as well as projects on shore in Russia and even the Arctic. So I think we have – we have the relationships, we have the access.

If there’s something that’s interesting, we’d be happy to take it on. We look at this partnership with RosNeft as one of multiple decades, so it’s still early. And just like for BP and just like for RosNeft, any decisions to enter in and do things together have to look good economically from both sides. But I’m – I don’t think we’re restricted, and I don’t think they feel restricted about anything. But no specific plans in the Gulf.

Oswald Clint – Bernstein

Okay. That’s great. Thank you.

Bob Dudley

Sure.

Jessica Mitchell

Next question from Fred Lucas of JP Morgan.

Fred Lucas – JP Morgan

Thanks, Jess. A question on numbers perhaps for Brian. Can you tell me, remind me the total cost BP incurred to exit the Solo business? And whether you expect to exit Wind without any costs? And when you exit the Wind sector, how might that affect your guidance for the OBC segment?

And then a question for Bob, Bob, I’ve been reading some of the summary reports following the Ula incident in September 2012, the report from Norway’s Petroleum Safety Authority. And I mean they describe it as an accident that – an incident that had the potential to become a major accident and a potential near miss. So I just wondered how you felt about that, given that that occurred 2.5 years after Macondo?

Bob Dudley

Okay. Well, Fred, let me take that last one, the Ula incident. You’re right. The Norwegian authorities, we’ve been working with them for since 2011 on that. It was – I believe – I don’t have the facts and figures. I’m going to do this from memory but I believe there was six barrels of oil discharged to the sea.

The rest was contained in a sump and there was a gas discharge. This was an unmanned platform. There was no one on the platform. And yes, any time you have just as has happened here in the UK, for example, you have an uncontrolled gas leak for a period of time, there’s a potential of course for ignition.

And that’s what that report is about and we’re working with the authorities there, and I think the authorities have obviously and rightly said this had the potential for an accident. And that they have also said that we have all the capability of improving and continue to improve our systems there. So I’m not going to say it obviously didn’t happen but it was not an accident. It had high potential. We call it a high potential incident. And I think that’s probably all I need to say about that right now. I know it’s solar.

Fred Lucas – JP Morgan

But, Bob, they were very critical of BP’s approach to maintenances and I was just astonished that so long after Macondo that your maintenance processes on North Shore platform could still be criticized in such a way.

Bob Dudley

Well, Fred, you read the report. I think everybody can read that report. We had a maintenance of a kind of set of bolts on that report that led to a discharge on an unmanned platform. The safety systems did work. The automated safety systems did work. There was a minimal discharge to the sea and regulators – any time there is any kind of an incident anywhere, whether that’s upstream or downstream for any company, I would expect regulators will write that kind of report.

Brian Gilvary

Yes. And, Fred, in terms of solar and the read across the wind, there really isn’t one. Solar was a business that we announced the intention to wind down and exit in 2011. We’ve been in that business for 40 years.

It’s a business that went through an enormous market change that made it very difficult to make money in that business, and that’s why we chose to exit it. In the case of wind, it’s a good business. We’ve got 16 wind farms in the United States, three that we recently constructed across nine states. We finished three wind farms last year in Kansas, Pennsylvania and Hawaii.

We think that will be – when we take that business to market, we think it will be very competitively bid. So I don’t think there’s any read across from what you saw in terms of the exit costs out of solar and some of the things that we had to put in place around warranties around the solar panels and some of the impairments that we took around that business.

I would not read any of that across to wind. Wind is a very viable business. That tax credits were extended to it’s a good business in terms of marketing. It simply doesn’t fit the portfolio going forward which is why we chose to exit and so therefore there is no read across from what you saw in solar.

Fred Lucas – JP Morgan

Thanks, Brian. That’s very clear. Can you just clarify, I mean, I have seen the business is profitable, so when it’s sold, will that deepen the costly charge for the OBC segment?

Brian Gilvary

You should – no. Actually, so the way it works is wind works in the base of tax credits so therefore on a post-tax basis, it’s accretive but of course you have to have revenue, some revenue stream somewhat to take advantage of those tax credits. So from a post-tax basis, there’ll be – you will see the charge come down. We have a report OB&C on a post-tax basis. You only see it on a pre-tax. You shouldn’t see any major changes in OB&C.

Fred Lucas – JP Morgan

Got it. Thanks.

Jessica Mitchell

All right. Thank you. Next question from (inaudible) from Goldman Sachs.

Unidentified Analyst

Hi. Thank you for the presentation. I was just wondering in view of your comments on capital discipline and inflationary pressure, if there are FIDs that you will feel comfortable taking over the next 12 months or if you prefer taking time to get to better cost environment?

Bob Dudley

Hi. We do have in fact. We’re projecting – we had a light year last year FIDs. We had three. We’re looking at as many as five this year and three of those would be mega projects I would say. And we have even more that we can decide from. So no, I think because of in light of our capital discipline, we’re going to look at any project that needs to be refined and it will go through this normal stage case but we would expect to see five this year and I would say more than five as well in 2014.

Unidentified Analyst

Thank you.

Jessica Mitchell

Right. Rahim Karim from BarCap.

Rahim Karim – BarCap

Thanks, Jess. Two questions if I may around the buyback program. First, might be more for clarification, but I just wanted to check what environment or what set of circumstances would see you not reach that $8 billion that you talked about. So you have talked about up to $8 billion, so I just wanted to check that.

And then the second was just around the scrip dividend. Clearly it’s currently dilutive given you’re not buying that back. Should we expect once that $8 billion is done and dusted that you should continue to do an ongoing kind of buyback program to offset that dividend given that gearing now is back at towards the bottom end of your range? Thank you.

Brian Gilvary

Yeah, thanks. So in terms of the latter part of that question, we have a mandate which goes before every AGM on an annual basis that allows us to buy back up to 10% of our market capitalization. So that’s kind of – those authorities are in place.

And that’s something that we typically look at on a routine basis, part of the financial frame. So that there is a mandate in place to enable us to do that. The $8 billion, you should assume that provided oil prices stay where they are, the balance sheet stays what it is, there is flexibility, but our assumptions and the assumption of the Board is that we’ll go ahead and do the full $8 billion buyback.

We think it will take 12 to 18 months. As of last night, we’re up to $850 million now over and above the $834 million that we talked about in the script in terms of what we just talked about. So the assumption is we will complete that, but of course, depending on what happens in the environment, it creates great flexibility.

We make sure that we can run the balance sheet of the firm at $80 a barrel for two years and we have stress tests in place to enable us to do that. So there’s nothing really in an environmental perspective I think that will get in the way of the full $8 billion buyback.

Then in terms of the scrip dividend, the scrip dividend is good for our shareholders. There are benefits for our shareholders around the issuing of scrip, and that’s really for their choice as well as whether they choose to take the scrip or take cash.

And we’ll continue to offer that. We haven’t put any commitment in place in terms of non-dilution of that and buying that scrip back and so therefore, there’s certainly no policy we’re about to make on the hoof here today, so no, we’ll continue to offer scrip for our shareholders while they request that. And then in terms of buyback of stock, generally that sits within the existing financial frame.

Rahim Karim – BarCap

Perfect. Thank you. If I just – may, I just have a follow-up question just around, more generally around the strategy and the update. I mean, I guess you’ve been overly constrained what’s going on in terms of the court case in the US. Given that seems to be progressing, should we expect greater disclosure around the strategy at some stage? I mean, you mentioned in December perhaps that once the court case developed and we were into it that you might be in a better position to talk about the longer term.

Bob Dudley

Rahim, hi. This is Bob. So in December when we laid it out, we basically laid out a company that is focused on upstream high margin projects out to the end of the decade with a capital discipline around it with projects that focused on higher margin upstream projects and emanating out of the four big hubs that we have, which is Angola, the North Sea, Azerbaijan and the Gulf of Mexico. And a further focusing down of some of the older assets and decisions that you now see like what we have said that at least at the moment our intention is with wind, for example.

So the strategy I think is clear around a focus on oil and gas, a bias towards liquids, not in all cases because there are regional differences on gas; capital discipline and downstream assets which generate cash for the company, high quality assets that generate cash. And I think with that, we should put ourselves into an ability to be a cash-generating machine with some back into good projects as well as some for distributions for the shareholders.

Now that I think is essentially what we laid out in December and what we are now considering doing is a business review later this summer just to give you a little bit more color past – from 2015 on to the end of the decade, but it won’t be a fundamental redirection.

Rahim Karim – BarCap

That’s helpful. Thank you very much, gentlemen.

Jessica Mitchell

Next question from Lucas Herrmann from Deutsche Bank.

Lucas Herrmann – Deutsche Bank

Cheers. Thanks, gentlemen. Good afternoon. A couple if I may. Bob, can I get you to talk through some of the developments of what’s going to be happening in the short term in the Gulf of Mexico in particular? I think you talked about an objective or a desire to fill the Atlantis platform, which from memory, 200,000 barrels a day of capacity, and that’s relative to I think it producing something near 70,000 at the moment.

And also where we are on Thunder Horse? You talked about an objective of moving production back to 125,000 a day. You’ve been working on maintaining pressure, et cetera, et cetera, but what should we – or what are you anticipating or planning through the second quarter? I’ll leave it there for the moment. Thank you.

Bob Dudley

Okay. Thanks, Lucas. You have mentioned two of the big hubs we have in the Gulf of Mexico and Atlantis. So the near term activities for us in Atlantis, by the way we want to show volume growth from 2013, so from around 50,000 up to around 75,000 by 2020. But the near term activity is the North field expansion, which is Phase 1 which has a total of 3 wells, plus the sub-sea facilities that go along with that.

And then another North Field expansion Phase 2, which has a total of four wells, along with the sub-sea facilities. And then the South in-fill, which will be a total of four producers, of which three are water and plus three water injection wells. So quite a bit of activity.

And we will have a turnaround in the second quarter, that’s a significant one in Atlantis, so we have about a 45 day turnaround there to tie in Thunder Horse. Sorry, the turnaround is in Thunder Horse.

So Atlantis, we’ve got new wells coming on, lots of activity there. Now Thunder Horse, near term activity there, we’ve got well work on six wells going on right now. We’ve got an in-fill phase, Phase 1, which will be nine wells. We’ll have a water injection phase which will change the topsides plus have three water injection wells, as well. We’ll have a third rig on Thunder Horse in January 2014, which we’re going to, at the moment, are planning to contract for three and a half years on that.

But we will see Thunder Horse come down in the second quarter, with a 45-day turnaround, and we will see Thunder Horse decline, 2013 to about 25,000 barrels a day. But we expect then to see it grow through 2020 back up, I’m just going to say a hundred thousand barrels a day. It could be higher than that. But a hundred thousand.

Lucas Herrmann – Deutsche Bank

So it’s through 2020 so over the next seven years, the ambition is to move Thunder Horse back towards?

Bob Dudley

Yeah, over a hundred thousand.

Lucas Herrmann – Deutsche Bank

Over a hundred thousand, sorry net or, or?

Brian Gilvary

That’s net.

Bob Dudley

That’s net, Lucas. That’s 75% net.

Lucas Herrmann – Deutsche Bank

I’m sorry, in terms of Atlantis, in just production on where you expect capacity to move to and just some pinpoints around time, as you bring the different phases on, what should we be thinking about? Where I’m confused I guess is these are huge facilities which?

Bob Dudley

That’s right. The work I outlined sort of goes out, all the way out through 2020, that I’ve listed there. I think, I think for us to give you specific, you know, wells and what we’re going to be doing on each of the wells, let me see what I can tell you here. I mean, we will have Atlantis 2-A starting up. I think what’s best, because there’s a lot of detail there, and I don’t want to do anything selectively right now, is that anyone can phone, Jess, and her team there, to go in what we’re doing sort of quarter by quarter, if we can even do that for you.

Lucas Herrmann – Deutsche Bank

All right. But, Bob, I mean from everything you have seen and all the work you’ve done in the Gulf so far, the guidance that you put out in December around, you know, anticipated production you clearly feel is robust?

Bob Dudley

That’s right, yes. Absolutely. I mean we’re, we’ll be underlying flat this year, and then we’ll see those numbers continue to move up through 2016, substantially, so year by year by year in the Gulf.

And you’ll remember that we had probably in 2012, we were around at 210,000 barrels a day in the Gulf. We have divested about 46,000 barrels out of the Gulf, so sort of net of that, we’ll be flat. And then each year confidence is absolutely there to keep growing.

Lucas Herrmann – Deutsche Bank

Okay. And finally one other, if I might, just on the 2014 guidance. I mean, Brian, you’re indicating that you feel that everything is already in place to deliver, you know, the $30 billion to $31 billion of operation cash flow. Or are there, you know, particular pinch points or particular events that need to happen, the start-up of Whiting aside?

Brian Gilvary

Yeah, Lucas, let me just sort of clear, that’s a risk number, so therefore, there are things that can go in our favor, things that can go against us. So I think that from a risk perspective, things are on track, but many things can happen between now and the end of next year, OPEC quotas, hurricane season. I wouldn’t say it’s complete.

Do not assume it’s in the bank, but all the things that we need to do to underpin it are in place. And as on a risk basis, there may be some upsides and downsides across each one of the projects. So I wouldn’t put it in the bank at this point, but we do feel things are underpinned. I’m sure, Bob, if you...

Bob Dudley

Yeah, I’d just add some of the things that had to happen were the five major project start-ups that happened in 2012, the Galapagos in the Gulf of Mexico, the Clochas-Mavacola in Angola, PSPN down there as well, Skarv and Devonic; those things had to happen.

In 2013, we’ve got the Angola L&G projects has got to come on, we’ve got the Chirag Oil Project that’s got to come on in Azerbaijan later. There’s a number of these projects that have to happen and you know what the road map is. We don’t take any of that for granted, but I would say they’re on track now.

Lucas Herrmann – Deutsche Bank

Okay. And, sorry, final question, where does CapEx on refining in the US move to post the completion of WRMP ?

Bob Dudley

Lower. Now let me bit, so look, we’ve got two refineries have gone, although we haven’t – weren’t actually capitalizing those since we announced them for sale. Clearly the CapEx going to Whiting will be reduced as we bring the coker on, so yeah, CapEx overall will be lower into the future. We haven’t given any specific guidance at what level.

Lucas Herrmann – Deutsche Bank

Right. But there are no other expansion plans once committed?

Bob Dudley

We have – no. We have no major expansion plans across any of – major, i.e., of a Whiting-like expansion that you should expect across any of our refineries.

Brian Gilvary

And we just – that’s one thing we didn’t mention. We actually have just completed an upgrade at Toledo, it’s just now finished.

Lucas Herrmann – Deutsche Bank

Gentlemen, yes. Thank you very much.

Jessica Mitchell

Okay. Folks time is moving on, and we still have quite a few people polling for questions so if they’re very detailed, IR is of course always available to help you afterwards. But let’s move on to the next question from Iain Reid from Jefferies.

Iain Reid – Jefferies

Hi. Yes. Thanks very much. Bob, couple questions about RosNeft again. I’m just wondering about the opportunities you’re talking with them about Arctic exploration, because it seems to me that a lot of the acreage which RosNeft had available is now gone to Exxon. And the only thing that’s left is pretty remote and so maybe not particularly perspective.

So I’m just wondering whether you could comment on that and maybe what you’re looking at with RosNeft now. Is it onshore tight oil? Is it gas? Because offshore Arctic seems to be kind of moved out of your grasp now, well, at least from my perspective. And also on the dividends, the 25% payout ratio that RosNeft has promised, is that an aspiration or something which is absolutely fixed? And are they going to move to a quarterly payout? I suppose you should know this now you’re a member of the Board.

Bob Dudley

Well, I haven’t actually – I step onto the Board upon election in June, but I obviously know quite a bit about this. First on the Arctic; one, the Arctic is very large and there are definitely still areas in the Arctic which are prospective including a fair number that RosNeft still has licenses on, plus there’s unlicensed areas in the Arctic.

So RosNeft now has partnerships with great companies, so Exxon, Statoil, and E&I have series of licenses offshore. I think there’s some others that are being considered. From our standpoint from BP, we’re very pleased to see great companies like that exploring, because effectively we own 20% and are carried in that exploration. So that’s a good thing for us.

And then – so we’ll continue to talk with them about ideas in the Arctic, but we’re very pleased that RosNeft has been so aggressive leasing up that acreage and then onshore yes, we are talking with them across a variety of things from our experience in TNK-BP. But for us, the success of having done the transaction with RosNeft is now less dependent on individual projects onshore or offshore because we’re sort of sharing all those together. And we each, BP and they, will look very carefully at things that have economic promise. So I feel fine about that.

And then in terms of the 25% dividend, the Russian government is a major shareholder who is considering a variety of different privatizations or whatever. But even as much as yesterday, the commitment has been made by RosNeft of 25% dividend, and the – even the President referred to it this last week as something that’s been in place.

It’s – I haven’t seen a document which says it’s the policy, but of course you can see over the last year how often that’s been referenced as being important to the government. I doubt that the company would go to a quarterly dividend, but they might. I don’t know of that happening. I think there are certain times of the year related to the government budgeting when dividends are paid. So I would stay tuned on that. But I don’t think it will be quarterly.

Iain Reid – Jefferies

Okay. Thanks very much

Brian Gilvary

Thanks, Iain.

Bob Dudley

Alastair Syme with Citi, maybe.

Jessica Mitchell

Go ahead, Alastair.

Alastair Syme – Citi

Yeah, thanks, Jess. Hi, Bob and Brian. Can I just quickly, for Brian, clarify the P&L accounting treatment of RosNeft? Is it just simply 20% of RosNeft IFRS account? Or is there something else in there?

Brian Gilvary

It is. It will be simply 19.75% of the IFRS numbers. We may – the only issue for us will be the way in which we look at our underlying earnings. It’ll be how they, RosNeft treat NOIs. So we just need to make sure that’s consistent with how we would treat NOIs. But effectively, yes, it’s 19.75% of IFRS.

Alastair Syme – Citi

Brilliant. Thank you, and one for Bob. Can I ask a very general question about profitability? Because you used the word strong multiple times through this call. And it just strikes me when you look at the return on capital employed you’re not a million miles away from the cost of capital in this business in an environment north of a hundred dollar barrel of oil. So I just wondered, is that a match you think about much and how you think that moves going forward?

Bob Dudley

Well, Alastair, it’s a good observation. But what has to come with it is a $38 billion of divestments what we’ve made a very high return projects so that were highly depreciated assets. So almost by definition, our return on capital employed has come down dramatically quickly because we have divested so many high return assets and gotten very good prices for it. So I think for us, all the major oil companies in their life cycles sometimes grab onto return on capital employed when it sort of fits.

Obviously it wouldn’t be the right one. Now, return on capital employed going forward, absolutely improving that is what we intend to do. But we have so many big major projects coming on right now where we’ve got capital that is going to be fractified that I think you – I mean, Brian, I think we’re sort of at the bottom of this now and now it’s going to move up overall. Maybe I’ll just leave it at that.

Brian Gilvary

That’s exactly right, Bob. That’s exactly right.

Bob Dudley

And so, Alistair, I’ll go back to the previous question on RosNeft because I just was flipping through here notes. And just sort of want to say on the dividends in the past at RosNeft, they typically pay the dividends 60 days after the annual meeting, which is held in June. So you should probably be expecting something September timeframe I’m thinking. And last year was the first year they actually made two dividend payments in a year. So it does sound like it’s going to be not easy to predict.

Jessica Mitchell

Right. Next question from Peter Hutton of RBC.

Peter Hutton – RBC

Thanks very much. I was going to ask on the Gulf of Mexico but

you’ve covered that to Lucas’s question. So really just follow-up on the share buyback and the timing of that one. Are you talking up to 8 billion over the next 12 to 18 months?

Can I just have – this is sort of directly linked to the return of the amount of cash originally invested in RosNeft that is being repaid. Is there sort of a timetable of that totally independent to whatever happens on the court case and the appeal relating to Macondo? Or is there likely to be some preference to keep a lower gearing until that is clarified later this year?

Bob Dudley

Yeah, we have made no linkage to anything happening with the legal cases to what we have done. We said that we would not, our shareholders would not be diluted by the transaction in RosNeft, which was roughly 4 billion. So and then we have shrunken our asset base over the last year and the decision by the board was to be more aggressive with that and put that out there as an 8 billion buyback which we have started sort of consistently already is in place. So our thinking is that we have made that commitment to shareholders independent of any kind of a court case.

Peter Hutton – RBC

Thanks.

Jessica Mitchell

Right. Next, Colin Smith from VTB.

Colin Smith – VTB

Thanks, gentlemen. A question on Shotendenese. Just the wording in the report I think makes it sound a little bit like it might be slipping post June 30, which is my understanding of when that decision was supposed to be made. I wonder if you could comment on that.

And more broadly, could you just talk a little bit around what actually is going on with Shotendenese? Some idea of what the involvement is expected to be both in the pipeline sections across Turkey and whichever choice you make into Europe and whether you are selling the gas direct or what’s going on with all of that contracting and costs? Thank you.

Bob Dudley

Okay. So I’ve just had a Shotendenese review that took a day, so let me see if I can summarize here your very good question. For those of you who don’t know what Shotendenese is, it’s a very large gas field in the Caspian that will, assuming its economic and the decisions are made, I have to qualify that of course.

But the pipeline would come out through and across Turkey that has an option of going to the north up through to Austria, or it could take a straight across Turkey and head over through Greece, Albania and into Italy. And there’s quite a bit of difference in the distance of those pipelines.

And at least for the beginning, that pipeline needs a choice of which direction because the project can bear both pipelines being built. And so there has been quite a bit of work done by the Tap pipeline, which is the southern one to Italy, and Nobucco, which goes up to Austria.

And we have said, as the company in the Shotendenese consortium which is BP, Statoil, Totall, and others, that that is – it needs to be a decision that’s based on economics and rather than politics. So those projects will be submitting their more-or-less bids that can determine the tariff structures across that, that will allow us then to make a decision on Shotendenese, on the upstream project, later this year.

So the pipeline selection is heading towards resolution of that in June. And then, based on only then, can we make a decision on a final investment decision heading towards later in the year for the upstream decision. All of that is on track right now. There’s a lot of politics involved in it, but we remain committed to an economic solution there. And I can tell you that the Shotendenese field itself is doing great. The Phase 1 field is producing very well there now as an indication of what’s to come. And I can just tell you there’s a lot of work going on, a lot of evaluation, and a lot of pencil sharpening going in the two different pipelines which are effectively competing with each other. Colin, that’s probably a day’s – that’s boiled down, so I...

Colin Smith – VTB

Thank you.

Bob Dudley

Okay. I don’t know what else you would want, specifically.

Jessica Mitchell

Okay. I think moving on then to Bertrand Hodée at Raymond James.

Bertrand Hodée – Raymond James

Yes. Thank you, Jess, for taking the question. I’ve got two questions if I may. One is a follow-up on Mad Dog. What kind of give up on cost prediction would you need on Mad Dog to get to a final investment decision? Is it 10%, 15%, 20%? And then on the follow-up also on your FID for 2013, Bob mentioned three mega-projects. You just talked about Shotendenese. Can you give us an update on the progress being made on Oman and Tangguh expansion?

Bob Dudley

Yes. Well, the sort of – a number for FIDing Mad Dog Phase 2, I would just say it’s not that simple because some of the options we’re looking at is possibly bringing on some resources early and phasing it out over time, versus a mega-project, all-at-once project.

And so I think for us, it’s got to be competitive with other projects we have around the world. We think we will get it there, but not in the current form that we had it. So I would just say, don’t worry. It’ll be a good return project when we finally redo and refine the development concept, and not out of line with other projects that we make.

On the Tangguh expansion, which would be train three, good progress has been made. We’ve certainly underpinned all the resources there for a third train, and we’re actually very close to underpinning resources for a fourth train. So we’re – and we’re actually beginning engineering, in fact, for the fourth train as well. But that’s just moving through the normal approval processes this year. I don’t see any problems with that. It’ll be back-end loaded this year.

And then in Oman, we’re in discussions now with the government of Oman. They’re sensitive, so I probably can’t say very much more about Oman in particular. But some of the others that we’re looking at, the Hod field in Norway, we’ve got other – we’ve got the R-series in India which we’re moving ahead.

So we’ve got – we’ve got a number of things out there that we continue to work on. And as we go forward, we’ve got another at least five in 2014. So it’s hard to say exactly which ones we see coming on. I just don’t want to list them all out, because obviously we’re in some sensitive discussions with some groups.

Bertrand Hodée – Raymond James

And just a final question on Mad Dog, what is the available outtake capacity on the existing Mad Dog spar for potential tiebacks?

Bob Dudley

I think that’s something you might want to check in with Jess. I can’t tell you exactly what the tieback is, but there is some volume in there. We’re going to have the rig up and running working on it. Those of you that remember in 2008 during the Ike hurricane, that rig was badly damaged. And that rig will be back up and working. But I think we’ve got capacity with Mad Dog. And there’s also new options and new facilities that we could consider as well for Phase II.

Bertrand Hodée – Raymond James

Okay. Thank you.

Jessica Mitchell

Okay. Turning to Steven Simcoe from Morningstar, go ahead, Steven.

Steven Simcoe – Morningstar

Hi. How are you guys doing?

Bob Dudley

Good. How you doing, Steven?

Steven Simcoe – Morningstar

Good. Thanks. I’ll just ask one brief question, and that will be on Valhall. Both you have Hus have given guidance for this year, and then you’ve talked about just the potential for the fields being very long-lived in the capacity of the platform being far above what 2013 guidance would be even at the implied end of the year run rate.

I’m just wondering, is this a project that’s going to see continued growth in the next one, two, three years? Is this going to be something that’s going to have some sort of starts and stop as these incremental wells are drilled? What would be the best way to think about the volumes from that post 2013? Thanks.

Bob Dudley

Yeah, I mean, it’s your point about stopping and starting that I’m not quite sure how to answer.

Steven Simcoe – Morningstar

I guess it’s more just is this effectively I’m just trying to ask is there any sort of planned date when this platform would be reaching full capacity?

Bob Dudley

Yeah, it is premature. We have got – we’ve done a lot of work on Valhall. It has a very unusual reservoir. It has ferocities greater than 33%, which is almost physically impossible to do because it’s got that chalk, that diatomaceous earth in there. So every well is a bit of an adventure when you drill it in terms of the results and how it’s going to hang on there in terms of production.

So we’ve got the facilities back. So they’ll last a very, very long time. And this is a field that has always surprised. It’s been around since the 1970s or late 1970s early 1980s, and it just continues to surprise the way that reservoir works in terms of the original projections of oil reserves and oil in play. So I don’t know how to exactly answer you there. We’re enthusiastic about it, but we haven’t laid out specifics.

Steven Simcoe – Morningstar

Helpful. Thank you.

Jessica Mitchell

Thank you. And the last question from Neil Morton from Investec. Go ahead, Neil.

Neil Morton – Investec

Thank you. Just two quick numbers questions left, please. Just firstly on the financial charges, you saw an uptick in Q1 with new pension law coming in. But on the cash side at the end of the quarter, you got a lot of cash coming in. So I just wondered if you’re going to give some guidance on a reasonable quarterly run rate from here on.

And just secondly with regard to the cash flow target next year and cash tax rates, I think historically you have guided to 1%, 2% points below the income statement tax rate. Is that still applicable? Thank you.

Brian Gilvary

So let me take that question, Neil. We had said originally I think with our 4Q results, we talked about the new IAS 19 tax rules that came through that would result in additional charge of about $1 billion dollars for the year. So it’s about $250 million a quarter. It is cash zero.

This is something that’s been forced on us by using the discount rates that we typically use against the liabilities rather than what you’d expect on return on equities. So it is actually cash neutral. It doesn’t actually impact the cash position in any of the quarters. And then sorry. Your second question was around the tax rate?

Neil Morton – Investec

It was just the cash tax rate versus the income?

Brian Gilvary

It is typically going to be around a couple of percentage points below where the income underlying effective tax rate is. That is right.

Neil Morton – Investec

Great. Thank you.

Brian Gilvary

Thanks, Neil.

Bob Dudley

All right. Well, thank you, everybody. I think that’s the last of the questions. And we look forward to talking to you again next quarter.

Brian Gilvary

Yes. I’d just like to thank everyone for your many detailed questions, and we’re already one-third away through the second quarter. So it won’t be that long before we’re back and see you again. Thank you.

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